<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Brooke Group Ltd.
- --------------------------------------------------------------------------------
(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)(1) 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:
<PAGE> 2
BROOKE GROUP LTD.
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 2, 1997
TO THE STOCKHOLDERS OF BROOKE GROUP LTD.:
The Annual Meeting of Stockholders of Brooke Group Ltd., a Delaware
corporation (the "Company"), will be held at The Hyatt Regency Miami, 400 S.E.
Second Avenue, Miami, Florida 33131 on Monday, June 2, 1997 at 11:00 a.m. local
time, and at any adjournments or postponements thereof, for the following
purposes:
1. To elect three directors to hold office until the next annual meeting
of stockholders and until their successors are duly elected and qualified.
2. To transact such other business as properly may come before the
meeting or any adjournments or postponements of the meeting.
Every holder of record of common stock, par value $.10 per share (the
"Common Stock"), of the Company at the close of business on April 28, 1997 is
entitled to notice of the meeting and any adjournments or postponements thereof
and to vote, in person or by proxy, one vote for each share of Common Stock
held by such holder. A list of stockholders entitled to vote at the meeting
will be available to any stockholder for any purpose germane to the meeting
during ordinary business hours from May 22, 1997 to June 2, 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, as amended, for the fiscal year ended December 31,
1996 are enclosed herewith.
By Order of the Board of Directors,
BENNETT S. LEBOW
Chairman of the Board of Directors
Miami, Florida
April 29, 1997
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> 3
BROOKE GROUP LTD.
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
PROXY STATEMENT
INTRODUCTION
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of Brooke Group Ltd., 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, June 2, 1997, at 11:00 a.m. local time, and at any
adjournments or postponements 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 common stock, par value $.10 per share (the
"Common Stock"), of the Company at the close of business on April 28, 1997 (the
"Record Date") is entitled to notice of the meeting and any adjournments or
postponements thereof and to vote, in person or by proxy, one vote for each
share of Common Stock held by such holder. At the Record Date, the Company had
outstanding 18,097,096 shares of Common Stock. The approximate date on which
this proxy statement, accompanying notice and proxy and the Company's Annual
Report on Form 10-K, as amended, for the fiscal year ended December 31, 1996
(the "Annual Report") are first being mailed to stockholders is on or about
April 30, 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 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. The nominees receiving a plurality of the votes cast will be
elected as directors. An affirmative vote of the majority of votes present at
the meeting is necessary for approval of any other matters to be considered at
the Annual Meeting. 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.
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<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, the beneficial
ownership of the Company's Common Stock (the only class of voting securities)
by (i) each person known to the Company to own beneficially more than five
percent of the Common Stock, (ii) each of the Company's directors and nominees,
(iii) each of the Company's named executive officers (as such term is defined
in the Summary Compensation Table below) and (iv) all directors and executive
officers as a group. Unless otherwise indicated, each person possesses sole
voting and investment power with respect to the shares indicated as
beneficially owned, and the business address of each person is 100 S.E. Second
Street, Miami, Florida 33131.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES CLASS
------------------- --------- ----------
<S> <C> <C>
Bennett S. LeBow (1) 9,536,208 52.7%
BSL Partners (2) 4,844,156 26.8%
LeBow Limited Partnership (3) 1,281,715 7.1%
LeBow Family Partnership 1993, Ltd. (4) 499,999 2.8%
Richard S. Ressler(5) 1,812,999 10.0%
Orchard Capital Corporation
10960 Wilshire Boulevard
Los Angeles, CA 90024
Robert J. Eide (6) 10,000 (*)
Aegis Capital Corp.
70 East Sunrise Highway
Valley Stream, NY 11581
Jeffrey S. Podell (6) 10,000 (*)
Newsote, Inc.
26 Jefferson Street
Passaic, NJ 07055
Richard J. Lampen (7) 0 -
Joselynn D. Van Siclen (7) 0 -
Ronald S. Fulford (8) 0 -
Liggett Group Inc.
700 West Main Street
Durham, NC 27702
All directors and executive officers as a group
(6 persons) 9,556,208 52.8%
</TABLE>
- ------------------------
(*) The percentage of shares beneficially owned does not exceed 1% of the
Common Stock.
