<PAGE> 1
===============================================================================
Securities And Exchange Commission
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
---------------------
JOINT ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
---------------------
BROOKE GROUP LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 1-5759 51-0255124
-------- ------ ----------
<S> <C> <C>
(State or other jurisdiction of Commission File Number (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
BGLS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 33-93576 13-3593483
-------- -------- ----------
<S> <C> <C>
(State or other jurisdiction of Commission File Number (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
305/579-8000
(Address, including zip code and telephone number, including area code,
of the principal executive offices)
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ------------------------
Brooke Group Ltd.
Common Stock, par value $.10 per share New York Stock Exchange
Securities Registered Pursuant to Section 12(G) of the Act: None
Indicate by check mark whether the Registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), during the preceding 12 months
(or for such shorter period that the Registrants were required to file such
reports), and (2) have been subject to such filing requirements for the past 90
days. [ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statement incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ] Yes [ ] No
The aggregate market value of the voting stock held by non-affiliates
of Brooke Group Ltd. as of April 23, 1999 was approximately $245,000,000.
Directors and officers and ten percent or greater stockholders of Brooke Group
Ltd. are considered affiliates for purposes of this calculation but should not
necessarily be deemed affiliates for any other purpose.
At April 23, 1999, Brooke Group Ltd. had 20,943,730 shares of common
stock outstanding, and BGLS Inc. had 100 shares of common stock outstanding,
all of which are held by Brooke Group Ltd.
===============================================================================
<PAGE> 2
The Issuer hereby amends its Annual Report on Form 10-K for the year
ended December 31, 1998 to include the information required by Part III.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
The following table sets forth certain information, as of April 23,
1999, with respect to each person who is a director of the Company and of BGLS.
Each director is a citizen of the United States of America. For information
concerning the executive officers of the Company and BGLS, see Item 4,
"Submission of Matters to a Vote of Security-Holders; Executive Officers of the
Registrants".
<TABLE>
<CAPTION>
DIRECTOR
NAME AND ADDRESS AGE PRINCIPAL OCCUPATION SINCE
---------------- --- -------------------- ---------
<S> <C> <C> <C>
Bennett S. LeBow 61 Chairman of the Board October 1986
Brooke Group Ltd. and Chief Executive Officer
100 S.E. Second Street of the Company
Miami, FL 33131
Robert J. Eide 46 Chairman and Treasurer of November 1993
Aegis Capital Corp. Aegis Capital Corp.
70 East Sunrise Highway
Valley Stream, NY 11581
Jeffrey S. Podell 58 Chairman of the Board and November 1993
Newsote, Inc. President of Newsote, Inc.
26 Jefferson Street
Passaic, NJ 07055
Jean E. Sharpe 52 Private Investor May 1998
462 Haines road
Mt. Kisco, NY 10549
</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 DIRECTORS (OTHER THAN EXECUTIVE OFFICERS)
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 and Chairman 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. and Miami Subs Corporation, restaurant chains.
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.
JEAN E. SHARPE has been a director of the Company since May 1998. Ms.
Sharpe is a private investor and has engaged in various philanthropic activities
since her retirement in September 1993 as Executive Vice President and Secretary
of the Company and as an officer of various of its subsidiaries. Ms. Sharpe
previously served as a director of the Company from July 1990 until September
1993.
2
<PAGE> 3
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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,
1998, all Reporting Persons have timely complied with all filing requirements
applicable to them.
ITEM 11. 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, 1998, the Company's Chief Executive Officer, the other
three executive officers of the Company and an executive officer of a
subsidiary of the Company whose cash compensation exceeded $100,000
(collectively, the "named executive officers"). No separate compensation was
paid during the past three years to the named executive officers by BGLS.
3
<PAGE> 4
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE (1)
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------------------- ------------
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------------------ ---- ------ ----- ------------ -------- ------------
($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Bennett S. LeBow 1998 3,391,601(2) 834,960(3) -- 2,500,000(6) 25,192(7)
Chairman of the Board, 1997 3,113,281(2) 667,969(3) -- --
President and Chief 1996 3,484,375(2) 890,626(3) -- --
Executive Officer
Richard J. Lampen(4) 1998 750,000 750,000(5) -- --
Executive Vice President 1997 650,000 -- -- 260,000(6)
1996 600,000 100,000 -- --
Marc N. Bell(8) 1998 300,000 300,000 -- --
Vice President, General
Counsel and Secretary
Joselynn D. Van Siclen 1998 155,000 155,000(5) 30,000(6)
Vice President, Chief 1997 140,000 -- -- --
Financial Officer and 1996 131,667 10,000 -- --
Treasurer
Ronald S. Fulford(9) 1998 425,000 425,000 83,112(10) --
Chairman of the Board, 1997 425,000 -- 247,961(10) (11) --
President and Chief 1996 157,530 -- 552,832(11) --
Executive Officer of
Liggett
</TABLE>
- ----------------------
(1) Unless otherwise stated, 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) Includes salary paid by New Valley of $2,000,000 per year.
