<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
JOINT CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): AUGUST 29, 1997
<TABLE>
<S> <C>
BROOKE GROUP LTD. BGLS INC.
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
1-5759 33-93576
(Commission File Number) (Commission File Number)
51-0255124 13-3593483
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
DELAWARE DELAWARE
(State or other jurisdiction of incorporation (State or other jurisdiction of incorporation
or organization) or organization)
100 S.E. SECOND STREET 100 S.E. SECOND STREET
MIAMI, FLORIDA 33131 MIAMI, FLORIDA 33131
(Address of principal executive offices including (Address of principal executive offices including
Zip Code) Zip Code)
305/579-8000 305/579-8000
(Registrant's telephone number, including area code) (Registrant's telephone number, including area code)
(NOT APPLICABLE) (NOT APPLICABLE)
(Former name or former address, (Former name or former address,
if changed since last report) if changed since last report)
</TABLE>
Page 1 of 13
<PAGE> 2
ITEM 5. OTHER EVENTS.
On August 29, 1997, Brooke Group Ltd. issued a press release, a copy of
which is attached hereto as Exhibit 99.1 and incorporated herein by reference.
The press release related, among other things, to the execution by BGLS Inc. of
a Standstill Agreement and Consent, a copy of which is attached hereto as
Exhibit 99.2 and incorporated herein by reference, with the principal holders of
BGLS Inc.'s 15.75% Senior Secured Notes due 2001.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
The following Exhibits are provided in accordance with the provisions
of Item 601 of Regulation S-K and are filed herewith unless otherwise noted.
EXHIBIT INDEX
99.1 Press Release of Brooke Group Ltd. dated August 29, 1997.
99.2 Standstill Agreement and Consent, dated as of August 28, 1997, among
BGLS Inc., AIF II, L.P., Artemis America Partnership, and Tortoise
Corp.
Page 2 of 13
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BROOKE GROUP LTD.
By: /s/ JOSELYNN D. VAN SICLEN
------------------------------------------
Joselynn D. Van Siclen
Vice President and Chief Financial Officer
BGLS INC.
By: /s/ JOSELYNN D. VAN SICLEN
------------------------------------------
Joselynn D. Van Siclen
Vice President and Chief Financial Officer
Date: September 3, 1997
Page 3 of 13
<PAGE> 1
Exhibit 99.1
S A R D V E R B I N N E N & C O NEWS
FOR IMMEDIATE RELEASE
Contact: George Sard/Anna Cordasco/Paul Caminiti
Sard Verbinnen & Co.
212/687 - 8080
LIGGETT GROUP MAKES INTEREST PAYMENT ON NOTES;
BROOKE GROUP CONTINUES TO NEGOTIATE BGLS NOTES
------------------------------------------------------
MIAMI, FL, AUGUST 29, 1997 -- Brooke Group Ltd. (NYSE: BGL) announced
today that its wholly-owned subsidiary, Liggett Group Inc., has made the
interest payment due on August 1, 1997 to the holders of Liggett's 11.50% Series
B and Variable Rate (19.75%) Series C Senior Secured Notes due 1999. Payment had
been postponed during negotiations with Liggett's noteholders concerning a
potential restructuring of its Senior Secured Notes. However, no agreement with
the Liggett noteholders was reached, and no further negotiations are currently
planned.
Brooke also announced that its wholly-owned subsidiary, BGLS Inc.,
continues in negotiations with the holders of more than 83% of the $232,864,000
principal amount of BGLS' 15.75% Senior Secured Notes due 2001 concerning the
potential restructuring of the debt. BGLS has made the interest payment due on
July 31, 1997 to all holders of the BGLS Notes other than such principal
holders. Pending completion of the negotiations, the principal holders have
agreed with BGLS that they will be entitled to receive their portion of the July
31, 1997 interest payment only after giving BGLS 20 days notice but in any event
by November 30, 1997.
Brooke Group is a holding company which owns Liggett Group
Inc. and controlling interests in Liggett-Ducat Ltd. and New Valley
Corporation.
