SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant x
Filed by Party other than the Registrant o
Check the appropriate box:
oPreliminary Proxy Statement
oConfidential, for Use of the Commission Only (as permitted by Rule 14-6(e)(2)
xDefinitive Proxy Statement
oDefinitive Additional Materials
oSoliciting Material Pursuant to Sec. 240.14a-11(c) or 240.14a-12
800-JR Cigar, Inc.
Payment of Filing Fee (Check the appropriate box):
x No fee required.
o 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(Set forth the amount on which the
filing fee is calculated and state how it was determined):
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing by registration 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.
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4) Date Filed:
<PAGE>
August 18, 1999
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: 800-JR Cigar, 1999 Annual Meeting Proxy Statement
Ladies and Gentlemen:
800-JR Cigar, Inc. (the "Company") is hereby transmitting for filing via EDGAR,
pursuant to Rule 14a-6(a) under the Securities Exchange Act of 1934, the Notice
of Annual Meeting of Stockholders, Proxy Statement, in definitive form, relating
to the Company's 1999 Annual Meeting of Stockholders. Although the enclosed
proxy materials, together with the Company's 1999 Annual Report, were
disseminated to the stockholders of the Company on or about April 12, 1999 in
accordance with Rule 14a-3, the technical filing of the proxy material with the
Commission was not completed due to an oversight. The Company's 1999 Annual
Meeting of Stockholders was held on May 18, 1999.
If you have any questions with respect to this filing, please contact the
undersigned at (973) 884-9555 x2212.
Very truly yours,
/s/ Kimberly A. Johnson
Kimberly A. Johnson
Attachments
<PAGE>
800-JR CIGAR, Inc.
301 Route 10 East
Whippany, New Jersey 07981
April 12, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders (the "Annual Meeting") of 800-JR Cigar, Inc. (the "Company"). The
Annual Meeting will be held on Tuesday, May 18, 1999, at 11:00 a.m., local time,
at the law offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, 39th Floor,
New York, New York 10178.
The enclosed Notice of Meeting and Proxy Statement contain details
concerning the business to come before the meeting. You will note that the Board
of Directors of the Company recommends a vote "FOR" the election of two Class II
Directors to serve until the 2002 Annual Meeting of Stockholders and "FOR" the
ratification of Ernst & Young, LLP as independent auditors of the Company for
the 1999 fiscal year. As is customary, there will be a report on the Company's
business, and stockholders will have an opportunity to inquire about the affairs
of the Company that may be of general interest.
The vote of every stockholder is important. I urge you to sign, date
and promptly mail your proxy. The Board of Directors and management look forward
to greeting those stockholders who are able to attend.
Sincerely,
Lew Rothman
President and Chief Executive Officer
<PAGE>
800-JR CIGAR, Inc.
301 Route 10 East
Whippany, New Jersey 07981
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held May 18, 1999
To the Stockholders:
The 1999 Annual Meeting of Stockholders of 800-JR Cigar, Inc., will be
held at the law offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, 39th
Floor, New York, New York 10178, on Tuesday, May 18, 1999, at 11:00 a.m., local
time, for the following purposes:
1. To elect two Class II Directors to serve until the 2002 Annual Meeting
of Stockholders;
2. To ratify the appointment of Ernst & Young, LLP as the independent
auditors of the Company to serve for the 1999 fiscal year; and
3. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
Owners of record of Common Stock of the Company at the close of business on
April 23, 1999 are entitled to receive notice of and to vote at the Annual
Meeting and any adjournment thereof. A list of stockholders of the Company as of
the close of business on April 23, 1999 will be available for inspection during
normal business hours from 10:00 a.m., May 4, 1999 through 5:00 p.m., May 17,
1999 at the Company's offices at 301 Route 10 East, Whippany, New Jersey 07981.
The Company's 1998 Annual Report, which is not part of the proxy soliciting
material, is enclosed.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING
WHETHER OR NOT YOU ARE PERSONALLY ABLE TO ATTEND. STOCKHOLDERS WHO DO NOT EXPECT
TO ATTEND THE MEETING IN PERSON ARE URGED TO PLEASE SIGN, DATE AND MAIL THE
ACCOMPANYING PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. THIS WILL ENSURE THAT YOUR
SHARES ARE VOTED IN ACCORDANCE WITH YOUR WISHES AND THAT A QUORUM WILL BE
PRESENT AT THE ANNUAL MEETING.
