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                                                                 Exhibit 10.35




                               BROOKE GROUP LTD.
                       100 S.E. Second Street, 32nd Floor
                              Miami, Florida 33131



                                                     January 1, 1997



Mr. Richard J. Lampen
350 Costa Brava Court
Coral Gables, Florida  33143

Dear Mr. Lampen:

     We are pleased to inform you that Brooke Group Ltd. (the "Company") has
granted you a nonqualified option (the "Option") to purchase 260,000 shares of
the Company's common stock, par value $.10 per share (the "Common Stock"), at a
price of $5.00 per share (any of the underlying shares of Common Stock to be
issued upon exercise of the Option are referred to hereinafter as the "Shares"),
subject to the following terms and conditions:

     1. The Option may be exercised on or prior to December 31, 2006 (at which
date the Option will, to the extent not previously exercised, expire), as
follows: (a) as to 43,333 of the Shares, on and after January 1, 1998; (b) as to
43,333 of the Shares, on and after January 1, 1999; (c) as to 43,333 of the
Shares, on and after January 1, 2000; (d) as to 43,333 of the Shares, on and
after January 1, 2001; (e) as to 43,334 of the Shares, on and after January 1,
2002; and (f) as to the final 43,334 of the Shares, on and after January 1,
2003. Each such installment shall be cumulative and your right of purchase
thereunder shall continue, unless exercised or terminated as herein provided,
through the expiration date of the Option.

     2. Any installment of the Option, from and after the date it becomes
exercisable pursuant to Section 1 hereof, may be exercised in whole or in part
by delivering to the Company a written notice of exercise in the form attached
hereto as Exhibit A, specifying the number of the Shares to be purchased,
together with payment of the purchase price of the Shares to be purchased. The
purchase price is to be paid in cash or by delivering shares of Common Stock
already owned by you and having a fair market value on the date of exercise
equal to the exercise price of the Option, or a combination of such shares and
cash.

     3. Except to the extent provided in Section 4 hereof, in the event your
employment with the Company is terminated for any reason, the Option shall
forthwith terminate, provided that you may exercise any then unexercised
installments of the Option then exercisable at any time prior to the earlier of
three months after the termination of your employment or the expiration of the
Option.


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Mr. Richard J. Lampen
January 1, 1997
Page 2



     4. In the event of the occurrence of any Change of Control of the Company
or of New Valley Corporation (as the term "Change of Control" is defined in
Section 6(f) of the Employment Agreement, dated as of January 1, 1995, as
amended as of January 1, 1996, between Howard M. Lorber and New Valley
Corporation), other than any Change of Control arising by reason of a
testamentary bequest by Bennett S. LeBow to or for the benefit of his surviving
spouse of any or all securities of the Company or of New Valley Corporation
beneficially owned by him as of his date of death so long as, following the
bequest, the event referenced in Section 6(f)(ii) of such Employment Agreement
shall not have occurred, all installments of the Option (to the extent not
previously exercised) shall become immediately exercisable at any time prior to
the earlier of three months after the termination of your employment or the
expiration of the Option.

     5. The Option is not transferable otherwise than by will or by the
applicable laws of descent and distribution and may be exercised during your
lifetime only by you (or in the event of your Disability, by your personal
representative or representatives).

     6. In the event of your death, the Option may be exercised by your personal
representative or representatives or by the person or persons to whom your
rights under the Option shall pass by will or by the applicable laws of descent
or distribution.

     7. In the event of any change in the outstanding Common Stock by reason of
a stock dividend, recapitalization, merger, consolidation, split-up,
subdivision, combination or exchange of shares, or the like, the aggregate
number and kind of shares subject to the Option and the exercise price thereof
shall be proportionately adjusted by the Company.

     8. Unless at the time of the exercise of the Option a registration
statement under the Securities Act of 1933, as amended (the "Act"), is in effect
as to the Shares, the Shares shall be acquired for investment and not for sale
or distribution, and if the Company so requests, upon any exercise of the
Option, in whole or in part, you agree to execute and deliver to the Company a
certificate to such effect.

     9. You understand and acknowledge that, under existing law, unless at the
time of the exercise of the Option a registration statement under the Act is in
effect as to the Shares so issuable: (i) any Shares purchased by you upon
exercise of the Option may be required to be held indefinitely unless such
Shares are subsequently registered under the Act or an exemption from such
registration is available; (ii) any sales of such Shares made in reliance upon
Rule 144 promulgated under the Act may be made only in accordance with the terms
and conditions of that Rule (which, under certain circumstances, restrict the
number of shares which may be sold and the manner in which shares may be sold);
(iii) in the case of securities to which Rule 144 is not



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Mr. Richard J. Lampen
January 1, 1997
Page 3




applicable, compliance with Regulation A promulgated under the Act or some other
disclosure exemption shall be required; (iv) certificates for Shares to be
issued to you hereunder shall bear a legend to the effect that the Shares have
not been registered under the Act and that the Shares may not be sold,
hypothecated or otherwise transferred in the absence of an effective
registration statement under the Act relating thereto or an opinion of counsel
satisfactory to the Company that such registration is not required; and (v) the
Company shall place an appropriate "stop transfer" order with its transfer agent
with respect to such Shares.

     10. Promptly following the date hereof, the Company shall use its best
efforts to file and keep in effect a Registration Statement on Form S-8, Form
S-3 or other applicable form to register under the Act the Shares issuable to
you upon exercise of the Option and the resale thereof by you.





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Mr. Richard J. Lampen
January 1, 1997
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     Would you kindly evidence your acceptance of the Option and your agreement
to comply with the provisions hereof by executing this letter in the space
provided below.




                                           Very truly yours,

                                           BROOKE GROUP LTD.



                                           By: ______________________________
                                              Bennett S. LeBow
                                              Chairman, President
                                               and Chief Executive Officer







AGREED TO AND ACCEPTED:


-----------------------------
     Richard J. Lampen




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                                                                 EXHIBIT A
                                                                 ---------


Brooke Group Ltd.
100 S.E. Second Street, 32nd Floor
Miami, Florida  33131


Gentlemen:


     Notice is hereby given of my election to purchase __________ shares of
Common Stock, $.10 par value (the "Shares"), of Brooke Group Ltd., at a price of
$5.00 per Share, pursuant to the provisions of the stock option granted to me on
January 1, 1997. Enclosed in payment for the Shares is:

                  |_|      my check in the amount of $ ____________________.

                  |_|      ___________________  Shares having a total value of
                           $______________, such value being based on the
                           closing price(s) of the Shares on the date hereof.

     The following information is supplied for use in issuing an registering
the Shares purchased hereby:



         Number of Certificates
              and Denominations   ________________________________

         Name                     ________________________________

         Address                  ________________________________

                                  ________________________________

                                  ________________________________

         Social Security          ________________________________


Dated:


                                                   Very truly yours,




                                                   Richard J. Lampen