<SUBMISSION>
<ACCESSION-NUMBER>0000912057-00-039487
<TYPE>SC TO-T
<PUBLIC-DOCUMENT-COUNT>13
<FILING-DATE>20000829
<GROUP-MEMBERS>JRC ACQUISITION CORP
<GROUP-MEMBERS>L&LR, INC.
<GROUP-MEMBERS>LAVONDA M. ROTHMAN
<GROUP-MEMBERS>LEWIS I. ROTHMAN
<SUBJECT-COMPANY>
<COMPANY-DATA>
<CONFORMED-NAME>800 JR CIGAR INC
<CIK>0001035507
<ASSIGNED-SIC>5190
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<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
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<FILM-NUMBER>712709
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>301 ROUTE 10 EAST
<CITY>WHIPPANY
<STATE>NJ
<ZIP>07981
<PHONE>2018849555
</BUSINESS-ADDRESS>
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<STATE>NJ
<ZIP>07981
</MAIL-ADDRESS>
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<STATE>NJ
<ZIP>07981
</MAIL-ADDRESS>
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<PHONE>9738849555
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<STREET1>301 ROUTE 10 EAST
<CITY>WHIPPANY
<STATE>NJ
<ZIP>07981
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<SEQUENCE>1
<FILENAME>scto-t.txt
<DESCRIPTION>TO-T
<TEXT>

<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  SCHEDULE TO
                             TENDER OFFER STATEMENT

   UNDER SECTION 14(D)(1) OR 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
                            ------------------------

                               800-JR CIGAR, INC.
                           (Name of Subject Company)

                             JRC ACQUISITION CORP.
                                   L&LR, INC.
                                LEWIS I. ROTHMAN
                               LAVONDA M. ROTHMAN
                            (Name of Filing Persons)

                         ------------------------------

                    COMMON STOCK, PAR VALUE $0.01 PER SHARE
                         (Title of Class of Securities)

                         ------------------------------

                                   282491109
                     (CUSIP Number of Class of Securities)

                         ------------------------------

                        SAMUEL B. FORTENBAUGH III, ESQ.
                          MORGAN, LEWIS & BOCKIUS LLP
                                101 PARK AVENUE
                            NEW YORK, NEW YORK 10178
                            TELEPHONE: 212-309-6000
                            FACSIMILE: 212-309-6273
          (Name, Address and Telephone Number of Person authorized to
         Receive Notices and Communications on Behalf of Filing Person)

                           CALCULATION OF FILING FEE*

<TABLE>
<S>                                      <C>
Transaction Valuation $40,123,967                    Amount of Filing Fee $8,025
</TABLE>

------------------------

*   Estimated for purposes of calculating the amount of the filing fee only.
    This calculation assumes the purchase of 3,086,459 shares of common stock,
    $0.01 par value (the "Common Stock"), of 800-JR CIGAR, Inc. at a price per
    share of Common Stock of $13.00 in cash. Such number of shares of Common
    Stock represents the number of outstanding shares of Common Stock not owned
    by Lewis I. Rothman, LaVonda M. Rothman and the Lewis Irving Rothman 1998
    Trust #1 u/a/d November 10, 1998 as of August 29, 2000. The amount of the
    filing fee, calculated in accordance with Rule 0-11 of the Securities
    Exchange Act of 1934, as amended, equals 1/50th of one percent of the value
    of the Common Stock proposed to be acquired.

/ /  Check box if any part of the fee is offset as provided by Rule 0-11 (a)(2)
     and identify the filing with which the offsetting fee was previously paid.
     Identify the previous filing by registration statement number, or the Form
     or Schedule and the date of its filing.

Amount Previously Paid: Not applicable.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Date Filed: Not applicable.

/ /  Check the box if the filing relates solely to preliminary communications
     made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the
statement relates:

/X/  third party tender offer subject to Rule 14d-1.
/ /  issuer tender offer subject to Rule 13e-4.
/X/  going private transaction subject to Rule 13e-3.
/ /  amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results
of the tender offer:  / /

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
    This Tender Offer Statement on Schedule TO relates to the offer by JRC
Acquisition Corp., a Delaware corporation (the "Purchaser") and wholly owned
subsidiary of L&LR, Inc. (the "Parent"), to purchase all of the outstanding
shares of common stock, par value $0.01 per share ("Common Stock"), of 800-JR
CIGAR, Inc., a Delaware corporation (the "Company"), not already owned by Lewis
I. Rothman, LaVonda M. Rothman and the Lewis Irving Rothman 1998 Trust #1 u/a/d
November 10, 1998 (collectively, the "Parent Stockholders"), at $13.00 per
share, net to the sellers in cash, without interest, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated August 29, 2000 (the
"Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1)(i),
and in the related Letter of Transmittal, a copy of which is attached hereto as
Exhibit (a)(1)(ii) (the "Letter of Transmittal," which, as they may be amended
and supplemented from time to time, together constitute the "Offer").

    The information in the Offer to Purchase and the related Letter of
Transmittal is incorporated herein by reference in answer to items 1 through 11
and item 13 of Schedule TO, including, without limitation, all of the
information required by Schedule 13E-3 that is not included or covered by the
items in Schedule TO.

    The information in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999 (filed with the Securities and Exchange Commission
on March 31, 2000) and the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2000 (filed with the Securities and Exchange
Commission on August 9, 2000) is incorporated herein by reference in answer to
item 13 of Schedule 13e-3.

ITEM 12. MATERIALS TO BE FILED AS EXHIBITS.

<TABLE>
<S>          <C>
(a)(1)(i)    Offer to Purchase dated August 29, 2000.

(a)(1)(ii)   Letter of Transmittal.

(a)(1)(iii)  Notice of Guaranteed Delivery.

(a)(1)(iv)   Letter to Brokers, Dealers, Commercial Banks, Trust
             Companies and Other Nominees.

(a)(1)(v)    Letter to Clients for use by Brokers, Dealers, Commercial
             Banks, Trust Companies and Other Nominees.

(a)(1)(vi)   Guidelines for Certification of Taxpayer Identification
             Number on Substitute Form W-9.

(a)(1)(vii)  Summary Advertisement dated August 29, 2000.

(b)(1)       Credit Agreement, dated as of August 28, 2000, by and among
             JRC Acquisition Corp., L&LR, Inc., the lenders signatory
             thereto and The Chase Manhattan Bank, as administrative
             agent.

(b)(2)       Credit Agreement, dated as of August 28, 2000, by and among
             L&LR, Inc., the Company, the subsidiaries of the Company
             signatory thereto, the lenders signatory thereto and The
             Chase Manhattan Bank, as administrative agent.

(c)(1)       Written Fairness Opinion of Merrill Lynch, Pierce, Fenner &
             Smith Incorporated (incorporated by reference to
             Exhibit (c)(1) of the Solicitation/Recommendation Statement
             on Schedule 14D-9 filed by the Company on August 29, 2000).

(c)(2)       Written Fairness Presentation of Merrill Lynch, Pierce,
             Fenner & Smith Incorporated.

(c)(3)       Written Presentation of First Union Securities, Inc.

(d)(1)       Agreement and Plan of Merger, dated August 28, 2000, by and
             among the Parent, the Purchaser, the Parent Stockholders
             (for purposes of Section 6.10 thereof only) and the Company
             (incorporated by reference to Annex A of the Offer to
             Purchase attached hereto as Exhibit (a)(1)(i)).

(d)(2)       Representation Letter, dated August 28, 2000, from the Other
             Rothman Trusts to the Purchaser.

(f)          None.

(g)          None.

(h)          None.
</TABLE>
<PAGE>
                                   SIGNATURE

    After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.

Date: August 29, 2000

<TABLE>
<S>                                                    <C>  <C>
                                                       /s/ LEWIS I. ROTHMAN
                                                       ---------------------------------------------
                                                       Lewis I. Rothman

                                                       /s/ LAVONDA M. ROTHMAN
                                                       ---------------------------------------------
                                                       LaVonda M. Rothman

                                                       L&LR, INC.

                                                       By:  /s/ LEWIS I. ROTHMAN
                                                            -----------------------------------------
                                                            Name: Lewis I. Rothman
                                                            Title:  President

                                                       JRC ACQUISITION CORP.

                                                       By:  /s/ LEWIS I. ROTHMAN
                                                            -----------------------------------------
                                                            Name: Lewis I. Rothman
                                                            Title:  President
</TABLE>

    After due inquiry and to the best of my knowledge and belief, I certify that
the information required by Schedule 13E-3 with respect to the subject company
that is set forth in this statement is true, complete and correct.

Date: August 29, 2000

<TABLE>
<S>                                                    <C>  <C>
                                                       800-JR CIGAR, INC.

                                                       By:  /s/ LEWIS I. ROTHMAN
                                                            -----------------------------------------
                                                            Name: Lewis I. Rothman
                                                            Title:  Chief Executive Officer

                                                       LEWIS IRVING ROTHMAN
                                                       1998 TRUST #1 U/A/D
                                                       NOVEMBER 10, 1998

                                                       By:  /s/ SAMUEL BORNSTEIN
                                                            -----------------------------------------
                                                            Name: Samuel Bornstein
                                                            Title: Trustee
</TABLE>
<PAGE>
                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER           EXHIBIT
---------------------   -------
<S>                     <C>
(a)(1)(i)               Offer to Purchase dated August 29, 2000.

(a)(1)(ii)              Letter of Transmittal.

(a)(1)(iii)             Notice of Guaranteed Delivery.

(a)(1)(iv)              Letter to Brokers, Dealers, Commercial Banks, Trust
                        Companies and Other Nominees.

(a)(1)(v)               Letter to Clients for use by Brokers, Dealers, Commercial
                        Banks, Trust Companies and Other Nominees.

(a)(1)(vi)              Guidelines for Certification of Taxpayer Identification
                        Number on Substitute Form W-9.

(a)(1)(vii)             Summary Advertisement dated August 29, 2000.

(b)(1)                  Credit Agreement, dated as of August 28, 2000, by and among
                        JRC Acquisition Corp., L&LR, Inc., the lenders signatory
                        thereto and The Chase Manhattan Bank, as administrative
                        agent.

(b)(2)                  Credit Agreement, dated as of August 28, 2000, by and among
                        L&LR, Inc., the Company, the subsidiaries of the Company
                        signatory thereto, the lenders signatory thereto and The
                        Chase Manhattan Bank, as administrative agent.

(c)(1)                  Written Fairness Opinion of Merrill Lynch, Pierce, Fenner &
                        Smith Incorporated (incorporated by reference to Exhibit
                        (c)(1) of the Solicitation/Recommendation Statement on
                        Schedule 14D-9 filed by the Company on August 29, 2000).

(c)(2)                  Written Fairness Presentation of Merrill Lynch, Pierce,
                        Fenner & Smith Incorporated.

(c)(3)                  Written Presentation of First Union Securities, Inc.

(d)(1)                  Agreement and Plan of Merger, dated August 28, 2000, by and
                        among the Parent, the Purchaser, the Parent Stockholders
                        (for purposes of Section 6.10 thereof only) and the Company
                        (incorporated by reference to Annex A of the Offer to
                        Purchase attached hereto as Exhibit (a)(1)(i)).

(d)(2)                  Representation Letter, dated August 28, 2000, from the Other
                        Rothman Trusts to the Purchaser.

(f)                     None.

(g)                     None.

(h)                     None.
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(A)(1)(I)
<SEQUENCE>2
<FILENAME>ex-99_a1i.txt
<DESCRIPTION>EXHIBIT 99.(A)(1)(I)
<TEXT>

<PAGE>
                           OFFER TO PURCHASE FOR CASH
                     ALL OUTSTANDING SHARES OF COMMON STOCK
                                       OF
                               800-JR CIGAR, INC.
                             AT A PURCHASE PRICE OF
                                $13.00 PER SHARE
                                       BY
                             JRC ACQUISITION CORP.
                          A WHOLLY OWNED SUBSIDIARY OF
                                   L&LR, INC.

--------------------------------------------------------------------------------
 THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
      TIME, ON TUESDAY, SEPTEMBER 26, 2000, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------------

THIS OFFER IS BEING MADE PURSUANT TO THE AGREEMENT AND PLAN OF MERGER, DATED
AUGUST 28, 2000 (THE "MERGER AGREEMENT"), BY AND AMONG L&LR, INC. (THE
"PARENT"), JRC ACQUISITION CORP. (THE "PURCHASER") AND 800-JR CIGAR, INC. (THE
"COMPANY") AND EACH OF LEWIS I. ROTHMAN, LAVONDA M. ROTHMAN AND THE LEWIS IRVING
ROTHMAN 1998 TRUST #1 U/A/D NOVEMBER 10, 1998 (COLLECTIVELY, THE "PARENT
STOCKHOLDERS").

BASED ON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION OF A SPECIAL
COMMITTEE OF INDEPENDENT DIRECTORS OF THE COMPANY, THE BOARD OF DIRECTORS, HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER (EACH AS
HEREINAFTER DEFINED) AND HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS
(OTHER THAN THE PARENT, THE PURCHASER, THE PARENT STOCKHOLDERS AND THE OTHER
ROTHMAN TRUSTS (AS HEREINAFTER DEFINED)) AND UNANIMOUSLY RECOMMENDS THAT SUCH
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, A MAJORITY OF THE OUTSTANDING
SHARES NOT OWNED BY THE PARENT STOCKHOLDERS AND THE OTHER ROTHMAN TRUSTS BEING
PROPERLY TENDERED AND THE PURCHASER HAVING AVAILABLE AT THE EXPIRATION OF THE
OFFER THE FINANCING PURSUANT TO THE BRIDGE CREDIT AGREEMENT (AS HEREINAFTER
DEFINED). THE OFFER ALSO IS CONDITIONED UPON THE SATISFACTION OF OTHER TERMS AND
CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE "THE OFFER, SECTION
12--CONDITIONS TO THE OFFER."

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE MERITS OR THE FAIRNESS OF SUCH TRANSACTION
NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
                            ------------------------

                                   IMPORTANT

    Any stockholder who desires to tender all or any portion of such
stockholder's Shares (as defined herein) should either (i) complete and sign the
Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, have such stockholder's signature
thereon guaranteed if required by Instruction 1 to the Letter of Transmittal,
mail or deliver the Letter of Transmittal (or a facsimile thereof) and any other
required documents to the Depositary and either deliver the certificates
<PAGE>
for such Shares to the Depositary or tender such Shares pursuant to the
procedures for book-entry transfer set forth in "THE OFFER,
Section 3--Procedure for Tendering Shares" or (ii) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Any stockholder whose Shares are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact such broker, dealer, commercial bank, trust company or other
nominee to tender such Shares.

    Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, or who cannot
deliver all required documents to the Depositary prior to the expiration of the
Offer, may tender such Shares by following the procedures for guaranteed
delivery set forth in "THE OFFER, Section 3--Procedure for Tendering Shares."

    Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Requests for additional
copies of this Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may be directed to the Information
Agent or the Dealer Manager. A stockholder whose Shares are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank or trust company for assistance
concerning the Offer.
                            ------------------------

                      THE INFORMATION AGENT FOR THE OFFER IS:
                             D.F. KING & CO., INC.
                               ------------------

                      THE DEALER MANAGER FOR THE OFFER IS:

                          FIRST UNION SECURITIES, INC.

             The date of this Offer to Purchase is August 29, 2000
<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                 PAGE
                                                               --------
<S>                                                            <C>
SUMMARY TERM SHEET..........................................       i

INTRODUCTION................................................       1

SPECIAL FACTORS.............................................       3

1. Background of the Offer and the Merger...................       3

2. Recommendation of the Special Committee and the Board of
Directors of Company........................................       7

3. Fairness Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................      10

4. Position of the Parent Stockholders Regarding Fairness of
the Offer and the Merger....................................      14

5. Plans for the Company....................................      16

6. Purpose and Structure of the Offer and the Merger........      16

7. The Merger Agreement.....................................      17

8. Dissenters' Rights.......................................      22

THE OFFER...................................................      25

1. Terms of the Offer.......................................      25

2. Acceptance for Payment...................................      27

3. Procedure for Tendering Shares...........................      28

4. Withdrawal Rights........................................      30

5. Certain Federal Income Tax Consequences..................      31

6. Price Range of the Shares; Dividends on the Shares.......      33

7. Effect of the Offer on the Market for the Shares; Stock
   Listing; Exchange Act Registration.......................      33

8. Certain Information Concerning the Company...............      34

9. Certain Information Concerning the Parent Stockholders,
the Parent and the Purchaser................................      37

10. Source and Amount of Funds..............................      38

11. Dividends and Distributions.............................      38

12. Conditions to the Offer.................................      39

13. Certain Legal Matters...................................      40

14. Fees and Expenses.......................................      40

15. Miscellaneous...........................................      41

ANNEX A

     AGREEMENT AND PLAN OF MERGER, DATED AS OF AUGUST 28,
     2000, BY AND AMONG THE PURCHASER, THE PARENT, THE
     PARENT STOCKHOLDERS (FOR PURPOSES OF 6.10 THEREOF ONLY)
     AND THE COMPANY........................................     A-1

ANNEX B

     EXCERPTS FROM THE GENERAL CORPORATION LAW OF THE STATE
     OF DELAWARE RELATING TO THE RIGHTS OF DISSENTING
     STOCKHOLDERS PURSUANT TO SECTION 262...................     B-1
</TABLE>
<PAGE>
                               SUMMARY TERM SHEET

    JRC Acquisition Corp. is offering to purchase all shares of common stock of
800-JR CIGAR, Inc. not already owned by Lewis I. Rothman, LaVonda M. Rothman and
the Lewis Irving Rothman 1998 Trust #1 u/a/d November 10, 1998, whom we refer to
collectively as the "Parent Stockholders" in this summary term sheet, for $13.00
per share in cash. The following are some of the questions you may have, as a
stockholder of 800-JR CIGAR, Inc., followed by answers to those questions. We
urge you to carefully read the remainder of this offer to purchase and the
accompanying letter of transmittal because the information in this summary term
sheet is not complete. Additional information is contained in the remainder of
this offer to purchase and the accompanying letter of transmittal.

<TABLE>
<S>                                 <C>
WHO IS OFFERING TO PURCHASE MY
  SHARES OF COMMON STOCK?.........  This offer is being made by JRC Acquisition Corp., a
                                    newly formed Delaware corporation. JRC was formed by
                                    L&LR, Inc., a Delaware corporation owned by the Parent
                                    Stockholders. The Parent Stockholders currently own
                                    approximately 74% of the outstanding shares of common
                                    stock of 800-JR CIGAR, Inc., and certain trusts of which
                                    Lewis I. Rothman and LaVonda M. Rothman are trustees own
                                    approximately 4.4% of the outstanding shares of common
                                    stock of 800-JR CIGAR. We refer to these trusts as the
                                    "Other Rothman Trusts" in this summary term sheet. See
                                    Introduction.

HOW MUCH IS JRC OFFERING TO PAY
  AND WHAT IS THE FORM OF
  PAYMENT?........................  JRC is offering to pay $13.00 in cash for each share of
                                    common stock that it is offering to purchase. See "THE
                                    OFFER, Section 1--Terms of the Offer."

HOW MANY SHARES OF COMMON STOCK IS
  JRC OFFERING TO PURCHASE?.......  JRC is offering to purchase up to 3,086,459 shares of
                                    common stock, including the shares owned by the Other
                                    Rothman Trusts, or approximately 26% of the outstanding
                                    shares of common stock of 800-JR CIGAR in the tender
                                    offer. The Other Rothman Trusts have represented that
                                    they do not intend to tender their shares of common
                                    stock to JRC in the tender offer. See "THE OFFER,
                                    Section 1--Terms of the Offer."

HOW WILL JRC PAY FOR THE SHARES OF
  COMMON STOCK?...................  JRC intends to finance the tender offer with funds
                                    obtained from a bridge loan from a group of lenders
                                    comprised of The Chase Manhattan Bank, Fleet Bank, N.A.
                                    and European American Bank. The offer is conditioned on
                                    JRC obtaining this bridge loan. See "THE OFFER, Section
                                    10--Source and Amount of Funds."

HOW LONG DO I HAVE TO TENDER MY
  SHARES OF COMMON STOCK?.........  You may tender your shares of common stock until the
                                    tender offer expires on Tuesday, September 26, 2000, at
                                    12:00 Midnight, New York City time, unless the offer is
                                    otherwise extended pursuant to the Merger Agreement. See
                                    "THE OFFER, Section 1--Terms of the Offer."
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                 <C>
HOW WILL I BE NOTIFIED IF JRC
  EXTENDS THE TENDER OFFER?.......  If JRC decides to extend the tender offer, JRC will
                                    issue a press release by 9:00 a.m., New York City time,
                                    on the business day after the previously scheduled
                                    expiration date. See "THE OFFER, Section 1--Terms of the
                                    Offer."

ARE THERE ANY CONDITIONS TO THE
  TENDER OFFER?...................  The tender offer is subject to conditions such as:

                                    - a majority of the outstanding shares of common stock
                                    not currently owned by the Parent Stockholders and the
                                      Other Rothman Trusts, consisting of 1,281,150 shares
                                      of common stock, shall have been validly tendered and
                                      not withdrawn by the stockholders of 800-JR CIGAR
                                      prior to the expiration of the tender offer;

                                    - JRC shall have available at the expiration of the
                                    tender offer the financing pursuant to a credit
                                      agreement dated August 28, 2000, by and among L&LR,
                                      JRC and a group of lenders comprised of Chase, Fleet
                                      and European American Bank; and

                                    - the Board of Directors of 800-JR CIGAR and its Special
                                      Committee shall not have withdrawn or modified, in a
                                      manner adverse to JRC, its approval of the tender
                                      offer and its recommendation that the stockholders of
                                      800-JR CIGAR tender their shares of common stock
                                      pursuant to the tender offer.

                                    In addition, the tender offer is subject to the absence
                                    of any materially adverse change in the condition of
                                    800-JR CIGAR's business and any judicial or governmental
                                    action prohibiting the offer, and other terms and
                                    conditions. See "THE OFFER, Section 12--Conditions to
                                    the Offer."

HOW DO I TENDER MY SHARES OF
  COMMON STOCK?...................  To tender your shares of common stock, before the tender
                                    offer expires:

                                    - If your broker holds your shares of common stock in
                                    "street name," you must inform your broker of your
                                      decision to sell your shares of 800-JR CIGAR so that
                                      American Stock Transfer & Trust Company receives a
                                      confirmation of receipt of your shares of common stock
                                      by book-entry transfer.

                                    - If you hold physical share certificates (meaning you
                                    hold stock certificates issued in your name), you must
                                      deliver your share certificate(s) and a properly
                                      completed and duly executed letter of transmittal to
                                      American Stock Transfer & Trust Company at the address
                                      appearing on the back cover of this document.

                                    - You or your broker must comply with the guaranteed
                                    delivery procedure.
</TABLE>

                                       ii
<PAGE>

<TABLE>
<S>                                 <C>
                                    - In any case, American Stock Transfer & Trust Company
                                    must receive all required documents prior to 12:00
                                      Midnight, New York City time, on Tuesday, September
                                      26, 2000, or, if the tender offer is extended, the
                                      date and time to which the offer is extended.

                                    If you have any questions, you should contact the
                                    information agent or your broker for assistance. See
                                    "THE OFFER, Section 3--Procedure for Tendering Shares"
                                    and the instructions to the letter of transmittal.

ONCE I HAVE TENDERED SHARES OF
  COMMON STOCK IN THE OFFER, CAN I
  WITHDRAW MY TENDER?.............  You (or your broker if your shares of common stock are
                                    held in "street name") may withdraw any shares of common
                                    stock you have tendered at any time before 12:00
                                    Midnight, New York City time, on Tuesday, September 26,
                                    2000, or, if the tender offer is extended, the date to
                                    which the offer is extended. Unless the shares of common
                                    stock you have tendered have been previously purchased
                                    by JRC, you may also withdraw your shares of common
                                    stock after 12:00 Midnight, New York City time, on
                                    Friday, October 27, 2000. See "THE OFFER, Section 4--
                                    Withdrawal Rights."

IS THIS TENDER OFFER THE FIRST
  STEP IN A GOING PRIVATE
  TRANSACTION?....................  Yes. The tender offer by JRC is the first step in a
                                    going private transaction. Prior to the close of the
                                    tender offer, the Parent Stockholders will contribute
                                    their shares of 800-JR CIGAR to L&LR, which in turn will
                                    contribute the shares to JRC. Following the close of the
                                    tender offer, JRC will seek to merge with and into
                                    800-JR CIGAR. If JRC owns more than 90% of the
                                    outstanding shares of 800-JR CIGAR following the close
                                    of the tender offer, JRC will be able to effect this
                                    merger without obtaining the approval of the
                                    stockholders of 800-JR CIGAR. If JRC owns less than 90%
                                    of the outstanding shares of 800-JR CIGAR following the
                                    close of the tender offer, JRC will seek stockholder
                                    approval for such a merger. However, because JRC will
                                    own a majority of the outstanding shares of 800-JR
                                    CIGAR, JRC will be able to effect the merger by voting
                                    the shares it will hold without the affirmative vote of
                                    any other stockholder. If the merger takes place, L&LR,
                                    the parent of JRC, will own all of the shares of common
                                    stock of 800-JR CIGAR and all remaining stockholders of
                                    800-JR CIGAR will receive $13.00 per share. See "SPECIAL
                                    FACTORS, Section 7--The Merger Agreement; Section
                                    5--Plans for the Company."

