<PAGE>
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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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14e-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NEW VALLEY CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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<PAGE>
NEW VALLEY CORPORATION
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 22, 1997
To the Stockholders of New Valley Corporation:
The annual meeting of stockholders (the 'Annual Meeting') of New Valley
Corporation, a Delaware corporation (the 'Company'), will be held at The Hyatt
Regency Miami, 400 S.E. Second Avenue, Miami, Florida 33131, on Monday,
September 22, 1997, at 11:00 a.m., local time, or at any postponement or
adjournment thereof, for the following purposes:
1. To elect five 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 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
July 28, 1997 is entitled to notice of the Annual Meeting and to vote, in person
or by proxy, .4645 of one vote for each Class A Senior Preferred Share, .05 of
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 stockholders entitled to vote at
the Annual Meeting will be available to any stockholder for any purpose germane
to the Annual Meeting during ordinary business hours, from September 11, 1997 to
September 22, 1997, 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, 1996, are enclosed herewith.
By Order of the Board of Directors,
/s/ Bennett S. Lebow
-------------------------
BENNETT S. LEBOW
Chairman of the Board of Directors
Miami, Florida
August 15, 1997
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>
NEW VALLEY CORPORATION
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION
The enclosed proxy is solicited on behalf of the Board of Directors of New
Valley Corporation, a Delaware corporation (the 'Company'). The proxy is
solicited for use at the annual meeting of stockholders (the 'Annual Meeting')
to be held at The Hyatt Regency Miami, 400 S.E. Second Avenue, Miami, Florida
33131 on Monday, September 22, 1997, 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 July 28, 1997
(the 'Record Date') is entitled to notice of the Annual Meeting and to vote, in
person or by proxy, .4645 of one vote for each Class A Senior Preferred Share,
.05 of 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 1,071,462 Class A Senior Preferred Shares, 2,790,776 Class B
Preferred Shares and 9,577,624 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, 1996 (the 'Annual Report'), are first being mailed to stockholders
is August 18, 1997.
Any stockholder 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 stockholder 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. 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, the
Joint Plan (as defined herein) mandates that 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).
In all cases, shares with respect to which authority is withheld,
abstentions 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), see 'Security
Ownership of Certain Beneficial Owners and Management' herein.
1
<PAGE>
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>
PERCENTAGE
NUMBER OF OF
NAME AND ADDRESS TITLE OF CLASS SHARES(1) CLASS(1)
- ------------------------------------- ------------------------------------- --------- ----------
<S> <C> <C> <C>
Bennett S. LeBow..................... Class A Senior Preferred Shares 618,326(2) 57.7%
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
Bennett S. LeBow..................... Class B Preferred Shares 250,885(2) 8.9%
Brooke Group Ltd.
BGLS Inc.
100 S.E. Second Street
Miami, FL 33131
Bennett S. LeBow..................... Common Shares 4,094,253(2)(3) 42.3%
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 Industries, Inc. ................ Common Shares 719,571(4) 7.5%
4 West Red Oak Lane
White Plains, NY 10604
</TABLE>
- ------------------------
(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 52.6% of the common stock of Brooke and the Chairman of
the Board and Chief Executive Officer of the Company, 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 over, subject to
the Pledge (as defined below): (i) 19,748 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) 3,969,962 Common Shares (approximately 41.4% of such
class); and
(Footnotes continued on next page)
2
<PAGE>
(ii) 618,326 Class A Senior Preferred Shares (approximately 57.7% 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 Mr. LeBow disclaims
beneficial ownership of the BGLS Shares and NV Holdings Shares under Rule
13d-3, or for any other purpose.
Pursuant to the indenture (the 'Indenture') relating to BGLS' 15.75% Series
B Senior Secured Notes due 2001 (the 'Series B Notes'), BGLS has pledged,
among other security interests, the BGLS Shares, and NV Holdings has 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 restrictions on 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 Mr. LeBow 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', and
'Joint Plan Provisions for Approval of Affiliated Transactions and Other
Matters'.
(3) Of such Common Shares, 104,543 represent shares which could be acquired by
conversion of the Class B Preferred Shares held by BGLS (the 'Derivative
Common Shares'), as to which shares Mr. LeBow disclaims beneficial
ownership.
(4) ITT Industries, Inc. (as the successor in interest to 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 719,571
Common Shares.
