View:
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
BROOKE GROUP LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
BROOKE GROUP LTD.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
- --------------------------------------------------------------------------------
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), or 14a-6(i)(1).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1) The filling fee is based on the
proposed maximum aggregate value of the transaction calculated as the
sum of (i) 2,000,000 shares of Registrant's Common Stock times $18.25,
the average of the high and low prices as reported by the NASDAQ/NMS on
December 16, 1993 and (ii) $10,000 the cash portion of the consideration
to be paid by the proposed transaction.
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 1-11(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:
Registrant
-------------------------------------------------------
4) Date filed:
-------------------------------------------------------
- -----------
(i) Set forth the amount on which the filing fee is calculated and state how
it was determined
BROOKE GROUP LTD.
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 18, 1996
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 Thursday, July 18, 1996, at 11:00 a.m.
local time, and at any postponement or adjournment thereof, for the following
purposes:
1. To elect three directors to hold office until the next annual meeting of
stockholders and until their successors are elected and qualified.
2. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors for the Company for the year ending December 31, 1996.
3. To transact such other business as properly may come before the meeting
or any adjournments or postponements of the meeting.
Every holder of record of common stock, par value $.10 per share (the
"Common Stock"), of the Company at the close of business on June 17, 1996 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 July 3, 1996 to July 18, 1996, 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, 1995, as amended, are enclosed
herewith.
By order of the Board of Directors,
BENNETT S. LEBOW
Chairman of the Board, President
and Chief Executive Officer
Miami, Florida
June 18, 1996
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
BROOKE GROUP LTD.
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
-------------
PROXY STATEMENT
-------------
INTRODUCTION
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of Brooke Group Ltd., a Delaware corporation (the "Company"). The proxy
is solicited for use at the annual meeting of stockholders (the "Annual
Meeting") to be held at The Hyatt Regency Miami, 400 S.E. Second Avenue, Miami,
Florida 33131 on Thursday, July 18, 1996, at 11:00 a.m., local time, and at any
postponement or adjournment thereof. The Company's principal executive offices
are located at 100 S.E. Second Street, 32nd Floor, Miami, Florida 33131 and its
telephone number is (305) 579-8000.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Every holder of record of common stock, par value $.10 per share (the
"Common Stock"), of the Company at the close of business on June 17, 1996 (the
"Record Date") is entitled to notice of the meeting and any adjournments or
postponements thereof and to vote, in person or by proxy, one vote for each
share of Common Stock held by such holder. At the Record Date, the Company had
outstanding 18,497,096 shares of Common Stock. The approximate date on which
this proxy statement, accompanying notice and proxy and the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, as amended (the
"Annual Report"), are first being mailed to stockholders is June 18, 1996.
Any stockholder giving a proxy in the form accompanying this proxy
statement has the power to revoke the proxy prior to its exercise. A proxy can
be revoked by an instrument of revocation delivered at or prior to the Annual
Meeting to the Secretary of the Company, by a duly executed proxy bearing a date
or time later than the date or time of the proxy being revoked, or at the Annual
Meeting if the stockholder is present and elects to vote in person. Mere
attendance at the Annual Meeting will not serve to revoke a proxy. Abstentions
and shares held of record by a broker or its nominee ("Broker Shares") that are
voted on any matter are included in determining the number of votes present.
Broker Shares that are not voted on any matter will not be included in
determining whether a quorum is present.
All proxies received and not revoked will be voted as directed. If no
directions are specified, such proxies will be voted FOR the election of the
Board's nominees and FOR ratification of the appointment of Coopers & Lybrand
L.L.P. ("Coopers & Lybrand") to serve as independent auditors for the Company.
The nominees receiving a plurality of the votes cast will be elected as
directors. An affirmative vote of the majority of votes present at the meeting
is necessary for approval of the other matters to be considered at the Annual
Meeting. In all cases, shares with respect to which authority is withheld,
abstentions and Broker Shares that are not voted will not be included in
determining the number of votes cast.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, the beneficial
ownership of the Company's Common Stock (the only class of voting securities) by
(i) each person known to the Company to own beneficially more than five percent
of the Common Stock, (ii) each of the Company's directors and nominees, (iii)
each of the Company's named executive officers (as such term is defined in the
Summary Compensation Table below) and (iv) all directors and executive officers
as a group. Unless otherwise indicated, each person possesses sole voting and
investment power with respect to the shares indicated as beneficially owned, and
the business address of each person is 100 S.E. Second Street, Miami, Florida
33131.