                                    If the merger takes place, L&LR will seek to delist the
                                    shares of common stock of 800-JR CIGAR from the Nasdaq
                                    National Market and terminate registration of the shares
                                    of common stock under the Securities Exchange Act of
                                    1934. See "THE OFFER, Section 7--Effect of the Offer on
                                    the Market for the Shares; Stock Listing; Exchange Act
                                    Registration."
</TABLE>

                                      iii
<PAGE>

<TABLE>
<S>                                 <C>
WHAT WILL JRC DO IF IT DOES NOT
  SUCCEED IN ACQUIRING ALL OF THE
  OUTSTANDING SHARES OF COMMON
  STOCK OF 800-JR CIGAR IN THE
  TENDER OFFER?...................  If JRC owns 90% or more of the outstanding shares of
                                    common stock of 800-JR CIGAR following the close of the
                                    tender offer, JRC may effect a short-form merger with
                                    and into 800-JR CIGAR without obtaining the approval of
                                    the stockholders of 800-JR CIGAR. Stockholders not
                                    tendering their shares in the tender offer will receive
                                    the same amount of cash per share which they would have
                                    received had they tendered their shares in the tender
                                    offer. Each share then outstanding (other than shares
                                    held by 800-JR CIGAR, JRC and shares held by
                                    stockholders who properly perfect their dissenters'
                                    rights under the Delaware General Corporation Law) will
                                    be canceled and extinguished and converted into the
                                    right to receive $13.00 in cash, without interest.

                                    If JRC owns less than 90% of the outstanding shares of
                                    common stock of 800-JR CIGAR following the close of the
                                    tender offer, JRC may:

                                    - seek to obtain the affirmative vote of the holders of
                                    a majority of the outstanding Shares in favor of a
                                      merger of JRC with and into 800-JR CIGAR; or

                                    - seek to purchase additional shares in the open market
                                    or otherwise in order to reach the 90% threshold and
                                      employ a short-form merger. The per share
                                      consideration paid for any shares so acquired may be
                                      greater or less than the tender offer price of $13.00
                                      per share.

                                    Even if JRC seeks stockholder approval for the merger,
                                    it will be able to effect the merger without the support
                                    of any other stockholder because it will already own a
                                    majority of the outstanding shares of 800-JR CIGAR. If
                                    the merger takes place, 800-JR CIGAR no longer will be
                                    publicly owned. Even if the merger does not take place,
                                    if JRC purchases all of the tendered shares, there may
                                    be so few remaining stockholders and publicly held
                                    shares that 800-JR CIGAR common stock will no longer be
                                    eligible to be quoted on the Nasdaq National Market or
                                    on a securities exchange, there may not be a public
                                    trading market for 800-JR CIGAR stock, and 800-JR CIGAR
                                    may cease making filings with the Securities and
                                    Exchange Commission or otherwise cease being required to
                                    comply with the SEC rules relating to publicly held
                                    companies. See "SPECIAL FACTORS, Section 7--The Merger
                                    Agreement; Section 5--Plans for the Company."
</TABLE>

                                       iv
<PAGE>

<TABLE>
<S>                                 <C>
HAS THE BOARD OF DIRECTORS OF
  800-JR CIGAR ADOPTED A POSITION
  ON THE TENDER OFFER AND THE
  MERGER?.........................  The Board of Directors, including a special committee of
                                    independent directors, has unanimously approved the
                                    merger agreement, the tender offer and the proposed
                                    merger of JRC with and into 800-JR CIGAR with 800-JR
                                    CIGAR as the surviving corporation, and has determined
                                    that the merger agreement, the tender offer and the
                                    merger are fair to, and in the best interests of, the
                                    stockholders of 800-JR CIGAR (other than L&LR, JRC, the
                                    Parent Stockholders and the Other Rothman Trusts).

WHEN WILL JRC PAY FOR THE SHARES
  OF COMMON STOCK I TENDER?.......  JRC will pay the purchase price for the shares it
                                    purchases promptly after the expiration of the tender
                                    offer, or any extension of it. See "THE OFFER, Section
                                    2--Acceptance for Payment."

WHAT IS THE MARKET VALUE OF SHARES
  AS OF A RECENT DATE?............  On August 25, 2000, the last full trading day prior to
                                    the public announcement of the tender offer, the
                                    reported closing price of the common stock on the Nasdaq
                                    National Market was $10.75 per share (Symbol: JRJR). On
                                    August 28, 2000, the last full trading day for which
                                    prices were available before the commencement of the
                                    tender offer, the reported closing price of the common
                                    stock on the Nasdaq National Market was $12.88 per
                                    share. You should obtain a recent market quotation for
                                    your shares in deciding whether to tender them. See "THE
                                    OFFER, Section 6--Price Range of the Shares; Dividends
                                    on Shares."

WHO IS RESPONSIBLE FOR PAYMENT OF
  TAXES AND BROKERAGE FEES?.......  Stockholders of record who tender shares directly to
                                    American Stock Transfer & Trust Company will not be
                                    obligated to pay brokerage fees or commissions or,
                                    except as set forth in Instruction 6 of the Letter of
                                    Transmittal, stock transfer taxes on the purchase of the
                                    shares by JRC pursuant to the tender offer. However, any
                                    tendering stockholder or other payee who fails to
                                    complete and sign the Substitute Form W-9 included in
                                    the Letter of Transmittal may be subject to backup
                                    federal income tax withholding of 31% of the gross
                                    proceeds payable to such stockholder or other payee
                                    under this tender offer. See "THE OFFER, Section
                                    2--Acceptance for Payment."

IF I OBJECT TO THE PRICE BEING
  OFFERED, WILL I HAVE APPRAISAL
  RIGHTS?.........................  You will not have appraisal rights in the tender offer,
                                    but you will have appraisal rights in the subsequent
                                    merger. To perfect your available appraisal rights and
                                    have the "fair value" of your shares determined and paid
                                    to you following the completion of the appraisal process
                                    in the Delaware courts, you must not tender your shares
                                    in the tender offer, not vote in favor of the merger and
                                    otherwise comply with the requirements of Delaware law.
                                    See "SPECIAL FACTORS. Section 8--Dissenters' Rights."
</TABLE>

                                       v
<PAGE>

<TABLE>
<S>                                 <C>
WHO CAN I TALK TO IF I HAVE
  QUESTIONS?                        Our information agent, D.F. King & Co., Inc., and our
                                    dealer manager, First Union Securities, Inc., can help
                                    answer your questions regarding this tender offer. You
                                    may call our information agent toll free at (800)
                                    269-6427. Banks and brokerage firms should call our
                                    information agent collect at (212) 269-5550 with any
                                    questions. Alternatively, you may choose to call our
                                    dealer manager at (804) 782-3411.
</TABLE>

                                       vi
<PAGE>
To the Holders of Shares of Common Stock
of 800-JR CIGAR, Inc.:

                                  INTRODUCTION

    JRC Acquisition Corp., a Delaware corporation (the "PURCHASER") and a wholly
owned subsidiary of L&LR, Inc. (the "PARENT"), hereby offers to purchase all of
the outstanding shares of common stock, par value $0.01 per share (the
"SHARES"), of 800-JR CIGAR, Inc., a Delaware corporation (the "COMPANY" or
"800-JR CIGAR"), not already owned by Lewis I. Rothman and LaVonda M. Rothman
(collectively, the "ROTHMANS") and the Lewis Irving Rothman 1998 Trust #1 u/a/d
November 10, 1998 (the "1998 TRUST"), at a price of $13.00 per Share (the "OFFER
PRICE"), net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, together with any amendments or supplements hereto
or thereto, collectively constitute the "OFFER"). As used herein, the term
"PARENT STOCKHOLDERS" shall mean the Rothmans and the 1998 Trust.

    Tendering stockholders who have Shares registered in their own name and who
tender directly to the Depositary (as defined below) will not be obligated to
pay brokerage fees or commissions or, except as set forth in Instruction 6 of
the Letter of Transmittal, transfer taxes on the sale of Shares pursuant to the
Offer. The Purchaser will pay all fees and expenses of D.F. King & Co., Inc.,
which is acting as the Information Agent (the "INFORMATION AGENT"), American
Stock Transfer & Trust Company, which is acting as the Depositary (the
"DEPOSITARY"), and First Union Securities, Inc., which is acting as Dealer
Manager ("FIRST UNION"), incurred in connection with the Offer. See "THE OFFER,
Section 14--Fees and Expenses."

    The Offer is conditioned upon, among other things, a majority of the
outstanding Shares (the "MINIMUM SHARES") not currently owned by the Parent
Stockholders and certain other trusts of which the Rothmans are trustees (the
"OTHER ROTHMAN TRUSTS") on the date Shares are accepted for payment having been
validly tendered and not withdrawn prior to the expiration of the Offer (the
"MINIMUM CONDITION"). See "THE OFFER, Section 12--Conditions to the Offer." The
Company has informed the Purchaser that, as of August 4, 2000, there were
2,562,299 Shares issued and outstanding not currently owned by the Parent
Stockholders or the Other Rothman Trusts. Based on the foregoing, the Purchaser
believes that the Minimum Condition will be satisfied if 1,281,150 Shares are
validly tendered and not withdrawn prior to the expiration of the Offer.

    The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 28, 2000 (the "MERGER AGREEMENT"), by and among the Parent, the
Purchaser, the Parent Stockholders (for purposes of Section 6.10 thereof only)
and the Company, pursuant to which after the completion of the Offer and
satisfaction or waiver of all conditions to the Merger (as defined below), the
Purchaser will be merged with and into the Company and the separate corporate
existence of the Purchaser will thereupon cease. The merger, as effected
pursuant to the immediately preceding sentence, is referred to herein as the
"MERGER," and the Company as the surviving corporation of the Merger is
sometimes herein referred to as the "SURVIVING CORPORATION." At the effective
time of the Merger (the "EFFECTIVE TIME"), each Share then outstanding (other
than Shares held by the Company, the Purchaser and Shares held by stockholders
who properly perfect their dissenters' rights under Section 262 of the Delaware
General Corporation Law ("DGCL")), will be canceled and extinguished and
converted into the right to receive $13.00 in cash or any higher price per Share
paid in the Offer (the "MERGER CONSIDERATION"), without interest. See "SPECIAL
FACTORS, Section 8--Dissenters' Rights." The Merger Agreement is more fully
described in "SPECIAL FACTORS, Section 7--The Merger Agreement."

    Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of stockholders of the Company of
the Merger Agreement, if required by applicable law in order to consummate the
Merger. See "THE OFFER, Section 12--Conditions to the Offer." Under the DGCL and
pursuant to the Company's certificate of incorporation, the affirmative vote of
the holders of a

                                       1
<PAGE>
majority of the outstanding Shares is the only vote of any class or series of
the Company's capital stock that is necessary to approve the Merger Agreement
and the Merger.

    Under Section 253 of the DGCL, if a corporation owns at least 90% of the
outstanding shares of each class of a subsidiary corporation entitled to vote,
the corporation holding such stock may merge such subsidiary into itself, or
itself into such subsidiary, without any action or vote on the part of the board
of directors or the stockholders of such other corporation (a "SHORT-FORM
MERGER"). In the event that the Purchaser acquires in the aggregate at least 90%
of the outstanding Shares pursuant to the Offer or otherwise, then, at the
election of the Purchaser, a short-form merger could be effected without any
further approval of the Board of Directors of the Company or the stockholders of
the Company, subject to compliance with the provisions of Section 253 of the
DGCL. Even if the Purchaser does not own 90% of the outstanding Shares following
consummation of the Offer, the Purchaser could seek to purchase additional
shares in the open market or otherwise in order to reach the 90% threshold and
employ a short-form merger. The per share consideration paid for any Shares so
acquired may be greater or less than the Offer Price. The Purchaser presently
intends to effect a short-form merger, if permitted to do so under the DGCL. If,
however, after consummation of the Offer, the Purchaser owns less than 90% of
the then outstanding Shares, and a vote of 800-JR CIGAR's stockholders is
required under the DGCL to approve the Merger, a significantly longer period of
time will be required to effect the Merger. The Parent Stockholders currently
own an aggregate of 8,775,840 Shares, representing approximately 74% of the
outstanding Shares. Because these Shares will be contributed to the Purchaser
prior to the Expiration Date, the Purchaser will be able to effect the Merger by
voting the Shares it will hold without the affirmative vote of any other
stockholder.

    THE BOARD OF DIRECTORS OF THE COMPANY, INCLUDING THE SPECIAL COMMITTEE OF
THE BOARD OF DIRECTORS, HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND HAS
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE HOLDERS OF SHARES (OTHER THAN THE PARENT, THE PURCHASER,
THE PARENT STOCKHOLDERS AND THE OTHER ROTHMAN TRUSTS) AND UNANIMOUSLY RECOMMENDS
THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.

    Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH") has
delivered to the Special Committee (the "SPECIAL COMMITTEE") of the Board of
Directors of the Company its opinion, dated August 28, 2000 (the "FAIRNESS
OPINION"), to the effect that, as of such date and based upon the assumptions
made, matters considered and limitations on review set forth therein, the
consideration to be received by the holders of Shares pursuant to the Offer and
the Merger is fair from a financial point of view to such holders, other than
the Parent, the Purchaser, the Parent Stockholders and the Other Rothman Trusts.
The full text of the Fairness Opinion, which sets forth the assumptions made,
matters considered and limitations on the review undertaken, is attached as an
exhibit to the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 (the "SCHEDULE 14D-9"), which has been filed by the Company with
the Securities and Exchange Commission (the "COMMISSION") in connection with the
Offer and which is being mailed to holders of Shares herewith. Holders of Shares
are urged to, and should, read the Fairness Opinion carefully in its entirety.
The Fairness Opinion is directed only to the fairness of the consideration to be
received by the holders of Shares (other than the Parent, the Purchaser, the
Parent Stockholders and the Other Rothman Trusts) from a financial point of view
and does not address any other aspect of the Merger Agreement. The Fairness
Opinion does not constitute a recommendation to any holder of Shares as to
whether such holder should tender Shares pursuant to the Offer or how such
holder should vote with respect to the Merger.

THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE YOU MAKE ANY DECISION
WITH RESPECT TO THE OFFER.

                                       2
<PAGE>
                                SPECIAL FACTORS

1. BACKGROUND OF THE OFFER AND THE MERGER.

    The Purchaser is a newly formed Delaware corporation organized in connection
with the Offer and the Merger and has not carried on any activities other than
in connection with the Offer and the Merger. The Purchaser is a wholly owned
subsidiary of the Parent, a Delaware corporation formed by the Rothmans on
July 21, 2000. The outstanding shares of capital stock of the Parent are owned
38.6% by Lewis I. Rothman, 38.6% by LaVonda M. Rothman and 22.8% by the 1998
Trust. Lewis I. Rothman and LaVonda M. Rothman each own 3,387,920 Shares and the
1998 Trust owns 2,000,000 Shares of the Company. Immediately prior to the
Expiration Date, the Parent Stockholders will contribute an aggregate of
8,775,840 Shares (the "PARENT STOCKHOLDER SHARES") to the Parent, and the Parent
in turn will contribute the Parent Stockholder Shares to the Purchaser (the
"CONTRIBUTION"). The Shares held by the Other Rothman Trusts will not be
contributed to either the Parent or the Purchaser. As a result of the
Contribution, the Purchaser will own 8,775,840 Shares, or approximately 74% of
the outstanding Shares. Lewis I. Rothman is the Chief Executive Officer,
President and Chairman of the Board of the Company. LaVonda M. Rothman is the
Executive Vice President and Secretary of the Company. See "THE OFFER,
Section 9--Certain Information Concerning the Parent Stockholders, the Parent
and the Purchaser."

    ALTERNATIVE TRANSACTIONS.  The Company is one of the largest distributors
and retailers of brand name premium cigars in the United States. The Company's
primary products consist of premium cigars, mass market cigars and cigarettes,
which are distributed to retail and wholesale customers. Over the last several
years, the Company and the Rothmans have considered various alternatives to
increase stockholder value while at the same time enhancing the strategic
position of the Company, its business prospects, operations and results.

    On April 7, 2000, representatives of the Company met with its financial
advisor, First Union Securities, Inc. ("FIRST UNION"), to discuss various
strategic alternatives to maximize stockholder value, including a potential sale
of the Company and a going private transaction. At the meeting, the Company
authorized First Union to conduct a solicitation of third party interest to
determine the interest of potential strategic buyers in acquiring the Company.
First Union contacted certain parties deemed by it to have a potential interest
in acquiring the Company. Based on conversations with these parties and the fact
that such parties declined to pursue an acquisition of the Company, First Union
concluded that no strategic buyers would be interested in acquiring the Company.
First Union further concluded that no financial buyers would be interested in
acquiring the Company because of the Company's limited growth prospects, the
inability to leverage the Company's operations and the difficult business
environment for tobacco product distributors.

    GOING PRIVATE TRANSACTION.  While considering a potential sale of the
Company, due to the difficult business environment for tobacco product
distributors and the limited liquidity provided by the relatively small public
float of the Shares, the Rothmans and the Company concluded that they should
also investigate the possibility of the Company going private. Such a going
private transaction could potentially create value for the public stockholders
of the Company through a premium purchase price. On May 18, 2000, First Union
met with members of management to update them on the results of their market
check and to discuss the possibility of a going private transaction. First Union
explained that the Company was not currently benefiting from remaining public
given the waning interest of investors in the tobacco industry and the lack of
research analyst coverage of the Company. Representatives of First Union
expressed their belief that it was unlikely the Company would benefit from
significant share price expansion in the future due to the Company's limited
growth prospects. At the end of this meeting, the Rothmans expressed their
belief that a going private transaction would be in the best interests of the
Company's stockholders.

    On June 5, 2000, the Board of Directors of the Company met to discuss a
proposal by the Rothmans to acquire all of the outstanding Shares of the Company
not currently owned by the Parent Stockholders

                                       3
<PAGE>
and the Other Rothman Trusts. Representatives of First Union and Morgan,
Lewis & Bockius LLP ("MORGAN LEWIS"), legal counsel to the Rothmans, attended
the meeting. At the meeting, First Union provided examples to the Board of a
growing trend toward consolidation in the tobacco industry generally, citing the
fact that most of the publicly-held domestic manufacturers or distributors of
cigars had either been acquired or taken private during the past two years.
Representatives of First Union then presented an overview of the Rothmans'
reasons for wanting to take the Company private. They also described their
unsuccessful efforts to sell the Company to logical strategic buyers. Following
this introduction, First Union described the terms of the Rothmans' proposal to
acquire the Shares of the Company not held by the Parent Stockholders and the
Other Rothman Trusts for a price per Share of $12.00. In determining this price,
First Union performed various financial and valuation analyses on behalf of the
Rothmans. These analyses included a comparable companies trading analysis, a
comparable transaction analysis, a discounted cash flow analysis, a leveraged
buyout model and an analysis of the average premiums paid in comparable
transactions. First Union explained to the Board of Directors of the Company how
the results of all these analyses impacted the decision by the Rothmans to offer
a price of $12.00 per share. A discussion then ensued among the Board members,
First Union and Morgan Lewis regarding the proposed form of the transaction and
the anticipated means of financing such transaction. A copy of First Union's
written presentation to the Board of Directors of the Company is attached as
Exhibit (c)(3) to the Tender Offer Statement on Schedule TO (the "SCHEDULE TO")
filed by the Purchaser, the Parent and the Rothmans with the Commission and will
be available for inspection and copying at the principal executive offices of
the Company during its regular business hours by any interested holder of Shares
or representative thereof who has been designated in writing by such holder.

    Following this discussion, the Board of Directors resolved to appoint a
Special Committee consisting of the Board's three outside members, John F.
Barry, Jr., John Oliva, Sr. and Bernard Rosenblum, to evaluate the Rothmans'
proposal and to make a recommendation to the Board of Directors of the Company
regarding the proposal. The Board of Directors of the Company authorized the
Special Committee to retain independent legal and financial advisors to assist
it in evaluating the transaction. At the conclusion of the meeting, First Union
indicated that, in light of the appointment of the Special Committee, it would
cease representing the Company at that time and thereafter would act as
financial advisor to the Rothmans in connection with the proposed transaction.

    On June 8, 2000, the Special Committee retained Dewey Ballantine LLP ("DEWEY
BALLANTINE") to act as legal counsel to the Special Committee and the Company.
Dewey Ballantine then reviewed with the Special Committee the purpose and
function of the Special Committee and the fiduciary duties of the members of the
Special Committee to the stockholders of the Company.

    During the weeks of June 12 and 19, the Special Committee and Dewey
Ballantine contacted a number of investment banking firms to solicit their
interest in acting as financial advisor to the Special Committee. On June 21,
2000, the Special Committee interviewed and received presentations from two of
those investment banking firms, including Merrill Lynch. Following a discussion
of these presentations, the Special Committee resolved that it would retain
Merrill Lynch and later formally engaged Merrill Lynch to act as the Special
Committee's financial advisor pursuant to a letter agreement dated July 10,
2000.

    Beginning the week of July 10, Merrill Lynch conducted a due diligence
investigation of the Company.

    On July 11, 2000, Morgan Lewis distributed drafts of the tender offer
documents, including the Offer to Purchase and Merger Agreement, to Dewey
Ballantine and Merrill Lynch for their review and comment. Representatives of
Dewey Ballantine informed representatives of Morgan Lewis that they would review
the draft Merger Agreement to determine if significant issues, in addition to
price, were raised which would preclude agreement on a transaction.

    On July 21, 2000, the Rothmans directed Morgan Lewis to form the Parent and
the Purchaser in Delaware.

                                       4
<PAGE>
    On July 27, 2000, the Special Committee met with its legal and financial
advisors to review the proposed $12.00 per Share offer and the proposed
transaction structure. During the course of the meeting, Merrill Lynch reviewed
with the Special Committee various trends in the cigar industry and the
historical financial and public market performance of the Company and discussed
its preliminary evaluation of the proposed transaction. Dewey Ballantine then
reviewed with the Special Committee the proposed draft Merger Agreement,
including that the proposed transaction contemplated a tender offer followed by
a merger and that the Purchaser could waive, in its sole discretion, the Minimum
Condition. The Special Committee discussed with its advisors the respective
advantages and disadvantages of a merger, on the one hand, and a tender offer
followed by a merger, on the other hand. After full discussion, the Special
Committee determined (i) that it was not prepared at that time to agree to a
$12.00 per Share offer and to attempt to negotiate a per Share price higher than
$12.00 and (ii) that a waivable Minimum Condition was unacceptable. The Special
Committee authorized Merrill Lynch to contact First Union to negotiate a higher
per Share price and indicate that a waivable Minimum Condition was not
acceptable.

    On July 29, 2000, Merrill Lynch conveyed to First Union the Special
Committee's position that the Special Committee was not prepared to conclude a
transaction at $12.00 per Share and that a waivable Minimum Condition was
unacceptable. First Union responded that the Rothmans were not prepared to
increase their offer at that time but might consider a counteroffer from the
Special Committee. Merrill Lynch also indicated that it was not authorized to
propose a counteroffer.

    Representatives of First Union, Morgan Lewis and the Purchaser communicated
with each other during the day on July 29, 2000 and agreed that the Purchaser
would not react to the Special Committee until a specific counteroffer was
presented to the Purchaser either verbally or in writing by the Special
Committee or its advisors.

    Later that day, Morgan Lewis and Dewey Ballantine discussed whether the
transaction should be structured as a merger or a tender offer and the relative
advantages and disadvantages of each structure.

    On July 31, 2000, Merrill Lynch advised the Special Committee and its legal
advisor that the Rothmans would not revise their $12.00 per Share offer but
might consider a counteroffer. The Special Committee discussed various
strategies for negotiating a higher price and, after consultation with its
advisors, requested that Merrill Lynch review its analyses with respect to the
Offer and assist the Special Committee in determining an appropriate
counteroffer.

    On August 1, 2000, the Special Committee met following a brief meeting of
the Board of Directors of the Company. At this meeting, the members of the
Special Committee discussed the offer price and other issues to be raised with
the Purchaser regarding the Offer and the Merger.

    On August 2, 2000, the Special Committee met with its advisors to review the
analyses prepared by Merrill Lynch and to discuss negotiating a higher price for
the Company's stockholders. After full discussion and analysis, the Special
Committee authorized Merrill Lynch to make a counteroffer of $14.00 per Share.