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>
PERCENTAGE
NUMBER OF OF
NAME TITLE OF CLASS SHARES(1) CLASS(1)
- -------------------------------------- -------------------------------------- --------- ----------
<S> <C> <C> <C>
Bennett S. LeBow(2)(6)................ Class A Senior Preferred Shares 618,326 57.7%
Class B Preferred Shares 250,885 8.9%
Common Shares 4,094,253 42.3%
Howard M. Lorber(3)(6)................ Class A Senior Preferred Shares 36,000 3.4%
Class B Preferred Shares 16,166 --(5)
Common Shares 55,375 --(5)
Richard J. Lampen(6).................. Class A Senior Preferred Shares 0 --
Class B Preferred Shares 0 --
Common Shares 0 --
Ronald J. Kramer(7)................... Class A Senior Preferred Shares 0 --
Class B Preferred Shares 0 --
Common Shares 0 --
Richard S. Ressler(7)................. Class A Senior Preferred Shares 0 --
Class B Preferred Shares 0 --
Common Shares 0 --
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF
NAME TITLE OF CLASS SHARES(1) CLASS(1)
- -------------------------------------- -------------------------------------- --------- ----------
<S> <C> <C> <C>
Arnold I. Burns(7).................... Class A Senior Preferred Shares 0 --
Class B Preferred Shares 0 --
Common Shares 0 --
Henry C. Beinstein(4)(7).............. Class A Senior Preferred Shares 0 --
Class B Preferred Shares 34,500 1.3%
Common Shares 14,376 --(5)
Barry W. Ridings(7)................... Class A Senior Preferred Shares 0 --
Class B Preferred Shares 0 --
Common Shares 0 --
Robert M. Lundgren(8)................. Class A Senior Preferred Shares 0 --
Class B Preferred Shares 0 --
Common Shares 0 --
All directors and executive officers
as a group (9 persons) (2).......... Class A Senior Preferred Shares 654,326 61.1%
Class B Preferred Shares 301,551 10.7%
Common Shares 4,164,004 42.7%
</TABLE>
- ------------------
(1) The percentage of each class is calculated based on the total number of
shares of each class outstanding on the Record Date. 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, the NV Holding Shares and the Derivative Common
Shares, as to which shares Mr. LeBow disclaims beneficial ownership. See
footnotes (2) and (3) to the preceding table.
(3) Mr. Lorber possesses voting power over his Class A Senior Preferred Shares.
See 'Executive Compensation--Summary Compensation Table'. All of the Class B
Preferred Shares and 55,000 of the Common Shares represent shares that are
subject to employee stock options exercisable within 60 days of the Record
Date. See 'Executive Compensation--Option Grants in Fiscal 1996'. 375 of the
Common Shares are held in a Keogh Plan for the benefit of Mr. Lorber.
(4) Includes 2,500 Class B Preferred Shares held in an individual retirement
account for his spouse, as to which shares Mr. Beinstein disclaims
beneficial ownership. Includes 14,376 Common Shares which could be acquired
by conversion of the Class B Preferred Shares. Mr. Beinstein disclaims
beneficial ownership over 1,041 of these Common Shares, as such shares
relate to the Class B Preferred Shares beneficially owned by his spouse.
(5) Less than one percent.
(6) The named individual is a director and an executive officer of the Company.
(7) The named individual is a director of the Company.
(8) The named individual is an executive officer of the Company.
4
<PAGE>
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 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. The Board of Directors of the Company currently
consists of eight directors and, effective with the Annual Meeting, the number
of directors will be set at seven. Three of the directors were directors at the
date of confirmation of the Joint Plan and four were appointed pursuant to the
Joint Plan, in each case subsequently re-elected at the 1995 and 1996 Annual
Meeting of Stockholders. Two of these directors (together, the 'Stockholder
Designees') are deemed by the Joint Plan to have been elected pursuant to the
Company's Restated Certificate of Incorporation (the 'Certificate of
Incorporation'), by the 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 special provisions of the Joint
Plan applicable to the election of the Stockholder Designees expire at the
Annual Meeting, the third annual meeting of stockholders held after the
Effective Date. However, as a result of continuing dividend arrearages on the
Preferred Shares, as specified in Board Proposals 2 and 3, the Board of
Directors has nominated the Stockholder Designees, and the Stockholder Designees
have agreed to serve, as the nominees for election as directors by the holders
of the Preferred Shares pursuant to the Certificate of Incorporation. The Joint
Plan also contains various other provisions with respect to transactions with
certain affiliates, including Brooke. See 'Joint Plan Provisions for the
Approval of Affiliated Transactions and Other Matters' below. The present term
of office of all directors will expire at the Annual Meeting.
