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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/x/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2)
NEW VALLEY CORPORATION
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(Name of Registrant As Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2), or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing party:
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4) Date filed:
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NEW VALLEY CORPORATION
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 25, 1996
TO THE SHAREHOLDERS OF NEW VALLEY CORPORATION:
The annual meeting of shareholders (the "Annual Meeting") of New Valley
Corporation, a New York corporation (the "Company"), will be held at The Hyatt
Regency Miami, 400 S.E. Second Avenue, Miami, Florida 33131, on Tuesday, June
25, 1996, at 11:00 a.m., local time, or at any postponement or adjournment
thereof, for the following purposes:
1. To elect seven directors by the holders of Common Shares,
Class A Senior Preferred Shares and Class B Preferred Shares, voting
together as a single class.
2. To elect two directors by the holders of Class A Senior
Preferred Shares, voting as a class.
3. To elect two directors by the holders of Class B Preferred
Shares and Class A Senior Preferred Shares, voting together as a single
class.
4. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent auditors for the year 1996, by the holders specified in
item 1 above.
5. To approve the change of 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, by the holders specified in item 1 above.
6. To transact such other business as may properly be brought
before the meeting or any postponement or adjournment thereof.
Every holder of record of Class A Senior Preferred Shares, Class B
Preferred Shares and Common Shares of the Company at the close of business on
May 20, 1996 is entitled to notice of the Annual Meeting and 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. A list of shareholders entitled to vote at the Annual
Meeting will be available to any shareholder for any purpose germane to the
Annual Meeting during ordinary business hours, from June 10, 1996 to June 25,
1996, at the headquarters of the Company located at 100 S.E. Second Street, 32nd
Floor, Miami, Florida 33131. A proxy statement, form of proxy and the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995, are
enclosed herewith.
By order of the Board of Directors,
BENNETT S. LEBOW
Chairman of the Board and
Chief Executive Officer
Miami, Florida
May 22, 1996
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YOUR VOTE IS IMPORTANT
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.
<PAGE> 4
NEW VALLEY CORPORATION
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
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PROXY STATEMENT
---------------------
INTRODUCTION
The enclosed proxy is solicited on behalf of the Board of Directors of
New Valley Corporation, a New York corporation (the "Company"). The proxy is
solicited for use at the annual meeting of shareholders (the "Annual Meeting")
to be held at The Hyatt Regency Miami, 400 S.E. Second Avenue, Miami, Florida
33131 on Tuesday, June 25, 1996, at 11:00 a.m., local time, or at any
postponement or adjournment thereof. The Company's principal executive offices
are located at 100 S.E. Second Street, 32nd Floor, Miami, Florida 33131 and its
telephone number is (305) 579-8000.
VOTING RIGHTS AND SOLICITATION OF PROXIES
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
together with the Class A Senior Preferred Shares, the "Preferred Shares"), and
Common Shares, $.01 par value (the "Common Shares", and together with the
Preferred Shares, the "Shares"), of the Company at the close of business on May
20, 1996 (the "Record Date") is entitled to notice of the Annual Meeting and 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. At 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 (in each case, excluding treasury
shares). The approximate date on which this proxy statement, accompanying notice
and proxy and the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, (the "1995 Form 10-K") are first being mailed to shareholders
is May 22, 1996.
Any shareholder giving a proxy in the form accompanying this proxy
statement has the power to revoke the proxy prior to its exercise. A proxy can
be revoked by an instrument of revocation delivered at or prior to the Annual
Meeting to the Secretary or Assistant Secretary of the Company, by a duly
executed proxy bearing a date or time later than the date or time of the proxy
being revoked, or at the Annual Meeting if the shareholder is present and elects
to vote in person. Mere attendance at the Annual Meeting will not serve to
revoke a proxy. Abstentions and shares held of record by a broker or its nominee
("Broker Shares") that are voted on any matter are included in determining the
number of votes present. Broker Shares that are not voted on any matter will not
be included in determining whether a quorum is present.
All proxies received and not revoked will be voted as directed. If no
directions are specified, such proxies will be voted FOR the election of the
Board's nominees as specified in Board Proposals 1, 2 and 3 below, FOR
ratification of the appointment of Coopers & Lybrand L.L.P. ("Coopers &
Lybrand") to serve as independent auditors for the Company as specified in Board
Proposal 4 below and FOR the Reincorporation Proposal (as defined below) as
specified in Board Proposal 5 below. With respect to Board Proposals 1, 2 and 3,
the nominees receiving a plurality of the votes cast will be elected as
directors except that, with respect to Board Proposal 2, for such election to be
effective, the nominees must also receive the affirmative vote of either (i) 80%
of the outstanding Class A Senior Preferred Shares, or (ii) a simple majority of
all Class A Senior Preferred Shares voting thereon, exclusive of Class A Senior
Preferred Shares beneficially owned directly and/or indirectly by the Brooke
Group (as defined herein). The adoption of Board Proposal 5 (the
"Reincorporation Proposal") requires that such Proposal receive the affirmative
vote of (i) the holders of two-thirds of all of the outstanding Shares entitled
to vote at the Annual Meeting and (ii) the holders of a majority of all of the
outstanding Common Shares so entitled
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to vote, voting as a separate class. An affirmative vote of the majority of
votes present at the Annual Meeting is necessary for approval of the other
matters to be considered at the Annual Meeting.
In all cases, shares with respect to which authority is withheld (with
respect to Board Proposals 1, 2, and 3), abstentions (with respect to Board
Proposal 4) and Broker Shares that are not voted will not be included in
determining the number of votes cast. For information on voting securities of
the Company beneficially owned by Brooke (as defined herein) and agreements
regarding the voting of such securities, see "Security Ownership of Certain
Beneficial Owners and Management" and "Certain Transactions Relating to the
Joint Plan and Interests of Certain Persons Therein - Joint Plan Provisions for
Appointment of Directors, Approval of Affiliated Transactions and Other Matters"
herein.
Pursuant to the Reincorporation Proposal and the transactions
contemplated thereby, as described in Board Proposal 5, the number of
outstanding Common Shares would be reduced on a one-for-twenty basis. See Board
Proposal 5, "The Reverse Stock Split", below. The descriptions and references to
the Common Shares in this Proxy Statement do not give effect to this proposed
reduction in the number of Common Shares, except as specifically indicated in
Board Proposal 5 below.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding all
persons known by the Company to own beneficially more than 5% of any class of
its voting securities as of the Record Date.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
NAME AND ADDRESS TITLE OF CLASS SHARES (1) OF CLASS (1)
- ---------------- -------------- ---------- ------------
<S> <C> <C> <C>
Bennett S. LeBow Class A Senior 618,326(2) 59.7%
Brooke Group Ltd. Preferred Shares
BGLS Inc.
100 S.E. Second Street
Miami, FL 33131
New Valley Holdings, Inc.
204 Plaza Centre
3505 Silverside Road
Wilmington, DE 19810
Bennett S. LeBow Class B 250,885(2) 8.9%
Brooke Group Ltd. Preferred Shares
BGLS Inc.
100 S.E. Second Street
Miami, FL 33131
Bennett S. LeBow Common Shares 79,794,229(2) 41.6%
Brooke Group Ltd.
BGLS Inc.
100 S.E. Second Street
Miami, FL 33131
New Valley Holdings, Inc.
204 Plaza Centre
3505 Silverside Road
Wilmington, DE 19810
ITT Corporation Common Shares 14,391,437(3) 7.6%
1330 Avenue of the Americas
New York NY 10019
</TABLE>
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(1) The number of shares beneficially owned by each beneficial owner
listed above is based upon the numbers reported by such owner in documents
publicly filed with the Securities and Exchange Commission (the "SEC"), publicly
available information or information available to the Company. The percentage of
each class is calculated based on the total number of shares of each class
outstanding on the Record Date. The number of shares and percentage of
class include shares with respect to which such beneficial owner has the right
to acquire beneficial ownership as specified in Rule 13d-3(d)(1) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(2) According to Amendment No. 16 to Schedule 13D dated January 30,
1996, relating to the Common Shares and Class A Senior Preferred Shares, filed
jointly by Brooke Group Ltd. ("Brooke"), BGLS Inc., a direct wholly-owned
subsidiary of Brooke ("BGLS"), New Valley Holdings Inc., a direct wholly-owned
subsidiary of BGLS ("NV Holdings"), and Bennett S. LeBow, the beneficial owner
of 56.5% of the common stock of Brooke and the Chairman of the Board and Chief
Executive Officer of
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the Company (the "Chairman"), and Amendment No. 1 to Schedule 13D dated January
30, 1996, relating to the Class B Preferred Shares, filed jointly by the
foregoing persons (except for NV Holdings), BGLS exercises sole voting power and
sole dispositive power, subject to the Pledge (as defined below), over: (i)
394,975 Common Shares (less than 1% of such class); and (ii) 250,885 Class B
Preferred Shares (approximately 8.9% of such class) (collectively, the "BGLS
Shares"), and NV Holdings exercises sole voting power and sole dispositive power
over, subject to the Pledge (as defined below): (i) 79,399,254 Common Shares
(approximately 41.4% of such class); and (ii) 618,326 Class A Senior Preferred
Shares (approximately 59.7% of such class) (collectively, the "NV Holdings
Shares"). Each of BGLS and NV Holdings disclaims beneficial ownership of the
shares beneficially owned by the other under Rule 13d-3 promulgated under the
Exchange Act ("Rule 13d-3"), or for any other purpose. Each of Brooke and the
Chairman disclaims beneficial ownership of the BGLS Shares and NV Holdings
Shares under Rule 13d-3, or for any other purpose.
According to the Schedules 13D referred to above, on or about January
30, 1996, BGLS, among other things, exchanged (i) its 15.75% Series A Senior
Secured Notes due 2001 (the "Series A Notes") for all of its outstanding 13.75%
Series 2 Senior Secured Notes due 1997 and (ii) its 15.75% Series B Senior
Secured Notes due 2001 (the "Series B Notes") for substantially all of its
outstanding 14.500% Subordinated Debentures due 1998. Pursuant to a registered
exchange offer under the Securities Act of 1933, as amended (the "Securities
Act"), as of March 21, 1996, all of the Series A Notes were exchanged for an
equal principal amount of registered Series B Notes. Pursuant to the indenture
relating to the Series A Notes and Series B Notes (the "Indenture"), BGLS
pledged, among other security interests, the BGLS Shares, and NV Holdings
pledged the NV Holdings Shares (such pledges being referred to herein
collectively as the "Pledge"), to secure the Series B Notes. The Indenture also
provides for the restriction of certain affiliated transactions between the
Company and Brooke, BGLS and their affiliates, as well as for certain
restrictions on the use of future distributions received from the Company.
NV Holdings and BGLS have advised the Company that each entity intends
to vote their Shares in favor of each Board Proposal, and that there is no event
of default under the Indenture pursuant to which such Shares are pledged.
For information on interests in and positions held with Brooke and its
affiliates by the Chairman and other nominees for election as directors of the
Company as well as voting and other provisions applicable to Brooke pursuant to
the terms of the Joint Plan (as defined below), see "Nomination and Election of
Directors", "Board Proposal Number 1", "Board Proposal Number 2", "Compensation
Committee Interlocks and Insider Participation", "Certain Transactions Relating
to the Joint Plan and Interests of Certain Persons Therein - Joint Plan
Provisions for Appointment of Directors, Approval of Affiliated Transactions and
Other Matters".
(3) ITT Corporation has reported that, as of May 15, 1991, it had sole
power to vote or to direct the voting and sole power to dispose or direct the
disposition of 14,391,437 Common Shares.
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The following table sets forth, as of the Record Date, the
beneficial ownership of the Company's voting securities by (i) each of the
Company's directors and nominees, (ii) each of the named executive officers (as
such term is defined in the Summary Compensation Table below) and (iii) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME TITLE OF CLASS SHARES(1) CLASS(1)
- ---- -------------- --------- ----------
<S> <C> <C> <C>
Bennett S. LeBow(2)...................... Class A Senior Preferred Shares 618,326 59.7%
Class B Preferred Shares 250,885 8.9%
Common Shares 79,794,229 41.6%
Howard M. Lorber(3)...................... Common Shares 7,500 --(5)
Henry C. Beinstein(4).................... Class B Preferred Shares 34,500 1.3%
All directors and executive officers
as a group (10 persons)................ Class A Senior Preferred Shares 618,326 59.7%
Class B Preferred Shares 285,385 10.2%
Common Shares 79,801,729 41.6%
</TABLE>
- -------------
(1) The percentage of each class is calculated based on the total number of
shares of each class outstanding on [RECORD DATE], 1996. Includes
shares with respect to which such person has the right to acquire
beneficial ownership as specified in Rule 13d-3(d)(1) of the Exchange
Act.
(2) Includes the BGLS Shares and NV Holding Shares, as to which shares the
Chairman disclaims beneficial ownership. See footnote (2) to the
preceding table.
(3) Mr. Lorber's Common Shares are held in a Keogh Plan for his benefit.
(4) Includes 2,500 Class B Preferred Shares held in an individual
retirement account for his spouse, as to which shares Mr. Beinstein
disclaims any beneficial interest.
(5) Less than one percent.
NOMINATION AND ELECTION OF DIRECTORS
On November 1, 1994, the First Amended Joint Chapter 11 Plan of
Reorganization of the Company, as amended (the "Joint Plan"), was confirmed by
the United States Bankruptcy Court for the District of New Jersey, Newark
Division (the "Bankruptcy Court"). The effective date of the Joint Plan occurred
on January 18, 1995 (the "Effective Date").
The current directors of the Company were appointed pursuant to the
Joint Plan and were subsequently elected by the Company's shareholders at the
last Annual Meeting of Shareholders held on May 15, 1995. The Joint Plan also
contains various other provisions with respect to the composition of the Board
of Directors and transactions with certain affiliates, including Brooke. See
"Certain Transactions Relating to the Joint Plan and Interests of Certain
Persons Therein - Joint Plan Provisions for the Appointment of Directors,
Approval of Affiliated Transactions and Other Matters" below.
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BOARD PROPOSAL 1 -- NOMINEES FOR ELECTION AS DIRECTORS BY HOLDERS OF COMMON
SHARES, CLASS A SENIOR PREFERRED SHARES AND CLASS B PREFERRED SHARES
The Company's By-Laws provide that the number of directors shall be not
more than nine and not less than three as shall be determined from time to time
by the Board of Directors. Pursuant to the Joint Plan, the number of directors
has been fixed at nine, two of whom are deemed to have been elected pursuant to
the Company's Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), by holders of the Class A Senior Preferred
Shares, voting as a class, and by the holders of the Class A Senior Preferred
Shares and the Class B Preferred Shares, voting together as a single class, in
each case as a result of the dividend arrearages thereon. The present term of
office of all directors will expire at the Annual Meeting. Provided a quorum is
present, directors are elected by a plurality of the votes cast at an election,
to serve until the next annual meeting of shareholders and until their
successors are elected and qualified.
The nominees for election as directors by holders of Common Shares,
Class A Senior Preferred Shares and Class B Preferred Shares, voting together as
a class, under Board Proposal 1 are discussed below. Although each nominee
presently intends to serve on the Board of Directors, if any nominee is unable
or unwilling to serve, the Board of Directors may nominate another person in
substitution for such nominee, in which case the persons named as proxies in the
accompanying proxy card shall vote FOR the election of such substitute nominee
for director.
The Board of Directors recommends that shareholders vote FOR election
of the nominees named below.
The following table sets forth, as to each of the nominees under Board
Proposal 1, certain information as of the Record Date. Each nominee is a
citizen of the United States of America.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND ADDRESS AGE PRINCIPAL OCCUPATION SINCE
- ---------------- --- -------------------- --------
<S> <C> <C> <C>
Bennett S. LeBow 58 Chairman of the Board and Chief December
New Valley Corporation Executive Officer of the Company 1987
100 S.E. Second Street
Miami, FL 33131
Howard M. Lorber 47 President and Chief Operating January
New Valley Corporation Officer of the Company 1991
100 S.E. Second Street
Miami, FL 33131
Arnold I. Burns 66 Partner, Proskauer Rose November
Proskauer Rose Goetz & Goetz & Mendelsohn LLP 1994(1)
Mendelsohn LLP
1585 Broadway
New York, NY 10036
Ronald J. Kramer 37 Chairman and Chief Executive November
Ladenburg, Thalmann Officer of Ladenburg, Thalmann 1994(1)
Group Inc. Group Inc.
1209 Orange Street
Wilmington, DE 19801
</TABLE>
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<PAGE> 10
<TABLE>
<S> <C> <C> <C>
Paul L. McDermott 42 Managing Director, Nomura Securities November
Nomura Securities International, Inc. 1994(1)
International, Inc.
2 World Financial Center
New York, NY 10281
Richard S. Ressler 37 President and Chief Executive Officer, August
Orchard Capital Corporation Orchard Capital Corporation 1990
1999 Avenue of the Stars
Los Angeles, CA 90067
Richard J. Lampen 42 Executive Vice President, -- (2)
New Valley Corporation General Counsel and Assistant
100 S.E. Second Street Secretary of the Company
Miami, FL 33131
</TABLE>
- -------------
(1) Initially appointed pursuant to the Joint Plan and subsequently
elected by the Company's shareholders at the last Annual Meeting of Shareholders
held on May 15, 1995.
(2) Mr. Lampen has been nominated by the Board of Directors to succeed
Gerald E. Sauter, a current director of the Company who was initially appointed
pursuant to the Joint Plan and subsequently elected by the Company's
shareholders at the last Annual Meeting of Shareholders held on May 15, 1995. In
May 1996, Mr. Sauter retired as Vice President, Chief Financial Officer and
Treasurer of the Company.
- ------------
BENNETT S. LEBOW. For the past five years, the Chairman's principal
occupation has been as an officer and/or director of, and a private investor in,
privately and publicly held companies.
The Chairman has been Chairman of the Board of the Company since
January 1988 and Chief Executive Officer thereof since November 1994 and
currently holds various positions with the Company's subsidiaries. Since June
1990, the Chairman has been the Chairman of the Board, President and Chief
Executive Officer of Brooke, a New York Stock Exchange-listed holding company,
and since October 1986 has been a director of Brooke. Since November 1990, he
has been Chairman of the Board, President and Chief Executive Officer of BGLS,
which directly or indirectly holds Brooke's equity interests in several private
and public companies. Each of the public companies have been, directly or
indirectly, operating companies.
The Chairman has been a director of Liggett Group Inc. ("Liggett"), a
manufacturer and seller of cigarettes, since June 1990 and Chairman of the Board
from July 1990 to May 1993. He served as one of three interim Co-Chief Executive
Officers from March 1993 to May 1993. Liggett is a wholly-owned subsidiary of
BGLS. From June 1990 until August 1994, he was Chairman of the Board and/or a
director of SkyBox International Inc. ("SkyBox"), Brooke's former indirect
wholly-owned subsidiary.
The Chairman was a director of MAI Systems Corporation ("MAI"),
Brooke's former indirect majority-owned subsidiary, from September 1984 to
October 1995, Chairman of the Board from November 1990 to May 1995 and the Chief
Executive Officer from November 1990 to April 1993.
HOWARD M. LORBER has been President and Chief Operating Officer of the
Company since November 1994. Mr. Lorber has been Chairman of the Board and Chief
Executive Officer of Hallman & Lorber Assoc., Inc., consultants and actuaries to
qualified pension and profit sharing plans ("Hallman & Lorber"), since 1975. Mr.
Lorber was also Chairman of the Board and Director of VTX Electronics Corp., a
distributor of wire and cable, from October 1991 until April 1994. He has been a
shareholder
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of Aegis Capital Corp., a broker-dealer and a member firm of the National
Association of Securities Dealers, since 1984; Chairman of the Board of
Directors since 1987 and Chief Executive Officer since November 1993 of Nathan's
Famous, Inc., a chain of fast food restaurants; and was a director of SkyBox
from November 1993 until May 1995 and Chairman of the Board of Directors of
SkyBox from March 1994 until May 1995. Mr. Lorber also serves as a director and
member of the Audit Committee of United Capital Corp., a real estate investment
and diversified manufacturing company, since May 1991; a director and member of
the Audit Committee of Alpine Lace Brands, Inc., a company which develops and
markets a full line of low salt, low cholesterol and fat-free cheeses, since
1993; and a director and member of the Audit Committee of Prime Hospitality
Corp., a company doing business in the lodging industry, since May 1994. Mr.
Lorber has also been a shareholder of a corporate general partner of a limited
partnership organized to acquire and operate real estate property. The limited
partnership filed for protection under the Federal bankruptcy laws in 1991.
ARNOLD I. BURNS has been a partner of Proskauer Rose Goetz & Mendelsohn
LLP, a New York-based law firm, since September 1988. Mr. Burns was an
Associate Attorney General at the United States Department of Justice in 1986
and Deputy Attorney General from 1986 to 1988.
RONALD J. KRAMER has been Chairman and Chief Executive Officer of
Ladenburg, Thalmann Group Inc. since 1995 and an employee of its subsidiary,
Ladenburg, Thalmann & Co. Inc. ("Ladenburg"), an investment banking firm, for
more than the past five years. On May 31, 1995, the Company acquired all of the
capital stock of Ladenburg. For additional information on the Company's
acquisition of Ladenburg and Mr. Kramer's interest therein, see "Certain
Relationships and Related Transactions". Mr. Kramer currently serves on the
Boards of Directors of Griffon Corporation and Grand Casinos, Inc.
PAUL L. MCDERMOTT has been a Managing Director of Nomura Securities
International, Inc., an investment banking firm, since December 1986. Mr.
McDermott served on the Board of Directors of VTX Electronics Corp. from January
1992 until December 1995. Mr. McDermott currently serves on the Boards of
Directors of Perceptron, Inc. and Apparel Marketing Corp.
RICHARD S. RESSLER has been President and Chief Executive Officer of
Orchard Capital Corporation, an investment and consulting firm, since January
1994. Mr. Ressler has also been President and Chief Executive Officer of MAI
since October 1994 and a director thereof since February 1995. From July 1988
until January 1, 1994, Mr. Ressler held various executive positions at Brooke
and Brooke's predecessor company, Brooke Partners, L.P. and their respective
subsidiaries and affiliates, including Liggett. From July 1990 to April 1993, he
was a director, and from November 1990 to April 1993, he was Executive Vice
President of Brooke. Mr. Ressler owns 10.8% of the outstanding common stock of
Brooke, and Orchard Capital Corporation has been a consultant to Brooke since
January 1994.
