<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 MAY 24, 2000
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 Wednesday, May 24, 2000 at 2:00 p.m.
local time, and at any postponement or adjournment thereof, for the following
purposes:
1. To elect four directors to hold office until the next annual
meeting of stockholders and until their successors are elected and
qualified.
2. To approve a proposed Brooke Group Ltd. 1999 Long-Term Incentive
Plan.
3. To amend the Company's Certificate of Incorporation to change the
corporate name to Vector Group Ltd.
4. 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 of the Company at the close of
business on April 17, 2000 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 12, 2000
to May 24, 2000, at the headquarters of the Company located at 100 S.E. Second
Street, 32nd Floor, Miami, Florida 33131. A proxy statement, form of proxy and
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999 are enclosed herewith.
By Order of the Board of Directors,
/s/ Bennett S. LeBow
-----------------------------------
Bennett S. LeBow
Chairman of the Board of Directors
Miami, Florida
April 18, 2000
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 of
Brooke Group Ltd., a Delaware corporation (the "Company"). The proxy is
solicited for use at the annual meeting of stockholders to be held at The Hyatt
Regency Miami, 400 S.E. Second Avenue, Miami, Florida 33131 on Wednesday, May
24, 2000, at 2:00 p.m. local time, and at any postponement or adjournment. 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 of the Company at the close of
business on April 17, 2000 is entitled to notice of the meeting and any
adjournments or postponements 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 21,989,782 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 for the fiscal year ended December 31, 1999 are first being
mailed to stockholders is on or about April 20, 2000.
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 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, FOR the approval of the Brooke Group Ltd. 1999 Long-Term
Incentive Plan and FOR the amendment to the Company's certificate of
incorporation to change the corporate name to Vector Group Ltd. The nominees
receiving a plurality of the votes cast will be elected as directors. The
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock will be required to approve the amendment to the Company's
certificate of incorporation. The affirmative vote of the majority of votes
present and entitled to vote on the matter at the meeting will be necessary for
approval of any other matters to be considered at the annual meeting. With
respect to the election of directors, shares as to which authority is withheld
and broker shares that are not voted will not be included in determining the
number of votes cast. With respect to other matters, abstentions and broker
shares that are not voted are not treated as present and entitled to vote on the
matter.
1
<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:
- each person known to the Company to own beneficially more than five
percent of the Common Stock;
- each of the Company's directors and nominees;
- each of the Company's named executive officers (as such term is defined
in the Summary Compensation Table below); and
- 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>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES CLASS
- ------------------------------------ ---------- ----------
<S> <C> <C>
Bennett S. LeBow(1)(6)(7)................................ 10,008,703 44.2%
AIF II, L.P. and Lion Advisors, L.P.(2).................. 4,357,500 16.5%
Two Manhattanville Road
Purchase, NY 10577
Richard S. Ressler(3).................................... 1,916,248 8.7%
Orchard Capital Corporation
10960 Wilshire Boulevard
Los Angeles, CA 90024
High River Limited Partnership(4)........................ 1,652,805 7.5%
Riverdale LLC
Carl C. Icahn
100 South Bedford Road
Mt. Kisco, NY 10549
Kasowitz, Benson, Torres & Friedman LLP(5)............... 1,312,500 5.6%
1301 Avenue of the Americas
New York, NY 10019
Robert J. Eide(6)........................................ 21,000 (*)
Aegis Capital Corp.
70 East Sunrise Highway
Valley Stream, NY 11581
Jeffrey S. Podell(6)..................................... 21,000 (*)
182 Gannet Court
Manhasset, NY 11030
Jean E. Sharpe(6)........................................ 10,500 (*)
462 Haines Road
Mt. Kisco, NY 10549
Richard J. Lampen(7)..................................... 91,034(8) (*)
Marc N. Bell(7).......................................... 35,000(8) (*)
Joselynn D. Van Siclen(7)................................ 10,500(8) (*)
Ronald S. Fulford(9)..................................... -- --
Liggett Group Inc.
700 West Main Street
Durham, NC 27702
All directors and executive officers as a group
(8 persons)............................................. 10,197,737 44.8%
</TABLE>
2
<PAGE> 5
- ---------------
(*) The percentage of shares beneficially owned does not exceed 1% of the Common
Stock.
(1) Includes 1,226,408 shares of the Company's Common Stock held by LeBow
Limited Partnership, a Delaware limited partnership, 7,560,000 shares held
by LeBow Gamma Limited Partnership, a Nevada limited partnership, 566,045
shares held by The Bennett and Geraldine LeBow Foundation, Inc., a Florida
not-for-profit corporation, and 656,250 shares acquirable by LeBow Epsilon
1999 Limited Partnership, a Delaware limited partnership, as assignee of Mr.
LeBow, upon exercise of currently exercisable options to purchase Common
Stock. Mr. LeBow indirectly exercises sole voting power and sole dispositive
power over the shares of Common Stock held or acquirable by the
partnerships. Of the shares held by LeBow Limited Partnership, 873,390
shares are pledged to US Clearing Corp. to secure a margin loan to Mr.
LeBow. LeBow Holdings, Inc., a Nevada corporation, is the general partner of
LeBow Limited Partnership and is the sole stockholder of LeBow Gamma Inc., a
Nevada corporation, which is the general partner of LeBow Gamma Limited
Partnership. LeBow Epsilon 1999 LLC, a Delaware limited liability company,
is the general partner of LeBow Epsilon 1999 Limited Partnership. Mr. LeBow
is a director, officer and sole shareholder of LeBow Holdings Inc., a
director and officer of LeBow Gamma Inc. and the sole member and manager of
LeBow Epsilon 1999 LLC. 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.
(2) Based upon Amendment No. 1 to Schedule 13D dated September 30, 1999, filed
by the named entities. These shares are issuable upon exercise of warrants
to purchase Common Stock expiring March 3, 2003 which are currently
exercisable or exercisable within 60 days of the record date.
(3) Based upon Amendment No. 6 to Schedule 13D dated April 15, 1998, filed by
the named individual.
(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.
(5) Based upon Schedule 13D dated December 8, 1998, filed by the named entity.
These shares are issuable upon exercise of currently exercisable options to
purchase Common Stock expiring March 31, 2003.
(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 Group Inc.
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 Inc., Liggett and New Valley Corporation. The
disclosure of this information should not be construed as an admission that Mr.
LeBow is the beneficial owner of any securities of the Company's subsidiaries
under Rule 13d-3 of the Securities Exchange Act of 1934 or for any other
purpose, and 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.
3
<PAGE> 6
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 four. The present term of office of all
directors will expire at the annual meeting. Four directors are to be elected at
the annual meeting to serve until the next annual meeting of stockholders and
until their respective 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.
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....................... 62 Chairman of the Board, President
Brooke Group Ltd. and Chief Executive Officer
100 S.E. Second Street
Miami, FL 33131
Robert J. Eide......................... 47 Chairman and Treasurer, Aegis
Aegis Capital Corp. Capital Corp.
70 E. Sunrise Highway
Valley Stream, NY 11581
Jeffrey S. Podell...................... 59 Chairman of the Board and
182 Gannet Court President, Newsote, Inc.
Manhasset, NY 11030
Jean E. Sharpe......................... 53 Private Investor
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 NOMINEES
BENNETT S. LEBOW 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. Mr. LeBow has been a director
of Liggett, a subsidiary of the Company engaged in the manufacture and sale of
cigarettes in the United States, since June 1990. Mr. LeBow has been Chairman of
the Board of New Valley, a majority-owned subsidiary of the Company principally
engaged in the investment banking and brokerage business, the real estate
business in Russia, and investment in Internet-related businesses, since January
1988 and Chief Executive Officer since November 1994.
ROBERT J. EIDE has been a director of the Company and BGLS since November
1993. Mr. Eide has been the 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., a restaurant chain.
4
<PAGE> 7
JEFFREY S. PODELL has been a director of the Company and BGLS since
November 1993. Mr. Podell has been 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 and BGLS 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.
BOARD OF DIRECTORS AND COMMITTEES
During 1999, the board held six meetings. During 1999, the executive
committee (currently composed of Messrs. Eide and LeBow) did not meet, while the
compensation committee (currently composed of Messrs. Eide and Podell) met three
times and the audit committee (currently composed of Messrs. Eide and Podell and
Ms. Sharpe) met once. Each director attended at least 75% of the aggregate
number of meetings of the board and of each committee of which he was a member
held during such period. The Company does not have a nominating committee.
The executive committee exercises, in the intervals between meetings of the
board, all the powers of the board 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 with respect to these matters.
The compensation committee reviews, approves and administers management
compensation and executive compensation plans. The compensation committee also
administers the Company's 1998 and 1999 Long-Term Incentive Plans.
5
<PAGE> 8
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, 1999, 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 $100,000 (collectively, the "named
executive officers"):
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION($)
ANNUAL 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................ 1999 3,739,501(2) 1,043,700(3) 56,946(4) 1,500,000 477,000(5)
Chairman of the Board, 1998 3,391,601(2) 834,960(3) -- 2,625,000 25,192(5)
President and Chief 1997 3,113,281(2) 667,969(3) -- --
Executive Officer
Richard J. Lampen(6)............ 1999 750,000 -- -- 100,000
Executive Vice President 1998 750,000 750,000 -- --
1997 650,000 -- -- 273,000
Marc N. Bell(7)................. 1999 300,000 -- -- 50,000
Vice President, General 1998 300,000 300,000 -- --
Counsel and Secretary
Joselynn D. Van Siclen.......... 1999 155,000 -- -- 15,000
Vice President, Chief 1998 155,000 155,000 -- 31,500
Financial Officer and 1997 140,000 -- -- --
Treasurer
Ronald S. Fulford............... 1999 650,000 -- 83,803(8) 250,000
Chairman of the Board, 1998 425,000 425,000 83,112(8) --
President and Chief 1997 425,000 -- 247,961(8)(9) --
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 SEC
rules.
(2) Includes salary paid by New Valley of $2,000,000 per year.
(3) Includes payments equal to 10% of Mr. LeBow's base salary from the Company
($173,950 in 1999, $139,160 in 1998 and $111,328 in 1997) in lieu of certain
other executive benefits.
(4) Represents an allowance paid by New Valley to an entity affiliated with Mr.
LeBow for lodging and related business expenses.
(5) Represents premiums paid 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.