BOARD PROPOSAL 1--NOMINEES FOR ELECTION AS DIRECTORS BY HOLDERS OF COMMON
SHARES, CLASS A SENIOR PREFERRED SHARES AND CLASS B PREFERRED
SHARES
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
stockholders and until their successors are duly 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 stockholders 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 ............................. 59 Chairman of the Board and Chief Executive December
New Valley Corporation Officer of the Company 1987
100 S.E. Second Street
Miami, FL 33131
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AND ADDRESS AGE PRINCIPAL OCCUPATION SINCE
- ---------------------------------------------- --- ---------------------------------------------- ---------
<S> <C> <C> <C>
Howard M. Lorber ............................. 48 President and Chief Operating Officer of the January
New Valley Corporation Company 1991
100 S.E. Second Street
Miami, FL 33131
Richard J. Lampen ............................ 43 Executive Vice President and General Counsel July 1996
New Valley Corporation of the Company
100 S.E. Second Street
Miami, FL 33131
Arnold I. Burns .............................. 67 Partner, Proskauer Rose LLP November
Proskauer Rose LLP 1994
1585 Broadway
New York, NY 10036
Ronald J. Kramer ............................. 38 Chairman and Chief Executive Officer of November
Ladenburg Thalmann Group Inc. Ladenburg Thalmann Group Inc. 1994
1209 Orange Street
Wilmington, DE 19801
</TABLE>
- ------------------
BENNETT S. LEBOW. For the past five years, Mr. LeBow's principal occupation
has been as an officer and/or director of, and a private investor in, privately
and publicly held companies.
Mr. LeBow 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, Mr. LeBow
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.
Mr. LeBow has been a director of Liggett Group Inc. ('Liggett'), a
manufacturer and seller of cigarettes, since June 1990 and was 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.
Mr. LeBow 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. In April 1993, MAI filed for
protection under Chapter 11 of Title 11 of the United States Code. In November
1993, the United States Bankruptcy Court for the District of Delaware confirmed
MAI's First Amended Joint Chapter 11 Plan of Reorganization, and it emerged from
bankruptcy reorganization proceedings. MAI is engaged in the development, sale
and service of a variety of computer and software products.
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'), and various of
its affiliates since 1975. Mr. Lorber has been a stockholder and a registered
representative 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; a consultant to Brooke and its
subsidiaries since January 1994; 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.
6
<PAGE>
RICHARD J. LAMPEN has been the Executive Vice President and General Counsel
of the Company since October 1995. Since July 1996, Mr. Lampen has served as
Executive Vice President of Brooke and BGLS. Mr. Lampen has been a director of
Thinking Machines Corporation, a developer and marketer of data mining and
knowledge discovery software in which the Company has a controlling interest,
since February 1996, and a director of PC411, Inc., a provider of on-line
electronic directory assistance to personal computer users in which the Company
also has a controlling interest, since January 1997. 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 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.
ARNOLD I. BURNS has been a partner of Proskauer Rose LLP ('Proskauer'), 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. ('Ladenburg Group') since June 1995 and Chairman of the
Board and Chief Executive Officer of Ladenburg Thalmann & Co. Inc.
('Ladenburg'), a broker-dealer and investment bank, since December 1995 and an
employee thereof for more than the past five years. Ladenburg Group and
Ladenburg are direct and indirect wholly-owned subsidiaries of the Company. Mr.
Kramer currently serves on the Boards of Directors of Griffon Corporation and
Grand Casinos, Inc.
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, 1996, more than six quarterly
dividends payable on the Class A Senior Preferred Shares were in arrears. During
1996, the Company declared and paid cash dividends on the Class A Senior
Preferred Shares of $40 per share (the '1996 Dividends'). At June 30, 1997, the
cumulative compounded amount of dividend arrearages on the Class A Senior
Preferred Shares was $139,017,117, or $129.75 per share, after giving effect to
such 1996 Dividends.
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 (as discussed below) 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) Mr. LeBow, 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).
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
7
<PAGE>
directors shall cease, 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.
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 stockholders 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.
As discussed earlier, the Stockholder Designees were deemed by the Joint
Plan to have been elected by the holders of the Preferred Shares pursuant to the
Certificate of Incorporation as a result of the dividend arrearages thereon. The
special provisions of the Joint Plan applicable to the election of the
Stockholder Designees expire at the Annual Meeting, the third annual meeting of
stockholders held after the Effective Date. As a result of the continuing
dividend arrearages on the Preferred Shares, the Board of Directors has
nominated the Stockholder Designees, and the Stockholder Designees have agreed
to serve, as the nominees for election as directors by the holders of the Class
A Senior Preferred Shares under this Board Proposal 2 and as 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.
