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EXHIBIT (a)(5)(i)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
LUCIA CURTI,
Plaintiff,
v.
ROBERT G. LEVIN,
CARLOS A. FUENTE, SR.,
CARLOS P. FUENTE, JR.,
MARVIN B. SHARFSTEIN,
HARVEY W. GROSSMAN, Civil Action No. 18497
MICHAEL PITKOW,
FUENTE INVESTMENT PARTNERSHIP,
HCH ACQUISITION CORP. AND
HOLT'S CIGAR HOLDINGS, INC.
Defendants.
COMPLAINT
Plaintiff alleges upon information and belief, except as to paragraph 1
which is alleged upon personal knowledge, as follows:
THE PARTIES
1. Plaintiff is the owner of shares of the common stock of Holt's Cigar
Holdings, Inc., ("Holt" or the "Company") and has been the owner of such shares
continuously since prior to the wrongs complained of herein.
2. Holt is a corporation duly existing and organized under the laws of the
State of Delaware, with its principal executive offices located at 12270
Townsend Road, Philadelphia, PA. Holt is one of the world's leading distributors
and retailers of brand name premium cigars and related accessories.
3. Defendant Robert G. Levin ("Levin") is President, Chief Executive
Officer and Chairman of the Board of Directors of Holt. Levin beneficially owns
about 47% of the outstanding common stock of Holt.
4. Defendants Carlos A. Fuente, Sr. ("Fuente Sr.") and his son Carlos P.
Fuente, Jr. ("Fuente Jr.") are directors of Holt and senior executive officers
of Fuente Cigar Ltd., the Company's major supplier. The Fuentes beneficially own
approximately 25% of the outstanding common stock of Holt.
5. Defendants Marvin B. Sharfstein, Harvey W. Grossman and Michael Pitkow
are directors of Holt.
6. The Individual Defendants are in a fiduciary relationship with
plaintiff and the other public stockholders of Holt, and owe them the highest
obligations of good faith, fair dealing, due care, loyalty and full and candid
disclosure.
7. Defendant Fuente Investment Partnership ("FIP") is a Florida
partnership which is beneficially owned by Fuente Sr. and his two children,
Fuente Jr. and Cynthia Fuente Suarez.
8. FIP and Levin have entered into an agreement which provides that Levin
will vote all of his shares of common stock for the election of two directors
nominated by FIP (currently Fuente Sr. and Fuente Jr.) and the Fuentes, through
FIP, will vote all of their shares of common stock for the remainder of the
directors to be nominated by Levin.
9. Defendant HCH Acquisition Corp. is a Delaware corporation (newly formed
for the purpose of the transaction complained of herein) which is wholly owned
by Levin and FIP.
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CLASS ACTION ALLEGATIONS
10. Plaintiff brings this action on her own behalf and as a class action,
pursuant to Court of Chancery Rule 23, on behalf of the public shareholders of
Holt (the "Class"). Excluded from the Class are defendants herein and any
person, firm, trust, corporation or other entity related to or affiliated with
any of the defendants.
11. This action is properly maintainable as a class action.
12. The Class is so numerous that joinder of all members is impracticable.
There are approximately 5.85 million shares of Holt common stock outstanding and
hundreds of class members who own Holt shares.
13. There are questions of law and fact which are common to the Class
including, inter alia, the following:
(a) whether the Individual Defendants have breached their fiduciary
and other common law duties owed by them to plaintiff and the other members
of the Class; and
(b) whether plaintiff and the other members of the Class would be
irreparably damaged were the wrongs complained of herein consummated.
14. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. Plaintiff's claims
are typical of the claims of the other members of the Class and plaintiff has
the same interests as the other members of the Class. Accordingly, plaintiff is
an adequate representative of the Class and will fairly and adequately protect
the interests of the Class.
15. The prosecution of separate actions by individual members of the Class
would create the 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
the other members not parties to the adjudications or substantially impair or
impede their ability to protect their interests.