RICHARD J. LAMPEN has been the Executive Vice President and General
Counsel of the Company since October 1995, and an Assistant Secretary thereof
since January 1996. From May 1992 to September 1995, Mr. Lampen was a partner at
Steel Hector & Davis, a law firm located in Miami, Florida. From January 1991 to
April 1992, Mr. Lampen was a Managing Director at Salomon Brothers Inc, an
investment bank, and was an employee at Salomon Brothers Inc from 1986 to April
1992. Mr. Lampen has been a director of Thinking Machines Corporation, a
developer and marketer of parallel software for high-end and networked computer
systems in which the Company indirectly holds a controlling interest, since
February 1996. Mr. Lampen has served as a director of a number of other
companies, including U.S. Can Corporation and The International Bank of Miami,
N.A., as well as a court-appointed independent director of Trump Plaza Funding,
Inc.
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<PAGE> 12
BOARD PROPOSAL 2 -- NOMINEES FOR ELECTION AS DIRECTORS BY HOLDERS OF CLASS A
SENIOR PREFERRED SHARES
The Certificate of Incorporation provides that when six quarterly
dividends (whether or not consecutive) payable on the Class A Senior Preferred
Shares are in arrears, the holders thereof, voting as a class, are entitled to
elect two directors. As of and through December 31, 1995, more than six
quarterly dividends payable on the Class A Senior Preferred Shares were in
arrears. On January 18, 1995, the Company paid a special cash dividend of $50
per share to holders of Class A Senior Preferred Shares, and on June 20, 1995,
September 29, 1995 and March 27, 1996, the Company paid three additional cash
dividends of $12.50, $37.50 and $10.00, respectively, per share to such holders.
At April 30, 1996, the cumulative compounded amount of dividend arrearages
on the Class A Senior Preferred Shares was $115,716,861, or $111.75 per share,
after giving effect to such dividends and the purchase by the Company of
54,445 Class A Senior Preferred Shares in a tender offer which expired on
February 17, 1995 and the Company's repurchase of an aggregate of 411,504
Class A Senior Preferred Shares, as of the Record Date, pursuant to
outstanding authorizations to repurchase as many as 500,000 of such shares.
Pursuant to the Certificate of Incorporation, directors are elected by
a plurality of the votes cast, to serve until the earlier of the date on which
dividend arrearages have been eliminated or the next annual meeting; however,
pursuant to the Joint Plan, whenever the provisions of the Certificate of
Incorporation provide for the vote of the holders of the Class A Senior
Preferred Shares acting as a single class, then, for such vote to be effective,
it must, in addition to satisfying the above requirement and all other
applicable requirements, reflect the affirmative vote of either (i) 80% of the
outstanding Class A Senior Preferred Shares, or (ii) a simple majority of all
Class A Senior Preferred Shares voting on the issue, exclusive of Class A Senior
Preferred Shares beneficially owned by the Brooke Group (as defined below). As a
result, the nominees for election as directors by holders of Class A Senior
Preferred Shares must be elected by a vote which meets the requirements of the
Joint Plan described in the preceding sentence.
The "Brooke Group" means any or all of the following: (i) the Chairman,
his parents, his parents' lineal descendants, any spouse of the foregoing, and
any trust for the benefit of the foregoing; (ii) Brooke, BGLS or any entity that
is, directly or indirectly, controlled by one or more of the foregoing persons
or trusts described in clause (i) above, or of which any of the foregoing
persons is a director, officer, general partner, trustee or a person who acts in
a similar capacity; and (iii) any entity in which one or more of the foregoing
persons or entities described in clauses (i) and (ii) above, own (individually
or in the aggregate) 5% or more of the voting power or economic interest (or, in
the case of a trust or estate, 5% or more of the beneficial interest).
The nominees for election as directors by holders of Class A Senior
Preferred Shares are discussed below. Both nominees are currently directors of
the Company and are nominees for election as directors by the holders of the
Class A Senior Preferred Shares and the Class B Preferred Shares under "Board
Proposal 3" below. Although both nominees presently intend to serve on the Board
of Directors, pursuant to the Joint Plan, if either nominee is unable or
unwilling to serve, then the remaining nominee identified in this Board Proposal
Number 2 below may designate such nominee's successor, subject to the members of
the Board of Directors identified in Board Proposal 1 above exercising a veto
if, in their reasonable judgment, such designee is unqualified to serve on the
Board of Directors. If both of the nominees identified in this Board Proposal 2
are unable or unwilling to serve, then, pursuant to the Joint Plan, their
successors shall be designated by a majority of the independent members of the
Board of Directors identified in Board Proposal 1 above not affiliated or
associated (except as directors of the Company and its subsidiaries) with the
Brooke Group, and such designees shall also not have any other association or
affiliation with the Company, the Brooke Group or any beneficial owner of 5% or
more of any class of capital stock of the Company, other than Class A Senior
Preferred Shares, in which case the persons named as proxies in the accompanying
proxy card shall vote FOR the election of such successor nominee for director.
9
<PAGE> 13
In addition, pursuant to the Joint Plan, Brooke is required to vote all
shares of capital stock of the Company beneficially owned by it in favor of the
election of the nominees set forth below or successor nominees designated as
described above. For further information on the Board of Directors, including
number of directors and committees of the Board of Directors, see "Board
Proposal 1" above and "Board of Directors and Committees" below.
For information concerning provisions of the Joint Plan pursuant to
which certain directors have been selected as a director or nominee for election
as director, see "Certain Transactions Relating to the Joint Plan and Interests
of Certain Persons Therein - Joint Plan Provisions for Appointment of Directors,
Approval of Affiliated Transactions and Other Matters" below.
The Board of Directors recommends that shareholders vote FOR election
of the nominees named below.
The following table sets forth, as to each of the nominees under Board
Proposal 2, certain information as of the Record Date. Each nominee is a
citizen of the United States of America.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND ADDRESS AGE PRINCIPAL OCCUPATION SINCE
- ---------------- --- -------------------- --------
<S> <C> <C> <C>
Henry C. Beinstein 53 Managing Director, November
Milbank, Tweed, Hadley & McCloy Milbank, Tweed, 1994(1)
1 Chase Manhattan Plaza Hadley & McCloy
New York, NY 10005-1413
Barry W. Ridings 44 Managing Director, November
Alex. Brown & Sons, Incorporated Alex. Brown & Sons, 1994(1)
1290 Avenue of the Americas Incorporated
New York, NY 10104
</TABLE>
- -------------
(1) Initially appointed pursuant to the Joint Plan and subsequently
elected by the Company's shareholders at the last Annual Meeting of Shareholders
held on May 15, 1995.
- -------------
HENRY C. BEINSTEIN has been the Managing Director of Milbank, Tweed,
Hadley & McCloy, a New York-based law firm, since November 1995. Mr. Beinstein
was the Executive Director of Proskauer from April 1985 through October 1995.
Mr. Beinstein is a certified public accountant in the States of New York and New
Jersey and prior to joining Proskauer was a partner and National Director of
Finance and Administration at Coopers & Lybrand. Mr. Beinstein currently serves
on the Board of Directors of Dyson Kissner Moran Corporation.
BARRY W. RIDINGS has been a Managing Director of Alex. Brown & Sons,
Incorporated, an investment banking firm, since March 1990. Mr. Ridings
currently serves on the Board of Directors of TransCor Waste Services Corp.,
SubMicron Systems, Inc., Norex America, Inc., Noodle Kidoodle Inc. and Telemundo
Group Inc.
BOARD PROPOSAL 3 -- NOMINEES FOR ELECTION AS DIRECTORS BY HOLDERS OF CLASS A
SENIOR PREFERRED SHARES AND CLASS B PREFERRED SHARES
Pursuant to the Certificate of Incorporation, when six quarterly
dividends (whether or not consecutive) payable on the Class B Preferred Shares
are in arrears, the holders of Class B Preferred Shares and Class A Senior
Preferred Shares, voting together as a single class, are entitled to elect two
10
<PAGE> 14
directors. As of and through December 31, 1995, more than six quarterly
dividends payable on the Class B Preferred Shares were in arrears. At April 30,
1996, the cumulative compounded amount of dividend arrearages on the Class B
Preferred Shares was $101,039,981, or $36.20 per share.
Pursuant to the Certificate of Incorporation, directors are elected by
a plurality of the votes cast, to serve until the earlier of the date on which
dividend arrearages have been eliminated or the next annual meeting. The special
voting provisions of the Joint Plan applicable to the Class A Senior Preferred
Shares when voting together as a single class, as described under Board Proposal
2 above, are not applicable to Board Proposal 3. Messrs. Beinstein and Ridings
are the nominees for election under Board Proposal 3 as directors by holders of
Class B Preferred Shares voting together as a single class with the Class A
Senior Preferred Shares. Both nominees are currently directors of the Company
and are nominees for election as directors by the holders of the Class A Senior
Preferred Shares under "Board Proposal 2" above. For information on such
nominees, the process for designating successor nominees, the alternates named
for the current nominees and other matters relating thereto, see "Board Proposal
2" above.
The Board of Directors recommends that shareholders vote FOR
election of the nominees named in this Board Proposal 3.
CERTAIN MATTERS RELATING TO THE COMPANY AND
ITS OFFICERS AND DIRECTORS
BOARD OF DIRECTORS AND COMMITTEES
During 1995, the Board of Directors held 10 meetings. Each director
attended at least 75% of the aggregate number of meetings of the Board of
Directors and of each committee of which he was a member held during such
period, except Mr. Ridings, who attended 50% of such meetings. During that
period, the Executive Committee (composed of Messrs. LeBow, as Chairman, Lorber,
Kramer until July 30, 1995 and Burns as of July 31, 1995) met 13 times and the
Audit Committee (composed of Messrs. Beinstein, Kramer and McDermott) did not
meet.
The Executive Committee exercises, in the intervals between
meetings of the Board of Directors, all the powers of the Board of Directors in
the management and affairs of the Company.
The Audit Committee reviews, with the Company's independent
auditors, matters relating to the scope and plan of the audit, the adequacy of
internal controls and the preparation of financial statements, and reports and
makes recommendations to the Board of Directors with respect thereto.
In November 1994, the Board of Directors determined not to have a
separate compensation committee and to act on compensation matters as a
committee of the whole. For information on the compensation of the Company's
executive officers, see "Board Compensation Committee Report on Executive
Compensation." The Company does not have a nominating committee.
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation
awarded to, earned by or paid during the past three fiscal years to those
persons who were, at December 31, 1995, the Company's Chief Executive Officer
and the other executive officers whose cash compensation exceeded $100,000 (of
which there are only three individuals whose compensation exceeded the threshold
amount) (collectively, the "named executive officers").
11
<PAGE> 15
SUMMARY COMPENSATION TABLE(1) (2)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- --------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Bennett S. LeBow 1995 $1,894,823 -- --
Chairman and Chief Executive Officer(3) 1994 71,045 -- --
1993 -- -- --
Howard M. Lorber 1995 $956,376 $500,000 --
President and Chief Operating Officer(3) 1994 56,008 -- --
1993 -- -- --
Richard J. Lampen 1995 $150,000 $100,000 --
Executive Vice President and 1994 -- -- --
General Counsel(4) 1993 -- -- --
Gerald E. Sauter 1995 $278,534(5) -- --
Vice President, Treasurer and Chief 1994 41,131 $57,500 --
Financial Officer(5) 1993 -- -- --
</TABLE>
- --------------
(1) The aggregate value of perquisites and other personal benefits received
by the named executive officers are not reflected because the amounts
were below the reporting requirements established by the rules of the
SEC.
(2) No restricted stock or stock options were granted in 1993, 1994 or 1995
to the named executive officers.
(3) The Chairman and Mr. Lorber received no compensation or other payments
for services rendered to the Company for any period prior to November
15, 1994 other than compensation (not included in the table) which was
received in their capacities as directors and certain expense
reimbursements.
(4) Mr. Lampen commenced employment with the Company in October 1995.
(5) In 1995, all of Mr. Sauter's salary was paid by the Company, 25% (or
$69,633) of which was subsequently reimbursed to the Company by Brooke.
The table reflects 100% of Mr. Sauter's 1995 salary. Mr. Sauter retired
as Vice President, Chief Financial Officer and Treasurer of the Company
in May 1996.
COMPENSATION OF DIRECTORS
In 1995, each non-employee director of the Company received an annual
fee of $35,000 for serving on the Board of Directors as well as a $1,000 fee for
attendance at each meeting of the Board of Directors or a committee thereof.
EMPLOYMENT AGREEMENTS
The Chairman is a party to an employment agreement with the Company
dated as of June 1, 1995, as amended. The agreement has an initial term of three
years effective as of January 18, 1995 (the "Effective Date"), with an automatic
one year extension on each anniversary of the Effective Date unless notice of
non-extension is given by either party within the sixty-day period prior to such
anniversary date. As of January 18, 1995, the Chairman's annual base salary was
$2,000,000. Following termination of his employment without cause (as defined
therein), he would continue to receive his base salary for a period of 36 months
commencing with the next anniversary of the Effective Date following the
termination notice. Following termination of his employment within two years of
a change of control (as defined therein), he is entitled to receive a lump sum
payment equal to 2.99 times his then current base salary. The Joint Plan
provides that the annual compensation paid to the Chairman for services rendered
in his capacity as an officer or director of the Company shall not exceed
$2,000,000.
12
<PAGE> 16
Howard M. Lorber is a party to an employment agreement with the Company
dated June 1, 1995, as amended. The agreement has an initial term of three years
effective as of January 18, 1995 (the "Effective Date"), with an automatic one
year extension on each anniversary of the Effective Date unless notice of
non-extension is given by either party within the sixty-day period prior to such
anniversary date. As of January 18, 1995, Mr. Lorber's annual base salary was
$1,000,000 and commencing January 1, 1996, his annual base salary was
$1,250,000. The Board shall periodically review such base salary and may
increase (but not decrease) it from time to time, in its sole discretion. In
addition, the Board of Directors may award an annual bonus to Mr. Lorber at its
sole discretion. The Board of Directors awarded Mr. Lorber a bonus of $500,000
in 1995. Following termination of his employment without cause (as defined
therein), he would continue to receive his base salary for a period of 36 months
commencing with the next anniversary of the Effective Date following the
termination notice. Following termination of his employment within two years of
a change of control (as defined therein), he is entitled to receive a lump sum
payment equal to 2.99 times the sum of (i) his then current base salary and (ii)
the Bonus Amounts (as defined therein) earned by him for the twelve-month period
ending with the last day of the month immediately preceding the month in which
the termination occurs.
Richard J. Lampen is a party to an employment agreement with the
Company dated September 22, 1995. The agreement has an initial term of two and a
quarter years from October 1, 1995 with automatic renewals after the initial
term for additional one-year terms unless notice of non-renewal is given by
either party within the ninety-day period prior to the termination date. As of
October 1, 1995, his annual base salary was $600,000. The Board shall review
such base salary annually and may increase (but not decrease) it from time to
time, in its sole discretion. In addition, the employment agreement provided for
a fixed bonus in 1995 of $100,000; thereafter, the Board of Directors may award
an annual bonus to Mr. Lampen at its sole discretion. Following termination of
his employment without cause (as defined therein), he shall receive severance
pay in a lump sum equal to the amount of his base salary he would have received
if he was employed until the later of December 31, 1997 or one year after
termination of his employment term.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not currently have a compensation committee. The Board
of Directors acts on compensation matters as a committee of the whole. The
Chairman has been Chairman of the Board of the Company since 1988 and Chief
Executive Officer since November 1994, Mr. Lorber was named President and Chief
Operating Officer of the Company in November 1994 and Mr. Sauter, a current
director not seeking re-election, was named Vice President, Treasurer and Chief
Financial Officer of the Company in November 1994 and served as such until May
1996.
In 1995, the Chairman was Chairman of the Board, President, Chief
Executive Officer and a member of the Compensation Committee of Brooke and was
the Chairman of the Board of MAI until May 1995 and a director thereof until
October 1995; Mr. Lorber was a director of SkyBox until May, 1995, and was
Chairman of the Board of Directors of SkyBox until May, 1995; Mr. Ressler was
Chief Executive Officer of MAI; Mr. Sauter was Vice President, Chief Financial
Officer and Treasurer of Brooke, and a director and Treasurer of Eve Holdings
Inc., a wholly owned subsidiary of Liggett; and Mr. Kramer was a director of
SkyBox until March 1995.
During 1995, the Chairman was a director, President and Treasurer of
each of BGLS, NV Holdings and BMI; and Mr. Sauter was Vice President, Chief
Financial Officer and Treasurer of each of BGLS, NV Holdings and BMI. For
information on the interests of the Chairman, Mr. Lorber and others in Brooke
and the securities of the Company and for information on certain other
relationships and transactions, see "Security Ownership of Certain Beneficial
Owners and Management", "Nomination and Election of Directors - Board Proposal
Number 1" and "Certain Transactions Relating to the Joint Plan and Interests of
Certain Persons Therein - Joint Plan Provisions for Appointment of Directors,
Approval of Affiliated Transactions and Other Matters" and "Certain
Relationships and Related Matters."
13
<PAGE> 17
PENSION PLANS
In connection with the Company's sale of its wholly owned subsidiary,
Western Union Financial Services, Inc. ("FSI"), to First Financial Management
Corporation ("FFMC") on November 15, 1994, the Western Union Pension Plan (the
"Pension Plan") was assumed by FSI and the Company was released from all
obligations thereunder.
None of the current employees of the Company are entitled to any
benefits under the Pension Plan.
STOCK OPTION GRANTS AND STOCK OPTION EXERCISES
There were no stock options granted to, or exercised by, the named
executive officers during 1995.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
From January 1, 1994 through January 18, 1995, the Company handled its
corporate governance and business affairs, including matters relating to
executive compensation, under the supervision of the Bankruptcy Court. The
policy of the Company regarding the compensation of its executive officers,
which was disclosed in the Disclosure Statement, dated September 27, 1994,
relating to the Joint Plan is to maintain a total compensation program
competitive with comparable companies in order to attract and retain
highly qualified personnel. The Company does not currently have a compensation
committee. The Board of Directors acts on compensation matters as a committee
of the whole.
In June 1995, the Company entered into employment agreements, as
amended, with the Chairman and Mr. Lorber, after it had engaged The
Wyatt Company, an independent executive compensation advisor (the "Advisor"),
to advise it with respect to the compensation of such executive officers. In
addition, the Company had appointed Messrs. Burns, McDermott and Ridings as
members of an ad hoc committee (the "Committee") to review the Advisor's report
and make a recommendation to the Board of Directors on such compensation. The
Committee evaluated various factors, including the roles of such executive
officers in effecting recent material transactions entered into by the Company,
the executive officers' prior services rendered to the Company, and the
compensation levels of other senior executive officers at comparable companies
performing comparable services. In determining the appropriate compensation
level for the Chairman's employment agreement, the Board of Directors, after a
review of such matters, including the recommendation of the Committee and the
report of the Advisor, accepted the recommendation of the Committee at a
special meeting of the Board of Directors in April 1995. First, the Board of
Directors noted that the Joint Plan provides that the compensation to be paid
to the Chairman for services rendered in his capacity as an officer or director
of the Company could not exceed $2,000,000 per year, and that such compensation
restrictions were extensively discussed during the Company's bankruptcy
reorganization proceedings. The Board of Directors then determined, based upon
additional recommendations of the Committee and the Advisor's report, that: (i)
the Company had been relying on a temporary exemption from registration
pursuant to Rule 3a-2 under the Investment Company Act of 1940; (ii)
implementation of the Company's strategy of acquisitions and dispositions in
connection therewith would involve complex matters requiring dedicated senior
management; (iii) the Chairman possessed substantial experience in acquiring
and managing operating companies; and (iv) the proposed annual compensation
level of $2,000,000 for the Chairman was reasonable compared to the
compensation levels of other chief executive officers at comparable companies
performing comparable services. Because the Chairman's compensation is limited
to $2,000,000 per year pursuant to the Joint Plan, as indicated above, the
Chairman does not receive any bonus or other payment based upon the Company's
performance.
In determining the compensation levels of the Company's other executive
officers, the Board of Directors reviews, as to each officer, such officer's
prior experience, including that with respect to acquiring and managing
operating companies and such officer's contribution to the Company's strategy
14
<PAGE> 18
with respect thereto, and the salary of such officer compared to the
compensation levels of other executive officers performing comparable services,
both in the Company and of comparable companies. In addition, the employment
agreements of certain executive officers provide for the payment of bonuses at
the sole discretion of the Board of Directors. Based on various factors,
including those specified above, Mr. Lorber was awarded a $500,000 bonus by the
Board of Directors in 1995. Mr. Lampen's employment agreement provided for a
fixed $100,000 bonus payable in 1995; in subsequent years, the payment of a
bonus is subject to the sole discretion of the Board of Directors. See
"Employment Agreements", above.
In 1993, Section 162(m) was added to the Internal Revenue Code of 1986,
as amended (the "Code"). This Section generally provides that no publicly held
company shall be permitted to deduct compensation in excess of $1 million paid
in any taxable year to its chief executive officer or any of its four other
highest paid officers unless: (i) the compensation is payable solely on account
of the attainment of performance goals; (ii) the performance goals are
determined by a compensation committee of two or more outside directors; (iii)
the material terms under which compensation is to be paid are disclosed to and
approved by the shareholders of the Company; and (iv) the compensation
committee certifies that the performance goals were met. This limitation is
applicable to compensation paid by the Company to certain of its executive
officers. The effect of the Code Section 162(m) limitation is substantially
mitigated by the Company's net operating losses, although the amount of any
deduction disallowed under Code Section 162(m) could increase the Company's
alternative minimum tax by up to 2% of such disallowed amount. For information
relating to the Company's net operating losses, see Note 9 (Federal Income Tax)
to the Company's Consolidated Financial Statements, which Note is set
forth in the 1995 Form 10-K enclosed herewith, and which Note is incorporated
herein by reference thereto.
The foregoing information is provided by the Board of Directors of the
Company.
Bennett S. LeBow
Henry C. Beinstein
Arnold I. Burns
Ronald J. Kramer
Howard M. Lorber
Paul L. McDermott
Richard S. Ressler
Barry W. Ridings
Gerald E. Sauter
PERFORMANCE GRAPH
The following graph compares the total annual return of the Company's
Common Shares, the S&P 500 Index, the S&P SmallCap 600 Index, and the NASDAQ
Composite Index for the five years ended December 31, 1995. The graph assumes
the value of the investment in the Common Shares and each index was $100 on
December 31, 1990 and that all dividends were reinvested. No dividends were
paid on Common Shares in the years indicated below. Because of (i) the
Company's recent emergence from bankruptcy and (ii) the Company's recent
material acquisitions and dispositions, the Company does not believe that it
can reasonably identify a "peer group", and in lieu thereof has included
statistical information with respect to companies in the S&P SmallCap 600 Index
and the NASDAQ Composite Index.