For further information on the Board of Directors, including the number of
directors and committees of the Board of Directors, see 'Board Proposal 1' above
and 'Board of Directors and Committees' below.
The Board of Directors recommends that holders of the Class A Senior
Preferred Shares vote FOR election of the nominees named below, both of whom
have served as the Stockholder Designees.
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 ........................... 54 Executive Director, November
Schulte Roth & Zabel LLP Schulte Roth & Zabel LLP 1994
900 Third Avenue
New York, NY 10022
Barry W. Ridings ............................. 45 Managing Director, November
Alex. Brown & Sons, Incorporated Alex. Brown & Sons, Incorporated 1994
1290 Avenue of the Americas
New York, NY 10104
</TABLE>
- ------------------
HENRY C. BEINSTEIN became the Executive Director of Schulte Roth & Zabel
LLP, a New York-based law firm, in August 1997. Prior thereto, Mr. Beinstein had
served as the Managing Director of Milbank, Tweed, Hadley & McCloy ('Milbank'),
a New York-based law firm, commencing 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.
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, Inc.,
SubMicron Systems Corporation, Norex Industries, Inc., Noodle Kidoodle Inc.,
Search Capital Group, Inc. and Telemundo Group, Inc.
8
<PAGE>
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 directors.
No dividends on the Class B Preferred Shares have been declared and paid since
1988. As of and through December 31, 1996, more than six quarterly dividends
payable on the Class B Preferred Shares were in arrears. At June 30, 1997, the
cumulative compounded amount of dividend arrearages on the Class B Preferred
Shares was $127,266,420, or $45.60 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 (as discussed below) or the next annual
meeting. 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, 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. 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 stockholders 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.
Messrs. Beinstein and Ridings, both of whom have served as the Stockholder
Designees, are the nominees for election as directors by holders of Class B
Preferred Shares voting together as a single class with the Class A Senior
Preferred Shares under this Board Proposal 3, 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 and other matters relating
thereto, see 'Board Proposal 2' above.
The Board of Directors recommends that holders of the Preferred Shares vote
FOR election of the nominees named in this Board Proposal 3.
BOARD OF DIRECTORS AND COMMITTEES
During 1996, the Board of Directors held 5 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. During that
period, the Executive Committee (composed of Messrs. LeBow, as Chairman, Lorber,
and Burns) met 9 times and the Audit Committee (composed of Messrs. Beinstein
and Kramer and, until November 1996, the late director Paul L. McDermott) met
once. Effective as of March 12, 1997, Mr. Ridings was appointed to serve as a
member of the Audit Committee as a successor to Mr. McDermott.
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.
In January 1997, the Board of Directors appointed a Special Committee
(composed of Messrs. Beinstein, Burns and Ridings) for the purpose of reviewing
the Company's purchase of the BML Shares (as defined herein). For a description
of the Company's purchase of the BML Shares, see 'Certain Relationships and
Related Transactions'.
9
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation awarded
to, earned by or paid during the past three years to those persons who were, at
December 31, 1996, the Company's Chief Executive Officer and the three other
executive officers whose cash compensation exceeded $100,000 (collectively, the
'named executive officers').
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------------
SECURITIES
UNDER-
ANNUAL COMPENSATION RESTRICTED LYING
--------------------- STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARD(S) (#) COMPENSATION
- ---------------------------------------- ---- ---------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Bennett S. LeBow ....................... 1996 $2,000,000 -- -- -- --
Chairman and Chief Executive 1995 1,894,823 -- -- -- --
Officer(2) 1994 71,045 -- -- -- --
Howard M. Lorber ....................... 1996 $1,250,000 $300,000 $4,356,000(3) 427,000(4) --
President and Chief Operating 1995 956,376 500,000 -- -- --
Officer(2) 1994 56,008 -- -- -- --
Richard J. Lampen ...................... 1996 $ 600,000 $100,000 -- -- --
Executive Vice President and 1995 150,000 100,000 -- -- --
General Counsel(5)
Robert M. Lundgren(6) .................. 1996 $ 90,000 $ 15,000 -- -- --
Vice President, Chief Financial
Officer and Treasurer
</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) Messrs. LeBow and 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.
