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EXHIBIT 99(a)(5)(1)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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:
AARON PARNES, :
:
Plaintiff, :
:
- against - :
:
LEW ROTHMAN, LAVONDA M. ROTHMAN, BERNIE :
ROSENBLUM, MAUREEN COLLETON, JOHN OLIVIA, :
JANE VARGAS, JOHN F. BARRY, JR., and :
800-JR CIGAR, INC., :
:
Defendants, :
:
:
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CLASS ACTION COMPLAINT
Plaintiff, by his attorneys, Rosenthal, Monhait, Gross & Goddess, P.A., for
his complaint against defendants, alleges upon information and belief, except
for paragraph 1 hereof, which is alleged upon knowledge, as follows:
1. Plaintiff has been the owner of shares of the common stock of 800-JR
Cigar, Inc. ("JR Cigar" or the "Company") since prior to the transaction herein
complained of and continuously to date.
2. JR Cigar is a corporation duly organized and existing under the laws of
the State of Delaware. The Company is one of the world's leading marketers and
distributors of premium cigars.
3. Defendant Lew Rothman is Chairman, President and Chief Executive Officer
of the Company.
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4. Defendant LaVonda Rothman is Lew Rothman's wife and an Executive Vice
President and Director of the Company. Lew Rothman and LaVonda Rothman are
referred to as the "Rothmans." The Rothmans, together with their affiliates, own
or control approximately 78.4% of the Company's outstanding common stock.
5. Defendant Jane Vargas is a Vice President and Director of the Company.
6. Defendants Bernie Rosenblum, Maureen Colleton, John Oliva and John F.
Barry, Jr., are Directors of the Company.
7. The individual defendants owe the public shareholders of JR Cigar the
highest fiduciary duties of good faith, fair dealing, due care, loyalty, and
full and candid disclosure.
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this action on his own behalf and as a class action,
pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all
security holders of the Company (except the defendants herein and any person,
firm, trust, corporation, or other entity related to or affiliated with any of
the defendants) and their successors in interest, who are or will be threatened
with injury arising from defendants' actions as more fully described herein.
9. This action is properly maintainable as a class action.
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10. The class is so numerous that joinder of all members is impracticable.
There are approximately 12,755,000 shares of JR Cigar common stock outstanding,
of which approximately 21.6% are owned by hundreds of holders other than the
Rothmans and their affiliates.
11. There are questions of law and fact which are common to the class
including, inter alia, the following: (a) whether defendants have breached their
fiduciary and other common law duties owed by them to plaintiff and the members
of the class; (b) whether defendants are pursuing a scheme and course of
business designed to eliminate the public securities holders of JR Cigar in
violation of the laws of the State of Delaware in order to enrich the Rothmans
at the expense and to the detriment of the plaintiff and the other public
stockholders who are members of the class; and (c) whether the class is entitled
to injunctive relief as a result of defendants' wrongful conduct.
12. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of the
plaintiff are typical of the claims of other members of the class and plaintiff
has the same interests as the other members of the class. Accordingly, plaintiff
will fairly and adequately represent the class.
13. Defendants have acted in a manner which affects plaintiff and all
members of the class alike, thereby making
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appropriate injunctive relief and/or corresponding declaratory relief with
respect to the class as a whole.
14. The prosecution of separate actions by individual members of the Class
would create a risk of inconsistent or varying adjudications with respect to
individual members of the Class, which would establish incompatible standards of
conduct for defendants, or adjudications with respect to individual members of
the Class which would, as a practical matter, be dispositive of the interests of
other members or substantially impair or impede their ability to protect their
interests.
SUBSTANTIVE ALLEGATIONS
15. On August 28, 2000, Jr. Cigar announced that it had agreed to a
proposal from the Rothmans for the acquisition by JRC Acquisition Corp., an
entity controlled by the Rothmans, of all of the shares of common stock of the
Company not held by the Rothmans and their affiliates for $13.00 per share.
16. The proposed transaction was purportedly recommended by a special
committee of purportedly independent directors. However, given the Rothman's
domination and control over the Board, any such special committee is incapable
of protecting the interests of the minority shareholders.
17. The price of $13.00 per share to be paid to the class members is unfair
and inadequate consideration because, among other things: (a) the intrinsic
value of the stock of JR
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Cigar is materially in excess of $13.00 per share, giving due consideration to
the prospects of growth and profitability of JR Cigar in light of its business,
earnings and earnings power, present and future; (b) the $13.00 per share price
offers an inadequate premium over market to the public stockholders of JR Cigar;
and (c) the $13.00 per share price is not the result of arm's length
negotiations but was fixed arbitrarily by the Rothmans to "cap" the market price
of JR Cigar stock, as part of a plan for the Rothmans to obtain complete
ownership of JR Cigar's assets and business at the lowest possible price.
18. The proposed transaction will, for inadequate consideration, deny
plaintiff and the other members of the class their right to share
proportionately in the future success of JR Cigar and its valuable assets, while
permitting the Rothmans to reap significant benefits from the transaction.
19. By reason of the foregoing acts, practices and course of conduct, the
Rothmans have breached and will breach their duty as controlling stockholders of
JR Cigar by engaging in overreaching in attempting to carry out a self-dealing
transaction at the expense of the minority shareholders. The other individual
defendants have violated their fiduciary duties to JR Cigar's minority
stockholders by acquiescing in the Rothmans' plan.
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20. Plaintiff and the other members of the class have no adequate remedy at
law.
WHEREFORE, plaintiff demands judgment against defendants, jointly and
severally, as follows:
(1) declaring this action to be a class action and certifying
plaintiff as class representative;
(2) enjoining, preliminarily and permanently, the transaction
complained of;
(3) to the extent, if any, that the transaction or transactions
complained of are consummated prior to the entry of this Court's
final judgment, rescinding such transaction or transactions, or
granting, inter alia, rescissory damages to the Class;
(4) directing that defendants pay to plaintiff and the other members
of the class all damages caused to them and account for all
profits and any special benefits obtained as a result of their
unlawful conduct;
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(5) awarding plaintiff the costs and disbursements of this action,
including a reasonable allowance for the fees and expenses of
plaintiff's attorneys and experts, and
(6) granting plaintiff such other and further relief as may be just
and proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/ (Illegible)
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P.O. Box 1070
919 N. Market Street
Suite 1401
Mellon Bank Center
Wilmington, Delaware 19801
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ, LLP
10 East 40th Street
New York, NY 10016
(212) 779-1414