By Order of the Board of Directors,
LaVonda Rothman
Secretary
Whippany, New Jersey
April 12, 1999
<PAGE>
800-JR Cigar, Inc.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
April 12, 1999
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of 800-JR Cigar, Inc., a Delaware
Corporation, for the Annual Meeting of Stockholders of the Company to be held at
the law offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, 39th Floor, New
York, New York 10178 on Tuesday, May 18, 1999 at 11:00 a.m., local time, and at
any adjournments thereof for the purposes set forth in the accompanying notice
of meeting.
All proxies delivered pursuant to this solicitation are revocable at
any time at the option of the persons executing them by giving written notice to
the Secretary of the Company, by delivering a later dated proxy or by voting in
person at the Annual Meeting.
The mailing address of the principal executive offices of the Company
is 301 Route 10 East, Whippany, New Jersey 07981. The approximate date on which
this Proxy Statement and form of proxy are first being sent or given to
stockholders is April 12, 1999.
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. Regarding the election of Directors to serve until the 2002
Annual Meeting of Stockholders, in voting by proxy, stockholders may vote in
favor of all nominees or withhold their votes as to all nominees or withhold
their votes as to specific nominees. With respect to the ratification of the
appointment of Ernst & Young, LLP as independent auditors, stockholders may vote
in favor of the proposal, against the proposal or may abstain from voting.
Stockholders should specify their choices on the enclosed form of proxy. If no
specific instructions are given with respect to the matters to be acted upon,
the shares represented by a signed proxy will be voted FOR the election of all
nominees and FOR ratification of the appointment of Ernst & Young, LLP as
independent auditors. If any other matters are properly presented at the meeting
for action, the person's names in the proxies and acting thereunder will have
discretion to vote on such matters in accordance with their best judgement. The
election of Directors will require the affirmative vote of a plurality of the
shares of Common Stock of the Company voting in person or by proxy at the Annual
Meeting. The ratification of the appointment of Ernst & Young, LLP as
independent auditors and approval of any other matter will require the
affirmative vote of a majority of the shares of Common Stock of the Company
voting on the proposal in person or by proxy at the Annual Meeting, except as
may otherwise be provided in the certificate of corporation or by-laws of the
Company, by the rules of the Nasdaq Stock Market or by the General Corporation
Law of the State of Delaware. Thus, abstentions and broker non-votes will not be
included in vote totals and will have no effect on the outcome of the vote.
Only owners of record of shares of Common Stock of the Company at the
close of business on April 23, 1999 are entitled to receive notice of vote at,
the meeting or adjournments thereof. Each owner of record on the record date is
entitled to one vote for each share of Common Stock of the Company so held and
there is no cumulative voting. The Common Stock is the only class of securities
issued by the Company that entitles an owner of record to vote on the proposals
contained herein. On April 12, 1999 there were 12,752,146 shares of Common Stock
of the Company issued and outstanding. The presence at the meeting, in person or
by proxy, of the holders of the majority of the outstanding shares of the Common
Stock entitled to vote is necessary to constitute a quorum.
After the initial mailing of this Proxy Statement, proxies may be
solicited by telephone, telegram or personally by directors, officers and other
employees of the Company (who will not receive any additional compensation
therefor). The Company will pay all expenses with respect to this solicitation.
Arrangements will be made with brokers and other custodians, nominees and
fiduciaries to send proxies and the proxy material to their principals, and the
Company will, upon request, reimburse them for their reasonable expenses in
doing so.
----------------------------------------
As used herein, the term "Company" or "JR" includes 800-JR Cigar, Inc. and its
subsidiaries.
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The term of office of the Company's two Class II Directors expires with
the forthcoming Annual Meeting or at such time as their successors shall have
been elected and qualified. Based on the recommendations of the Nominating
Committee, the Board of Directors of the Company proposes the reelection of
Maureen Colleton and John Oliva as Directors of the Company for a three-year
term expiring with the 2002 Annual Meeting of Stockholders.
The two director nominees will be elected by a plurality of the votes
cast.
The following table sets forth certain information relating to the
nominees and the Directors whose terms of office will continue after this Annual
Meeting. Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the above named nominees, who have consented to serve if
elected. If a nominee is unable to serve as a Director, an event not now
anticipated, the proxies will be voted by the proxy holders for a substitute
nominee.