# # #
SARD VERBINNEN & CO., INC. 630 THIRD AVENUE NEW YORK, NY 10017
TEL 212 687 8080 FAX 212 687 8344
Page 4 of 13
<PAGE> 1
Exhibit 99.2
STANDSTILL AGREEMENT AND CONSENT
THIS STANDSTILL AGREEMENT AND CONSENT, dated as of August 28, 1997
among BGLS INC., a Delaware corporation (the "COMPANY"), AIF II, L.P., a
Delaware limited partnership ("AIF II"), ARTEMIS AMERICA PARTNERSHIP, a Delaware
partnership (as successor to Artemis America LLC, a Delaware limited liability
company) ("ARTEMIS") and TORTOISE CORP., a New York corporation ("TORTOISE";
together with AIF II and Artemis, the "PARTICIPATING HOLDERS"). Capitalized
terms not otherwise defined herein shall have the meanings specified in the
Indenture (as defined below).
WHEREAS, pursuant to that certain Indenture dated as of January 1, 1996
(the "INDENTURE") between the Company and State Street Bank and Trust Company,
as successor to Fleet National Bank of Massachusetts (the "TRUSTEE"), the
Company issued the Series A Securities and the Series B Securities, of which
only the Series B Securities remain outstanding;
WHEREAS, the Participating Holders (directly or through one or more
nominees or custodians, as more fully described on Schedule 1 hereto) and
certain other Holders (the "OTHER HOLDERS") (the Participating Holders and the
Other Holders being collectively referred to herein as the "HOLDERS") own all of
the outstanding Series B Securities;
WHEREAS, pursuant to Section 2.13 of the Indenture and the terms of the
Series B Securities, interest on the Series B Securities was due to the Holders
on July 31, 1997 in an aggregate amount of $18,338,040, which amount was not
paid as of such date (such amount, plus amounts owing thereon pursuant to
Section 2.12 of the Indenture, the "JULY INTEREST AMOUNT");
WHEREAS, pursuant to Section 7.01(1) of the Indenture, the Company's
default in the payment of the July Interest Amount, unless cured, will mature
into an Event of Default on August 30, 1997;
WHEREAS, the Company has requested, and each of the Participating
Holders has agreed, subject to the terms and conditions set forth in this
Standstill Agreement and Consent, (i) to waive any Default or Event of Default
existing solely as a result of the failure of the Company to pay to such
Participating Holder its pro rata share of the July Interest Amount until such
Participating Holder has delivered to the Company in writing a demand for such
payment (a "JULY INTEREST AMOUNT DEMAND") and the Company has failed to make
such payment within twenty days subsequent to the delivery to the Company of
such demand (such failure, a "JULY INTEREST AMOUNT DEFAULT") and (ii) that it
shall refrain from exercising its rights and remedies against the Company in
connection with the Company's failure to pay such Participating Holder its pro
rata share of the July Interest Amount until the occurrence of a July Interest
Amount Default;
STANDSTILL AGREEMENT AND CONSENT
--------------------------------
Page 5 of 13
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreement of the parties hereinafter set forth, the parties hereto
hereby agree as follows:
1. PAYMENT OF JULY INTEREST AMOUNT TO OTHER HOLDERS. The Company agrees
that by no later than August 29, 1997 it shall pay to the Trustee for
distribution to the Other Holders cash in an amount necessary to cause the Other
Holders' pro rata portion of the July Interest Amount to be paid in full in
cash.
2. WAIVER OF DEFAULT. Conditioned upon the Company making the payment
required pursuant to Section 1, each of the Participating Holders hereby waives
any Default or Event of Default existing solely as a result of the Company's
failure to pay to such Participating Holder such Participating Holder's pro rata
share of the July Interest Amount, until the occurrence of a July Interest
Amount Default. The Company acknowledges that interest at the default rate shall
continue to accrue pursuant to Section 2.12 of the Indenture on the July
Interest Amount owed to the Participating Holders.
3. STANDSTILL. Each of the Participating Holders hereby agrees that
prior to the occurrence of a July Interest Amount Default, it will not exercise
and shall not direct the Trustee to exercise any remedy under the Indenture or
the Series B Securities, at law or in equity, which it or the Trustee now has or
hereafter may have in respect of any Default or Event of Default resulting
solely from the failure of the Company to pay to such Participating Holder its
pro rata share of the July Interest Amount. The Company hereby agrees that no
grace periods set forth in the Indenture shall apply with respect to the
occurrence and continuance of a July Interest Amount Default.