(3) Includes payments equal to 10% of base salary ($139,160, $111,328 and
$148,438 during 1998, 1997 and 1996, respectively) in lieu of certain
other executive benefits. See "Employment Agreements".
(4) The table reflects 100% of Mr. Lampen's salary and bonus, all of which
are paid by New Valley, and includes his salary and bonus from New
Valley and a bonus of $500,000 awarded by the Company for 1998. 25% of
Mr. Lampen's salary and bonus from New Valley (or $250,000, $162,500
and $175,000 in 1998, 1997 and 1996, respectively) and all of the 1998
bonus from the Company have been or will be reimbursed to New Valley by
the Company.
(5) Under the terms of these bonus awards, two-thirds of such amounts will
be paid upon closing of the exercise of the Class A Option by PM and
the Loan. See Item 1, "Business - Liggett Group Inc.-Philip Morris
Brand Transaction".
(6) Represents options to purchase the Company's Common Stock. See "Stock
Option Grants in 1998".
4
<PAGE> 5
(7) Represents premiums paid for 1998 by the Company under collateral
assignment split-dollar insurance agreements covering the life of Mr.
LeBow entered into by the Company commencing in December 1998. For a
period of ten years, the Company will advance the amount of the annual
premiums on the policies, less the maximum permitted borrowings under
the policies. Upon surrender of the policies or payment of the death
benefits, the Company is entitled to repayment of all premiums paid by
it.
(8) Effective January 10, 1998, Mr. Bell was appointed a Vice President of
the Company. The table reflects 100% of Mr. Bell's salary and bonus,
all of which are paid by the Company. $200,000 of Mr. Bell's salary and
bonus from the Company have been or will be reimbursed to the Company
by New Valley.
(9) Effective September 5, 1996, Mr. Fulford was appointed Chairman of the
Board, President and Chief Executive Officer of Liggett.
(10) Represents an automobile allowance, living allowance and group term
life insurance provided to Mr. Fulford.
(11) Includes payments ($163,155 and $552,832 in 1997 and 1996,
respectively) made pursuant to a consulting agreement between Mr.
Fulford and the Company, which payments were reimbursed to the Company
by New Valley. See "Employment Agreements".
The following table sets forth all grants of stock options to the named
executive officers during 1998.
STOCK OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF MARKET
SECURITIES TOTAL OPTIONS PRICE ON
UNDERLYING GRANTED TO EXERCISE DATE OF GRANT
OPTIONS EMPLOYEES PRICE GRANT EXPIRATION DATE PRESENT
NAME GRANTED (#) IN 1998 ($/SHARE) ($/SHARE) DATE VALUE ($)(2)
- ---- ----------- ------------- --------- --------- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Bennett S. LeBow 2,500,000(1) 98.3% $ 9.75 $ 9.75 7/20/08 $ 20,525,000
Joselynn D. Van Siclen 30,000(1) 1.2% $ 5.00 $8.625 12/31/06 $ 227,400
</TABLE>
- ---------------------
(1) Represents options to purchase shares of the Company's Common Stock
granted on July 20, 1998 to Mr. LeBow and on January 9, 1998 to Ms.
Van Siclen. Subject to earlier vesting upon a change of control (as
defined), Mr. LeBow's options vest and become exercisable in four
equal installments commencing on the first anniversary of the date of
grant and Ms. Van Siclen's options vest and become exercisable in six
equal annual installments commencing on the date of the grant.
(2) The estimated present value at the respective grant dates of options
granted during 1998 has been calculated using the Black-Scholes option
pricing model, based upon the following assumptions: volatility of
79.14% for Mr. LeBow and 76.56% for Ms. Van Siclen, a risk-free rate
of 5.54% for Mr. LeBow and 5.74% for Ms. Van Siclen, 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".