2
Name and Address of Number of Percent of
Beneficial Owner Shares Class
------------------- ---------- ----------
Bennett S. LeBow (1) ......................... 10,451,208 56.5%
BSL Partners (2) ............................. 4,844,156 26.2%
LeBow Limited Partnership (3) ................ 1,681,715 9.1%
LeBow Family Partnership 1993, Ltd. (4) ...... 999,999 5.4%
Richard S. Ressler(5) ........................ 1,824,999 9.9%
Orchard Capital Corporation
1999 Avenue of the Stars
Los Angeles, CA 90067
Robert J. Eide (6) ........................... 10,000 (*)
Aegis Capital Corp.
70 East Sunrise Highway
Valley Stream, NY 11581
Jeffrey S. Podell (6) ........................ 10,000 (*)
Newsote, Inc.
26 Jefferson Street
Passaic, NJ 07055
Gerald E. Sauter (7) ......................... 0 -
Rouben V. Chakalian (8) ...................... 0 -
Liggett Group Inc.
700 West Main Street
Durham, NC 27702
All directors and executive officers
as a group (5 persons) ....................... 10,471,208 56.6%
- ----------
(*) The percentage of shares beneficially owned does not exceed 1% of the
Common Stock.
(1) Includes Common Stock held by BSL Partners, a New York general
partnership ("BSL Partners"), LeBow Limited Partnership, a Delaware
limited partnership ("LLP"), and LeBow Family Partnership 1993, Ltd., a
Florida limited partnership ("LFP"). In January 1996, 2,874,129 of the
shares of Common Stock owned by Bennett S. LeBow (the "Chairman")
(together with shares of certain other affiliated holders specified
below) were pledged to a financial institution (the "1996 Pledge").
(2) The Chairman holds an 80% interest in BSL Partners. The remaining
interest is held by LLP. Pursuant to the 1996 Pledge, all shares of
Common Stock owned by BSL Partners were pledged.
(3) The Chairman is the 99.99% general partner of LLP. In 1990, 1,681,715
shares of Common Stock owned by LLP were pledged to secure its
obligation to make certain payments to the Company on account of a
former executive's outstanding indebtedness of $8,677,000, due in 1997.
In May 1994, LLP paid $3,200,000 in partial satisfaction of the
obligation. In consideration thereof, the Company released 1,281,715 of
the pledged shares. These shares were subsequently pledged under the
1996 Pledge.
(4) The Chairman is the general partner and a limited partner of LFP, and
trusts for the benefit of the Chairman and certain family members hold
the remaining partnership interests.
(5) Based upon a Statement of Changes in Beneficial Ownership on Form 4 dated
June 5, 1996, filed by the named individual.
(6) The named individual is a director of the Company.
(7) The named individual retired as Vice President, Chief Financial Officer
and Treasurer of the Company in May 1996.
(8) The named individual is an executive officer of the Company.
3
In addition, by virtue of his controlling interest in the Company, the
Chairman may be deemed to own beneficially the securities of the Company's
subsidiaries, including BGLS Inc. ("BGLS") and Liggett Group, Inc. ("Liggett"),
and securities of New Valley Corporation ("New Valley"), in which the Company
holds an indirect voting interest of approximately 42%. The disclosure of this
information shall not be construed as an admission that the Chairman is the
beneficial owner of any securities of the Company's subsidiaries or New Valley
under Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or for any other purpose, and such beneficial ownership is
expressly disclaimed. None of the Company's other directors or executive
officers beneficially owns any equity securities of any of the Company's
subsidiaries or New Valley.
NOMINATION AND ELECTION OF DIRECTORS
The By-Laws of the Company provide, among other things, that the Board,
from time to time, shall determine the number of directors of the Company. The
size of the Board is presently set at three. The present term of office of all
directors will expire at the Annual Meeting. Three directors are to be elected
at the Annual Meeting to serve until the next annual meeting of stockholders and
until their respective successors are 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 of Directors 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.
Name and Address Age Principal Occupation
- ---------------- --- ---------------------
Bennett S. LeBow ........... 58 Chairman of the Board, President and
Brooke Group Ltd. Chief Executive Officer of the
100 S.E. Second Street Company
Miami, FL 33131
Robert J. Eide ............. 43 Secretary and Treasurer, Aegis
Aegis Capital Corp. Capital Corp.