4. NOTICES.
(a) TO TRUSTEE AND DTC. Each of the Participating Holders shall upon
execution of this Standstill Agreement and Consent (i) advise the Trustee that
such Participating Holder has waived its right to be paid its pro rata share of
the July Interest Amount from the cash payment made pursuant to Section 1 and
has waived any Default or Event of Default existing as a result of its failure
to receive its pro rata share of the July Interest Amount from the Company until
the delivery to the Company of a July Interest Amount Demand by such
Participating Holder and the failure of the Company to pay to such Participating
Holder its pro rata share of the July Interest Amount within twenty days
subsequent to the delivery to the Company of such July Interest Amount Demand,
(ii) direct the Trustee to distribute to the Other Holders or The Depository
Trust Company ("DTC") on behalf of the Other Holders by August 29, 1997 the
portion of the cash delivered by the Company to the Trustee attributable to such
Participating Holder's pro rata share of the July Interest Amount and (iii)
direct DTC to distribute to the Other Holders for which DTC is the custodian by
August 29, 1997, the portion of the July Interest Amount which would otherwise
by distributed to such Participating Holder.
STANDSTILL AGREEMENT AND CONSENT
--------------------------------
Page 6 of 13
<PAGE> 3
(b) TO PARTICIPATING HOLDERS. The Company hereby agrees that upon its
receipt of a July Interest Amount Demand that it shall promptly, but in any
event within three Business Days, provide notice in writing to each other
Participating Holder and the Trustee of such Interest Amount Demand.
5. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS STANDSTILL AGREEMENT.
This Standstill Agreement and Consent shall become effective upon the execution
and delivery hereof by the Company and each of the Participating Holders.
6. COVENANTS. The Company hereby agrees that (in addition to the
restrictions set forth in Section 4.03 of the Indenture) it shall not make any
Restricted Payments in excess of $1,500,000 in the aggregate until each
Participating Holder has been paid its pro rata share of the July Interest
Amount, plus all amounts owing thereon pursuant to Section 2.12 of the
Indenture.
7. TERMINATION. This Standstill Agreement and Consent shall terminate
automatically (except with respect to the provisions of Section 6) upon the
earlier of (i) the occurrence of a July Interest Amount Default, (ii) the
payment in full to each Participating Holder of its pro rata share of the July
Interest Amount, plus all amounts owing thereon pursuant to Section 2.12 of the
Indenture, (iii) the occurrence of an Event of Default (other than in connection
with the July Interest Amount) and (iv) 5:00 p.m. eastern standard time on
November 30, 1997.
8. ABSENCE OF WAIVER. The parties hereto agree that, except to the
extent expressly set forth herein, nothing contained herein shall be deemed to:
(a) be a consent to, or waiver of, any Default or Event of Default;
(b) prejudice any right or remedy which any of the Participating
Holders may now have or may in the future have under the Indenture, the Series B
Securities or otherwise, including, without limitation, any right or remedy
resulting from any Default or Event of Default; or
(c) constitute a waiver of the rights of any of the Participating
Holders under Section 2.12 of the Indenture.
9. REPRESENTATIONS. Each party hereto hereby represents and warrants to
the other parties that:
(a) such party is a corporation or partnership, as applicable, duly
organized, validly existing, and in good standing under the laws of the state of
its incorporation or formation, as applicable;
STANDSTILL AGREEMENT AND CONSENT
--------------------------------
Page 7 of 13
<PAGE> 4
(b) the execution, delivery and performance of this Standstill
Agreement and Consent by such party is within its corporate or partnership
powers, as applicable, has been duly authorized by all necessary corporate or
partnership action, as applicable, has received all necessary consents and
approvals (if any shall be required), and does not and will not contravene or
conflict with any provisions of law or of the charter or by-laws, or partnership
agreement, as applicable, of such party or of any material agreement binding
upon such party or its property; and
(c) upon its effectiveness under Section 5 hereof, this Standstill
Agreement and Consent will be a legal, valid and binding obligation of such
party, enforceable against it in accordance with its terms.
In addition, the Company represents and warrants that to the best of its
knowledge, except as set forth herein no Default or Event of Default under the
Indenture has occurred and is continuing.
10. CONTINUING EFFECT, ETC. Except as expressly provided herein, the
Company hereby agrees that the Indenture and the Series B Securities shall
continue unchanged and in full force and effect, and all rights, powers and
remedies of the Participating Holders thereunder and under applicable law are
hereby expressly reserved.