The following table sets forth certain information concerning option
exercises during 1998 by the named executive officers and the status of their
options at December 31, 1998.
5
<PAGE> 6
AGGREGATED OPTION EXERCISES DURING
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED REALIZED OPTIONS AT DECEMBER 31, 1998 OPTIONS AT DECEMBER 31, 1998
ON UPON ---------------------------- ----------------------------
NAME EXERCISE EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bennett S. LeBow -- -- -0- 2,500,000 -- $36,562,500
Richard J. Lampen 43,300 $ 437,788 33 216,667 $639 $4,197,923
Marc N. Bell 33,332 $ 359,682 -0- 66,668 -- $1,291,693
Joselynn D. Van Siclen 5,000 $ 43,499 -0- 25,000 -- $484,375
</TABLE>
- -------------------------
* Calculated using the closing price for the Company's Common Stock of
$24 3/8 per share on December 31, 1998 less the option exercise price.
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.
In the second quarter of 1998, each outside director of the Company
received an award of 10,000 shares of Common Stock for services as a director.
Subject to earlier vesting upon a change of control (as defined), the shares
vest one-quarter on the date of grant and the remaining shares vest in three
equal annual installments commencing on the first anniversary of the date of
grant.
EMPLOYMENT AGREEMENTS
THE COMPANY. Bennett S. LeBow is a party to an employment agreement
with the Company dated February 21, 1992, as amended July 20, 1998. 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, 1999, Mr. LeBow's annual base salary was
$1,739,501. He is also entitled to an annual bonus for 1999 of $869,750 and 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. Under the terms of the Indenture governing the BGLS'
Notes, Mr. LeBow's salary and bonus may not be increased from one year to the
next 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 ($1,425,000).
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 January 1, 1999, Mr.
6
<PAGE> 7
Fulford's annual salary was $650,000. Bonus payments are at the sole discretion
of the Board of Liggett. Liggett awarded Mr. Fulford a bonus of $425,000 for
1998. 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 (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 UK(pound)33,417 (or approximately
$54,000) per month and reimbursement for all reasonable business and travel
expenses 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 UK(pound)14,400 or approximately $23,000 per annum)
which resulted from his terminating his employment with Imperial Tobacco to
enter into the agreement.
Marc N. Bell is a party to an employment agreement with the Company
dated April 15, 1994. The agreement has an initial term of two years from April
15, 1994 with automatic renewals after the initial term for additional one-year
terms unless notice of non-renewal is given by either party within the
sixty-day period prior to the termination date. As of January 1, 1999, his
annual base salary was $300,000. In addition, the Board of Directors may award
an annual bonus to Mr. Bell at its sole discretion. The Board awarded Mr. Bell
a bonus of $300,000 for 1998. The Board may review such base salary and
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 in the year in which such termination occurs.
There are no employment agreements between BGLS and the named
executive officers.
NEW VALLEY. Mr. LeBow is a party to an employment agreement with New
Valley 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, 1999, 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 BGLS Indenture and New Valley's
Joint Plan provide that the annual compensation paid to Mr. LeBow for services
rendered in his capacity as an officer or director of New Valley shall not
exceed $2,000,000.
Richard J. Lampen is a party to an employment agreement with New
Valley 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, 1999, his annual base salary was $750,000. In addition, the New
Valley Board of Directors may award an annual bonus to Mr. Lampen at its sole
discretion. The New Valley Board awarded Mr. Lampen a bonus of $250,000 for
1998, and the Company's Board awarded him a bonus of $500,000 for 1998, payable
upon exercise of the Class A Option by PM and the Loan. The New Valley 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
During 1998, Messrs. Eide, LeBow (until April 30, 1998) 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 Chairman and Treasurer of Aegis Capital Corp.
7
<PAGE> 8
("ACC"), a registered broker-dealer, that has performed services for the
Company and/or its affiliates since before January 1, 1998. During 1998, ACC
received commissions and other income in the aggregate amount of approximately
$128,000 from the Company and/or its affiliates. ACC, in the ordinary course of
its business in 1998, engaged in brokerage activities with Ladenburg Thalmann &
Co. Inc., a subsidiary of New Valley, on customary terms.
Mr. LeBow is a director of Liggett. He is Chairman of the Board and
Chief Executive Officer of New Valley, BGLS and NV Holdings. Mr. Lampen, an
executive officer of the Company and BGLS, is an executive officer and director
of New Valley.
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 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, 1998, 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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 23, 1999, 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 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.