    During the morning of August 3, 2000, Merrill Lynch advised First Union that
the Special Committee had carefully considered its request for a counteroffer
and had determined to make a counteroffer of $14.00 per Share.

    Later that day, First Union presented the Special Committee's counteroffer
to representatives of the Purchaser. The Purchaser indicated that although it
was willing to revise its offer to $13.00 per Share, it would not be willing to
offer a price above such amount and that $13.00 per Share was its best and final
offer. After consulting with Morgan Lewis, the Purchaser concluded that, in the
interest of time, it would require that the transaction be structured as a
tender offer, but it would agree to the Special Committee's conditions that the
Purchaser not waive the Minimum Condition and, if requested by the Special
Committee, it would extend the offer period.

                                       5
<PAGE>
    Following its meeting with the Purchaser, First Union informed Merrill Lynch
via telephone of the terms of the revised offer, including the increased offer
price of $13.00 per Share and the agreement not to waive the Minimum Condition.
During the call, First Union also indicated that the Purchaser believed the
proposal would provide liquidity to the stockholders that otherwise was
unavailable in the marketplace and would not offer a price per Share in excess
of $13.00.

    At a meeting of the Special Committee on August 4, 2000, Merrill Lynch
reported to the Special Committee and its legal advisors the terms of the
revised Offer and the fact that First Union had indicated that the Offer of
$13.00 per Share was the Purchaser's best and final offer. Merrill Lynch then
reviewed with the Special Committee its analyses based upon the $13.00 per Share
offer. The Special Committee discussed at length whether Mr. Rothman's $13.00
offer was, in fact, his best and final offer. After further discussion, the
Special Committee determined that a member of the Special Committee, Mr. Oliva,
should contact Mr. Rothman and attempt to negotiate an increased offer price.

    Later that day, Mr. Oliva, on behalf of the Special Committee, contacted
Mr. Rothman and attempted to negotiate an increase in the offer price.
Mr. Rothman, however, made clear that $13.00 per Share was his best and final
offer. Mr. Oliva indicated to Mr. Rothman that he would need to discuss the
situation further with the other members of the Special Committee and its
advisors.

    On August 7, 2000, the Special Committee met with its advisors to discuss
the $13.00 per Share offer and that, if the Special Committee was not prepared
to accept $13.00, Mr. Rothman would withdraw his proposed offer and continue to
operate the Company as a public company. Mr. Oliva reported on his discussion
with Mr. Rothman. After full discussion, including a review of Merrill Lynch's
analyses, the Special Committee determined that it was prepared to recommend
acceptance of the $13.00 per Share offer to the full Board of Directors, subject
to negotiation of a definitive merger agreement and receipt of Merrill Lynch's
financial analysis and opinion regarding the $13.00 per Share offer.

    From August 7 through August 28, 2000, the representatives of the Purchaser
and the Company and their respective legal advisors negotiated and finalized the
Merger Agreement. During the week of August 21, 2000 revised drafts of the
proposed Merger Agreement and tender offer documents were distributed to the
Special Committee.

    At a meeting of the Special Committee on August 22, 2000, Merrill Lynch
reviewed with the Special Committee its evaluation of the Offer, and Dewey
Ballantine reviewed with the Special Committee the terms and conditions of the
proposed Merger Agreement. The Special Committee adjourned and Dewey Ballantine
contacted Morgan Lewis to discuss (i) the status of the Purchaser's negotiations
with its lenders and (ii) certain additional issues regarding the proposed
Merger Agreement. The Special Committee reconvened and Dewey Ballantine reported
on its discussions with Morgan Lewis. The Special Committee determined to
adjourn and reconvene when the Purchaser's financing arrangements were
negotiated and final terms of the Merger Agreement could be considered by the
Special Committee.

    From August 22 to August 25, 2000, Morgan Lewis finalized definitive
financing documentation relating to the Offer and the Merger with bank counsel.
On August 26, 2000 revised drafts of the proposed Merger Agreement and tender
offer documents were distributed to the Special Committee.

    The Special Committee met during the morning on August 28, 2000, to review
the Offer and the terms of the Merger Agreement with its legal and financial
advisors. Merrill Lynch delivered to the Special Committee its oral opinion,
which was subsequently confirmed in writing, to the effect that, as of that date
and based on the assumptions made, matters considered and limitations on review
set forth therein, the consideration to be received by the holders of Shares
pursuant to the Offer and the Merger is fair from a financial point of view to
such holders, other than the Parent, the Purchaser, the Parent Stockholders and
the Other Rothman Trusts. A copy of the Fairness Opinion is attached as
Schedule I to the Schedule 14D-9. A copy of Merrill Lynch's written presentation
to the Special Committee has been filed with the Commission as Exhibit (c)(2) to
the Purchaser's Tender Offer Statement on Schedule TO filed with the Commission
(the "SCHEDULE TO"), and will be available for inspection and copying at the
principal

                                       6
<PAGE>
executive offices of the Company during its regular business hours by any
interested holder of Shares or representative thereof who has been designated in
writing by such holder. See "SPECIAL FACTORS, Section 3--Fairness Opinion of
Merrill Lynch." Dewey Ballantine reviewed with the Special Committee the terms
and conditions of the Merger Agreement. After a full discussion, the Special
Committee unanimously determined (i) that the Offer and the Merger are fair to
and in the best interests of the stockholders of the Company (other than the
Parent, the Purchaser, the Parent Stockholders and the Other Rothman Trusts) and
(ii) to recommend that the Board of Directors (a) approve the Offer, the Merger
and the Merger Agreement and the transactions contemplated thereby and
(b) recommend acceptance of the Offer and, if required by applicable law,
adoption of the Merger Agreement by the stockholders of the Company.

    Later that morning, the Board of Directors, including the members of the
Special Committee and its legal advisor, met to consider the recommendation of
the Special Committee. After a full discussion, the Board of Directors
unanimously determined (i) that the Offer and the Merger are fair to and in the
best interests of the stockholders of the Company (other than the Parent, the
Purchaser, the Parent Stockholders and the Other Rothman Trusts), (ii) to
approve the Offer, the Merger and the Merger Agreement and the transactions
contemplated thereby and (iii) to recommend acceptance of the Offer and, if
required by applicable law, adoption of the Merger Agreement by the stockholders
of the Company.

    Following the meeting of the Board of Directors, the Merger Agreement was
executed and delivered by the Purchaser, the Parent, the Company and the Parent
Stockholders.

    In a press release issued by the Company on August 28, 2000, the Company
announced that the Board of Directors had approved the Offer and the Merger and
signed the Merger Agreement.

    On August 29, 2000, the Purchaser commenced the Offer.

2.  RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS OF THE
    COMPANY.

    RECOMMENDATION OF THE SPECIAL COMMITTEE.  As described below, the members of
the Special Committee, consisting of Messrs. Barry, Oliva and Rosenblum,
(i) unanimously recommended that the Board of Directors approve the Merger
Agreement, the Offer and the Merger, (ii) determined that the terms of the Offer
and the Merger are fair to, and in the best interests of, the Company's
stockholders (other than the Parent, the Purchaser, the Parent Stockholders and
the Other Rothman Trusts) and (iii) determined to recommend to the Board of
Directors of the Company that the Company should recommend that such
stockholders accept the Offer and tender their Shares pursuant to the Offer.

    The Special Committee considered the following material factors, among
others, in connection with making their conclusions and recommendation:

    - The Fairness Opinion of Merrill Lynch to the effect that, as of the date
      of such opinion and based upon the assumptions made, matters considered
      and limitations on review set forth therein, the consideration to be
      received by the holders of Shares pursuant to the Offer and the Merger is
      fair from a financial point of view to such holders, other than the
      Parent, the Purchaser, the Parent Stockholders and the Other Rothman
      Trusts. STOCKHOLDERS ARE URGED TO READ MERRILL LYNCH'S FAIRNESS OPINION IN
      ITS ENTIRETY, WHICH FAIRNESS OPINION IS ATTACHED AS SCHEDULE I TO THE
      SCHEDULE 14D-9.

    - The presentations of Merrill Lynch that included various valuation
      analyses of the Company, described below under "SPECIAL FACTORS--Fairness
      Opinion of Merrill Lynch."

    - The views of the Special Committee regarding, among other things: (a) the
      financial condition, results of operations, cash flows, business and
      prospects of the Company, including the prospects of, and uncertainties
      facing, the Company if it remains independent; (b) the likelihood of
      achieving maximum long-term value as a public company; (c) the strategic
      alternatives available to the Company and the associated advantages and
      disadvantages of such alternatives; and (d) the

                                       7
<PAGE>
      likelihood that any other party would propose an acquisition or strategic
      business combination that would be more favorable to the Company and its
      stockholders than the Offer and the Merger.

    - The current and historical market prices for the Shares and the fact that
      the purchase price represents a premium of approximately 20.9% over the
      per share closing price of the Shares on August 25, 2000, the last trading
      day prior to the public announcement of the Offer and approximately 26.5%
      over the average price of the Shares over the 30 trading days prior to
      August 25, 2000. The historical market prices of the Shares during the
      time Shares have been traded are deemed relevant because they indicate the
      arms'-length trading prices of the Shares for that period as determined in
      the open market.

    - The relatively low trading volume of the Shares and the fact that the
      public float for the Shares held by the stockholders consists of only
      approximately 22% of the outstanding Shares. Because of the limited float
      and relatively low trading volume in the Shares, the Special Committee
      believed that attempts to sell significant portions of the Shares would
      cause substantial downward pressure on market prices for the Shares, and
      therefore believed that an offer by the Rothman's represents an
      opportunity for public stockholders to realize a higher price for their
      Shares than might be realized in significant market transactions.

    - The relatively thin trading market and the lack of liquidity on the Shares
      and the lack of success, due to the relatively small market
      capitalization, in attracting institutional investors to invest in, or
      research analysts to report on, the Company.

    - Ownership by the Parent Stockholders and the Other Rothman Trusts of
      approximately 78% of the currently outstanding common stock of the Company
      and the effects of such ownership on the alternatives available to the
      Company.

    - The recent and historical results of operations and financial condition of
      the Company and the business strategy, projections and prospects of the
      Company, including increased competition. Recent and historical adverse
      economic and other developments in the tobacco industry.

    - Trends in the cigar industry, including the fact that the decline in
      premium cigar demand coupled with the proliferation of lower margin
      products have caused earnings growth to decline.

    - The fact that consummation of the Offer and the Merger will preclude the
      stockholders of the Company, other than the Parent Stockholders, from
      participating in any future growth of the Company. In the view of the
      Special Committee, however, this loss of opportunity was adequately
      reflected in the Offer Price of $13.00.

    - The fact that neither the Special Committee nor the Company are aware of
      any current offer from any person regarding the acquisition of the Company
      or any significant portion of its assets or securities.

    - The history of the negotiations between the Special Committee (none of
      whose members were employed by the Company or affiliated with the Parent,
      the Purchaser, the Parent Stockholders or the Other Rothman Trusts) and
      its representatives and the Parent and its representatives, including that
      (i) the consideration of $13.00 per Share was the result of arms-length
      negotiations, (ii) the negotiations resulted in an increase in the price
      at which the Parent and the Purchaser were prepared to acquire the Shares
      from $12.00 to $13.00 and (iii) the Special Committee's belief that
      neither the Parent nor any other third party would offer more than $13.00
      per Share.

    - The Company's prior unsuccessful efforts to solicit bids for the Company
      from strategic and financial buyers.

    - The fact that the consideration to be paid is all cash.

    - The terms and conditions of the Merger Agreement, which were determined
      through arm's-length negotiations, including that (i) the Purchaser may
      not reduce the purchase price, impose additional

                                       8
<PAGE>
      conditions to the Offer or amend or modify any other term of the Offer in
      a manner adverse to the holders of the Shares; (ii) the Minimum Condition
      requires that a majority of the outstanding Shares (other than Shares
      owned by the Parent Stockholders and the Other Rothman Trusts) be tendered
      pursuant to the Offer and such condition may not be waived except with the
      Special Committee's prior written consent; (iii) the recommendation of the
      Special Committee may be withdrawn, modified or amended to the extent the
      Special Committee believes it necessary to do so in the exercise of its
      fiduciary duties, and (iv) in the event that the Company should receive a
      proposal from a third party, the terms of the Merger Agreement permit the
      Special Committee to provide information to and negotiate with such party
      and to modify or withdraw its recommendation to the stockholders if the
      Special Committee determines that its failure to take such action would be
      inconsistent with its fiduciary duties under applicable law.

    - The fact that the Offer and the Merger have been structured to include a
      first-step cash tender offer for all outstanding Shares, thereby enabling
      stockholders who tender their Shares to promptly receive $13.00 per Share
      in cash, and the fact that any stockholders who do not tender their Shares
      will receive the same price per Share in the subsequent Merger.

    - The availability of judicial appraisal rights under Section 262 of the
      DGCL to stockholders of the Company who dissent from the Merger.

    RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY.  Based upon their
review of the Fairness Opinion and the foregoing analysis of the Special
Committee, the Board of Directors of the Company also determined that the terms
of the Offer and the Merger are fair to, and in the best interests of, the
Company's stockholders (other than the Parent, the Purchaser, the Parent
Stockholders and the Other Rothman Trusts) and resolved at its meeting on
August 28, 2000 to (i) approve the Merger Agreement, the Offer and the Merger
and (ii) recommend that such stockholders accept the Offer and tender their
Shares in response to the Offer.

    The Board of Directors, including the Special Committee, also believes that
the Offer and the Merger are procedurally fair because, among other things:
(i) the Special Committee consists of all of the directors of the Company who
are not affiliated with the Parent Stockholders, the Other Rothman Trusts, the
Parent or the Purchaser; (ii) the Special Committee retained and received advice
from independent legal counsel; (iii) the Special Committee retained Merrill
Lynch, which provided an opinion as to the fairness of the consideration to be
received by the holders of Shares (other than the Parent, the Purchaser, the
Parent Stockholders and the Other Rothman Trusts) pursuant to the Offer and the
Merger; and (iv) the consideration to be received by stockholders in the Offer
and the Merger and the terms and conditions of the Offer and the Merger were the
result of arms'-length negotiations between representatives of the Special
Committee on the one hand, and the Parent and the Purchaser, on the other hand,
and their respective advisors.

    The members of the Board of Directors, including the members of the Special
Committee, evaluated the Offer and the Merger in light of their knowledge of the
business, financial condition and prospects of the Company, and based upon the
advice of financial and legal advisors.

    The Board of Directors and the Special Committee recognized that the Merger
is not structured to require the approval of a majority of the stockholders of
the Company (other than the Parent, the Purchaser, the Parent Stockholders and
the Other Rothman Trusts), and that the Purchaser will have sufficient voting
power to approve the Merger without the affirmative vote of any other
stockholder of the Company.

    Neither the Board of Directors nor the Special Committee considered the
liquidation of the Company's assets to be a viable course of action. Therefore,
no appraisal of liquidation values was sought for purposes of evaluating the
Offer and the Merger.

                                       9
<PAGE>
    The foregoing discussion of the information and factors considered by the
Special Committee and the Board of Directors as a whole is not meant to be
exhaustive, but includes the material factors considered by them in reaching
their conclusions and recommendations. In view of the variety of factors
considered in their reaching a determination, the Board of Directors, including
the members of the Special Committee, did not find it practicable to, and did
not, quantify or otherwise assign relative weights to the specific factors
considered in reaching their conclusions and recommendations. In addition, each
member of the Board of Directors, including each member of the Special
Committee, may have given different weights to different factors. The Board of
Directors and the Special Committee viewed their positions and recommendations
as being based upon the totality of the information presented to and considered
by them.

3. FAIRNESS OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED.

    OVERVIEW.

    Pursuant to an engagement letter dated July 10, 2000 (the "Engagement
Letter"), the Special Committee retained Merrill Lynch to act as its exclusive
financial advisor in connection with assisting the Company in respect to a
possible sale of the Company and the Offer and the Merger. The Special Committee
retained Merrill Lynch to act as its exclusive financial advisor in connection
with the Offer and the Merger because Merrill Lynch is a leading investment
banking and financial advisory firm with experience in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwriting, secondary distributions of securities, private
placements and valuations for corporate purposes. Merrill Lynch has had no prior
investment advisory or corporate finance relationship with the Company.

    On August 28, 2000, Merrill Lynch delivered its oral opinion to the Special
Committee, subsequently confirmed in writing, that as of such date and based
upon the assumptions made, matters considered and limitations on the review set
forth therein, the Consideration to be received by holders of Shares pursuant to
the Transaction is fair from a financial point of view to such holders, other
than the Parent, the Purchaser, the Parent Stockholders and the Other Rothman
Trusts.

    THE FULL TEXT OF MERRILL LYNCH'S OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW SET FORTH THEREIN, IS
ATTACHED AS SCHEDULE I TO THE 14D-9 AND IS INCORPORATED BY REFERENCE HEREIN. THE
DESCRIPTION OF MERRILL LYNCH'S OPINION BELOW SETS FORTH THE MATERIAL TERMS OF
THE OPINION. HOLDERS OF SHARES ARE URGED TO, AND SHOULD READ CAREFULLY SUCH
OPINION IN ITS ENTIRETY. THE FOLLOWING SUMMARY OF MERRILL LYNCH'S OPINION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.

    Merrill Lynch's opinion is addressed to the Special Committee and addresses
only the fairness from a financial point of view of the consideration to be
received by holders of Shares, other than the Parent, the Purchaser, the Parent
Stockholders and the Other Rothman Trusts, pursuant to the Transaction. The
opinion does not address the merits of the Company's underlying decision to
engage in the Transaction. The opinion does not constitute, nor should it be
construed as, a recommendation to any stockholder as to whether he or she should
tender their shares pursuant to the Offer or as to how such holders should vote
with respect to the Merger.

    In connection with the preparation of the opinion, Merrill Lynch, among
other things:

    (a) Reviewed certain publicly available business and financial information
       relating to the Company that it deemed to be relevant;

    (b) Reviewed certain information, including financial forecasts, relating to
       the business, earnings, cash flow, assets, liabilities and prospects of
       the Company, furnished to it by the Company;

                                       10
<PAGE>
    (c) Conducted discussions with members of senior management and
       representatives of the Company and the Parent concerning the matters
       described clauses (a) and (b) immediately above;

    (d) Reviewed the market prices and valuation multiples for the Shares and
       compared them with those of certain publicly traded companies that it
       deemed to be relevant;

    (e) Reviewed historical market prices and trading activity for the Shares;

    (f) Reviewed the results of operations of the Company and compared them with
       those of certain publicly traded companies that it deemed to be relevant;

    (g) Compared the proposed financial terms of the Transaction with the
       financial terms of certain other transactions that it deemed to be
       relevant;

    (h) Participated in certain discussions and negotiations among
       representatives of the Special Committee, the Company and the Parent and
       their financial and legal advisors;

    (i) Conducted discussions with representatives of the Company and the Parent
       concerning their solicitation of offers from third parties to acquire the
       Company and the results thereof;

    (j) Reviewed the Merger Agreement and certain related documents; and

    (k) Reviewed such other financial studies and analyses and took into account
       such other matters as it deemed necessary, including its assessment of
       general economic, market and monetary conditions.

    In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to it,
discussed with or reviewed by it, or publicly available. Merrill Lynch did not
assume any responsibility for independently verifying such information or
undertaking an independent evaluation or appraisal of the assets or liabilities
of the Company nor was it furnished with any such independent evaluation or
appraisal. In addition, Merrill Lynch has not assumed any obligation to conduct,
nor did it conduct, any physical inspection of the properties or facilities of
the Company. With respect to the financial forecast information furnished to or
discussed with Merrill Lynch by the Company, Merrill Lynch has assumed that they
have been reasonably prepared and reflect the best currently available estimates
and judgment of the Company's management as to the expected future financial
performance of the Company. Merrill Lynch expresses no opinion as to such
financial forecast information or the assumptions on which they were based. In
connection with the preparation of its opinion, Merrill Lynch was not authorized
by the Company, the Special Committee of the Board of Directors or the Board of
Directors to solicit, nor has Merrill Lynch solicited, third-party indications
of interest for the acquisition of all or any part of the Company.

    Merrill Lynch's opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated, and on the information made
available to Merrill Lynch as of, the date of the opinion.

    In accordance with customary investment banking practice, Merrill Lynch
employed generally accepted valuation methods in reaching its Opinion. The
following is a summary of the material analyses utilized by Merrill Lynch in
connection with the Fairness Opinion.

    VALUATION OF THE COMPANY.

    SELECTED COMPARABLE PUBLICLY TRADED COMPANIES ANALYSIS.  Merrill Lynch
compared certain financial and operating ratios for the Company with the
corresponding financial and operating ratios for a group of publicly traded
companies engaged primarily in the specialty retail and direct mail retail
industries, that Merrill Lynch deemed to be comparable to the Company. For the
purpose of its analyses, the following companies in the specialty retail
industry were used as companies comparable to the Company: Sunglass Hut
International, Inc., Cole National Corporation, PETsMART, Inc., Jo-Ann
Stores, Inc., and Holt's Cigar Holdings, Inc. (collectively the "Specialty
Retail Comparable Companies"). Also, for the purpose of

                                       11
<PAGE>
its analysis, the following companies in the direct mail retail industry were
used as companies comparable to the Company: J. Jill Group, Inc., Coldwater
Creek, Inc., Sharper Image Corporation, Lillian Vernon Corporation,
Spiegel, Inc. and Blair Corporation (collectively, the "Direct Mail Retail
Comparable Companies", and together with the Specialty Retail Comparable
Companies, the "Comparable Companies").

    For each of the Comparable Companies, Merrill Lynch calculated stock price
as a multiple of estimated earnings per share ("EPS") for the calendar year
ended 2001. This analysis resulted in the following relevant ranges for the
Specialty Retail Comparable Companies as of August 25, 2000: a range of stock
price as a multiple of estimated 2001 EPS of 5.7x to 9.3x with a mean of 8.0x
(as compared to the Offer at 11.5x, Holt Cigar Holdings, Inc. was excluded from
the analysis) and a range of enterprise value as a multiple of latest twelve
months ("LTM") earnings before interest, taxes, depreciation and amortization
(otherwise known as "EBITDA") of 3.2x to 6.1x with a mean of 5.0x (as compared
to the Offer at 6.5x). This analysis resulted in the following relevant ranges
for the Direct Mail Retail Comparable Companies as of August 25, 2000: a range
of stock price as a multiple of 2001 EPS of 6.8x to 15.6x with a mean of 12.3x
(as compared to the Offer at 11.5x, Blair Corporation was excluded from the
analysis) and a range of enterprise value as a multiple of LTM EBITDA analysis
of 4.0x to 9.6x with a mean of 6.5x (as compared to the Offer at 6.5x, J. Jill
Group, Inc. was excluded from the analysis). Based on the foregoing, Merrill
Lynch determined a reference multiple range for LTM EBITDA for the Company of
4.0x to 6.0x and a reference multiple range for the estimated 2001 EPS for the
Company of 7.0x and 10.0x, resulting in a reference range for an implied value
per Share of $8.00 to $12.00.

    To calculate the trading multiples utilized in the Analysis of Selected
Comparable Publicly Traded Companies, Merrill Lynch used publicly available
information concerning the historical and projected financial performance of the
Comparable Companies, including public historical financial information,
consensus analysts' earnings estimates and Merrill Lynch Equity Research.

    None of the Comparable Companies is, of course, identical to the Company.
Accordingly, a complete analysis of the results of the foregoing calculations
cannot be limited to a quantitative review of such results and involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the Comparable Companies and other factors that could affect
the public trading volume of the Comparable Companies, as well as that of the
Company. In addition, the multiples of stock price to estimated 2001 earnings
multiples for the Comparable Companies is based on projections prepared by
research analysts using only publicly available information. Accordingly, such
estimates may or may not prove to be accurate.

    SELECTED COMPARABLE TRANSACTIONS ANALYSIS.  Using publicly available
information, Merrill Lynch considered selected transactions in the cigar
industry that Merrill Lynch deemed to be relevant. Specifically, Merrill Lynch
reviewed the following transactions: Swedish Match AB's offer for General Cigar
Holdings, Inc., Altadis SA's offer for Corporacio Habanos, Austria Tabak AG's
offer for Swedish Match AB's Cigarette Operations, Swisher International's offer
for its outstanding public shares (the "Swisher Transaction"), Seita SA's offer
for Consolidated Cigar Holdings, Inc., Tabacalera Cigars International SA's
offer for Havatampa Inc.'s Cigar Division and General Cigar Holding, Inc.'s
offer for Villazon & Co. (collectively, the "Comparable Transactions"). Merrill
Lynch noted that nearly all of the Comparable Transactions represent the
acquisition of control of the target company which may not be directly
comparable to the acquisition of a minority stake of a target company, as in the
Offer and the Merger. Merrill Lynch also noted that the Swisher Transaction
represents the most comparable transaction to the Offer due to the majority
ownership position of the acquiror at the time of the announcement of the
transaction.