(6) The table reflects 100% of Mr. Lampen's salary and bonus, all of which are
paid by New Valley, and includes a bonus of $500,000 awarded by the Company
for 1998. Of Mr. Lampen's salary and bonus from New Valley, 25% (or $187,500
in 1999, $250,000 in 1998 and $162,500 in 1997), and all of the 1998 bonus
from the Company, have been reimbursed to New Valley by the Company.
(7) 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. Of Mr. Bell's salary and bonus from the
Company, $150,000 in 1999 and $200,000 in 1998 have been reimbursed to the
Company by New Valley.
(8) Represents an automobile allowance, living allowance and group term life
insurance provided to Mr. Fulford.
(9) Includes payment of $163,155 made in 1997 pursuant to a consulting agreement
between Mr. Fulford and the Company reimbursed to the Company by New Valley.
6
<PAGE> 9
The following table sets forth all grants of stock options to the named
executive officers during 1999.
STOCK OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT
OPTIONS EMPLOYEES IN PRICE EXPIRATION DATE PRESENT
NAME GRANTED(#) 1999 ($/SHARE) DATE VALUE($)(3)
- ---- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Bennett S. LeBow.................................... 1,500,000(1) 47.9% $15 7/16 11/4/09 $18,585,000
Richard J. Lampen................................... 100,000(1) 3.2% $15 7/16 11/4/09 $ 1,239,000
Marc N. Bell........................................ 50,000(1) 1.6% $15 7/16 11/4/09 $ 619,500
Joselynn D. Van Siclen.............................. 15,000(1) 0.5% $15 7/16 11/4/09 $ 185,850
Ronald S. Fulford................................... 250,000(2) 7.0% $18 11/24/09 $ 1,882,500
</TABLE>
- ---------------
(1) Represents options to purchase shares of Common Stock granted at fair market
value on November 4, 1999, subject to stockholder approval of the 1999
Long-Term Incentive Plan at the annual meeting. Common Stock dividend
equivalents will be paid currently with respect to each share underlying the
unexercised portion of the options. Subject to earlier vesting upon a change
of control, death or disability, the options vest and become exercisable on
November 4, 2003.
(2) Represents options to purchase shares of Common Stock granted at fair market
value on November 24, 1999. Subject to earlier vesting upon death or
disability, the options vest and become exercisable as to 25% of the shares
on December 31, 2001 and as to an additional 37.5% of the shares on each of
December 31, 2002 and December 31, 2003.
(3) The estimated present value at grant date of options granted during 1999 has
been calculated using the Black-Scholes option pricing model, based upon the
following assumptions: volatility of 68.27% for Mr. Fulford and 69.67% for
the other optionees, a risk-free rate of 6.08% for Mr. Fulford and 5.96% for
the other optionees, an expected life of 10 years, a dividend rate of 5.56%
for Mr. Fulford and 0% for the other optionees, and no 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 unexercised
options held by the named executive officers as of December 31, 1999. There were
no stock options exercised by any of the named executive officers during 1999.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT DECEMBER 31, 1999 OPTIONS AT DECEMBER 31, 1999*
---------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Bennett S. LeBow........................... 656,250 3,468,750 $3,706,172 $11,118,516
Richard J. Lampen.......................... 45,534 282,000 $ 463,422 $ 1,852,305
Marc N. Bell............................... 17,500 102,501 $ 178,106 $ 534,329
Joselynn D. Van Siclen..................... 5,250 36,000 $ 53,432 $ 213,728
Ronald S. Fulford.......................... -0- 250,000 -- --
</TABLE>
- ---------------
* Calculated using the closing price of $14 15/16 per share on December 31, 1999
less the option exercise price.
COMPENSATION OF DIRECTORS
Outside directors of the Company receive $7,000 per annum as compensation
for serving as 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
7
<PAGE> 10
BGLS receives $28,000 per annum as compensation for serving as 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 director is
reimbursed for reasonable out-of-pocket expenses incurred in serving on the
board of the Company and/or BGLS. The Company also makes available health and
dental insurance coverage to its directors.
On December 10, 1999, each outside director of the Company was granted an
option to purchase 10,000 shares of Common Stock at $16.75 per share, the fair
market value on the date of grant. Subject to earlier vesting upon a change of
control, the options vest and become exercisable in three equal annual
installments commencing on January 1, 2001.
EMPLOYMENT AGREEMENTS
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, 2000, Mr. LeBow's annual base salary from the Company was
$1,527,282. He is also entitled to an annual bonus for 1999 of $763,641 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, 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
or in connection with similar events, he would receive a lump sum payment equal
to 2.99 times his then current base salary and bonus. Under the terms of the
Indenture governing BGLS' senior secured notes, Mr. LeBow's salary and bonus may
not be increased from one year to the next by more than 10% per annum. However,
his salary and bonus may be increased in the same percentage amount as any
increase in the price of the Common Stock during a calendar year up 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).
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 had an
initial term of three years effective as of January 18, 1995, 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 60-day period before such
anniversary date. As of January 1, 1999, Mr. LeBow's annual base salary from New
Valley was $2,000,000. Following termination of his employment without cause, 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, he would receive a lump sum payment equal to 2.99 times his then
current base salary.
Richard J. Lampen is a party to an employment agreement with New Valley
dated September 22, 1995. The agreement had 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 90-day period prior to the termination date. As of January 1, 2000,
his annual base salary was $750,000. In addition, the New Valley board of
directors may award an annual bonus to Mr. Lampen in its sole discretion. The
New Valley Board may increase but not decrease Mr. Lampen's base salary from
time to time in its sole discretion. Following termination of his employment
without cause, Mr. Lampen would 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.
Marc N. Bell is a party to an employment agreement with the Company dated
April 15, 1994. The agreement had 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 60-day
period prior to the termination date. As of January 1, 2000, his annual base
salary was $300,000. In addition, the board of directors may award an annual
bonus to Mr. Bell in its sole discretion. The board may increase but
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<PAGE> 11
not decrease Mr. Bell's base salary from time to time in its sole discretion.
Following termination of his employment without cause, Mr. Bell would 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.
Joselynn D. Van Siclen is a party to an employment agreement with the
Company dated August 1, 1999. The agreement has an initial term of one year from
August 1, 1999 with automatic renewals after the initial term for additional
one-year terms unless notice of non-renewal is given by either party within the
90- day period prior to the termination date. As of January 1, 2000, her annual
base salary was $155,000. In addition, the board of directors may award an
annual bonus to Ms. Van Siclen in its sole discretion. The board may increase
but not decrease Ms. Van Siclen's base salary from time to time in its sole
discretion. Following termination of her employment without cause, Ms. Van
Siclen would receive severance pay in a lump sum equal to the amount of her base
salary she would have received if she was employed for one year after
termination of her employment term.
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, 2000, Mr. Fulford's annual salary was
$650,000. Bonus payments are at the sole discretion of the board of Liggett. As
of March 1, 1996, Mr. Fulford agreed with the Company to provide various
services in connection with the Company's investment in RJR Nabisco Holdings
Corp., including 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 UKL33,417 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 UKL14,400 or approximately $23,000 per annum which resulted from
his terminating his employment with Imperial Tobacco to enter into the
agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, Messrs. Eide, LeBow and Podell were members of the Company's
compensation committee. Messrs. Eide and Podell serve as directors of BGLS. Mr.
Eide is a stockholder, and serves as the Chairman and Treasurer of Aegis Capital
Corp., a registered broker-dealer, that has performed services for New Valley
since before January 1, 1998. During 1999, Aegis received commissions and other
income in the aggregate amount of approximately $59,000 from New Valley. Aegis,
in the ordinary course of its business in 1999, 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 and BGLS. 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 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
9
<PAGE> 12
maximum years of credited service is 35. If an employee was 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 plan also provides
benefits to disabled participants and to surviving spouses of participants who
die before 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 was
frozen.
As of December 31, 1999, none of the named executive officers was eligible
to receive any benefits under the retirement plan.
Under some circumstances, the amount of retirement benefits payable under
the retirement plan to some employees may be limited by the federal tax laws.
Any 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.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation arrangements for the Company's executive officers are usually
negotiated on an individual basis between Mr. LeBow 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.
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 Mr. LeBow was negotiated and approved by the
independent members of the Board in February 1992. The compensation of Mr. LeBow
is set forth in an employment agreement between Mr. LeBow and the Company and is
restricted by the BGLS notes indenture. See "Employment Agreements", above. In
1999, Mr. LeBow was granted stock options, subject to stockholder approval of
the 1999 plan at the annual meeting. See "Approval of Brooke Group Ltd. 1999
Long-Term Incentive Plan -- 1999 Stock Option Grants Under the Plan".
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.
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:
- the compensation is payable solely on account of the attainment of
performance goals;
- the performance goals are determined by a compensation committee of two
or more outside directors;
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<PAGE> 13
- the material terms under which compensation is to be paid are disclosed
to and approved by the stockholders of the Company; and
- the compensation committee certifies that the performance goals were met.
The Company believes that the limitation on deductibility does not apply to
compensation expense relating to the stock options granted to Mr. LeBow and the
other named executive officers, other than any compensation expense for dividend
equivalent payments made on the 1999 option grants. This limitation is
applicable to the cash compensation paid by the Company to Mr. LeBow and the
other named executives officers in 1999. 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.
The foregoing information is provided by the compensation committee of the
Company.
Robert J. Eide
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, 1999. The graph assumes that $100
was invested on December 31, 1994 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 the value of the February 13, 1995 distribution to the
Company's stockholders of MAI Systems Corp. common stock, assuming the stock was
held until December 31, 1999.
<TABLE>
<CAPTION>
BROOKE GROUP LTD. S&P 500 S&P MIDCAP S&P TOBACCO
----------------- ------- ---------- -----------
<S> <C> <C> <C> <C>
12/94 100 100 100 100
12/95 288 137 130 155
12/96 179 168 156 196
12/97 283 224 205 243
12/98 801 287 244 293
12/99 531 347 280 144
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1999, the Company granted Howard M. Lorber, a consultant to the
Company and Liggett, who also serves as a director and President of New Valley,
non-qualified stock options to purchase 500,000
11
<PAGE> 14
shares of the Company's Common Stock at an exercise price of $15 7/16 per share.
