<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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 Section 240.14a-11(c) or Section
240.14a-12
GENERAL CIGAR HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name(s) of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pur-
suant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
GENERAL CIGAR HOLDINGS, INC.
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 20, 1999
PLEASE TAKE NOTICE that the Annual Meeting of Stockholders of General Cigar
Holdings, Inc. ("General Cigar") will be held in the Auditorium on the 11th
floor of the offices of the Corporate Headquarters of Chase Manhattan Bank, 270
Park Avenue, New York, N.Y. on the 20th day of April 1999, at 10:00 A.M., local
time, to consider and act upon:
1. The election of directors of General Cigar;
2. The approval of the selection of General Cigar's independent accountants
for 1999; and
3. Such other business as may properly be brought before the Annual Meeting
or any adjournment thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE.
Only stockholders of record at the close of business on March 1, 1999 are
entitled to notice of, and to vote at, the Annual Meeting.
A. ROSS WOLLEN
SECRETARY
Dated: March 8, 1999
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
387 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10016-8899
------------------------
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of General Cigar
Holdings, Inc. ("General Cigar") in connection with the solicitation by the
Board of Directors of proxies for the Annual Meeting of Stockholders to be held
on April 20, 1999 at 10:00 A.M., local time, in the Auditorium on the 11th Floor
of Chase Manhattan Bank, 270 Park Avenue, New York, N.Y., for the purposes set
forth in the accompanying notice of meeting.
GENERAL
This solicitation is being made on behalf of the Board of Directors of
General Cigar. The initial distribution of proxy materials is expected to be
made on or about March 8, 1999. Any proxy received in the accompanying form may
be revoked by the person executing it at any time before the authority thereby
granted is exercised. Proxies received by the Board of Directors in such form
will be voted at the meeting or any adjournment thereof as specified therein by
the person giving the proxy; if no specification is made, the shares represented
by such proxy will be voted (i) for the election of directors as described in
this Proxy Statement; and (ii) for approval of the selection of
PricewaterhouseCoopers LLP as independent accountants for General Cigar for
1999. For voting purposes (as opposed to for purposes of establishing a quorum)
abstentions and broker non-votes will not be counted in determining whether the
directors standing for election have been elected or whether the other matters
to be voted on have been approved. Proposals by stockholders for General Cigar's
2000 Annual Meeting of Stockholders must be received by General Cigar before
November 1, 1999 if such proposal is to be considered for inclusion in the 2000
proxy materials of General Cigar. Any such proposal received after January 25,
2000 will be considered untimely for purposes of the 2000 Annual Meeting, and
proxies delivered for the 2000 Annual Meeting will confer discretionary
authority to vote on any such matters.
Management knows of no matters which may be brought before the Annual
Meeting or any adjournment thereof other than those described in the
accompanying notice of meeting and routine matters incidental to the conduct of
the meeting. However, if any other matter should come before the meeting or any
adjournment thereof, it is the intention of the persons named in the
accompanying form of proxy or their substitutes to vote the proxy in accordance
with their judgment on such matters.
The cost of solicitation of proxies by the Board of Directors will be borne
by General Cigar. Such solicitation will be made by mail and in addition may be
made by officers and employees of General Cigar personally or by telephone,
e-mail, facsimile or telegram. Proxies and proxy material will also be
distributed through brokers, custodians and other similar parties.
<PAGE>
Each holder of a share of Class A Common Stock, par value $0.01 per share,
of General Cigar (the "Class A Common Stock") will be entitled to one vote for
each share held of record by such person at the close of business on March 1,
1999 (the "Record Date"), which is the record date fixed by the Board of
Directors for the determination of stockholders entitled to notice of, and to
vote at, the Annual Meeting or any adjournment thereof. Each holder of a share
of Class B Common Stock, par value $0.01 per share, of General Cigar (the "Class
B Common Stock" and, together with the Class A Common Stock, the "Common Stock")
will be entitled to ten votes for each share held of record by such person at
the close of business on the Record Date. As of such date, General Cigar had
outstanding 12,597,338 shares of Class A Common Stock (excluding 1,233,700
shares of treasury stock) and 13,801,811 shares of Class B Common Stock (none of
which are shares of treasury stock). 9,935,888 shares of Class B Common Stock,
representing 72% of the outstanding shares of Class B Common Stock, are held by
members of the Cullman & Ernst Group (See "Security Ownership of Management and
Principal Holders"). The Cullman & Ernst Group beneficially owns shares of
Common Stock representing approximately 66% of the total voting power of the
outstanding Common Stock. Although no formal voting arrangement exists among the
members of the Cullman & Ernst Group, certain members of the Cullman & Ernst
Group have informed General Cigar that they will vote for the election of the
nominees for election to the Board of Directors identified herein and for the
ratification of PricewaterhouseCoopers LLP as General Cigar's independent public
accountants. The affirmative vote of all of the members of the Cullman & Ernst
Group would be sufficient, without the concurring vote of any other stockholder
of General Cigar, to approve and adopt each of the proposals to be considered at
the Annual Meeting.
The Class A Common Stock trades on the New York Stock Exchange under the
symbol MPP. Each share of Class B Common Stock is convertible into a share of
Class A Common Stock at the option of the holder and automatically upon sale.
As used herein, the term "Company" refers to General Cigar Holdings, Inc.
and its predecessor, Culbro Corporation ("Culbro"), and their respective
subsidiaries, including the principal operating subsidiary, General Cigar Co.,
Inc. On August 29, 1997, Culbro merged with and into General Cigar (the
"Merger"), with General Cigar as the surviving corporation. Prior to the initial
public offering of Class A Common Stock in February 1997 (the "IPO", and
together with the Merger, the "Reorganization"), General Cigar was a
wholly-owned subsidiary of Culbro.
2
<PAGE>
I. ELECTION OF DIRECTORS
At the 1999 Annual Meeting of Stockholders, eleven (11) directors (which
will comprise the entire Board) are to be elected. The Board of Directors
proposes the nominees listed below for election as directors to serve until the
Annual Meeting of Stockholders next year and until their successors are duly
elected and qualified. All of the nominees have served as directors since May
1997. All of the nominees except Susan R. Cullman also served as directors of
Culbro for more than six years and from the time of General Cigar's 1997 annual
meeting of shareholders until the consummation of the Merger. The directors must
be elected by a plurality of the votes cast in person or by proxy by
stockholders entitled to vote at the meeting. If for any reason any nominee or
nominees become unavailable for election, the proxy holders will vote for such
substitute nominee or nominees as may be designated by the Board of Directors.