[GRAPH]
<TABLE>
<CAPTION>
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New Valley Corporation 100 44 61 11 33 52
- -----------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX 100 130 140 154 156 215
- -----------------------------------------------------------------------------------------------------------------------
S&P SMALLCAP 600 INDEX 100 148 179 214 204 262
- -----------------------------------------------------------------------------------------------------------------------
NASDAQ COMPOSITE INDEX 100 159 185 214 207 288
=======================================================================================================================
</TABLE>
15
<PAGE> 19
CERTAIN TRANSACTIONS RELATING TO THE JOINT PLAN AND INTERESTS OF CERTAIN PERSONS
THEREIN
The following summaries of the Joint Plan and the Purchase Agreement
(as defined below) are qualified in their entirety by reference to the Joint
Plan and the Purchase Agreement, respectively, which are incorporated by
reference as exhibits to the 1995 Form 10-K enclosed herewith.
Emergence from Bankruptcy Proceedings, Sale of FSI; Tender Offer. On
November 15, 1994, FFMC purchased from the Company all of the issued and
outstanding shares of common stock of FSI (the "FSI Shares") and those tangible
and intangible assets and properties of the Company and its affiliates (other
than the Seller's Marks, as defined below), relating to the business (the "Money
Transfer Business") of providing domestic and international money transfer
services, bill payment services, telephone cards, money orders and bank card
services (the "Related Assets") pursuant to a purchase agreement, dated as of
October 20, 1994, which was subsequently amended as of November 14, 1994 (as so
amended, the "Purchase Agreement"). On January 13, 1995, the Company sold to
FFMC all of the trademarks and tradenames used in the Money Transfer Business
and constituting the "Western Union" name and trademark (the "Seller's Marks").
The Purchase Agreement prohibits the Company from competing with FSI's business
for five years. The aggregate purchase price for the FSI Shares and the Related
Assets (including the Sellers' Marks) was approximately $1,193 million,
including $893 million in cash and $300 million representing the assumption by
FSI of the liabilities associated with the Pension Plan. In addition, FFMC and
FSI agreed to assume certain other liabilities of the Company in connection with
the sale of the FSI Shares and the Related Assets. The amount of consideration
was determined pursuant to an auction process and subsequent negotiations
between the Company and FFMC conducted pursuant to an order of, and under the
jurisdiction and supervision of, the Bankruptcy Court.
On the Effective Date of the Joint Plan, the Company completed
substantially all distributions to creditors required to be made under the Joint
Plan, and all of the Company's Class A Senior Preferred Shares, Class B
Preferred Shares, Common Shares and other equity interests were reinstated and
deemed to retain all of their legal, equitable and contractual rights.
On such date, pursuant to the Joint Plan, the Company paid a $50 per
share special cash dividend to the holders of record of Class A Senior Preferred
Shares on December 20, 1994 in an aggregate amount of $75,000,550.
On February 17, 1995, the Company completed a cash tender offer (the
"Offer"), which was made pursuant to the terms of the Joint Plan, for up to
150,000 Class A Senior Preferred Shares at a price of $80 per share net to the
seller in cash. On February 21, 1995, the Company accepted for payment and paid
for all 54,445 Class A Senior Preferred Shares validly tendered in the Offer, at
an aggregate cash purchase price equal to $4,355,600.
On October 31, 1995, the Company conveyed to FFMC substantially all of
the assets and liabilities of Western Union Data Services Company, Inc. for an
aggregate cash purchase price, as adjusted, of $17.54 million.
16
<PAGE> 20
Joint Plan Provisions for Appointment of Directors, Approval of
Affiliated Transactions and Other Matters. The Board of Directors of the Company
consists of the following nine directors, each of which was appointed pursuant
to the Joint Plan and subsequently elected by the Company's shareholders at the
last Annual Meeting of Shareholders held on May 15, 1995: Bennett S. LeBow,
Howard M. Lorber and Richard S. Ressler, all of whom were directors of the
Company prior to confirmation of the Joint Plan (the "Prior Directors"); Paul L.
McDermott, Ronald J. Kramer and Arnold I. Burns, three new independent directors
who were identified in the Disclosure Statement relating to the Joint Plan;
Gerald E. Sauter, who was designated by the Prior Directors pursuant to the
terms of the Joint Plan (Richard J. Lampen has been nominated by the Board of
Directors to succeed Mr. Sauter as a director); and Henry C. Beinstein and Barry
W. Ridings (together, the "Shareholder Designees"), who were selected as a
result of negotiations with the Official Committee of Equity Security Holders.
The Shareholder Designees are deemed to be directors elected pursuant to the
Certificate of Incorporation by holders of the Class A Senior Preferred Shares,
voting as a class, and by the holders of the Class A Senior Preferred Shares and
the Class B Preferred Shares, voting together as a single class, in each case as
a result of dividend arrearages thereon.
The Company and the Board of Directors have agreed to take all steps
within their power to cause the Shareholder Designees (or their permitted
successors) to serve as directors of the Company until their successors are
elected at the third annual meeting of shareholders held after the Effective
Date (the "Shareholder Designee Termination Date"). For information on the
designation of a successor if a Shareholder Designee resigns or otherwise
becomes disabled from serving, see "Board Proposal Number 2" above.
Members of the Brooke Group have agreed to vote or cause to be voted
all of their respective shares of capital stock in the Company in favor of the
election of the Shareholder Designees as provided above and during the time
period referred to above. Until the Shareholder Designee Termination Date, if
any director other than a Shareholder Designee shall resign or become unable to
serve, the remaining directors shall be entitled to designate the successor
thereof.
The Joint Plan also (i) makes provisions for restrictions on and
approvals for certain transactions with affiliates to which the Company may be a
party, (ii) imposes requirements regarding proposed investments in capital stock
or other ownership interests in other entities, or in capital assets, under
certain circumstances, and (iii) requires that, whenever the vote of the holders
of Class A Senior Preferred Shares acting as a single class is necessary for any
approval, then such vote must, in addition to satisfying all other applicable
requirements, reflect the affirmative vote of either (x) 80% of the outstanding
shares of that class or (y) a simple majority of all shares of that class voting
on the issue exclusive of shares beneficially owned by the Brooke Group.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Lorber, a director and executive officer of the Company, is a
shareholder of Aegis Capital Corp. ("Aegis"), a broker-dealer that has performed
services for the Company and its subsidiaries since January 1, 1995. During
1995, Aegis received commission and other income in the aggregate amount of
approximately $584,466. Mr. Lorber is also Chairman of the Board and Chief
Executive Officer of Hallman & Lorber and a consultant to Brooke. During 1995,
Hallman & Lorber received ordinary and customary insurance commissions
aggregating approximately $11,719 on various insurance policies issued for the
Company.
Mr. Burns, a director of the Company, is a partner of Proskauer Rose
Goetz & Mendelsohn LLP, a law firm which has been engaged to perform legal
services for the Company in the past and which may be so engaged in the future.
The fees received for such legal services in 1995 did not exceed five percent of
the law firm's revenues.
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Mr. Beinstein, a director of the Company, was the Executive Director of
Proskauer Rose Goetz & Mendelsohn LLP from 1985 until October 1995. He is
currently the Managing Director of Milbank, Tweed, Hadley & McCloy, a law firm
which has been engaged to perform legal services for the Company in the past and
which may be so engaged in the future. The fees received for such legal services
in 1995 did not exceed five percent of the law firm's revenues.
Brooke has paid, among others, Messrs. Burns and Ridings, directors of
the Company, $30,000 each in connection with their agreeing to be a Brooke
nominee at the annual stockholders' meeting of RJR Nabisco Holdings Corp. ("RJR
Holdings") held in April 1996. Brooke also entered into an agreement with each
Brooke nominee including Messrs. Burns and Ridings to indemnify such nominees
from and against any losses incurred by such nominees resulting from, relating
to or arising out of any claim in connection with the solicitation of proxies in
support of the nominees' election at such annual meeting, including the right to
be advanced by Brooke for any expenses incurred in connection with any such
claim. For further information concerning certain agreements and transactions
between the Company and Brooke relating to RJR Holdings, see the information
incorporated by reference under "Certain Matters Relating to RJR Holdings",
below.
During 1995, the Company and Brooke entered into an expense sharing
agreement whereby the Company agreed to reimburse Brooke for its portion of
certain operating expenses, rent and utilization of personnel. Expense
reimbursements amounted to $571,000 for the year ended December 31, 1995.
Mr. Kramer, a director of the Company, is Chairman of Ladenburg,
Thalmann Group Inc. and an employee of its subsidiary, Ladenburg, an investment
banking firm that was acquired by the Company in May 1995. Prior to May 1995,
Ladenburg provided, from time to time, financial advisory services to the
Company and/or its affiliates.
On May 31, 1995, pursuant to a purchase agreement (the "Ladenburg
Agreement"), the Company acquired all of the outstanding shares of common stock
and other equity interests of Ladenburg for $26.75 million in cash, subject to
adjustment. The purchase price was based on the book value of Ladenburg's assets
at January 31, 1995. Pursuant to the Ladenburg Agreement, Mr. Kramer received
approximately $101,000 for his shares of common stock and other equity interests
in Ladenburg, and he was paid a finder's fee at closing of $800,000, half of
which was paid by the Company. The foregoing is qualified in its entirety by
reference to the Ladenburg Agreement, which is incorporated by reference as an
exhibit to the 1995 Form 10-K enclosed herewith.
Certain Matters Relating to RJR Holdings. For information concerning
certain agreements and transactions between the Company and Brooke relating to
RJR Holdings, see Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Recent Developments Certain Matters
Relating to RJR Holdings" and Note 5 (Investment Securities) and Note 17
(Related Party Transactions) to the Company's Consolidated Financial Statements,
each of which is set forth in the 1995 Form 10-K enclosed herewith, and each of
which is incorporated herein by reference thereto.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
BOARD PROPOSAL 4 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Coopers & Lybrand
L.L.P. ("Coopers & Lybrand") to serve as its independent auditors for 1996.
Coopers & Lybrand has acted as the Company's independent accountants since March
8, 1995.
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The shareholders will be requested to adopt the following resolution:
"RESOLVED, that the appointment by the Board of Directors of New
Valley Corporation of Coopers & Lybrand L.L.P. as independent auditors
for the year 1996 be ratified."
The Board of Directors recommends a vote FOR this proposal.
In the event the resolution is defeated, the adverse vote will be
considered as a direction to the Board of Directors to select other auditors for
the following year. However, because of the difficulty of substituting other
auditors, it is contemplated that the appointment for the year 1996 will be
permitted to stand unless the Board of Directors finds other good reason for a
substitution.
On March 8, 1995, the Board of Directors voted to terminate the
engagement of Price Waterhouse LLP ("Price Waterhouse") as its independent
auditors effective upon completion of the audit for the fiscal year ended
December 31, 1994, and to approve the engagement of Coopers & Lybrand, as
auditors for the fiscal year 1995.
During the fiscal year ended December 31, 1994 and the subsequent
interim period through March 8, 1995, there were no disagreements with Price
Waterhouse on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Price Waterhouse, would have caused them to
make reference in connection with their opinion to the subject matter of the
disagreements.
The audit reports of Price Waterhouse on the consolidated financial
statements of the Company and its subsidiaries, as of and for the fiscal year
ended December 31, 1994 and the subsequent interim period through March 8, 1995,
did not contain any adverse opinion or disclaimer of opinion, nor were they
qualified as to audit scope or accounting principles.
The Company engaged Coopers & Lybrand as its independent auditors as of
March 8, 1995.
Representatives of Coopers & Lybrand are expected to be present at the
Annual Meeting and will have an opportunity to make a statement should they
desire to do so. Such representatives are also expected to be available to
answer appropriate questions of shareholders.
The services to be rendered to the Company by Coopers & Lybrand include
examination of the consolidated financial statements of the Company and its
subsidiaries, reviews of quarterly and other reports filed with the SEC,
participation in meetings with the Audit Committee in connection with the
performance of audit services, and other special audit, tax and accounting
services.
REINCORPORATION PROPOSAL
The Company's Board of Directors has determined that it would be in the
best interests of the Company and its shareholders to (i) change the Company's
jurisdiction of incorporation from the State of New York to the State of
Delaware and (ii) effect a "reverse stock split" of the outstanding Common
Shares on a proportionate one-for-twenty basis.
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BOARD PROPOSAL 5 -- CHANGE OF THE COMPANY'S JURISDICTION OF INCORPORATION FROM
NEW YORK TO DELAWARE AND "REVERSE STOCK SPLIT" OF THE COMMON SHARES
THE REINCORPORATION PROPOSAL - GENERAL
The Company's Board of Directors has unanimously approved, and
recommends for shareholder approval, the proposed change of the Company's
jurisdiction of incorporation from the State of New York to the State of
Delaware (the "Reincorporation"). The Reincorporation would be accomplished
through the merger (the "Merger") of the Company with and into NV Delaware Inc.,
a newly-formed wholly owned subsidiary of the Company that is incorporated in
Delaware ("NV Delaware"), with NV Delaware as the surviving corporation in the
Merger. NV Delaware has not conducted any business other than with respect to
the proposed Merger. The Reincorporation would not result in any change in the
business, management, executive officers, directors, location of principal
executive offices, assets, liabilities or net worth of the Company. By operation
of law, upon the completion of the Merger, all assets, property, rights,
liabilities and obligations of the Company would be transferred to and assumed
by NV Delaware. The Merger would be accomplished pursuant to the terms and
conditions of a merger agreement (the "Merger Agreement") between the Company
and NV Delaware, a copy of which is attached hereto as Annex II. The Company's
officers and directors, who together may be deemed to beneficially own 41.6% of
the Common Shares, have indicated that they intend to vote FOR the
Reincorporation Proposal.
The principal purpose of the Reincorporation is to change the law
applicable to the Company's corporate affairs from the New York Business
Corporation Law ("NYBCL") to the Delaware General Corporation Law ("DGCL"),
because the Company believes that Delaware corporation law offers a number of
advantages over New York corporation law. See "Principal Reasons for Changing
the State of Incorporation", below. In addition, the Reincorporation would, as a
result of the transactions contemplated by the Merger Agreement, reduce the
number of outstanding Common Shares on a proportionate one-for-twenty basis.
See "The Reverse Stock Split", below.
The Merger Agreement has been approved and adopted by (i) the Company's
Board of Directors in accordance with the NYBCL; and (ii) the Board of Directors
of NV Delaware, and the Company as sole stockholder of NV Delaware, each in
accordance with the DGCL. The Board of Directors of NV Delaware consists solely
of persons who are executive officers of the Company.
The Board of Directors recommends that shareholders vote FOR the
Reincorporation Proposal.
If the Reincorporation Proposal is approved by the Company's
shareholders as provided herein (see "Vote Required for Approval of the
Reincorporation Proposal", below), immediately upon completion of the Merger, NV
Delaware will be merged (the "Second-Step Merger", and together with the Merger,
the "Mergers") with and into NV Merger Sub Inc., a Delaware corporation and a
wholly owned subsidiary of NV Delaware ("NV Merger Sub"). As described in "The
Second-Step Merger", below, NV Merger Sub has not conducted any business other
than with respect to the Second-Step Merger. The Second-Step Merger would not
result in any change in the business, management, executive officers, directors,
location of principal executive offices, assets, liabilities or net worth of the
Company (or NV Delaware). By operation of law, upon the completion of the
Second-Step Merger, all assets, property, rights, liabilities and obligations of
the Company (and NV Delaware) would be transferred to and assumed by NV Merger
Sub. Upon completion of the Second-Step Merger, NV Merger Sub would be renamed
"New Valley Corporation". The Second-Step Merger would be accomplished pursuant
to the terms and conditions of a merger agreement (the "Second-Step Merger
Agreement") between NV Merger Sub and NV Delaware, a copy of which is attached
hereto as Annex V. NV Merger Sub may be referred to herein, as the surviving
corporation and in the Second-Step Merger, as the "Surviving Corporation".
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The Second-Step Merger Agreement has been adopted and approved in
accordance with the DGCL by (i) the boards of directors of each of NV Delaware
and NV Merger Sub and (ii) the Company and NV Delaware, as sole stockholders of
NV Delaware and NV Merger Sub, respectively. The Company's Board of Directors
has also approved the Second-Step Merger and the form and terms of the
Second-Step Merger Agreement. The Company owns all of the capital stock of NV
Delaware and, indirectly, NV Merger Sub, and the boards of directors of NV
Delaware and NV Merger Sub consist solely of persons who are executive officers
of the Company. The Second-Step Merger is conditioned upon, among other things,
the approval of Board Proposal 5 (the Reincorporation Proposal) by the Company's
shareholders as provided herein and the consummation of the Merger. THE
SECOND-STEP MERGER IS NOT SUBJECT TO THE APPROVAL OF EITHER THE COMPANY'S
SHAREHOLDERS (THROUGH THIS PROXY STATEMENT OR OTHERWISE) OR, AFTER GIVING EFFECT
TO THE MERGER, THE STOCKHOLDERS OF NV DELAWARE UNDER APPLICABLE LAW, AND NO SUCH
APPROVALS WILL BE SOUGHT. THE SECOND-STEP MERGER WILL BE EFFECTED IMMEDIATELY
AFTER THE MERGER IF BOARD PROPOSAL 5 (THE REINCORPORATION PROPOSAL) IS APPROVED
BY THE COMPANY'S SHAREHOLDERS. See "Vote Required for Approval of the
Reincorporation Proposal", below. The Second-Step Merger will not be effected if
the Reincorporation Proposal is not approved by the Company's shareholders. The
Second-Step Merger Agreement was executed in May 1996.
As described in greater detail in "The Second-Step Merger", below, the
sole purposes of the Second-Step Merger are to (1) provide an arrangement for
the "bundling" and sale of fractional common stock interests otherwise issuable
in the Second-Step Merger; and (2) adjust the voting power of the outstanding
Surviving Corporation Preferred Shares (as defined below) to reflect the Reverse
Stock Split, in order to restore the same pro rata voting power among the $15.00
Class A Increasing Rate Cumulative Senior Preferred Shares ($100 Liquidation
Value), $.01 par value, of the Surviving Corporation (the "Surviving Corporation
Class A Senior Preferred Shares"), the $3.00 Class B Cumulative Convertible
Preferred Shares ($25 Liquidation Value), $.10 par value, of the Surviving
Corporation (the "Surviving Corporation Class B Preferred Shares", and together
with the Surviving Corporation Class A Senior Preferred Shares, the "Surviving
Corporation Preferred Shares"), and the Common Shares, $.01 par value, of the
Surviving Corporation (the "Surviving Corporation Common Shares"; and together
with the Surviving Corporation Preferred Shares, the "Surviving Corporation
Shares"), as existed among the Shares immediately prior to the Merger. In
addition, the certificate of incorporation of the Surviving Corporation (the
"Surviving Corporation Certificate of Incorporation") will contain an increased
conversion price for the Surviving Corporation Class B Preferred Shares --
rather than rely on the antidilution provisions of the Certificate of
Incorporation (which provisions would have provided for the identical
adjustment) -- in order to more clearly reflect the actual conversion price in
effect after the Reverse Stock Split. See "Principal Effects of the Second-Step
Merger" and "The Second-Step Merger Agreement Effect on Capital Stock", below.
Other than these procedures with respect to the disposition of fractional share
interests (see "Fractional Share Procedures", below), and the adjustments to the
terms of the Surviving Corporation Preferred Shares in order to properly reflect
the Reverse Stock Split, no other changes will be made to any rights,
designations, limitations or preferences of the Surviving Corporation Shares.
PRINCIPAL EFFECTS OF THE REINCORPORATION
The Company's Board of Directors has unanimously approved the
Reincorporation, and the Merger Agreement pursuant to which it would be
effected, in order to accomplish the two principal objectives specified below.
The Merger, if consummated, would have the following principal effects:
(1) THE COMPANY WILL BE A DELAWARE CORPORATION. The Company would
become a Delaware corporation through the Merger (the merger of the Company with
and into NV Delaware, a wholly owned subsidiary of the Company that is
incorporated in Delaware). NV Delaware has not conducted any business other than
with respect to the proposed Merger. The Merger would not result in any change
in the business, management, executive officers, directors, location of
principal executive offices, assets,
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liabilities or net worth of the Company. By operation of law, upon the
completion of the Merger, all assets, property, rights, liabilities and
obligations of the Company would be transferred to and assumed by NV Delaware.
As a result of the Reincorporation in Delaware, the Company's corporate affairs
would be governed by Delaware corporation law, which the Board of Directors
believes has certain advantages over New York corporation law. See "Principal
Reasons for Changing the State of Incorporation to Delaware", below. For a
discussion of certain differences between Delaware and New York corporate law,
please refer to "Principal Differences Between New York and Delaware Corporation
Laws", below, and Annex I attached hereto, which describes such differences in
greater detail. NV Delaware may be referred to herein, as the surviving
corporation in the Merger, as the "Surviving Corporation".
(2) THE NUMBER OF OUTSTANDING COMMON SHARES WILL BE DECREASED. Pursuant
to the Merger Agreement, each outstanding Common Share will be converted into
one-twentieth of an NV Delaware Common Share, having otherwise identical rights,
limitations, designations and preferences as the Common Shares had immediately
prior to the Merger (the "Reverse Stock Split"). As examples of the conversion
of Common Shares in the Merger, (i) a shareholder holding one hundred Common
Shares immediately prior to the Merger would hold five NV Delaware Common Shares
upon completion of the Merger and (ii) a shareholder holding two hundred fifty
Common Shares immediately prior to the Merger would hold twelve and one-half NV
Delaware Common Shares upon completion of the Merger. Accordingly, the Reverse
Stock Split will affect all Common Shares on a proportionate basis and each
stockholder of NV Delaware will have the same proportionate interest in NV
Delaware upon completion of the Merger that such shareholder had in the Company
immediately prior to the Merger. However, because no fractional shares will be
issued in the Second-Step Merger, to the extent a NV Delaware stockholder holds
fractional share interests -- a Company shareholder holding less than twenty
Common Shares or a number of Common Shares not evenly divisible by twenty
immediately prior to the Merger - - the equity and voting interest of such
stockholder in the Surviving Corporation will be reduced thereby. See "The
Second-Step Merger Agreement - Effect on Capital Stock". The principal reason
for the Reverse Stock Split is to enhance the ability of the Surviving
Corporation (after the Second-Step Merger) to have the Surviving Corporation
Common Shares listed on the National Association of Securities Dealers, Inc.