The grant is subject to stockholder approval of the 1999 Long-Term Incentive
Plan at the annual meeting. These options, which have a ten-year term, vest and
become exercisable on the fourth anniversary of the date of grant. Since January
1, 1999, Mr. Lorber has received consulting fees of $40,000 per month from the
Company and Liggett. In April 1999, Mr. Lorber received a consulting bonus of
$500,000. In January 1998, Mr. Lorber 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 525,000
restricted shares of the Company's Common Stock and 1995 and 1996 awards of a
total of 1,575,000 non-qualified stock options to purchase shares of the
Company's Common Stock. Under the terms of the 1995, 1996 and 1999 option
awards, Common Stock dividend equivalents are paid on each option share.
In 1995, the Company and New Valley entered into an expense sharing
agreement pursuant to which lease, legal and administrative expenses are
allocated to the entity incurring the expense. The Company was reimbursed
$307,000 in 1999 under this agreement.
In September 1998, New Valley made a one-year $950,000 loan to BGLS bearing
interest at 14% per annum which has been repaid in full.
As of the record date, AIF II, L.P. and an affiliated investment manager,
Lion Advisors, L.P., on behalf of a managed account, were the beneficial owners
of 16.5% of the Common Stock. Until February 1999, these holders held $97.2
million principal amount of the BGLS notes. On March 2, 1998, the Company
entered into an agreement under which these holders (and their transferees)
agreed to defer the payment of interest on the BGLS notes held by them,
commencing with the interest payment that was due July 31, 1997, which they had
previously agreed to defer, through the interest payment due July 31, 2000. The
deferred interest payments will be payable at final maturity of the BGLS notes
on January 31, 2001 or upon an event of default under the Indenture for the BGLS
notes. In connection with the agreement, the Company issued to these holders a
five-year warrant to purchase 2,100,000 shares of Common Stock at a price of
$4.76 per share. The holders were also issued a second warrant expiring October
31, 2004 to purchase an additional 2,257,500 shares of the Common Stock at a
price of $0.095 per share. The second warrant became exercisable on October 31,
1999.
In February 1998, New Valley and Apollo Real Estate Investment Fund III,
L.P., an affiliate of AIF II, L.P. and Lion Advisors, L.P., organized Western
Realty Development LLC to make real estate and other investments in Russia. New
Valley agreed, among other things, to contribute to Western Realty Development
the real estate assets of BrookeMil Ltd., and Apollo agreed to contribute $65
million. Western Realty Development has made a $30 million participating loan to
Western Tobacco Investments LLC, which holds Brooke (Overseas) Ltd.'s interest
in Liggett-Ducat Ltd. The loan is payable out of a 30% profits interest in the
entity.
As of the record date, High River Limited Partnership was the beneficial
owner of 7.5% of the Common Stock. Until May 1999, an affiliate of High River,
Tortoise Corp., held $97.6 million principal amount of the BGLS notes. On May
25, 1999, BGLS repurchased the notes for 99% of the principal amount plus
accrued interest.
As of the record date, the law firm of Kasowitz, Benson, Torres & Friedman
LLP was the beneficial owner of 5.6% of the Common Stock. The firm which
represents the Company and various of its subsidiaries, including Liggett and
New Valley, received legal fees of approximately $3.3 million during 1999.
See also "Compensation Committee Interlocks and Insider Participation."
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<PAGE> 15
APPROVAL OF BROOKE GROUP LTD. 1999 LONG-TERM INCENTIVE PLAN
The board has approved and the Company has adopted, subject to stockholder
approval, the Brooke Group Ltd. 1999 Long-Term Incentive Plan. A general
description of the basic features of the plan is set forth below. This
description is qualified in its entirety by reference to the full text of the
plan which is appended in full to this proxy statement.
PURPOSE
The purpose of the plan is to promote the interests of the Company, its
subsidiaries and its stockholders by enabling the Company to attract, retain and
motivate officers, employees and consultants and to align the interests of those
individuals and the Company's stockholders. To do this, the plan offers
equity-based opportunities to provide such persons with a proprietary interest
in maximizing the growth, profitability and overall success of the Company and
its subsidiaries.
NUMBER OF SHARES
The maximum number of shares of Common Stock as to which awards may be
granted will not exceed 5,000,000 shares. During any calendar year, no
individual may be granted stock options under the plan to acquire more than
1,500,000 shares of Common Stock. In addition, during the term of the plan, each
individual participant may not receive awards of stock options, stock
appreciation rights and/or restricted shares in excess of 2,500,000 shares.
These limits are subject to proportional adjustment to reflect stock changes,
such as stock dividends and stock splits.
If any awards expire or terminate unexercised, the shares of Common Stock
allocable to the unexercised or terminated portion will again be available for
awards under the plan, subject to limitations.
ADMINISTRATION
The administration, interpretation and operation of the plan will be vested
in a committee of the Board. Members of the committee will serve at the pleasure
of the board, which may at any time remove or add members to it. No member of
the committee will be eligible to receive an award under the plan. The day-to-
day administration of the plan may be carried out by officers and employees of
the Company designated by the committee. The board has designated its
compensation committee to administer the plan.
ELIGIBILITY
All officers, employees and consultants of the Company and its subsidiaries
are eligible to receive awards under the plan. Awards under the plan will be
made by the committee. Awards will be made pursuant to individual award
agreements between the Company and each participant.
AWARDS UNDER THE PLAN
Introduction. Awards under the plan may consist of stock options, stock
appreciation rights or restricted shares, each of which is described below. All
awards will be evidenced by an agreement approved by the committee. In the
discretion of the committee, an eligible employee may receive awards from one or
more of the categories described below, and more than one award may be granted
to an eligible employee. In the event of any change in the outstanding shares of
Common Stock of the Company by reason of certain stock changes, including
without limitation stock dividends and stock splits, the terms of awards and
number of shares of any outstanding award may be equitably adjusted by the board
in its sole discretion. Except as set forth below under "1999 Stock Option
Grants Under the Plan," no determination has been made as to future awards which
may be granted under the plan, although it is anticipated that future recipients
of awards may include current executive officers of the Company and its
subsidiaries.
Stock Options and Stock Appreciation Rights. A stock option is an award
that entitles a participant to purchase shares of Common Stock at a price fixed
at the time the option is granted. Stock options granted under the plan may be
in the form of incentive stock options which qualify for special tax treatment
or non-
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<PAGE> 16
qualified stock options, and may be granted alone or in addition to other awards
under the plan, or in tandem with stock appreciation rights ("SARs").
SARs entitle a participant to receive, upon exercise, cash, restricted
shares or unrestricted shares of Common Stock, or any combination thereof, as
provided in the relevant award agreement, with a value equal to the difference
between
- the fair market value on the exercise date of the shares with respect to
which an SAR is exercised and
- the fair market value on the date the SAR was granted,
multiplied by the number of shares of Common Stock for which the SAR has been
exercised.
No SAR may be exercised until six months after its grant or prior to the
exercisability of the stock option with which it is granted in tandem, whichever
is later.
The exercise price and other terms and conditions of options will be
determined by the committee at the time of grant, and in the case of incentive
stock options, the exercise price will not be less than 100 percent of the fair
market value of the Common Stock on the date of the grant. No term of any
incentive stock options may exceed ten years after grant. An option or SAR grant
under the plan does not provide an optionee any rights as a shareholder. These
rights will accrue only as to shares actually purchased through the exercise of
an option or the settlement of an SAR.
An option or SAR grant under the plan may, if determined by the committee,
include the payment of dividend equivalents. Under such an award, the
participant would receive a payment equal to the amount of any dividend or other
distribution that would have been paid on the shares covered by the award had
the covered shares been issued and outstanding on the dividend record date.
Exercise of an option or an SAR will result in the cancellation of the
related option or SAR to the extent of the number of shares in respect of which
such option or SAR has been exercised. Unless otherwise determined by the
committee or provided in the relevant award agreement, stock options shall
become exercisable over a three-year period from the date of grant with 33 1/3%
vesting on each anniversary of the grant in that time period.
Payment for shares issuable on exercise of an option may be made either in
cash or, if permitted by the committee, by tendering a fully-secured promissory
note or shares of Common Stock owned by a participant for at least six months
with a fair market value at the date of exercise equal to the portion of the
exercise price not paid in cash. The committee may also allow participants to
simultaneously exercise stock options and sell the acquired shares of Common
Stock under a "cashless exercise" arrangement.
Restricted Share Awards. Restricted share awards are grants of Common
Stock made to a participant subject to conditions established by the committee
in the relevant award agreement. The restricted shares become unrestricted only
in accordance with the conditions and vesting schedule, if any, provided in the
relevant award agreement, but in no event may restricted shares vest before six
months after the date of grant. A participant may not sell or otherwise dispose
of restricted stock until the conditions imposed by the committee have been
satisfied. Restricted share awards under the plan may be granted alone or in
addition to other awards under the plan. Restricted shares that vest will be
reissued as unrestricted Common Stock.
Each participant who receives a grant of restricted shares will have the
right to receive all dividends and vote or execute proxies for such shares. Any
stock dividends will be treated as additional restricted shares.
FORFEITURE UPON TERMINATION
Unless otherwise provided in the relevant award agreement or in a
participant's then-effective employment agreement, if a participant's employment
is terminated for any reason, any unexercisable option or SAR will be forfeited
and canceled by the Company. The participant's right to exercise any
then-exercisable option or SAR will terminate 90 days after the date of
termination, but not beyond the stated term of the stock option or SAR. However,
the committee may, to the extent options and/or SARs were exercisable on the
date of termination, extend these periods, but not beyond the stated term of
such option and/or SAR. If a participant
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<PAGE> 17
dies, becomes totally disabled or retires, he or she or his or her estate or
other legal representative, to the extent these options or SARs are exercisable
immediately before the date of death, total disability or retirement, will be
entitled to exercise any stock options or SARs for one year, but not beyond the
stated term of the option or SAR.
If a participant's employment is terminated for any reason other than
death, total disability or retirement before satisfaction and/or lapse of the
restrictions, terms and conditions, applicable to any grant of restricted
shares, such restricted shares will be immediately forfeited. However, the
committee may, in its sole discretion, determine within 90 days after
termination that all or a portion of the restricted shares should not be
forfeited. In the case of death, total disability or retirement, the participant
or his or her estate or other legal representatives will become 100% vested in
any restricted shares as of the date of termination.
AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The board of directors may suspend or terminate the plan at any time and
may amend the plan at any time as it deems advisable to insure that awards
conform to or otherwise reflect changes in applicable law or regulations, or
otherwise as it may deem in the best interests of the Company or any subsidiary.