INFORMATION CONCERNING DIRECTORS
<TABLE>
<CAPTION>
NAME (LETTERS (AGE) AND
REFER TO DATE SINCE PRINCIPAL
COMMITTEE WHICH HAS OCCUPATION AND ALSO SERVES AS A
MEMBERSHIPS, CONTINUOUSLY BUSINESS DIRECTOR OF THE
IDENTIFIED SERVED AS A EXPERIENCE DURING FOLLOWING
BELOW) DIRECTOR(1) PAST FIVE YEARS(2) CORPORATIONS
- -------------------------------- ------------ -------------------------------- --------------------------------
<S> <C> <C> <C>
Bruce A. Barnet................. (53) 1990 President and Chief Executive American Business Press;
(a, b, g) Officer of Cahners Business Mainspring Communications; Reed
Information (1996); President Elsevier, Inc.
and Chief Executive Officer of
Cowles Enthusiast Media
(1993-1996)
John L. Bernbach................ (55) 1988 Chairman and Chief Executive North American Television, Inc.;
(a, e, f, g) Officer of The Bernbach Group, Northbridge Programming, Inc.;
Inc.-- consulting (1994); Sportsworld Media Group
Chairman and Chief Executive
Officer of North American
Television, Inc.--television
distribution; Vice Chairman of
DDB Needham Worldwide, Inc.
(1993-1994)
Edgar M. Cullman (3)............ (81) 1961 Chairman of the Board of Centaur Communications Limited;
(c, d, e) Directors (1996); Chief Bloomingdale Properties, Inc.;
Executive Officer of Culbro Griffin Land & Nurseries,
Corporation (1962-1996) Inc.;(5)
Edgar M. Cullman, Jr. (3)....... (53) 1982 President and Chief Executive Bloomingdale Properties, Inc.;
(c, d, f, g) Officer (1996); Chief Executive Doral Financial Corporation;(5)
Officer of Culbro Corporation
(1996-1997); President and Chief
Operating Officer of Culbro
Corporation (1984-1996);
President of Culbro Land
Resources, Inc. (1995)
(1992-1993)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NAME (LETTERS (AGE) AND
REFER TO DATE SINCE PRINCIPAL
COMMITTEE WHICH HAS OCCUPATION AND ALSO SERVES AS A
MEMBERSHIPS, CONTINUOUSLY BUSINESS DIRECTOR OF THE
IDENTIFIED SERVED AS A EXPERIENCE DURING FOLLOWING
BELOW) DIRECTOR(1) PAST FIVE YEARS(2) CORPORATIONS
- -------------------------------- ------------ -------------------------------- --------------------------------
<S> <C> <C> <C>
Susan R. Cullman (3)............ (48) 1997 Co-Chairperson; Republican Choate Rosemary Hall Foundation
(c, f, g) Pro-Choice Coalition (1995)
John L. Ernst (4)............... (58) 1983 Chairman of the Board and Doral Financial Corporation;
(b, c, e) President of Bloomingdale Griffin Land & Nurseries, Inc.
Properties, Inc.
Thomas C. Israel................ (54) 1989 Chairman of A.C. Israel
(b, g) Enterprises, Inc.-- investments
Dan W. Lufkin................... (67) 1976 Private investor Allen & Co., Inc.; Syratech,
(a, b, c, d, e) Inc.
Graham V. Sherren............... (61) 1987 Chairman and Chief Executive Duplo International Ltd.; Gieves
(g) Officer of Centaur Group Ltd.; Hundred Acre
Communications Securities Ltd.; InType Ltd.
Limited--publisher of magazines
and trade periodicals in the
United Kingdom
Peter J. Solomon................ (60) 1980 Chairman of Peter J. Solomon Monro Muffler Brake, Inc.;
(b, d) Company Limited and Peter J. Office Depot, Inc.; Phillips- Van
Solomon Securities Company Heusen Corporation
Limited
Francis T. Vincent, Jr. ........ (60) 1992 Vincent Enterprises; Private Oakwood Homes Corp.; Time
(a, b, g) investor Warner, Inc.; Westfield America,
Inc.
</TABLE>
- ------------------------
Member of the: (a) Audit Committee; (b) Compensation Committee; (c) Executive
Committee; (d) Finance Committee; (e) Nominating Committee; (f) Public Policy
Committee; and (g) Strategic Planning Committee
(1) Except for Susan R. Cullman, who was elected as a director of General Cigar
in 1997, each director shown as serving on the Board of Directors prior to
1997 served as a director of Culbro, which was merged into General Cigar.
(2) Except as otherwise indicated each director has had the same principal
occupation during the past five years. Positions not otherwise identified
are with the Company.
(3) Mr. Cullman is the father of Mr. Cullman, Jr. and Ms. Cullman.
(4) Mr. Ernst is the nephew of Mr. Edgar M. Cullman.
(5) Messrs. Cullman served as directors of The Eli Witt Company which filed for
relief from its creditors under Chapter 11 of the Federal Bankruptcy Code in
November 1996.
4
<PAGE>
The Board of Directors held 11 meetings during 1998. The Company has the
following Committees of the Board of Directors: Audit, Compensation, Executive,
Finance, Nominating, Public Policy and Strategic Planning. Committee memberships
of the Board of Directors are indicated in the above table. Directors as a whole
attended approximately 90% of the aggregate of all Board and Committee meetings
(of Committees of which they were members). No director attended less than 75%
of the aggregate of all Board and Committee meetings, except Mr. Lufkin.
Members of the Board of Directors who are not employees of the Company
received $20,000 per year and $900 for each Board and Committee meeting attended
in 1998. Committee chairpersons received $1,300 for each Committee meeting
attended, except for the chairpersons of the Audit and Compensation Committees
who received $1,600. Reduced amounts were paid if more than one meeting was held
on any day. Non-employee directors who are not members of the Cullman & Ernst
Group participate in the Company's stock option plans for non-employee
directors.
The Audit Committee, whose Chairman is Mr. Vincent, reviews audit reports
and the scope of audit by both the Company's internal audit staff and its
independent accountants and related matters pertaining to the preparation and
examination of the Company's financial statements. From time to time such
Committee makes recommendations to the Board of Directors with respect to the
foregoing matters as well as with respect to the appointment of the Company's
independent accountants. The Audit Committee held 2 meetings in 1998. At a
meeting on January 28, 1999 the Committee recommended to the Board of Directors
the selection of PricewaterhouseCoopers LLP (See "Selection of Independent
Accountants").
The Nominating Committee, whose Chairman is Mr. Ernst, recommended to the
Board of Directors the election of the director-nominees proposed in this Proxy
Statement for election by the stockholders. The Nominating Committee reviews
incumbent directors and the qualifications of candidates suggested from all
sources, including Board members, management and stockholders. Stockholders
desiring to recommend candidates for election as directors at the Company's
Annual Meeting of Stockholders in 2000 should submit names and appropriate
biographical information to the Secretary of the Company before December 1,
1999.
For information about the Compensation Committee, see Compensation Committee
Report on Executive Compensation--Interlocks and Insider Participation.