The Board of Directors recommends that the Stockholders vote FOR the
election to the Board of each of the proposed nominees.
Name of Nominees Principal Occupation Age Director Year in which
Since Term Expires
- --------------------------------------------------------------------------------
Maureen Colleton Director and President, 59 March 1997 Class II/1999/2002
MC Management, Inc.
John Oliva Director and President, 57 March 1997 Class II/1999/2002
Oliva Tobacco Company
Other Directors
- --------------------------------------------------------------------------------
Lew Rothman Chief Executive Officer, 53 March 1997 Class III/2000
President and Chairman
of the Board
LaVonda M. Rothman Executive Vice President 51 March 1997 Class III/2000
and Secretary
Jane Vargas Vice President and Director 42 March 1997 Class I/2001
Stephen J. Bloom Director 63 March 1997 Class III/2000
John F. Barry, Jr. Director 74 July 1997 Class I/2001
Business Experience
Lew Rothman has been the President, Chief Executive Officer and a Director of
the Company since March 1997 and the President, Chief Executive Officer and a
director of each of the Company's predecessors since 1970. He graduated from
Kansas State Teachers College in 1970 with a BA in Political Science and
Geography. He is the author of The Cigar Almanac and a contributing editor of
Smoke magazine. Lew Rothman and LaVonda M. Rothman are married.
LaVonda M. Rothman has been the Executive Vice President, Secretary and a
Director of the Company since March 1997 and the Executive Vice President,
Secretary and a Director of each of the Company's predecessors since 1970.
Lew Rothman and LaVonda M. Rothman are married.
Maureen A. Colleton has been President of MC Management, Inc., a company which
provides customer list and banking record maintenance, payroll and sales tax
return preparation, general ledger accounting, account receivable and payable
processing, and telemarketing services to the Company since 1990. Mrs. Colleton
has been a Director of the Company since March 1997. She graduated from Brooklyn
College in 1960 with a BA in Marketing.
<PAGE>
Jane Vargas has been Vice President and a Director of the Company since March
1997 and has been a Vice President of MC Management, Inc. since 1990. Prior to
joining MC Management, Ms. Vargas was an Assistant Vice President for Horizon
Bank. She graduated from St. Peter's College in 1980 with a BS in accounting.
John Oliva became a Director of the Company in March1997. Since 1980, he has
been the President and a director of Oliva Tobacco Company, one of the largest
tobacco-leaf growers in the world. Mr. Oliva graduated from the University of
Florida in 1966 with a BS in Industrial Engineering.
Stephen J. Bloom became a Director of the Company in March 1997. He has been
an outside consultant to Phillip Morris U.S.A. since April 1993. Mr. Bloom
was employed by Phillip Morris U.S.A. as Vice President, Corporate Account
Sales from January 1986 to April 1989, as Vice President of Trade Development
from 1989 to 1991 and as Senior Vice President and Chief Executive Officer of
S. Bloom, Inc.in Chicago, a tobacco distributing company. Mr. Bloom was elected
to the National Association of Tobacco Distributors Hall of Fame in 1985.
He graduated from the University of Michigan with a BBA in 1958.
John F. Barry Jr. became a Director of the Company in July 1997. He was a
Partner at Lord Day & Lord, Barrett Smith until September 1994 and Special
Counsel at Morgan, Lewis & Bockius LLP from October 1994 to September 1996.
He has been involved in his private legal practice from October 1996 to present.
Mr. Barry graduated from Princeton University in 1947 and from Columbia
University Law School in 1952.
Meetings and Committees of the Board of Directors
During the fiscal year ended December 31, 1998, the Executive Committee
functioned as the Compensation Committee (the "Compensation Committee") of the
Company's Board of Directors. The Compensation Committee was charged with
administering the Company's 1997 Long-Term Incentive Plan (the "1997 Plan");
reviewing the compensation of senior management; and recommending to the Board
of Directors such changes to the compensation of senior management, including
changes to the Company's compensation plans and programs, as the Compensation
Committee determines are appropriate.
The Audit Committee of the Company's Board of Directors consists of
Maureen A. Colleton, John Oliva and Stephen Bloom. The Audit Committee is
charged with recommending to the Board of Directors the engagement or discharge
of independent auditors; reviewing the plan and results of the audit engagement
with the Chief Financial Officer of the Company and the independent auditors.