70 E. Sunrise Highway
Valley Stream, NY 11581
Jeffrey S. Podell .......... 55 Chairman of the Board and President,
Newsote, Inc. Newsote, Inc.
26 Jefferson Street
Passaic, NJ 07055
Each director is elected annually and serves until the next annual meeting
of stockholders or until his successor is duly elected and qualified.
BUSINESS EXPERIENCE OF NOMINEES
BENNETT S. LEBOW (the "Chairman") has been Chairman of the Board, President
and Chief Executive Officer of the Company since June 1990 and has been a
director of the Company since October 1986. Since November 1990, he has been
Chairman of the Board, President and Chief Executive Officer of BGLS, a
wholly-owned subsidiary of the Company, which directly or indirectly holds the
Company's equity interests in several private and public companies.
4
The Chairman has been a director of Liggett, an indirect wholly-owned
subsidiary of the Company engaged in the manufacture and sale of cigarettes
primarily in the United States, since June 1990 and Chairman of the Board of
Liggett from July 1990 to May 1993. He served as one of three interim Co-Chief
Executive Officers of Liggett from March 1993 to May 1993.
He has been Chairman of the Board of New Valley, a company engaged in the
investment banking and brokerage business, ownership and management of
commercial real estate and the acquisition of operating companies, in which the
Company holds an indirect voting interest of approximately 42%, since January
1988 and Chief Executive Officer since November 1994. In November 1991, an
involuntary petition seeking an order for relief under Chapter 11 of Title 11 of
the United States Code was commenced against New Valley by certain of its
bondholders. New Valley emerged from bankruptcy reorganization proceedings in
January 1995. He has been Chairman of the Board, President and Chief Executive
Officer of New Valley Holdings, Inc., an indirect wholly-owned subsidiary of the
Company ("NV Holdings"), which holds certain of the Company's equity interest in
New Valley, since September 1994.
He was a director of MAI Systems Corporation ("MAI"), the Company's former
indirect majority-owned subsidiary, from September 1984 to October 1995,
Chairman of the Board from November 1990 to May 1995 and the Chief Executive
Officer from November 1990 to April 1993. In April 1993, MAI filed for
protection under Chapter 11 of Title 11 of the United States Code. In November
1993, MAI emerged from bankruptcy reorganization proceedings. MAI is engaged in
the development, sale and service of a variety of computer and software
products. From June 1990 until August 1994, he was Chairman of the Board and/or
a director of SkyBox International Inc. ("SkyBox"), the Company's former
indirect wholly-owned subsidiary. SkyBox is a producer, marketer and distributor
of collectible sports and trading cards and related products.
ROBERT J. EIDE has been a director of the Company since November 1993. Mr.
Eide has been a director of BGLS since November 1993, a director of NV Holdings
since September 1994, Secretary and Treasurer of Aegis Capital Corp., a
registered broker-dealer, since before 1988. Mr. Eide also serves as a director
of Nathan's Famous, Inc., a restaurant chain. Mr. Eide served as a director of
VTX Electronics Corp., a wire and cable distributor, from September 1991 until
November 1995 and served as Chairman of the Board thereof from April 1994 until
November 1995. Mr. Eide has also been a stockholder of a corporate general
partner of a limited partnership organized to acquire and operate real estate
property. The limited partnership filed for protection under the Federal
bankruptcy laws in 1991.
JEFFREY S. PODELL has been a director of the Company since November 1993.
Mr. Podell has been a director of BGLS since November 1993, a director of NV
Holdings since September 1994 and the Chairman of the Board and President of
Newsote, Inc., a privately held holding company, since 1989. Mr. Podell was a
director of VTX Electronics Corp. from 1991 until 1995, and was a registered
representative at Aegis Capital Corp. from before 1988 to 1992.
BOARD OF DIRECTORS AND COMMITTEES
During 1995, the Board of Directors held two meetings, both of which were
attended by all of the directors. During 1995, the Executive Committee (composed
of Messrs. LeBow and Eide), and the Audit Committee (composed of Messrs. Eide
and Podell) did not meet, while the Compensation Committee (composed of Messrs.
Eide, LeBow and Podell) met once.