11. EXPENSES AND INDEMNIFICATIONS.
(a) The Company hereby agrees to reimburse each of the Participating
Holders for their reasonable attorneys fees and expenses incurred in connection
with this Standstill Agreement.
(b) The Company agrees that an actual or threatened or potential claim,
action, suit or proceeding against or affecting an Indemnitee (as defined in the
Exchange Agreement dated as of November 21, 1995 among INTER ALIA the Company
and the Participating Holders) that at any time results form, relates to or
arises out of the execution, delivery or performance by the Participating
Holders of this Standstill Agreement and Consent is deemed to be an
Indemnification Event (as defined in the Exchange Agreement).
12. MISCELLANEOUS.
(a) Section headings used in this Standstill Agreement and Consent are
for convenience of reference only and shall not affect the construction of this
Standstill Agreement and Consent.
STANDSTILL AGREEMENT AND CONSENT
--------------------------------
Page 8 of 13
<PAGE> 5
(b) This Standstill Agreement and Consent may be executed in any number
of counterparts and by the different parties on separate counterparts and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same agreement.
(c) This Standstill Agreement and Consent shall be a contract made
under and governed by the laws of the State of New York.
(d) All obligations of the Company and rights of the Participating
Holders expressed herein shall be in addition to and not in limitation of those
provided by applicable law.
(e) This Standstill Agreement and Consent shall be binding upon the
Company, the Participating Holders and their respective successors and assigns,
and shall inure to the benefit of the Company, the Participating Holders and
their respective successors and assigns.
(f) All amendments or modifications of this Standstill Agreement and
Consent and all consents, waivers and notices delivered hereunder or in
connection herewith shall be in writing.
13. WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE PARTICIPATING
HOLDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS STANDSTILL
AGREEMENT AND CONSENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE PARTIES
HERETO FURTHER AGREE THAT THIS AGREEMENT MAY BE FILED AS EVIDENCE OF THE WAIVER
REFERRED TO ABOVE IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS STANDSTILL AGREEMENT AND CONSENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
STANDSTILL AGREEMENT AND CONSENT
--------------------------------
Page 9 of 13
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Standstill
Agreement and Consent to be executed by their duly authorized representatives as
of the date first above written.
BGLS INC.
By /s/ Bennett S. LeBow
-------------------------------------------
Name: Bennett S. LeBow
Title: Chairman and Chief Executive Officer
AIF II, L.P.
By APOLLO ADVISORS, L.P.
Managing General Partner
By APOLLO CAPITAL MANAGEMENT, INC.
General Partner
By /s/ Michael D. Weiner
-------------------------------------------
Name: Michael D. Weiner
Title: Vice President
ARTEMIS AMERICA PARTNERSHIP
By LION ADVISORS, L.P.
Attorney-in-Fact
By LION CAPITAL MANAGEMENT, INC.
General Partner
By /s/ Michael D. Weiner
-------------------------------------------
Name: Michael D. Weiner
Title: Vice President
STANDSTILL AGREEMENT AND CONSENT
--------------------------------
Page 10 of 13
<PAGE> 7
TORTOISE CORP.
By /s/ Edward E. Mattner
-------------------------------------------
Name: Edward E. Mattner
Title: President
STANDSTILL AGREEMENT AND CONSENT
--------------------------------
Page 11 of 13
<PAGE> 8
ACKNOWLEDGED, AGREED & CONSENTED TO
WITH RESPECT TO SECTION 11(b):
BROOKE GROUP LTD.
By /s/ Richard J. Lampen
---------------------------------
Name: Richard J. Lampen
Title: Executive Vice President
STANDSTILL AGREEMENT AND CONSENT
--------------------------------
Page 12 of 13
<PAGE> 9
SCHEDULE I
----------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT ($)
HOLDER DTC PARTICIPANT (NO.) OF SERIES B NOTES
- ------ --------------------- --------------------
<S> <C> <C>
Artemis America The Bank of New York (901) $42,513,000
Partnership
AIF II, L.P. Chase Manhattan Bank, Trust (931) $54,726,000
Tortoise Corp. Icahn & Co., Inc. (342) $ 3,972,000
ING Baring (U.S.)
Securities, Inc. (425) $60,875,000
Chase Manhattan Bank/Chemical (930) $32,704,000
</TABLE>
STANDSTILL AGREEMENT AND CONSENT
--------------------------------
Page 13 of 13