3
<PAGE> 5
(1) Includes Common Stock held by BSL Partners, a New York general
partnership ("BSL Partners"), LeBow Limited Partnership, a Delaware
limited partnership ("LLP"), and LeBow Family Partnership 1993, Ltd., a
Florida limited partnership ("LFP"). 2,874,129 of the shares of Common
Stock owned by Bennett S. LeBow (the "Chairman") (together with shares of
certain other affiliated holders specified below) are pledged to a
financial institution (the "Pledge").
(2) The Chairman holds an 80% interest in BSL Partners. The remaining
interest is held by LLP. Pursuant to the Pledge, all shares of Common
Stock owned by BSL Partners are pledged.
(3) The Chairman is the 99.99% general partner of LLP. Pursuant to the
Pledge, all shares of Common Stock owned by LLP are pledged.
(4) The Chairman is the general partner and a limited partner of LFP, and
trusts for the benefit of the Chairman and certain family members hold the
remaining partnership interests.
(5) Based upon Amendment No. 5 to Schedule 13D dated July 24, 1996, filed by
the named individual.
(6) The named individual is a director of the Company.
(7) The named individual is an executive officer of the Company.
(8) The named individual is an executive officer of the Company's subsidiary,
Liggett Group Inc. ("Liggett").
In addition, by virtue of his controlling interest in the Company, the
Chairman may be deemed to own beneficially the securities of the Company's
subsidiaries, including BGLS Inc. ("BGLS") and Liggett, and securities of New
Valley Corporation ("New Valley"), in which the Company holds an indirect
voting interest of approximately 42%. The disclosure of this information shall
not be construed as an admission that the Chairman is the beneficial owner of
any securities of the Company's subsidiaries or New Valley under Rule 13d-3 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or for
any other purpose, and such beneficial ownership is expressly disclaimed. None
of the Company's other directors or executive officers beneficially owns any
equity securities of any of the Company's subsidiaries or New Valley.
NOMINATION AND ELECTION OF DIRECTORS
The By-Laws of the Company provide, among other things, that the Board,
from time to time, shall determine the number of directors of the Company. The
size of the Board is presently set at three. The present term of office of all
directors will expire at the Annual Meeting. Three directors are to be elected
at the Annual Meeting to serve until the next annual meeting of stockholders
and until their successors are duly elected and qualified.
It is intended that proxies received will be voted FOR election of the
nominees named below unless marked to the contrary. In the event any such
person is unable or unwilling to serve as a director, proxies may be voted for
substitute nominees designated by the present Board. The Board has no reason
to believe that any of the persons named below will be unable or unwilling to
serve as a director if elected.
The Board recommends that stockholders vote FOR election of the nominees
named below.
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<PAGE> 6
INFORMATION WITH RESPECT TO NOMINEES
The following table sets forth certain information, as of the Record Date,
with respect to each of the nominees. Each nominee is a citizen of the United
States.
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE PRINCIPAL OCCUPATION
- ---------------- --- --------------------
<S> <C> <C>
Bennett S. LeBow 59 Chairman of the Board, President
Brooke Group Ltd. and Chief Executive Officer
100 S.E. Second Street
Miami, FL 33131
Robert J. Eide 43 Secretary and Treasurer, Aegis
Aegis Capital Corp. Capital Corp.
70 E. Sunrise Highway
Valley Stream, NY 11581
Jeffrey S. Podell 56 Chairman of the Board and
Newsote, Inc. President, Newsote, Inc.
26 Jefferson Street
Passaic, NJ 07055
</TABLE>
Each director is elected annually and serves until the next annual
meeting of stockholders and until his successor is duly elected and qualified.
BUSINESS EXPERIENCE OF NOMINEES
BENNETT S. LEBOW (the "Chairman") has been Chairman of the Board,
President and Chief Executive Officer of the Company since June 1990 and has
been a director of the Company since October 1986. Since November 1990, he has
been Chairman of the Board, President and Chief Executive Officer of BGLS, a
wholly-owned subsidiary of the Company, which directly or indirectly holds the
Company's equity interests in several private and public companies.
The Chairman has been a director of Liggett, an indirect wholly-owned
subsidiary of the Company engaged in the manufacture and sale of cigarettes
primarily in the United States, since June 1990 and Chairman of the Board of
Liggett from July 1990 to May 1993. He served as one of three interim Co-Chief
Executive Officers of Liggett from March 1993 to May 1993.