Quotations System (the "NASDAQ SmallCap Market"), and (if possible) on the
NASDAQ National Market System ("NMS"). (In the first quarter of 1995, the
Company's application to list its equity securities on the NMS was rejected
because of the Company's failure to satisfy certain listing requirements,
including the minimum share bid price requirement and the minimum net tangible
asset requirement.) See "The Reverse Stock Split", below. The rights,
designations, limitations and preferences of NV Delaware Class A Senior
Preferred Shares and NV Delaware Class B Preferred Shares upon completion of the
Merger would be identical to those of the Class A Senior Preferred Shares and
the Class B Preferred Shares, respectively, immediately prior to the Merger. In
addition, the number of outstanding Class A Senior Preferred Shares and Class B
Preferred Shares would not be affected by the Merger, and such shares would be
converted into a like number of NV Delaware Class A Senior Preferred Shares and
NV Delaware Class B Preferred Shares, respectively, in the Merger. The rights,
designations, limitations and preferences of the NV Delaware Preferred Shares
would not be otherwise affected by the Merger. However, pursuant to the
Second-Step Merger, (i) the respective voting power of the outstanding NV
Delaware Preferred Shares would each be reduced by a factor of twenty and (ii)
the conversion price allocated to a Surviving Corporation Common Share upon
conversion of the NV Delaware Class B Preferred Shares would correspondingly be
increased by a factor of twenty. As described in greater detail in "The
Second-Step Merger Agreement - Effect on Capital Stock", below, these changes in
the terms of the Surviving Corporation Preferred Shares are designed solely to
address the consequences on such Surviving Corporation Preferred Shares of the
one-for-twenty Reverse Stock Split of the Common Shares effected pursuant to the
Merger. Accordingly, such adjustments do not adversely affect the rights,
designations, limitations and preferences of the Surviving Corporation Preferred
Shares.
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PRINCIPAL REASONS FOR CHANGING THE STATE OF INCORPORATION TO DELAWARE
For many years, Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and flexible corporate laws which are periodically updated
and revised to meet changing business needs. As a result, many corporations
initially choose Delaware as their domicile and many others have reincorporated
in Delaware in a manner similar to that proposed by the Company. Because of
Delaware's long-standing policy of encouraging incorporation in that state, and
its consequent preeminence as the state of incorporation for many major
corporations, the Delaware courts have developed a considerable expertise in
dealing with corporate issues and a substantial body of case law has developed
construing Delaware law and establishing public policies with respect to
Delaware corporations. It is anticipated that Delaware corporate law will
continue to be interpreted and explained in a number of significant court
decisions which may provide greater predictability with respect to the Company's
corporate legal affairs. Certain aspects of Delaware corporate law have,
however, been criticized on the ground that they do not afford minority
stockholders the same substantive rights and protection as are available in a
number of other states. For a discussion of certain differences in stockholders'
rights and the powers of management under the DGCL and the NYBCL, see "Principal
Differences Between New York and Delaware Corporation Laws", below, and Annex I
attached to this Proxy Statement, which describes certain differences between
New York and Delaware corporation law in greater detail.
In the event that the Reincorporation Proposal is not approved by the
Company's shareholders as provided herein, the Company will remain a New York
corporation.
PRINCIPAL DIFFERENCES BETWEEN NEW YORK AND DELAWARE CORPORATION LAWS
The Reincorporation would effect several changes in the rights of
shareholders as a result of differences between the NYBCL and the DGCL. The
provisions of the NYBCL and DGCL differ in many respects, including without
limitation with respect to dividends, statutory "dissenters" or "appraisal"
rights, shareholder vote to approve certain business combinations,
classification of the board of directors, the right to examine the subject
corporation's books and records and the ability to enter into "business
combinations" with certain shareholders. As a result, if the Reincorporation
Proposal is approved by the Company's shareholders as provided herein, certain
of their rights as shareholders will be affected thereby. A more detailed
analysis of certain principal differences between New York and Delaware
corporation law is set forth in Annex I hereto, "Principal Differences Between
New York and Delaware Corporation Laws".
In addition to changes arising generally under Delaware law, the Merger
Agreement contemplates that the existing Certificate of Incorporation and bylaws
(the "By-Laws") of the Company would be changed in the Merger, and that NV
Delaware would be governed by a new certificate of incorporation (the "NV
Delaware Certificate of Incorporation") and bylaws (the "NV Delaware By-Laws").
The NV Delaware Certificate of Incorporation and the NV Delaware By-Laws will be
identical to the Surviving Corporation Certificate of Incorporation and the
Surviving Corporation By-Laws, respectively, except for those differences
specified in Annexes III and IV, respectively. Copies of the Surviving
Corporation Certificate of Incorporation and the Surviving Corporation By-Laws
are attached hereto as Annexes VI and VII, respectively. See "Principal
Differences Between the Charter Documents of the Company and NV Delaware" and
"Principal Differences Between the Charter Documents of NV Delaware and the
Surviving Corporation", below.
PRINCIPAL DIFFERENCES BETWEEN THE CHARTER DOCUMENTS OF THE COMPANY AND NV
DELAWARE
Certain differences between the existing Certificate of Incorporation
and By-Laws of the Company, on the one hand, and the NV Delaware Certificate of
Incorporation and NV Delaware By-Laws, on the other hand, respectively, arise
from certain differences generally between the NYBCL and the
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DGCL. See "Principal Differences Between New York and Delaware Corporation
Laws", above, and Annex I hereto.
Certificate of Incorporation. Other than such differences arising from
differences between the NYBCL and the DGCL, the NV Delaware Certificate of
Incorporation is identical to the Certificate of Incorporation in all material
respects, except as described below.
Limitation of Liability. The NV Delaware Certificate of Incorporation
provides, as permitted by Section 102(7) of the DGCL, that a director of NV
Delaware shall not be personally liable to NV Delaware 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 NV Delaware or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL (declaration and payment of dividends) or (iv) for any transaction from
which the director derived an improper personal benefit. (See Paragraph EIGHTH
of the NV Delaware Certificate of Incorporation.) The Certificate of
Incorporation provides for the limitation of liability of directors except to
the extent prohibited by the NYBCL. (See Paragraph NINTH of the Certificate of
Incorporation.) The NYBCL prohibits elimination of liability for a director if a
judgment or final adjudication establishes that (i) his acts or omissions were
in bad faith or involved intentional misconduct or a knowing violation of law,
(ii) he personally gained a financial profit or other advantage to which he was
not legally entitled or (iii) he violated Section 719 of the NYBCL (involving
the declaration of dividends; purchase or redemption of shares; the distribution
of assets to shareholders after dissolution; and loans to directors).
Indemnification. The NV Delaware Certificate of Incorporation provides
that no amendment or repeal of the indemnification provisions thereof shall
adversely affect any right or protection of any person NV Delaware has agreed to
indemnify with respect to any act or omission occurring prior to such amendment
or repeal. (See Paragraph SEVENTH of the NV Delaware Certificate of
Incorporation.) The Certificate of Incorporation does not contain such a
provision.
Purpose Clause. The "purpose" clause of the NV Delaware Certificate of
Incorporation has been revised to permit NV Delaware to engage in any lawful act
or activity for which corporations may be organized under the DGCL. (See
Paragraph SECOND of the NV Delaware Certificate of Incorporation.) The
Certificate of Incorporation contains additional historical language in its
"purposes" clause which is no longer relevant and which refers to the NYBCL.
(See Paragraph SECOND of the Certificate of Incorporation.)
Capital Stock. The NV Delaware Certificate of Incorporation would not
effect any substantive change in the rights, designations, limitations and
preferences of the $15.00 Class A Increasing Rate Cumulative Senior Preferred
Shares ($100 Liquidation Value), $.01 par value, of NV Delaware Corporation (the
"NV Delaware Class A Senior Preferred Shares"), the $3.00 Class B Cumulative
Convertible Preferred Shares ($25 Liquidation Value), $.10 par value, of NV
Delaware (the "NV Delaware Class B Preferred Shares", and together with the NV
Delaware Class A Senior Preferred Shares, the "Preferred Shares"), and the
Common Shares, $.01 par value, of NV Delaware (the "NV Delaware Common Shares",
and together with the NV Delaware Preferred Shares, the "NV Delaware Shares"),
compared to those of the Common Shares, Class A Senior Preferred Shares and the
Class B Preferred Shares, respectively, immediately prior to the Merger. The
Reverse Stock Split, which will reduce the Common Shares on a one-for-twenty
basis, will be effected through the Merger Agreement. The only changes to be
made to the NV Delaware Certificate of Incorporation with respect to capital
stock, compared to the Company's existing Certificate of Incorporation, are: (i)
all references to the Company's Class B Common Share have been deleted because
such share has been retired; and (ii) historical dates relating to certain
designations and preferences of NV Delaware Class A Senior Preferred Shares and
the NV Delaware Class B Preferred Shares that are no longer relevant have been
deleted. (See Paragraphs THIRD (A)(ii) and (v); and THIRD (B)(v) of the NV
Delaware Certificate of Incorporation).
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All of the changes reflected in the NV Delaware Certificate of
Incorporation described above with respect to the NV Delaware Shares will be
carried forward in the Surviving Corporation Certificate of Incorporation. In
addition, in the Second-Step Merger, certain changes will be made to (i) the
respective voting power of the Surviving Corporation Preferred Shares and (ii)
the conversion price allocated to a Surviving Corporation Common Share upon
conversion of the Surviving Corporation Class B Preferred Shares, which
adjustments are in each case designed solely to reflect properly the effects of
the Reverse Stock Split on such voting rights and conversion price,
respectively. See "The Second-Step Merger Reasons for the Second-Step Merger"
and "The Second-Step Merger Agreement - Effect on Capital Stock".
Joint Plan Restriction. The NV Delaware Certificate of Incorporation
eliminates a provision previously required to be included in the Certificate of
Incorporation by the Joint Plan in accordance with Section 1123(a)(6) of Title
11 of the United States Code, as amended. This provision had restricted the
Company from issuing nonvoting equity securities. (See Paragraph THIRD of the NV
Delaware Certificate of Incorporation; Paragraph FOURTH of the Certificate of
Incorporation.) If the NV Delaware Certificate of Incorporation is adopted in
the Merger, this provision will no longer be required to be included therein.
Conforming Changes. All other changes in the NV Delaware Certificate of
Incorporation are conforming, non-substantive changes reflecting the change of
jurisdiction of incorporation from New York to Delaware; the selection of the
DGLC as the applicable corporation law; and the selection of a new registered
agent domiciled in Delaware.
By-Laws. Other than differences arising from differences between the
NYBCL and the DGCL, as described herein, the NV Delaware By-Laws are identical
to the By-Laws in all material respects, except as described below.
Special Meetings. Section 2 of the NV Delaware By-Laws provides that
stockholders holding at least 25% of the capital stock entitled to vote there at
shall be entitled to call a special meeting of stockholders. (See Section 2, NV
Delaware By-Laws.) The By-Laws require the vote of stockholders holding at least
a majority of such capital stock to call a special meeting. (See Section 2,
By-Laws.)
Notice of Stockholder Meetings; Record Date. The maximum period for
serving notice of stockholder meetings and setting a record date has been
changed to sixty days. (See Sections 3 and 36, NV Delaware By-Laws.) The By-Laws
had specified fifty days for such periods in accordance with the NYBCL.
Number and Qualification of Directors. The maximum age limitation
regarding qualification as a director has been deleted. (See Section 9, NV
Delaware By-Laws.)
Notice of Board of Director Meetings. The provisions governing the
giving of notice for Board of Director meetings have been revised to (i) delete
the requirement of specifying a purpose therefor and (ii) provide that such
notice may be delivered by telephone or other means of electronic communication
or given orally. (See Sections 15 (directors) and 22 (executive committee), NV
Delaware By-Laws.)
Regular Board of Director Meetings. Regular Board of Directors meetings
are to be held on such dates as are fixed by the Board of Directors or the
Chairman of the Board under the NV Delaware ByLaws; the By-Laws provide that
such meetings are to be held on specified dates. (See Section 12, NV Delaware
By-Laws.)
Officers. First, the duties of the Chairman of the Board and President
have been revised to reflect the current management structure of the Company, in
which the Chairman of the Board serves as the chief
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executive officer of the Company and the President serves as the chief operating
officer. In addition, the office of Vice-Chairman has been deleted. (See Section
26, NV Delaware By-Laws.)
Conforming Changes. All other changes in the NV Delaware By-Laws are
conforming, non-substantive changes reflecting the change of jurisdiction of
incorporation from New York to Delaware, such as the designation of NV
Delaware's principal office in Delaware; and the designation of the principal
office of NV Delaware in Miami, Florida, as the place of meetings of the board
of directors unless otherwise specified by the board. In the Second-Step Merger,
the Surviving Corporation will adopt By-Laws (the "Surviving Corporation
By-Laws") that are identical to the NV Delaware By-Laws as described above,
except that the name of the Company reflected therein will be "New Valley
Corporation".
A summary of all differences between the Surviving Corporation
Certificate of Incorporation and the NV Delaware Certificate of Incorporation is
attached as Annex III hereto. A summary of all differences between the Surviving
Corporation By-Laws and the NV Delaware By-Laws is attached as Annex IV hereto.
(The Surviving Corporation Certificate of Incorporation and the Surviving
Corporation By-Laws are attached hereto as Annexes VI and VII, respectively.)
Copies of the Company's existing Certificate of Incorporation and
By-Laws are available for inspection at the Company's executive offices, and
copies thereof will be sent to shareholders, without charge, upon request.
THE REVERSE STOCK SPLIT
The Merger Agreement provides that, at the completion of the Merger,
(i) each Common Share issued and outstanding will, by virtue of the Merger and
without any action on the part of any holder thereof, be converted into
one-twentieth of a NV Delaware Common Share; (ii) all Common Shares then held in
the Company's treasury, if any, shall cease to exist, and all certificates
representing such shares will be canceled by virtue of the Merger; and (iii) any
capital stock of the Company owned by the Company as treasury stock or by any of
its subsidiaries will be canceled and cease to exist and no NV Delaware Common
Shares, or other securities of the NV Delaware, will be issued in respect
thereof.
Other than with respect to the Reverse Stock Split, the rights,
designations, limitations and preferences of the Surviving Corporation Common
Shares will in all respects be identical to the rights, designations,
limitations and preferences of the Common Shares immediately prior to the
Merger. The Reverse Stock Split would apply to all Common Shares on a
proportionate basis and accordingly, the Reverse Stock Split would not change
the ownership interest or proportional voting power of the holders of Common
Shares. However, in the Second-Step Merger, the equity and voting interest of
certain holders in the Surviving Corporation Common Shares would be reduced to
the extent they would otherwise receive fractional interests in the Second-Step
Merger. See "Principal Effects of the Reincorporation", above and "The
Second-Step Merger Agreement - Effect on Capital Stock", below.
The principal purpose for the one-for-twenty Reverse Stock Split is to
enhance the Surviving Corporation's ability, after the Mergers, to have the
Surviving Corporation Common Shares listed on the NASDAQ SmallCap Market, or if
possible, the NMS. In order for a company's stock to be listed on the NASDAQ
SmallCap Market, it must meet certain requirements, including: (i) the stock
must have a minimum bid price of $3.00 per share; (ii) the stock must be held by
more than 300 holders; (iii) 100,000 shares must be publicly held having a
market value not less than $1 million; (iv) the company must have total assets
of $4 million; (v) the company must have capital and surplus of at least $2
million; and (vi) the company must have at least two registered and active
market makers. In addition, in order to qualify for listing on the NMS, a
company must also satisfy one of the following sets of requirements: either
(A)(i) the company had annual pre-tax income of at least $750,000 and net income
of at least $400,000 in the most recently completed fiscal year or in two of the
last three most recently completed fiscal years; (ii) there are at least 500,000
publicly held shares; (iii) the market value of publicly held shares is at least
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<PAGE> 30
$3 million; (iv) the price per share on each of the five business days prior to
the date of application by the company is $5.00 or more; (v) the company of the
security has net tangible assets of at least $4 million; (vi) the company has a
minimum of 800 shareholders if the company has between 500,000 and 1 million
shares publicly held, or a minimum of 400 shareholders if the company has either
(x) over 1 million shares publicly held or (y) over 500,000 shares publicly held
and average daily trading volume in excess of 2,000 shares per day for the six
months preceding the date of application; and (vii) at least two dealers act as
NASDAQ market makers with respect to the security on each of the five business
days preceding the date of application by the company; or (B)(i) the company has
net tangible assets of at least $12 million; (ii) there are at least 1 million
publicly held shares; (iii) the market value of publicly held shares is at least
$15 million; (iv) the price per share on each of the five business days prior to
the date of application by the company is $3.00 or more; (v) at least two
dealers act as NASDAQ market makers with respect to the security on each of the
five business days preceding the date of application by the company; (vi) the
company has a three-year operating history; and (vii) the company has a minimum
of 400 shareholders. In addition, the NASDAQ may consider securities for listing
on the NMS under certain other circumstances.
If the Reincorporation Proposal is approved by the Company's
shareholders as provided herein (see "Vote Required for Approval of the
Reincorporation Proposal", below), upon completion of the Mergers, the Surviving
Corporation will use its commercially reasonable efforts to cause the Surviving
Corporation Common Shares to be listed on the NASDAQ SmallCap Market, or, if
possible, the NMS.
The Company believes that the Reverse Stock Split would increase the
acceptance of the Surviving Corporation Common Shares by the financial community
and the investing public. However, there can be no assurance that the market
price of the Surviving Corporation Common Shares will rise in proportion to the
reduction in the number of the Surviving Corporation Common Shares outstanding
as a result of the Reverse Stock Split and the Second-Step Merger. The number of
Surviving Corporation Common Shares outstanding immediately following the
Mergers will be identical to the number of whole NV Delaware Common Shares
outstanding immediately following the Merger (without taking into account any
fractional interests issuable in the Merger, which interests will be eliminated
in the Second-Step Merger). Further, there can be no assurance that the
Surviving Corporation will be able to satisfy the other NASDAQ SmallCap Market
(or NMS) listing standards such as minimum net tangible asset requirement, or
that the Surviving Corporation's shares will be approved for listing either on
the NASDAQ SmallCap Market or the NMS.
As a result of the Reverse Stock Split effected on a one-for-twenty
share basis in the Merger, the aggregate voting power of the NV Delaware Common
Shares would be reduced by a factor of twenty upon completion of the Merger.
Accordingly, pursuant to the Second-Step Merger, certain adjustments will be
made to the voting rights of the outstanding Surviving Corporation Preferred
Shares and the conversion ratio with respect to the Surviving Corporation Class
B Preferred Shares, in each case, in order to maintain the same relative voting
rights as were in effect with respect to the Preferred Shares and the same
conversion ratio as was in effect with respect to the Class B Preferred Shares,
in each case, immediately prior to the Merger. See "The Second-Step Merger
Agreement - Effect on Capital Stock", below. As a result of these adjustments,
(i) the Surviving Corporation will be able to maintain the same relative voting
rights and convertibility features with respect to the Surviving Corporation
Shares as were in effect, immediately prior to the Merger, with respect to the
Shares, and (ii) the Surviving Corporation Common Shares will retain one vote
per share, which the Company believes is desirable. For a discussion of certain
alternative transaction structures, see "The Second-Step Merger - Reasons for
the Second-Step Merger" and "The Second-Step Merger Agreement - Effect on
Capital Stock", below.
As described below in "The Merger Agreement - Capital Stock After the
Merger", the number of authorized Common Shares (850,000,000) will not be
changed as a result of the Merger. Since the Reverse Stock Split would cause the
number of outstanding NV Delaware Common Shares to be reduced by a factor of
twenty, this reduction in the number of outstanding NV Delaware Common Shares
would
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<PAGE> 31
effectively increase the authorized NV Delaware Common Shares (and, after giving
effect to the Second-Step Merger, the authorized Surviving Corporation Common
Shares) by this same factor of twenty. As a consequence, after the Mergers, the
Surviving Corporation will have significantly greater numbers of authorized and
unissued common shares than the Company presently does. In the event the
Surviving Corporation sells or issues additional Surviving Corporation Common
Shares, the equity and voting interests of holders of Surviving Corporation
Common Shares would be diluted, reducing the equity and voting interest of such
holder in the Surviving Corporation. Presently, the Company does not have any
specific plans for the issuance or sale of additional Surviving Corporation
Common Shares by the Surviving Corporation after the Mergers.
A vote FOR the Reincorporation Proposal will be a vote FOR (i) the
Reincorporation in Delaware; and (ii) the one-for-twenty Reverse Stock Split
with respect to the outstanding Common Shares.
If the Reincorporation Proposal is approved by the Company's
Shareholders as provided herein (see "Vote Required for Approval of the
Reincorporation Proposal", below), upon completion of the Merger, the
Second-Step Merger will be effected. See "The Second-Step Merger", below.
THE MERGER AGREEMENT
Set forth below is a description of certain material terms of the
Merger Agreement, other than the Reverse Stock Split, which is described above.
This description does not purport to describe all terms of the Merger Agreement
and is qualified in its entirety by reference to the Merger Agreement, a copy of
which is attached as Annex II to this Proxy Statement. Under the Merger
Agreement, the Company would be merged with and into NV Delaware, a newly-formed
wholly owned subsidiary of the Company that is incorporated in Delaware, with NV
Delaware as the surviving corporation in the Merger. NV Delaware has not
conducted any business other than with respect to the proposed Merger. The
Merger would not result in any change in the business, management, executive
officers, directors, location of principal executive offices, assets,
liabilities or net worth of the Company. By operation of law, upon the
completion of the Merger, all assets, property, rights liabilities and
obligations of the Company would be transferred to and assumed by NV Delaware as
the surviving corporation. Shareholders will not have any statutory "dissenters'
rights" under the NYBCL with respect to the Merger.