    Using publicly available information, concerning historical financial
performance, Merrill Lynch calculated the transaction values for the target
companies as a multiple of LTM EBITDA for the Comparable Transactions for the
latest twelve months immediately preceding the announcement of each of the
respective transactions. Based on the foregoing, Merrill Lynch determined a
reference multiple range

                                       12
<PAGE>
LTM EBITDA for the Company of 6.0x to 7.5x, resulting in a reference range for
an implied value per Share of $12.00 to $15.50. The Swisher Transaction
represents 6.2x LTM EBITDA or $12.00 per share.

    No company utilized in the Selected Comparable Transaction Analysis is
identical to the Company nor is any transaction identical to the contemplated
transaction between the Company and the Purchaser. An analysis of the results
therefore requires complex considerations and judgments regarding the financial
and operating characteristics of the Company and the companies involved in the
Comparable Transactions, as well as other facts that could affect their
publicly-traded and/or transaction value. The numerical results are not in
themselves meaningful in analyzing the contemplated transaction as compared to
Comparable Transactions.

    DISCOUNTED CASH FLOW ANALYSIS.  Merrill Lynch performed a discounted cash
flow analyses (i.e., analyses of the present value of the projected unlevered
after-tax cash flows ) for the Company for the fiscal years ended 2001 through
2004, inclusive, using discount rates (determined through the use of the capital
asset pricing model) ranging from 13.0% to 15.0% and terminal value multiples of
year 2004 EBITDA ranging from 4.0x to 6.0x, based on the Comparable Companies
and current trading levels of the Company. Based upon the foregoing, Merrill
Lynch determined a reference range for an implied value per Share of $9.50 to
$12.75.

    IMPLIED SHARE PRICE BASED ON PROJECTED EARNINGS PER SHARE ANALYSIS.  Merrill
Lynch used projections provided by the Company's management or adjusted through
discussions with the Company's management for the years 2001 through 2004,
inclusive, and additionally assumed that excess cash flow during the projection
period would be used to repurchase some of the outstanding Shares to calculate a
pro forma EPS for 2001 to 2004. Merrill Lynch applied a forward price to the EPS
multiple range of 8.0x to 10.0x (based on historical trading ranges for the
Company) to the pro forma EPS to calculate the projected share price for the
Company. Using discount rates reflecting a equity cost of capital of 16.0%,
Merrill Lynch determined a reference range for an implied value per Share of
$8.50 to $11.00.

    PREMIUMS PAID ANALYSIS.  Merrill Lynch performed a premiums paid analysis
for the Company based upon the review and analysis of the range of premiums paid
in similar acquisitions of minority ownership positions for the period between
January 1, 1998 through August 25, 2000. For the period selected, Merrill Lynch
reviewed 26 selected transactions that Merrill Lynch deemed relevant where the
ownership of the acquiror in the target at the time of the announcement of the
transaction was greater than 75%. Using information obtained from Thomson
Financial Securities Data and other publicly available information, Merrill
Lynch obtained the premium of the offer price per share relative to the target
company's stock price one day, one week and four weeks prior to the date of
announcement of the transaction (the "Announcement") as well as the 52-week high
of the respective transactions. The mean and median range of premiums paid to
the target company's stock price one day, one week, and one month prior to
Announcement, as well as its 52-week high, were 19.9% and 15.4%, 21.7% and
17.3%, 37.0% and 42.2%, (12.6%) and (4.1%), respectively. Merrill Lynch applied
a premium range of 10% to 25% to the Company's stock price of $10.00 per share
on August 4, 2000 (one trading day prior to the day that the Purchaser made an
offer price of $13.00 per Share). Based on the foregoing, Merrill Lynch
determined a reference range for an implied value per Share $11.00 to $12.50.

    FINANCIAL SPONSOR INTERNAL RATE OF RETURN ANALYSIS.  Using financial
projections provided by the Company's management or adjusted through discussions
with the Company's management for the years 2001 through 2004 inclusive, Merrill
Lynch performed a financial sponsor internal rate of return valuation for the
Company. To determine the financial sponsor internal rate of return, Merrill
Lynch calculated the rate of return on an equity investment made on January 1,
2001 compared to the equity value of the Company on December 31, 2004.
Acquisition prices were calculated to yield an investment return to the
financial sponsor of approximately 25.0% to 35.0%. Based upon the foregoing
analysis, Merrill Lynch determined an implied value per share of $9.00 to
$10.00.

                                       13
<PAGE>
    The summary set forth above does not purport to be a complete description of
the analysis presented by Merrill Lynch. The preparation of a fairness opinion
is a complex process and is not necessarily susceptible to partial analysis or
summary description. Merrill Lynch believes that selecting any portion of its
analysis or of the summary set forth above, without considering the analyses as
a whole, would create an incomplete view of the process underlying Merrill
Lynch's opinion. In arriving at its opinion, Merrill Lynch considered the
results of all such analyses. The analyses performed by Merrill Lynch are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than those suggested by such analyses. The
analyses do not purport to be appraisals or to reflect the prices at which the
Company might actually be sold or the prices at which the Shares may trade at
any time in the future. Such analyses were prepared solely for the purposes of
Merrill Lynch providing its opinion to the Special Committee as to the fairness,
from a financial point of view, of the Consideration to be received by holders
of Shares pursuant to the Offer and the Merger, other than the Parent, the
Purchaser, the Parent Stockholders and the Other Rothman Trusts. Analyses based
upon forecasts or future results are not necessarily indicative of actual values
or future results, which may be significantly more or less favorable than
suggested by such analyses. Because such analyses are inherently subject to
uncertainty, being based upon numerous factors and events, including, without
limitation, factors related to general economic and competitive conditions
beyond the control of the parties or their respective advisors, none of Merrill
Lynch, the Company, the Purchaser or any other person assumes responsibility if
future results or actual values are materially different from those forecast.
The foregoing summary does not purport to be a complete description of the
analysis performed by Merrill Lynch and is qualified by reference to the written
opinion dated as of August 28, 2000 of Merrill Lynch as attached as an exhibit
to the Schedule 14D-9.

    Pursuant to the terms of the Engagement Letter, the Company will pay a fee
of $1,000,000 to Merrill Lynch for its services and for the rendering of its
opinion as to whether the Consideration to be received by holders of Shares
pursuant to the Offer and the Merger is fair from a financial point of view to
such holders, other than the Parent, the Purchaser, the Parent Stockholders and
the Other Rothman Trusts. In addition to any fees payable to Merrill Lynch
pursuant to the Engagement Letter, the Company has agreed to reimburse Merrill
Lynch for its reasonable out-of-pocket expenses in connection with its services
and for the rendering of its opinion. The Company has also agreed to indemnify
Merrill Lynch, its affiliates and each of its directors, officers, agents,
employees and controlling persons against certain liabilities, including
liabilities under U.S. federal securities laws. In addition, in the ordinary
course of business, Merrill Lynch may trade the securities of the Company for
its customers, and accordingly may hold long or short positions in such
securities.

4. POSITION OF THE PARENT STOCKHOLDERS REGARDING FAIRNESS OF THE OFFER AND THE
  MERGER.

    The Parent Stockholders have considered the analyses and findings of the
Special Committee and the Board of Directors and believe that the consideration
to be received by the stockholders pursuant to the Offer and the Merger is fair.
The Parent Stockholders base their belief on the following facts:

    - The fact that the Special Committee concluded that the terms of the Offer
      and the Merger are fair to, and in the best interests of, the stockholders
      of the Company (other than the Parent, the Purchaser, the Parent
      Stockholders and the Other Rothman Trusts).

    - The belief of First Union that the consideration to be received by the
      stockholders of the Company (other than the Parent, the Purchaser, the
      Parent Stockholders and the Other Rothman Trusts) in the Offer and the
      Merger is fair from a financial point of view to such holders.

    - Notwithstanding the fact that the Fairness Opinion of Merrill Lynch was
      provided solely for the information and assistance of the Special
      Committee and the Company's Board of Directors, and that the Parent
      Stockholders, the Purchaser and the Parent are not entitled to rely upon
      such opinion, the fact that the Special Committee received a Fairness
      Opinion from Merrill Lynch to the effect that, as of the date of such
      opinion and based upon the assumptions made, matters

                                       14
<PAGE>
      considered and limitations on review set forth therein the consideration
      to be received by the holders of Shares pursuant to the Offer and the
      Merger is fair from a financial point of view to such holders, other than
      the Parent, the Purchaser, the Parent Stockholders and the Other Rothman
      Trusts.

    - The current and historical market prices for the Shares and the fact that
      the purchase price represents a premium of approximately 20.9% over the
      per share closing price of the Shares on August 25, 2000, the last trading
      day prior to the public announcement of the Offer and approximately 26.5%
      over the average price of the Shares over the 30 trading days prior to
      August 25, 2000. The historical market prices of the Shares during the
      time Shares have been traded are deemed relevant because they indicate the
      arms'-length trading prices of the Shares for that period as determined in
      the open market.

    - The relatively thin trading market and the lack of liquidity on the Shares
      and the lack of success, due to the relatively small market
      capitalization, in attracting institutional investors to invest in, or
      research analysts to report on, the Company.

    - The recent and historical results of operations and financial condition of
      the Company and the business strategy, publicly available analyst
      estimates and prospects of the Company, including increased competition.
      Recent and historical adverse economic and other developments in the
      tobacco industry.

    - Trends in the cigar industry, including the fact that the decline in
      premium cigar demand coupled with the proliferation of lower margin
      products have caused earnings growth to decline.

    - The fact that the Parent Stockholders are not aware of any current offer
      from any person regarding the acquisition of the Company or any
      significant portion of its assets or securities.

    - The history of the negotiations between the Special Committee (none of
      whose members were employed by the Company or affiliated with the Parent,
      the Purchaser, the Parent Stockholders or the Other Rothman Trusts) and
      its representatives and the Parent and its representatives, including that
      (i) the consideration of $13.00 per Share was the result of arms-length
      negotiations, (ii) the negotiations resulted in an increase in the price
      at which the Parent and the Purchaser were prepared to acquire the Shares
      from $12.00 to $13.00 and (iii) the Special Committee's belief that
      neither the Parent nor any other third party would offer more than $13.00
      per Share.

    - The Company's prior unsuccessful efforts to solicit bids for the Company
      from strategic and financial buyers.

    - The fact that the consideration to be paid is all cash.

    - The terms and conditions of the Merger Agreement, which were determined
      through arm's-length negotiations, including that (i) the Purchaser may
      not reduce the purchase price, impose additional conditions to the Offer
      or amend or modify any other term of the Offer in a manner adverse to the
      holders of the Shares; (ii) the Minimum Condition requires that a majority
      of the outstanding Shares (other than Shares owned by the Parent
      Stockholders and the Other Rothman Trusts) be tendered pursuant to the
      Offer and such condition may not be waived except with the Special
      Committee's prior written consent; (iii) the recommendation of the Special
      Committee may be withdrawn, modified or amended to the extent the Special
      Committee believes it necessary to do so in the exercise of its fiduciary
      duties, and (iv) in the event that the Company should receive a proposal
      from a third party, the terms of the Merger Agreement permit the Special
      Committee to provide information to and negotiate with such party and to
      modify or withdraw its recommendation to the stockholders if the Special
      Committee determines that its failure to take such action would be
      inconsistent with its fiduciary duties under applicable law.

    - The fact that the Offer and the Merger have been structured to include a
      first-step cash tender offer for all outstanding Shares, thereby enabling
      stockholders who tender their Shares to promptly receive $13.00 per Share
      in cash, and the fact that any public stockholders who do not tender their
      Shares will receive the same price per Share in the subsequent Merger.

                                       15
<PAGE>
    - The availability of judicial appraisal rights under Section 262 of the
      DGCL to stockholders of the Company who dissent from the Merger.

    The Parent Stockholders did not find it practicable to assign, nor did they
assign, relative weights to the individual factors considered in reaching its
conclusion as to the fairness of the Offer and the Merger.

5. PLANS FOR THE COMPANY.

    THE MERGER.  Pursuant to the Merger Agreement, upon completion of the Offer,
the Purchaser intends to effect the Merger in accordance with the Merger
Agreement and, upon consummation of the Merger, the Company will become a
privately-held corporation. See "SPECIAL FACTORS, Section 7--The Merger
Agreement."

    Except as otherwise described in this Offer to Purchase, the Parent
Stockholders have no current plans or proposals or negotiations in which they
are engaged that relate to or would result in: (i) other than the Merger, an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company; (ii) any purchase, sale or transfer of a
material amount of assets of the Company; (iii) any change in the management of
the Company or any change in any material term of the employment contract of any
executive officer; or (iv) any other material change in the Company's corporate
structure or business.

    MANAGEMENT.  The Merger Agreement provides that the directors of the
Purchaser and the officers of the Company at the Effective Time of the Merger
will, from and after the Effective Time, be the initial directors and officers,
respectively, of the Surviving Corporation.

    DELISTING AND TERMINATION OF REGISTRATION.  The Parent Stockholders shall
cause the Company to seek delisting of the Shares from the Nasdaq National
Market and the termination of the registration of the Shares under the Exchange
Act as soon after the completion of the Offer as the requirements for such
delisting and termination are met. See "THE OFFER--Section 7--Effect of the
Offer on the Market for the Shares; Stock Listing; Exchange Act Registration."

6. PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER.

    PURPOSE.  The purpose of the Offer, the Merger and the Merger Agreement is
to provide the public stockholders a fair price for their Shares and to enable
the Parent Stockholders to acquire control of, and the entire equity interest
in, the Company. Over the last few years, a variety of alternatives have been
considered by the Rothmans and other members of the Company's management to
increase stockholder value, while at the same time enhancing the operations,
results and business prospects of the Company. After consideration of various
alternatives, the limited public float of Shares and various other financial and
economic factors, the Rothmans concluded that it is unlikely that any meaningful
improvement in share value or liquidity of the Company will occur in the
foreseeable future. The Rothmans concluded that, as a private company, 800-JR
CIGAR would have greater flexibility to invest in its future and allow senior
management of the Company to focus on the long-term interests of the Company
without concern for the impact that any action might have on operating results
or share price of the Company. The Rothmans see the Offer as an opportunity to
create value for the stockholders of the Company through a premium purchase
price.

    If the Merger is consummated, the Parent Stockholders' common equity
interest in the Company would increase to 100% and the Parent Stockholders would
be entitled to all benefits resulting from that interest. These benefits include
control over management of the Company's business and any increase in its value.
Similarly, the Parent Stockholders will also bear the risk of any losses
incurred in the operation of the Company and any decrease in the value of the
Company.

    Stockholders of the Company who sell their Shares in the Offer will cease to
have any equity interest in the Company or to participate in its earnings and
any future growth of the Company. If the Merger is

                                       16
<PAGE>
consummated, the Company's stockholders will no longer have an equity interest
in the Company and instead will have only the right to receive cash
consideration pursuant to the Merger Agreement. Similarly, the stockholders of
the Company will not bear the risk of any decrease in the value of the Company
after selling their Shares in the Offer or the subsequent Merger.

    The acquisition of the public equity interest in 800-JR CIGAR has been
structured as a cash tender offer followed by a cash merger in order, as
promptly as possible, to provide the stockholders of 800-JR CIGAR with cash for
all of their Shares and to transfer all equity interests of 800-JR CIGAR to the
Purchaser.

    STOCKHOLDER APPROVAL.  Under the DGCL, the approval of the Board of
Directors of the Company and the affirmative vote of the holders of a majority
of the outstanding Shares are required to adopt and approve the Merger Agreement
and the transactions contemplated thereby. The Company has represented in the
Merger Agreement that the execution and delivery of the Merger Agreement by the
Company and the consummation by the Company of the transactions contemplated by
the Merger Agreement have been duly authorized by all necessary corporate action
on the part of the Company, subject to the approval of the Merger by the
Company's stockholders in accordance with the DGCL. In addition, the Company has
represented that the affirmative vote of the holders of a majority of the
outstanding Shares is the only vote of the holders of any class or series of the
Company's capital stock which is necessary to approve the Merger Agreement and
the transactions contemplated thereby, including the Merger. Therefore, unless
the Merger is consummated pursuant to the short-form merger provisions under the
DGCL described below (in which case no further corporate action by the
stockholders of the Company will be required to complete the Merger), the only
remaining required corporate action of the Company will be the approval of the
Merger Agreement and the transactions contemplated thereby by the affirmative
vote of the holders of a majority of the Shares. The Purchaser intends to vote
the Shares that it owns following the close of the Offer in favor of the Merger.

    SHORT-FORM MERGER.  Section 253 of the DGCL provides that if a corporation
owns at least 90% of the outstanding shares of each class of another corporation
the corporation holding such stock may merge itself into such corporation
without any action or vote on the part of the board of directors or the
stockholders of such other corporation (a "SHORT-FORM MERGER"). In the event
that the Purchaser acquires, in the aggregate, at least 90% of the outstanding
Shares, pursuant to the Offer or otherwise, then, at the election of the
Purchaser (subject to compliance with the provisions of Section 253 of the
DGCL), a short-form merger could be effected without any approval of the Board
of Directors of the Company or the stockholders of the Company. Even if the
Purchaser does not own 90% of the outstanding Shares following consummation of
the Offer, the Purchaser could seek to purchase additional Shares in the open
market or otherwise in order to reach the 90% threshold and effect a short-form
merger. The per share consideration paid for any Shares so acquired on the open
market may be greater or less than that paid in the Offer. The Purchaser
presently intends to effect a short-form merger following the closing of the
Offer if permitted to do so under the DGCL.

7. THE MERGER AGREEMENT.

    THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT.
THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT
WHICH IS INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ATTACHED HERETO
AS ANNEX A.

    THE OFFER.  Pursuant to the Merger Agreement, the Purchaser is obligated to
commence the Offer as promptly as practicable after the date of the Merger
Agreement. On the terms and subject to the conditions of the Offer and the
Merger Agreement, the Purchaser will accept for payment and pay for all Shares
validly tendered and not withdrawn pursuant to the Offer prior to the expiration
of the Offer, or any extension of it. The obligations of the Purchaser to accept
for payment, and pay for, the Shares are

                                       17
<PAGE>
subject to the conditions specified in "THE OFFER, Section 12--Conditions to the
Offer." The Purchaser expressly reserves the right to waive any condition to the
Offer or modify the terms of the Offer except that, without the consent of the
Special Committee, the Purchaser may not (i) waive the Minimum Condition,
(ii) reduce the price per Share or change the form of consideration to be paid
pursuant to the Offer, (iii) decrease the number of Shares sought pursuant to
the Offer, (iv) add to the conditions set forth in "THE OFFER,
Section 12--Conditions to the Offer" or modify any such condition in any manner
adverse to the holders of Shares or (v) otherwise amend the Offer in any manner
adverse to the holders of Shares. Notwithstanding the foregoing, the Purchaser
may, without the consent of the Company, (x) extend the Offer for any period
required by any rule, regulation, interpretation or position of the SEC or the
staff thereof applicable to the Offer and (y) make available a "subsequent
offering period," in accordance with Rule 14d-11 of the SEC, of not less than
three nor greater than 20 business days, provided that the Purchaser shall
extend the Offer following its initial expiration upon the prior written request
of the Special Committee for such number of days as is necessary to satisfy the
conditions to the Offer set forth in "THE OFFER, Section 12--Conditions to the
Offer" but in no event shall the Purchaser be required to extend the Offer later
than October 31, 2000.

    THE MERGER.  The Merger Agreement provides that, on the terms and subject to
the conditions set forth therein, following the expiration of the Offer, the
Purchaser will be merged with and into the Company in accordance with the
applicable provisions of the DGCL. Following the Merger, the separate corporate
existence of the Purchaser shall cease and the Company will continue as the
surviving corporation.

    At the Effective Time, by virtue of the Merger and without any action on the
part of the holder of any Shares,

    - each issued and outstanding share of capital stock of the Purchaser will
      be converted into and become one fully paid and nonassessable share of
      common stock of the Surviving Corporation and will constitute the only
      outstanding shares of capital stock of the Surviving Corporation; and

    - each issued and outstanding Share immediately prior to the Effective Time
      (other than Shares owned by the Parent, the Purchaser or any other direct
      or indirect subsidiary of the Parent) shall be converted into the right to
      receive $13.00 in cash, or any higher price per Share paid pursuant to the
      Offer in cash (without interest).

    For a discussion of appraisal rights under the DGCL, see "SPECIAL FACTORS,
Section 8--Dissenters' Rights."

    STOCK PLANS.  Pursuant to the Merger Agreement, prior to the Effective Time,
the Company must use its reasonable efforts to take all actions necessary to
provide for the cancellation, effective at the Effective Time, of all of the
outstanding stock options ("OPTIONS") to purchase Shares granted under any stock
option plan of the Company (the "STOCK PLANS"). Immediately prior to the
Effective Time, the Company must use its reasonable efforts to ensure that each
Option, whether or not then vested or exercisable, is no longer exercisable for
the purchase of Shares but will instead entitle the holder of an Option, in
cancellation and settlement of the Option, to a payment in cash (subject to any
applicable withholding taxes), at the Effective Time, equal to the product of
(i) the total number of Shares subject to such Option whether or not then vested
or exercisable and (ii) the excess of the Offer Price over the exercise price
per Share subject to such Option. The Company must use its reasonable efforts to
ensure that the Stock Plans will terminate as of the Effective Time and the
provisions of any employee benefit plan providing for the issuance or grant of
Shares will be deleted as of the Effective Time. The Company must take all
reasonable steps to ensure that neither the Company nor any of its subsidiaries
will be bound, as of the Effective Time, by any Options, other options,
warrants, rights or agreements which would entitle any person, other than Parent
or its affiliates, to own or purchase any capital stock of the Surviving
Corporation or any of its subsidiaries. The Company must use its reasonable
efforts to obtain any necessary consents to ensure that, after the Effective
Time, the only rights of the holders of Options to purchase Shares in respect of
such

                                       18
<PAGE>
Options will be to receive a cash payment described above in cancellation and
settlement thereof. Prior to the Effective Time, the Board of Directors of the
Company (or, if appropriate, any committee thereof) shall adopt appropriate
resolutions and use its reasonable efforts to take all other actions necessary
to provide for termination of the Company's Employee Stock Purchase Plan, and
for the return of all employee contributions accumulated thereunder.

    REPRESENTATIONS AND WARRANTIES.  In the Merger Agreement, the Company has
made customary representations and warranties to the Parent and the Purchaser
with respect to authority to enter into the Merger Agreement and receipt of the
Fairness Opinion.

    In the Merger Agreement, each of the Parent and the Purchaser has made
customary representations and warranties to the Company with respect to, among
other things, corporate organization and qualification, organizational
documents, authority to enter into the Merger Agreement, required filings and
consents, no conflicts between the Merger Agreement and any applicable laws and
any agreements to which either the Parent or the Purchaser or either of their
assets may be bound, disclosures in tender offer documents, and availability of
funds to consummate the Offer and brokers' fees.

    CONDITIONS TO THE MERGER.  The respective obligations of the Parent and the
Purchaser, on the one hand, and the Company, on the other hand, to effect the
Merger are subject to the satisfaction of each of the following conditions:
(i) the Purchaser shall have commenced the Offer and shall have purchased,
pursuant to the terms and conditions of the Offer, the Minimum Shares; (ii) if
required by law in order to consummate the Merger, the Company shall have
obtained the necessary stockholder approval (as described below); (iii) all
material consents, waivers, approvals, authorizations or orders of third parties
to the consummation of the Merger shall have been obtained; and (iv) no statute,
rule, regulation, executive order, decree, ruling, temporary restraining order,
preliminary or permanent injunction or other order shall have been enacted,
entered, promulgated, enforced or issued by any court or governmental authority
of competent jurisdiction or shall otherwise be in effect which prohibits,
restrains, enjoins or restricts the consummation of the Merger, provided that in
the case of a decree, injunction or other order, each of the parties shall have
used reasonable efforts to prevent the entry of any such injunction or other
order and to appeal as promptly as possible any decree, injunction or other
order that may be entered.