The Executive Committee exercises, in the intervals between meetings of the
Board of Directors, all the powers of the Board of Directors in the management
and affairs of the Company.
The Audit Committee reviews, with the Company's independent auditors,
matters relating to the scope and plan of the audit, the adequacy of internal
controls and the preparation of financial statements, and reports and makes
recommendations to the Board of Directors with respect thereto.
The Compensation Committee reviews, approves and administers management
compensation and executive compensation plans. For information on the
compensation of the Company's executive officers, see "Board Compensation
Committee Report on Executive Compensation".
5
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, 1995, the Company's Chief Executive Officer and the other two
executive officers of the Company whose cash compensation exceeded $100,000
(collectively, the "named executive officers").
SUMMARY COMPENSATION TABLE (1)(2)
Annual Compensation
--------------------------------------------
Name and Other Annual All Other
Principal Position Year Salary Bonus Compensation Compensation
------------------ ---- --------- ------- ------------ ------------
($) ($) ($) ($)
Bennett S. LeBow .............. 1995 1,187,500 593,750 118,750(3) --
Chairman of the Board, 1994 950,000 475,000 95,000(3) --
President and Chief 1993 950,000 475,000 95,000(3) 4,497(4)
Executive Officer
Gerald E. Sauter(5) ........... 1995 278,534(5) -- -- --
Vice President, Chief 1994 229,167 80,000 -- 12,040(7)
Financial Officer 1993 264,063(6) 50,000 -- 4,497(4)
and Treasurer
Rouben V. Chakalian(8) ........ 1995 432,000 285,120 -- --
Chairman of the Board, 1994 252,000 302,400 250,000(9) --
President and Chief 1993 -- -- -- --
Executive Officer of
Liggett
- -------------
(1) The aggregate value of perquisites and other personal benefits
received by the named executive officers are not reflected because the
amounts were below the reporting requirements established by the rules
of the Securities and Exchange Commission (the "SEC").
(2) No restricted stock or stock options were granted in 1993, 1994 or 1995
to the named executive officers.
(3) Represents an annual payment in lieu of certain other executive benefits.
(4) Represents employer contributions under profit sharing (i.e., 401(k))
and similar plans maintained by the Company.
(5) In 1995, all of Mr. Sauter's salary was paid by New Valley, and 25% (or
$69,633) was subsequently reimbursed to New Valley by the Company. The table
reflects 100% of Mr. Sauter's 1995 salary. Mr. Sauter retired as Vice
President, Chief Financial Officer and Treasurer of the Company in May 1996.
(6) Includes $26,562 relating to a salary increase that was declared in
May 1994, and retroactively effective as of April 1993.
(7) Includes life insurance premiums paid by the Company.
(8) Effective April 1, 1996, Mr. Chakalian assumed the title of Chairman of the
Board of Liggett.
(9) Represents payments made pursuant to a consulting agreement between
Mr. Chakalian and Liggett. See "Employment Agreements".
COMPENSATION OF DIRECTORS
Outside directors of the Company each receive $7,000 per annum as
compensation for serving as a director, $1,000 per annum for each Board
committee membership, $1,000 per meeting for each Board
6
meeting attended, and $500 per meeting for each committee meeting attended.
In addition, each outside director of BGLS receives $28,000 per annum as
compensation for serving as a director, $500 per annum for each Board committee
membership, $500 per meeting for each Board meeting attended, and $500 for each
committee meeting attended. Each outside director is reimbursed for reasonable
out-of-pocket expenses incurred in serving on the Board of the Company and/or
BGLS. In January 1995, each outside director of the Company received an award of
10,000 shares of the Company's Common Stock for services as a director during
1994.
EMPLOYMENT AGREEMENTS
The Chairman is a party to an employment agreement with the Company dated
February 21, 1992. The agreement has a one-year term with automatic renewals for
additional one-year terms unless notice of non-renewal is given by either party
six months prior to the termination date. As of January 1, 1996, the Chairman's
annual base salary was $1,484,375. He is entitled to a minimum annual bonus of
$742,188, payable quarterly, in lieu of participation in Company stock incentive
plans. He is also entitled to an annual payment equal to 10% of his base salary
in lieu of certain other executive benefits such as club memberships, company
paid automobiles and other similar perquisites. Following termination of his
employment without cause (as defined), he would continue to receive his then
current base salary and minimum bonus for 24 months. Following termination of
his employment within two years of a change of control (as defined) or in
connection with similar events, he is entitled to receive a lump sum payment
equal to 2.99 times his then current base salary and minimum bonus. In
connection with the settlement of a stockholder lawsuit against the Company and
the Chairman, the Chairman has agreed that for a period of four years beginning
January 1, 1994, his employment contract shall be adjusted on an annual basis on
such terms as are established by a compensation committee consisting entirely of
independent directors. In addition, the Chairman's salary and bonus may not be
increased from one year to the next during the same four-year period by more
than 10% per annum, except that his salary and bonus may be increased in the
same percentage amount as any increase in the price of the Company's Common
Stock during a calendar year, subject to a maximum increase of 25% per annum.