5
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL HOLDERS
The following table lists the number of shares and exercisable options to
purchase shares of Common Stock of the Company beneficially owned or held by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of Class A Common Stock or Class B Common Stock (ii) the
nominees for election as directors (who are all current directors), (iii) the
Named Executive Officers (as defined) and (iv) all directors and executive
officers of the Company collectively. Information with respect to the Class A
Common Stock held by each person or group of persons includes shares of Class A
Common Stock issuable upon conversion of shares of Class B Common Stock held by
such person or group of persons, such that each share of Class B Common Stock is
also reflected as a share of Class A Common Stock.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
---------------------------- ----------------------------
SHARES SHARES
BENEFICIALLY PERCENT OF BENEFICIALLY PERCENT OF
NAME AND ADDRESS (1) OWNED (2) TOTAL(3) OWNED (2) TOTAL(3)
- ------------------------------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Edgar M. Cullman (4)......................................... 4,242,783 25.2% 4,242,574 30.7%
Edgar M. Cullman, Jr. (4).................................... 3,896,960 23.6 3,896,923 28.2
Louise B. Cullman (4)........................................ 3,662,153 22.5 3,662,129 26.5
Susan R. Cullman (4)......................................... 3,372,452 21.1 3,372,424 24.4
Lucy C. Danziger (4)......................................... 4,573,136 26.6 4,573,106 33.1
John L. Ernst (4)............................................ 1,860,784 12.9 1,860,772 13.5
B. Bros. Realty Limited Partnership (5)...................... 1,039,339 7.6 1,039,338 7.5
Gabelli Funds, Inc. (6)...................................... 3,946,476 14.9 2,485,976 18.0
Wellington Management Company, LLP (7)....................... 920,900 7.3
Gilder Gagnon Howe & Co. LLC (8)............................. 1,717,392 13.6
Bruce A. Barnet.............................................. 18,226 * 444 *
John L. Bernbach............................................. 2,667 * 2,667 *
Thomas C. Israel............................................. 40,010 * 22,228 *
Dan W. Lufkin................................................ 137,237 1.1 62,237 *
Graham V. Sherren............................................ 2,222 * 2,222 *
Peter J. Solomon............................................. 22,227 * 4,445 *
Francis T. Vincent, Jr....................................... 22,227 * 4,445 *
Joseph C. Aird............................................... 71,208 * 53,323 *
A. Ross Wollen............................................... 166,355 1.3 75,859 *
All directors and executive officers collectively, consisting
of 14 persons (9).......................................... 9,451,188 43.4 9,196,524 66.6
</TABLE>
- ------------------------
* Less than 1%
(1) Unless otherwise indicated, the address of each person listed is c/o General
Cigar Holdings, Inc., 387 Park Avenue South, New York, New York 10016.
(2) This information reflects the definition of beneficial ownership adopted by
the Securities and Exchange Commission. Beneficial ownership reflects sole
investment and voting power, except as reflected in footnote 4. Where more
than one person shares investment and voting power in the same shares, such
shares may be shown more than once. Such shares are reflected only once,
however, in the total for all directors and officers. Includes under Class A
Common Stock options exercisable within 60 days. Excluded are shares held by
charitable foundations and trusts of which members of the Cullman and Ernst
families, including persons referred to in footnote 4, are officers and
directors. As of November 28, 1998, a group (the "Cullman & Ernst Group")
consisting of Edgar M. Cullman, Edgar M. Cullman, Jr., Susan R. Cullman,
direct members of their families and trusts for their benefit; John L.
Ernst, his sister and direct members of their families and trusts for their
benefit; a partnership
6
<PAGE>
in which members of the Cullman and Ernst families hold substantial direct
and indirect interests and charitable foundations and trusts of which
members of the Cullman and Ernst families are directors or trustees, owned
an aggregate of approximately 9,935,888 shares of the Class B Common Stock
(approximately 72% of the outstanding shares of Class B Common Stock). Among
others, Edgar M. Cullman, Edgar M. Cullman, Jr., their wives, Susan R.
Cullman and Mr. Ernst hold investment and voting power or shared investment
and voting power over such shares. Certain of such shares are pledged as
security for loans payable under standard pledge arrangements. A form filed
with the Securities and Exchange Commission on behalf of the Cullman & Ernst
Group states that there is no formal agreement governing the group's holding
and voting of such shares but that there is an informal understanding that
the persons and entities included in the group will hold and vote together
the shares owned by each of them in each case subject to any applicable
fiduciary responsibilities.
(3) The Cullman & Ernst Group beneficially owns shares of Common Stock
representing approximately 66% of the total voting power of the outstanding
Common Stock.
(4) Included within the shares shown as beneficially owned by Edgar M. Cullman
are 3,749,401 shares of Class B Common Stock in which he holds shared
investment and/or voting power; included within the shares shown as
beneficially owned by John L. Ernst are 1,828,544 shares of Class B Common
Stock in which he holds shared investment and/or voting power; included
within the shares shown as beneficially owned by Edgar M. Cullman, Jr. are
3,262,664 shares of Class B Common Stock in which he holds shared investment
and/or voting power; and included within the shares shown as beneficially
owned by Susan R. Cullman are 2,982,259 shares of Class B Common Stock in
which she holds shared investment and/or voting power. Included within the
shares shown as beneficially owned by Louise B. Cullman are 3,202,413 shares
of Class B Common Stock in which she holds shared investment and/or voting
power; and included within the shares shown as beneficially owned by Lucy C.
Danziger are 4,209,272 shares of Class B Common Stock in which she holds
shared investment and/or voting power. Excluded in each case are shares held
by charitable foundations and trusts in which such persons or their families
or trusts for their benefit are officers and directors. Messrs. Cullman,
Ernst and Cullman, Jr. and Susan R. Cullman disclaim beneficial interest in
all shares over which there is shared investment and/or voting power and in
all excluded shares. Louise B. Cullman is the wife of Edgar M. Cullman;
Susan R. Cullman and Lucy R. Danziger are the daughters of Edgar M. Cullman
and Louise B. Cullman.
(5) The address of B. Bros. Realty Limited Partnership is 641 Lexington Avenue,
New York, New York 10022.
(6) Such person's percentage of the total outstanding shares of Class A Common
Stock has been calculated assuming the conversion of all shares of Class B
Common Stock held by all holders of Class B Common Stock. Assuming that such
person (and no other holder of Class B Common Stock) were to convert all of
such person's shares of Class B Common Stock into shares of Class A Common
Stock, such person's percentage of the total outstanding shares of Class A
Common Stock would be 26.2%. The address of such person is Gabelli Funds,
Inc., One Corporate Center, Rye, New York, New York 10580. A form filed with
the Securities and Exchange Commission in September 1991 and amended as of
December 18, 1998 by Gabelli Funds, Inc., indicates that the securities have
been acquired by Gabelli Funds, Inc. and its wholly-owned subsidiaries on
behalf of their investment advisory clients. The Company has been informed
that no individual client of Gabelli Funds, Inc. has ownership of more than
5% of the Company's outstanding Common Stock.
(7) The address of Wellington Management Company, LLP ("WMC") is 75 State
Street, Boston, Massachusetts 02109. A form filed with the Securities and
Exchange Commission as of December 31, 1998 by WMC indicates that most of
these shares are held in individual customer accounts.