No amendment, suspension or termination by the board of directors shall
materially adversely affect the rights of any award, without the consent of the
grantee, or make any change that would disqualify the plan from the benefits or
entitlements to deductions provided under Sections 422 and 162(m) of the
Internal Revenue Code.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
Incentive Stock Options. Stock options granted under the plan may be
incentive stock options (within the meaning of Section 422 of the Code) or
non-qualified stock options. Upon the grant of an incentive stock option, the
optionee will not recognize any income. No income is recognized by the optionee
upon the exercise of an incentive stock option if the holding period
requirements contained in the plan and in the Code are met. These include the
requirement that the optionee remain an employee of the Company or a subsidiary
during the period beginning with the date of the grant and ending on the day
three months (one year if the optionee becomes disabled) before the date the
option is exercised. The optionee must increase his or her alternative minimum
taxable income for the taxable year in which he or she exercised the incentive
stock option by the amount that would have been ordinary income had the option
not been an incentive stock option.
Upon the subsequent disposition of shares acquired upon the exercise of an
incentive stock option, the federal income tax consequences will depend upon
when the disposition occurs and the type of disposition. If the shares are
disposed of after the second anniversary of the date of grant of the option and
after the end of the one-year period beginning on the day after the shares are
issued to the optionee, any gain or loss realized upon the disposition will be
long-term capital gain or loss, and the Company will not be entitled to any
income tax deduction in respect of the option or its exercise. For purposes of
determining the amount of the gain or loss, the optionee's tax basis in the
shares will be the option price.
Generally, if the shares are disposed of within these periods, the excess
of the amount realized up to the fair market value of the shares on the exercise
date over the option price will be compensation taxable to the optionee as
ordinary income. In this case, the Company will be entitled to a deduction,
subject to the provisions of Section 162(m) of the Code discussed below under
the caption "Limits on Deductions", equal to the amount of ordinary income
realized by the optionee.
If an optionee has not remained an employee of the Company during the
period beginning with the grant of an incentive stock option and ending on the
day three months (one year if the optionee becomes disabled) before the date the
option is exercised, the exercise of the option will be treated as the exercise
of a non-qualified stock option with the tax consequences described below.
Non-Qualified Stock Options. Upon the grant of a non-qualified stock
option, an optionee will not recognize any income. At the time a nonqualified
option is exercised, the optionee will recognize compensation taxable as
ordinary income, and the Company will be entitled to a deduction, subject to the
provisions of Section 162(m) of the Code discussed below under the caption
"Limits on Deductions", in an amount equal
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<PAGE> 18
to the difference between the fair market value on the exercise date of the
shares acquired and the option price. Upon a subsequent disposition of the
shares, the optionee will recognize long-or short-term capital gain or loss,
depending upon the holding period of the shares. For purposes of determining the
amount of the gain or loss, the optionee's tax basis in the shares will be the
fair market value of the shares on the exercise date.
If an optionee elects to tender shares of Common Stock in partial or full
payment of the option price for shares to be acquired through the exercise of an
option, generally the optionee will not recognize any gain or loss on such
tendered shares. However, if the shares tendered were previously acquired upon
exercise of an incentive stock option, and exercise occurs within two years
after the date of grant of the option or one year after the tendered shares were
acquired, the tender will be a taxable disposition with the tax consequences
described above under the caption "Incentive Stock Options" for taxable
dispositions within two years after the date of grant of the option or within
one year after shares are acquired upon the exercise of an incentive stock
option.
If the optionee tenders shares upon an exercise of an option that would
result in the receipt of compensation by the optionee, the optionee will
recognize compensation taxable as ordinary income. In this case, the Company
will be entitled to a deduction, subject to the provisions of Section 162(m) of
the Code discussed below under the caption "Limits on Deductions", in an amount
equal only to the fair market value of the number of shares received by the
optionee upon exercise in excess of the number of tendered shares, less any cash
paid by the optionee.
Stock Appreciation Rights. Generally, upon the grant of a stock
appreciation right, an optionee will not realize any income. At the time a stock
appreciation right is exercised, an optionee will realize compensation taxable
as ordinary income, and the Company will be entitled to a deduction, in an
amount equal to any cash received before applicable withholding plus the fair
market value on the exercise date of any shares of Common Stock received. The
optionee's tax basis in shares received upon the exercise of a stock
appreciation right will be the fair market value of such shares on the exercise
date and the holding period of such shares for capital gain purposes will begin
on such date.
Restricted Stock. An employee will not realize any income upon an award of
restricted stock. At the time the terms and conditions applicable to a share of
restricted stock are satisfied, an employee will realize compensation taxable as
ordinary income, and the Company will be entitled to a deduction, equal to the
then fair market value of the shares of unrestricted Common Stock received by
the employee. The employee's tax basis for any such shares of Common Stock would
be their fair market value on the date such terms and conditions are satisfied.
An employee who receives an award of shares of restricted stock may
irrevocably elect under Section 83(b) of the Code to report compensation taxable
as ordinary income, and the Company will be entitled to a corresponding
deduction, in an amount equal to the fair market value of the shares determined
without regard to any restrictions on the date of the transfer of the shares to
the employee upon such award. This election must be made by the employee not
later than 30 days after the date of such award. If an election is made, no
income would be recognized by the employee and the Company will not be entitled
to a corresponding deduction at the time the applicable terms and conditions are
satisfied. The employee's tax basis for the shares of restricted stock received
would be the fair market value of the restricted stock determined without regard
to any restrictions thereon on the date of the award. If an employee makes this
election and subsequently all or part of the award is forfeited, the employee
will not be entitled to a deduction as a result of the forfeiture.
Limits on Deductions. Under Section 162(m) of the Code, the amount of
compensation paid to the chief executive officer and the four other most highly
paid executive officers of the Company in the year for which a deduction is
claimed by the Company (including its subsidiaries) is limited to $1,000,000 per
person in any year. However, compensation which is performance-based will be
excluded for purposes of calculating the amount of compensation subject to this
limitation. The ability of the Company to claim a deduction for compensation
paid to any other executive officer or employee is not affected by this
provision.
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The Company has structured the plan so that compensation for which the
Company may claim a deduction in connection with the exercise of non-qualified
stock options and related SARs and the disposition by an optionee of shares
acquired upon the exercise of incentive stock options may be performance-based
within the meaning of Section 162(m). However, the Company's deduction for any
payments to holders of options equal to the amount of any dividends or similar
distributions with respect to the shares of the Common Stock underlying the
unexercised portion of the options will be subject to the limitations on
deductibility under Section 162(m). Because the restricted share awards under
the plan are not deemed to be performance-based under Section 162(m), amounts
for which the Company may claim a deduction upon the lapse of any restrictions
on such restricted share awards will be subject to the limitations on
deductibility under Section 162(m).
The recognition by an employee of compensation income with respect to a
grant or an award under the Plan will be subject to withholding for federal
income and employment tax purposes. If an employee, to the extent permitted by
the terms of a grant or award, uses shares of Common Stock to satisfy the
federal income and employment tax withholding obligation, or any similar
withholding obligation for state and local tax obligations, the employee will
recognize a capital gain or loss, short-term or long-term, depending on the tax
basis and holding period for the shares.
1999 STOCK OPTION GRANTS UNDER THE PLAN
On November 4, 1999, the Company granted under the plan non-qualified stock
options to purchase a total of 2,210,000 shares of the Company's Common Stock.
The grant of these options is conditioned upon the approval of the plan by the
Company's stockholders at the annual meeting. The recipients of the options
include the following executive officers of the Company and New Valley: Mr.
LeBow, options for 1,500,000 shares; Mr. Lampen, options for 100,000 shares; Mr.
Bell, options for 50,000 shares; Ms. Van Siclen, options for 15,000 shares; and
Mr. Lorber, options for 500,000 shares. The exercise price of the options was
$15 7/16 per share, the fair market value on the date of grant, subject to
increase under certain circumstances. Common Stock dividend equivalents will be
paid currently with respect to each share underlying the unexercised portion of
the options. The options have a ten-year term and become exercisable on the
fourth anniversary of the date of grant. However, the options will earlier vest
and become immediately exercisable upon the occurrence of a "Change in Control,"
or the termination of the option holder's employment due to death or disability.
Upon the termination of the option holder's employment for any other reason, any
then unexercisable portion of the options will be forfeited and cancelled by the
Company. The option holder's right to exercise will terminate nine months after
his or her date of termination, but not beyond the stated term of the option. If
an option holder dies or becomes disabled, the option holder, or his or her
estate or other legal representative, will be entitled to exercise the option
for a one-year period following the date of his or her death or disability, but
not beyond the stated term of the option.
---------------
At the record date, the total number of outstanding shares of Common Stock
was 21,989,782 shares. The closing price of the Common Stock on April 17, 2000
on The New York Stock Exchange was $14 11/16 per share.
EFFECTIVE DATE
The plan became effective on November 4, 1999, the date of its adoption by
the board of directors, subject to stockholder approval. The plan will terminate
on December 31, 2008, except with respect to awards then outstanding. Thereafter
no further awards will be granted under the plan unless the plan is extended by
the board of directors.
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APPROVAL OF THE PLAN
To become effective, the plan must be approved by the affirmative vote of a
majority of the votes cast at the annual meeting on this proposal by the holders
of the shares of Common Stock entitled to vote.
The board recommends a vote FOR approval of the plan.
APPROVAL OF CHANGE IN CORPORATE NAME
The Board has adopted and declared advisable, subject to stockholder
approval, an amendment to the Company's certificate of incorporation to change
the corporate name to Vector Group Ltd.
With the growth in recent years of the Company's Russian tobacco business,
an increasing level of the Company's activities involve businesses other than
Liggett's domestic tobacco operations. In addition, New Valley's
recapitalization in June 1999 resulted in New Valley becoming a majority-owned
subsidiary of the Company. The Company believes that its current corporate name
is traditionally associated with Liggett's business and that a new corporate
name will more appropriately reflect the broader scope of the Company's current
business activities. With the change in the Company's name, the symbol for the
Common Stock on The New York Stock Exchange will change to "VGR".
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock will be required to approve this amendment to the Company's
certificate of incorporation. As a result, shares with respect to which
authority is withheld, abstentions and broker shares that are not voted will
have the same effect as votes against this proposal.
The board recommends a vote FOR amending the Company's certificate of
incorporation to change the corporate name.