His salary and bonus are subject to decrease if the price of the Common Stock
decreases by more than 10% during a calendar year, up to a maximum decrease of
25% per annum, but in no event lower than compensation earned in 1993.
Rouben V. Chakalian, Chairman of the Board of Directors and, prior to April
1, 1996, President and Chief Executive Officer of Liggett, is a party to an
employment agreement with Liggett, dated and effective as of June 1, 1994. The
agreement, which terminated on May 31, 1996, has been supplemented by a letter
agreement dated January 9, 1996. Mr. Chakalian's annual base salary through May
31, 1996 was $432,000 and thereafter is at a rate of $240,000 per annum (plus
$2,000 per day if his presence is required at certain locations over six days
per month). He is also entitled to receive a 1996 target annual bonus of 60% of
his base salary, prorated for the first five months of 1996, based upon the
achievement of specified EBIT (earnings before interest and taxes) targets, and,
effective January 1997, his bonus target will be 25% of annual salary. In case
of termination, Mr. Chakalian is covered by Liggett's executive termination
policy which provides for 24 months of termination pay at the current salary of
an executive, if the executive officer's employment is terminated without cause
(as defined). The definition of "cause" in such executive termination pay policy
is willful and continued failure to perform employment duties or obligations,
willful misconduct, material breach of any provision in the agreement, fraud or
conviction of a felony.
Prior to June 1994, Mr. Chakalian served as a consultant to Liggett
advising on both Liggett's international and domestic operations. While acting
as a consultant, and pursuant to a letter agreement dated June 15, 1993, Mr.
Chakalian received payments of $250,000 and $196,000 for consulting services
rendered during 1994 and 1993, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, the Chairman and Messrs. Eide and Podell were members of the
Company's compensation committee. Messrs. Eide and Podell serve as directors of
BGLS and NV Holdings. Mr. Eide is a stockholder, and serves as the Secretary and
Treasurer of Aegis Capital Corp. ("ACC"), a registered broker-dealer that has
performed services for the Company and its affiliates since before January 1,
1995.
7
During 1995, ACC received commissions and other income in the aggregate
amount of $584,616 from the Company and/or its affiliates. In connection with
the acquisition of certain office buildings by New Valley on January 10, 1996,
Mr. Eide received a commission of $220,000 from the seller.
The Chairman is a director of Liggett. He is Chairman of the Board and
Chief Executive Officer of New Valley. The Chairman is a director of BGLS and NV
Holdings.
DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
BGLS sponsors the Retirement Plan For Salaried Non-Bargaining Unit
Employees (the "Retirement Plan") of Liggett, which is a noncontributory,
defined benefit plan. Each salaried employee of the participating companies
becomes a participant on the first day of the month following one year of
employment with 1,000 hours of service and the attainment of age 21. A
participant becomes vested as to benefits on the earlier of his attainment of
age 65, or upon completion of five years of service. Benefits become payable on
a participant's normal retirement date, age 65, or, at the participant's
election, at his early retirement after he has attained age 55 and completed ten
years of service. A participant's annual benefit at normal retirement date is
equal to the sum of: (A) the product of: (1) the sum of: (a) 1.4% of the
participant's average annual earnings during the five-year period from January
1, 1986 through December 31, 1990 not in excess of $19,500 and (b) 1.7% of his
average annual earnings during such five-year period in excess of $19,500 and
(2) the number of his years of credited service prior to January 1, 1991; (B)
1.55% of his annual earnings during each such year after December 31, 1990, not
in excess of $16,500; and (C) 1.85% of his annual earnings during such year in
excess of $16,500. The maximum years of credited service is 35. If hired prior
to January 1, 1983, there is no reduction for early retirement. If hired on or
after January 1, 1983, there is a reduction for early retirement equal to 3% per
year for the number of years prior to age 65 (age 62 if the participant has at
least 20 years of service) that the participant retires. The Retirement Plan
also provides benefits to disabled participants and to surviving spouses of
participants who die prior to retirement. Benefits are paid in the form of a
single life annuity, with optional actuarially equivalent forms of annuity
available. Payment of benefits is made beginning on the first day of the month
immediately following retirement. As of December 31, 1993, the accrual of
benefits under the plan for Liggett employees was frozen.