7
<PAGE>
(8) The address of Gilder Gagnon Howe & Co. LLC ("Gilder Gagnon") is 1775
Broadway, New York, New York 10019. A form filed with the Securities and
Exchange Commission on February 2, 1999 by Gilder Gagnon indicates that most
of these shares are held in individual customer accounts.
(9) Excluding shares held by Messrs. Polite and Green, former executive officers
of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of its Common Stock, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission and the New York Stock Exchange. Such
persons are required by regulation to furnish the Company with copies of all
Section 16(a) forms they file. Based upon its involvement in the preparation of
certain of such forms, a review of the copies of other such forms received by it
and the written representations from certain reporting entities that no Form 5
was required for each such entity, the Company believes that with respect to
1998 all such Section 16(a) filing requirements were satisfied, except for Mr.
Lufkin, whose filing of a Form 4 with respect to purchases of the Company's
Class A Common Stock was untimely.
INTERESTS IN CERTAIN TRANSACTIONS
For the information of stockholders, attention is called to the following
transactions between the Company and other parties in which the persons
mentioned below might have had a direct or indirect interest.
1. The interior design firm of Cullman & Kravis, which is owned by a member
of the Cullman & Ernst Group, provided interior design services for the
Company's Club Macanudo cigar bar in Chicago, Illinois, and for renovations to
the Company's Club Macanudo New York City facilities. In 1998, the Company and
Club Macanudo paid a total of approximately $17,000 to such firm in fees and
commissions (other than reimbursements for furnishings purchased for the
Company). Elissa Cullman, owner of the firm, is the wife of Edgar M. Cullman,
Jr.
2. The Company entered into an agreement with John L. Bernbach in 1997
pursuant to which Mr. Bernbach provides consulting services to the Company with
respect to its international operations. During the Company's 1998 fiscal year,
Mr. Bernbach received advisory fees of $75,000 pursuant to such agreement.
3. Messrs. Cullman are members of the Board of Directors, and Mr. Ernst is
Chairman and President, of Bloomingdale Properties, Inc., which provides the
Company with real estate management and advisory services. In 1998, the Company
paid Bloomingdale Properties, Inc. a fee of approximately $174,000 for
management of the Company's New York office building and for other real estate
advisory services.
4. Peter J. Solomon Company Limited ("PJSC"), whose Chairman is Peter J.
Solomon, provides the Company with strategic and financial advisory services. In
1998, the Company paid PJSC $166,661 in fees and disbursements for such advisory
services.
5. Edgar M. Cullman, the Chairman of General Cigar, is also the Chairman of
Griffin Land & Nurseries, Inc. ("Griffin"). In addition, certain members of the
Cullman & Ernst Group who may be deemed to beneficially own more than five
percent of General Cigar's Class B Common Stock (see "Security Ownership of
Management and Principal Holders") also may be deemed to beneficially own more
than five percent of the Common Stock of Griffin. Prior to the Reorganization in
1997, Griffin, as lessor, and General Cigar Co., Inc. ("General Cigar Co."), a
wholly owned subsidiary of General Cigar, as lessee, entered into a lease for
certain agricultural land in Connecticut and Massachusetts (the "Agricultural
Lease"). The Agricultural Lease is for approximately 500 acres of arable land
held by Griffin for possible development in the long-term, but which is being
used by General Cigar Co. for growing Connecticut Shade wrapper tobacco. General
Cigar Co.'s use of the land is limited to the cultivation of
8
<PAGE>
cigar wrapper tobacco. The Agricultural Lease has an initial term of ten years
and provides for the extension of the lease for additional periods thereafter.
In addition, at Griffin's option, the Agricultural Lease may be terminated with
respect to 100 acres of such land annually upon one year's prior notice. In 1998
General Cigar made a total of $80,000 in rental payments to Griffin in respect
of the Agricultural Lease.
Also in 1997, Griffin, as lessor, and General Cigar Co., as lessee, entered
into a lease for approximately 40,000 square feet of office space in the Griffin
Center South office complex in Bloomfield, Connecticut (the "Commercial Lease").
The Commercial Lease has an initial term of ten years and provides for the
extension of the lease for additional annual periods thereafter. In 1998 General
Cigar made a total of $437,000 in rental payments to Griffin in respect of the
Commercial Lease.
In 1997, Culbro entered into a Services Agreement (the "Services Agreement")
with Griffin. Pursuant to the Services Agreement, General Cigar provided
Griffin, for a period of one year after the Reorganization, with certain
administrative services, including internal audit, tax preparation, legal and
transportation services. The Services Agreement was terminated as of July 1998
with respect to all services provided by General Cigar, except for certain
transportation services, with respect to which the Services Agreement was
amended and extended through June, 1999. In 1998, Griffin paid $400,000 to
General Cigar under the Services Agreement.
See Compensation Committee Interlocks and Insider Participation on page 17,
for certain other interests.
The information given in this Proxy Statement with respect to the five-year
business experience of each director, beneficial ownership of stock, interlocks
and the respective interests of persons in transactions to which the Company or
any of its subsidiaries was a party (other than as appears from the records of
the Company), is based upon statements furnished to the Company by its directors
and officers.
9
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation for the
Company's Chief Executive Officer, the four highest-paid executive officers, and
one individual who ceased being an executive officer in 1998 (collectively, the
"Named Executive Officers"), as well as the total compensation paid to each
individual during the Company's last three calendar years, except where
otherwise noted.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
- ------------------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING
POSITION(1) YEAR SALARY BONUS COMPENSATION(2) OPTIONS
- -------------------------------------------------------------------- ---- -------- ----------- --------------- ----------
Edgar M. Cullman.................................................... 1998 $450,000 $12,956
Chairman of the Board 1997 400,000 $ 440,000(3) 12,756
1996 400,000 17,256
Edgar M. Cullman, Jr. .............................................. 1998 500,000 284,829
President and Chief Executive Officer 1997 440,000 456,676 285,166
1996 400,000 289,604 444,738
A. Ross Wollen...................................................... 1998 265,000 243,996
Senior Vice President, General Counsel and Secretary 1997 236,250 297,123(4) 244,185 25,000
1996 225,000 55,000 244,213 22,280
Joseph C. Aird...................................................... 1998 187,000 153,810
Senior Vice President, Chief Financial Officer, Treasurer and 1997 170,000 188,222(4) 156,254 25,000
Acting Controller 1996 145,000 45,000 153,803 13,390
Jay M. Green(5)..................................................... 1998 373,000 232,720
Former Chief Financial Officer 1997 373,000 232,894
1996 355,000 65,000 232,432
Edward B. Polite(6)................................................. 1998 400,000 60,000
Former Chief Operating Officer 1997 285,000 386,641 23,161 40,000
</TABLE>
- ------------------------
(1) Each of the executive officers identified was employed by Culbro or a
subsidiary of Culbro until August 29, 1997.