The Executive Committee of the Company's Board of Directors consists of
Lew Rothman, LaVonda M. Rothman and Maureen A. Colleton. The Executive Committee
has authority to act for the Board on most matters during intervals between
Board meetings and is charged with supervising the implementation of the
decisions of the Board.
The Nominating Committee of the Company's Board of Directors consists
of Lew Rothman, LaVonda M. Rothman and Maureen A. Colleton. The Committee
reviews the qualifications of candidates suggested by Board members, management,
stockholders and other sources; considers the performance of Directors in
determining whether to nominate them for reelection; and recommends to the Board
nominees for election as Directors.
During the fiscal year ended December 31, 1998 the Board of Directors
held five meetings; the Compensation Committee held two meetings; the Audit
Committee held two meetings, the Executive Committee held ten meetings and the
Nominating Committee held three meetings. Each Director attended at least 75% of
the aggregate number of meetings held by the Board and any committee on which he
or she served.
Compensation of Directors
The Company pays each Director who is not a full-time employee of (or
consultant to) the Company an annual stipend of $20,000 plus a fee of $900 for
<PAGE>
attendance at each meeting or committee meeting (unless held on the same day as
a Board meeting) of the Board. In addition, such Directors receive options to
purchase 10,000 shares of Common Stock upon the commencement of their term of
office. All Directors are reimbursed for out-of-pocket expenses incurred in
attending meetings of the Board or committees thereof, and for other expenses
incurred in their capacity as Directors of the Company.
EXECUTIVE OFFICERS
Michael E. Colleton, age 61, became Chief Financial Officer of the Company on
January 27, 1998. Mr. Colleton has 30 years of experience as a corporate
financial manager and has an extensive background in both accounting and law.
Prior to his appointment, Mr. Colleton served as advisor to the Chief Financial
Officer and headed up the financial team that brought the Company public in June
1997.
EXECUTIVE COMPENSATION
The aggregate compensation paid or accrued by the Company for the last
three fiscal years to those serving as the Chief Executive Officer and the other
four most highly compensated executive officers during fiscal 1998 whose
compensation in salary and bonus exceeded $100,000 is set forth in the following
table:
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Securities
Underlying
Options/
Name and Salary Bonus SARs
Principal Position Year ($) ($) (#)
- --------------------------------------------------------------------------------
Lew Rothman 1: 1998 200,004 -0- -0-
President & Chief
Executive Officer 1997 200,004 -0- 50,000
LaVonda Rothman 1: 1998 200,004 -0- -0-
Vice President and
Secretary 1997 200,004 -0- 50,000
Jane Vargas 2: 1998 150,000 -0- -0-
Vice President 1997 127,500 -0- 35,000
Michael E. Colleton 2: 1998 150,000 -0- -0-
Chief Financial Officer 1997 101,250 -0- 35,000
(1) Lew Rothman and LaVonda Rothman have each entered into a three-year
employment agreement with the company providing for an annual base salary
of $200,000, respectively. The agreements also provide that each executive
shall be entitled to such medical and other benefits, including insurance
and pension plans, as are provided to other executive officers of the
Company and to such bonuses as the board shall determine in its discretion.
The agreements also provide that in the event either officer leaves the
employ of the Company during the term of the agreement, he or she agrees
not to compete with the Company for a period of two years. These employment
agreements expire in March 2000, unless renewed.
(2) Jane Vargas entered into a three-year employment contract at an annual base
salary of $105,000. The agreement provides that the executive will be
entitled to such medical and other benefits, including insurance and
pension plans, as are provided to other executive officers of the Company
and to such bonuses as the board shall determine in its discretion. The
agreement also provides that in the event the executive leaves the employ
of the Company during the term of the agreement, she agrees not to compete
with the Company for a period of two years. The agreement between the
Company and Ms. Vargas also provided for a signing bonus of $500,000. This
employment agreement expires in March 2000, unless renewed. In July of 1998
the Board of Directors approved an increase of Ms. Vargas's salary to
$150,000 per annum.
OPTION GRANTS IN LAST FISCAL YEAR
During 1998, there we no options granted.
<PAGE>
AGGREGATE OPTION EXERCISES AND
FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth the number of shares covered by stock
options held by the named executive officers as of December 31, 1998, and the
value of "in-the-money" stock options, which represents the positive spread
between the exercise price of a stock option and the year-end market price of
the shares subject to such options at December 31, 1998. The named executive
officers of the Company did not exercise any stock options during the year ended
December 31, 1998.