As of December 31, 1995, none of the named executive officers was eligible
to receive any benefits under the Retirement Plan.
Under certain circumstances, the amount of retirement benefit payable under
the Retirement Plan to certain employees may be limited by the federal tax laws.
Any Retirement Plan benefit lost due to such a limitation will be made up by
BGLS through a non-qualified supplemental retirement benefit plan. BGLS has
accrued, but not funded, amounts to pay benefits under this supplemental plan.
STOCK OPTION GRANTS AND STOCK OPTION EXERCISES
There were no stock options granted to or exercised by any of the named
executive officers during 1995.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation arrangements for the Company's executive officers are usually
negotiated on an individual basis between the Chairman and each executive. The
Company's executive compensation philosophy is to base management's pay, in
part, on achievement of the Company's goals, to provide incentives to enhance
stockholder value, to provide competitive levels of compensation, to recognize
individual initiative and achievement, and to assist the Company in attracting
talented executives to a challenging and demanding environment and to retain
such executives for the benefit of the Company and its subsidiaries, as the case
may be. Compensation arrangements for the Company's executive officers are
determined initially by evaluating the responsibilities of the position held and
the experience of the individual, and by reference to the competitive
marketplace for management talent. Annual salary adjustments are determined by
evaluating the competitive marketplace, the performance of the Company, the
performance of the executive, and any increased responsibilities assumed by the
executive. Bonus
8
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, first,
upon the level of achievement by the Company of its goals and, second, upon the
level of personal achievement by such executive officers.
The compensation package of the Chairman was negotiated and approved by the
Board of Directors in February 1992. The compensation of the Chairman is set
forth in an employment agreement between the Chairman and the Company and is
restricted by a settlement agreement between the parties to a stockholder
lawsuit against the Company and Chairman. See "Employment Agreements", above.
The compensation package of Mr. Chakalian, as Chairman of the Board, and
prior to April 1, 1996, as President and Chief Executive Officer of Liggett, was
negotiated and approved by the Board of Directors of Liggett in June 1994. The
compensation of Mr. Chakalian is set forth in an employment agreement, as
supplemented, between Mr. Chakalian and Liggett. See "Employment Agreements",
above.
In 1993, Section 162(m) was added to the Internal Revenue Code of 1986, as
amended (the "Code"). This Section generally provides that no publicly held
company shall be permitted to deduct compensation in excess of $1 million paid
in any taxable year to its chief executive officer or any of its four other
highest paid officers unless: (i) the compensation is payable solely on account
of the attainment of performance goals; (ii) the performance goals are
determined by a compensation committee of two or more outside directors; (iii)
the material terms under which compensation is to be paid are disclosed to and
approved by the stockholders of the Company; and (iv) the compensation committee
certifies that the performance goals were met. This limitation is applicable to
compensation paid by the Company to the Chairman. The effect of the Code Section
162(m) limitation is substantially mitigated by the Company's net operating
losses, although the amount of any deduction disallowed under Code Section
162(m) could increase the Company's alternative minimum tax by up to 2% of such
disallowed amount. For information relating to the Company's net operating
losses, see Note 11 (Income Taxes) to the Company's Consolidated Financial
Statements, which Note is set forth in the Annual Report enclosed herewith
and is incorporated herein by reference thereto.
The foregoing information is provided by the Compensation Committee of the
Company.