(2) Amounts shown under Other Annual Compensation include matching contributions
made by the Company under its Savings Plan and other miscellaneous cash
benefits, but do not include funding for or receipt of retirement plan
benefits (See "Employee Benefit Plans"). Amounts shown include amounts being
paid annually in each of fiscal year 1997, 1998 and 1999 to Messrs. Cullman,
Jr., Wollen, Green and Aird, respectively, as a result of the termination
and payout of benefits under the 1995-1997 Long Term Performance Plan. See
"Employee Benefit Plans--Long Term Performance Plan." Mr. Aird's payment was
deferred under the Company's Deferred Incentive Compensation Plan.
(3) Special bonus awarded to Edgar M. Cullman as a result of the Company's
performance in 1997.
(4) Amounts shown include special bonuses of $150,000 and $100,000 paid to Mr.
Wollen and Mr. Aird, respectively, in connection with the Reorganization.
(5) See "Employee Benefit Plans--Retirement of Jay M. Green."
(6) Amounts for 1998 do not include $595,000 of expenses paid or incurred by the
Company in connection with Mr. Polite's relocation from Pennsylvania and for
housing in Connecticut convenient to the Company's headquarters.
10
<PAGE>
EMPLOYEE BENEFIT PLANS
1997 STOCK PLAN
General Cigar adopted a Stock Plan (the "1997 Stock Plan") in February 1997.
A total of 3,300,000 shares of Class A Common Stock were authorized to be made
available for issuance under the 1997 Stock Plan. Options granted under the 1997
Stock Plan are either incentive stock options or nonqualified options. The 1997
Stock Plan contains a limitation on the dollar amount of incentive stock options
which may be granted to any employee and restrictions pertaining to any grant to
an employee who beneficially owns 10% or more of the outstanding Common Stock.
In connection with the IPO, more than 40 Company employees were granted
incentive stock options to purchase shares of General Cigar's Common Stock under
the 1997 Stock Plan. Such options had an exercise price equal to $18.00 per
share (which was the price per share in the IPO) and become exercisable in three
equal cumulative annual installments on each of the third, fourth and fifth
anniversaries of the date of grant. See "--Stock Option Plans/Exchange of
Options." As of November 28, 1998 there were 2,086,727 shares of Class A Common
Stock reserved for issuance under the 1997 Stock Plan.
STOCK OPTION INFORMATION
The following table sets forth the number of stock options granted to each
of the Named Executive Officers during fiscal 1998. Neither Edgar M. Cullman,
Edgar M. Cullman, Jr., A. Ross Wollen, Joseph Aird nor Jay M. Green was granted
any options during fiscal 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------
<S> <C> <C> <C> <C> <C> <C>
POTENTIAL REALIZABLE
VALUE
PERCENTAGE OF AT ASSUMED ANNUAL
NUMBER OF TOTAL OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES IN OR BASE TEN YEAR OPTION TERM
OPTIONS 1998 FISCAL PRICE EXPIRATION -------------------------
NAME GRANTED (#) YEAR ($/SHARE) DATE 5% 10%
- ----------------------------------- ------------- --------------- ----------- ----------- ----------- ------------
Edward B. Polite................... 60,000 60.0% $ 19.66 1/22/08 $ 578, 400 $ 1,622,400
</TABLE>
- ------------------------
Edgar M. Cullman did not hold any options at 1998 fiscal year end. The
following table presents the value of options exercised in fiscal 1998 and the
value of unexercised options held by the other Named Executive Officers at
November 28, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS HELD IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED VALUE AT FISCAL YEAR END (#) FISCAL YEAR END (1)
ON EXERCISE REALIZED -------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXCERCISABLE UNEXERCISABLE
- -------------------------------------- ------------------- ------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Edgar M. Cullman, Jr (2).............. -- -- -- 444,738 -- --
A. Ross Wollen........................ -- -- 107,259 47,280 $ 771,394 $ 8,942
Joseph Aird........................... -- -- 17,885 38,390 133,944 6,546
Jay M. Green.......................... -- -- 373,116 111,139 3,306,061 1,015,077
Edward B. Polite...................... -- -- 60,397 122,281 431,855 10,140
</TABLE>
- ------------------------
(1) The amounts presented in this column have been calculated based upon the
difference between the fair market value of $9.9375 of General Cigar Common
Stock on November 28, 1998 and the exercise price of each stock option.
(2) Edgar M. Cullman, Jr. was granted an option to purchase 100,000 shares of
Culbro common stock in March 1996, which option was converted into an option
to purchase 444,738 shares of General Cigar's Common Stock as a result of
the Reorganization. Such option is exercisable in equal annual
11
<PAGE>
installments over five years beginning on February 21, 1999 and ending on
February 21, 2003. The option was originally granted by Culbro at the
exercise prices of $66.00, $66.00, $72.60, $72.60 and $80.00 for the years
1999, 2000, 2001, 2002 and 2003, respectively, which exercise prices were
reformulated as a result of the Reorganization to be approximately $13.27,
$13.27, $14.60, $14.60 and $16.08 for such years, respectively.
ANNUAL INCENTIVE COMPENSATION PLAN
The Compensation Committee meets during the first quarter of each year to
assess the performance during the preceding fiscal year of the officers of the
Company and to recognize and reward meritorious performance by payment of
incentive compensation with respect to such year. Pursuant to a plan approved
for 1998 by the Board of Directors, such annual incentive compensation was based
upon predetermined percentages of each recipient's annual salary and depended
upon the achievement of specified subjective and Company financial goals. The
Company's 1998 financial goal of actual results compared to plan was not
achieved in 1998, and no incentive compensation was paid to any Named Executive
Officer with respect to 1998 under the annual incentive compensation plan.
LONG TERM PERFORMANCE PLAN
The Long Term Performance Plan for 1995-1997 as it related to the corporate
executives of the Company (and, in 1995-1996, Culbro) was based upon the stock
price of Culbro Common Stock. In late 1996, the Culbro Board of Directors, on
the recommendation of the Culbro Compensation Committee, approved the full
vesting and termination of the 1995-1997 Performance Plan as it pertained to
Culbro corporate executives. These awards totaled approximately $3.4 million and
are being paid by the Company in three equal annual installments from 1997 to
1999. Such payments made in fiscal 1998 to the Named Executive Officers are set
forth in the Summary Compensation Table.
DEFERRED INCENTIVE COMPENSATION PLAN
The Company's Deferred Incentive Compensation Plan (the "Plan") was assumed
from Culbro in connection with the Merger. The Plan is administered by the
Compensation Committee, pursuant to which recipients of compensation, incentive
compensation and directors' fees may elect to defer receipt thereof under a
defined contribution arrangement. Amounts deferred earn interest, compounded
quarterly, at the prime rate less 1%. Such amounts are not intended to be
recognized for tax purposes until received. Participating recipients may
designate the amount and the time periods of deferral. Participants have no
vested rights in deferred amounts credited to their accounts and are general
creditors of the Company until such amounts actually are paid. The Plan provides
for the immediate payout of all deferred incentive compensation upon a "change
of control" (as defined in the Plan).