He has been Chairman of the Board of New Valley, a company engaged in the
investment banking and brokerage business, in real estate development in Russia
and the Ukraine, in the ownership and management of commercial real estate in
the United States and in the acquisition of operating companies, in which the
Company holds an indirect voting interest of approximately 42%, since January
1988 and Chief Executive Officer since November 1994. In November 1991, an
involuntary petition seeking an order for relief under Chapter 11 of Title 11
of the United States Code was commenced against New Valley. New Valley emerged
from bankruptcy reorganization proceedings in January 1995. He has been
Chairman of the Board, President and Chief Executive Officer of New Valley
Holdings, Inc., an indirect wholly-owned subsidiary of the Company ("NV
Holdings"), which holds certain of the Company's equity interests in New Valley,
since September 1994.
He was a director of MAI Systems Corporation ("MAI"), the Company's former
indirect majority-owned subsidiary, from September 1984 to October 1995,
Chairman of the Board from November 1990 to May 1995
5
<PAGE> 7
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, MAI emerged from bankruptcy reorganization
proceedings. MAI is engaged in the development, sale and service of a variety
of computer and software products.
ROBERT J. EIDE has been a director of the Company since November 1993.
Mr. Eide has been a director of BGLS since November 1993, a director of NV
Holdings since September 1994, Secretary and Treasurer of Aegis Capital Corp.,
a registered broker-dealer, since before 1988. Mr. Eide also serves as a
director of Nathan's Famous, Inc., a restaurant chain.
JEFFREY S. PODELL has been a director of the Company since November 1993.
Mr. Podell has been a director of BGLS since November 1993, a director of NV
Holdings since September 1994 and the Chairman of the Board and President of
Newsote, Inc., a privately-held holding company, since 1989. Mr. Podell was a
registered representative at Aegis Capital Corp. from before 1988 to 1992.
BOARD OF DIRECTORS AND COMMITTEES
During 1996, the Board of Directors held seven meetings. During 1996, the
Executive Committee (composed of Messrs. Eide and LeBow) did not meet, while
the Audit Committee (composed of Messrs. Eide and Podell) and the Compensation
Committee (composed of Messrs. Eide, LeBow and Podell) met once. 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.
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.
The Compensation Committee reviews, approves and administers management
compensation and executive compensation plans.
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, the other two
executive officers of the Company and an executive officer and a former
executive officer of a subsidiary of the Company whose cash compensation
exceeded $100,000 (collectively, the "named executive officers").
6
<PAGE> 8
SUMMARY COMPENSATION TABLE (1)(2)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- -------------------------- ---- ------------ ---------- ------------ ------------
($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Bennett S. LeBow 1996 1,484,375 742,188 148,438(3) --
Chairman of the Board, 1995 1,187,500 593,750 118,750(3) --
President and Chief 1994 950,000 475,000 95,000(3) --
Executive Officer
Richard J. Lampen(4) 1996 600,000(4) 100,000(4) -- --
Executive Vice President
Joselynn D. Van Siclen(5) 1996 131,667 10,000
Vice President, Chief
Financial Officer and
Treasurer
Ronald S. Fulford(6) 1996 157,530(6) -- 552,832(7) --
Chairman of the Board,
President and Chief
Executive Officer of
Liggett
Rouben V. Chakalian(8) 1996 294,000 -- 68,000(9) --
Former Chairman of the 1995 432,000 285,120 -- --
Board, President and Chief 1994 252,000 302,400 250,000(9) --
Executive Officer of
Liggett
</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
Securities and Exchange Commission (the "SEC").
(2) No restricted stock or stock options were granted in 1994, 1995 or 1996
to the named executive officers.
(3) Represents an annual payment in lieu of certain other executive benefits.
(4) Effective July 1, 1996, Mr. Lampen was appointed Executive Vice President
of the Company. In 1996, all of Mr. Lampen's salary and bonus were paid
by New Valley, and 25% (or $175,000) was subsequently reimbursed to New
Valley by the Company. The table reflects 100% of Mr. Lampen's salary and
bonus.
(5) Effective May 6, 1996, Ms. Van Siclen was appointed Vice President, Chief
Financial Officer and Treasurer of the Company.
(6) Effective September 5, 1996, Mr. Fulford was appointed Chairman of the
Board, President and Chief Executive Officer of Liggett.
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<PAGE> 9
(7) Represents payments made pursuant to a consulting agreement between Mr.
Fulford and the Company, which payments were reimbursed to the Company by
New Valley. See "Employment Agreements".