Effect on Capital Stock. The Merger will have no effect on the
authorized capital stock of the Company as reflected in its Certificate of
Incorporation. The number of outstanding Class A Senior Preferred Shares and
Class B Preferred Shares will not be affected by the Merger, and the number of
outstanding Common Shares will be reduced on a proportionate one-for-twenty
basis as a result of the Reverse Stock Split. See "The Reverse Stock Split",
above. Other than with respect to the Reverse Stock Split, the rights,
designations, preferences and limitations of the NV Delaware Common Shares will
be identical to those of the Common Shares immediately prior to the Merger. The
number of NV Delaware Class A Senior Preferred Shares and NV Delaware Class B
Preferred Shares upon completion of the Merger, and the respective rights,
designations, preferences and limitations of such NV Delaware Preferred Shares,
will be identical to those of the Class A Senior Preferred Shares and the Class
B Preferred Shares, respectively, immediately prior to the Merger. However, in
the Second-Step Merger, (i) fractional interests otherwise issuable in respect
of the NV Delaware Common Shares will be "bundled" and disposed of as described
in "Fractional Share Procedures", below, and (ii) certain adjustments will be
made with respect to the Surviving Corporation Preferred Shares. See "Principal
Reasons for The Second-Step Merger" and "The Second-Step Merger Agreement -
Effect on Capital Stock", below. The Surviving Corporation will not make any
payment to holders in respect of fractional interests. The securities of NV
Delaware to be issued to Company shareholders in the Merger will not be
registered under the Securities Act in reliance upon Rule 145(a)(2) promulgated
under the Securities Act, and such securities of NV Delaware will not be deemed
to be "restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act.
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Notification of Holders of Class B Preferred Shares. At least twenty
days before the date on which the Mergers are expected to become effective
("Expected Effective Date"), the Company shall cause a notice stating (i) the
Expected Effective Date and (ii) the date as to which it is expected that
holders of Common Shares of record shall be entitled to exchange their Common
Shares for Surviving Corporation Common Shares, which notice shall be filed with
the transfer agent or agents for the Class B Preferred Shares (and NV Delaware
Class B Preferred Shares) and mailed to the holders of record of the outstanding
Class B Preferred Shares (and NV Delaware Class B Preferred Shares).
Certificates. In the Merger, shareholders will not be required to
surrender their certificates representing Shares in exchange for certificates
representing shares of NV Delaware Common Shares, NV Delaware Class A Senior
Preferred Shares and/or NV Delaware Class B Preferred Shares, as the case may
be. Upon consummation of the Merger, certificates representing Common Shares
will be deemed to represent that number of NV Delaware Common Shares equal to
one-twentieth of the number of Common Shares reflected on such certificates
immediately prior to the Merger. The number of Class A Senior Preferred Shares
and Class B Preferred Shares outstanding immediately prior to the Merger will
not be affected by the Merger and will be deemed after the Merger to represent
the same number of NV Delaware Class A Senior Preferred Shares and NV Delaware
Class B Preferred Shares, respectively, as reflected on such holders' stock
certificates immediately prior to the Merger.
Accounting Treatment of the Merger. In accordance with generally
accepted accounting principles, the Company expects that the Merger will be
accounted for as a reorganization of entities under common control at historical
cost in a manner similar to a pooling of interests. Under this accounting
method, the assets and liabilities of the combining entities will be carried
forward at their recorded historical book values. The Second-Step Merger will be
effected upon consummation of the Merger. See "Accounting Treatment of the
Second-Step Merger", below. The Merger will be effected if the Reincorporation
Proposal is approved by the Company's shareholders as provided herein.
Certain Federal Income Tax Consequences of the Merger. The Merger will
have the following federal income tax consequences:
(a) Shareholders of the Company will recognize neither gain or loss upon
the exchange of (i) Common Shares for NV Delaware Common Shares, (ii)
Class A Senior Preferred Shares for NV Delaware Class A Senior
Preferred Shares and/or (iii) Class B Preferred Shares for NV Delaware
Class B Preferred Shares, as the case may be.
(b) Neither the Company nor the holders of Common Shares will recognize
gain or loss upon the Reincorporation of the Company to Delaware
pursuant to the Merger.
(c) The basis of NV Delaware Common Shares, NV Delaware Class A Senior
Preferred Shares and/or NV Delaware Class B Preferred Shares in the
hands of a shareholder immediately after the Merger will be equal, in
the aggregate, to the basis of the Common Shares, Class A Senior
Preferred Shares and/or Class B Preferred Shares, as the case may be,
converted in the Merger.
(d) The holding period of the NV Delaware Common Shares, NV Delaware Class
A Senior Preferred Shares and/or Surviving Corporation Class B
Preferred Shares received by a Company shareholder in the Merger will
include the period of time that the Common Stock, Class A Senior
Preferred Shares and/or Class B Preferred Shares, as the case may be,
were held as a capital asset at the time of the Merger.
The Second-Step Merger will be effected upon consummation of the
Merger. See "Certain Federal Income Tax Consequences of the Second-Step Merger",
below. The Merger will be effected if the Reincorporation Proposal is approved
by the Company's shareholders as provided herein.
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<PAGE> 33
The foregoing discussion of certain federal income tax consequence is
for general information only and is not tax advice. ALL SHAREHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR CONSEQUENCES OF THE MERGER
TO THEM, INCLUDING WITHOUT LIMITATION THE APPLICATION AND EFFECT OF STATE,
LOCAL, FEDERAL AND/OR FOREIGN TAX LAWS AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT.
Conditions to the Merger; Amendment; Waiver; Termination. The
obligations of the Company to effect the Merger are subject to the following
conditions:
(a) obtaining the requisite Company shareholder approvals for the
Merger and the Merger Agreement pursuant to the NYBCL (see "Vote
Required for Approval of the Reincorporation Proposal", below);
(b) obtaining the consent of the commissioner of taxation and finance
to the Merger, as provided in Section 907(f) of the NYBCL; and
(c) the absence of any material pending or threatened litigation
concerning the Merger or other transaction contemplated by the
Merger Agreement.
The Merger Agreement may be amended and any of its provisions,
including any conditions precedent, may be waived by the Company at any time
prior to the completion of the Merger, if, in the sole judgment of the Board of
Directors, such amendment would not adversely affect the rights and interests of
the Company's shareholders thereunder.
Notwithstanding any approval by the shareholders of the Company of the
Reincorporation Proposals, the Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the completion of the Merger by the Board
of Directors, if the Board of Directors determines for any reason that the
consummation of the transactions contemplated by the Merger Agreement would not
be advisable or in the best interests of the Company and its shareholders.
VOTE REQUIRED FOR APPROVAL OF THE REINCORPORATION PROPOSAL
Approval of the Reincorporation Proposal will require the affirmative
vote of (i) the holders of two-thirds of all of the outstanding Shares entitled
to vote at the Annual Meeting and (ii) the holders of a majority of all of the
outstanding Common Shares so entitled to vote, voting as a separate class.
Proxies solicited by the Board of Directors will be voted FOR the
Reincorporation Proposal unless shareholders specify otherwise. A vote for the
Reincorporation Proposal will be a vote for (i) the Reincorporation from New
York to Delaware through the Merger; and (ii) the other transactions
contemplated by the Merger Agreement, including the Reverse Stock Split. Upon
completion of the Merger, the Second-Step Merger will be effected. See "The
Second-Step Merger", below.
THE SECOND-STEP MERGER
General. If the Reincorporation Proposal is approved by the Company's
shareholders as provided below (See "Vote Required for Approval of the
Reincorporation Proposal", above), NV Delaware and NV Merger Sub, its wholly
owned subsidiary, will effect the Second-Step Merger, in which NV Delaware (the
surviving corporation in the Merger), will merge with and into NV Merger Sub,
with NV Merger Sub as the surviving corporation in the Second-Step Merger.
NV Merger Sub has not conducted any business other than with respect to
the Second-Step Merger. The Second-Step Merger would not result in any change in
the business, management, executive
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<PAGE> 34
officers, directors, location of principal executive offices, assets,
liabilities or net worth of the Company (or NV Delaware). By operation of law,
upon the completion of the Second-Step Merger, all assets, property, rights,
liabilities and obligations of the Company (and NV Delaware) would be
transferred to and assumed by NV Merger Sub. Upon completion of the Second-Step
Merger, NV Merger Sub would be renamed "New Valley Corporation". The Second-Step
Merger would be accomplished pursuant to the terms and conditions of the
Second-Step Merger Agreement between NV Merger Sub and NV Delaware, a copy of
which is attached hereto as Annex V. NV Merger Sub may be referred to herein, as
the surviving corporation in the Second-Step Merger, as the "Surviving
Corporation".
The Second-Step Merger Agreement has been adopted and approved by (i)
the boards of directors of each of NV Delaware and NV Merger Sub and (ii) the
Company and NV Delaware, as sole stockholders of NV Delaware and NV Merger Sub,
respectively. The Company's Board of Directors has also approved the Second-Step
Merger and the form and terms of the Second-Step Merger Agreement. The Company
owns all of the capital stock of NV Delaware and, indirectly, NV Merger Sub, and
the boards of directors of NV Delaware and NV Merger Sub consist solely of
persons who are executive officers of the Company. The Second-Step Merger is
conditioned upon, among other things, the approval of Board Proposal 5 (the
Reincorporation Proposal) by the Company's shareholders as provided herein and
the consummation of the Merger. HOWEVER, THE SECOND-STEP MERGER IS NOT SUBJECT
TO THE APPROVAL OF EITHER THE COMPANY'S SHAREHOLDERS (THROUGH THIS PROXY
STATEMENT OR OTHERWISE) OR, AFTER GIVING EFFECT TO THE MERGER, THE STOCKHOLDERS
OF NV DELAWARE UNDER APPLICABLE LAW, AND NO SUCH APPROVALS WILL BE SOUGHT. THE
SECOND-STEP MERGER WILL BE EFFECTED IMMEDIATELY AFTER THE MERGER IF BOARD
PROPOSAL 5 (THE REINCORPORATION PROPOSAL) IS APPROVED BY THE COMPANY'S
SHAREHOLDERS. The Second-Step Merger will not be effected if the Reincorporation
Proposal is not approved by the Company's shareholders. The Second-Step Merger
Agreement was executed in May 1996.
Reasons for the Second-Step Merger. As described in greater detail in
"Principal Effects of the Second-Step Merger" and "The Second-Step Merger
Agreement - Effect on Capital Stock", below, the sole purposes of the
Second-Step Merger are to (1) provide an arrangement for the "bundling" and sale
of fractional stock interests otherwise issuable in the Second-Step Merger; and
(2) adjust the voting power of the outstanding Surviving Corporation Preferred
Shares to reflect the Reverse Stock Split, in order to restore the same pro rata
voting power among the Surviving Corporation Shares as existed among the Shares
immediately prior to the Merger. See "The Second-Step Merger Agreement - Effect
on Capital Stock", below. Other than the procedures with respect to the
disposition of fractional share interests and the adjustments to the voting
power of the Surviving Corporation Preferred Shares, as described above, and a
corresponding adjustment to the conversion price of the Series B Preferred
Shares (see "The Second-Step Merger - Effect on Capital Stock"), no other
changes will be made to any rights, designations, limitations or preferences of
the Surviving Corporation Shares in the Second-Step Merger. With respect to such
adjustments to certain terms of the Surviving Corporation Preferred Shares, the
Surviving Corporation Common Shares will have one vote per share after the
Second-Step Merger, as the Common Shares had prior to the Merger. If, in the
Merger, the Company had increased the voting power of the NV Delaware Common
Shares to twenty votes per share, (i) no adjustment would have been required
with respect to the voting rights of the Surviving Corporation Preferred Shares
and (ii) this arrangement would have been substantively identical to the
arrangements described above implemented in the Second-Step Merger. However, the
Company believes that it is more traditionally accepted and desirable to have
common shares with one vote per share, and hence has elected to proceed with the
Second-Step Merger and not to alter the voting power of the Common Shares. If
such adjustments to the voting rights of the Preferred Shares and/or the
conversion price for the Class B Preferred Shares were effected in the Merger
(involving a New York and a Delaware corporation, as opposed to two Delaware
corporations), a separate class vote of each of the Class A Senior Preferred
Shares and the Class B Preferred Shares may arguably have been required under
the NYBCL. See "The Second-Step Merger Agreement", below.
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<PAGE> 35
PRINCIPAL EFFECTS OF THE SECOND-STEP MERGER
The purpose of the Second-Step Merger is to complete the transactions
effected in the Merger by accomplishing the two principal objectives specified
below. The Second-Step Merger, if consummated, would have the following
principal effects:
(1) THE FRACTIONAL INTERESTS WITH RESPECT TO THE NV DELAWARE COMMON
SHARES WILL BE ELIMINATED. In the Reverse Stock Split effected pursuant to the
Merger Agreement, each outstanding Common Share would be converted into
one-twentieth of an NV Delaware Common Share having otherwise identical rights,
limitations, designations and preferences as the Common Shares had immediately
prior to the Merger. In the Second-Step Merger, all fractional interests of NV
Delaware Common Shares issued in the Merger will be eliminated since no
fractional shares will be issued in the Second-Step Merger. Any shareholders of
the Company holding, prior to the Merger, either less than twenty Common Shares
or a number of Common Shares not evenly divisible by twenty will receive
fractional interests of an NV Delaware Common Share in the Merger. After the
Mergers, the Surviving Corporation will notify its stockholders of any
fractional interest otherwise payable to such stockholder in the Second-Step
Merger and arrange for the "bundling" and disposition of such fractional
interests. (Such arrangements are referred to herein as the "Fractional Share
Procedures" and are described in greater detail in "Fractional Share
Procedures", below). The Surviving Corporation will not make any payment to
holders in respect of fractional interests. As examples of the conversion of
common shares in the Mergers, (i) a shareholder holding one hundred Common
Shares immediately prior to the Merger would hold (x) five NV Delaware Common
Shares upon completion of the Merger and (y) five Surviving Corporation Common
Shares upon completion of the Second-Step Merger and (ii) a shareholder holding
two hundred fifty Common Shares immediately prior to the Merger would hold (x)
twelve and one-half NV Delaware Common Shares upon completion of the Merger and
(y) twelve Surviving Corporation Common Shares upon completion of the
Second-Step Merger. In addition, since the stockholder in example (ii) above
would otherwise have been entitled to receive one-half of a Surviving
Corporation Common Share in the Second-Step Merger, such fractional interest
would be covered by the Fractional Share Procedures described below. As a
result, each stockholder of the Surviving Corporation, except to the extent such
fractional interests would otherwise have been receivable, will have the same
proportionate interest in the Surviving Corporation upon completion of the
Mergers that such shareholder had in the Company immediately prior to the
Merger. To the extent a shareholder received fractional interests in the Merger,
such stockholder's equity and voting interest in the Surviving Corporation will
be reduced correspondingly, since such fractional interests will not be
converted into equity of the Surviving Corporation in the Second-Step Merger,
but rather will be subject to the Fractional Share Procedures. See "Fractional
Share Procedures", below.
(2) CERTAIN ADJUSTMENTS WILL BE MADE TO CERTAIN TERMS OF THE
OUTSTANDING SURVIVING CORPORATION PREFERRED SHARES IN ORDER TO REFLECT PROPERLY
THE REVERSE STOCK SPLIT. As a result of the Mergers, (i) there will be the same
number of Surviving Corporation Preferred Shares outstanding immediately upon
consummation thereof as the number of Preferred Shares outstanding immediately
prior to the Merger, and (ii) the number of outstanding Surviving Corporation
Common Shares will be equal to one-twentieth (in whole shares only) of the
Common Shares outstanding immediately prior to the Merger. Accordingly, if no
corresponding adjustments were made in the Second-Step Merger, the voting power
of the Surviving Corporation Preferred Shares would be disproportionately
increased by a factor of twenty. Therefore, the Second-Step Merger will effect
such adjustments, as more fully described in "The Second-Step Merger Agreement -
Effect on Capital Stock", below, in order to restore the same relative voting
rights with respect to the Surviving Corporation Shares as were in effect with
respect to the Shares immediately prior to the Merger. In addition, the
Surviving Corporation Certificate of Incorporation will contain an increased
conversion price for the Surviving Corporation Class B Preferred Shares in order
to expressly state the conversion ratio in effect after the Reverse Stock Split.
See "The Second-Step Merger - Effect on Capital Stock", below. In all other
respects, the rights, designations, limitations and preferences of the Surviving
Corporation Class A Senior Preferred Shares and the
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<PAGE> 36
Surviving Corporation Class B Preferred Shares will be identical to those of (i)
the Class A Senior Preferred Shares and the Class B Preferred Shares,
respectively, immediately prior to the Merger and (ii) the NV Delaware Class A
Preferred Shares and the NV Delaware Class B Preferred Shares, respectively,
immediately prior to the Second-Step Merger.
With respect to such adjustments to certain terms of the Surviving
Corporation Preferred Shares, after the Second-Step Merger, the Surviving
Corporation Common Shares will have one vote per share, as the Common Shares had
prior to the Merger. If, in the Merger, the Company had increased the voting
power of the NV Delaware Common Shares to twenty votes per share, (i) no
adjustment would have been required with respect to the voting rights of the
Surviving Corporation Preferred Shares and (ii) this arrangement would have the
same effect of restoring the relative voting rights as were in effect
immediately prior to the Merger and would also be in these respects
substantively identical to the arrangements described above implemented in the
Second-Step Merger. However, the Company believes that it is more traditionally
accepted and desirable to have common shares with one vote per share, and hence
has elected to proceed with the Second-Step Merger as described herein and not
to alter the voting rights of the Common Shares. If such adjustments to the
voting rights of the Preferred Shares and/or the conversion price for the Class
B Preferred Shares were effected in the Merger (involving a New York and a
Delaware corporation, as opposed to two Delaware corporations), a separate class
vote of each of the Class A Senior Preferred Shares and the Class B Preferred
Shares may arguably have been required under the NYBCL. See "The Second-Step
Merger Agreement - Required Approvals".
Accordingly, after the Mergers:
(1) The Company will be a Delaware corporation (see "Principal
Reasons for Changing the State of Incorporation to Delaware",
above);
(2) The number of outstanding Common Shares will be reduced by
one-twentieth, in whole shares only, and fractional shares will
be eliminated (see "The Reverse Stock Split", above, and
"Principal Effects of the Second-Step Merger" and "Fractional
Share Procedures", below);
(3) The voting power of each outstanding class of Preferred Shares
will be proportionately reduced by one-twentieth, respectively,
in order to compensate for the Reverse Stock Split of the Common
Shares (see "The Second-Step Merger Agreement - Effect on Capital
Stock", below); and
(4) The conversion price for the Class B Preferred Shares will be
increased by a factor of twenty in order to clearly reflect the
actual conversion price in effect after the Reverse Stock Split
(see "The Second-Step Merger Agreement - Effect on Capital
Stock", below).
PRINCIPAL DIFFERENCES BETWEEN THE CHARTER DOCUMENTS OF NV DELAWARE AND THE
SURVIVING CORPORATION
Certificate of Incorporation. The Surviving Corporation Certificate of
Incorporation will be identical to the NV Delaware Certificate of Incorporation,
except as described below. See "Principal Differences between the Charter
Documents of the Company and NV Delaware - Certificate of Incorporation", above.
Accordingly, all such changes described in that section will be incorporated in
the Surviving Corporation Certificate of Incorporation, the form of which is
attached as Annex VI hereto. A summary of all differences between the Surviving
Corporation Certificate of Incorporation and the NV Delaware Certificate of
Incorporation is attached as Annex III hereto.
Capital Stock. As described herein, several adjustments would be made
to the rights of the Surviving Corporation Preferred Shares in the Surviving
Corporation Certificate of Incorporation adopted
33
<PAGE> 37
in the Second-Step Merger, in order to correct certain disproportionate changes
in the voting rights of the Surviving Corporation Preferred Shares and the
conversion price for the Surviving Corporation Class B Preferred Shares that
would otherwise have occurred as a result of the Reverse Stock Split. See
"Principal Effects of the Second-Step Merger" and "The Second-Step Merger
Agreement - Effect on Capital Stock", below. (See Paragraphs THIRD(A)(vi) and
(B)(vii) and THIRD (B)(vi)(1) of the Surviving Corporation Certificate of
Incorporation.)
Change of Name. The name of NV Merger Sub will be changed to "New
Valley Corporation".
By-Laws. The Surviving Corporation By-Laws will be identical to the NV
Delaware By-Laws, except that the name of the corporation as reflected therein
will be changed to "New Valley Corporation". See "Principal Differences between
the Charter Documents of the Company and NV Delaware - By-Laws", above. All such
changes described in that section, in addition to the aforesaid name change,
will be reflected in the Surviving Corporation By-Laws, the form of which is
attached as Annex VII hereto. A summary of all differences between the Surviving
Corporation By-Laws and the NV Delaware By-Laws is attached as Annex IV hereto.
The foregoing discussion is intended as a summary only and is qualified
in its entirety by reference to the Surviving Corporation Certificate of
Incorporation and the Surviving Corporation By-Laws, which are attached to this
Proxy Statement as Annexes VI and VII, respectively.
THE SECOND-STEP MERGER AGREEMENT
Set forth below is a description of certain material terms of the
Second-Step Merger Agreement. This description does not purport to describe all
terms of the Second-Step Merger Agreement and is qualified in its entirety by
reference to the Second-Step Merger Agreement, a copy of which is attached as
Annex V to this Proxy Statement. Under the Second-Step Merger Agreement, NV
Delaware, the surviving corporation in the Merger, would be merged with and into
NV Merger Sub, a newly-formed wholly owned subsidiary of NV Delaware, with NV
Merger Sub as the surviving corporation in the Second-Step Merger. NV Merger Sub
has not conducted any business other than with respect to the Second-Step
Merger. The Second-Step Merger would not result in any change in the business,
management, executive officers, directors, location of principal executive
offices, assets, liabilities or net worth of the Company (or NV Delaware). By
operation of law, upon the completion of the Merger, all assets, property,
rights liabilities and obligations of the Company (and NV Delaware) would be
transferred to and assumed by NV Merger Sub as the surviving corporation. Upon
completion of the Merges, NV Merger Sub would be renamed "New Valley
Corporation". Stockholders will not have any statutory "dissenters' rights"
under the DGCL with respect to the Second-Step Merger. NV Merger Sub, as the
surviving corporation in the Second-Step Merger, may be referred to herein as
the "Surviving Corporation".