SAVINGS PLAN
The Culbro Board of Directors adopted a Savings Plan in 1982 (the "Savings
Plan"), which Savings Plan was assumed by General Cigar in connection with the
Merger. The Savings Plan covers salaried and hourly employees of the Company and
its participating subsidiaries who are employed in the U.S., are over age 21 and
have six months of service. In 1998, a participating employee could have (i)
saved up to 5% of annual base salary through payroll deductions, with the
Company contributing $0.40 on each dollar contributed and (ii) saved an
additional 10% of annual base salary without receiving any matching
contributions. Highly compensated employees are limited to an additional 3% of
annual base salary without receiving any matching contributions. Contributions
made in 1998 through payroll deductions not in excess of $10,000 per employee
may have been accumulated as pre-tax savings pursuant to Section 401(k) of the
Internal Revenue Code. Participants are permitted to choose to allocate their
contributions among several alternative investment options.
12
<PAGE>
During the period from January 1, 1998 to December 31, 1998, the Company's
matching contributions under the Savings Plan for the accounts of the Named
Executive Officers are set forth in the "Summary Compensation Table" under Other
Annual Compensation.
RETIREMENT PLAN
Retirement benefits are payable under the Company's Employees Retirement
Plan (the "Retirement Plan") for officers and other employees of the Company and
its participating subsidiaries, which Retirement Plan General Cigar assumed from
Culbro in connection with the Merger. Directors who are not employees do not
participate. Benefits are accrued under the Plan on a career-average earnings
basis and through 1998, the pension credit is 1.1% for annual compensation up to
the individual's covered compensation as determined from published Social
Security tables and 1.65% for annual compensation above said amounts.
Compensation is the base rate of earnings as of the first business day of each
plan year payable for service during the plan year excluding overtime, bonuses,
incentive compensation or other additional compensation. The estimated annual
benefits payable as a life annuity upon retirement at normal retirement age,
which assumes service will continue until age 65 at 1998 base salaries, for
Messrs. Cullman, Jr., Wollen, Aird and Green are $101,619, $65,031, $49,650 and
$56,237, respectively. The retirement benefit of $182,218, subject to certain
inflation adjustments, for Edgar M. Cullman reflects the fact that he deferred
receipt since age 65 from 1983 to 1989.
INSURANCE AND HEALTH PROGRAMS
The Company maintains a variety of employee welfare benefit plans providing
life, hospitalization, medical and long-term disability insurance for its
salaried and certain hourly paid employees, which plans were assumed from Culbro
in connection with the Merger. In addition, the Company provides life,
hospitalization and medical insurance for certain of its retired employees,
which were also assumed from Culbro in connection with the Merger. The Company's
aggregate contributions for such employee welfare benefit plans in fiscal 1998
amounted to approximately $3.2 million.
In 1976, Culbro adopted an Executive Life Insurance Program (the "Program")
pursuant to which insurance was purchased for middle and senior level officers
and employees. Insurance coverage of $20,000 was provided for each $10,000
salary increment in excess of $50,000 and additional coverage of $10,000 was
provided for each $10,000 salary increment in excess of $100,000 up to a maximum
insurance coverage of $250,000. As of July 1, 1988 the Program was suspended and
all benefits remain as they were as of that date. No new participants have been
offered benefits under this Program since its suspension. In connection with the
Merger, General Cigar assumed responsibility for the suspended benefits. The
aggregate face amount of such coverage through November 28, 1998 was
approximately $2.6 million. The amounts paid by the Company in fiscal 1998 as
premiums totaled approximately $155,000, which was paid in part from loans
against the cash value of said insurance policies and the balance in cash.
EDWARD B. POLITE AGREEMENT AND GENERAL RELEASE
On August 3, 1998, the Company entered into an Agreement and General Release
with Edward B. Polite (the "Polite Agreement") pursuant to which Mr. Polite
resigned as Chief Operating Officer of the Company effective August 3, 1998 and
agreed to be retained as a part time employee of the Company. Mr. Polite
received a one-time payment of $340,000 in fiscal 1998 in connection with the
execution of the Polite Agreement and the release by Mr. Polite of any claims
that Mr. Polite might otherwise have had against the Company. Under the terms of
the Polite Agreement, Mr. Polite agreed to provide services on special projects
at the request of the Company during the remainder of 1998. Thereafter, Mr.
Polite has agreed to provide similar services for 30 days in each of 1999 and
2000, for which he will receive a fee of $100,000 in each such year. In the
event that Mr. Polite is requested to provide additional special project
services, he will receive a per diem fee of approximately $3,333, to a maximum
of $200,000 for a maximum of 60 days in each such year. The obligation of Mr.
Polite to perform such services and the obligation of the
13
<PAGE>
Company to make payments therefor terminate in the event that Mr. Polite accepts
full time employment from another employer.
During the term of the Polite Agreement, Mr. Polite will be entitled to
participate fully in the Company's benefit plans, and will be permitted to
continue to hold the options granted to him pursuant to the 1997 Stock Option
Plan. Pursuant to the Polite Agreement, the terms governing the grant of such
options were amended to provide that all of such options will become
exercisable, to the extent not previously exercisable pursuant to the original
terms thereof, in January, 2001. In addition, the Company paid or incurred
expenses of approximately $595,000 in connection with Mr. Polite's relocation
from Pennsylvania and for housing in Connecticut convenient to the Company's
headquarters.
RETIREMENT OF JAY M. GREEN
Mr. Green elected to retire at the end of his contract period on April 8,
1999. The Company agreed to extend the period during which he can exercise the
options previously granted to him until March 31, 2000.
EMPLOYMENT AGREEMENT WITH NAMED EXECUTIVE OFFICER
Mr. Wollen and the Company entered into an Employment Agreement (the
"Agreement"), dated June 6, 1997, pursuant to which the Company agreed to employ
Mr. Wollen in his current position and salary, subject to annual increases,
until June 6, 2000. The Agreement specifies that if Mr. Wollen is terminated for
any reason, other than "for cause" as defined, he would be paid 300% of his then
current annual salary and would be vested in the Company's employee benefit
plans in which he then participated.
14
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION-INTERLOCKS AND
INSIDERS PARTICIPATION
The Compensation Committee, whose Chairman is Mr. Israel, supervises
management compensation and employee benefits and administers the Company's
pension, stock option, savings, health, incentive compensation and other
employee benefit plans. It held three meetings in 1998 and one in early 1999.
The Committee sets compensation for the executive officers of General Cigar and
the senior officers of its principal subsidiary, General Cigar Co., Inc.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
Pursuant to its authority to designate committees to exercise the powers and
authority of the Board, the Board of Directors has designated the Compensation
Committee to review, consider and approve the recommendations of management as
to all compensation paid by the Company and its subsidiaries exceeding $75,000
per annum.
Edgar M. Cullman, the Chairman of the Board, and Edgar M. Cullman, Jr., the
Chief Executive Officer and President, are both members of the Cullman & Ernst
Group which owns Common Stock representing approximately 66% of the total voting
power of the Company's Common Stock. For many years they have declined to
participate in the Company's Stock Option Plans and Edgar M. Cullman has never
participated in the Annual Plan or the Long Term Performance Plan. For the first
time in many years the Compensation Committee determined to pay a special bonus
to Edgar M. Cullman for the Company's exceptional fiscal year 1997 results. See
the "--Summary Compensation Table." No bonuses or incentive compensation was
paid to any Named Executive Officer with respect to 1998.