8
<PAGE> 9
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES CLASS
------------------- --------- ----------
<S> <C> <C>
Bennett S. LeBow (1) (6) (7) 9,015,008 43.0%
Richard S. Ressler (2)
Orchard Capital Corporation 1,824,999 8.7%
10960 Wilshire Boulevard
Los Angeles, CA 90024
AIF II, L.P. and Lion Advisors, L.P.(3)
Two Manhattanville Road 2,000,000 8.7%
Purchase, NY 10577
High River Limited Partnership (4)
Riverdale LLC 1,574,100 7.5%
Carl C. Icahn
100 South Bedford Road
Mt. Kisco, NY 10549
Kasowitz, Benson, Torres & Friedman LLP (5)
1301 Avenue of the Americas 1,250,000 5.6%
New York, NY 10019
Robert J. Eide (6)
Aegis Capital Corp. 20,000 (*)
70 East Sunrise Highway
Valley Stream, NY 11581
Jeffrey S. Podell (6)
Newsote, Inc. 20,000 (*)
26 Jefferson Street
Passaic, NJ 07055
Jean E. Sharpe (6)
462 Haines Road 10,000 (*)
Mt. Kisco, NY 10549
Richard J. Lampen (7) 43,366 (8) (*)
Marc N. Bell (7) 16,662 (8) --
Joselynn D. Van Siclen (7) 5,000 (8) --
Ronald S. Fulford (9)
Liggett Group Inc. -- --
700 West Main Street
Durham, NC 27702
All directors and executive officers as a group 9,135,036 43.5%
(8 persons)
</TABLE>
- ---------------------------
(*) The percentage of shares beneficially owned does not exceed 1% of the
Common Stock.
9
<PAGE> 10
(1) Includes 8,373,008 shares of Common Stock held by LeBow Limited
Partnership, a Delaware limited partnership ("LLP"), and 642,000
shares of Common Stock held by The Bennett and Geraldine LeBow
Foundation, Inc., a Florida not-for-profit corporation (the
"Foundation"). Mr. LeBow indirectly exercises sole voting power and
sole dispositive power over the shares of Common Stock held by LLP,
8,031,800 shares of which are pledged to U.S. Clearing Corp. to secure
a margin loan to Mr. LeBow. Mr. LeBow is a director, officer and sole
shareholder of LeBow Holdings, Inc., a Nevada corporation ("LHI"), the
general partner of LLP. Mr. LeBow and family members serve as
directors and executive officers of the Foundation, and Mr. LeBow
possesses shared voting power and shared dispositive power with the
other directors of the Foundation with respect to the Foundation's
shares of Common Stock. The Foundation's principal business and office
address is 1221 Brickell Avenue, 21st Floor, Miami, Florida 33131.
(2) Based upon Amendment No. 6 to Schedule 13D dated April 15, 1998, filed
by the named individual.
(3) Based upon Schedule 13D dated March 26, 1998, filed by the named
entities. These shares are issuable upon exercise of currently
exercisable warrants to purchase Common Stock expiring March 3, 2003.
See Item 13, "Certain Relationships and Related Transactions".
(4) Based upon Amendment No. 1 to Schedule 13D dated October 7, 1998,
filed by the named entities. Riverdale LLC is the general partner of
High River Limited Partnership and is wholly owned by Mr. Icahn.
See Item 13, "Certain Relationships and Related Transactions".
(5) Based upon Schedule 13D dated December 8, 1998, filed by the named
entities. These shares are issuable upon exercise of currently
exercisable options to purchase Common Stock expiring March 31, 2003.
See Item 13, "Certain Relationships and Related Transactions."
(6) The named individual is a director of the Company.
(7) The named individual is an executive officer of the Company.
(8) Represents shares issuable upon exercise of currently exercisable
options to purchase Common Stock.
(9) The named individual is an executive officer of the Company's
subsidiary Liggett.
In addition, by virtue of his controlling interest in the Company, Mr.
LeBow may be deemed to own beneficially the securities of the Company's
subsidiaries, including BGLS and Liggett, and securities of 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 Mr.
LeBow is the beneficial owner of any securities of the Company's subsidiaries
or New Valley under Rule 13d-3 of 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.
All of the issued and outstanding voting securities of BGLS are held
by the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 20, 1998, the Company granted Howard M. Lorber, a consultant
who serves as a director and President of New Valley, non-qualified stock
options to purchase 500,000 shares of the Company's Common Stock at an exercise
price of $9.75 per share. The options, which have a ten-year term, vest and
become exercisable in six equal annual installments beginning on July 20, 1999.