Effect on Capital Stock. The Mergers will have no effect on the
authorized capital stock of the Surviving Corporation; such capital stock will
be the same as that of the Company as reflected in its Certificate of
Incorporation. The number of outstanding Surviving Corporation Class A Senior
Preferred Shares (compared to the Class A Senior Preferred Shares or NV Delaware
Class A Senior Preferred Shares) and Surviving Corporation Class B Preferred
Shares (compared to the Class B Preferred Shares or the NV Delaware Class B
Preferred Shares) will not be affected by the Mergers, and the number of
outstanding Surviving Corporation Common Shares (compared to the Common Shares)
will be reduced on a proportionate one-for-twenty basis as a result of the
Reverse Stock Split in the Merger and to the extent of the elimination of
fractional interests in the Second-Step Merger. The Surviving Corporation will
not make any payment to holders in respect of fractional interests. See "The
Reverse Stock Split", above; with respect to the disposition of fractional
interests resulting from the conversion of NV Delaware Common Shares in the
Second-Step Merger, see "Principal Effects of The Second-Step Merger", above,
and "Fractional Share Procedures" below. Other than with respect to the Reverse
Stock Split, the rights,
34
<PAGE> 38
designations, preferences and limitations of the Surviving Corporation Common
Shares will be identical to those of the Common Shares immediately prior to the
Merger. In Second-Step Merger, the voting rights per share of each class of
Surviving Corporation Preferred Shares would be reduced by a factor of twenty in
order to reflect the reduction, on a one-for-twenty basis, of the outstanding
Common Shares pursuant to the Reverse Stock Split. More specifically, in the
Second-Step Merger, (i) the votes per share of the Surviving Corporation Class A
Senior Preferred Shares would be changed to .4645 of a vote per share (from 9.29
votes per share); and (ii) the vote per share of the Surviving Corporation Class
B Preferred Shares would be changed to one-twentieth of a vote per share (from
one vote per share). Because the collective voting power of the Surviving
Corporation Common Shares will also be reduced by a factor of twenty pursuant to
(i) the Reverse Stock Split and (ii) the one-to-one conversion of NV Delaware
Common Shares into whole shares only of Surviving Corporation Common Stock in
the Second-Step Merger, the proportionate reduction in voting power per share
of outstanding Surviving Corporation Preferred Shares, as described in the
preceding sentence, will restore the same relative voting power among the
Surviving Corporation Shares immediately following the Mergers, as was in effect
with respect to the Shares immediately prior to the Merger. In addition, in
connection with the conversion of the Surviving Corporation Class B Preferred
Shares, the Surviving Corporation Certificate of Incorporation will provide that
the conversion price is $60.00 per share, subject to adjustment (as increased
from $3.00 per share, subject to adjustment), in order to clearly set forth the
actual conversion price in effect after the Reverse Stock Split. This conversion
price adjustment would have occurred automatically, even if the Surviving
Corporation Certificate of Incorporation were not so amended, by operation of
the antidilution provisions in the existing Certificate of Incorporation.
However, the Company believes that the revised conversion price, reflecting the
actual conversion price after giving effect to the Mergers, will more clearly
disclose the rights of the holders of Surviving Corporation Class B Preferred
Shares.
With respect to the changes to the Surviving Corporation Preferred
Shares, after the Second-Step Merger, the Surviving Corporation Common Shares
will have one vote per share, as the Common Shares had prior to the Merger. If,
in the Merger, the Company had increased the voting power of the NV Delaware
Common Shares to twenty votes per share, (i) no adjustment would have been
required with respect to the voting rights of the Surviving Corporation
Preferred Shares and (ii) this arrangement would have the same effect of
restoring the relative voting rights as were in effect immediately prior to the
Merger and would have been substantively identical to the arrangements described
above implemented in the Second-Step Merger. However, the Company believes that
it is more traditionally accepted and desirable to have common shares with one
vote per share, and hence has elected to proceed with the Second-Step Merger as
described herein and not to alter the voting power of the Common Shares. If the
voting rights of the Preferred Shares and/or the conversion price for the Class
B Preferred Shares were effected in the Merger, a separate class vote of each of
the Class A Senior Preferred Shares and the Class B Preferred Shares may
arguably have been required under the NYBCL. See "The Second-Step Merger
Agreement - Required Approvals". The securities of the Surviving Corporation to
be issued to NV Delaware stockholders in the Second-Step Merger will not be
registered under the Securities Act in reliance upon Rule 145(a)(1) promulgated
under the Securities Act, and such securities of the Surviving Corporation will
not be deemed to be "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act.
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<PAGE> 39
The following table compares the voting power per share of the shares
of the Company and the Surviving Corporation prior to and following the Mergers,
respectively.
<TABLE>
<CAPTION>
CLASS OF SECURITIES VOTING POWER PRIOR TO MERGER(1) VOTING POWER AFTER THE MERGERS(1)
- ------------------- ------------------------------- ---------------------------------
<S> <C> <C>
Common Shares One vote per share One vote per share
Class A Senior Preferred Shares 9.29 votes per share .4645 vote per share (9.29/20)
Class B Preferred Shares One vote per share .0500 vote per share (1/20)
</TABLE>
(1) The voting power as a class is calculated based on the total
number of shares of each class authorized on the Record Date, rounded to the
nearest hundredth, and without taking into account fractional interests.
The following table compares the voting power of the issued and
outstanding shares of the Company and the Surviving Corporation prior to and
following the Mergers, respectively.
<TABLE>
<CAPTION>
CLASS OF VOTING POWER % OF TOTAL VOTING POWER % OF TOTAL
SECURITIES PRIOR TO MERGER(1)(2) VOTING POWER AFTER THE MERGERS(1)(3) VOTING POWER
- ------------ ----------------------- -------------- ----------------------- ------------
<S> <C> <C> <C> <C>
Common Shares 191,552,476 votes 93.91% 9,577,624 votes 93.91%
Class A Senior
Preferred Shares 9,619,442 votes 4.72% 480,972 votes 4.72%
Class B
Preferred Share 2,790,776 votes 1.37% 139,539 votes 1.37%
----------------- ------ ---------------- ------
Total Votes 203,962,694 votes 100.00% 10,198,135 votes 100.00%
=========== ================= ====== ================ ======
</TABLE>
(1) The voting power as a class is calculated based on the total number
of shares of each class authorized on the Record Date, rounded to the nearest
hundredth, and without taking into account fractional interests.
(2) Voting power prior to the Merger is calculated as follows: (1)
191,552,476 Common Shares outstanding, at one vote per share, is equal to
191,552,476 votes; (ii) 1,035,462 Class A Senior Preferred Shares, at 9.29 votes
per share, is equal to 9,619,442 votes; and (iii) 2,790,776 Class B Preferred
Shares, at one vote per share, is equal to 2,790,776 votes.
(3) Voting power after the Mergers is calculated as follows: (i)
9,577,624 Common Shares outstanding, at one vote per share, is equal to
9,577,624 votes; (ii) 1,035,462 Class A Senior Preferred Shares outstanding, at
.4645 votes per share, is equal to 480,972 votes; and (iii) 2,790,776 Class B
Preferred Shares, at one-twentieth of a vote per share, is equal to 139,539
votes.
In addition, the conversion price with respect to the Surviving
Corporation Class B Preferred Shares has been revised as set forth below in
greater detail in order to properly reflect the effects of the Reverse Stock
Split on the conversion ratio.
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<PAGE> 40
The following table sets forth certain information with respect to the
conversion price for the Class B Preferred Shares prior to the Merger, and with
respect to the Surviving Corporation Class B Preferred Shares following the
Mergers.
A. Prior to Merger:
<TABLE>
<CAPTION>
NUMBER OF COMMON
SHARES ISSUABLE ON ASSUMED VALUE
STATED VALUE OF NUMBER OF CONVERSION OF CONVERSION PRICE OF COMMON
CLASS B PREFERRED COMMON SHARES A CLASS B PER COMMON SHARES ISSUABLE
SHARES IN CHARTER OUTSTANDING PREFERRED SHARE SHARE ON CONVERSION(1)
- ----------------- ----------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C>
$25.00 191,552,476 8.333 $3.00 $25.00
</TABLE>
B. Following the Mergers:
<TABLE>
<CAPTION>
NUMBER OF COMMON
SHARES ISSUABLE ON ASSUMED VALUE
STATED VALUE OF NUMBER OF CONVERSION OF CONVERSION PRICE OF COMMON
CLASS B PREFERRED COMMON SHARES A CLASS B PER COMMON SHARES ISSUABLE
SHARES IN CHARTER OUTSTANDING PREFERRED SHARE SHARE ON CONVERSION(1)
- ----------------- ----------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C>
$25.00 9,619,442 .4167 $60.00 $25.00
</TABLE>
(1) The "assumed value of common shares issuable on conversion" is
equal to (i) the actual number of Common Shares issuable on conversion of one
Class B Preferred Share, multiplied by (ii) the conversion price per Common
Share as reflected in the applicable certificate of incorporation.
Certificates; No Fractional Shares. After the Second-Step Merger,
holders of Common Shares will be required to surrender their certificates
("Common Certificates") formerly representing Common Shares (or NV Delaware
Common Shares, after the Merger), and deliver such Common Certificates, together
with completed Transmittal Documents (as defined below) to the Exchange Agent
(as defined below). Stockholders will thereafter receive Surviving Corporation
Common Shares and, if applicable, payment in respect of fractional interests
pursuant to the Second-Step Merger Agreement and the Fractional Share
Procedures. See "The Second-Step Merger Agreement - Effect on Capital Stock",
above, and "Fractional Share Procedures" and "Transmittal Procedures", below.
Upon consummation of the Second-Step Merger, Common Certificates will be deemed
to represent that number of whole Surviving Corporation Common Shares equal to
one-twentieth of the number of Common Shares, immediately prior to the Merger,
reflected on such Common Certificates. See "The Second-Step Merger Agreement -
Effect on Capital Stock", above. No fractional shares will be issued in the
Second-Step Merger. To the extent a stockholder received a fractional NV
Delaware Common Share in the Merger, such fractional interest otherwise issuable
in the Second-Step Merger will be disposed of pursuant to the Fractional Share
Procedures described below. The Surviving Corporation will not make any payment
to holders in respect of fractional interests. The number of Surviving
Corporation Class A Senior Preferred Shares and Surviving Corporation Class B
Preferred Shares outstanding immediately after the Mergers will not be affected
thereby, and will be identical to the number of Class A Senior Preferred Shares
and Class B Preferred Shares, respectively, outstanding immediately prior to the
Merger. See "Fractional Share Procedures", below.
Warrants. As of the Record Date, there were outstanding warrants to
purchase an aggregate of 440,000 Common Shares (without giving effect to the
Reverse Stock Split). Pursuant to the terms of the warrants, the exercise price,
and the number of Common Shares into which they are exercisable, would be
adjusted to reflect the Reverse Stock Split.
Accounting Treatment of the Second-Step Merger. In accordance with
generally accepted accounting principles, the Company expects that the
Second-Step Merger will be accounted for as a reorganization of entities under
common control at historical cost in a manner similar to a pooling of interests.
Under this accounting method, the assets and liabilities of the combining
entities will be carried forward at their recorded historical book values. See
"Accounting Treatment of the Merger", above.
Certain Federal Income Tax Consequences of the Second-Step Merger. The
Second-Step Merger will have the following federal income tax consequences:
37
<PAGE> 41
(a) Stockholders of NV Delaware will recognize neither gain or loss upon
the exchange of (i) NV Delaware Common Shares for Surviving Corporation
Common Shares, (ii) NV Delaware Class A Senior Preferred Shares for
Surviving Corporation Class A Senior Preferred Shares and/or (iii) NV
Delaware Class B Preferred Shares for Surviving Corporation Class B
Preferred Shares, as the case may be, except to the extent that a
holder of NV Delaware Common Shares receives cash for fractional
interests otherwise payable in the Second-Step Merger pursuant to the
Fractional Share Procedures.
(b) The basis of the Surviving Corporation Common Shares, Surviving
Corporation Class A Senior Preferred Shares and/or Surviving
Corporation Class B Preferred Shares in the hands of a stockholder
immediately after the Second-Step Merger will be equal ,in the
aggregate, to the basis of the NV Delaware Common Shares, NV Delaware
Class A Senior Preferred Shares and/or NV Delaware Class B Preferred
Shares, as the case may be, exchanged therefor. The basis of such NV
Delaware Shares for a stockholder thereof will be equal to the basis of
the Common Shares, Class A Senior Preferred Shares and Class B
Preferred Shares, respectively, held by such shareholder immediately
prior to the Merger.
(c) The holding period of the Surviving Corporation Common Shares,
Surviving Corporation Class A Senior Preferred Shares and/or Surviving
Corporation Class B Preferred Shares received by an NV Delaware
stockholder in the Second-Step Merger will include the period of time
that the NV Delaware Common Shares, NV Delaware Class A Senior
Preferred Shares and/or NV Delaware Class B Preferred Shares, as the
case may be, were held as a capital asset at the time of the
Second-Step Merger.
The foregoing discussion of certain federal income tax consequence is
for general information only and is not tax advice. ALL SHAREHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR CONSEQUENCES OF THE MERGER
TO THEM, INCLUDING WITHOUT LIMITATION THE APPLICATION AND EFFECT OF STATE,
LOCAL, FEDERAL AND/OR FOREIGN TAX LAWS AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT AND THE SECOND-STEP MERGER AGREEMENTS,
RESPECTIVELY. See "Certain Federal Income Tax Consequences of the Merger",
above.
Conditions to the Second-Step Merger; Amendment; Waiver; Termination.
The obligations of NV Delaware and NV Merger Sub to effect the Second-Step
Merger are subject to the following conditions:
(a) the consummation of the Merger; and
(b) the absence of any material pending or threatened litigation
concerning the Second-Step Merger or other transaction
contemplated by the Second-Step Merger Agreement.
The Second-Step Merger Agreement may be amended and any of its
provisions, including any conditions precedent (other than that pertaining to
the consummation of the Merger), may be waived by NV Delaware at any time prior
to the completion of the Merger, if, in the sole judgment of the Board of
Directors of NV Delaware, such amendment would not adversely affect the rights
and interests of NV Delaware's stockholders thereunder.
Notwithstanding any approval by the shareholders of the Company of the
Reincorporation Proposal, the Second-Step Merger Agreement may be terminated and
the Second-Step Merger may be abandoned at any time prior to the completion of
the Merger by the board of directors of NV Delaware, if such board of directors
determines for any reason that the consummation of the transactions contemplated
by the Second-Step Merger Agreement would not be advisable or in the best
interests of NV Delaware and its stockholders.
38
<PAGE> 42
FRACTIONAL SHARE PROCEDURES
As described above, no fractional shares, or certificates representing
such fractional interests, will be issued in the Second-Step Merger. See "The
Reverse Stock Split" and "The Second-Step Merger Agreement - Certificates; No
Fractional Shares", above. With respect to any stockholder who would have
received fractional interests in the Second-Step Merger -- a holder of less than
twenty Common Shares or a number of Common Shares not evenly divisible by twenty
immediately prior to the Merger - the fractional interests otherwise issuable to
such stockholder in the Second-Step Merger ("Fractional Interests") will be
covered by an arrangement to be implemented by the Surviving Corporation in
accordance with Section 155 of the DGCL (such arrangement being referred to
herein as the "Fractional Share Procedures"). (DGCL Section 155 specifies
alternative procedures that may be used by a corporation that elects not to
issue fractional shares.) Under the Fractional Share Procedures, as more fully
described below, all Fractional Interests will be "bundled" and sold by an
independent exchange agent (the "Exchange Agent") to be retained by the
Surviving Corporation. The Exchange Agent will be an entity having experience in
the bundling and sale of such interests that is not an affiliate of the Company,
NV Delaware or the Surviving Corporation.
After the Mergers, the Surviving Corporation will deposit with the
Exchange Agent that number of Surviving Corporation Common Shares as is equal to
the aggregate number of Fractional Interests, rounded upwards to the next whole
number. The Exchange Agent will use its commercially reasonable efforts to sell
such shares in brokers' transactions at the highest prevailing market prices it
is able to obtain, and will remit to each such holder, upon receipt by the
Exchange Agent of the Transmittal Documents, its pro rata share in cash of the
aggregate proceeds received therefor, based on such holder's Fractional Interest
compared to the Fractional Interests of all holders, net of commissions. The
Surviving Corporation will not make any payment to holders in respect of
Fractional Interests. Neither the Company, NV Delaware nor the Surviving
Corporation will determine or influence the bid or sale price for such shares.
The Surviving Corporation will pay the Exchange Agent a flat fee to cover the
costs of the Fractional Share Procedures. No action will be required by any
stockholder with respect to any of the foregoing procedures.
No assurance can be given that there will be a market for such bundled
shares; that the Exchange Agent will be successful in marketing and selling such
shares on behalf of the holders thereof; or that the consideration, if any,
received by such holder in exchange for its Fractional Interest, will be equal
to the corresponding percentage of a Surviving Corporation Common Share
represented by such Fractional Interest at prevailing market prices.
TRANSMITTAL PROCEDURES
Upon completion of the Mergers, the Exchange Agent will send, to all
record holders of Common Shares, a letter of transmittal and such other
documents as may be required by the Exchange Agent (together, the "Transmittal
Documents"). As provided in the Second-Step Merger Agreement, each holder of a
Common Certificate (a certificate or certificates formerly representing Common
Shares) will be required to surrender such certificate or certificates to the
Exchange Agent for cancellation, together with completed Transmittal Documents.
Each holder of a Common Certificate shall be entitled to receive therefor, upon
surrender thereof and delivery of completed Transmittal Documents, (i) a
certificate representing the number of whole Surviving Corporation Common Shares
into which such Common Shares were converted in the Mergers (see "The
Second-Step Merger - Effect on Capital Stock", above) and (ii), if such holder
held any Fractional Interests, the cash consideration, if any, payable to such
holder for such holder's pro rata share of all such Fractional Interests, net of
commissions, as described above. See "Fractional Share Procedures", above.
Holders of certificates formerly representing outstanding Class A Senior
Preferred Shares or Class B Preferred Shares will not receive, and will not be
required to submit, any Transmittal Documents. After the Mergers, the existing
certificates of such holders, formerly representing Class A Senior Preferred
Shares and Class B Preferred Shares, respectively, will represent
39
<PAGE> 43
the same number of Surviving Corporation Class A Senior Preferred Shares and
Surviving Corporation Class B Preferred Shares, respectively. See "The
Second-Step Merger Agreement - Certificates; No Fractional Shares", above.
THE COMPANY URGES ALL SHAREHOLDERS TO CAREFULLY READ THIS BOARD
PROPOSAL 5, ANNEX I HERETO DESCRIBING CERTAIN PRINCIPAL DIFFERENCES BETWEEN NEW
YORK AND DELAWARE CORPORATION LAW; ANNEXES II, V, VI AND VII, WHICH CONTAIN THE
MERGER AGREEMENT, THE SECOND-STEP MERGER AGREEMENT, THE SURVIVING CORPORATION
CERTIFICATE OF INCORPORATION AND THE SURVIVING CORPORATION BY-LAWS,
RESPECTIVELY; AND ANNEXES III AND IV HERETO, SUMMARIZING THE DIFFERENCES BETWEEN
THE NV DELAWARE CERTIFICATE OF INCORPORATION AND THE NV DELAWARE BY-LAWS,
RESPECTIVELY, AND THE SURVIVING CORPORATION CERTIFICATE OF INCORPORATION (ANNEX
VI) AND THE SURVIVING CORPORATION BY-LAWS (ANNEX VII), RESPECTIVELY.
The Board of Directors recommends that shareholders vote FOR the
Reincorporation Proposal.
MISCELLANEOUS
1995 ANNUAL REPORT ON FORM 10-K
The Company has mailed, with this proxy statement, copies of its Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 (the "Annual
Report") to the holders of its Class A Senior Preferred Shares, Class B
Preferred Shares and Common Shares as of the Record Date. THE COMPANY WILL
PROVIDE WITHOUT CHARGE, TO EACH HOLDER OF CLASS A SENIOR PREFERRED SHARES, CLASS
B PREFERRED SHARES AND COMMON SHARES AS OF THE RECORD DATE, A COPY OF THE ANNUAL
REPORT ON THE WRITTEN REQUEST OF ANY SUCH HOLDER ADDRESSED TO THE COMPANY'S
SECRETARY AT NEW VALLEY CORPORATION, 100 S.E. SECOND STREET, MIAMI, FLORIDA
33131.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, as well as persons who own more than 10% of a registered
class of the Company's equity securities (the "Reporting Persons"), to file
reports of initial beneficial ownership and changes in beneficial ownership on
Forms 3, 4 and 5 with the SEC. Such Reporting Persons are also required by SEC
regulations to furnish the Company with copies of all such reports that they
file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and representations that no other reports
were required, during and with respect to the fiscal year ended December 31,
1995, all Reporting Persons have timely complied with all filing requirements
applicable to them.
SHAREHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
Proposals of security holders intended to be presented at the 1997
Annual Meeting of Shareholders of the Company must be received by the Company at
its principal executive offices, 100 S.E. Second Street, Miami, Florida 33131,
Attention: Marc N. Bell, Secretary, on or before January 20, 1997 in
order to be included in the Company's proxy statement and accompanying proxy
card relating to that meeting.
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<PAGE> 44
OTHER MATTERS
The cost of this solicitation of proxies will be borne by the Company.
In addition to the use of the mails, some of the directors, officers and regular
employees of the Company may, without additional compensation, solicit proxies
personally or by telephone. The Company will reimburse brokerage houses, banks
and other custodians, nominees and fiduciaries for expenses incurred in
forwarding soliciting material to the beneficial owners of Class A Senior
Preferred Shares, Class B Preferred Shares and Common Shares. The Company has
engaged Georgeson & Company Inc., Wall Street Plaza, New York, NY 10005,
telephone: 212-440-9800, to assist with the solicitation of proxies for an
estimated fee of $6,000, plus reimbursement of out-of-pocket expenses.
The Board of Directors knows of no other matters which will be
presented at the Annual Meeting. If, however, any other matter is properly
presented at the Annual Meeting, the proxy solicited by this proxy statement
will be voted on such matters in accordance with the judgment of the person or
persons holding such proxy.
By order of the Board of Directors,
BENNETT S. LEBOW
Chairman of the Board and
Chief Executive Officer
Date: May 20, 1996
41
<PAGE> 45
ANNEX I
PRINCIPAL DIFFERENCES BETWEEN NEW YORK AND DELAWARE CORPORATION LAWS
The following discussion summarizes certain principal differences
between New York Business Corporation Law (the "NYBCL") and the Delaware General
Corporation Law (the "DGCL"). This summary does not purport to be a complete
description of such corporation laws or the differences between shareholders'
rights under each of the NYBCL and the DGCL, respectively, and is qualified by
reference to each of the NYBCL and the DGCL.
Dividends. Under the NYBCL, dividends may be paid only out of surplus. The DGCL
provides that a corporation may, unless otherwise restricted by its certificate
of incorporation, declare and pay dividends out of surplus, or if no surplus
exists, out of net profits for the current or preceding fiscal year (provided
that the amount of capital of the corporation is not less than the aggregate
amount of the capital represented by the issued and outstanding stock of all
classes having a preference upon the distribution of assets).