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Value Options at Fiscal In-the-Money Options
Acquired on Realized Year-End-(#) at Year-End1-($)
Name Exercise # ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------
Lew Rothman - - 16,667 33,333 104,168 $208,331
LaVonda Rothman - - 16,667 33,333 104,168 208,331
Jane Vargas - - 11,667 23,333 72,918 145,831
Michael E.
Colleton - - 11,667 23,333 72,918 145,831
(1) Values for "in-the-money" outstanding options represent the positive spread
between the respective exercise price of the outstanding options and the
last closing price of the Common Stock as of December 31, 1998, which was
$23.25.
Employment Agreements
Each of Mr. Lew Rothman, Mrs. LaVonda M. Rothman, and Ms. Jane Vargas
has entered into employment agreements with the Company expiring on March 13,
2000, providing for an annual base salary of $200,000, $200,000, and $105,000,
respectively. In July of 1998 the Board of Directors approved an increase of Ms.
Vargas's salary to $150,000 per annum. These agreements also provide that each
employee shall be entitled to such medical and other benefits, including
insurance and pension plans, as are provided to other executive officers of the
Company and to bonuses at the discretion of the Board from amounts available
under the Company's bonus pool. The bonus pool is calculated based upon an
amount not to exceeding five percent of the amount by which the Company's
pre-tax profit exceeds the Company's forecasted pre-tax profit as set forth in
the budget approved by the Board. There were no bonuses paid in 1998. The
Agreements also provide that in the event any such officer shall leave the
employ of the Company during the term of the agreement, he or she agrees not to
compete with the Company for a period of two years. The employment agreement
between the Company and Jane Vargas provided for a signing bonus of $500,000.
Compliance with Reporting Requirements
The Company believes that, during the fiscal year ended December 31,
1998, all filing requirements under Section 16(a) of the Securities Exchange Act
of 1934, as amended, applicable to its executive officers, directors and greater
than ten percent stockholders were complied with on a timely basis.
Compensation Committee Report on Executive Compensation-Interlocks and Insiders
Participation
The Executive Committee functioned as the Company's Compensation
Committee during the fiscal 1998, supervises management compensation and
employee benefits and administered the Company's pension, stock option,
health, incentive compensation and other employee benefit plans. Since
March 1997, the Compensation Committee has consisted of Mr. Lew Rothman,
Chairman, and members Mrs. LaVonda M. Rothman and Mrs. Maureen A. Colleton.
Mr. Rothman is the President and Chief Executive Officer of the Company and
beneficially owns 72.95% of the outstanding capital stock of the Company. Mrs.
LaVonda M. Rothman is Vice President and Secretary of the Company and
beneficially owns 72.95% of the outstanding capital stock of the Company. Ms.
Maureen A. Colleton is President of MC Management, Inc., which provides
telemarketing services and various administrative and other services to the
Company.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The following report of the Compensation Committee and the performance graph
that appears immediately after such report shall not be deemed to be soliciting
material or to be filed with the Securities and Exchange Commission under the
Securities Act of 1933 or the Securities Exchange Act of 1934 or incorporated by
reference in any document so filed.
Overview
800-JR Cigar, Inc.'s executive compensation programs are designed to
attract, retain and motivate the broad based executive talent required to
achieve its business objectives and increase stockholder value. The Company's
executive compensation program is administrated by the Executive Committee of
the Board of Directors (the "Committee") which is comprised of the individuals
listed above. Total compensation for the Company's executive officers consists
of a base salary and long-term incentives consisting of stock options. The
Committee annually reviews the competitiveness of the Executive Compensation
programs.
Base Salary
In 1998, the Company capped all executive base salaries at a rate of no
more than $200,000 per year. The Company took this action to promote equality
among the founding group of owner/managers and to stabilize fixed executive
compensation costs. As such, the Company was able to focus its executive
resources on managing the business and maximizing earnings per share and cash
flow performance.
Over time, the Company intends to establish base salary levels based
upon competitive market pay rates, each individual's role in the Company and
each individual executive's performance over time. Consequently, employees
assuming greater responsibilities and/or employees with higher levels of
sustained performance over time will be paid correspondingly higher salaries.