Since before January 1, 1998, the consultant has received consulting fees of
$40,000 per month from the Company and a subsidiary. In April 1999, the
consultant received a consulting bonus of $500,000. In January 1998, the
consultant and the Company entered into an amendment to his consulting
agreement whereby he is entitled on an annual basis to receive additional
payments in an amount necessary to reimburse him, on an after-tax basis, for
all applicable taxes incurred by him during the prior calendar year as a result
of the grant to him, or vesting, of a 1994 award of 500,000 restricted shares
of the Company's Common Stock, and 1995 and 1996 awards of a total of 1,500,000
options
10
<PAGE> 11
to acquire shares of the Company's Common Stock. The consultant received an
additional consulting payment of $425,000 in January 1998, which the consultant
and the Company have agreed will constitute full satisfaction of the Company's
obligations under the amendment with respect to 1997.
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 between the entities. The Company was reimbursed approximately
$502,000 under this agreement for the year ended December 31, 1998.
In September 1998, New Valley made a one-year $950,000 loan to BGLS
which bears interest at 14%.
As of April 23, 1999, the Apollo Holders are the beneficial owners of
8.7% of the Company's Common Stock and affiliates. During 1998, the Apollo
Holders held $97,239,000 principal amount of the BGLS Notes. For information
concerning the Standstill Agreement with the Apollo Holders and the issuance of
warrants to purchase shares of the Company's Common Stock to the Apollo Holders
in connection with the Standstill Agreement, see Note 9 to the Company's
Consolidated Financial Statements. The Company, New Valley and their affiliates
have other business relationships with affiliates of the Apollo Holders. For
additional information concerning such business relationships, see Item 1,
"Business - New Valley Corporation - Western Realty Ducat", "- Western Realty
Repin" and "- New Valley Realty Division", as well as Note 3 to the Company's
Consolidated Financial Statements.
As of April 23, 1999, High River Limited Partnership ("High River") is
the beneficial owner of 7.5% of the Company's Common Stock and an affiliate,
Tortoise Corp., held $97,551,000 principal amount of the BGLS Notes. On January
16, 1998, the Company entered into a Stock Purchase Agreement in which High
River purchased 1,500,000 shares of the Company's Common Stock at $6.00 per
share for an aggregate purchase price of $9,000,000.
As of April 23, 1999, the law firm of Kasowitz, Benson, Torres &
Friedman LLP ("KBTF") is the beneficial owner of 5.6% of the Company's Common
Stock. On March 12, 1998, the Company entered into a Stock Option Agreement
with KBTF whereby KBTF was granted an option to purchase 1,250,000 shares of
Common Stock at $17.50 per share. The option was exercisable for 250,000 shares
commencing May 1, 1998 and for 1,000,000 shares commencing April 1, 1999, and
expired on March 31, 2003. On October 12, 1998, the Company entered into an
Amended and Restated Stock Option Agreement (the "Amended Agreement") with the
KBTF. Pursuant to the Amended Agreement, the Company amended the option to
reduce the exercise price from $17.50 per share to $6.00 per share and extended
the initial exercise date on all 1,250,000 share to April 1, 2000. The option
was subject to earlier exercise upon Change of Control (as defined) of the
Company or upon the average closing price for a share Common Stock equaling
$17.50 or more for a 10 trading day period. Based on the average closing price
of Common Stock for the 10 trading day period ended December 8, 1998, the
option became exercisable in full on that date. KBTF, which represents the
Company and various of its subsidiaries, including Liggett and New Valley,
received legal fees of $4,550,000 during 1998.
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 - New Valley - Investment in RJR Nabisco" and
Notes 3 and 17 to the Company's Consolidated Financial Statements.
See, also, Item 11, "Executive Compensation - Compensation Committee
Interlocks and Insider Participation".
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunto duly authorized.
BROOKE GROUP LTD.
(REGISTRANT)
By: /s/ Joselynn D. Van Siclen
------------------------------
Joselynn D. Van Siclen
Vice President and
Chief Financial Officer
Date: April 26, 1999
BGLS INC.
(REGISTRANT)
By: /s/ Joselynn D. Van Siclen
------------------------------
Joselynn D. Van Siclen
Vice President and
Chief Financial Officer
Date: April 26, 1999
12