Robert J. Eide
Bennett S. LeBow
Jeffrey S. Podell
9
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, 1995. The graph assumes the value of
the investment and each index was $100 on December 31, 1990 and that all
dividends were reinvested. Information for the Company's Common Stock includes
(i) the value of the Company's Contingent Value Rights ("CVRs") at December 31,
1991 and 1992; (ii) the value of the October 7, 1993 distribution to the
Company's stockholders of SkyBox common stock assuming such stock was held by
such stockholders until April 30, 1995 (the date on which Marvel Entertainment
Group, Inc. completed its acquisition of SkyBox pursuant to, among other things,
a cash tender offer of $16 per share); (iii) a cash distribution of $.36 per CVR
on account of the Company's redemption of the CVRs on December 9, 1993; and (iv)
the value of the February 13, 1995 distribution to the Company's stockholders of
MAI common stock, assuming such stock was held by such stockholders until
December 31, 1995.
[PERFORMANCE GRAPH]
12/90 12/91 12/92 12/93 12/94 12/95
----- ----- ----- ----- ----- -----
Brooke Group Ltd. ......... 100 138 146 118 206 689
S&P 500 ................... 100 130 140 154 156 215
S&P MidCap ................ 100 150 168 192 184 237
S&P Tobacco ............... 100 152 152 118 129 199
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 25, 1995, the Company entered into a Non-qualified Stock Option
Agreement (the "Agreement") with a consultant who serves as a director and
President of New Valley. The Agreement granted such consultant non-qualified
stock options to purchase 500,000 shares of the Company's restricted Common
Stock at an exercise price of $2.00 per share. The options are exercisable over
a ten-year period, with 20% vesting on the grant date and 20% vesting on each of
the four anniversaries of the grant date. Pursuant to the Agreement, Common
Stock dividend equivalents are paid on each unexercised option. During 1995, the
consultant received $320,000 of consulting fees from the Company. Since January
1, 1996, the consultant has received consulting fees of $40,000 per month from
the Company and a subsidiary.
Effective July 1, 1990, a former executive of the Company transferred
his equity in the Company to the Chairman and resigned from substantially all of
his positions with the Company and its affiliates. In consideration for this
transfer, LLP, a partnership controlled by the Chairman, agreed, among other
things,
10
to make certain payments to the Company on account of the former
executive's outstanding indebtedness of $8,677,000. In connection with this
transaction, LLP pledged 1,681,715 of the shares it held of Common Stock to
secure its obligation. In May 1994, LLP paid $3,200,000 in partial satisfaction
of the obligation. In consideration thereof, the Company released 1,281,715 of
the pledged shares.
During 1995, Orchard Capital Corporation, an affiliate of Richard Ressler,
the beneficial owner of 9.9% of the Company's Common Stock and a director of New
Valley, served as a consultant to the Company and its subsidiaries and received
consulting fees of $270,000.
During 1995, the Company and New Valley entered into an expense sharing
agreement whereby New Valley agreed to reimburse the Company for its portion of
certain operating expenses, rent and utilization of personnel. Expense
reimbursements amounted to $571,000 for the year ended December 31, 1995.
For information concerning certain agreements and transactions between the
Company, BGLS and New Valley relating to RJR Nabisco Holdings Corp., see Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Recent Developments Certain Matters Relating to RJR Holdings" and
Note 3 (RJR Nabisco Holdings Corp.) and Note 17 (Related Party Transactions) to
the Company's Consolidated Financial Statements, each of which is set forth in
the Annual Report enclosed herewith and is incorporated herein by reference
thereto.
See also "Compensation Committee Interlocks and Insider Participation."
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed the firm of Coopers & Lybrand to serve
as its independent auditors for 1996. Coopers & Lybrand has acted as the
Company's independent accountants since December 1986.
The stockholders will be requested to adopt the following resolution:
"RESOLVED, that the appointment by the Board of Directors of Brooke
Group Ltd. of Coopers & Lybrand L.L.P. as independent auditors for the year
1996 be ratified."
The Board of Directors recommends a vote FOR this proposal.
In the event the resolution is defeated, the adverse vote will be
considered as a direction to the Board of Directors to select other auditors for
the following year. However, because of the difficulty of substituting other
auditors, it is contemplated that the appointment for the year 1996 will be
permitted to stand unless the Board of Directors finds other good reason for a
substitution.
Representatives of Coopers & Lybrand are expected to be present at the
Annual Meeting and will have an opportunity to make a statement should they
desire to do so. Such representatives are also expected to be available to
answer appropriate questions of stockholders.