    STOCKHOLDERS' MEETING; PROXY STATEMENT.  If required by applicable law in
order to consummate the Merger, the Company will (i) duly call, give notice of,
convene and hold a special meeting of its stockholders as promptly as
practicable following the acceptance for payment and purchase of the Minimum
Shares by the Purchaser pursuant to the Offer for the purpose of considering and
taking action upon the approval of the Merger and the adoption of the Merger
Agreement and (ii) prepare and file with the Commission, subject to the prior
approval of the Purchaser (which approval shall not be unreasonably withheld),
preliminary and final versions of a proxy statement (the "PROXY STATEMENT") and
proxy and other filings relating to such stockholders' meeting as required by
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"). Subject to
the terms of the Merger Agreement, the Company has agreed to include in the
Proxy Statement the recommendation of the Board of Directors of the Company
(based on the recommendation of the Special Committee) that stockholders of the
Company vote in favor of the approval of the Merger and the adoption of the
Merger Agreement. Notwithstanding the foregoing, the Purchaser may at its
election execute a written consent approving the Merger and the Company shall
notify stockholders of such action by the Purchaser in lieu of holding a
stockholders meeting in accordance with the by-laws of the Company and
Section 228 of the DGCL and the Company shall prepare and file with the
Commission, subject to the prior approval of the Purchaser (which approval shall
not be unreasonably withheld), preliminary and final versions of an information
statement as required by the Exchange Act.

    INDEMNIFICATION.  The Merger Agreement provides that, from and after the
Effective Time, in addition to any indemnification available to any officer or
director by the Company, the Surviving Corporation shall to the fullest extent
permitted under applicable law, indemnify and hold harmless, each present and
former director, officer or employee of the Company or any of its subsidiaries
(collectively, the

                                       19
<PAGE>
"INDEMNIFIED PARTIES") against any costs or expenses (including reasonable
attorneys' fees and disbursements), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, (i) arising out of or pertaining to the Merger Agreement or the
transactions contemplated thereby or (ii) otherwise with respect to any acts or
omissions occurring at or prior to the Effective Time, to the same extent as
provided in the Company's Certificate of Incorporation or By-Laws or any
applicable contract or agreement (including, without limitation, indemnification
agreements with the Company's directors and officers) as in effect on the date
of the Merger Agreement, in each case through the later of (x) six years from
the date of the Merger Agreement and (y) the expiration of any statute of
limitations applicable to such claim, action, suit or proceeding. In the event
of any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time),

    - any counsel retained by the Indemnified Parties for any period after the
      Effective Time shall be reasonably satisfactory to the Surviving
      Corporation,

    - after the Effective Time, the Surviving Corporation shall pay the
      reasonable fees and expenses of such counsel, promptly after statements
      therefor are received, and

    - the Surviving Corporation will cooperate in the defense of any such
      matter; PROVIDED, HOWEVER, that the Surviving Corporation shall not be
      liable for any settlement effected without its written consent (which
      consent shall not be unreasonably withheld); and PROVIDED, FURTHER, that,
      in the event that any claim or claims for indemnification are asserted or
      made within such six-year period, all rights to indemnification in respect
      of any such claim or claims shall continue until the disposition of any
      and all such claims.

    The Indemnified Parties as a group may retain only one law firm to represent
them with respect to any single action unless an Indemnified Party, based on
advice of counsel, reasonably believes that there may be, under applicable
standards of professional conduct, a conflict of interest between the positions
of any two or more Indemnified Parties.

    The Surviving Corporation has also agreed to honor and fulfill in all
respects the obligations of the Company pursuant to indemnification agreements
with the Company's directors and officers existing at or before the Effective
Time, and the Parent has agreed to guarantee the obligations of the Surviving
Corporation in connection therewith. In addition, for a period of six years
after the Effective Time, the Surviving Corporation shall maintain in effect
directors' and officers' liability insurance covering those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy on terms no less advantageous to such persons than those now applicable
to directors and officers of the Company.

    CONTRIBUTION.  Pursuant to the Merger Agreement, the Parent Stockholders
have agreed that on or prior to the Expiration Date or any extension thereof, as
the case may be, (i) the Parent Stockholders shall contribute the Parent
Stockholder Shares and shall cause the Parent to contribute the Parent
Stockholder Shares to the Purchaser, and (ii) the Parent Stockholders shall not
take any action, or omit to take any action which they could reasonably be
expected to take, if the taking of, or the omission to take, such action could
reasonably be expected to adversely affect the ability of the Purchaser to
consummate the Offer and the Merger. However, the Parent Stockholders shall only
be required to make the Contribution if all of the conditions to the Offer set
forth in "THE OFFER, Section 12--Conditions to the Offer" are satisfied unless
the failure to satisfy such conditions is a result of the Parent Stockholders
knowingly taking any action, or knowingly omitting to take any action which they
could reasonably be expected to take, if the taking of, or the omission to take,
such action could reasonably be expected to adversely affect the ability of the
Purchaser to consummate the transactions contemplated by the Merger Agreement.

                                       20
<PAGE>
    TERMINATION.  The Merger Agreement may be terminated and the transactions
contemplated therein abandoned at any time prior to the Effective Time, whether
before or after approval of the stockholders of the Company,

    - by mutual written consent of the Parent, the Purchaser and the Special
      Committee on behalf of the Company; or

    - by either the Parent or the Special Committee on behalf of the Company:

    (i) if the purchase of the Shares pursuant to the Offer is not consummated
        on or before October 31, 2000, unless the failure to consummate the
        Offer is the result of a breach of the Merger Agreement by the party
        seeking to terminate the Merger Agreement; or

    (ii) if any governmental entity issues an order, decree or ruling or takes
         any other action permanently enjoining, restraining or otherwise
         prohibiting the Merger and such order, decree, ruling or other action
         shall have become final and nonappealable; or

    - by the Parent or the Special Committee if the Special Committee determines
      in good faith that the Special Committee's fiduciary obligations under
      applicable law require the Special Committee to withdraw its
      recommendation of the Merger Agreement and the transactions contemplated
      thereby; or

    - by the Special Committee on behalf of the Company if (i) the Parent fails
      to commence the Offer, (ii) the Parent shall have terminated the Offer or
      permitted the Offer to expire without the purchase of Shares; or
      (iii) the Parent fails to purchase validly tendered Shares in violation of
      the terms of the Offer and the Merger Agreement; or

    - by either the Parent or the Special Committee if the Merger shall not have
      been consummated by January 31, 2001, provided that a party may not invoke
      this right if its failure to fulfill any obligation under the Merger
      Agreement results in the failure of the Merger to occur on or before such
      date; or

    - by the Special Committee, if there has been a material misrepresentation
      or breach of warranty in the representations and warranties made by the
      Parent or the Purchaser that cannot be cured at or prior to the Effective
      Time; or

    - by the Parent, if there has been a material misrepresentation or breach of
      warranty in the representations and warranties made by the Company that
      cannot be cured at or prior to the Effective Time; or

    - by the Parent or the Special Committee, if (i) the Special Committee shall
      have recommended to the stockholders of the Company (x) a transaction or
      series of transactions pursuant to which any person (or group of persons)
      other than the Purchaser or any affiliate of any thereof acquires or would
      acquire more than 35% of the outstanding Shares, whether from the Company
      or pursuant to a tender offer or exchange offer or otherwise, (y) any
      acquisition or proposed acquisition of the Company or any of its
      subsidiaries by a merger or other business combination (including any
      so-called "merger of equals" and whether or not the Company or any of its
      subsidiaries is the entity surviving any such merger or business
      combination) or (z) any other transaction pursuant to which any third
      party acquires or would acquire control of assets (including for this
      purpose the outstanding equity securities of subsidiaries of the Company
      and any entity surviving any merger or business combination including any
      of them) of the Company or any of its subsidiaries having a fair market
      value equal to more than 35% of the fair market value of all the assets of
      the Company and its subsidiaries, taken as a whole, immediately prior to
      such transaction (any of x, y and z above, referred to hereinafter as an
      "ALTERNATIVE TRANSACTION"); or (ii) a tender offer or exchange offer for
      35% or more of the outstanding Shares is commenced (other than by the
      Purchaser or an affiliate of the Purchaser) and recommends that the
      stockholders of the Company tender their shares in such tender offer or
      exchange offer.

                                       21
<PAGE>
    In the event of such termination, except as described below, the Merger
Agreement will become void and have no effect, without any liability or
obligation on the part of the Parent, the Purchaser or the Company.

8. DISSENTERS' RIGHTS.

APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION SET FORTH
BELOW IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES AVAILABLE
TO STOCKHOLDERS IF THE MERGER IS CONSUMMATED. STOCKHOLDERS WHO WILL BE ENTITLED
TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER WILL RECEIVE ADDITIONAL
INFORMATION CONCERNING APPRAISAL RIGHTS AND THE PROCEDURES TO BE FOLLOWED IN
CONNECTION THEREWITH BEFORE SUCH STOCKHOLDERS HAVE TO TAKE ANY ACTION RELATING
THERETO.

STOCKHOLDERS WHO SELL SHARES IN THE OFFER WILL NOT BE ENTITLED TO EXERCISE
APPRAISAL RIGHTS WITH RESPECT THERETO BUT, RATHER, WILL RECEIVE THE PRICE PAID
IN THE OFFER THEREFOR.

    Under Section 262 of the DGCL, any holder of Shares at the Effective Time (a
"REMAINING STOCKHOLDER") who does not wish to accept the Merger Consideration
pursuant to the Merger will have the right to seek an appraisal and be paid the
"fair value" of its Shares as of the Effective Time (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) judicially
determined and paid to it in cash provided that such holder complies with the
provisions of such Section 262 of the DGCL.

    The following is a brief summary of the statutory procedures to be followed
by a Remaining Stockholder in order to perfect appraisal rights under Delaware
law. This summary is not intended to be complete and is qualified in its
entirety by reference to Section 262 of the DGCL, the text of which is set forth
in ANNEX B hereto. Any Remaining Stockholder considering demanding appraisal is
advised to consult legal counsel. Appraisal rights will not be available unless
and until the Merger (or a similar merger) is consummated.

    Remaining Stockholders of record who desire to exercise their appraisal
rights must fully satisfy all of the following conditions. A written demand for
appraisal of Shares must be delivered to the Secretary of the Company
(i) before the taking of the vote on the adoption of the Merger Agreement, if
the Merger is not being effected as a short-form merger but rather is being
consummated following a vote thereon at a meeting of the Company's stockholders
(a "LONG-FORM MERGER"), and in such case such Remaining Stockholder must not
vote in favor of adoption of the Merger Agreement, or (ii) within 20 days after
the date that the Surviving Corporation mails to the Remaining Stockholders a
notice (the "NOTICE OF MERGER") to the effect that the Merger is effective and
that appraisal rights are available (and includes in such notice a copy of
Section 262 of the DGCL and any other information required thereby), if the
Merger is being effected as a short-form merger without a vote or meeting of the
Company's stockholders. If the Merger is effected as a long-form merger, a
written demand for appraisal of Shares must be made in addition to and separate
from any proxy abstaining from voting or any vote against adoption of the Merger
Agreement, and neither voting against, abstaining from voting, nor failing to
vote on the Merger Agreement will constitute a demand for appraisal within the
meaning of Section 262 of the DGCL.

    In the case of a long-form merger, any stockholder seeking appraisal rights
must (i) hold the Shares for which appraisal is sought on the date the demand is
made, (ii) continuously hold such Shares through the Effective Time, and
(iii) otherwise comply with the provisions of Section 262 of the DGCL. In the
case of both a short-form merger and a long-form merger, a demand for appraisal
must be executed by or for the stockholder of record, fully and correctly, as
such stockholder's name appears on the stock certificates. If shares are owned
of record in a fiduciary capacity, such as by a trustee, guardian or custodian,
such demand must be executed by the fiduciary. If Shares are owned of record by
more than one person, as in a

                                       22
<PAGE>
joint tenancy or tenancy in common, such demand must be executed by all joint
owners. An authorized agent, including an agent for two or more joint owners,
may execute the demand for appraisal for a stockholder of record; however, the
agent must identify the record owner and expressly disclose the fact that, in
exercising the demand, he is acting as agent for the record owner.

    A record owner, such as a broker, who holds Shares as a nominee for others,
may exercise appraisal rights with respect to the Shares held for all or less
than all beneficial owners of Shares as to which the holder is the record owner.
In such case the written demand must set forth the number of Shares covered by
such demand. Where the number of Shares is not expressly stated, the demand will
be presumed to cover all Shares outstanding in the name of such record owner.
Beneficial owners who are not record owners and who intend to exercise appraisal
rights should instruct the record owner to comply strictly with the statutory
requirements with respect to the exercise of appraisal rights before the date of
any meeting of stockholders of the Company called to approve the Merger in the
case of a long-form merger and within 20 days following the mailing of the
Notice of Merger in the case of a short-form merger.

    Remaining Stockholders who elect to exercise appraisal rights must mail or
deliver their written demands to: 800-JR CIGAR, Inc., 301 Route 10 East,
Whippany, New York, 07981, Attn: Mr. Michael E. Colleton, General Counsel. The
written demand for appraisal should specify the stockholder's name and mailing
address, the number of Shares covered by the demand and that the stockholder is
thereby demanding appraisal of such Shares.

    In the case of a long-form merger, the Company must, within ten days after
the Effective Time, provide notice of the Effective Time to all stockholders who
have demanded appraisal and complied with Section 262 of the DGCL and have not
voted for adoption of the Merger Agreement. In the case of a long-form merger,
Remaining Stockholders electing to exercise their appraisal rights under
Section 262 must not vote for the adoption of the Merger Agreement or consent
thereto in writing. Voting in favor of the adoption of the Merger Agreement, or
delivering a proxy in connection with the stockholders meeting called to adopt
the Merger Agreement (unless the proxy votes against, or expressly abstains from
the vote on, the adoption of the Merger Agreement), will constitute a waiver of
the stockholder's right of appraisal and will nullify any written demand for
appraisal submitted by the stockholder.

    Regardless of whether the Merger is effected as a long-form merger or a
short-form merger, within 120 days after the Effective Time, either the Company
or any stockholder who has demanded appraisal and complied with the required
conditions of Section 262 and who is otherwise entitled to appraisal rights may
file a petition in the Delaware Court of Chancery demanding a determination of
the fair value of the Shares of the dissenting stockholders. If a petition for
an appraisal is timely filed, after a hearing on such petition, the Delaware
Court of Chancery will determine which stockholders are entitled to appraisal
rights and thereafter will appraise the Shares owned by such stockholders,
determining the fair value of such Shares, exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest to be paid, if any, upon the amount determined to be the
fair value. In determining fair value, the Delaware Court of Chancery is to take
into account all relevant factors. In WEINBERGER V. UOP, INC., ET AL., the
Delaware Supreme Court discussed the factors that could be considered in
determining fair value in an appraisal proceeding, stating that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered and
that "[f]air price obviously requires consideration of all relevant factors
involving the value of a company." The Delaware Supreme Court stated that in
making this determination of fair value the court must consider "market value,
asset value, dividends, earnings prospects, the nature of the enterprise and any
other facts which were known or which could be ascertained as of the date of
merger which throw any light on future prospects of the merged corporation." The
Delaware Supreme Court has construed Section 262 of the DGCL to mean that
"elements of future value, including the nature of the enterprise, which are
known or susceptible of proof as of the date of the merger and not the product
of speculation, may be considered." However, the court noted that Section 262
provides that fair

                                       23
<PAGE>
value is to be determined "exclusive of any element of value arising from the
accomplishment or expectation of the merger."

    Remaining Stockholders who in the future consider seeking appraisal should
have in mind that the fair value of their Shares determined under Section 262
could be more than, the same as, or less than the Merger Consideration if they
do seek appraisal of their Shares, and that opinions of investment banking firms
as to fairness from a financial point of view are not necessarily opinions as to
fair value under Section 262 of the DGCL.

    The cost of the appraisal proceeding may be determined by the Delaware Court
of Chancery and taxed upon the parties as the Delaware Court of Chancery deems
equitable under the circumstances. Upon application of a dissenting stockholder,
the Delaware Court of Chancery may order that all or a portion of the expenses
incurred by any dissenting stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all
Shares entitled to appraisal. In the absence of such a determination or
assessment, each party bears its own expenses.

    Any Remaining Stockholder who has duly demanded appraisal in compliance with
Section 262 of the DGCL will not, after the Effective Time, be entitled to vote
the Shares for any purpose, subject to such demand, or to receive payment of
dividends or other distributions on such Shares, except for dividends or other
distributions payable to stockholders of record at a date prior to the Effective
Time.

    At any time within 60 days after the Effective Time, any former holder of
Shares shall have the right to withdraw his or her demand for appraisal and to
accept the Merger Consideration. After this period, such holder may withdraw his
or her demand for appraisal only with the consent of the Company as the
Surviving Corporation. If no petition for appraisal is filed with the Delaware
Court of Chancery within 120 days after the Effective Time, stockholders' rights
to appraisal shall cease and all stockholders shall be entitled to receive the
Merger Consideration. Inasmuch as the Company has no obligation to file such a
petition, and Parent has no present intention to cause or permit the Surviving
Corporation to do so, any stockholder who desires such a petition to be filed is
advised to file such petition on a timely basis. No petition timely filed in the
Delaware Court of Chancery demanding appraisal shall be dismissed as to any
stockholder without the approval of the Delaware Court of Chancery, and such
approval may be conditioned upon such terms as the Delaware Court of Chancery
deems just.

    Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of such rights. The
Purchaser and the Parent do not intend to grant unaffiliated stockholders of the
Company access to its corporate files or obtain and pay for counsel or appraisal
services on the behalf of such holders.

                                       24
<PAGE>
                                   THE OFFER

1. TERMS OF THE OFFER.

    Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for all Shares validly tendered, and not
withdrawn, promptly after the Expiration Date. The term "Expiration Date" shall
mean 12:00 Midnight, New York City time, on Tuesday, September 26, 2000, unless
and until the Purchaser, in accordance with the terms of the Merger Agreement,
shall have extended the period of time for which the Offer is open (but not
including any Subsequent Offering Period as defined below), in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by the Purchaser, shall expire.

    The Offer is subject to the satisfaction of certain conditions, including,
among others, the satisfaction of the Minimum Condition. See "THE OFFER,
Section 12--Conditions to the Offer," which sets forth in full the conditions to
the Offer. If the Minimum Condition is not satisfied or any of the other events
set forth in Section 12 shall have occurred or shall be determined by the
Purchaser to have occurred prior to the Expiration Date, the Purchaser reserves
the right (but shall not be obligated), subject to the terms of the Merger
Agreement and subject to complying with applicable rules and regulations of the
Commission, to (i) decline to purchase any of the Shares tendered in the Offer,
terminate the Offer and return all tendered Shares to the tendering
stockholders, (ii) waive any or all conditions to the Offer and, to the extent
permitted by applicable law, purchase all Shares validly tendered, (iii) extend
the Offer and, subject to the right of stockholders to withdraw Shares until the
Expiration Date, retain the Shares that have been tendered during the period or
periods for which the Offer is extended or (iv) amend the Offer.

    However, under the Merger Agreement, Purchaser has agreed that, without the
prior written consent of the Special Committee, it will not (i) waive the
Minimum Condition, (ii) reduce the price per Share or change the form of
consideration to be paid pursuant to the Offer, (iii) decrease the number of
shares sought pursuant to the Offer, (iv) add to the conditions set forth in the
Merger Agreement or modify any condition set forth in the Merger Agreement in
any manner adverse to the holders of Shares or (v) otherwise amend the Offer in
any manner adverse to the holders of Shares.

    Pursuant to the Merger Agreement, Purchaser may, without the consent of the
Company, extend the Offer for any period required by any rule or regulation of
the Commission applicable to the Offer.

    Under the terms of the Merger Agreement, the Purchaser must, upon the prior
written request of the Special Committee, extend the expiration date of the
Offer for such number of days as is necessary to satisfy the conditions to the
Offer set forth in Section 12 but in no event shall the Purchaser be required to
extend the Offer later than October 31, 2000.

    Any extension, amendment or termination of the Offer will be followed, as
promptly as practicable, by public announcement thereof. The announcement in the
case of an extension will be issued no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date in
accordance with the public announcement requirements of Rule 14d-4(d) under the
Exchange Act. Without limiting the obligation of the Purchaser under such Rule
or the manner in which the Purchaser may choose to make any public announcement,
the Purchaser currently intends to make any such announcements by issuing a
press release to the Dow Jones News Service or as otherwise may be required by
applicable law.

    Pursuant to, but subject to certain conditions in the Merger Agreement, the
Purchaser has agreed to accept for payment all Shares validly tendered and not
withdrawn pursuant to the Offer as soon as permitted under applicable law and
pay for such Shares promptly thereafter.

    If, subject to the Merger Agreement, the Purchaser makes a material change
to the terms of the Offer or the information concerning the Offer or waives a
material condition of the Offer, the Purchaser will

                                       25
<PAGE>
disseminate additional tender offer materials and extend the Offer to the extent
required by Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act. The
minimum period during which the Offer must remain open following material
changes in the terms of the Offer or information concerning the Offer, other
than a change in price or a change in percentage of securities sought, will
depend upon the facts and circumstances then existing, including the relative
materiality of the changed terms or information. In the Commission's view, an
offer must remain open for a minimum period of time following a material change
to the terms of the Offer and that waiver of a material condition is a material
change to the terms of the Offer. The Commission has stated that an offer should
remain open for a minimum of five (5) business days from the date a material
change is first published, or sent or given to security holders and that, if
material changes are made with respect to information not materially less
significant than the offer price and the number of shares being sought, a
minimum of ten (10) business days may be required to allow adequate
dissemination and investor response. The requirement to extend the Offer will
not apply to the extent that the number of business days remaining between the
occurrence of the change and the then-scheduled Expiration Date equals or
exceeds the minimum extension period that would be required because of such
amendment.

    Pursuant to Rule 14d-11 under the Exchange Act, the Purchaser may, subject
to certain conditions, provide a subsequent offering period of from three
business days to twenty business days in length following the purchase of Shares
on the Expiration Date (the "SUBSEQUENT OFFERING PERIOD"). The Purchaser does
not currently intend to provide a Subsequent Offering Period, but it reserves
the right to do so in its discretion. The Subsequent Offering Period, if
applicable, will be at least three days and, if the Parent and the Purchaser own
less than 90% of the outstanding Shares following expiration of the initial
offering period and the purchase of all Shares tendered pursuant to the Offer
during that period and the first three days of the subsequent Offering Period,
the Purchaser will extend the Subsequent Offering Period until the earlier of
(i) twenty business days from the Expiration Date and (ii) the time at which the
Parent and the Purchaser become the owner of at least 90% of the outstanding
Shares so that a short-form merger can be effected. A Subsequent Offering Period
is an additional period of time, following the expiration of the Offer and the
purchase of Shares in the Offer, during which stockholders may tender Shares
that had not been purchased in the Offer. A Subsequent Offering Period is not an
extension of the Offer which already will have been completed.

    During a Subsequent Offering Period, if applicable, tendering stockholders
will not have withdrawal rights and Purchaser will promptly purchase and pay for
any Shares tendered at the same price paid in the Offer. Rule 14d-11 provides
that the Purchaser may provide a Subsequent Offering Period so long as, among
other things, (i) the initial twenty business days period of the Offer has
expired; (ii) the Purchaser offers the same form and amount of consideration for
Shares in the Subsequent Offering Period as in the Offer; (iii) the Purchaser
accepts and promptly pays for all Shares tendered pursuant to the Offer prior to
the Expiration Date; (iv) the Purchaser announces the results of the Offer,
including the approximate number and percentage of Shares deposited in the
Offer, no later than 9:00 a.m. Eastern time on the next business day after the
Expiration Date and immediately begins the Subsequent Offering Period; and
(v) the Purchaser immediately accepts and promptly pays for Shares as they are
tendered during the Subsequent Offering Period. In the event the Purchaser
elects to extend the Subsequent Offering Period, it will notify stockholders of
the Company consistent with the requirements of the Commission.

    The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
will be mailed by the Purchaser to record holders of Shares and will be
furnished by the Purchaser to brokers, dealers, banks and similar persons whose
names, or the names of whose nominees, appear on the stockholder lists or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.

                                       26
<PAGE>
2. ACCEPTANCE FOR PAYMENT.

    Upon the terms and subject to the conditions to the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment, and during the Subsequent Offering Period, if applicable), the
Purchaser will accept for payment and will pay, promptly after the Expiration
Date, and during the Subsequent Offering Period, if applicable, promptly after
tender, for all Shares validly tendered prior to the Expiration Date and not
properly withdrawn in accordance with Section 4. All determinations concerning
the satisfaction of such terms and conditions will be within the Purchaser's
sole discretion, which determinations will be final and binding. The Purchaser
expressly reserves the right, in its sole discretion, to delay acceptance for
payment of, or subject to the applicable rules of the Commission, payment for,
Shares in order to comply in whole or in part with any applicable law. See "THE
OFFER, Section 1--Terms of the Offer and Section 12--Conditions to the Offer."

    In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates for
such Shares (or a timely Book-Entry Confirmation (as defined below) with respect
thereto), (ii) a Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message (as defined below), and
(iii) any other documents required by the Letter of Transmittal. The per share
consideration paid to any holder of Shares pursuant to the Offer will be the
highest per share consideration paid to any other holder of such Shares pursuant
to the Offer.

    The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.