Salaries for executives will be reviewed annually based on a variety of
factors, including individual performance, market salary levels for comparable
positions within comparable companies and the Company's overall financial
results. Salary increases will be granted within a pay-for-performance
framework, but not to exceed certain maximum levels based upon the applicable
position. The Company intends to target the marketplace median in setting base
pay levels over time.
1997 Long-Term Incentive Plan
Prior to its Initial Public Offering, the Board of Directors and the
Company's stockholders approved and adopted the 1997 Long-Term Incentive Plan
("the 1997 Plan"). The maximum number of shares of Common Stock that may be
subject to outstanding awards may not exceed the greater of 800,000 shares or 9%
of the aggregate number of shares of Common Stock outstanding. Awards may be
settled in cash, shares, other awards or other property, as determined by the
Committee. The number of shares received or deliverable under the 1997 Plan and
the annual per-participant limit is subject to adjustment in the event of stock
splits, stock dividends and other extraordinary corporate events.
The purpose of the 1997 Plan is to provide executive officers
(including directors who also serve as executive officers), key employees,
consultants and other service providers with additional incentives by enabling
such persons to increase their ownership interests in the Company. Individual
awards under the 1997 Plan may take the form of one or more of: (i) either
incentive stock options ("ISOs") or non-qualified stock options ("NQSOs"); (ii)
stock appreciation rights ("SARs"); (iii) restricted or deferred stock; (iv)
dividend equivalents; (v) bonus shares and awards in lieu of Company obligations
to pay cash compensation; and (vi) other awards the value of which is based in
whole or in part upon the value of the Common Stock. Upon a change of control
the Company (as defined in the Plan), certain conditions and restrictions
relating to an award with respect to the exercisability or settlement of such
award will be accelerated.
<PAGE>
The Compensation Committee administers the 1997 Plan and generally
selects the individuals who will receive awards and the terms and conditions of
those awards including exercise prices, vesting and forfeiture conditions,
performance conditions and periods during which awards will remain outstanding.
The number of shares deliverable upon exercise of ISOs is limited to 800,000,
provided that shares of Common Stock that are attributable to ISOs that have
expired, terminated or been canceled or forfeited or otherwise terminate without
delivery of shares are available for issuance or use in connection with future
ISOs. The 1997 Plan also provides that no participant may be granted in any
calendar year awards settleable by delivery of more than 500,000 shares, and
limits payment under cash-settled awards in any calendar year to an amount equal
to the fair market value of that number of shares.
The 1997 Plan will remain in effect until terminated by the Board of
Directors. The 1997 Plan may be amended by the board of Directors without the
consent of the stockholders of the Company, except that any amendment, although
effective when made, will be subject to stockholder approval if required by any
Federal or State law or regulation or by the rules of any stock exchange or
automated quotation system on which the Common Stock may then be listed or
quoted.
Concurrently with the Company's initial public offering, NQSO's to
purchase a total of 450,000 shares of Common Stock of the Company were granted
to various employees, each of which have an exercise price of $17.00. These
options vest equally over a three-year period commencing on June 25, 1998, and
generally will expire on the earlier of 10 years after the date grant or three
months after termination of employment. If termination is for cause, all options
will terminate immediately.
1997 Non-Employee Directors' Stock Plan
Prior to its Initial Public Offering, the Board of Directors and the
Company's Stockholders approved the 1997 Non-Employee Directors' Stock Plan (the
"Directors' Plan"), which provides for (i) the automatic grant to each
non-employee director serving at the commencement of the Offering of an option
to purchase 10,000 shares, and (ii) thereafter, the automatic grant to each
newly elected non-employee director of an option to purchase 10,000 shares upon
such person's initial election as a director; provided, however, that the number
of options which may be granted to newly elected non-employee directors upon
such person's initial election after the commencement of the Offering may be
altered by the Board. A total of 100,000 shares are reserved for issuance under
the Directors' Plan.
401(k) Plan
During 1997, the Board of Directors adopted a defined contribution plan (401(k))
for all eligible employees. The plan provides for discretionary contributions by
the Company based on the performance of the Company. In November 1998, the
Company contributed an amount equal to 100% of the first 5% of salaries that the
employees contribute totaling $196,000. The Company made no contributions to the
plan in 1997.