RELATIONSHIP WITH INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP has been the independent auditors for the
Company since December 1986 and will serve in that capacity for the 2000 fiscal
year unless the board 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 desire.
MISCELLANEOUS
ANNUAL REPORT
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, 32nd Floor,
Miami, Florida 33131.
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, 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. These persons are also required by SEC
regulations to furnish the Company with copies of all 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
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ended December 31, 1999, all reporting persons have timely complied with all
filing requirements applicable to them.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2001 annual
meeting of stockholders of the Company pursuant to Rule 14a-8 of the Exchange
Act must be received by the Company at its principal executive offices, 100 S.E.
Second Street, 32nd Floor, Miami, Florida 33131, Attention: Marc N. Bell,
Secretary, on or before December 21, 2000 in order to be eligible for inclusion
in the Company's proxy statement relating to that meeting. Notice of a
stockholder proposal submitted outside the processes of Rule 14a-8 will be
considered untimely unless submitted by March 6, 2001.
OTHER MATTERS
All information in this proxy statement concerning the Common Stock has
been adjusted to give effect to the 5% stock dividend paid to the stockholders
of the Company on September 30, 1999.
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,
/s/ Bennett S. LeBow
-----------------------------------
Bennett S. LeBow
Chairman of the Board of Directors
Dated: April 18, 2000
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APPENDIX A
BROOKE GROUP LTD.
1999 LONG-TERM INCENTIVE PLAN
1. PURPOSE. The purpose of the 1999 Long-Term Incentive Plan (the "Plan")
is to further and promote the interests of Brooke Group Ltd. (the "Company"),
its Subsidiaries and its shareholders by enabling the Company and its
Subsidiaries to attract, retain and motivate officers, employees and consultants
or those who will become officers, employees or consultants, and to align the
interests of those individuals and the Company's shareholders. To do this, the
Plan offers equity-based opportunities providing such officers, employees and
consultants with a proprietary interest in maximizing the growth, profitability
and overall success of the Company and its Subsidiaries.
2. DEFINITIONS. For purposes of the Plan, the following terms shall have
the meanings set forth below:
2.1 "AWARD" means an award or grant made to a Participant under
Sections 6, 7 and/or 8 of the Plan.
2.2 "AWARD AGREEMENT" means the agreement executed by a Participant
pursuant to Sections 3.2 and 15.6 of the Plan in connection with the
granting of an Award.
2.3 "BOARD" means the Board of Directors of the Company, as
constituted from time to time.
2.4 "CODE" means the Internal Revenue Code of 1986, as in effect and
as amended from time to time, or any successor statute thereto, together
with any rules, regulations and interpretations promulgated thereunder or
with respect thereto.
2.5 "COMMITTEE" means the committee of the Board established to
administer the Plan, as described in Section 3 of the Plan.
2.6 "COMMON STOCK" means the Common Stock, par value $.10 per share,
of the Company or any security of the Company issued by the Company in
substitution or exchange therefor.
2.7 "COMPANY" means Brooke Group Ltd., a Delaware corporation, or any
successor corporation to Brooke Group Ltd.
2.8 "DISABILITY" means disability as defined in the Participant's
Award Agreement or then effective employment agreement, or if the
Participant's Award Agreement does not define disability, or if the
Participant is not then a party to an effective employment agreement with
the Company which defines disability, "Disability" means disability as
determined by the Committee in accordance with standards and procedures
similar to those under the Company's long-term disability plan, if any.
Subject to the first sentence of this Section 2.8, at any time that the
Company does not maintain a long-term disability plan, "Disability" shall
mean any physical or mental disability which is determined to be total and
permanent by a physician selected in good faith by the Company.
2.9 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as in
effect and as amended from time to time, or any successor statute thereto,
together with any rules, regulations and interpretations promulgated
thereunder or with respect thereto.
2.10 "FAIR MARKET VALUE" means on, or with respect to, any given
date(s), the closing price of the Common Stock, as reported on the
consolidated transaction reporting system for the New York Stock Exchange
for such date(s) or, if the Common Stock was not traded on such date(s), on
the next preceding day or days on which the Common Stock was traded. If at
any time the Common Stock is not traded on such exchange, the Fair Market
Value of a share of the Common Stock shall be determined in good faith by
the Board.
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2.11 "INCENTIVE STOCK OPTION" means any stock option granted pursuant
to the provisions of Section 6 of the Plan (and the relevant Award
Agreement) that is intended to be (and is specifically designated as) an
"incentive stock option" within the meaning of Section 422 of the Code.
2.12 "NON-QUALIFIED STOCK OPTION" means any stock option granted
pursuant to the provisions of Section 6 of the Plan (and the relevant Award
Agreement) that is not (and is specifically designated as not being) an
Incentive Stock Option.
2.13 "PARTICIPANT" means any individual who is selected from time to
time under Section 5 to receive an Award under the Plan.
2.14 "PLAN" means the Brooke Group Ltd. 1999 Long-Term Incentive Plan,
as set forth herein and as in effect and as amended from time to time
(together with any rules and regulations promulgated by the Committee with
respect thereto).
2.15 "RESTRICTED SHARES" means the restricted shares of Common Stock
granted pursuant to the provisions of Section 8 of the Plan and the
relevant Award Agreement.
2.16 "RETIREMENT" means the voluntary retirement by the Participant
from active employment with the Company and its Subsidiaries on or after
the attainment of (i) age 65, or (ii) 60, with the consent of the Board.
2.17 "STOCK APPRECIATION RIGHT" means an Award described in Section
7.2 of the Plan and granted pursuant to the provisions of Section 7 of the
Plan.
2.18 "SUBSIDIARY(IES)" means any corporation (other than the Company)
in an unbroken chain of corporations, including and beginning with the
Company, if each of such corporations, other than the last corporation in
the unbroken chain, owns, directly or indirectly, more than fifty percent
(50%) of the voting stock in one of the other corporations in such chain,
or any "subsidiary" of the Company as defined in Rule 405 under the
Securities Act of 1933, as amended.
3. ADMINISTRATION.
3.1 THE COMMITTEE. The Plan shall be administered by the Committee.
The Committee shall be appointed from time to time by the Board and shall
be comprised of not less than two (2) of the then members of the Board who
are Outside Directors (within the meaning of Code Section 162(m) and the
regulations promulgated thereunder) of the Company. No member of the
Committee shall be eligible to receive awards under the Plan. Consistent
with the Bylaws of the Company, members of the Committee shall serve at the
pleasure of the Board and the Board, subject to the immediately preceding
sentence, may at any time and from time to time remove members from, or add
members to, the Committee.
3.2 PLAN ADMINISTRATION AND PLAN RULES. The Committee is authorized
to construe and interpret the Plan and to promulgate, amend and rescind
rules and regulations relating to the implementation, administration and
maintenance of the Plan. Subject to the terms and conditions of the Plan,
the Committee shall make all determinations necessary or advisable for the
implementation, administration and maintenance of the Plan including,
without limitation, (a) selecting the Plan's Participants, (b) making
Awards in such amounts and form as the Committee shall determine, (c)
imposing such restrictions, terms and conditions upon such Awards as the
Committee shall deem appropriate, and (d) correcting any technical
defect(s) or technical omission(s), or reconciling any technical
inconsistency(ies), in the Plan and/or any Award Agreement. The Committee
may designate persons other than members of the Committee to carry out the
day-to-day ministerial administration of the Plan under such conditions and
limitations as it may prescribe, except that the Committee shall not
delegate its authority with regard to the selection for participation in
the Plan and/or the granting of any Awards to Participants. The Committee's
determinations under the Plan need not be uniform and may be made
selectively among Participants, whether or not such Participants are
similarly situated. Any determination, decision or action of the Committee
in connection with the construction, interpretation, administration,
implementation or maintenance of the Plan shall be final, conclusive and
binding upon all Participants and any person(s) claiming under or through
any Participants. The Company shall effect the
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granting of Awards under the Plan, in accordance with the determinations
made by the Committee, by execution of written agreements and/or other
instruments in such form as is approved by the Committee.
3.3 LIABILITY LIMITATION. Neither the Board nor the Committee, nor
any member of either, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in
connection with the Plan (or any Award Agreement), and the members of the
Board and the Committee shall be entitled to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or
expense (including, without limitation, attorneys' fees) arising or
resulting therefrom to the fullest extent permitted by law and/or under any
directors and officers liability insurance coverage which may be in effect
from time to time.
4. TERM OF PLAN/COMMON STOCK SUBJECT TO PLAN.
4.1 TERM. The Plan shall terminate on December 31, 2008, except with
respect to Awards then outstanding. After such date no further Awards shall
be granted under the Plan.
4.2 COMMON STOCK. The maximum number of shares of Common Stock in
respect of which Awards may be granted or paid out under the Plan, subject
to adjustment as provided in Section 13.2 of the Plan, shall not exceed
5,000,000 shares. In the event of a change in the Common Stock of the
Company that is limited to a change in the designation thereof to "Capital
Stock" or other similar designation, or to a change in the par value
thereof, or from par value to no par value, without increase or decrease in
the number of issued shares, the shares resulting from any such change
shall be deemed to be the Common Stock for purposes of the Plan. Common
Stock which may be issued under the Plan may be either authorized and
unissued shares or issued shares which have been reacquired by the Company
(in the open-market or in private transactions) and which are being held as
treasury shares. No fractional shares of Common Stock shall be issued under
the Plan.
4.3 COMPUTATION OF AVAILABLE SHARES. For the purpose of computing the
total number of shares of Common Stock available for Awards under the Plan,
there shall be counted against the limitations set forth in Section 4.2 of
the Plan the maximum number of shares of Common Stock potentially subject
to issuance upon exercise or settlement of Awards granted under Sections 6
and 7 of the Plan, and the number of shares of Common Stock issued under
grants of Restricted Shares pursuant to Section 8 of the Plan, in each case
determined as of the date on which such Awards are granted. If any Awards
expire unexercised or are forfeited, surrendered, cancelled, terminated or
settled in cash in lieu of Common Stock, the shares of Common Stock which
were theretofore subject (or potentially subject) to such Awards shall
again be available for Awards under the Plan to the extent of such
expiration, forfeiture, surrender, cancellation, termination or settlement
of such Awards.