    For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. Payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering stockholders. Upon the deposit of funds
with the Depositary for the purpose of making payments to tendering
stockholders, the Purchaser's obligation to make such payment shall be
satisfied, and tendering stockholders must thereafter look solely to the
Depositary for payment of amounts owed to them by reason of the acceptance for
payment of Shares pursuant to the Offer.

    UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE
PAID BY THE PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER
OR ANY DELAY IN MAKING SUCH PAYMENT.

    If the Purchaser is delayed in its acceptance for payment of, or payment
for, Shares or is unable to accept for payment, or pay for, Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer (including such rights as are set forth in Sections 1 and
14) (but subject to compliance with Rule 14e-1(c) under the Exchange Act), the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 4.

    If any tendered Shares are not accepted for payment pursuant to the Offer
for any reason, or if certificates are submitted representing more Shares than
are tendered, certificates representing Shares not tendered or not accepted for
purchase will be returned to the tendering stockholder, or such other person

                                       27
<PAGE>
as the tendering stockholder shall specify in the Letter of Transmittal, as
promptly as practicable following the expiration, termination or withdrawal of
the Offer. In the case of Shares delivered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3, such Shares will be credited to such account
maintained at a Book-Entry Transfer Facility as the tendering stockholder shall
specify in the Letter of Transmittal, as promptly as practicable following the
expiration, termination or withdrawal of the Offer. If no such instructions are
given with respect to Shares delivered by book-entry transfer, any such Shares
not tendered or not purchased will be returned by crediting the account at the
Book-Entry Transfer Facility designated in the Letter of Transmittal as the
account from which such Shares were delivered.

3. PROCEDURE FOR TENDERING SHARES.

    VALID TENDER.  Except as set forth below, for Shares to be validly tendered
pursuant to the Offer, either (i) a properly completed and duly executed Letter
of Transmittal (or a facsimile thereof), together with any required signature
guarantees, or in the case of a book-entry transfer, an Agent's Message (as
defined below), and any other required documents, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase prior to the Expiration Date and either certificates for tendered
Shares must be received by the Depositary at one of such addresses or such
Shares must be delivered pursuant to the procedures for book-entry transfer set
forth below (and a Book-Entry Confirmation (as defined below) received by the
Depositary), in each case prior to the Expiration Date, or (ii) the tendering
stockholder must comply with the guaranteed delivery procedures set forth below.

THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.

    BOOK-ENTRY TRANSFER.  The Depositary will establish accounts with respect to
the Shares at The Depository Trust Company (the "BOOK-ENTRY TRANSFER FACILITY")
for purposes of the Offer within two (2) business days after the date of this
Offer to Purchase. Any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of Shares by
causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with the Book-Entry Transfer Facility's
procedure for such transfer. However, although delivery of Shares may be
effected through book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message, and any other required documents must, in any
case, be transmitted to, and received by, the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date, or the tendering stockholder must comply with the guaranteed delivery
procedures described below. The confirmation of a book-entry transfer of Shares
into the Depositary's account at the Book-Entry Transfer Facility as described
above is referred to herein as a "Book-Entry Confirmation." REQUIRED DOCUMENTS
MUST BE TRANSMITTED TO AND RECEIVED BY THE DEPOSITARY AT ONE OF ITS ADDRESSES
SET FORTH ON THE BACK COVER PAGE OF THIS OFFER TO PURCHASE. DELIVERY OF
DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.

    SIGNATURE GUARANTEES.  No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
any of the Book Entry Transfer Facilities' systems whose name appears on a

                                       28
<PAGE>
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an "ELIGIBLE INSTITUTION" and, collectively, "ELIGIBLE INSTITUTIONS"). In
all other cases, all signatures on Letters of Transmittal must be guaranteed by
an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal.
If the certificates for Shares are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made, or
certificates for Shares not tendered or not accepted for payment are to be
returned, to a person other than the registered holder of the certificates
surrendered, then the tendered certificates for such Shares must be endorsed or
accompanied by appropriate stock powers, in either case, signed exactly as the
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed as aforesaid.
See Instruction 5 to the Letter of Transmittal.

    GUARANTEED DELIVERY.  If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:

    (i) such tender is made by or through an Eligible Institution;

    (ii) a properly completed and duly executed Notice of Guaranteed Delivery,
         substantially in the form provided by the Purchaser, is received by the
         Depositary, as provided below, prior to the Expiration Date; and

   (iii) the certificates for (or a Book-Entry Confirmation with respect to)
         such Shares, together with a properly completed and duly executed
         Letter of Transmittal (or a facsimile thereof), with any required
         signature guarantees, or, in the case of a book-entry transfer, an
         Agent's Message, and any other required documents, are received by the
         Depositary within three trading days after the date of execution of
         such Notice of Guaranteed Delivery. A "trading day" is any day on which
         the Nasdaq National Market, operated by the National Association of
         Securities Dealers, Inc., is open for business.

    OTHER REQUIREMENTS.  The Notice of Guaranteed Delivery may be delivered by
hand to the Depositary or transmitted by telegram, facsimile transmission or
mail to the Depositary and must include a guarantee by an Eligible Institution
in the form set forth in the Notice of Guaranteed Delivery distributed with this
Offer to Purchase.

    Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY THE PURCHASER FOR THE
SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.

    APPOINTMENT AS PROXY.  By executing the Letter of Transmittal as set forth
above (including delivery through an Agent's Message) the tendering stockholder
will irrevocably appoint designees of the Purchaser

                                       29
<PAGE>
as such stockholder's attorneys-in-fact and proxies, in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser, and with respect to any
and all non-cash dividends, distributions, rights, other Shares or other
securities issued or issuable in respect of such Shares on or after August 29,
2000 (collectively, "DISTRIBUTIONS"). All such proxies will be considered
coupled with an interest in the tendered Shares. Such appointment will be
effective if and when, and only to the extent that, the Purchaser accepts for
payment Shares tendered by such stockholder as provided herein. All such powers
of attorney and proxies will be irrevocable and will be deemed granted in
consideration of the acceptance for payment of Shares tendered in accordance
with the terms of the Offer. Upon such appointment, all prior powers of
attorney, proxies and consents given by such stockholder with respect to such
Shares (and any and all Distributions) will, without further action, be revoked
and no subsequent powers of attorney, proxies, consents or revocations may be
given by such stockholder (and, if given, will not be deemed effective). The
designees of the Purchaser will thereby be empowered to exercise all voting and
other rights with respect to such Shares (and any and all Distributions),
including, without limitation, in respect of any annual or special meeting of
the Company's stockholders (and any adjournment or postponement thereof),
actions by written consent in lieu of any such meeting or otherwise, as each
such attorney-in-fact and proxy or his substitute shall in his sole discretion
deem proper. The Purchaser reserves the right to require that, in order for
Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, the Purchaser must be able to exercise
full voting, consent and other rights with respect to such Shares (and any and
all Distributions), including voting at any meeting of stockholders.

    DETERMINATION OF VALIDITY.  All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders of any Shares determined by it not to be in proper form or
the acceptance for payment of which, or payment for which, may, in the opinion
of the Purchaser's counsel, be unlawful. The Purchaser also reserves the
absolute right, in its sole discretion, to waive any of the conditions of the
Offer or any defect or irregularity in the tender of any Shares of any
particular stockholder, whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares will be deemed to
have been validly made until all defects or irregularities relating thereto have
been cured or waived. None of the Purchaser, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for failure to give
any such notification. The Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.

    BINDING AGREEMENT.  The Purchaser's acceptance for payment of Shares
tendered in response to the Offer will constitute a binding agreement by the
tendering stockholder to sell, and by the Purchaser to purchase, the tendered
Shares on the terms and subject to the conditions of the Offer.

4. WITHDRAWAL RIGHTS.

    Except as otherwise provided in this Section 4, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after October 27, 2000.

    For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates,

                                       30
<PAGE>
the serial numbers shown on such certificates must be submitted to the
Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedures
for book-entry transfer as set forth in Section 3, any notice of withdrawal must
also specify the name and number of the account at the appropriate Book-Entry
Transfer Facility to be credited with the withdrawn Shares and otherwise comply
with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of
Shares may not be rescinded, and any Shares properly withdrawn will thereafter
be deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be tendered by again following one of the procedures described in
Section 3 any time prior to the Expiration Date.

    If the Purchaser extends the Offer, is delayed in its acceptance of Shares
for payment or is unable to accept Shares for payment for any reason, then,
without prejudice to the Purchaser's rights under the Offer, the Depositary may,
nevertheless, retain tendered Shares on behalf of the Purchaser, and those
Shares not withdrawn except to the extent that tendering stockholders are
entitled to withdraw them as described in this Section 4. Any such delay will be
accompanied by an extension of the Offer to the extent required by law. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by the Purchaser, in its sole discretion, which
determination will be final and binding. None of the Purchaser, the Depositary,
the Information Agent, First Union or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give any such notification.

5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.

    The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to beneficial holders of Shares whose
Shares are tendered and accepted for payment pursuant to the Offer or whose
Shares are converted to cash in the Merger. The discussion is for general
information only and does not purport to consider all aspects of federal income
taxation that might be relevant to beneficial holders of Shares. The discussion
is based on current provisions of the Internal Revenue Code of 1986, as amended
(the "CODE"), existing, proposed and temporary regulations promulgated
thereunder and administrative and judicial interpretations thereof, all of which
are subject to change. The discussion applies only to beneficial holders of
Shares in whose hands Shares are capital assets within the meaning of
Section 1221 of the Code and may not apply to Shares received pursuant to the
exercise of employee stock options or otherwise as compensation, or to certain
types of beneficial holders of Shares (such as insurance companies, tax-exempt
organizations, holders who hold Shares are part of a straddle or conversion
transaction or other arrangement involving more than one position, holders whose
"functional currency" is not the U.S. dollar, holders who have a principal place
of business or "tax home" outside the United States, financial institutions and
broker-dealers) who may be subject to special rules. This discussion does not
discuss the federal income tax consequences to a beneficial holder of Shares
who, for United States federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership or a foreign estate or
trust, nor does it consider the effect of any foreign, state or local tax laws.

BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL HOLDER OF SHARES
SHOULD CONSULT WITH SUCH BENEFICIAL HOLDER'S OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH BENEFICIAL HOLDER AND THE
PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL HOLDER OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.

    The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for United States federal income tax purposes and possibly
for state and local income tax purposes as well. In general, a stockholder who
sells Shares pursuant to the Offer or receives cash in exchange for Shares
pursuant to the Merger will recognize gain or loss for federal income tax
purposes equal to the difference,

                                       31
<PAGE>
if any, between the amount of cash received and the stockholder's adjusted tax
basis in the Shares sold pursuant to the Offer or surrendered for cash pursuant
to the Merger. Gain or loss will be determined separately for each block of
Shares (I.E., Shares acquired at the same cost in a single transaction) tendered
pursuant to the Offer or surrendered for cash pursuant to the Merger. Such gain
or loss will be capital gain or loss.

    Net capital gain recognized by non-corporate taxpayers from the sale of
property held more than one year will generally be taxed at a rate not to exceed
20% for U.S. federal income tax purposes. Net capital gain from property held
for one year or less will be subject to tax at ordinary income tax rates. In
addition, capital gains recognized by a corporate taxpayer will be subject to
tax at the ordinary income tax rates applicable to corporations. In general,
capital losses are deductible only against capital gains and are not available
to offset ordinary income. However, individual taxpayers are allowed to offset a
limited amount of capital losses against ordinary income.

    The receipt of cash pursuant to the exercise by a holder of Shares of
appraisal rights, if any, under the DGCL, will be a taxable transaction. We
encourage any holder of Shares considering the exercise of any appraisal rights
to consult a tax advisor to determine the tax consequence of exercising such
appraisal rights.

    Certain noncorporate holders of Shares may be subject to backup withholding
at a rate of 31% on cash payments received pursuant to the Offer or the Merger.
Backup withholding will not apply, however, to a holder of Shares who furnishes
a taxpayer identification number ("TIN") and certifies that he or she is not
subject to backup withholding on the substitute Form W-9 included in the
transmittal letter, who provides a certificate of foreign status on Form W-8, or
who is otherwise exempt from backup withholding. A holder of Shares who fails to
provide the correct TIN on Form W-9 may be subject to a $50.00 penalty imposed
by the Internal Revenue Service.

                                       32
<PAGE>
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES.

    The Shares are quoted on the Nasdaq National Market under the symbol "JRJR".
The following table sets forth, for each of the fiscal quarters indicated, the
high and low reported closing sales price per Share on the Nasdaq National
Market.

<TABLE>
<CAPTION>
                                                                                COMMON STOCK
                                                              ------------------------------------------------
                                                                       HIGH                      LOW
                                                              -----------------------   ----------------------
<S>                                                           <C>                       <C>
Fiscal Year Ended December 31, 1997.........................
  Second Quarter (commencing June 26, 1997).................  $                 21.50                    19.00
  Third Quarter.............................................                    37.00                    20.00
  Fourth Quarter............................................                    38.75                    20.00

Fiscal Year Ending December 31, 1998
  First Quarter.............................................  $                 29.25   $                19.25
  Second Quarter............................................                    24.25                    17.75
  Third Quarter.............................................                    22.75                    10.25
  Fourth Quarter............................................                    23.25                     9.44

Fiscal Year Ending December 31, 1999
  First Quarter.............................................  $                 23.25   $                 7.25
  Second Quarter............................................                    12.81                     7.44
  Third Quarter.............................................                    12.75                     9.25
  Fourth Quarter............................................                    10.63                     7.56

Fiscal Year Ending December 31, 2000
  First Quarter.............................................  $                 10.00   $                 8.25
  Second Quarter............................................                    10.69                     9.13
  Third Quarter (through August 25, 2000)...................                    10.94                     9.88
</TABLE>

    On August 25, 2000, the last trading day prior to the announcement of the
execution of the Merger Agreement, the closing price per Share of the Shares, as
reported by the Nasdaq National Market System was $10.75. On August 28, 2000,
the last full day of trading prior to the commencement of the Offer, the closing
price per Share of the Shares, as reported by the Nasdaq National Market System
was $12.88.

    The Company did not declare or pay any cash dividends during any of the
periods indicated in the above table.

7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING; EXCHANGE ACT
  REGISTRATION.

    MARKET FOR THE SHARES.  The purchase of Shares by the Purchaser pursuant to
the Offer will reduce the number of Shares that might otherwise trade publicly
and will reduce the number of holders of Shares, which, depending upon the
number of Shares so purchased, could adversely affect the liquidity and market
value of the remaining Shares held by the public. The Purchaser cannot predict
whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for, or
marketability of, the Shares or whether it would cause future market prices to
be greater or less than the Offer Price.

    NASDAQ QUOTATION.  Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements for continued
inclusion in the Nasdaq National Market. The published guidelines of the Nasdaq
National Market indicate that the Nasdaq National Market would consider
delisting the Shares if, among other things, (i) there should be fewer than two
registered and active market makers providing quotations for the Shares;
(ii) the net tangible assets of 800-JR CIGAR should fall below $35,000,000, and
the net income of 800-JR CIGAR should fall below $500,000 in the most recently
completed fiscal year and in more than one of the last three most recently
completed fiscal

                                       33
<PAGE>
years; (iii) the minimum bid price for Shares should fall below $1 per Share;
(iv) in the case of common stock, the number of round lot holders of Shares
should fall below 300; (v) in the case of common stock, the number of publicly
held Shares should fall below 500,000, or the aggregate market value of publicly
held Shares should fall below $1,000,000. If the foregoing standards are not
met, the Shares would no longer be admitted to quotation on the Nasdaq National
Market. Shares held directly or indirectly by directors, officers or beneficial
owners of more than 10% of the Shares are not considered as being publicly held
for this purpose. If the Nasdaq National Market were to cease to publish
quotations for the Shares, it is possible that the Shares would continue to
trade as a Nasdaq SmallCap stock or otherwise in the over-the-counter market and
that prices or other quotations would be reported by other sources. The extent
of the public market for such Shares and the availability of such quotations
would depend, however, upon such factors as the number of stockholders and/or
the aggregate market value of such securities remaining at such time, the
interest in maintaining a market in the Shares on the part of securities firms,
the possible termination of registration under the Exchange Act, as described
below, and other factors.

    EXCHANGE ACT REGISTRATION.  The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
not listed on a national securities exchange, the Nasdaq National Market or the
Nasdaq SmallCap Market and are not held by 300 or more holders of record. If
registration is terminated, the Shares would no longer be eligible to be quoted
on the Nasdaq Stock Market. Termination of registration of the Shares under the
Exchange Act, assuming there are no other securities of the Company subject to
registration, would substantially reduce the information required to be
furnished by the Company to its stockholders and to the Commission and would
make certain provisions of the Exchange Act, such as the requirement of filing
an annual report on Form 10-K with the Commission, and the requirements of
Rule 13e-3 under the Exchange Act with respect to "going private" transactions,
no longer applicable to the Company. Furthermore, the ability of "affiliates" of
the Company and persons holding "restricted securities" of the Company to
dispose of such securities pursuant to Rule 144 or Rule 144A promulgated under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), may be impaired
or eliminated.

    The Purchaser shall seek delisting of the Shares from the Nasdaq National
Market and the termination of the registration of the Shares under the Exchange
Act following consummation of the Offer and the Merger.

8. CERTAIN INFORMATION CONCERNING THE COMPANY.

    GENERAL.  The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Financial
Information," has been furnished by the Company or has been taken from or based
upon publicly available documents and records on file with the Commission and
other public sources. The Parent and the Purchaser do not assume responsibility
for the accuracy or completeness of the information concerning the Company
contained in such documents and records or for any failure by the Company to
disclose events which may have occurred or may affect the significance or
accuracy of any such information but which are unknown to the Parent and the
Purchaser.

    The Company is one of the largest distributors and retailers of brand name
premium cigars in the United States. The Company's primary products consist of
premium cigars, mass market cigars and cigarettes, which are distributed to
retail and wholesale customers. The Company's highest gross margins are
generated from the sale of premium cigars (imported, hand-made and hand-rolled
cigars made with long filler and all natural tobacco leaf) and, because of these
high margins, the Company has targeted premium cigars as its primary growth
vehicle. The Company's premium cigars consist of approximately 150 brands of
which 52 are the Company's proprietary or licensed brands. Among the Company's
proprietary and licensed products are nationally recognized brand names such as
Belinda-Registered Trademark-, Bolivar-Registered Trademark-, Casa
Blanca-Registered Trademark-, El Rey del Mundo-Registered Trademark-, Jose
Marti-TM-, J.R. Alternative-Registered Trademark-, J.R.
Ultimate-Registered Trademark-, La Finca-Registered Trademark-, Romeo y
Julieta-TM-, and Santa Clara-Registered Trademark-. The Company is the largest
customer for each of the world's leading cigar manufacturers,

                                       34
<PAGE>
including Consolidated Cigar Holdings, Inc., General Cigar Holdings, Inc.,
Swisher International, Inc. and Villazon & Company, Inc.

    The Company is a holding company owning 100% of the outstanding capital
stock of each of J.R. Tobacco of America, Inc., Santa Clara, N.A., Inc., J.N.R.
Grocery Corp., J.R. Tobacco NC, Inc., J&R Tobacco (New Jersey) Corp.,
J.R.Tobacco Company of Michigan, Inc., J.R.-46th Street, Inc., J.R. Tobacco
Outlet, Inc., J.R. Statesville, Inc., J R Cigar (DC), Inc., J.R. Tobacco of
Burlington, Inc., Casa Blanca, Inc. and jrcigars.com, Inc.

    The Company is well known for its cigar business, principally the sale of
premium cigars, at discounted prices. Associated sales of other discount
products, including cigarettes, general merchandise, fragrances and other
tobacco related products, benefit from this recognition. The principal offices
of the Company are located at 301 Route 10 East, Whippany, New Jersey 07981. The
telephone number of the Company at such location is (973) 884-9555.

    HISTORICAL FINANCIAL DATA.  Set forth below is the historical financial data
of the Company as of December 31, 1999 and for each of the two years ending
December 31, 1998 and 1999, derived from the audited consolidated financial
statements from the Company's Annual Reports on Form 10-K for the years ended
December 31, 1998 and 1999. The historical financial data of the Company as of
June 30, 2000 and for the fiscal quarter ended June 30, 2000 are unaudited and
have been derived from the unaudited consolidated financial statements from the
Company's Quarterly Report on Form 10-Q filed with the Commission on August 9,
2000. The information contained in these tables should be read in conjunction
with the Consolidated Financial Statements of the Company and the Notes thereto
included in the Company's Annual Report on Form 10-K and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
the years ended December 31, 1998 and 1999 and the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 2000. The following summary is
qualified in its entirety by reference to such reports and all of the financial
information contained therein. Such reports may be inspected and copies may be
obtained from the Commission by mail, upon payment of the Commission's customary
charges, by writing to the Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission also maintains a web site at
http://www.sec.gov that contains reports, proxy statements and other information
relating to the Company which have been filed via the EDGAR System.

<TABLE>
<CAPTION>
                                                               SIX MONTHS            YEAR ENDED
                                                                  ENDED             DECEMBER 31,
                                                                JUNE 30,      -------------------------
                                                                  2000           1999          1998
                                                              -------------   -----------   -----------
                                                               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
                                                                              AMOUNTS)
<S>                                                           <C>             <C>           <C>
SUMMARY OF OPERATIONS
Net sales...................................................    $150,680       $317,001      $286,512
Gross profit................................................      25,706         52,295        52,795
Operating income (loss).....................................       8,408         19,566        22,451
Net income (loss)...........................................       5,295         11,881        13,734
Basic and diluted income (loss) per share...................         .44            .96          1.08

BALANCE SHEET DATA
Current assets..............................................    $ 65,925       $ 64,768      $ 76,682
Total assets................................................     101,838        101,501       104,672
Current liabilities.........................................      18,206         22,195        26,035
Total liabilities...........................................      18,206         22,195        31,002
Stockholders' equity........................................      83,632         79,306        73,670
</TABLE>

    The Company's book value per share was $7.05 at June 30, 2000.

                                       35
<PAGE>
    BENEFICIAL OWNERSHIP OF COMMON STOCK.  The following table sets forth as of
August 28, 2000, the number of Shares beneficially owned by the directors and
executive officers of the Company.

<TABLE>
<CAPTION>
                                                                                       PERCENTAGE OF
NAME OF BENEFICIAL OWNER                    TITLE               AMOUNT OF SHARES         OWNERSHIP
------------------------        ------------------------------  ----------------       -------------
<S>                             <C>                             <C>                    <C>
Lewis I. Rothman..............  Chief Executive Officer,           7,400,000(1)(2)(3)      61.9%
                                President and Chairman of the
                                Board

LaVonda M. Rothman............  Executive Vice President,          7,400,000(1)(2)(3)      61.9%
                                Secretary and Director

Michael E. Colleton...........  Chief Financial Officer               35,000(4)               *

Jane Vargas...................  Vice President and Director           35,000(4)               *

Maureen A. Colleton...........  Director                              35,000(4)               *

John F. Barry, Jr.............  Director                               8,000(5)               *

John Oliva, Sr................  Director                              59,900(5)               *

Bernard Rosenblum.............  Director                               4,000(6)               *

All Executive Officers and
  Directors as a group
  (8 persons).................                                     7,576,900               62.7%(7)
</TABLE>

------------------------

*   Less than one percent.

(1) Includes 3,387,920 shares owned by Lewis I. Rothman and 3,387,920 shares
    owned by LaVonda M. Rothman.

(2) Includes (i)131,040 Shares held by LaVonda M. Rothman and Lewis I. Rothman,
    Trustees and Samuel Bornstein as Special Trustee of a trust f/b/o Shane
    Rothman created under a trust agreement dated November 1, 1994, Lewis I.
    Rothman, Grantor, (ii) 131,040 Shares held by LaVonda M. Rothman and Lewis
    I. Rothman, Trustees, and Samuel Bornstein as Special Trustee of a trust
    f/b/o Marni Rothman created under a trust agreement dated November 1, 1994,
    Lewis I. Rothman, Grantor, (iii) 131,040 Shares held by LaVonda M. Rothman
    and Lewis I. Rothman, Trustees and Samuel Bornstein as Special Trustee of
    trust f/b/o Samantha Rothman created under a trust agreement dated
    November 1, 1994, Lewis I. Rothman, Grantor and (iv) 131,040 Shares held by
    LaVonda M. Rothman and Lewis I. Rothman, Trustees and Samuel Bornstein as
    Special Trustee of a trust f/b/o Luke Rothman created under a trust
    agreement dated November 1, 1994, Lewis I. Rothman, Grantor. Does not
    include 2,000,000 Shares owned by the 1998 Trust, Samuel Bornstein, Trustee,
    as to which the named person disclaims beneficial ownership.