(3) Represents an award of 36,000 Class A Senior Preferred Shares valued based
on the closing price on the date of issuance. Subject to earlier vesting
upon a change of control (as defined), the shares vest in six equal annual
installments commencing on July 1, 1997. The shares are identical with all
other Class A Senior Preferred Shares issued and outstanding as of July 1,
1996, including undeclared dividends of $3,776,000 and declared dividends of
$1,080,000. Dividends are payable on the shares provided that such payments
will be deferred until the time of vesting. At December 31, 1996, the shares
had a market value of $4,320,000 (without giving effect to any diminution in
value attributable to the restrictions).
(4) Represents options to purchase 330,000 Common Shares and 97,000 Class B
Preferred Shares. See 'Option Grants in Fiscal 1996'.
(5) Mr. Lampen commenced employment with the Company in October 1995. In 1996,
all of Mr. Lampen's salary and bonus were paid by the Company, and 25% (or
$175,000) was subsequently reimbursed to the Company by Brooke. The table
reflects 100% of Mr. Lampen's 1996 salary and bonus.
(6) Effective May 7, 1996, Mr. Lundgren was appointed Vice President, Chief
Financial Officer and Treasurer of the Company.
10
<PAGE>
The following table sets forth certain information regarding stock options
granted during 1996.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE GRANT DATE
OPTIONS EMPLOYEES PRICE MARKET VALUE EXPIRATION PRESENT VALUE
NAME GRANTED (#) IN FISCAL YEAR ($/SHARE) ($/SHARE) DATE ($)(2)
- --------------------- --------------------- -------------- --------- ------------ ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Howard M. Lorber 330,000 Common 100 .58 2.75 07/01/06 878,000
Shares(1)
97,000 Class B 100 1.85 9.25 07/01/06 895,000
Preferred Shares(1)
</TABLE>
- ------------------
(1) Represents options to purchase 330,000 Common Shares and 97,000 Class B
Preferred Shares, which were granted on November 18, 1996.
(2) The estimated present value at grant date of options granted during fiscal
year 1996 has been calculated using the Black-Scholes option pricing model,
based upon the following assumptions: volatility of 101% for the Common
Shares and 171% for the Class B Preferred Shares, a risk free rate of 6.2%,
an expected life of 10 years, and no expected dividends or forfeiture. The
approach used in developing the assumptions upon which the Black-Scholes
valuation was done is consistent with the requirements of Statement of
Financial Accounting Standards No. 123, 'Accounting for Stock-Based
Compensation'.
STOCK OPTION EXERCISES
There were no stock options exercised by the named executive officers
during 1996.
COMPENSATION OF DIRECTORS
In 1996, each non-employee director of the Company received an annual fee
of $35,000 for serving on the Board of Directors, an annual fee of $30,000 for
serving on the Executive Committee thereof and a $1,000 fee for attendance at
each meeting of the Board of Directors or a committee thereof (other than the
Executive Committee).
EMPLOYMENT AGREEMENTS
Mr. LeBow is a party to an employment agreement with the Company dated as
of June 1, 1995, as amended effective as of January 1, 1996. 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 1, 1997, Mr.
LeBow'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 Mr.
LeBow for services rendered in his capacity as an officer or director of the
Company shall not exceed $2,000,000.
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 1, 1997, Mr. Lorber's annual base salary was
$1,400,000. 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 $300,000
for 1996. Following termination of his employment without cause (as defined
therein), he would
11
<PAGE>
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 January 1,
1997, his annual base salary was $650,000. In addition, the Board of Directors
may award an annual bonus to Mr. Lampen at its sole discretion. The Board of
Directors awarded Mr. Lampen a bonus of $100,000 for 1996. The Board shall
review such base salary annually and may increase (but not decrease) it from
time to time, in 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
for 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. Mr. LeBow
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, Mr. Kramer was named Chairman of the
Board and Chief Executive Officer of Ladenburg Group in June 1995 and Chairman
of the Board and Chief Executive Officer of Ladenburg in December 1995, and Mr.
Lampen was named Executive Vice President and General Counsel of the Company in
October 1995.
During 1996, Mr. LeBow was Chairman of the Board, President and Chief
Executive Officer of Brooke (a member of the Compensation Committee) and BGLS;
and as of July 1996, Mr. Lampen was Executive Vice President of Brooke and BGLS.
For information on the interests of Messrs. LeBow, Lorber and Lampen in
Brooke and certain other relationships and transactions, see 'Security Ownership
of Certain Beneficial Owners and Management', 'Nomination and Election of
Directors--Board Proposal Number 1', 'Joint Plan Provisions for Approval of
Affiliated Transactions and Other Matters' and 'Certain Relationships and
Related Transactions'.