Dissenters' Rights of Appraisal. Under the NYBCL, dissenting shareholders who
follow prescribed statutory procedures are entitled to appraisal rights in
connection with certain mergers, consolidations and sales of all or
substantially all the assets of a corporation. The DGCL provides similar rights
and procedures for mergers and consolidations only. Furthermore, under the DGCL,
even in those cases, such rights are not provided in certain circumstances,
including transactions in which shares of the corporation being voted in a
merger or consolidation are listed on a national securities exchange, designated
as national market system securities by the National Association of Securities
Dealers, Inc. (the "NASD") or are held of record by more than 2,000 stockholders
and in which the shares to be received in such merger or consolidation are
shares of the surviving corporation or are listed on a national securities
exchange or designated as national market system securities by the NASD or are
held of record by more than 2,000 stockholders.
Issuance to Officers, Directors and Employees of Rights or Options to Purchase
Shares. The NYBCL requires the affirmative vote of a majority of the shares
entitled to vote in order to issue to officers, directors or employees options
or rights to purchase stock. The DGCL does not require stockholder approval of
such transactions.
Vote Required for Certain Business Combinations. The NYBCL requires that certain
mergers and consolidations and sales of all or substantially all of the assets
not in the ordinary course of business be approved by the holders of two-thirds
of the outstanding shares entitled to vote thereon. Under the DGCL, such
transactions require approval by the holders of a majority of the outstanding
shares entitled to vote thereon, and a vote of the stockholders of the surviving
corporation is not necessary where, in the case of a merger, (i) no amendment of
its certificate of incorporation or change in its outstanding shares is involved
and (ii) the merger results in no more than a 20% increase in its outstanding
common shares.
Loans to Directors. The NYBCL requires that loans to directors be authorized by
an affirmative vote of shareholders as provided in the NYBCL. Under the DGCL,
loans may be made to employees or officers, even those who are also directors if
the Board of Directors finds that the loan may benefit the corporation.
Redeemable Shares. The NYBCL generally permits redemption only at the option of
the corporation, while the DGCL permits redeemable shares to be redeemed at the
option of the corporation or the stockholder.
Corporate Actions. The NYBCL permits corporate action without a shareholders'
meeting only upon the written consent of all shareholders entitled to vote on
such action. The DGCL permits corporate action
<PAGE> 46
without a meeting of stockholders upon the written consent of the holders of
that number of shares necessary to authorize the proposed corporate action being
taken, unless the certificate of incorporation expressly provides otherwise, and
then requires the corporation to provide notice of the actions taken through
such procedure to the stockholders who did not vote with respect to such action.
Consideration for Shares. Under the NYBCL, neither obligations of the subscriber
for future payments nor obligations of the subscriber for future services
constitutes payment or partial payment for shares of a corporation. Furthermore,
certificates for shares may not be issued until the full amount of the
consideration therefor has been paid (except in the case of shares purchased
pursuant to stock options under a plan permitting installment payments). Under
the DGCL, shares of stock may be issued, and deemed to be fully paid and
nonassessable, if the corporation receives consideration (in the form of cash,
services rendered, personal property, real property, leases of real property, or
a combination thereof) having a value not less than the par value of such
shares, and the corporation receives a binding obligation of the subscriber to
pay the balance of the subscription price.
Classification of the Board of Directors. The NYBCL permits a classified board
with as many as four classes but forbids fewer than three directors in any
class. The DGCL permits a classified board of directors with as many as three
classes, but does not specify a minimum number of directors for each class.
Neither the Surviving Corporation's new Certificate of Incorporation nor the
Company's existing Certificate of Incorporation provides for a classified board.
Business Combination Statutes. The NYBCL prohibits any "business combination"
(as therein defined) between a "resident domestic corporation" and an
"interested shareholder" for five years after the date that the interested
shareholder became an interested shareholder unless prior to that date the board
of directors of the domestic corporation approved the business combination or
the transaction that resulted in the interested shareholder becoming an
interested shareholder. After five years, such a business combination is
permitted only if (i) it is approved by a majority of the shares not owned by,
or by an affiliate of, the interested shareholder or (ii) certain statutory fair
price requirements are met. A "resident domestic corporation" is defined as any
corporation that (i) is incorporated in New York, (ii) has its principal
executive offices and significant business operations in New York or has at
least 250 or 25% of its employees in New York (including employees of its 80%
subsidiaries), and (iii) has at least 10% of its stock beneficially owned by New
York residents. An "interested shareholder" is any person who beneficially owns,
directly or indirectly, 20% or more of the outstanding voting shares of the
corporation.
The DGCL prohibits any "business combination" (as therein defined) between a
Delaware corporation and an "interested stockholder" for three years following
the date that the interested stockholder became an interested stockholder unless
(i) prior to that date the board of directors approved the business combination
or the transaction that resulted in the interested stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction that resulted
in the interested stockholder becoming an interested stockholder, the interested
stockholder held at least 85% of the outstanding voting stock of the corporation
(not counting shares owned by officers and directors and certain shares in
employee stock plans), or (iii) on or subsequent to such date the business
combination is approved by the board of directors and at least two-thirds of the
outstanding shares of voting stock not owned by the interested stockholder. The
DGCL defines "interested stockholder" as any person who beneficially owns,
directly or indirectly, 15% or more of the outstanding voting stock of the
corporation. Unlike New York, Delaware does not require that the corporation's
principal executive offices or significant operations be located in Delaware in
order to be covered by this provision.
Under the NYBCL, the number of directors may not be less than three, and any
higher number may be fixed by the bylaws or by action of the shareholders or of
the board of directors under specific provisions of the bylaws adopted by the
shareholders. The number of directors may be increased or decreased by amendment
of the bylaws or by action of the shareholders or of the board of directors
under the specific provisions of a bylaw adopted by the shareholders, subject to
certain conditions.
<PAGE> 47
Number of Directors. Under the DGCL, a corporation may have as few as one
director and there are no maximum limits. The specific number may be fixed in
the certificate of incorporation but if so, it may be changed only with both
board of directors and shareholder approval. If the certificate of incorporation
is silent as to the number of directors, the board of directors may fix or
change the authorized number of directors pursuant to a provision of the bylaws.
Inspection of Stockholder's List. With respect to the inspection of
shareholder's lists, the NYBCL provides a right of inspection on at least 5
days' written demand to (i) any person who shall have been a shareholder for at
least 6 months immediately preceding the demand or (ii) any person holding, or
authorized in writing by, at least 5% of any class of outstanding shares. The
corporation has certain rights calculated to assure itself that the demand for
inspection is not for a purpose or interest other than that of the corporation.
The DGCL permits any stockholder to inspect the stockholder's list for a purpose
reasonably related to such person's interest as a stockholder and, during the 10
days preceding the stockholder's meeting, for any purpose germane to that
meeting.
<PAGE> 48
ANNEX II
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of __________, 1996 (this
"Agreement") by and between New Valley Corporation, a New York corporation ("New
Valley") and NV Delaware Inc., a Delaware corporation and a wholly owned
subsidiary of New Valley ("NV Delaware" or the "Surviving Corporation", and
together with New Valley, the "Constituent Corporations").
WHEREAS, the Boards of Directors of New Valley and NV Delaware
desire that New Valley merge with and into NV Delaware pursuant to the terms and
conditions of this Agreement and in accordance with Section 252 of the Delaware
General Corporation Law ("DGCL") and Section 907 of the New York Business
Corporation Law (the "NYBCL"), and have adopted and approved this Agreement in
accordance with Section 902 of the NYBCL and Section 252 of the DGCL,
respectively;
WHEREAS, New Valley, as the sole stockholder of NV Delaware, has
adopted and approved this Agreement in accordance with Section 252 of the NYBCL:
WHEREAS, New Valley intends to solicit, at its 1996 annual meeting
of shareholders (the "Annual Meeting"), the approval of this Agreement by the
holders of the New Valley Shares (as defined below) entitled to vote thereon in
accordance with Sections 903 and 907 of the NYBCL;
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. New Valley shall merge with and into NV
Delaware (the "Merger"). NV Delaware shall be the surviving corporation in the
Merger, and at the Effective Time (as defined below), the separate existence of
New Valley shall cease. The corporate existence of NV Delaware, with its
purposes, powers and objects, shall continue unaffected and unimpaired by the
Merger, and as the surviving corporation it shall succeed to all rights, assets,
liabilities and obligations of New Valley as and to the extent provided in
Section 259 of the DGCL and Section 906 of the NYBCL.
Section 1.2. The Effective Time. The Merger shall become effective
(the "Effective Time") upon the filing of (i) a certificate of merger executed
by NV Delaware with the Secretary of State of the State of Delaware pursuant to
Section 253 of the DGCL, the form of which is attached as Annex A and (ii) a
certificate of merger executed by the Constituent Corporations with the
Secretary of State of the State of New York pursuant to Sections 904 and 907 of
the NYBCL, the form of which is attached as Annex B.
Section 1.3. Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall as of the Effective Time read
in its entirety as set forth in Annex C, and shall be the Certificate of
Incorporation of the Surviving Corporation after the Effective Time until duly
amended. At the Effective Time, the Surviving Corporation shall file such
Certificate of Incorporation with the Secretary of State of the State of
Delaware.
Section 1.4. By-Laws. The By-Laws of the Surviving Corporation as
of the Effective Time shall read in their entirety as set forth in Annex D, and
shall be the By-Laws of the Surviving Corporation after the Effective Time until
duly amended.
<PAGE> 49
Section 1.5. Officers and Directors. At the Effective Time, the
directors and officers of New Valley immediately prior to the Effective Time
shall be and constitute the directors and officers of the Surviving Corporation.
Section 1.6. Required Approvals. This Agreement is subject to the
adoption and approval of the holders of (i) two-thirds of all of the outstanding
New Valley Shares entitled to vote thereon at the Annual Meeting and (ii) a
majority of all of the outstanding Common Shares entitled to vote thereon at the
Annual Meeting, voting as a separate class, each in accordance with Sections 903
and 907 of NYBCL (together, the "New Valley Shareholder Approvals"). As of May
__, 1996, [191,552,476] common shares, par value $.01 per share ("New Valley
Common Shares"), [1,035,462] $15.00 Class A Increasing Rate Cumulative Senior
Preferred Shares ($100 Liquidation Value), par value $.01 per share ("New Valley
Class A Senior Preferred Shares") and [2,790,776] $3.00 Class B Cumulative
Convertible Preferred Shares ($25 Liquidation Value), par value $.10 per share
("New Valley Class B Preferred Shares", and together with the New Valley Common
Shares and the New Valley Class A Senior Preferred Shares, the "New Valley
Shares") outstanding. This Agreement has been adopted and approved by New
Valley, the sole stockholder of NV Delaware, in accordance with Section 252 of
the DGCL. As of May __, 1996, 100 shares of common stock, par value $.01 per
share, of NV Delaware (the "NV Delaware Common Shares") were outstanding.
Section 1.7. Corporate Name. The name under which New Valley was
originally formed is "Mississippi Valley Printing Telegraph Company".
ARTICLE II
CONVERSION OF SHARES
Section 2.1. Effect of the Merger on Capital Stock. At the
Effective Time, by virtue of the Merger and without any action on the part of
the Constituent Corporations or the holders of any capital stock thereof:
(a) Cancelation of Certain Capital Stock of New Valley. Each of
the (i) New Valley Common Shares, (ii) New Valley Class A Senior Preferred
Shares, and (iii) New Valley Class B Preferred Shares that are owned by New
Valley as treasury stock or by any of its subsidiaries shall be canceled and
cease to exist.
(b) Conversion of New Valley Common Shares. Each issued and
outstanding New Valley Common Share (excluding shares canceled under Section
2.1(a)) shall be converted into the right to receive one-twentieth of a share of
common stock, par value $.01 per share, of NV Delaware ("NV Delaware Common
Shares").
(c) Conversion of New Valley Class A Senior Preferred Shares. Each
issued and outstanding New Valley Class A Senior Preferred Share (excluding
shares canceled under Section 2.1(a)) shall be converted into the right to
receive one $15.00 Class A Increasing Rate Cumulative Senior Preferred Shares
($100 Liquidation value), par value $.01 per share, of NV Delaware ("NV Delaware
Class A Senior Preferred Shares").
(d) Conversion of New Valley Class B Preferred Shares. Each issued
and outstanding New Valley Class B Preferred Share (excluding shares canceled
under Section 2.1(a)) shall be converted into the right to receive one $3.00
Class B Cumulative Convertible Preferred Share ($25 Liquidation Value), par
value $.10 per share, of NV Delaware ("NV Delaware Class B Preferred Shares").
(e) Cancelation of Shares Upon Conversion. Upon the conversion of
New Valley Common Shares, New Valley Class A Senior Preferred Shares and New
Valley Class B Preferred Shares pursuant to paragraphs (b), (c) and (d) of this
Section 2.1, respectively, such shares shall be canceled and
<PAGE> 50
cease to exist, and each holder of a certificate representing any such shares
shall cease to have any rights with respect thereto, other than the right to
receive shares of capital stock of NV Delaware as provided in paragraph, (b),
(c) or (d) above, as the case may be.
(f) Cancelation of Certain Capital stock of NV Delaware. Each NV
Delaware Common Share that is issued and outstanding immediately prior to the
Effective Time shall be canceled and cease to exist.
Section 2.2. Closing of Transfer Books. From and after the
Effective Time, the stock transfer books of New Valley shall be closed and no
transfer of any capital stock of New Valley shall thereafter be made. If, after
the Effective Time, certificates representing any shares of such capital stock
are presented to the Surviving Corporation, they shall be canceled and exchanged
for the merger consideration specified in Section 2.1.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties. Each party hereby
represents and warrants to the other that such party: (i) is a corporation duly
organized and in good standing in its jurisdiction of incorporation; (ii) has
obtained the approval of its board of directors to effect the Merger; and (iii)
has full power and authority to execute, deliver and perform this Agreement.
ARTICLE IV
CLOSING CONDITIONS; THE CLOSING
Section 4.1. Closing Conditions. (a) The consummation of the
Merger and the other transactions provided herein is conditioned upon the
satisfaction of the following conditions: (i) the New Valley Shareholder
Approvals shall have been obtained; (ii) the consent of the commissioner of
taxation and finance pursuant to Section 907(f) of the NYBCL shall have been
obtained; and (iii) there shall not be any pending or threatened litigation,
action or proceeding concerning the Merger or any other transaction contemplated
by this Agreement that, in the judgment of the Board of Directors of New Valley,
would materially adversely affect any Constituent Corporation or any right of
their respective equity holders. The parties shall use their commercially
reasonable efforts to satisfy the foregoing conditions.
(b) The closing under this Agreement shall occur on a date not
more than ten business days following the satisfaction of the foregoing
conditions at a place mutually agreed by the parties.
ARTICLE V
TERMINATION OR ABANDONMENT OF MERGER
Section 5.1. Termination. This Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time by the Board of
Directors of New Valley, if the Board of Directors of New Valley shall determine
for any reason that the consummation of the transactions contemplated hereby
would be inadvisable or not in the best interests of New Valley or its
shareholders.
<PAGE> 51
ARTICLE VI
AMENDMENTS
Section 6.1. Amendments. At any time prior to the Effective Time,
the parties hereto may by written agreement amend, modify or supplement any
provision of this Agreement, provided that no such amendment, modification or
supplement may be made if, in the sole judgment of the Board of Directors of New
Valley, it would adversely affect the rights and interests of New Valley's
shareholders in any material respect.
ARTICLE VII
ACCOMPLISHMENT OF MERGER
Section 7.1. Further Assurances. The parties hereto each agree to
execute such documents and instruments and to take whatever action may be
necessary or desirable to consummate the Merger.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. Governing Law. This Agreement shall be construed
under and in accordance with the laws of the State of New York applicable to
contracts to be fully performed in such State, without giving effect to choice
of law principles.
Section 8.2. Headings. The headings set forth herein are for
convenience only and shall not be used in interpreting the text of the section
in which they appear.
Section 8.3. Binding Effect; Successors and Assigns. This
Agreement may not be assigned by either party without the written consent of the
other party; this Agreement shall be binding upon and inure to the benefit of
the respective successors and permitted assigns of the parties hereto.
Section 8.4. Counterparts. This Agreement may be executed in
separate counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts when taken together shall constitute but one and
the same instrument.
Section 8.5. Extensions of Time. At any time prior to the
Effective Time, the parties hereto may, by written agreement, extend time for
the performance of any of the obligations or other acts of the parties hereto.
Section 8.6. Merger Agreement. A copy of this Agreement is on file
at the principal place of business of NV Delaware, c/o New Valley Corporation,
100 S.E. Second Street, Miami, Florida 33131, and will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder or
shareholder of either Constituent Corporation.
<PAGE> 52
IN WITNESS WHEREOF, New Valley and NV Delaware have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the day first above written.
NEW VALLEY CORPORATION
By:___________________________
Name:
Title:
NV DELAWARE INC.
By:__________________________
Name:
Title:
<PAGE> 53
ANNEX III
RESTATED CERTIFICATE OF INCORPORATION
OF
NV DELAWARE INC.
The Restated Certificate of Incorporation of NV Delaware Inc., a
Delaware corporation ("NV Delaware") will be identical to the Restated
Certificate of Incorporation (the "New Valley Certificate of Incorporation") of
New Valley Corporation, a New York corporation ("New Valley"), attached to the
accompanying proxy statement as Annex VI, except as provided below:
1. The name of corporation will be "NV Delaware Inc." (to be changed to "New
Valley Corporation"). (See cover page of New Valley Certificate of
Incorporation and Paragraph FIRST thereof.)
2. The voting power of the Class A Senior Preferred Shares will be 9.29
votes per share (to be changed to .4645 of a vote per share). (See
Paragraph THIRD (A)(vi) of the New Valley Certificate of Incorporation.)
3. The conversion price of the Class B Preferred Shares will be $3.00 per
Common Share (to be changed to $60.00 per Common Share), and clarifying
language will be added to provide 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 ______________, 1996
between New Valley and NV Delaware or (ii) the Merger Agreement dated
as of ____________________, 1996 between NV Delaware and NV Merger Sub
Inc., a Delaware corporation. (See Paragraph THIRD (B)(vi)(1) of the New
Valley Certificate of Incorporation.)
4. The voting power of the Class B Preferred Shares will be one vote per
share (to be changed to one-twentieth of a vote per share). (See
Paragraph THIRD (B)(vii) of the New Valley Certificate of Incorporation.)
<PAGE> 54
ANNEX IV
BY-LAWS
OF
NV DELAWARE INC.
The By-Laws of NV Delaware Inc. will be identical to the By-Laws
of New Valley Corporation (the "New Valley By-Laws"), attached to the
accompanying proxy statement as Annex VII, except as provided below:
1. The name of the corporation will be "NV Delaware Inc." (to be changed to
"New Valley Corporation"). (See outside and inside cover pages of the New
Valley By-Laws and Section 33 thereof).
<PAGE> 55
ANNEX V
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of __________, 1996 (this
"Agreement") by and between NV Delaware Inc., a Delaware corporation ("NV
Delaware") and NV Merger Sub Inc., a Delaware corporation and a wholly owned
subsidiary of NV Delaware ("NV Merger Sub" or the "Surviving Corporation", and
together with NV Delaware, the "Constituent Corporations").
WHEREAS, the Boards of Directors of the Constituent Corporations
desire that NV Delaware merge with and into NV Merger Sub pursuant to the terms
and conditions of this Agreement and in accordance with Section 251 of the
Delaware General Corporation Law ("DGCL"), and have adopted and approved this
Agreement in accordance with Section 251 of the DGCL;
WHEREAS, New Valley Corporation, a New York corporation and the
parent of NV Delaware ("NV New York") and NV Delaware, the sole stockholders of
NV Delaware and NV Merger Sub, respectively, have adopted and approved this
Agreement in accordance with Section 251 of the DGCL;
WHEREAS, as a condition to the Merger (as defined below), NV New
York shall have been merged with and into NV Delaware pursuant to the terms and
conditions of that certain Merger Agreement dated as of __________, 1996 between
NV New York and NV Delaware (such merger, the "First Merger");
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. NV Delaware shall merge with and into NV
Merger Sub (the "Merger"). NV Merger Sub shall be the surviving corporation in
the Merger, and at the Effective Time (as defined below), the separate existence
of NV Delaware shall cease. The corporate existence of NV Merger Sub, with its
purposes, powers and objects, shall continue unaffected and unimpaired by the
Merger, and as the surviving corporation it shall succeed to all rights, assets,
liabilities and obligations of NV Delaware as and to the extent provided in
Section 259 of the DGCL.
Section 1.2. The Effective Time. The Merger shall become effective
(the "Effective Time") upon the filing of a certificate of merger executed by
the Surviving Corporation with the Secretary of State of the State of Delaware
pursuant to Section 251 of the DGCL, the form of which is attached as Annex A.
Section 1.3. Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall as of the Effective Time read
in its entirety as set forth in Annex B, and shall be the Certificate of
Incorporation of the Surviving Corporation after the Effective Time until duly
amended. At the Effective Time, the Surviving Corporation shall file such
Certificate of Incorporation
<PAGE> 56
with the Secretary of State of the State of Delaware. As provided therein, the
Surviving Corporation shall be renamed "New Valley Corporation".
Section 1.4. By-Laws. The By-Laws of the Surviving Corporation as
of the Effective Time shall read in their entirety as set forth in Annex C, and
shall be the By-Laws of the Surviving Corporation after the Effective Time until
duly amended.
Section 1.5. Officers and Directors. At the Effective Time, the
directors and officers of NV Delaware immediately prior to the Effective Time
shall be and constitute the directors and officers of the Surviving Corporation.
ARTICLE II
CONVERSION OF SHARES
Section 2.1. Effect of the Merger on Capital Stock. At the
Effective Time, by virtue of the Merger and without any action on the part of
the Constituent Corporations or the holders of any capital stock thereof:
(a) Cancelation of Certain Capital Stock of NV Delaware. Each of
the NV Delaware (i) common shares, par value $.01 per share ("NV Delaware Common
Shares"); (ii) $15.00 Class A Increasing Rate Cumulative Senior Preferred Shares
($100 Liquidation Value), par value $.01 per share ("NV Delaware Class A Senior
Preferred Shares"); or (iii) $3.00 Class B Cumulative Convertible Preferred
Shares ($25 Liquidation Value), par value $.10 per share ("NV Delaware Class B
Preferred Shares"), that are owned by NV Delaware as treasury stock or by any of
its subsidiaries shall be canceled and cease to exist.
(b) Conversion of NV Delaware Common Shares. Each issued and
outstanding NV Delaware Common Share (excluding shares canceled under Section
2.1(a)) shall be converted into the right to receive one-twentieth of a share of
common stock, par value $.01 per share, of NV Merger Sub ("Surviving Corporation
Common Shares"), in whole shares only.