(3) Includes 50,000 Shares underlying options exercisable as of August 28, 2000
    granted to Lewis I. Rothman and 50,000 Shares underlying options exercisable
    as of August 28, 2000 granted to LaVonda M. Rothman.

(4) Includes 35,000 Shares underlying options exercisable as of August 28, 2000.

(5) Includes 8,000 Shares underlying options exercisable as of August 28, 2000.

(6) Includes 4,000 Shares underlying options exercisable as of August 28, 2000.

(7) Based upon 11,862,299 Shares issued and outstanding on August 4, 2000 and
    assumes the exercise of 225,000 Shares underlying stock options held by
    executive officers and directors of the Company.

                                       36
<PAGE>
    None of the executive officers and directors of the Company named above has
effected any transaction in the Shares during the past 60 days. Each executive
officer and director of the Company named above (other than the Rothmans)
intends to tender the Shares beneficially owned by such person pursuant to the
Offer. The Rothmans, in their capacity as trustees for the Other Rothman Trusts,
do not intend to tender the Shares that are held by the Other Rothman Trusts.

9. CERTAIN INFORMATION CONCERNING THE PARENT STOCKHOLDERS, THE PARENT AND THE
  PURCHASER.

    The Parent and the Purchaser are Delaware corporations formed by the
Rothmans on July 21, 2000 for the purpose of consummating the Offer and the
Merger. The outstanding shares of capital stock of the Parent are owned 38.6% by
Lewis I. Rothman, 38.6% by LaVonda M. Rothman and 22.8% by the 1998 Trust. Since
their formation, the Purchaser and the Parent have not carried on any activities
other than in connection with the Offer and the Merger. Immediately prior to the
Expiration Date, the Parent Stockholders intend to contribute the Parent
Stockholder Shares to the Parent, and the Parent in turn will contribute the
Parent Stockholder Shares to the Purchaser (the "CONTRIBUTION"). The Shares held
by the Other Rothman Trusts will not be contributed to either the Parent or the
Purchaser. As a result of the Contribution, the Purchaser will own 8,775,840
Shares, or approximately 74% of the outstanding Shares. None of the Parent
Stockholders, the Parent or Purchaser has effected any transaction in Shares
during the past 60 days.

    The principal offices of the Parent and the Purchaser are located at 301
Route 10 East, Whippany, New Jersey 07981. The telephone number of the Parent
and the Purchaser at such location is (973) 884-9555 x2110. Neither the Parent
nor the Purchaser is subject to the informational filing requirements of the
Exchange Act.

    Lewis I. Rothman has served as the President and LaVonda M. Rothman has
served as the Vice President, Secretary and Treasurer of each of the Parent and
the Purchaser since their formation. The combined net worth of the Rothmans is
in excess of $100 million, which includes an equity interest in the Company
valued at approximately $78.5 million based upon a closing price per Share of
$10.75 on August 25, 2000.

    Lewis I. Rothman has been the President, Chief Executive Officer and
Chairman of the Board of the Company since its formation in March 1997 and
President, Chief Executive Officer and a director of each of the Company's
predecessor entities since 1970. LaVonda M. Rothman has been the Executive Vice
President, Secretary and a director of the Company since its formation
March 1997 and the Executive Vice President, Secretary and a director of each of
the Company's predecessor entities since 1970. Lewis I. and LaVonda M. Rothman
are married. The Rothmans are U.S. citizens.

    The 1998 Trust was established under the laws of the State of New Jersey on
November 10, 1998. The trustee of the 1998 Trust is Samuel Bornstein. The
address of the 1998 Trust is c/o Mr. Bornstein, East Lake Road, Tuxedo, New York
10987.

    During the past five years, none of the Parent Stockholders, the Parent or
the Purchaser or any of their respective executive officers and directors has
been (i) convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to United States
Federal or state securities laws or finding any violation with respect to such
laws.

    Other than the Bridge Credit Agreement and Permanent Credit Agreement (each
as hereinafter defined) for the funding of the purchase of Shares pursuant to
the Offer described in "THE OFFER, Section 10--Source and Amount of Funds," none
of the Parent, the Purchaser or any of their respective executive officers and
directors currently has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Company, including,
but not limited to, any

                                       37
<PAGE>
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any securities of the Company, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or the
giving or withholding of proxies.

    The Rothmans, the Parent and the Purchaser have jointly filed with the
Commission a Schedule TO that contains additional information with respect to
the Offer. The Schedule TO, and any amendments thereto, may be examined and
copies may be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Schedule TO, which has been jointly filed by the Rothmans, the Parent
and the Purchaser with the Commission via the EDGAR System, can also be obtained
by accessing the Commission's web site at http://www.sec.gov.

10. SOURCE AND AMOUNT OF FUNDS.

    The Offer is conditioned upon receipt by the Purchaser of a bridge loan in
an amount sufficient to pay the purchase price. Assuming that the Purchaser
purchases 3,086,459 Shares pursuant to the Offer at a purchase price of $13.00
per Share, net to the sellers in cash, the Purchaser expects the maximum
aggregate cost, including all fees and expenses applicable to the Offer and the
Merger, to be approximately $43.5 million.

    Subject to the terms and conditions contained therein, the Purchaser will
receive a bank loan in an amount up to $55,000,000 (the "BRIDGE LOAN") from a
group of three lenders comprised of The Chase Manhattan Bank ("CHASE"), Fleet
Bank, N.A. ("FLEET") and European American Bank ("EAB"). Chase will serve as
administrative agent and Fleet will serve as documentation agent in connection
with the Bridge Loan. The terms and conditions of the Bridge Loan are set forth
in that certain Credit Agreement, dated as of August 28, 2000 (the "BRIDGE
CREDIT AGREEMENT"), by and among the Purchaser and the Parent, as co-borrowers,
Chase, Fleet and EAB. In connection with the Bridge Credit Agreement, the
Purchaser will enter into a pledge agreement with Chase and a related account
control agreement with Chase and the Depositary, pursuant to which the Purchaser
granted Chase, as administrative agent, a perfected security interest in all of
the Shares owned or hereafter acquired by the Purchaser. A portion of the funds
borrowed under the Bridge Loan will be paid to the Purchaser on the Expiration
Date and shall be used to pay for the Shares tendered in the Offer and all
related fees and expenses incurred in connection therewith. The remainder of the
funds borrowed under the Bridge Loan will be paid to the Purchaser at the
Effective Time to pay the Merger Consideration and all related fees and expenses
incurred in connection therewith.

    The Purchaser will repay the Bridge Loan from the proceeds of a bank loan
(the "PERMANENT LOAN") in the amount of $55,000,000 from a group of lenders
including Chase, Fleet and EAB. A portion of the Permanent Loan will also be
available to meet the future working capital needs of the Company. Chase will
serve as administrative agent in connection with the Permanent Loan. Fleet will
serve as documentation agent in connection with the Permanent Loan. The terms
and conditions of the Permanent Loan are set forth in that certain Credit
Agreement dated as of August 28, 2000, by and among, the Parent, the Company and
various subsidiaries of the Company, as co-borrowers, and Chase, Fleet and EAB
(the "Permanent Credit Agreement"). The Permanent Credit Agreement relating to
the Permanent Loan will be effective upon consummation of the Merger. In
connection with the Permanent Loan (i) the Parent will enter into a pledge
agreement pursuant to which the Parent will grant to Chase as agent a perfected
security interest in all the shares of capital stock of the Company and
(ii) the Company will enter into a pledge agreement pursuant to which the
Company will grant to Chase as agent a perfected security interest in all the
shares of capital stock of the Company's subsidiaries.

11. DIVIDENDS AND DISTRIBUTIONS.

    Since inception, the Company has not paid any cash or other dividends on its
Shares. The Company currently requires all cash generated by its activities to
be invested in the operations of its business. The determination of the amount
of future cash dividends, if any, to be declared and paid, however, will

                                       38
<PAGE>
depend upon, among other things, the Company's financial condition, funds
received from operations, the level of its capital expenditures and its future
business prospects. The Company's current policy of not paying dividends is
based on the belief of the Company's Board of Directors that the Company's
earnings are needed to support its current operations. If the Company should
declare or pay any dividend on the Shares or make any other distribution
(including the issuance of additional shares of capital stock pursuant to a
stock dividend or stock split, the issuance of other securities or the issuance
of rights for the purchase of any securities) with respect to the Shares that is
payable or distributable to stockholders of record on a date prior to the
transfer to the name of the Purchaser or its nominee or transferee on the
Company's stock transfer records of the Shares pursuant to the Offer, then,
without prejudice to the Purchaser's rights specified in "THE OFFER,
Section 12--Conditions to the Offer," (i) the purchase price per Share payable
by the Purchaser pursuant to the Offer will be reduced to the extent any such
dividend or distribution is payable in cash and (ii) any non-cash dividend,
distribution or right shall be received and held by the tendering stockholder
for the account of the Purchaser and will be required to be promptly remitted
and transferred by each tendering stockholder to the Depositary for the account
of the Purchaser, accompanied by appropriate documentation of transfer. Pending
such remittance and subject to applicable law, the Purchaser will be entitled to
all the rights and privileges as owner of any such non-cash dividend,
distribution or right and may withhold the entire purchase price or deduct from
the purchase price the amount or value thereof, as determined by the Purchaser
in its sole discretion.

12. CONDITIONS TO THE OFFER.

    Notwithstanding any other provisions of the Offer, the Purchaser shall not
be required to accept for payment, purchase or pay for any Shares, and may
postpone the acceptance for payment of or the payment for any tendered Shares,
unless (i) the Minimum Condition is satisfied by 12:00 Midnight on the
Expiration Date or such later date to which the Offer may be extended in
accordance with the terms of the Merger Agreement, and (ii) the Purchaser shall
have available at the Expiration Date the financing pursuant to the Bridge
Credit Agreement.

    In addition, the Offer is conditioned upon the following:

    - The Board of Directors of the Company and the Special Committee shall not
      have withdrawn or modified, in a manner adverse to the Purchaser, its
      approval of the Offer and its recommendation that the stockholders of the
      Company tender their Shares pursuant to the Offer.

    - There shall not have occurred any effect that, individually or in
      aggregate, is materially adverse to the condition, business, assets, or
      results of operations of the Company.

    - The representations and warranties of the Company shall be true and
      correct in all material respects.

    - No governmental or judicial action shall have been taken which materially
      adversely affects the consummation of the Offer.

    - Any material consents or authorizations, permits, orders or approvals of
      any governmental body required for the consummation of the Offer shall
      have been obtained and any filings or registrations required to be made
      with any governmental body shall have been made by the closing of the
      Offer.

    - There shall not have occurred (i) any general suspension for at least
      three business days of trading in securities quoted on the Nasdaq National
      Market, (ii) the declaration of a banking moratorium or any suspension of
      payments in respect of banks in the United States (whether or not
      mandatory), (iii) the declaration of war by the Congress of the United
      States having had or being reasonably likely to have a material adverse
      effect on the condition, business, assets, liabilities or results of
      operations of the Company taken as a whole, or (iv) any limitation or
      proposed limitation (whether or not mandatory) by any governmental body,
      or any other event, that materially adversely affects generally the
      extension of credit by banks or other financial institutions in the United
      States.

                                       39
<PAGE>
    The foregoing conditions are for the sole benefit of the Purchaser, may be
asserted by the Purchaser regardless of the circumstances giving rise to such
condition and may be waived by the Purchaser in whole or in part, except for the
Minimum Condition which may not be waived by the Purchaser without the prior
written consent of the Special Committee. The failure by the Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right.

13. CERTAIN LEGAL MATTERS.

    Except as otherwise disclosed herein, based on a review of publicly
available information filed by the Company with the Commission, the Purchaser is
not aware of (i) any license or regulatory permit that appears to be material to
the business of the Company and its subsidiaries, taken as a whole, that might
be adversely affected by the acquisition of Shares by the Purchaser pursuant to
the Offer or (ii) any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required for the acquisition or ownership of Shares by the Purchaser as
contemplated herein. Should any such approval or other action be required, the
Purchaser currently contemplates that it would seek such approval or action. The
Purchaser's obligation under the Offer to accept for payment and pay for Shares
is subject to certain conditions. See "THE OFFER, Section 12--Conditions to the
Offer." While the Purchaser does not currently intend to delay the acceptance
for payment of Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or action, if
needed, would be obtained or would be obtained without substantial conditions or
that adverse consequences might not result to the business of the Company or the
Purchaser or that certain parts of the businesses of the Company or the
Purchaser might not have to be disposed of in the event that such approvals were
not obtained or any other actions were not taken.

    The Offer constitutes a "going private" transaction under Rule 13e-3 of the
Exchange Act. Consequently, the Purchaser, the Parent, the Parent Stockholders
and the Company have signed the Schedule TO, which has been filed with the
Commission, for purposes of certifying the information required by Rule 13e-3 of
the Exchange Act contained therein. Pursuant to Rule 13e-3, this Offer to
Purchase contains information relating to, among other matters, the fairness of
the Offer to 800-JR CIGAR's stockholders (other than the Parent, the Purchaser,
the Parent Stockholders and the Other Rothman Trusts).

    The Purchaser, the Parent and the Parent Stockholders are not aware of any
pending or overtly threatened legal proceedings which would affect the Offer or
the Merger. If any such matters were to arise, Purchaser could decline to accept
for payment or pay for any Shares tendered in the Offer. See "THE OFFER,
Section 12--Conditions to the Offer."

14. FEES AND EXPENSES.

    The Purchaser has retained First Union to act as dealer manager in
connection with the Offer. As compensation for financial advisory services
provided to the Company, First Union has been paid a nonrefundable cash fee of
$50,000 for financial advisory services. Pursuant to the terms and conditions of
the engagement letter for financial advisory services with the Company and a
Dealer Manager Agreement with the Purchaser, First Union will receive at the
Effective Time a transaction fee equal to 1.15% of the aggregate consideration
paid in the Offer and the Merger. The Purchaser has also agreed, whether or not
the Offer is consummated, to pay First Union for its reasonable out-of-pocket
expenses, including the reasonable fees and expenses of its legal counsel,
incurred in connection with its engagement, and to indemnify First Union against
certain liabilities and expenses in connection with its engagement. First Union
renders various investment banking and other advisory services to the Company,
the Purchaser and their affiliates and is expected to continue to render such
services, for which it has received and will continue to receive customary
compensation from the Company, the Purchaser and their affiliates.

    The Purchaser has retained D.F. King & Co., Inc. to act as the Information
Agent and American Stock Transfer & Trust Company to act as the Depositary in
connection with the Offer. The Information

                                       40
<PAGE>
Agent may contact holders of Shares by personal interview, mail, e-mail,
telephone, facsimile transmission, telegraph and other methods of electronic
communication and may request brokers, dealers, commercial banks, trust
companies and other nominees to forward the Offer materials to beneficial
holders. The Information Agent and the Depositary will each receive reasonable
and customary compensation for their services. The Purchaser has also agreed to
reimburse each such firm for certain reasonable out-of-pocket expenses and to
indemnify each such firm against certain liabilities in connection with their
services, including certain liabilities under Federal securities laws.

    Except as set forth above, the Purchaser will not pay any fees or
commissions to any broker, dealer or other person for making solicitations or
recommendations in connection with the Offer. Brokers, dealers, banks and trust
companies will be reimbursed by the Purchaser for customary mailing and handling
expenses incurred by them in forwarding the Offer materials to their customers.

15. MISCELLANEOUS.

    The Offer is being made to all holders of Shares other than the Parent
Stockholders. The Purchaser is not aware of any jurisdiction in which the making
of the Offer or the tender of Shares in connection therewith would not be in
compliance with the laws of such jurisdiction. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED HEREIN OR IN THE LETTER
OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.

                                          JRC ACQUISITION CORP.

                                          August 29, 2000

                                       41
<PAGE>
                                                                         ANNEX A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                          AGREEMENT AND PLAN OF MERGER
                                  BY AND AMONG
                                  L&LR, INC.,
                             JRC ACQUISITION CORP.,
                               LEWIS I. ROTHMAN,
                              LAVONDA M. ROTHMAN,
                     THE LEWIS IRVING ROTHMAN 1998 TRUST #1
                            U/A/D NOVEMBER 10, 1998
                                      AND
                               800-JR CIGAR, INC.
                          DATED AS OF AUGUST 28, 2000

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<S>                       <C>                                                           <C>
ARTICLE I

    THE OFFER.........................................................................     A-2
    SECTION 1.1           THE OFFER...................................................     A-2
    SECTION 1.2           COMPANY ACTIONS.............................................     A-3

ARTICLE II

    THE MERGER........................................................................     A-4
    SECTION 2.1           THE MERGER..................................................     A-4
    SECTION 2.2           EFFECTIVE TIME..............................................     A-4
    SECTION 2.3           CLOSING.....................................................     A-4
    SECTION 2.4           CERTIFICATE OF INCORPORATION AND BY-LAWS....................     A-4
    SECTION 2.5           DIRECTORS AND OFFICERS......................................     A-4
    SECTION 2.6           EFFECT ON CAPITAL STOCK.....................................     A-5
    SECTION 2.7           STOCK OPTION AND OTHER PLANS................................     A-5
    SECTION 2.8           EXCHANGE OF CERTIFICATES....................................     A-6
    SECTION 2.9           STOCK TRANSFER BOOKS........................................     A-7
    SECTION 2.10          LOST, STOLEN OR DESTROYED CERTIFICATES......................     A-7
    SECTION 2.11          TAKING OF NECESSARY ACTION; FURTHER ACTION..................     A-8

ARTICLE III

    REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................................     A-8
    SECTION 3.1           AUTHORITY RELATIVE TO THIS AGREEMENT........................     A-8
    SECTION 3.2           OPINION OF FINANCIAL ADVISOR................................     A-8

ARTICLE IV

    REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...........................     A-8
    SECTION 4.1           ORGANIZATION AND QUALIFICATION..............................     A-8
    SECTION 4.2           ORGANIZATION DOCUMENTS......................................     A-9
    SECTION 4.3           CAPITALIZATION..............................................     A-9
    SECTION 4.4           AUTHORITY RELATIVE TO THIS AGREEMENT........................     A-9
    SECTION 4.5           NO CONFLICT, REQUIRED FILINGS AND CONSENTS..................     A-9
    SECTION 4.6           INFORMATION SUPPLIED........................................    A-10
    SECTION 4.7           FINANCING...................................................    A-10
    SECTION 4.8           BROKERS.....................................................    A-10
    SECTION 4.9           SALE OF THE COMPANY.........................................    A-11

ARTICLE V

    CONDUCT OF BUSINESS PENDING THE MERGER............................................    A-11
    SECTION 5.1           NO SOLICITATION.............................................    A-11

ARTICLE VI

    ADDITIONAL AGREEMENTS.............................................................    A-12
    SECTION 6.1           PREPARATION OF PROXY STATEMENT; STOCKHOLDERS MEETING........    A-12
    SECTION 6.2           ACCESS TO INFORMATION.......................................    A-12
    SECTION 6.3           CONSENTS; APPROVALS.........................................    A-13
    SECTION 6.4           INDEMNIFICATION AND INSURANCE...............................    A-13
    SECTION 6.5           NOTIFICATION OF CERTAIN MATTERS.............................    A-14
    SECTION 6.6           FURTHER ACTION..............................................    A-14
</TABLE>

                                      A-i
<PAGE>
<TABLE>
<S>                       <C>                                                           <C>
    SECTION 6.7           PUBLIC ANNOUNCEMENTS........................................    A-14
    SECTION 6.8           CONVEYANCE TAXES............................................    A-14
    SECTION 6.9           GUARANTEE OF MERGER SUB OBLIGATIONS.........................    A-14
    SECTION 6.10          CONTRIBUTION OF PARENT STOCKHOLDER SHARES...................    A-14

ARTICLE VII

CONDITIONS TO THE MERGER..............................................................    A-15
                          CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
    SECTION 7.1           MERGER......................................................    A-15
                          ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
    SECTION 7.2           SUB.........................................................    A-15
    SECTION 7.3           ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY..........    A-15

ARTICLE VIII

TERMINATION...........................................................................    A-16
    SECTION 8.1           TERMINATION.................................................    A-16
    SECTION 8.2           EFFECT OF TERMINATION.......................................    A-17
    SECTION 8.3           FEES AND EXPENSES...........................................    A-17

ARTICLE IX

GENERAL PROVISIONS....................................................................    A-17
                          EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
    SECTION 9.1           AGREEMENTS..................................................    A-17
    SECTION 9.2           ACTIONS OF THE COMPANY......................................    A-17
    SECTION 9.3           NOTICES.....................................................    A-17
    SECTION 9.4           CERTAIN DEFINITIONS.........................................    A-18
    SECTION 9.5           AMENDMENT...................................................    A-19
    SECTION 9.6           WAIVER......................................................    A-19
    SECTION 9.7           HEADINGS....................................................    A-19
    SECTION 9.8           SEVERABILITY................................................    A-19
    SECTION 9.9           ENTIRE AGREEMENT............................................    A-19
    SECTION 9.10          ASSIGNMENT..................................................    A-20
    SECTION 9.11          PARTIES IN INTEREST.........................................    A-20
    SECTION 9.12          FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.......    A-20
    SECTION 9.13          GOVERNING LAW...............................................    A-20
    SECTION 9.14          COUNTERPARTS................................................    A-20
    SECTION 9.15          CONSENT TO JURISDICTION.....................................    A-20
</TABLE>

                                      A-ii
<PAGE>
                          AGREEMENT AND PLAN OF MERGER

    AGREEMENT AND PLAN OF MERGER, dated as of August 28, 2000 (this
"AGREEMENT"), by and among (i) L&LR, INC., a Delaware corporation ("PARENT"),
(ii) JRC ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary
of Parent ("MERGER SUB"), (iii) LEWIS I. ROTHMAN (for purposes of Section 6.10
only), (iv) LAVONDA M. ROTHMAN (for purposes of Section 6.10 only), (iv) THE
LEWIS IRVING ROTHMAN 1998 TRUST #1 U/A/D NOVEMBER 10, 1998 ("1998 TRUST") (for
purposes of Section 6.10 only) and (v) 800-JR CIGAR, INC., a Delaware
corporation (the "COMPANY").

                                  WITNESSETH:

    WHEREAS, Lewis I. Rothman, LaVonda M. Rothman and the 1998 Trust
(collectively, the "PARENT STOCKHOLDERS") own an aggregate of 8,775,840 shares,
or approximately 74% of the outstanding shares (the "PARENT STOCKHOLDER
SHARES"), of common stock, par value $0.01 per share (the "COMPANY COMMON
STOCK"), of the Company; and

    WHEREAS, the Parent Stockholders have formed Parent and Parent in turn has
formed Merger Sub for the purpose of making a tender offer to acquire all of the
outstanding shares of Company Common Stock, excluding the Parent Stockholder
Shares at a price per share of $13.00, net to the sellers in cash, on the terms
and subject to the conditions set forth in EXHIBIT A to this Agreement (as such
tender offer may be amended from time to time as permitted under this Agreement,
the "OFFER"); and

    WHEREAS, immediately prior to the expiration of the Offer, the Parent
Stockholders intend to contribute the Parent Stockholder Shares (but not the
shares of Company Common Stock owned by certain other trusts of which Lewis I.
Rothman and LaVonda M. Rothman are trustees (the "OTHER ROTHMAN TRUSTS") to
Parent, and Parent in turn will contribute the Parent Stockholder Shares to
Merger Sub; and

    WHEREAS, the Board of Directors of the Company (the "COMPANY BOARD"), based
on the unanimous recommendation of a special committee of independent directors
of the Company (the "SPECIAL COMMITTEE"), has (i) determined that each of the
Offer and the merger of Merger Sub with and into the Company, with the Company
as the surviving corporation (the "MERGER"), is fair to and in the best
interests of the stockholders of the Company (other than Parent, Merger Sub, the
Parent Stockholders and the Other Rothman Trusts), (ii) resolved to approve the
Offer, the Merger and this Agreement and the transactions contemplated hereby
and (iii) recommended acceptance of the Offer and, if required under the
applicable provisions of the Delaware General Corporation Law (the "DGCL"),
adoption of this Agreement by the stockholders of the Company, subject to the
terms and conditions set forth herein; and

    WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.

    NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:

                                      A-1
<PAGE>
                                   ARTICLE I
                                   THE OFFER

    SECTION 1.1  THE OFFER.