5. ELIGIBILITY. Individuals eligible for Awards under the Plan shall
consist of all officers, employees and consultants, or those who will become
such officers, employees or consultants, of the Company and/or its Subsidiaries
who are responsible for the management, growth and protection of the business of
the Company and/or its Subsidiaries or whose performance or contribution, in the
sole discretion of the Committee, benefits or will benefit the Company.
6. STOCK OPTIONS.
6.1 TERMS AND CONDITIONS. Stock options granted under the Plan shall
be in respect of Common Stock and may be in the form of Incentive Stock
Options, or Non-Qualified Stock Options (sometimes referred to collectively
herein as the "Stock Option(s)"). Such Stock Options shall be subject to
the terms and conditions set forth in this Section 6 and any additional
terms and conditions, not inconsistent with the express terms and
provisions of the Plan, as the Committee shall set forth in the relevant
Award Agreement.
6.2 GRANT. Stock Options may be granted under the Plan in such form
as the Committee may from time to time approve. Stock Options may be
granted alone or in addition to other Awards under the Plan or in tandem
with Stock Appreciation Rights. Special provisions shall apply to Incentive
Stock Options granted to any employee who owns (within the meaning of
Section 422(b)(6) of the Code)
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more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or its parent corporation or any subsidiary
of the Company, within the meaning of Sections 424(e) and (f) of the Code
(a "10% Shareholder").
6.3 EXERCISE PRICE. The exercise price per share of Common Stock
subject to a Stock Option shall be determined by the Committee, including,
without limitation, a determination based on a formula determined by the
Committee; provided, however, that the exercise price of an Incentive Stock
Option shall not be less than one hundred percent (100%) of the Fair Market
Value of the Common Stock on the date of the grant of such Incentive Stock
Option; provided, further, however, that, in the case of a 10% Shareholder,
the exercise price of an Incentive Stock Option shall not be less than one
hundred ten percent (110%) of the Fair Market Value of the Common Stock on
the date of grant.
6.4 TERM. The term of each Stock Option shall be such period of time
as is fixed by the Committee; provided, however, that the term of any
Incentive Stock Option shall not exceed ten (10) years (five (5) years, in
the case of a 10% Shareholder) after the date immediately preceding the
date on which the Incentive Stock Option is granted.
6.5 METHOD OF EXERCISE. A Stock Option may be exercised, in whole or
in part, by giving written notice of exercise to the Secretary of the
Company, or the Secretary's designee, specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the
exercise price in cash, by certified check, bank draft or money order
payable to the order of the Company or, if permitted by the Committee (in
its sole discretion) and applicable law, by delivery of, alone or in
conjunction with a partial cash or instrument payment, (a) a fully-secured
promissory note or notes, (b) shares of Common Stock already owned by the
Participant for at least six (6) months, or (c) some other form of payment
acceptable to the Committee. The Committee may also permit Participants
(either on a selective or group basis) to simultaneously exercise Stock
Options and sell the shares of Common Stock thereby acquired, pursuant to a
"cashless exercise" arrangement or program, selected by and approved of in
all respects in advance by the Committee. Payment instruments shall be
received by the Company subject to collection. The proceeds received by the
Company upon exercise of any Stock Option may be used by the Company for
general corporate purposes. Any portion of a Stock Option that is exercised
may not be exercised again.
6.6 EXERCISABILITY. In respect of any Stock Option granted under the
Plan, unless otherwise provided in the Award Agreement or in the
Participant's employment agreement in respect of any such Stock Option,
such Stock Option shall become exercisable as to the aggregate number of
shares of Common Stock underlying such Stock Option, as determined on the
date of grant, as follows:
- 33%, on the first anniversary of the date of grant of the Stock
Option, provided the Participant is then employed by the Company
and/or one of its Subsidiaries;
- 66%, on the second anniversary of the date of grant of the Stock
Option, provided the Participant is then employed by the Company
and/or one of its Subsidiaries; and
- 100%, on the third anniversary of the date of grant of the Stock
Option, provided the Participant is then employed by the Company
and/or one of its Subsidiaries.
6.7 TANDEM GRANTS. If Non-Qualified Stock Options and Stock
Appreciation Rights are granted in tandem, as designated in the relevant
Award Agreements, the right of a Participant to exercise any such tandem
Stock Option shall terminate to the extent that the shares of Common Stock
subject to such Stock Option are used to calculate amounts or shares
receivable upon the exercise of the related tandem Stock Appreciation
Right.
7. STOCK APPRECIATION RIGHTS.
7.1 TERMS AND CONDITIONS. The grant of Stock Appreciation Rights
under the Plan shall be subject to the terms and conditions set forth in
this Section 7 and any additional terms and conditions, not inconsistent
with the express terms and provisions of the Plan, as the Committee shall
set forth in the relevant Award Agreement.
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7.2 STOCK APPRECIATION RIGHTS. A Stock Appreciation Right is an Award
granted with respect to a specified number of shares of Common Stock
entitling a Participant to receive an amount equal to the excess of the
Fair Market Value of a share of Common Stock on the date of exercise over
the Fair Market Value of a share of Common Stock on the date of grant of
the Stock Appreciation Right, multiplied by the number of shares of Common
Stock with respect to which the Stock Appreciation Right shall have been
exercised.
7.3 GRANT. A Stock Appreciation Right may be granted in addition to
any other Award under the Plan or in tandem with or independent of a
Non-Qualified Stock Option.
7.4 DATE OF EXERCISABILITY. Unless otherwise provided in the
Participant's employment agreement or the Award Agreement in respect of any
Stock Appreciation Right, a Stock Appreciation Right may be exercised by a
Participant, in accordance with and subject to all of the procedures
established by the Committee, in whole or in part at any time and from time
to time during its specified term. Notwithstanding the preceding sentence,
in no event shall a Stock Appreciation Right be exercisable prior to the
date which is six (6) months after the date on which the Stock Appreciation
Right was granted or prior to the exercisability of any Non-Qualified Stock
Option with which it is granted in tandem. The Committee may also provide,
as set forth in the relevant Award Agreement and without limitation, that
some Stock Appreciation Rights shall be automatically exercised and settled
on one or more fixed dates specified therein by the Committee.
7.5 FORM OF PAYMENT. Upon exercise of a Stock Appreciation Right,
payment may be made in cash, in Restricted Shares or in shares of
unrestricted Common Stock, or in any combination thereof, as the Committee,
in its sole discretion, shall determine and provide in the relevant Award
Agreement.
7.6 TANDEM GRANT. The right of a Participant to exercise a tandem
Stock Appreciation Right shall terminate to the extent such Participant
exercises the Non-Qualified Stock Option to which such Stock Appreciation
Right is related.
8. RESTRICTED SHARES.
8.1 TERMS AND CONDITIONS. Grants of Restricted Shares shall be
subject to the terms and conditions set forth in this Section 8 and any
additional terms and conditions, not inconsistent with the express terms
and provisions of the Plan, as the Committee shall set forth in the
relevant Award Agreement. Restricted Shares may be granted alone or in
addition to any other Awards under the Plan. Subject to the terms of the
Plan, the Committee shall determine the number of Restricted Shares to be
granted to a Participant and the Committee may provide or impose different
terms and conditions on any particular Restricted Share grant made to any
Participant. With respect to each Participant receiving an Award of
Restricted Shares, there shall be issued a stock certificate (or
certificates) in respect of such Restricted Shares. Such stock
certificate(s) shall be registered in the name of such Participant, shall
be accompanied by a stock power duly executed by such Participant, and
shall bear, among other required legends, the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including,
without limitation, forfeiture events) contained in the Brooke Group
Ltd. 1999 Long-Term Incentive Plan and an Award Agreement entered into
between the registered owner hereof and Brooke Group Ltd. Copies of such
Plan and Award Agreement are on file in the office of the Secretary of
Brooke Group Ltd., 100 S.E. Second Street, Miami Florida 33131. Brooke
Group Ltd. will furnish to the recordholder of the certificate, without
charge and upon written request at its principal place of business, a
copy of such Plan and Award Agreement. Brooke Group Ltd. reserves the
right to refuse to record the transfer of this certificate until all
such restrictions are satisfied, all such terms are complied with and
all such conditions are satisfied."
Such stock certificate evidencing such shares shall, in the sole discretion of
the Committee, be deposited with and held in custody by the Company until the
restrictions thereon shall have lapsed and all of the terms and conditions
applicable to such grant shall have been satisfied.
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8.2 RESTRICTED SHARE GRANTS. A grant of Restricted Shares is an Award
of shares of Common Stock granted to a Participant, subject to such
restrictions, terms and conditions as the Committee deems appropriate,
including, without limitation, (a) restrictions on the sale, assignment,
transfer, hypothecation or other disposition of such shares, (b) the
requirement that the Participant deposit such shares with the Company while
such shares are subject to such restrictions, and (c) the requirement that
such shares be forfeited upon termination of employment for specified
reasons within a specified period of time or for other reasons (including,
without limitation, the failure to achieve designated performance goals).
8.3 RESTRICTION PERIOD. In accordance with Sections 8.1 and 8.2 of
the Plan and unless otherwise determined by the Committee (in its sole
discretion) at any time and from time to time, Restricted Shares shall only
become unrestricted and vested in the Participant in accordance with such
vesting schedule relating to such Restricted Shares, if any, as the
Committee may establish in the relevant Award Agreement (the "Restriction
Period"). Notwithstanding the preceding sentence, in no event shall the
Restriction Period be less than six (6) months after the date of grant.
During the Restriction Period, such stock shall be and remain unvested and
a Participant may not sell, assign, transfer, pledge, encumber or otherwise
dispose of or hypothecate such Award. Upon satisfaction of the vesting
schedule and any other applicable restrictions, terms and conditions, the
Participant shall be entitled to receive payment of the Restricted Shares
or a portion thereof, as the case may be, as provided in Section 8.4 of the
Plan.
8.4 PAYMENT OF RESTRICTED SHARE GRANTS. After the satisfaction and/or
lapse of the restrictions, terms and conditions established by the
Committee in respect of a grant of Restricted Shares, a new certificate,
without the legend set forth in Section 8.1 of the Plan, for the number of
shares of Common Stock which are no longer subject to such restrictions,
terms and conditions shall, as soon as practicable thereafter, be delivered
to the Participant.