(8) Mr. Chakalian retired as President and Chief Executive Officer of Liggett
on April 1, 1996.
(9) Represents payments made pursuant to a consulting agreement between Mr.
Chakalian and Liggett. See "Employment Agreements".
COMPENSATION OF DIRECTORS
Outside directors of the Company each receive $7,000 per annum as
compensation for serving as a director, $1,000 per annum for each Board
committee membership, $1,000 per meeting for each Board meeting attended, and
$500 per meeting for each committee meeting attended. In addition, each
outside director of BGLS receives $28,000 per annum as compensation for serving
as a director, $500 per annum for each Board committee membership, $500 per
meeting for each Board meeting attended, and $500 for each committee meeting
attended. Each outside director is reimbursed for reasonable out-of-pocket
expenses incurred in serving on the Board of the Company and/or BGLS.
EMPLOYMENT AGREEMENTS
The Chairman is a party to an employment agreement with the Company dated
February 21, 1992. The agreement has a one-year term with automatic renewals
for additional one-year terms unless notice of non-renewal is given by either
party six months prior to the termination date. As of January 1, 1997, the
Chairman's annual base salary was $1,113,281. He is entitled to an annual
bonus for 1997 of $556,640, payable quarterly, in lieu of participation in
Company stock incentive plans. He is also entitled to an annual payment equal
to 10% of his base salary in lieu of certain other executive benefits such as
club memberships, company-paid automobiles and other similar perquisites.
Following termination of his employment without cause (as defined), he would
continue to receive his then current base salary and bonus for 24 months.
Following termination of his employment within two years of a change of control
(as defined) or in connection with similar events, he is entitled to receive a
lump sum payment equal to 2.99 times his then current base salary and bonus.
In connection with the settlement of a stockholder lawsuit against the Company
and the Chairman, the Chairman has agreed that, for a period of four years
beginning January 1, 1994, his employment contract shall be adjusted on an
annual basis on such terms as are established by a compensation committee
consisting entirely of independent directors. In addition, the Chairman's
salary and bonus may not be increased from one year to the next during the same
four-year period by more than 10% per annum, except that his salary and bonus
may be increased in the same percentage amount as any increase in the price of
the Company's Common Stock during a calendar year, subject to a maximum
increase of 25% per annum. His salary and bonus are subject to decrease if the
price of the Common Stock decreases by more than 10% during a calendar year, up
to a maximum decrease of 25% per annum, but in no event lower than compensation
earned in 1994.
Ronald S. Fulford, Chairman of the Board, President and Chief Executive
Officer of Liggett, is a party to an employment agreement with Liggett, dated
September 5, 1996. As of September 5, 1996, Mr. Fulford's annual salary was
$425,000. Bonus payments are at the sole discretion of the Board of Directors
of Liggett. Effective as of March 1, 1996, the Company entered into an
agreement with Mr. Fulford. Pursuant to this agreement, Mr. Fulford agreed to
provide various services in connection with the Company's investment in RJR
Nabisco Holdings Corp. ("RJR Nabisco") (including, without limitation,
consulting services, attendance at and participation in meetings related to the
Company's solicitation of proxies at RJR Nabisco's 1996 annual meeting and
presentations to financial analysts and institutional investors). During the
term of the agreement, which ended on March 31, 1997, Mr. Fulford received
compensation equal to UKPounds33,417 (or approximately US$54,000) per month and
reimbursement for all reasonable business and travel expenses
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<PAGE> 10
incurred in performing services under the agreement. The Company also agreed to
reimburse Mr. Fulford for any reduction in pension benefits (currently estimated
at approximately UKPounds14,400 (or approximately US$23,000) per annum) which
resulted from his terminating of his employment with Imperial Tobacco to enter
into the agreement.
Rouben V. Chakalian, the former Chairman of the Board, President and Chief
Executive Officer of Liggett, is a party to an employment agreement with
Liggett, dated and effective as of June 1, 1994. The agreement, which
terminated on May 31, 1996, was supplemented by letter agreements dated January
9, 1996 and August 23, 1996. Mr. Chakalian's annual base salary through May
31, 1996 was $432,000 and thereafter is compensated at a rate of $240,000 per
annum (plus $2,000 per day if his presence is required at certain locations
over six days per month). Since retiring as an executive officer of Liggett,
Mr. Chakalian has continued to serve as a director of Liggett and has been
serving as a consultant to Liggett's and the Company's management concerning
worldwide tobacco business issues.