1997 Employee Stock Purchase Plan
During 1997, the Board of Directors adopted, and the Company's Stockholders
approved, the 1997 Employee Stock Purchase Plan, effective on July 1, 1997. This
plan permits eligible employees of the Company and its subsidiaries (generally
all full-time employees who have completed one year of service) to purchase
shares of Common Stock at a discount. Employees who elect to participate will
have amounts withheld through payroll deduction during six-month purchase
periods. At the end of each purchase period, accumulated payroll deductions will
be used to purchase stock at a price equal to 85% of the market price at the
beginning of the period or the end of the period, whichever is lower. Stock
purchased under the plan will be subject to a six-month holding period. The
Company has reserved 300,000 shares of Common Stock for issuance under this
plan. During 1998, 2,146 shares were issued under the plan and remain
outstanding at December 31, 1998. No shares were purchased in 1997.
Summary
The Committee believes that the Company's executive compensation
program must continually provide compensation potential of such significance
<PAGE>
that individuals of exceptional talent and skills are motivated to join and
remain with the Company and to perform in an exceptional manner. By ensuring
that such persons are managing the Company's operations, the long-term interests
of stockholders will be best served. The actions taken by the Committee for 1998
were consistent with the focus and the principles outlines above.
Lew Rothman (Chairman)
LaVonda Rothman
Maureen Colleton
April 12, 1999
STOCK PERFORMANCE GRAPH AND TABLE
The following graph compares the percentage change in the Company's
Common Stock to the cumulative total return of the Standard & Poor's 500 Stock
Index and the Company's peer group since the Company's Common Stock was
registered pursuant to Section 12 of the Securities Exchange Act, assuming the
investment of $100 on June 26, 1997.
The following table was represented by a line chart in the printed
material.
STARTING
BASIS
DESCRIPTION June 1997 December 1997 December 1998
800 JR CIGAR INC (%) 47.06 -7.00
800 JR CIGAR INC ($) $100.00 $147.06 $136.76
S & P 500 (%) 15.53 28.28
S & P 500 ($) $100.00 $115.53 $148.55
S & P Smallcap 600 (%) 17.55 2.73
S & P Smallcap 600 ($) $100.00 $117.55 $120.76
PEER GROUP ONLY (%) -15.43 -45.82
PEER GROUP ONLY ($) $100.00 $84.57 $45.81
PEERS + YOUR COMPANY (%) -9.04 -40.65
PEERS + YOUR COMPANY ($) $100.00 $90.96 $53.98
The performance of the Company's Common Stock reflected above is not
necessarily indicative of future performance of the Common Stock. The total
return on investment (change in the year-end stock price plus reinvested
dividends) for the period shown for the Company, the S&P 500 Index and the
Company's peer group is based on the stock price or composite index at June 26,
1997.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 6, 1998, certain
information concerning the ownership of the Company's Common Stock by (i) each
person known to the Company to be the beneficial owner of more than 5% of the
Company's Common Stock, (ii) each Director and nominee for Director, (iii) each
executive officer of the Company named in the Summary Compensation Table and
(iv) the Company's executive officers and Directors as a group. Except as
otherwise indicated, the address of each such person is c/o 800-JR Cigar, Inc.,
301 Route 10 East, Whippany, New Jersey 07981. Unless otherwise indicated, the
named beneficial owner has sole voting and investment power with respect to the
shares beneficially owned by him or her.
Name Number of Common Shares and Share Equivalents 3 % of Ownership 1
- --------------------------------------------------------------------------------
Lew Rothman 2 9,333,333 72.35%
LaVonda M. Rothman 2 9,333,333 72.35%
Jane Vargas 23,333 *
Michael E. Colleton 23,333 *
Maureen Colleton 23,333 *
John Oliva 57,100 *
Stephen Bloom 12,000 *
John F. Barry, Jr. 4,000 *
All Executive Officers and 9,509,765 73.71%
Directors as a group (8 persons)
(1) Represents percent of shares outstanding based on 12,752,146 shares
outstanding as of April 6, 1999.
(2) Includes (i) 131,040 shares of Common Stock held by LaVonda M. Rothman and
Lew Rothman, as Trustees, and Samuel Bornstein, as Special Trustee, of a
trust f/b/o Shane Rothman (the "Shane Rothman Trust"), created under a
trust agreement dated November 1, 1994, made by Lewis Irving Rothman, as
Grantor (the "Lewis Irving Rothman Children's Trust Agreement #1"), (ii)
131,040 shares of Common Stock held by LaVonda M.Rothman and Lew Rothman,
as Trustees, and Samuel Bornstein, as Special Trustee, of a trust f/b/o
Marni Rothman created under the Lewis Irving Rothman Children's Trust
Agreement #1, (iii) 131,040 shares of Common Stock held by LaVonda M.