16. Defendants have acted, or refused to act, on grounds generally
applicable to, and causing injury to, the Class and, therefore, preliminary and
final injunctive relief on behalf of the Class as a whole is appropriate.
SUBSTANTIVE ALLEGATIONS
17. On November 9, 2000, Holt announced that it had entered into a
definitive agreement to be acquired by defendant HCH Acquisition Corp., which is
wholly owned by defendants Levin and FIP. MCH Acquisition Corp., Levin, FIP,
Fuente Sr. and Fuente Jr. are hereinafter collectively referred to as the
"Buyout Group". The Buyout Group defendants collectively own and/or control
approximately 74% of the outstanding common stock of the Company.
18. Pursuant to the terms of the buyout, the public shareholders of Holt
would receive $5.50 per share in cash for each share of Holt common stock they
own.
19. At the same time that the buyout was announced, the Company also
announced record sales for the fiscal quarter ended September 30, 2000, an
increase of 6.4% over sales for the same period last year. The Company also
announced increased earnings for the quarter and for the six months ended
September 30, 2000.
20. The Buyout Group has timed the buyout to freeze out Holt's public
shareholders in order to capture for the Buyout Group defendants Holt's future
potential without paying an adequate or fair price to the Company's public
shareholders. In fact, shares of Holt traded in excess of the buyout price as
recently as July 2000.
21. The Buyout Group timed the announcement of the proposed buyout to place
an artificial lid on the market price of Holt's stock so that the market would
not reflect Holt's improving potential, thereby purporting to justify an
unreasonably low price.
22. The Buyout Group has access to internal financial information about
Holt, its true value, expected increase in true value and the benefits of 100%
ownership of Holt to which plaintiff and the Class members are not privy. The
Buyout Group is using such inside information to benefit its members in this
transaction, to the detriment of the Holt' public stockholders.
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23. The Buyout Group has clear and material conflicts of interest and is
acting to better its members' own interests at the expense of Holt's public
shareholders. The Buyout Group defendants control the Company and its proxy
machinery. They have selected and elected all of Holt's directors who are
beholden to the Buyout Group for their offices and the valuable perquisites
which they enjoy therefrom.
24. The Buyout Group, with the acquiescence of the directors of Holt, is
engaging in self-dealing and not acting in good faith toward plaintiff and the
other members of the Class. By reason of the foregoing, defendants have breached
and are breaching their fiduciary duties to the members of the Class.
25. Unless the proposed buyout is enjoined by the Court, defendants will
continue to breach their fiduciary duties owed to plaintiff and the members of
the Class to the irreparable harm of the members of the Class.
26. Plaintiff and the Class have no adequate remedy at law. WHEREFORE,
plaintiff prays for judgment and relief as follows:
A. Ordering that this action may be maintained as a class action and
certifying plaintiff as the Class representative;
B. Preliminarily and permanently enjoining defendants and all persons
acting in concert with them, from proceeding with, consummating or closing
the proposed transaction;
C. In the event the proposed buyout is consummated, rescinding it and
setting it aside or awarding rescissory damages to the Class;
D. Directing defendants to account to Class members for their damages
sustained as a result of the wrongs complained of herein;
E. Awarding plaintiff the costs of this action, including a reasonable
allowance for plaintiff's attorneys' and experts' fees;
F. Granting such other and further relief as this Court may deem just
and proper.
ROSENTHAL, MONHAIT, GROSS
& GOODESS, P.A.
By: /s/ J. A. ROSENTHAL
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Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Of Counsel:
SCHIFFRIN & BARROWAY, LLP
Marc A. Topaz
Patricia C. Weiser
Three Bala Plaza East, Suite 400
Bala Cynwyd, PA 19004
CAULEY & GELLER, LLP
One Boca Place
2255 Glades Road, Suite 421A
Boca Raton, FL 33431
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