Prior to June 1994, Mr. Chakalian served as a consultant to Liggett
advising on both Liggett's international and domestic operations. While acting
as a consultant, and pursuant to a letter agreement dated June 15, 1993, Mr.
Chakalian received payments of $250,000 for consulting services rendered during
1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, the Chairman and Messrs. Eide and Podell were members of the
Company's compensation committee. Messrs. Eide and Podell serve as directors
of BGLS and NV Holdings. Mr. Eide is a stockholder, and serves as the
Secretary and Treasurer of Aegis Capital Corp. ("ACC"), a registered
broker-dealer that has performed services for the Company and/or its affiliates
since before January 1, 1996. During 1996, ACC received commissions and other
income in the aggregate amount of $316,781 from the Company and/or its
affiliates. ACC, in the ordinary course of its business in 1996, engaged in
brokerage activities with Ladenburg Thalmann & Co. Inc., a subsidiary of New
Valley, on customary terms. In connection with the acquisition of certain
office buildings by New Valley on January 10, 1996, Mr. Eide received a
commission of $220,000 from the seller.
The Chairman is a director of Liggett. He is Chairman of the Board and
Chief Executive Officer of New Valley, BGLS and NV Holdings.
DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
BGLS sponsors the Retirement Plan For Salaried Non-Bargaining Unit
Employees (the "Retirement Plan") of Liggett, which is a noncontributory,
defined benefit plan. Each salaried employee of the participating companies
becomes a participant on the first day of the month following one year of
employment with 1,000 hours of service and the attainment of age 21. A
participant becomes vested as to benefits on the earlier of his attainment of
age 65, or upon completion of five years of service. Benefits become payable
on a participant's normal retirement date, age 65, or, at the participant's
election, at his early retirement after he has attained age 55 and completed
ten years of service. A participant's annual benefit at normal retirement date
is equal to the sum of: (A) the product of: (1) the sum of: (a) 1.4% of the
participant's average annual earnings during the five-year period from January
1, 1986 through December 31, 1990 not in excess of $19,500 and (b) 1.7% of his
average annual earnings during such five-year period in excess of $19,500 and
(2) the number of his years of credited service prior to January 1, 1991; (B)
1.55% of his annual earnings during each such year after December 31, 1990, not
in excess of $16,500; and (C) 1.85% of his annual earnings during such year in
excess of $16,500. The maximum years of credited service is 35. If hired prior
to January 1, 1983, there is no reduction for early retirement. If hired on or
after January 1, 1983, there is a reduction for early retirement equal to 3%
per year for the number of years prior to age 65 (age 62 if the participant has
at least 20 years of service) that the participant retires. The Retirement Plan
also provides
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<PAGE> 11
benefits to disabled participants and to surviving spouses of participants who
die prior to retirement. Benefits are paid in the form of a single life
annuity, with optional actuarially equivalent forms of annuity available.
Payment of benefits is made beginning on the first day of the month immediately
following retirement. As of December 31, 1993, the accrual of benefits under
the plan for Liggett employees was frozen.
As of December 31, 1996, none of the named executive officers was eligible
to receive any benefits under the Retirement Plan.
Under certain circumstances, the amount of retirement benefit payable
under the Retirement Plan to certain employees may be limited by the federal
tax laws. Any Retirement Plan benefit lost due to such a limitation will be
made up by BGLS through a non-qualified supplemental retirement benefit plan.
BGLS has accrued, but not funded, amounts to pay benefits under this
supplemental plan.
STOCK OPTION GRANTS AND STOCK OPTION EXERCISES
There were no stock options granted to or exercised by any of the named
executive officers during 1996.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation arrangements for the Company's executive officers are usually
negotiated on an individual basis between the Chairman and each executive. The
Company's executive compensation philosophy is to base management's pay, in
part, on achievement of the Company's goals, to provide incentives to enhance
stockholder value, to provide competitive levels of compensation, to recognize
individual initiative and achievement, and to assist the Company in attracting
talented executives to a challenging and demanding environment and to retain
such executives for the benefit of the Company and its subsidiaries, as the
case may be. Compensation arrangements for the Company's executive officers
are determined initially by evaluating the responsibilities of the position
held and the experience of the individual, and by reference to the competitive
marketplace for management talent. Annual salary adjustments are determined by
evaluating the competitive marketplace, the performance of the Company, the
performance of the executive, and any increased responsibilities assumed by the
executive. Bonus arrangements of certain executive officers are fixed by
contract and are not contingent. The Company, from time to time, considers the
payment of discretionary bonuses to its executive officers. Bonuses are
determined based, first, upon the level of achievement by the Company of its
goals and, second, upon the level of personal achievement by such executive
officers.