Rothman and Lew Rothman, as Trustees, and Samuel Bornstein, as Special
Trustee, of a trust f/b/o Samantha Rothman (the "Samantha Rothman Trust")
created under the Lewis Irving Rothman Children's Trust Agreement #1 and
(iv) 131,040 shares of Common Stock held by LaVonda M. Rothman and Lew
Rothman, as Trustees, and Samuel Bornstein, as Special Trustee, of a trust
f/b/o Luke Rothman (the "Luke Rothman Trust") created under the Lewis
Irving Rothman Children's Trust Agreement #1, which may be deemed to be
beneficially owned by the names person but as to which the named person
disclaims beneficial ownership.
(3) The share equivalents include previously issued stock options totaling
148,665 shares of which 74,333 shares vested on June 27, 1998 and the
remaining balance of 74,332 will vest on June 27, 1999.
* % of Ownership is less than 1%.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Services
During 1997, the Company entered into a five year contract with MC
Management, Inc. ("MC Management"), for the performance on behalf of the Company
of various administrative and other services, including, among other things,
maintaining customer lists and banking records, preparing quarterly and annual
payroll and sales tax returns, providing general ledger accounting services,
processing account receivable and payable, making payroll distributions and
providing telemarketing services. MC Management receives a management fee from
the Company equal to 1.0% of the Company's gross cigarette sales and between
0.5% and 3.1% of the Company's gross sales of all other products marketed by the
Company. In consideration of MC Management's agreement to enter into the
five-year contract, the Company paid a signing bonus to MC Management in the
amount of $1.0 million.
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company, upon the recommendation of the
Audit Committee, has appointed the firm of Ernst & Young LLP to serve as
independent auditors of the Company for the fiscal year ended December 31, 1999,
subject to ratification of this appointment by the stockholders of the Company.
Ernst & Young LLP have served as independent auditors of the Company for three
years and are considered by management of the Company to be well qualified. The
firm has advised the Company that neither it nor any member thereof has any
financial interest, direct or indirect, in the Company or any of its
subsidiaries in any capacity.
One or more representatives of Ernst & Young LLP will be present at
this year's Annual Meeting of Stockholders, will have an opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.
Ratification of the appointment of the independent auditors requires
the affirmative vote of a majority of the shares of Common Stock of the Company
voting in person or by proxy at the Annual Meeting of Stockholders. If
stockholders should not ratify the appointment of Ernst & Young LLP, the Board
of Directors will reconsider the appointment.
The Board of Directors recommends a vote FOR the proposal to ratify the
appointment of Ernst & Young LLP as independent auditors of the Company for the
1999 fiscal year. Proxies received by the Board of Directors will be so voted
unless stockholders specify in their proxies a contrary choice.
REPORT ON FORM 10-K
The Company filed its Annual Report on Form 10-K for the year ended
December 31, 1998 with the Securities and Exchange Commission on March 31, 1999.
A copy of the report, including any financial statements and schedules and a
list describing any exhibits not contained therein, may be obtained without
charge. Written requests for copies of the report should be directed to Investor
Relations, 800-JR Cigar, Inc., 301 Route 10 East, Whippany, New Jersey 07981.
In addition, a copy of the Report 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, NW, Washington, DC 20549.
Copies also may be obtained at prescribed rates at the Commission" regional
office in New York located at 7 World Trade Center, 15th Floor, New York, New
York 10048.
A copy of the Company's 1998 Annual Report accompanies this Proxy
Statement.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposal to be presented by a stockholder at the Company's 2000
Annual Meeting of Stockholders must be received by the Company no later than
(December 15, 1999), so that it may be considered by the Company for inclusion
in its proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no matters that are expected to be
presented at the Annual Meeting other than those described in this Proxy
Statement. Should any other matter properly come before the Annual Meeting,
however, the persons named in the form of proxy accompanying this Proxy
Statement will vote all shares represented by proxies in accordance with their
best judgement on such matters.
By Order of the Board of Directors,
LaVonda Rothman
Secretary
Whippany, New Jersey
April 12, 1999