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 on November 15, 1994 pursuant to the Joint Plan, 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.
BOARD COMPENSATION COMMITTEE 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 Messrs. LeBow and Lorber, after it had engaged 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
12
<PAGE>
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 Mr. LeBow'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 Mr. LeBow
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) Mr.
LeBow possessed substantial experience in acquiring and managing operating
companies; and (iv) the proposed annual compensation level of $2,000,000 for Mr.
LeBow was reasonable compared to the compensation levels of other chief
executive officers at comparable companies performing comparable services.
Because Mr. LeBow's compensation is limited to $2,000,000 per year pursuant to
the Joint Plan, as indicated above, Mr. LeBow 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
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 in the preceding paragraph, Messrs. Lorber, Lampen and
Lundgren were awarded bonuses of $300,000, $100,000 and $15,000, respectively,
by the Board of Directors in 1996. See 'Employment Agreements', above. In 1996,
Mr. Lorber was also granted certain stock options and awarded certain restricted
shares. See 'Executive Compensation--Summary Compensation Table and Option
Grants in Fiscal 1996'.
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 stockholders 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 11 (Federal Income Tax) to the Company's
Consolidated Financial Statements, which Note is set forth in the Annual Report
enclosed herewith, and which Note is incorporated herein by reference thereto.
The foregoing information is provided by the Board of Directors of the
Company.
Henry C. Beinstein
Arnold I. Burns
Ronald J. Kramer
Richard J. Lampen
Bennett S. LeBow
Howard M. Lorber
Richard S. Ressler
Barry W. Ridings
13
<PAGE>
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, 1996. The graph assumes
the value of the investment in the Common Shares and each index was $100 on
December 31, 1991 and that all dividends were reinvested. No dividends were paid
on Common Shares in the years indicated below. Because of (i) the Company's
emergence in 1995 from bankruptcy and (ii) the Company's subsequent 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 500 Index, the S&P SmallCap 600
Index and the NASDAQ Composite Index.
[GRAPHIC]
<TABLE>
<CAPTION>
12/91 12/92 12/93 12/94 12/95 12/96
<S> <C> <C> <C> <C> <C> <C>
New Valley Corporation $100 $138 $25 $75 $216 $53
S&P 500 $100 $108 $118 $120 $165 $203
S&P SmallCap 600 $100 $121 $145 $138 $177 $215
NASDAQ Composite $100 $116 $135 $130 $181 $223
</TABLE>
14
<PAGE>
JOINT PLAN PROVISIONS FOR APPROVAL OF AFFILIATED TRANSACTIONS AND OTHER MATTERS
The following summary of the Joint Plan is qualified in its entirety by
reference to the Joint Plan which is incorporated by reference as an exhibit to
the Annual Report enclosed herewith.
The Joint Plan (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
stockholder and registered representative of Aegis Capital Corp. ('Aegis'), a
broker-dealer that has performed services for the Company and its subsidiaries
since before January 1, 1996. During 1996, Aegis received commission and other
income in the aggregate amount of approximately $316,781. Aegis, in the ordinary
course of its business in 1996, engaged in brokerage activities with Ladenburg
on customary terms. Mr. Lorber is also Chairman of the Board and Chief Executive
Officer of Hallman & Lorber and its affiliates, and serves as a consultant to
Brooke and BGLS and is a stockholder of Brooke. During 1996, Hallman & Lorber
and its affiliates received ordinary and customary insurance commissions
aggregating approximately $43,080 on various insurance policies issued for the
Company.
On December 18, 1996, the Company loaned to BGLS $990,000 under a
short-term promissory note due January 31, 1997 and bearing interest at 14%. On
January 2, 1997, the Company loaned to BGLS an additional $975,000 under another
short-term promissory note due January 31, 1997 and bearing interest at 14%.
Both loans including interest were repaid on January 31, 1997.
On January 31, 1997, the Company entered into a stock purchase agreement
(the 'Purchase Agreement') with Brooke (Overseas) Ltd. ('BOL'), a wholly-owned
subsidiary of Brooke, pursuant to which the Company acquired 99.1% of the shares
(the 'BML shares') of the common stock of BrookeMil Ltd. ('BML'), a subsidiary
of BOL engaged in real estate development in Russia, from BOL. The Company paid
to BOL a purchase price of $55 million, consisting of $21.5 million in cash and
the $33.5 million 9% Note of the Company. The Note is collateralized by the BML
Shares. On June 30, 1997, $18 million of the Note became payable (net of an
April 1997 $3.5 million prepayment) and was paid by the Company. The remaining
$12 million of the Note is payable on or before December 31, 1997. The
transaction was approved by a Special Committee consisting of independent
members of the Board of Directors of the Company. The Company retained
independent legal and financial advisors in connection with the evaluation and
negotiation of the transaction.