(c) Conversion of NV Delaware Class A Senior Preferred Shares.
Each issued and outstanding NV Delaware Class A Senior Preferred Share
(excluding shares canceled under Section 2.1(a)) shall be converted into the
right to receive one $15.00 Class A Increasing Rate Cumulative Senior Preferred
Shares ($100 Liquidation value), par value $.01 per share, of NV Merger Sub
("Surviving Corporation Class A Senior Preferred Shares").
(d) Conversion of NV Delaware Class B Preferred Shares. Each
issued and outstanding NV Delaware Class B Preferred Share (excluding shares
canceled under Section 2.1(a)) shall be converted into the right to receive one
$3.00 Class B Cumulative Convertible Preferred Share ($25 Liquidation Value),
par value $.10 per share, of NV Merger Sub ("Surviving Corporation Class B
Preferred Shares", and together with the Surviving Corporation Common Shares and
the Surviving Corporation Class A Senior Preferred Shares, the "Surviving
Corporation Shares").
(e) Cancelation of Shares Upon Conversion. Upon the conversion of
NV Delaware Common Shares, NV Delaware Class A Senior Preferred Shares and NV
Delaware Class B Preferred Shares pursuant to paragraphs (b), (c) and (d) of
this Section 2.1, respectively, such shares shall be canceled and cease to
exist, and each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the shares
of the Surviving Corporation specified in such subsections in exchange therefor,
upon the surrender of the certificate or certificates representing such shares
in accordance with Section 2.2.
<PAGE> 57
(f) Cancelation of Certain Capital stock of NV Merger Sub. Each
share of common stock, par value $.01 per share, of NV Merger Sub, that is
issued and outstanding immediately prior to the Effective Time, shall be
canceled and cease to exist.
(g) No Fractional Securities; Arrangement under DGCL Section 155.
Notwithstanding any other provision of this Agreement, no certificates or scrip
representing fractional Surviving Corporation Common Shares shall be issued upon
the surrender for exchange of NV Delaware Common Shares, and such fractional
interests otherwise issuable shall not entitle the owner thereof to vote or to
any other rights of a holder of Surviving Corporation Common Shares. In lieu of
any such fractional shares, such fractional interests otherwise issuable shall
be subject to an arrangement to be implemented by the Surviving Corporation in
accordance with Section 155 of the DGCL.
Section 2.2. Exchange Procedures.
(a) Deposit with Exchange Agent. As soon as practicable after the
Effective Time, NV Merger Sub shall deposit with a disbursing agent (the
"Exchange Agent"), certificates representing Surviving Corporation Common
Shares, Surviving Corporation Class A Senior Preferred Shares and Surviving
Corporation Class B Preferred Shares.
(b) Exchange of Shares. As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate or
certificates ("Certificates") which immediately prior to the Effective Time
represented outstanding NV Delaware Common Shares that were converted in the
Merger, pursuant to Section 2.1(b), into the right to receive whole Surviving
Corporation Common Shares (the "Converted Shares"), (i) a letter of transmittal
(the "Letter of Transmittal") which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
actual delivery of the Certificates to the Exchange Agent, and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
certificates representing Surviving Corporation Common Shares. Upon surrender of
a Certificate to the Exchange Agent (or to such other agent or agents as may be
appointed by NV Delaware or NV Merger Sub) for cancelation, together with a duly
executed Letter of Transmittal and such other documents as the Exchange Agent
shall require, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole Surviving
Corporation Common Shares which such holder has the right to receive pursuant to
the provisions of Section 2.1(b). In the event of a transfer of ownership of
Converted Shares which is not registered in the transfer records of NV Delaware
or NV Merger Sub, as the case may be, a certificate representing the proper
number of Surviving Corporation Common Shares may be issued to a transferee if
the Certificate representing such Converted Shares is presented to the Exchange
Agent, accompanied by a Letter of Transmittal and all other documents required
to evidence and effect such transfer and by evidence satisfactory to the
Exchange Agent that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.2(b), each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive, upon such surrender and the delivery of a Letter of Transmittal and
other such documents as may be requested by the Exchange Agent, a certificate
representing Surviving Corporation Common Shares as provided in Section 2.1(b),
and, if applicable, the rights granted to holders of fractional interests
provided in Section 2.1(g).
(c) Closing of Transfer Books. From and after the Effective Time,
the stock transfer books of NV Delaware shall be closed and no transfer of any
capital stock of NV Delaware shall thereafter be made. If, after the Effective
Time, certificates representing any shares of such capital stock are presented
to the Surviving Corporation or the Exchange Agent, they shall be canceled and
exchanged for the merger consideration specified in Section 2.1.
<PAGE> 58
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties. Each party hereby represents
and warrants to the other that such party: (i) is a corporation duly organized
and in good standing in its jurisdiction of incorporation; (ii) has obtained the
approval of its board of directors to effect the Merger; and (iii) has full
power and authority to execute, deliver and perform this Agreement.
ARTICLE IV
CLOSING CONDITIONS; THE CLOSING
Section 4.1. Closing Conditions. (a) The consummation of the
Merger and the other transactions provided herein is conditioned upon the
satisfaction of the following conditions: (i) the First Merger shall have been
consummated; and (ii) there shall not be any pending or threatened litigation,
action or proceeding concerning the Merger or any other transaction contemplated
by this Agreement that, in the judgment of the Board of Directors of NV
Delaware, would materially adversely affect any Constituent Corporation or any
right of their respective equity holders. The parties shall use their
commercially reasonable efforts to satisfy the foregoing conditions.
(b) The closing under this Agreement shall occur on a date not
more than ten business days following the satisfaction of the foregoing
conditions at a place mutually agreed by the parties.
ARTICLE V
TERMINATION OR ABANDONMENT OF MERGER
Section 5.1. Termination. This Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time by the Board of
Directors of NV Delaware, if the Board of Directors of NV Delaware shall
determine for any reason that the consummation of the transactions contemplated
hereby would be inadvisable or not in the best interests of NV Delaware or its
stockholders.
ARTICLE VI
AMENDMENTS
Section 6.1. Amendments. At any time prior to the Effective Time,
the parties hereto may by written agreement amend, modify or supplement any
provision of this Agreement, provided that no such amendment, modification or
supplement may be made if, in the sole judgment of the Board of Directors of NV
Delaware, it would adversely affect the rights and interests of NV Delaware's
stockholders in any material respect.
ARTICLE VII
ACCOMPLISHMENT OF MERGER
Section 7.1. Further Assurances. The parties hereto each agree to
execute such documents and instruments and to take whatever action may be
necessary or desirable to consummate the Merger.
<PAGE> 59
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. Governing Law. This Agreement shall be construed
under and in accordance with the laws of the State of New York applicable to
contracts to be fully performed in such State, without giving effect to choice
of law principles.
Section 8.2. Headings. The headings set forth herein are for
convenience only and shall not be used in interpreting the text of the section
in which they appear.
Section 8.3. Binding Effect; Successors and Assigns. This
Agreement may not be assigned by either party without the written consent of the
other party; this Agreement shall be binding upon and inure to the benefit of
the respective successors and permitted assigns of the parties hereto.
Section 8.4. Counterparts. This Agreement may be executed in
separate counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts when taken together shall constitute but one and
the same instrument.
Section 8.5. Extensions of Time. At any time prior to the
Effective Time, the parties hereto may, by written agreement, extend time for
the performance of any of the obligations or other acts of the parties hereto.
Section 8.6. Merger Agreement. A copy of this Agreement is on file
at the principal place of business of New Valley Corporation (as the Surviving
Corporation), 100 S.E. Second Street, Miami, Florida 33131, and will be
furnished by New Valley Corporation, on request and without cost, to any
stockholder of either Constituent Corporation.
IN WITNESS WHEREOF, NV Delaware and NV Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the day first above written.
NV DELAWARE INC.
By:___________________________
Name:
Title:
NV MERGER SUB INC.
By:__________________________
Name:
Title:
<PAGE> 60
ANNEX VI
RESTATED CERTIFICATE OF INCORPORATION
OF
NEW VALLEY CORPORATION
---------------------
The undersigned, being the Chairman of the Board and Chief
Executive Officer of NEW VALLEY CORPORATION, a corporation organized under the
laws of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY as
follows:
(1) The name under which the Corporation was originally
incorporated is NV Merger Sub Inc.
(2) The original Certificate of Incorporation of the Corporation
was filed in the office of the Secretary of State of the State of
Delaware on _________, 1996.
(3) The Restated Certificate of Incorporation of the Corporation
restates, integrates and further amends the Certificate of
Incorporation to read in its entirety as follows:
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 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
<PAGE> 61
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 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 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
<PAGE> 62
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 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.
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,
<PAGE> 63
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 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 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:
<PAGE> 64
(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 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 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:
<PAGE> 65
(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.
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 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.
<PAGE> 66
(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.
(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
<PAGE> 67
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 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 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
<PAGE> 68
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, 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 __________________, 1996 between New Valley Corporation, a New
York corporation, and NV Delaware Inc., a Delaware corporation ("NV
Delaware") (ii) the Merger Agreement dated as of _____________, 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 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.
<PAGE> 69
(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 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 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
<PAGE> 70
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 by the Corporation commencing not
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:
(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);
<PAGE> 71
(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 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 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
<PAGE> 72
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 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 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
<PAGE> 73
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 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 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,
<PAGE> 74
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 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.
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:
<PAGE> 75
(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 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 liquidation, dissolution or winding up
of the Corporation, and (d) shall be of equal rank regardless of series. The
shares of any one
<PAGE> 76
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
therefore.
(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 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 director or officer of the Corporation is
<PAGE> 77
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, (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.
IN WITNESS WHEREOF, the undersigned corporation has caused
this Restated Certificate of Incorporation to be executed and acknowledged by
its Chairman of the Board and Chief Executive Officer thereunto duly authorized
this __th day of __________, 1996.
NEW VALLEY CORPORATION
By__________________________
Name: Bennett S. LeBow
Title: Chairman of the Board
and Chief Executive
Officer
<PAGE> 78
ANNEX VII
BY-LAWS
OF
NEW VALLEY CORPORATION
(a Delaware corporation)
----------------
Adopted
June __, 1996
<PAGE> 79
BY-LAWS
OF
NEW VALLEY CORPORATION
(a Delaware corporation)
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, 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.
<PAGE> 80
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, 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. 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.
<PAGE> 81
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.
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.
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
<PAGE> 82
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.
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.
<PAGE> 83
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 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 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.
<PAGE> 84
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.
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 duties
<PAGE> 85
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 "New Valley Corporation" 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 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
<PAGE> 86
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.
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 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.
<PAGE> 87
[FORM OF PROXY]
PROXY CARD
NEW VALLEY CORPORATION
1996 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned is the record holder of Common Shares, par
value $.01 per share (the "Common Shares"), of New Valley Corporation, and
hereby appoints each of Bennett S. LeBow, Howard M. Lorber and Richard J.
Lampen, and each of them, with full power of substitution, for and in the name
of the undersigned, to represent and to vote, as designated below, all Common
Shares that the undersigned is entitled to vote if personally present at the
1996 Annual Meeting of Shareholders of New Valley Corporation, and at any
postponement or adjournment thereof. The undersigned hereby revokes any
previous proxies with respect to the matters covered by this Proxy.
(Please mark with an "X" in the appropriate boxes)
1. Election of Bennett S. LeBow, Howard M. Lorber, Arnold I. Burns,
Ronald J. Kramer, Paul L. McDermott, Richard S. Ressler and Richard J.
Lampen as directors whose terms expire in 1997.
<TABLE>
<S> <C> <C> <C>
/_/ FOR all nominees listed above /_/ WITHHOLD AUTHORITY
to (except as marked to the contrary) vote for the nominees listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for one or more of the nominees,
mark FOR above and print the name(s) of the person(s) with respect to whom you
wish to withhold authority in the space provided below.)
----------------------------------------------------
4. Ratification of the appointment of Coopers & Lybrand L.L.P. as
independent auditors for the year 1996.
<TABLE>
<S> <C> <C> <C> <C> <C>
/_/ FOR /_/ AGAINST /_/ ABSTAIN
</TABLE>
5. Proposal to approve a change of New Valley Corporation'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 Common Shares outstanding on a
one-for-twenty basis.
<TABLE>
<S> <C> <C> <C> <C> <C>
/_/ FOR /_/ AGAINST /_/ ABSTAIN
</TABLE>
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE).
<PAGE> 88
6. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING,OR ANY
POSTPONEMENT OR ADJOURNMENT THEREOF.
<TABLE>
<S> <C> <C> <C> <C> <C>
/_/ FOR /_/ AGAINST /_/ ABSTAIN
</TABLE>
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE POSTAGE-PAID
ENVELOPE ENCLOSED.
This Proxy, when properly executed, will be voted in the
manner marked herein by the undersigned shareholder. IF NO MARKING IS MADE,
THIS PROXY WILL BE DEEMED TO BE A DIRECTION TO VOTE FOR THE COMPANY'S NOMINEES
LISTED IN ITEM 1, FOR THE PROPOSALS LISTED IN ITEMS 4 AND 5, AND FOR THE
AUTHORIZATION SET FORTH IN ITEM 6.
<TABLE>
<S> <C>
Please date and sign this proxy
exactly as your name appears hereon.
-----------------------------------
(Signature) (Date)
-----------------------------------
(Signature, if held jointly)
-----------------------------------
(Title)
</TABLE>
When shares are held by joint tenants, all joint tenants should sign.
When signing as attorney-in-fact, executor, administrator, trustee,
guardian, corporate officer or partner, please give full title. If
shares are held by a corporation, please sign in corporate name by the
president or other authorized officer. If shares are held by a
partnership, an authorized person should sign in the partnership's
name.
<PAGE> 89
[FORM OF PROXY]
PROXY CARD
NEW VALLEY CORPORATION
1996 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned is the record holder of $15.00 Class A Increasing
Rate Cumulative Senior Preferred Shares ($100 Liquidation Value), par value
$.01 per share (the "Class A Senior Preferred Shares), of New Valley
Corporation and hereby appoints each of Bennett S. LeBow, Howard M. Lorber and
Richard J. Lampen, and each of them, with full power of substitution, for and
in the name of the undersigned, to represent and to vote, as designated below,
all Class A Senior Preferred Shares that the undersigned is entitled to vote if
personally present at the 1996 Annual Meeting of Shareholders of New Valley
Corporation, and at any adjournment or postponement thereof. The undersigned
hereby revokes any previous proxies with respect to the matters covered by this
Proxy.
(Please mark with an "X" in the appropriate boxes)
1. Election of Bennett S. LeBow, Howard M. Lorber, Arnold I. Burns,
Ronald J. Kramer, Paul L. McDermott, Richard S. Ressler and Richard J.
Lampen as directors whose terms expire in 1997.
<TABLE>
<S> <C> <C> <C>
/_/ FOR all nominees listed above /_/ WITHHOLD AUTHORITY
to (except as marked to the contrary) vote for the nominees listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for one or more of the nominees,
mark FOR above and print the name(s) of the person(s) with respect to whom you
wish to withhold authority in the space provided below.)
-------------------------------------------------
2. Election of Henry C. Beinstein and Barry W. Ridings as directors
representing the holders of the Class A Senior Preferred Shares, whose
terms expire in 1997.
<TABLE>
<S> <C> <C> <C>
/_/ FOR all nominees listed above to /_/ WITHHOLD AUTHORITY
(except as marked to the contrary) vote for the nominees listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for one or more of the nominees,
mark FOR above and print the name(s) of the person(s) with respect to whom you
wish to withhold authority in the space provided below.)
-------------------------------------------------
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE).
<PAGE> 90
3. Election of Henry C. Beinstein and Barry W. Ridings as directors
representing the holders of the Class A Series Preferred Shares
and the $3.00 Class B Cumulative Convertible Preferred Shares, whose
terms expire in 1997.
<TABLE>
<S> <C> <C> <C>
/_/ FOR all nominees listed above to /_/ WITHHOLD AUTHORITY
(except as marked to the contrary) vote for the nominees
listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for one or more of the nominees,
mark FOR above and print the name(s) of the person(s) with respect to whom you
wish to withhold authority in the space provided below.)
-------------------------------------------------
4. Ratification of the appointment of Coopers & Lybrand L.L.P. as
independent auditors for the year 1996.
<TABLE>
<S> <C> <C> <C> <C> <C>
/_/ FOR /_/ AGAINST /_/ ABSTAIN
</TABLE>
5. Proposal to approve a change of New Valley Corporation'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, par value $.01 per share (the "Common Shares"), to reduce the
number of Common Shares outstanding on a one-for-twenty basis.
<TABLE>
<S> <C> <C> <C> <C> <C>
/_/ FOR /_/ AGAINST /_/ ABSTAIN
</TABLE>
6. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, OR ANY
ADJOURNMENT OR POSTPONEMENT THEREOF.
<TABLE>
<S> <C> <C> <C> <C> <C>
/_/ FOR /_/ AGAINST /_/ ABSTAIN
</TABLE>
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN
THE POSTAGE-PAID ENVELOPE ENCLOSED.
This Proxy, when properly executed, will be voted in the
manner marked herein by the undersigned shareholder. IF NO MARKING IS MADE,
THIS PROXY WILL BE DEEMED TO BE A DIRECTION TO VOTE FOR THE COMPANY'S NOMINEES
LISTED IN ITEM 1, FOR THE NOMINEES LISTED IN ITEMS 2 AND 3, FOR THE
PROPOSALS LISTED IN ITEMS 4 AND 5, AND FOR THE AUTHORIZATION SET FORTH IN ITEM
6.
<TABLE>
<S> <C>
Please date and sign this proxy
exactly as your name appears hereon.
-----------------------------------
(Signature) (Date)
----------------------------------
(Signature, if held jointly)
----------------------------------
(Title)
</TABLE>
When shares are held by joint tenants, all joint tenants should sign.
When signing as attorney-in-fact, executor, administrator, trustee,
guardian, corporate officer or partner, please give full title. If
shares are held by a corporation, please sign in corporate name by the
president or other authorized officer. If shares are held by a
partnership, an authorized person should sign in the partnership's
name.
<PAGE> 91
[FORM OF PROXY]
PROXY CARD
NEW VALLEY CORPORATION
1996 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned is the record holder of $3.00 Class B Cumulative
Convertible Preferred Shares ($25 Liquidation Value), par value $.10 per share
(the "Class B Preferred Shares), of New Valley Corporation and hereby appoints
each of Bennett S. LeBow, Howard M. Lorber and Richard J. Lampen, and each of
them, with full power of substitution, for and in the name of the undersigned,
to represent and to vote, as designated below, all Class B Preferred Shares
that the undersigned is entitled to vote if personally present at the 1996
Annual Meeting of Shareholders of New Valley Corporation, and at any
postponement or adjournment thereof. The undersigned hereby revokes any
previous proxies with respect to the matters covered by this Proxy.
(Please mark with an "X" in the appropriate boxes)
1. Election of Bennett S. LeBow, Howard M. Lorber, Arnold I. Burns,
Ronald J. Kramer, Paul L. McDermott, Richard S. Ressler and Richard J.
Lampen as directors whose terms expire in 1997.
<TABLE>
<S> <C> <C> <C>
/_/ FOR all nominees listed above /_/ WITHHOLD AUTHORITY
to (except as marked to the contrary) vote for the nominees listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for one or more of the nominees,
mark FOR above and print the name(s) of the person(s) with respect to whom you
wish to withhold authority in the space provided below.)
-------------------------------------------------
2. Election of Henry C. Beinstein and Barry W. Ridings as directors whose
terms expire in 1997.
<TABLE>
<S> <C> <C> <C>
/_/ FOR all nominees listed above to /_/ WITHHOLD AUTHORITY
(except as marked to the contrary) vote for the nominees listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for one or more of the nominees,
mark FOR above and print the name(s) of the person(s) with respect to whom you
wish to withhold authority in the space provided below.)
-------------------------------------------------
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE).
<PAGE> 92
3. Election of Henry C. Beinstein and Barry W. Ridings as directors
representing the holders of the Class B Preferred Shares and the
$15.00 Class A Increasing Rate Cumulative Series Preferred Shares,
whose terms expire in 1997.
<TABLE>
<S> <C> <C> <C>
/_/ FOR all nominees listed above to /_/ WITHHOLD AUTHORITY
(except as marked to the contrary) vote for the nominees listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for one or more of the nominees,
mark FOR above and print the name(s) of the person(s) with respect to whom you
wish to withhold authority in the space provided below.)
-------------------------------------------------
4. Ratification of the appointment of Coopers & Lybrand L.L.P. as
independent auditors for the year 1996.
<TABLE>
<S> <C> <C> <C> <C> <C>
/_/ FOR /_/ AGAINST /_/ ABSTAIN
</TABLE>
5. Proposal to approve a change of New Valley Corporation'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, par value $.01 per share (the "Common Shares"), to reduce the
number of Common Shares outstanding on a one-for-twenty basis.
<TABLE>
<S> <C> <C> <C> <C> <C>
/_/ FOR /_/ AGAINST /_/ ABSTAIN
</TABLE>
6. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, OR ANY
POSTPONEMENT OR ADJOURNMENT THEREOF.
<TABLE>
<S> <C> <C> <C> <C> <C>
/_/ FOR /_/ AGAINST /_/ ABSTAIN
</TABLE>
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN
THE POSTAGE-PAID ENVELOPE ENCLOSED.
This Proxy, when properly executed, will be voted in the
manner marked herein by the undersigned shareholder. IF NO MARKING IS MADE,
THIS PROXY WILL BE DEEMED TO BE A DIRECTION TO VOTE FOR THE COMPANY'S NOMINEES
LISTED IN ITEM 1, FOR THE NOMINEES LISTED IN ITEMS 2 AND 3, FOR THE
PROPOSALS LISTED IN ITEMS 4 AND 5, AND FOR THE AUTHORIZATION SET FORTH IN ITEM
6.
<TABLE>
<S> <C>
Please date and sign this proxy
exactly as your name appears hereon.
-----------------------------------
(Signature) (Date)
-----------------------------------
(Signature, if held jointly)
-----------------------------------
(Title)
</TABLE>
When shares are held by joint tenants, all joint tenants should sign.
When signing as attorney-in-fact, executor, administrator, trustee,
guardian, corporate officer or partner, please give full title. If
shares are held by a corporation, please sign in corporate name by the
president or other authorized officer. If shares are held by a
partnership, an authorized person should sign in the partnership's
name.