POLICIES
The Committee intends that stock options and cash performance awards serve
as a significant part of executives' total compensation package, and thus they
are granted and awarded in consideration of present and anticipated performance
as well as past performance. Moreover, the stock options and cash performance
awards are intended to offer the top executives significant long-term incentives
to increase their efforts on behalf of the Company and to focus managerial
efforts on enhancing stockholder value. In March 1996, the Culbro Board of
Directors approved the adoption by the Culbro Compensation Committee of a
guideline which would require that all employees and directors retain, during
the period of their employment or service, not less than 50% of the aggregate of
all (i) options granted, (ii) shares issued upon the exercise of options granted
and (iii) shares awarded, in 1996 and thereafter, which guideline the Company's
Board of Directors continues to follow. As indicated above, the Committee's
compensation philosophy is to have long-term incentives that pay more for
superior performance and less if performance does not achieve that level. The
Committee, in making its determinations with respect to stock option and
performance award grants and awards to the individual senior executives, was
guided by the percentage of the individual's base salary that the estimated
value of the stock options and cash performance awards would comprise.
SALARY AND CASH BONUSES
The Chief Executive Officer's salary was increased 12.5% in 1998. The
Committee does not believe it need now adopt any policy with respect to the
$1,000,000 deduction cap of Internal Revenue Code Section 162(m). While the
Compensation Committee will continue to give due consideration to the
deductibility of compensation payments on compensation arrangements with the
Company's executive officers, the Compensation Committee will make its
compensation decisions based on an overall determination of what it believes to
be in the best interests of the Company and its stockholders, and deductibility
15
<PAGE>
will be only one among a number of factors used by the Compensation Committee in
making its compensation decisions.
STOCK OPTION PLANS/EXCHANGE OF OPTIONS
The Committee administers the plan described under "1997 Stock Plan." In
past years options have been granted to approximately 15 employees including the
Company's senior management (other than Edgar M. Cullman, who has declined to
participate) and one or two senior officers at each of the Company's operating
companies. In connection with the IPO the Committee granted options to
approximately 40 officers and key employees of the Company.
The Committee on December 14, 1998 granted options at the fair market value
that day, $9.00 per share, in exchange for the options granted in connection
with the IPO of $18.00 per share. All of the old options were exchanged for new
options exercisable for 63% of the number of shares subject to the old options.
The Board also approved the same exchange for the options held by the eligible
non-employee directors of the Company. This was accomplished by canceling
488,600 options at an exercise price of $18.00 per share and granting 307,818
options at an exercise price of $9.00 per share. The vesting schedule and other
terms and conditions of the options remain the same. The stock option tables do
not reflect this exchange because it occurred after the end of the Company's
1998 fiscal year end.
LONG TERM PERFORMANCE PLAN
The Committee administers the Long Term Performance Plan which is based upon
financial performance of the Company over three-year cycles. Target goals in
each category were set and incentive compensation, as a percentage of salary,
was paid depending upon percentage of goal achieved. Earlier cycles resulted in
immaterial amounts being paid to any Named Executive Officer. The fourth cycle
(1995-1997) resulted in payments reflected in the Summary Compensation Table.
In 1997 the Compensation Committee adopted the 1997-1999 Long Term
Performance Plan (the "Plan"). Awards under the Plan for the three year
performance period 1997-1999 are based upon appreciation in the price per share
of General Cigar's Common Stock. Each participant has been assigned a target
award percentage (expressed as a percentage of such participant's average base
salary during the period 1997-1999) which will be fully paid to such participant
if, after the release in early 2000 of the Company's 1999 fiscal year results,
the price per share of General Cigar's Common Stock is greater than or equal to
$37.25, which represents a compounded annual growth of 20% per year from the
average closing price of the General Cigar Common Stock when the Plan was
adopted. Lesser amounts would be paid if the stock price were to be between
$29.80 and $37.25. No amounts would be paid under the Plan if the price is less
than $29.80. Greater amounts are payable for prices up to $44.70 but any
payments above that price would be at the discretion of the Committee. The
predetermined target percentages of the Named Executive Officers are as follows:
Edgar M. Cullman, Jr. (75%), A. Ross Wollen (35%), and Joseph Aird (35%).
Pursuant to their respective severance agreements, Messrs. Polite and Green
could receive an allocated portion of their award under the Plan based on the
number of years they worked under the Plan. Edgar M. Cullman does not
participate in the Plan. Assuming a stock price of $44.70, the maximum
percentage of salary of any Named Executive Officer would be 112.5%.
At its December, 1998 meeting, the Committee approved the fifth cycle of the
Long Term Performance Plan (1999-2001), which, like prior cycles, will depend
upon achieving a compounded annual growth of 20% per year from the average price
of the General Cigar Common Stock when the Plan was adopted.
16
<PAGE>
ANNUAL INCENTIVE COMPENSATION PLAN
The Committee established and administers the Annual Incentive Compensation
Plan which is designed to recognize and reward meritorious performance during
the previous fiscal year. Such compensation is based upon predetermined
percentages of each recipient's annual salary and depends upon the achievement
of specified financial and subjective goals.
The Company's 1998 financial goal of actual results compared to plan was not
achieved in 1998, and no incentive compensation was paid with respect to 1998
under the annual incentive compensation plan.
The Committee has approved a 1999 Annual Incentive Plan for the officers of
the Company. It follows the structure of the 1998 Annual Incentive Plan and
depends upon the achievement of specified Company financial (70%) and subjective
(30%) goals. The predetermined percentages of the Named Executive Officers are
as follows: Edgar M. Cullman, Jr. (50%), A. Ross Wollen (35%), and Joseph Aird
(35%).
As in the past, Edgar M. Cullman will not participate in the Annual
Incentive Plan. The Compensation Committee, however, intends to evaluate the
Company's performance in 1999 and consider awarding him a special bonus if
warranted, as it did for 1997.
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE SECTION 162(M) SUBCOMMITTEE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Thomas C. Israel, Chairman Bruce A. Barnet
John L. Ernst Dan W. Lufkin
Bruce A. Barnet Francis T. Vincent, Jr.
Dan W. Lufkin
Peter J. Solomon
Francis T. Vincent, Jr.
</TABLE>
The Board Compensation Committee Report on Executive Compensation shall not
be deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Cullman are members of the Board of Bloomingdale Properties, Inc.,
of which Mr. Ernst, a member of the Company's Compensation Committee, is
Chairman and President. Mr. Cullman is Chairman of the Compensation Committee of
Centaur Communications Limited, of which Mr. Sherren is chief executive officer.
Mr. Sherren is a member of the Company's Board but does not serve on its
Compensation Committee.