8.5 SHAREHOLDER RIGHTS. A Participant shall have, with respect to the
shares of Common Stock underlying a grant of Restricted Shares, all of the
rights of a shareholder of such stock (except as such rights are limited or
restricted under the Plan or in the relevant Award Agreement). Any stock
dividends paid in respect of unvested Restricted Shares shall be treated as
additional Restricted Shares and shall be subject to the same restrictions
and other terms and conditions that apply to the unvested Restricted Shares
in respect of which such stock dividends are issued.
9. DEFERRAL ELECTIONS/TAX REIMBURSEMENTS/OTHER PROVISIONS.
9.1 DEFERRALS. The Committee may permit a Participant to elect to
defer receipt of any payment of cash or any delivery of shares of Common
Stock that would otherwise be due to such Participant by virtue of the
exercise, earn out or settlement of any Award made under the Plan. If any
such election is permitted, the Committee shall establish rules and
procedures for such deferrals, including, without limitation, the payment
or crediting of reasonable interest on such deferred amounts credited in
cash, and the payment or crediting of dividend equivalents in respect of
deferrals credited in units of Common Stock. The Committee may also provide
in the relevant Award Agreement for a tax reimbursement cash payment to be
made by the Company in favor of any Participant in connection with the tax
consequences resulting from the grant, exercise, settlement, or earn out of
any Award made under the Plan.
9.2 MAXIMUM YEARLY AWARDS. The maximum annual Common Stock amounts in
this Section 9.2 are subject to adjustment under Section 13.2 and are
subject to the Plan maximum under Section 4.2. Each individual Participant
may not receive in any calendar year Awards of Options or Stock
Appreciation Rights exceeding 1,500,000 underlying shares of Common Stock.
In addition, during the Term of the Plan, each individual Participant may
not receive Awards of Options, Stock Appreciation Rights and/or Restricted
Shares exceeding one-half of the maximum number of shares of Common Stock
in respect of which Awards may be granted or paid out under the Plan as
provided in Section 4.2.
10. DIVIDEND EQUIVALENTS. In addition to the provisions of Section 8.5 of
the Plan, Awards of Stock Options, and/or Stock Appreciation Rights, may, in the
sole discretion of the Committee and if provided for in the relevant Award
Agreement, earn dividend equivalents. In respect of any such Award which is
outstanding on a dividend record date for Common Stock, the Participant shall be
credited with an amount
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equal to the amount of cash or stock dividends that would have been paid on the
shares of Common Stock covered by such Award had such covered shares been issued
and outstanding on such dividend record date. The Committee shall establish such
rules and procedures governing the crediting of such dividend equivalents,
including, without limitation, the amount, the timing, form of payment and
payment contingencies and/or restrictions of such dividend equivalents, as it
deems appropriate or necessary.
11. TERMINATION OF EMPLOYMENT.
11.1 GENERAL. Except as is otherwise provided (a) in the relevant
Award Agreement as determined by the Committee (in its sole discretion), or
(b) in the Participant's then effective employment agreement, if any, the
following terms and conditions shall apply as appropriate and as not
inconsistent with the terms and conditions, if any, contained in such Award
Agreement and/or such employment agreement:
11.1.1 OPTIONS/SARS. If a Participant's employment with the
Company terminates for any reason any then unexercisable Stock Options
and/or Stock Appreciation Rights shall be forfeited and cancelled by the
Company. Except as otherwise provided in this Section 11.1.1, if a
Participant's employment with the Company and its Subsidiaries
terminates for any reason, such Participant's rights, if any, to
exercise any then exercisable Stock Options and/or Stock Appreciation
Rights, if any, shall terminate ninety (90) days after the date of such
termination (but not beyond the stated term of any such Stock Option
and/or Stock Appreciation Right as determined under Sections 6.4 and
7.4) and thereafter such Stock Options or Stock Appreciation Rights
shall be forfeited and cancelled by the Company. The Committee, in its
sole discretion, may determine that any such Participant's Stock Options
and/or Stock Appreciation Rights, if any, to the extent exercisable
immediately prior to any termination of employment (other than a
termination due to death, Retirement or Disability), may remain
exercisable for an additional specified time period after such ninety
(90) day period expires (subject to any other applicable terms and
provisions of the Plan and the relevant Award Agreement), but not beyond
the stated term of any such Stock Option and/or Stock Appreciation
Right. If any termination of employment is due to death, Retirement or
Disability, a Participant (and such Participant's estate, designated
beneficiary or other legal representative, as the case may be and as
determined by the Committee) shall have the right, to the extent
exercisable immediately prior to any such termination, to exercise such
Stock Options and/or Stock Appreciation Rights, if any, at any time
within the one (1) year period following such termination due to death,
Retirement or Disability (but not beyond the term of any such Stock
Option and/or Stock Appreciation Right as determined under Sections 6.4
and 7.4).
11.1.2 RESTRICTED SHARES. If a Participant's employment with the
Company and its Subsidiaries terminates for any reason (other than due
to Disability, Retirement or death) prior to the satisfaction and/or
lapse of the restrictions, terms and conditions applicable to a grant of
Restricted Shares, such Restricted Shares shall immediately be cancelled
and the Participant (and such Participant's estate, designated
beneficiary or other legal representative) shall forfeit any rights or
interests in and with respect to any such Restricted Shares.
Notwithstanding anything to the contrary in this Section 11, the
Committee, in its sole discretion, may determine, prior to or within
ninety (90) days after the date of such termination, that all or a
portion of any such Participant's Restricted Shares shall not be so
cancelled and forfeited. If the Participant's employment terminates due
to death, Disability or Retirement, the Participant shall become 100%
vested in any such Participant's restricted Shares as of the date of any
such termination.
12. NON-TRANSFERABILITY OF AWARDS. Unless otherwise provided in the Award
Agreement, no Award under the Plan or any Award Agreement, and no rights or
interests herein or therein, shall or may be assigned, transferred, sold,
exchanged, encumbered, pledged, or otherwise hypothecated or disposed of by a
Participant or any beneficiary(ies) of any Participant, except by testamentary
disposition by the Participant or the laws of intestate succession. No such
interest shall be subject to execution, attachment or similar legal process,
including, without limitation, seizure for the payment of the Participant's
debts, judgements, alimony, or
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separate maintenance. Unless otherwise provided in the Award Agreement, during
the lifetime of a Participant, Stock Options and Stock Appreciation Rights are
exercisable only by the Participant.
13. CHANGES IN CAPITALIZATION AND OTHER MATTERS.
13.1 NO CORPORATE ACTION RESTRICTION. The existence of the Plan, any
Award Agreement and/or the Awards granted hereunder shall not limit, affect
or restrict in any way the right or power of the Board or the shareholders
of the Company to make or authorize (a) any adjustment, recapitalization,
reorganization or other change in the Company's or any Subsidiary's capital
structure or its business, (b) any merger, consolidation or change in the
ownership of the Company or any Subsidiary, (c) any issue of bonds,
debentures, capital, preferred or prior preference stocks ahead of or
affecting the Company's or any Subsidiary's capital stock or the rights
thereof, (d) any dissolution or liquidation of the Company or any
Subsidiary, (e) any sale or transfer of all or any part of the Company's or
any Subsidiary's assets or business, or (f) any other corporate act or
proceeding by the Company or any Subsidiary. No Participant, beneficiary or
any other person shall have any claim against any member of the Board or
the Committee, the Company or any Subsidiary, or any employees, officers or
agents of the Company or any subsidiary, as a result of any such action.
13.2 RECAPITALIZATION ADJUSTMENTS. In the event of any change in
capitalization affecting the Common Stock of the Company, including,
without limitation, a stock dividend or other distribution, stock split,
reverse stock split, recapitalization, consolidation, subdivision,
split-up, spin-off, split-off, combination or exchange of shares or other
form of reorganization or recapitalization, or any other change affecting
the Common Stock, the Board shall authorize and make such proportionate
adjustments, if any, as the Board deems appropriate to reflect such change,
including, without limitation, with respect to the aggregate number of
shares of the Common Stock for which Awards in respect thereof may be
granted under the Plan, the maximum number of shares of the Common Stock
which may be granted or awarded to any Participant, the number of shares of
the Common Stock covered by each outstanding Award, and the exercise price
or other price per share of Common Stock in respect of outstanding Awards.
13.3 CERTAIN MERGERS.
13.3.1 If the Company enters into or is involved in any merger,
reorganization or other business combination with any person or entity
(such merger, reorganization or other business combination to be
referred to herein as a "Merger Event") and as a result of any such
Merger Event the Company will be or is the surviving corporation, a
Participant shall be entitled, as of the date of the execution of the
agreement evidencing the Merger Event (the "Execution Date") and with
respect to both exercisable and unexercisable Stock Options and/or Stock
Appreciation Rights (but only to the extent not previously exercised),
to receive substitute stock options and/or stock appreciation rights in
respect of the shares of the surviving corporation on such terms and
conditions, as to the number of shares, pricing and otherwise, which
shall substantially preserve the value, rights and benefits of any
affected Stock Options or Stock Appreciation Rights granted hereunder as
of the date of the consummation of the Merger Event. Notwithstanding
anything to the contrary in this Section 13.3, if any Merger Event
occurs, the Company shall have the right, but not the obligation, to pay
to each affected Participant an amount in cash or certified check equal
to the excess of the Fair Market Value of the Common Stock underlying
any affected unexercised Stock Options or Stock Appreciation Rights as
of the Execution Date (whether then exercisable or not) over the
aggregate exercise price of such unexercised Stock Options and/or Stock
Appreciation Rights, as the case may be.
13.3.2 If, in the case of a Merger Event in which the Company will
not be, or is not, the surviving corporation, and the Company determines
not to make the cash or certified check payment described in Section
13.3.1 of the Plan, the Company shall compel and obligate, as a
condition of the consummation of the Merger Event, the surviving or
resulting corporation and/or the other party to the Merger Event, as
necessary, or any parent, subsidiary or acquiring corporation thereof,
to grant, with respect to both exercisable and unexercisable Stock
Options and/or Stock Appreciation Rights (but only to the extent not
previously exercised), substitute stock options or stock appreciation
rights in respect of the shares of common or other capital stock of such
surviving or resulting corporation
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on such terms and conditions, as to the number of shares, pricing and
otherwise, which shall substantially preserve the value, rights and
benefits of any affected Stock Options and/or Stock Appreciation Rights
previously granted hereunder as of the date of the consummation of the
Merger Event.