The compensation package of the Chairman was negotiated and approved by
the independent members of the Board of Directors in February 1992. The
compensation of the Chairman is set forth in an employment agreement between
the Chairman and the Company and is restricted by a settlement agreement
between the parties to a stockholder lawsuit against the Company and Chairman.
See "Employment Agreements", above.
The compensation package of Mr. Fulford, as Chairman of the Board,
President and Chief Executive Officer of Liggett, was negotiated and approved
by the Board of Directors of Liggett in September 1996. The compensation of
Mr. Fulford is set forth in an employment agreement between Mr. Fulford and
Liggett. 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
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<PAGE> 12
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 the Chairman. 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 12 to the Company's Consolidated Financial
Statements, which Note is set forth in the Annual Report enclosed herewith and
is incorporated herein by reference thereto.
The foregoing information is provided by the Compensation Committee of the
Company.
Robert J. Eide
Bennett S. LeBow
Jeffrey S. Podell
PERFORMANCE GRAPH
The following graph compares the total annual return of the Company's
Common Stock, the S&P 500 Index, the S&P MidCap 400 Index and the S&P Tobacco
Index for the five years ended December 31, 1996. The graph assumes that $100
was invested on December 31, 1991 in the Company's Common Stock and each of the
indices, and that all dividends were reinvested. Information for the Company's
Common Stock includes (i) the value of the October 7, 1993 distribution to the
Company's stockholders of SkyBox International Inc. ("SkyBox") common stock
assuming such stock was held until April 30, 1995 (the date on which Marvel
Entertainment Group, Inc. completed its acquisition of SkyBox pursuant to,
among other things, a cash tender offer of $16 per share) and the proceeds from
the tender offer were reinvested on that date in the Company's Common Stock;
and (ii) the value of the February 13, 1995 distribution to the Company's
stockholders of MAI common stock, assuming such stock was held until December
31, 1996.
[GRAPH TO BE INSERTED.]
<TABLE>
<CAPTION>
12/91 12/92 12/93 12/94 12/95 12/96
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Brooke Group Ltd. 100 51 155 273 935 548
S&P 500 100 108 118 120 165 203
S&P MidCap 100 112 128 123 155 192
S&P Tobacco 100 100 78 85 134 170
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 16, 1996, the Company entered into a Stock Option Agreement
(the "Agreement") with a consultant who serves as a director and President of
New Valley. The Agreement granted such consultant non-qualified stock options
to purchase 1,000,000 shares of the Company's Common Stock at an exercise price
of $1.00 per share. The options, which will become exercisable over a ten-year
term, vest in six equal annual installments beginning on July 1, 1997.
Pursuant to the Agreement, Common Stock dividend equivalents are paid on each
vested and unexercised option. During 1996, the consultant received $480,000
of consulting fees from the Company and a subsidiary.
Effective July 1, 1990, a former executive of the Company transferred his
equity in the Company to the Chairman and resigned from substantially all of
his positions with the Company and its affiliates. In consideration for this
transfer, LLP, a partnership controlled by the Chairman, agreed, among other
things, to make certain payments to the Company on account of the former
executive's loan with a principal amount of $5,200,000 on December 31, 1996.
On March 7, 1997, LLP satisfied its obligation with respect
11
<PAGE> 13
to the loan by transferring to the Company 400,000 shares of the Company's
Common Stock, which shares had been pledged to secure the non-recourse
obligation, except as to the pledged shares.
During 1996, Orchard Capital Corporation, an affiliate of Richard Ressler,
the beneficial owner of 10.0% of the Company's Common Stock and a director of
New Valley, served as a consultant to Liggett and received consulting fees of
$220,000.
In 1995, the Company and New Valley 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
$406,807 under this agreement for the year ended December 31, 1996.