Mr. Ernst, a member of the Compensation Committee, is a director of Griffin.
Mr. Cullman is Chairman of the Board of Griffin. Neither Mr. Cullman nor Mr.
Ernst is an employee of Griffin.
Mr. Solomon is Chairman of Peter J. Solomon Company Limited ("PJSC") which
provides the Company with strategic and financial advisory services as well as
specific transaction-related advisory services pursuant to an engagement letter
entered into by Culbro with PJSC and assumed by General Cigar in connection with
the Merger. In 1998, PJSC was paid $166,661 in fees and disbursements for such
advisory services.
Real estate management and advisory services have been provided to the
Company by Bloomingdale Properties, Inc., with which members of the Cullman &
Ernst Group (see "Security Ownership of Management and Principal Holders") are
associated. A fee of approximately $174,000 was paid by the Company in 1998 for
management of the Company's New York office building and for other real estate
advisory services. Mr. Ernst is Chairman and President of Bloomingdale
Properties, Inc.
See also Interests in Certain Transactions on page 8 for certain other
interests.
17
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows cumulative total return to stockholders on an
initial investment of $100 in Class A Common Stock as compared to an initial
investment of $100 in the Russell 2000 Index and General Cigar's two public
company competitors, Swisher International Group, Inc. and Consolidated Cigar
Holdings, Inc. from February 28, 1997, the first trading date of the Class A
Common Stock, through November 28, 1998.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GENERAL CIGAR HOLDINGS, SWISHER INTERNATIONAL GROUP, CONSOLIDATED CIGAR HOLDINGS,
INC. RUSSELL 2000 INDEX INC. INC.
<S> <C> <C> <C> <C>
02/28/1997 $100.00 $100.00 $100.00 $100.00
11/29/1997 $102.17 $119.41 $95.38 $108.62
11/28/1998 $43.21 $111.68 $39.23 $45.81
</TABLE>
<TABLE>
<CAPTION>
28 FEB. 97 29 NOV. 97 28 NOV. 98
----------- ----------- -----------
<S> <C> <C> <C>
GENERAL CIGAR HOLDINGS, INC................................................... $ 100.00 $ 102.17 $ 43.21
Russell 2000 Index............................................................ 100.00 119.41 111.68
Swisher International Group, Inc.............................................. 100.00 95.38 39.23
Consolidated Cigar Holdings, Inc.............................................. 100.00 108.62 45.81
</TABLE>
18
<PAGE>
II. SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the firm of PricewaterhouseCoopers LLP
as independent accountants to audit the financial statements of the Company for
the fiscal year ending November 27, 1999. This selection was recommended by the
Audit Committee of the Board of Directors. PricewaterhouseCoopers LLP, and its
predecessor, Price Waterhouse LLP, have been the independent accountants for the
Company for many years. The fees of PricewaterhouseCoopers LLP paid by the
Company with respect to its 1998 fiscal year approximated $1,332,434.85 in
total, $292,123.86 for audit services, $191,390 for tax services and $848,921
for consulting services. The consulting services were rendered in connection
with the conversion to a new Company-wide computer system and in attaining Year
2000 compliance.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE SELECTION OF
PRICEWATERHOUSECOOPERS LLP.
The submission of this proposal to a vote of stockholders is not legally
required. If this selection of PricewaterhouseCoopers LLP is not approved, the
Board of Directors will reconsider its selection. A majority of the votes cast
by the holders of shares of Common Stock (in person or by proxy), provided that
Common Stock representing at least a majority of such votes is represented at
the meeting, is required to adopt this proposal.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting and will be given an opportunity to make a statement if so
desired and to respond to appropriate questions.
------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") IS AVAILABLE TO THE COMPANY'S
STOCKHOLDERS WITHOUT CHARGE AT THE WEB SITE (HTTP://WWW.SEC.GOV/) MAINTAINED BY
THE COMMISSION AND AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE
COMMISSION AT JUDICIARY PLAZA, 450 FIFTH STREET, N.W., WASHINGTON, DC 20549.
COPIES ALSO MAY BE OBTAINED AT PRESCRIBED RATES AT THE COMMISSION'S REGIONAL
OFFICE IN NEW YORK LOCATED AT 7 WORLD TRADE CENTER, 15TH FLOOR, NEW YORK, NEW
YORK 10048. IN ADDITION, A LIMITED NUMBER OF COPIES ARE AVAILABLE TO
STOCKHOLDERS AT THE COMPANY'S OFFICES AND MAY BE OBTAINED UPON WRITTEN REQUEST
TO:
GENERAL CIGAR HOLDINGS, INC.
387 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10016-8899
ATTENTION: CORPORATE SECRETARY
Dated: March 8, 1999
19
<PAGE>
General Cigar Holdings, Inc.
387 Park Avenue South
New York, N.Y. 10016-8899
[LOGO]
NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS,
TUESDAY,
APRIL 20, 1999
AND PROXY STATEMENT
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No. 1 - Election of Directors. Nominess: B.A. Barnet, J.L. Bernbach, E.M. Cullman, E.M. Cullman, Jr., S.R.
FOR all nominess WITHHOLD Cullman, J.L. Ernst, T.C. Israel, D.W. Lufkin, G.V. Sherren, P.J. Solomon and F.T.
listed to the right AUTHORITY Vincent, Jr.
(except as marked to vote for all nominees
to the contrary) listed to the right (INSTRUCTION: To withhold authority to vote for any individual nominee, write that
|_| |_| nominee's name on the space provided below.)
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No. 2 - Approval of Selection of Independent Accountants. To vote in accordance with the Board of Directors recommendations
just sign below, no boxes need to be checked.
FOR AGAINST ABSTAIN YES
|_| |_| |_| I plan to attend the Annual Meeting. |_|
Signature __________________________________________ Signature _________________________________________ Date ____________ , 1999
NOTE: Please sign as name appears hereon, Joint owners should each sign. When signing as attorney, executor, administrator,
trusteeor guardian, please give full title as such.
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General Cigar Holdings, Inc.
The undersigned holder of Common Stock of General Cigar Holdings, Inc.
(the "Company") hereby authorizes and appoints Edgar M. Cullman, Edgar M.
Cullman, Jr., and John L. Ernst, or any one or more of them, as proxies with
full power of substitution in each, to represent the undersigned at the
Annual Meeting of Shareholders of the Company to be held in the Auditorium on
the 11th floor of the offices of the Corporate Headquarters of Chase
Manhattan Bank, 270 Park Avenue, New York, N.Y. at 10:00 A.M., local time, on
April 20, 1999 and any adjournment or adjournments of said meeting and
thereat to vote and act with respect to all the shares of Common Stock of the
Company that the undersigned would be entitled to vote if then personally
present in accordance with the instructions listed on the reverse hereof.
Such proxies may vote in their discretion upon such other business as
may properly be brought before the meeting or any adjournment thereof.
Receipt of the Notice of Meeting and the related Proxy Statement is
hereby acknowledged.
(CONTINUED, AND TO BE SIGNED, ON THE OTHER SIDE)
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