The foregoing description of the BML purchase is qualified in its entirety
by reference to the Purchase Agreement and the annexes thereto, copies of which
are incorporated by reference as exhibits to the Annual Report enclosed herewith
and are incorporated herein by reference. See Item 1. 'Business--BrookeMil Ltd.'
as well as Note 22 (Subsequent Events) to the Company's Consolidated Financial
Statements for information concerning the transaction and a pending lawsuit
relating to the Company's purchase of the BML Shares, each of which is set forth
in the Annual Report enclosed herewith and is incorporated herein by reference
thereto.
In 1995, the Company and Brooke entered into an expense sharing agreement
pursuant to which certain lease, legal and administrative expenses are allocated
to the entity incurring the expense. The Company expensed $415,272 under this
agreement for the year ended December 31, 1996.
During 1996, the Company entered into a court-approved Stipulation and
Agreement (the 'Settlement') with Brooke and BGLS relating to Brooke's and
BGLS's application under the Federal Bankruptcy Code for reimbursement of legal
fees and expenses incurred by them in connection with the Company's bankruptcy
reorganization proceedings. Pursuant to the Settlement, the Company reimbursed
Brooke and BGLS $655,217 for such legal fees and expenses. The terms of the
Settlement were substantially similar to the terms of previous
15
<PAGE>
settlements between the Company and other applicants who had sought
reimbursement of reorganization-related legal fees and expenses.
Mr. Ressler, a director of the Company, is Chairman of the Board and the
beneficial owner of more than 10% of the shares of MAI, which in 1996 entered in
certain arrangements with Ladenburg, whereby MAI has sold computer and software
products and has been providing related professional and support services to
Ladenburg. During 1996 and through June 30, 1997, Ladenburg paid MAI, in the
aggregate, approximately $394,000 for such products and services.
In March 1997, the Company acquired a membership interest in Orchard/JFAX
Investors, LLC ('Orchard/JFAX'), of which Mr. Ressler serves as a managing
member, for $1 million. Orchard/JFAX holds a controlling interest in JFAX
Communications Inc., a provider of telecommunication services.
Mr. Burns, a director of the Company, is a partner of Proskauer, 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 1996 did not exceed five percent of the law firm's revenues.
During 1996, Mr. Beinstein, a director of the Company, was the Managing
Director of Milbank, 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 1996 did not exceed five percent of the law
firm's revenues.
Certain Matters Relating to RJR Nabisco. For information concerning
certain agreements and transactions between the Company and Brooke relating to
RJR Nabisco, see Item 7. 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--Recent Developments--Certain Matters
Relating to RJR Nabisco' and Note 5 (Investment Securities Available for Sale)
and Note 18 (Related Party Transactions) to the Company's Consolidated Financial
Statements, each of which is set forth in the Annual Report enclosed herewith
and is incorporated herein by reference thereto.
See also 'Compensation Committee Interlocks and Insider Participation'.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P. has been the independent auditors for the Company
since March 1995 and will serve in that capacity for the 1997 fiscal year unless
the Board of Directors deems it advisable to make a substitution. It is expected
that one or more representatives of such firm will attend the Annual Meeting and
be available to respond to any questions. These representatives will be given an
opportunity to make statements at the Annual Meeting if they so desire.
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.
16
<PAGE>
MISCELLANEOUS
1996 ANNUAL REPORT ON FORM 10-K
The Company has mailed, with this proxy statement, copies of 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1996,
all Reporting Persons have timely complied with all filing requirements
applicable to them.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Proposals of security holders intended to be presented at the 1998 Annual
Meeting of Stockholders 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 April 14, 1998 in order to be
included in the Company's proxy statement and accompanying proxy card relating
to that meeting.
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 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,
/s/ Bennett S. Lebow
--------------------------
BENNETT S. LEBOW
Chairman of the Board of Directors
Date: August 15, 1997
17
[FORM OF PROXY]
PROXY CARD
NEW VALLEY CORPORATION
1997 ANNUAL MEETING OF STOCKHOLDERS
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, a
Delaware corporation (the "Company"), and hereby appoints each of Marc N. Bell
and Robert M. Lundgren, 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 1997 Annual Meeting of Stockholders of the
Company to be held at The Hyatt Regency Miami, 400 S.E. Second Avenue, Miami,
Florida 33131 on Monday, September 22, 1997 at 11:00 A.M. local time, 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, Richard J. Lampen,
Arnold I Burns and Ronald J. Kramer as directors whose terms expire
in 1998.