During 1996, the Company and BGLS entered into a court-approved
Stipulation and Agreement (the "Settlement") with New Valley relating to the
Company's and BGLS's application under the Federal Bankruptcy Code for
reimbursement of legal fees and expenses incurred by them in connection with
New Valley's bankruptcy reorganization proceedings. Pursuant to the
Settlement, New Valley reimbursed the Company and BGLS $655,217 for such legal
fees and expenses. The terms of the Settlement were substantially similar to
the terms of previous settlements between New Valley and other applicants who
had sought reimbursement of reorganization-related legal fees and expenses.
On December 18, 1996, New Valley loaned BGLS $990,000 under a short-term
promissory note due January 31, 1997 and bearing interest at 14%. On January
2, 1997, New Valley loaned 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, Brooke (Overseas) Ltd. ("BOL"), a wholly-owned
subsidiary of the Company, entered into a stock purchase agreement (the
"Purchase Agreement") with New Valley, pursuant to which BOL sold 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, to New Valley.
New Valley paid to BOL for the BML Shares a purchase price of $55 million,
consisting of $21.5 million in cash and a $33.5 million 9% promissory note of
New Valley (the "Note"). The Note is collateralized by the BML Shares and is
payable $21.5 million on June 30, 1997 and $12 million on December 31, 1997.
The transaction was approved by the independent members of the Board of
Directors of BOL. BOL retained independent legal counsel in connection with
the evaluation and negotiation of the transaction.
The foregoing description of the BML sale 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 -
Brooke (Overseas) Ltd. - Sale of BrookeMil Ltd." as well as Note 4 to the
Company's Consolidated Financial Statements for information concerning the
transaction and a pending lawsuit relating to New Valley'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.
For information concerning certain agreements and transactions between the
Company, BGLS and New Valley 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 Holdings" and Note 3 and
Note 17 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."
12
<PAGE> 14
RELATIONSHIP WITH INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P. has been the independent auditors for the Company
since December 1986 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.
MISCELLANEOUS
1996 ANNUAL REPORT ON FORM 10-K
The Company has mailed, with this proxy statement, a copy of the Annual
Report to each stockholder as of the Record Date. If a stockholder requires an
additional copy of the Annual Report, THE COMPANY WILL PROVIDE ONE, WITHOUT
CHARGE, ON THE WRITTEN REQUEST OF ANY SUCH STOCKHOLDER ADDRESSED TO THE
COMPANY'S SECRETARY AT BROOKE GROUP LTD., 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 directors and executive
officers of the Company, 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 and the New York Stock Exchange.
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 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 stockholders 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 December 31, 1997 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 customary and reasonable
expenses incurred in forwarding soliciting material to the beneficial owners of
Common Stock.
The Board 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 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 of Directors
Dated: April 29, 1997
13
<PAGE> 15
BROOKE GROUP LTD.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE 1997 ANNUAL MEETING OF
STOCKHOLDERS OF BROOKE GROUP LTD.
The undersigned stockholder of Brooke Group Ltd. (the "Company") hereby
constitutes and appoints Andrew E. Balog and Marc N. Bell, attorney and proxy
of the undersigned, with power of substitution, to attend, vote and act for the
undersigned at the 1997 Annual Meeting of Stockholders of the Company, a
Delaware corporation, to be held at The Hyatt Regency Miami, 400 S.E. Second
Avenue, Miami, Florida 33131 on Monday June 2, 1997 at 11:00 a.m. local time,
and at any adjournments or postponements thereof, with respect to the following
on the reverse side of this proxy card and, in their discretion, on such other
matters as may properly come before the meeting and at any adjournments or
postponements thereof.
(TO BE CONTINUED AND SIGNED ON THE REVERSE SIDE)
[X] PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE.
Item 1. Election of Directors:
FOR all nominees named at right (except as indicated to the contrary)[ ]
WITHHOLD AUTHORITY to vote for all nominees named at right [ ]
Nominees: Robert J. Eide, Bennett S. LeBow and Jeffrey S. Podell
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided below.
- --------------------------------------------------------------------------------
If not otherwise directed, this proxy will be voted FOR the election of
the nominees in Item 1.
The Board of Directors recommends a vote FOR all nominees in Item 1.
PLEASE DATE, SIGN AND MAIL AT ONCE IN THE ENCLOSED POSTPAID ENVELOPE.
Signature ______________ Date _______ Signature _______________ Date___________
IF HELD JOINTLY
NOTE: Please sign exactly as your name appears hereon. If signing as attorney,
administrator, trustee, guardian or the like, please give your full title as
such. If signing for a corporation, please give your title.