The services to be rendered to the Company by Coopers & Lybrand include
examination of the consolidated financial statements of the Company and its
subsidiaries, reviews of quarterly and other reports filed with the SEC,
participation in meetings with the Audit Committee in connection with the
performance of audit services, audits of the employee pension plans of the
Company's subsidiaries, and other special audit, tax and accounting services.
MISCELLANEOUS
1995 ANNUAL REPORT ON FORM 10-K
The Company has mailed, with this proxy statement, copies of the Annual
Report to stockholders as of the Record Date. THE COMPANY WILL PROVIDE WITHOUT
CHARGE, TO EACH STOCKHOLDER AS OF THE RECORD DATE, A COPY OF THE ANNUAL REPORT
ON THE WRITTEN REQUEST OF ANY SUCH STOCKHOLDER ADDRESSED TO THE COMPANY'S
SECRETARY AT BROOKE GROUP LTD., 100 S.E. SECOND STREET, MIAMI, FLORIDA 33131.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires directors and executive officers
of the Company, as well as persons who own more than 10% of a registered class
of the Company's equity securities (the "Reporting
11
Persons"), to file reports of initial beneficial ownership and changes in
beneficial ownership on Forms 3, 4 and 5 with the SEC and the New York Stock
Exchange. Such Reporting Persons are also required by SEC regulations to furnish
the Company with copies of all such reports that they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and representations that no other reports were
required, during and with respect to the fiscal year ended December 31, 1995,
all Reporting Persons have timely complied with all filing requirements
applicable to them, except Mr. Chakalian filed late his initial statement of
beneficial ownership of securities on Form 3 after being designated an executive
officer by the Company.
STOCKHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders of the Company must be received by the Company at its
principal executive offices, 100 S.E. Second Street, Miami, Florida 33131,
Attention: Marc N. Bell, Secretary, on or before March 20, 1997 in order to be
included in the Company's proxy statement and accompanying proxy card relating
to that meeting.
OTHER MATTERS
The cost of this solicitation of proxies will be borne by the Company. In
addition to the use of the mails, some of the directors, officers and regular
employees of the Company may, without additional compensation, solicit proxies
personally or by telephone. The Company will reimburse brokerage houses, banks
and other custodians, nominees and fiduciaries for customary expenses incurred
in forwarding soliciting material to the beneficial owners of Common Stock.
The Board knows of no other matters which will be presented at the Annual
Meeting. If, however, any other matter is properly presented at the Annual
Meeting, the proxy solicited by this proxy statement will be voted in accordance
with the judgment of the person or persons holding such proxy.
By order of the Board of Directors,
BENNETT S. LEBOW
Chairman of the Board, President
and Chief Executive Officer
Dated: June 18, 1996
12
BROOKE GROUP LTD.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE 1996 ANNUAL MEETING OF
STOCKHOLDERS OF BROOKE GROUP LTD.
The undersigned stockholder of Brooke Group Ltd. (the "Company") hereby
constitutes and appoints Andrew E. Balog and Marc N. Bell, attorney and proxy of
the undersigned, with power of substitution, to attend, vote and act for the
undersigned at the 1996 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 Thursday, July 18, 1996 at 11:00 a.m. local
time, and at any postponement or adjournment 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
postponement or adjournment thereof.
(TO BE CONTINUED AND SIGNED ON THE REVERSE SIDE.)
[X] PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE.
Item 1. Election of Directors:
FOR all nominees named at right (except as indicated to the contrary) [ ]
WITHHOLD AUTHORITY to vote for all nominees named at right [ ]
Nominees: Robert J. Eide, Bennett S. LeBow and Jeffrey S. Podell
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided below.
---------------------------------------------------------------
Item 2. Ratification of the appointment of Coopers & Lybrand L.L.P. as the
independent auditors for 1996.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
If not otherwise directed, this proxy will be voted FOR the election of the
nominees in Item 1 and FOR the ratification of the appointment of Coopers &
Lybrand L.L.P. as the independent auditors for 1996 in Item 2.
The Board of Directors recommends a vote FOR all nominees in Item 1 and a
vote FOR Item 2.
PLEASE DATE, SIGN AND MAIL AT ONCE IN THE ENCLOSED POSTPAID ENVELOPE.
Signature ________________ Date _________ Signature ______________ Date ________
IF HELD JOINTLY
NOTE: Please sign exactly as your name appears hereon. If signing as
attorney, administrator, trustee, guardian or the like, please give your full
title as such. If signing for a corporation, please give your title