13.3.3 Upon receipt by any affected Participant of any such cash,
certified check, or substitute stock options or stock appreciation
rights as a result of any such Merger Event, such Participant's affected
Stock Options and/or Stock Appreciation Rights for which such cash,
certified check or substitute awards was received shall be thereupon
cancelled without the need for obtaining the consent of any such
affected Participant.
13.3.4 The foregoing adjustments and the manner of application of
the foregoing provisions, including, without limitation, the issuance of
any substitute stock options and/or stock appreciation rights, shall be
determined in good faith by the Committee in its sole discretion. Any
such adjustment may provide for the elimination of fractional shares.
14. AMENDMENT, SUSPENSION AND TERMINATION.
14.1 IN GENERAL. The Board may suspend or terminate the Plan (or any
portion thereof) at any time and may amend the Plan at any time and from
time to time in such respects as the Board may deem advisable to insure
that any and all Awards conform to or otherwise reflect any change in
applicable laws or regulations, or to permit the Company or the
Participants to benefit from any change in applicable laws or regulations,
or in any other respect the Board may deem to be in the best interests of
the Company or any Subsidiary. No such amendment, suspension or termination
shall (x) materially adversely effect the rights of any Participant under
any outstanding Stock Options, Stock Appreciation Rights, or Restricted
Share grants, without the consent of such Participant, or (y) make any
change that would disqualify the Plan, or any other plan of the Company or
any Subsidiary intended to be so qualified, from the benefits provided
under Section 422 of the Code, or any successor provisions thereto.
14.2 AWARD AGREEMENT MODIFICATIONS. The Committee may (in its sole
discretion) amend or modify at any time and from time to time the terms and
provisions of any outstanding Stock Options, Stock Appreciation Rights, or
Restricted Share grants, in any manner to the extent that the Committee
under the Plan or any Award Agreement could have initially determined the
restrictions, terms and provisions of such Stock Options, Stock
Appreciation Rights, and/or Restricted Share grants, including, without
limitation, changing or accelerating (a) the date or dates as of which such
Stock Options or Stock Appreciation Rights shall become exercisable, or (b)
the date or dates as of which such Restricted Share grants shall become
vested. No such amendment or modification shall, however, materially
adversely affect the rights of any Participant under any such Award without
the consent of such Participant.
15. MISCELLANEOUS.
15.1 TAX WITHHOLDING. The Company shall have the right to deduct from
any payment or settlement under the Plan, including, without limitation,
the exercise of any Stock Option or Stock Appreciation Right, or the
delivery, transfer or vesting of any Common Stock or Restricted Shares, any
federal, state, local or other taxes of any kind which the Committee, in
its sole discretion, deems necessary to be withheld to comply with the Code
and/or any other applicable law, rule or regulation. If the Committee, in
its sole discretion, permits shares of Common Stock to be used to satisfy
any such tax withholding, such Common Stock shall be valued based on the
Fair Market Value of such stock as of the date the tax withholding is
required to be made, such date to be determined by the Committee. The
Committee may establish rules limiting the use of Common Stock to meet
withholding requirements by Participants who are subject to Section 16 of
the Exchange Act.
15.2 NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan, the
granting of any Award, nor the execution of any Award Agreement, shall
confer upon any employee of the Company or any Subsidiary any right to
continued employment with the Company or any Subsidiary, as the case may
be,
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nor shall it interfere in any way with the right, if any, of the Company or
any Subsidiary to terminate the employment of any employee at any time for
any reason.
15.3 UNFUNDED PLAN. The Plan shall be unfunded and the Company shall
not be required to segregate any assets in connection with any Awards under
the Plan. Any liability of the Company to any person with respect to any
Award under the Plan or any Award Agreement shall be based solely upon the
contractual obligations that may be created as a result of the Plan or any
such Award or Award Agreement. No such obligation of the Company shall be
deemed to be secured by any pledge of, encumbrance on, or other interest
in, any property or asset of the Company or any Subsidiary. Nothing
contained in the Plan or any Award Agreement shall be construed as creating
in respect of any Participant (or beneficiary thereof or any other person)
any equity or other interest of any kind in any assets of the Company or
any Subsidiary or creating a trust of any kind or a fiduciary relationship
of any kind between the Company, any Subsidiary and/or any such
Participant, any beneficiary thereof or any other person.
15.4 OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS. Payments and
other benefits received by a Participant under an Award made pursuant to
the Plan shall not be deemed a part of a Participant's compensation for
purposes of the determination of benefits under any other employee welfare
or benefit plans or arrangements, if any, provided by the Company or any
Subsidiary unless expressly provided in such other plans or arrangements,
or except where the Board expressly determines in writing that inclusion of
an Award or portion of an Award should be included to accurately reflect
competitive compensation practices or to recognize that an Award has been
made in lieu of a portion of competitive annual base salary or other cash
compensation. Awards under the Plan may be made in addition to, in
combination with, or as alternatives to, grants, awards or payments under
any other plans or arrangements of the Company or its Subsidiaries. The
existence of the Plan notwithstanding, the Company or any Subsidiary may
adopt such other compensation plans or programs and additional compensation
arrangements as it deems necessary to attract, retain and motivate
employees.
15.5 LISTING, REGISTRATION AND OTHER LEGAL COMPLIANCE. No Awards or
shares of the Common Stock shall be required to be issued or granted under
the Plan unless legal counsel for the Company shall be satisfied that such
issuance or grant will be in compliance with all applicable federal and
state securities laws and regulations and any other applicable laws or
regulations. The Committee may require, as a condition of any payment or
share issuance, that certain agreements, undertakings, representations,
certificates, and/or information, as the Committee may deem necessary or
advisable, be executed or provided to the Company to assure compliance with
all such applicable laws or regulations. Certificates for shares of the
Restricted Shares and/or Common Stock delivered under the Plan may be
subject to such stock-transfer orders and such other restrictions as the
Committee may deem advisable under the rules, regulations, or other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Common Stock is then listed, and any applicable federal or
state securities law. In addition, if, at any time specified herein (or in
any Award Agreement or otherwise) for (a) the making of any Award, or the
making of any determination, (b) the issuance or other distribution of
Restricted Shares and/or Common Stock, or (c) the payment of amounts to or
through a Participant with respect to any Award, any law, rule, regulation
or other requirement of any governmental authority or agency shall require
either the Company, any Subsidiary or any Participant (or any estate,
designated beneficiary or other legal representative thereof) to take any
action in connection with any such determination, any such shares to be
issued or distributed, any such payment, or the making of any such
determination, as the case may be, shall be deferred until such required
action is taken. With respect to persons subject to Section 16 of the
Exchange Act, transactions under the Plan are intended to comply with all
applicable conditions of SEC Rule 16b-3. To the extent any provision of the
Plan or any action by the administrators of the Plan fails to so comply
with such rule, it shall be deemed null and void, to the extent permitted
by law and deemed advisable by the Committee.
15.6 AWARD AGREEMENTS. Each Participant receiving an Award under the
Plan shall enter into an Award Agreement with the Company in a form
specified by the Committee. Each such Participant shall agree to the
restrictions, terms and conditions of the Award set forth therein and in
the Plan.
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15.7 DESIGNATION OF BENEFICIARY. Each Participant to whom an Award
has been made under the Plan may designate a beneficiary or beneficiaries
to exercise any option or to receive any payment which under the terms of
the Plan and the relevant Award Agreement may become exercisable or payable
on or after the Participant's death. At any time, and from time to time,
any such designation may be changed or cancelled by the Participant without
the consent of any such beneficiary. Any such designation, change or
cancellation must be on a form provided for that purpose by the Committee
and shall not be effective until received by the Committee. If no
beneficiary has been designated by a deceased Participant, or if the
designated beneficiaries have predeceased the Participant, the beneficiary
shall be the Participant's estate. If the Participant designates more than
one beneficiary, any payments under the Plan to such beneficiaries shall be
made in equal shares unless the Participant has expressly designated
otherwise, in which case the payments shall be made in the shares
designated by the Participant.
15.8 LEAVES OF ABSENCE/TRANSFERS. The Committee shall have the power
to promulgate rules and regulations and to make determinations, as it deems
appropriate, under the Plan in respect of any leave of absence from the
Company or any Subsidiary granted to a Participant. Without limiting the
generality of the foregoing, the Committee may determine whether any such
leave of absence shall be treated as if the Participant has terminated
employment with the Company or any such Subsidiary. If a Participant
transfers within the Company, or to or from any Subsidiary, such
Participant shall not be deemed to have terminated employment as a result
of such transfers.
15.9 LOANS. Subject to applicable law, the Committee may provide,
pursuant to Plan rules, for the Company or any Subsidiary to make loans to
Participants to finance the exercise price of any Stock Options, as well as
the withholding obligation under Section 15.1 of the Plan and/or the
estimated or actual taxes payable by the Participant as a result of the
exercise of such Stock Option and the Committee may prescribe the terms and
conditions of any such loan.
15.10 GOVERNING LAW. The Plan and all actions taken thereunder shall
be governed by and construed in accordance with the laws of the State of
Delaware, without reference to the principles of conflict of laws thereof.
Any titles and headings herein are for reference purposes only, and shall
in no way limit, define or otherwise affect the meaning, construction or
interpretation of any provisions of the Plan.
15.11 EFFECTIVE DATE. The Plan shall be effective upon its approval
by the Board and adoption by the Company, subject to the approval of the
Plan by the Company's shareholders in accordance with Sections 162(m) and
422 of the Code.
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BROOKE GROUP LTD.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE 2000 ANNUAL MEETING OF
STOCKHOLDERS OF BROOKE GROUP LTD.
The undersigned stockholder of Brooke Group Ltd. (the "Company") hereby
constitutes and appoints Joselynn D. Van Siclen and Marc N. Bell, attorney and
proxy of the undersigned, with power of substitution, to attend, vote and act
for the undersigned at the 2000 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 Wednesday, May 24, 2000 at 2:00 p.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, Jeffrey S. Podell and
Jean E. Sharpe
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line provided below.)
- --------------------------------------------------------------------------------
Item 2. Proposal to approve Brooke Group Ltd. 1999 Long-Term Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 3. Proposal to change the corporate name to Vector Group Ltd.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
If not otherwise directed, this proxy will be voted FOR the election of
the nominees, FOR the approval of the Long-Term Incentive Plan and FOR the
change in the corporate name.
The Board of Directors recommends a vote FOR all nominees in Item 1
and FOR the approval of Items 2 and 3.
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 full title as such. If
signing for a corporation, please give your title.