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY
(except as marked to the to vote for all of the
contrary below) nominees listed above
(INSTRUCTION: To withhold authority to vote for one or more but not all 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 1998.
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY
(except as marked to the to vote for all of the
contrary below) nominees listed above
(INSTRUCTION: To withhold authority to vote for one or more but not all 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.)
------------------------------------
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 1998.
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY
(except as marked to the to vote for all of the
contrary below) nominees listed above
<PAGE>
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE).
(INSTRUCTION: To withhold authority to vote for one or more but not all 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. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, OR AT ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
/ / FOR / / AGAINST / / ABSTAIN
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 stockholder. IF NO MARKING IS MADE, THIS PROXY WILL BE
DEEMED TO BE A DIRECTION TO VOTE FOR THE COMPANY'S NOMINEES LISTED IN ITEMS 1, 2
AND 3, AND FOR THE AUTHORIZATION SET FORTH IN ITEM 4.
Please date and sign this proxy
exactly as your name appears hereon.
-----------------------------------------
(Signature) (Date)
-----------------------------------------
(Signature, if held jointly)
-----------------------------------------
(Title)
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 partnerships name.
<PAGE>
[FORM OF PROXY]
PROXY CARD
NEW VALLEY CORPORATION
1997 ANNUAL MEETING OF STOCKHOLDERS
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, a Delaware
corporation (the "Company"), and hereby appoints each of Marc N. Bell and Robert
M. Lundgren, 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 1997 Annual Meeting of Stockholders of the Company to be held at
The Hyatt Regency Miami, 400 S.E. Second Avenue, Miami, Florida 33131 on Monday,
September 22, 1997 at 11:00 A.M. local time, 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, Richard J. Lampen,
Arnold I Burns and Ronald J. Kramer as directors whose terms expire in
1998.
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY
(except as marked to the to vote for all of the
contrary below) nominees listed above
(INSTRUCTION: To withhold authority to vote for one or more but not all 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.)
------------------------------------
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 Senior Preferred Shares, whose terms
expire in 1998.
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY
(except as marked to the to vote for all of the
contrary below) nominees listed above
(INSTRUCTION: To withhold authority to vote for one or more but not all 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. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, OR AT ANY POSTPONEMENT
OR ADJOURNMENT THEREOF.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE).
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 stockholder. IF NO MARKING IS MADE, THIS PROXY WILL BE
DEEMED TO BE A DIRECTION TO VOTE FOR THE COMPANY'S NOMINEES LISTED IN ITEMS 1
AND 3, AND FOR THE AUTHORIZATION SET FORTH IN ITEM 4.
Please date and sign this proxy
exactly as your name appears hereon.
-----------------------------------------
(Signature) (Date)
-----------------------------------------
(Signature, if held jointly)
-----------------------------------------
(Title)
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 partnerships name.
<PAGE>
[FORM OF PROXY]
PROXY CARD
NEW VALLEY CORPORATION
1997 ANNUAL MEETING OF STOCKHOLDERS
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, a Delaware corporation
(the "Company"), and hereby appoints each of Marc N. Bell and Robert M.
Lundgren, 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
1997 Annual Meeting of Stockholders of the Company to be held at The Hyatt
Regency Miami, 400 S.E. Second Avenue, Miami, Florida 33131 on Monday, September
22, 1997 at 11:00 A.M. local time, 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, Richard J. Lampen,
Arnold I Burns and Ronald J. Kramer as directors whose terms expire
in 1998.
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY
(except as marked to the to vote for all of the
contrary below) nominees listed above
(INSTRUCTION: To withhold authority to vote for one or more but not all 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. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, OR AT ANY POSTPONEMENT
OR ADJOURNMENT THEREOF.
/ / FOR / / AGAINST / / ABSTAIN
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 stockholder. 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 AND
FOR THE AUTHORIZATION SET FORTH IN ITEM 4.
<PAGE>
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE).
Please date and sign this proxy
exactly as your name appears hereon.
-----------------------------------------
(Signature) (Date)
-----------------------------------------
(Signature, if held jointly)
-----------------------------------------
(Title)
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 partnerships name.