        (a)  TERMS OF THE OFFER.  As promptly as practicable after the date of
    this Agreement, but in no event later than five business days following the
    public announcement of the execution of this Agreement, Merger Sub shall
    commence the Offer within the meaning of the applicable rules and
    regulations of the Securities and Exchange Commission (the "SEC"). The
    obligations of Merger Sub to accept for payment, and pay for, any shares of
    Company Common Stock tendered pursuant to the Offer are subject only to the
    conditions set forth in EXHIBIT A. The initial expiration date of the Offer
    shall be the 20th business day following the commencement of the Offer
    (determined using Rule 14d-1(g)(3) under the Securities Exchange Act of 1934
    (the "EXCHANGE ACT")). Merger Sub expressly reserves the right to waive any
    condition to the Offer or modify the terms of the Offer, except that,
    without the prior written consent of the Special Committee, Merger Sub shall
    not (i) waive the Minimum Condition (as defined in EXHIBIT A hereof),
    (ii) reduce the price per share of Company Common Stock or change the form
    of consideration to be paid pursuant to the Offer, (iii) decrease the number
    of shares sought pursuant to the Offer, (iv) add to the conditions set forth
    in EXHIBIT A or modify any condition set forth in EXHIBIT A in any manner
    adverse to the holders of Company Common Stock or (v) otherwise amend the
    Offer in any manner adverse to the holders of Company Common Stock.
    Notwithstanding the foregoing, Merger Sub may, without the consent of the
    Company, (i) extend the Offer for any period required by any rule,
    regulation, interpretation or position of the SEC or the staff thereof
    applicable to the Offer and (ii) make available a "subsequent offering
    period," in accordance with Rule 14d-11 of the SEC, of not less than three
    nor greater than 20 business days PROVIDED, HOWEVER, that Merger Sub shall
    extend the Offer following its initial expiration upon the prior written
    request of the Special Committee for such number of days as is necessary to
    satisfy the conditions of the Offer set forth in EXHIBIT A but in no event
    shall Merger Sub be required to extend the Offer later than October 31,
    2000. On the terms and subject only to the conditions of the Offer set forth
    in EXHIBIT A, Merger Sub shall pay for all shares of Company Common Stock
    validly tendered and not withdrawn pursuant to the Offer that Merger Sub
    becomes obligated to purchase pursuant to the Offer promptly after the
    expiration of the Offer.

        (b)  OFFER DOCUMENTS.  On the date of commencement of the Offer,
    (i) Parent and Merger Sub shall file with the SEC and disseminate to holders
    of Company Common Stock a Tender Offer Statement on Schedule TO with respect
    to the Offer, which shall contain, among other things, an offer to purchase
    and a related letter of transmittal and summary advertisement; and
    (ii) Parent, Merger Sub and the Company shall file with the SEC a
    Transaction Statement on Schedule 13E-3 with respect to the Offer which
    shall be filed as a part of the Schedule TO (such Schedule TO and the
    documents included therein pursuant to which the Offer will be made and such
    Schedule 13E-3, together with any supplements or amendments to the
    foregoing, the "OFFER DOCUMENTS"). The Offer Documents shall comply in all
    material respects with the provisions of the Exchange Act. Each of Parent,
    Merger Sub and the Company shall promptly correct any information provided
    by it for use in the Offer Documents if and to the extent that such
    information shall have become false or misleading in any material respect,
    and the Parent and Merger Sub shall take all steps necessary to amend or
    supplement the Offer Documents and to cause the Offer Documents as so
    amended or supplemented to be filed with the SEC and the Offer Documents as
    so amended or supplemented to be disseminated to the Company's stockholders,
    in each case as and to the extent required by applicable Federal securities
    laws. The Company and its counsel shall be given the opportunity to review
    the Offer Documents prior to their initial filing with the SEC. Parent and
    Merger Sub shall provide the Company and its counsel with a copy of any
    written comments or telephonic notification of any oral

                                      A-2
<PAGE>
    comments Parent, Merger Sub or their counsel may receive from the SEC or its
    staff with respect to the Offer Documents promptly after the receipt of such
    comments.

        (c)  ACCEPTANCE FOR PAYMENT.  Merger Sub shall provide on a timely basis
    the funds necessary to purchase any shares of Company Common Stock that
    Merger Sub becomes obligated to purchase pursuant to the Offer.

        SECTION 1.2  COMPANY ACTIONS.

        (a)  APPROVAL OF TRANSACTION.  The Company hereby approves of and
    consents to the Offer, the Merger and the other transactions contemplated by
    this Agreement.

        (b)  SCHEDULE 14D-9. On the date the Offer Documents are filed with the
    SEC, the Company shall file with the SEC a Solicitation/Recommendation
    Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9,
    as supplemented or amended from time to time, the "SCHEDULE 14D-9")
    describing the recommendations of the Company Board. Neither the Company
    Board nor any committee thereof shall withdraw or modify, or propose to
    withdraw or modify, such recommendations or any related approval, unless
    prior to the acceptance for payment of shares of Company Common Stock
    pursuant to the Offer, the Board of Directors, based on the recommendation
    of the Special Committee, determines in good faith, after consultation with
    outside counsel, that it is necessary to do so in order to comply with its
    fiduciary duties to the Company's stockholders under any applicable Federal,
    foreign, state or provincial law, rule, regulation, order, judgment or
    decree (collectively, "LAWS"). The Schedule 14D-9 shall comply in all
    material respects with the provisions of the Exchange Act, assuming the
    accuracy of the information provided for inclusion therein by Parent and
    Merger Sub. Each of the Company, Parent and Merger Sub shall promptly
    correct any information provided by them for use in the Schedule 14D-9 if
    and to the extent that such information shall have become false or
    misleading in any material respect, and the Company shall take all steps
    necessary to amend or supplement the Schedule 14D-9 and to cause the
    Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
    disseminated to the Company's stockholders, in each case as and to the
    extent required by applicable Federal securities laws. Parent, Merger Sub
    and their counsel shall be given the opportunity to review the
    Schedule 14D-9 prior to its initial filing with the SEC. The Company shall
    provide Parent, Merger Sub and their counsel with a copy of any written
    comments or telephonic notification of any oral comments the Company or its
    counsel may receive from the SEC or its staff with respect to the
    Schedule 14D-9 promptly after the receipt of such comments.

        (c)  STOCKHOLDER LISTS.  In connection with the Offer, the Company shall
    cause its transfer agent to furnish Merger Sub promptly with mailing labels
    containing the names and addresses of the record holders of Company Common
    Stock as of a recent date and of those persons becoming record holders
    subsequent to such date, together with copies of all lists of stockholders,
    security position listings and computer files and all other information in
    the Company's possession or control regarding the beneficial owners of
    Company Common Stock, and shall furnish to Merger Sub such information and
    assistance (including updated lists of stockholders, security position
    listings and computer files) as Merger Sub may reasonably request in
    communicating the Offer to the Company's stockholders. Subject to the
    requirements of any applicable Law, and except for such steps as are
    necessary to disseminate the Offer Documents and any other documents
    necessary to consummate the Merger, Merger Sub and Parent and their agents
    shall hold in confidence the information contained in any such labels,
    lists, listings and files, and use such information only in connection with
    the Offer and the Merger and, if this Agreement shall be terminated, will,
    upon request, promptly deliver, and will use their best efforts to cause
    their agents promptly to deliver, to the Company all copies of such
    information (and all copies of information derived therefrom) then in their
    possession or control.

                                      A-3
<PAGE>
                                   ARTICLE II
                                   THE MERGER

    SECTION 2.1  THE MERGER.

        (a)  THE MERGER.  Subject to and upon the terms and conditions of this
    Agreement and the DGCL, at the Effective Time (as defined in Section 2.2),
    Merger Sub shall be merged with and into the Company, the separate corporate
    existence of Merger Sub shall cease, and the Company shall continue as the
    surviving corporation and the separate corporate existence of the Company
    with all of its rights, privileges, immunities, powers and franchises shall
    continue unaffected by the Merger. The Company as the surviving corporation
    after the Merger is hereinafter sometimes referred to as the "SURVIVING
    CORPORATION."

        (b)  EFFECT OF THE MERGER.  At the Effective Time, the effect of the
    Merger shall be as provided in this Agreement, the Certificate of Merger and
    the applicable provisions of the DGCL. Without limiting the generality of
    the foregoing, and subject thereto, at the Effective Time, all the property,
    rights, privileges, powers and franchises of the Company and Merger Sub
    shall vest in the Surviving Corporation, and all debts, liabilities and
    duties of the Company and Merger Sub shall become the debts, liabilities and
    duties of the Surviving Corporation.

    SECTION 2.2  EFFECTIVE TIME.  On the date of the Closing, the parties hereto
shall cause the Merger to be consummated by filing a certificate of merger as
contemplated by the DGCL (the "CERTIFICATE OF MERGER"), together with any
required related certificates, with the Secretary of State of the State of
Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, the DGCL (the time of such filing being the "EFFECTIVE
TIME").

    SECTION 2.3  CLOSING.  Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1 hereof and subject to the satisfaction or waiver of the conditions
set forth in Article VII, the consummation of the Merger (the "CLOSING") will
take place as promptly as practicable (and in any event not later than two
business days) after satisfaction or waiver of the conditions set forth in
Article VII, at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New
York, New York, unless another date, time or place is agreed to in writing by
the parties hereto.

    SECTION 2.4  CERTIFICATE OF INCORPORATION AND BY-LAWS.

        (a)  CERTIFICATE OF INCORPORATION.  The Certificate of Incorporation of
    the Company, as in effect immediately prior to the Effective Time, shall be
    the Certificate of Incorporation of the Surviving Corporation until
    thereafter amended in accordance with the DGCL and such Certificate of
    Incorporation.

        (b)  BY-LAWS.  The By-Laws of the Company, as in effect immediately
    prior to the Effective Time, shall be the By-Laws of the Surviving
    Corporation until thereafter amended in accordance with the DGCL, the
    Certificate of Incorporation of the Surviving Corporation and such By-Laws.

    SECTION 2.5  DIRECTORS AND OFFICERS.  The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.

                                      A-4
<PAGE>
    SECTION 2.6  EFFECT ON CAPITAL STOCK.  At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or the holders of any of the following securities:

        (a)  CAPITAL STOCK OF MERGER SUB.  Each issued and outstanding share of
    capital stock of Merger Sub shall be converted into and become one fully
    paid and nonassessable share of common stock, par value $0.01 per share, of
    the Surviving Corporation and shall constitute the only outstanding shares
    of capital stock of the Surviving Corporation.

        (b)  CANCELLATION OF TREASURY STOCK.  Each share of Company Common Stock
    that is owned (or held in the treasury) by the Company or any wholly owned
    subsidiary of the Company shall no longer be outstanding and shall
    automatically be canceled and retired and shall cease to exist, and no
    consideration shall be delivered or deliverable in exchange therefor.

        (c)  CONVERSION OF COMPANY COMMON STOCK.  Subject to Sections 2.6
    (b) and (d) and Section 2.7 hereof, each share of Company Common Stock
    issued and outstanding immediately prior to the Effective Time (other than
    shares of Company Common Stock owned by Merger Sub) shall be converted into
    the right to receive the $13.00 in cash, or any higher price per share of
    Company Common Stock paid pursuant to the Offer in cash (without interest).
    The cash payable upon the conversion of shares of Company Common Stock
    pursuant to this Section 2.6 (c) is referred to collectively as the "MERGER
    CONSIDERATION." As of the Effective Time, all such shares of Company Common
    Stock shall no longer be outstanding and shall automatically be canceled and
    retired and shall cease to exist, and each holder of a certificate
    representing any such shares of Company Common Stock shall cease to have any
    rights with respect thereto, except the right to receive the Merger
    Consideration payable with respect to such shares upon surrender of such
    certificate in accordance with Section 2.8, without interest, plus the
    amount of any dividends or other distributions with a record date prior to
    the Effective Time, if any, remaining unpaid with respect to such shares.

        (d)  APPRAISAL RIGHTS.  Notwithstanding anything in this Agreement to
    the contrary, shares ("APPRAISAL SHARES") of Company Common Stock that are
    outstanding immediately prior to the Effective Time and that are held by any
    person who is entitled to demand, and who properly demands, appraisal of
    such Appraisal Shares pursuant to, and who complies in all respects with,
    Section 262 of the DGCL ("SECTION 262") shall not be converted into Merger
    Consideration as provided in Section 2.6 (c), but rather the holders of
    Appraisal Shares shall be entitled to payment of the fair value of such
    Appraisal Shares in accordance with Section 262; provided, however, that if
    any such holder shall fail to perfect or otherwise shall waive, withdraw or
    lose the right to appraisal under Section 262, then the right of such holder
    to be paid the fair value of such holder's Appraisal Shares shall cease and
    such Appraisal Shares shall be deemed to have been converted as of the
    Effective Time into, and to have become exchangeable solely for the right to
    receive, the Merger Consideration (but without interest thereon) as provided
    in Section 2.6 (c). The Company shall serve prompt notice to Parent of any
    demands received by the Company for appraisal of any shares of Company
    Common Stock, and Parent shall have the right to participate in and direct
    all negotiations and proceedings with respect to such demands. Prior to the
    Effective Time, the Company shall not, without the prior written consent of
    Parent, make any payment with respect to, or settle or offer to settle, any
    such demands, or agree to do any of the foregoing.

    SECTION 2.7  STOCK OPTION AND OTHER PLANS.  Prior to the Effective Time, the
Company Board (or, if appropriate, any committee thereof) shall adopt
appropriate resolutions and use its reasonable efforts to take all other actions
necessary to provide for the cancellation, effective at the Effective Time, of
all of the outstanding stock options to purchase Common Stock (the "OPTIONS")
heretofore granted under the Company's 1997 Long-Term Incentive Plan and 1997
Non-Employee Directors' Plan (the "COMPANY STOCK OPTION PLANS"). Immediately
prior to the Effective Time, the Company shall use its

                                      A-5
<PAGE>
reasonable efforts to ensure that each Option, whether or not then vested or
exercisable, shall no longer be exercisable for the purchase of shares of
Company Common Stock but shall entitle the holder thereof, in cancellation and
settlement therefor, to a payment in cash (subject to any applicable withholding
taxes, the "CASH PAYMENT"), at the Effective Time, equal to the product of
(i) the total number of shares of Company Common Stock subject to such Option
whether or not then vested or exercisable and (ii) the excess of the Merger
Consideration over the exercise price per share of Company Common Stock subject
to such Option, each such Cash Payment to be paid to each holder of an
outstanding Option at the Effective Time. As provided herein, the Company shall
use its reasonable efforts to ensure that the Company Stock Option Plans shall
terminate as of the Effective Time and the provisions of any employee pension
plans (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), any material employee welfare plans (as defined
in Section 3(1) of ERISA), or any material bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance or similar
fringe or employee benefit plans, programs or arrangements providing for the
issuance or grant of shares of the capital stock of the Company shall be deleted
as of the Effective Time. The Company will use its reasonable efforts to obtain
any necessary consents to ensure that, after the Effective Time, the only rights
of the holders of Options to purchase shares of Company Common Stock in respect
of such Options will be to receive a Cash Payment in cancellation and settlement
thereof. Prior to the Effective Time, the Company Board (or, if appropriate, any
committee thereof) shall adopt appropriate resolutions and use its reasonable
efforts to take all other actions necessary to provide for termination of the
Employee Stock Purchase Plan, and for the return of all employee contributions
accumulated thereunder.

    SECTION 2.8  EXCHANGE OF CERTIFICATES.

        (a)  PAYING AGENT.  Prior to the Effective Time, Parent shall select a
    bank or trust company to act as paying agent (the "PAYING AGENT") for the
    payment of the Merger Consideration upon surrender of certificates which
    immediately prior to the Effective Time represented Company Common Stock.
    Immediately prior to the Effective Time, Parent shall deposit or shall cause
    to be deposited with or for the account of the Paying Agent, for the benefit
    of the holders of shares of Company Common Stock converted into the right to
    receive cash, an amount in cash equal to the aggregate Merger Consideration
    payable pursuant to Section 2.6(c) (such cash being hereinafter referred to
    as the "EXCHANGE FUND"). The Exchange Fund shall not be used for any other
    purpose.

        (b)  EXCHANGE PROCEDURE.  As soon as reasonably practicable after the
    Effective Time, the Paying Agent shall mail to each holder of record of a
    certificate or certificates (the "CERTIFICATES") that immediately prior to
    the Effective Time represented outstanding shares of Company Common Stock
    whose shares were converted into the right to receive Merger Consideration
    pursuant to Section 2.7, (i) a letter of transmittal (which shall specify
    that delivery shall be effected, and risk of loss and title to the
    Certificates shall pass, only upon delivery of the Certificates to the
    Paying Agent and shall be in such form and have such other provisions as
    Parent may reasonably specify) and (ii) instructions for use in effecting
    the surrender of the Certificates in exchange for Merger Consideration. Upon
    surrender of a Certificate for cancellation to the Paying Agent, together
    with such letter of transmittal, duly executed, and such other documents as
    may reasonably be required by the Paying Agent, the holder of such
    Certificate shall be entitled to receive in exchange therefor the amount of
    cash into which the shares of Company Common Stock theretofore represented
    by such Certificate shall have been converted pursuant to Section 2.7, and
    the Certificate so surrendered shall forthwith be canceled. In the event of
    a transfer of ownership of Company Common Stock that is not registered in
    the transfer records of the Company, payment may be made to a person other
    than the person in whose name the Certificate so surrendered is registered,
    if such Certificate shall be properly endorsed or otherwise be in proper
    form for transfer and the person requesting such payment shall pay any
    transfer or other taxes required by reason of the payment to a person other
    than the

                                      A-6
<PAGE>
    registered holder of such Certificate or establish to the satisfaction of
    Parent that such tax has been paid or is not applicable. The Merger
    Consideration will be delivered by the Paying Agent as promptly as
    practicable following the surrender of a Certificate, the related letter of
    transmittal, duly executed, and such other documents as may reasonably be
    required by the Paying Agent. Until surrendered as contemplated by this
    Section 2.8, each Certificate shall be deemed at any time after the
    Effective Time to represent only the right to receive upon such surrender
    the amount of cash, without interest, into which the shares of Company
    Common Stock theretofore represented by such Certificate have been converted
    pursuant to Section 2.7. No interest shall be paid or accrue on the cash
    payable upon surrender of any Certificate.

        (c)  NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK.  The Merger
    Consideration paid in accordance with the terms of this Article II upon
    conversion of any shares of Company Common Stock shall be deemed to have
    been paid in full satisfaction of all rights pertaining to such shares of
    Company Common Stock, subject, however, to the Surviving Corporation's
    obligation to pay any dividends or make any other distributions with a
    record date prior to the Effective Time that may have been declared or made
    by the Company on such shares of Company Common Stock in accordance with the
    terms of this Agreement or prior to the date of this Agreement and which
    remain unpaid at the Effective Time.

        (d)  TERMINATION OF EXCHANGE FUND.  Any portion of the Exchange Fund
    that remains undistributed to the holders of Company Common Stock for one
    year after the Effective Time shall be delivered to the Surviving
    Corporation, upon demand, and any holder of shares of Company Common Stock
    who has not theretofore complied with this Article II shall thereafter look
    only to the Surviving Corporation for payment of its claim for Merger
    Consideration.

        (e)  NO LIABILITY.  None of Parent, Merger Sub, the Company or the
    Paying Agent shall be liable to any person in respect of any cash from the
    Exchange Fund delivered to a public official pursuant to any applicable
    abandoned property, escheat or similar Law.

        (f)  INVESTMENT OF EXCHANGE FUND.  The Paying Agent shall invest any
    cash included in the Exchange Fund, as directed by Parent, on a daily basis.
    Any interest and other income resulting from such investments shall be paid
    to Parent.

        (g)  WITHHOLDING RIGHTS.  The Surviving Corporation shall be entitled to
    deduct and withhold from the consideration otherwise payable to any holder
    of Company Common Stock pursuant to this Agreement such amounts as may be
    required to be deducted and withheld with respect to the making of such
    payment under the United States Internal Revenue Code of 1986, as amended,
    or under any provision of state, local or foreign tax Law, and Parent shall
    provide, or cause the Paying Agent to provide, to such holders written
    notice of the amounts so deducted or withheld.

    SECTION 2.9  STOCK TRANSFER BOOKS.  At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of shares of Company Common Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, any Certificates are
presented to the Surviving Corporation or the Paying Agent for any reason, they
shall be canceled and exchanged as provided in this Article II.

    SECTION 2.10  LOST, STOLEN OR DESTROYED CERTIFICATES.  In the event any
Certificate evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, the holder of such lost, stolen or destroyed Certificate
shall execute an affidavit of that fact upon request. The holder of any such
lost, stolen or destroyed Certificate shall also deliver a reasonable indemnity
against any claim that may be made against Parent, Merger Sub, the Surviving
Corporation or the Paying Agent with respect to the Certificate alleged to have
been lost, stolen or destroyed. The affidavit and any indemnity which may be
required

                                      A-7
<PAGE>
hereunder shall be delivered to the Paying Agent, who shall be responsible for
making payment for such lost, stolen or destroyed Certificate pursuant to the
terms hereof.

    SECTION 2.11  TAKING OF NECESSARY ACTION; FURTHER ACTION.  Each of Parent,
Merger Sub and the Company will take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Merger in accordance
with this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full right,
title and possession to all assets, property, rights, privileges, powers and
franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.

                                  ARTICLE III
                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

    The Company hereby represents and warrants to Parent and Merger Sub as
follows:

    SECTION 3.1  AUTHORITY RELATIVE TO THIS AGREEMENT.  The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by the requisite corporate action, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than the
adoption of this Agreement by the holders of at least a majority of the
outstanding shares of Company Common Stock entitled to vote in accordance with
the DGCL and the Company's Certificate of Incorporation and By-Laws). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Merger Sub,
as applicable, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited or affected by (i) bankruptcy, insolvency,
reorganization, moratorium, liquidation, arrangement, fraudulent transfer,
fraudulent conveyance and other similar laws (including, without limitation,
court decisions) now or hereafter in effect and affecting the rights and
remedies of creditors generally or providing for the relief of debtors,
(ii) the refusal of a particular court to grant equitable remedies, including,
without limitation, specific performance and injunctive relief, and
(iii) general principles of equity (regardless of whether such remedies are
sought in a proceeding in equity or at Law).

    SECTION 3.2  OPINION OF FINANCIAL ADVISOR.  The Special Committee has
received the opinion of Merrill Lynch, Pierce, Fenner & Smith, Incorporated,
dated as of the date hereof, to the effect that, as of such date, the
consideration to be received by the holders of shares of Company Common Stock
pursuant to the Offer and the Merger is fair from a financial point of view to
such holders, other than Parent, Merger Sub, the Parent Stockholders and the
Other Rothman Trusts.

                                   ARTICLE IV
                       REPRESENTATIONS AND WARRANTIES OF
                             PARENT AND MERGER SUB

    Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company as follows:

    SECTION 4.1  ORGANIZATION AND QUALIFICATION.  Each of Parent and Merger Sub
is duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized.

                                      A-8
<PAGE>
    SECTION 4.2  ORGANIZATION DOCUMENTS.  Each of Parent and Merger Sub has
heretofore furnished to the Company complete and correct copies of its
Certificate of Incorporation and By-Laws, each as most recently restated and
subsequently amended to date.

    SECTION 4.3  CAPITALIZATION.

    (a) The authorized capital stock of Parent consists of 10,000,000 shares of
common stock, $0.0001 par value per share ("PARENT COMMON STOCK"). As of the
date hereof, (i) 8,775,840 shares of Parent Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable,
(ii) no shares were held in treasury and (iii) no shares of Parent Common Stock
were held by subsidiaries of Parent. Except as set forth in this Section 4.3 or
Section 4.3 of the written disclosure schedule delivered on or prior to the date
hereof by Parent to the Company that is arranged in paragraphs corresponding to
the numbered and lettered paragraphs contained in this Article IV (the "PARENT
DISCLOSURE SCHEDULE"), there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of Parent or any of its subsidiaries or obligating
Parent or any of its subsidiaries to issue or sell any shares of capital stock
of, or other equity interests in, Parent or any of its subsidiaries. All of the
outstanding shares of capital stock of each of Parent's subsidiaries is duly
authorized, validly issued, fully paid and nonassessable, and all such shares
are owned by Parent free and clear of all security interests, liens, claims,
pledges, agreements, limitations on voting rights, charges or other encumbrances
of any nature whatsoever (collectively, "LIENS").

    (b) As of the date hereof, the authorized capital stock of Merger Sub
consists of 3,000 shares of common stock, $0.01 par value per share, of which
100 shares are issued and outstanding. All the outstanding shares of capital
stock of Merger Sub are owned by Parent, free and clear of all Liens.

    SECTION 4.4  AUTHORITY RELATIVE TO THIS AGREEMENT.  Each of Parent and
Merger Sub has the requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by the requisite corporate action on the part of Parent and Merger
Sub, and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement or to consummate the transactions
contemplated thereby. This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of Parent and Merger Sub enforceable against each of them in
accordance with its terms, except as such enforceability may be limited or
affected by (i) bankruptcy, insolvency, reorganization, moratorium, liquidation,
arrangement, fraudulent transfer, fraudulent conveyance and other similar laws
(including, without limitation, court decisions) now or hereafter in effect and
affecting the rights and remedies of creditors generally or providing for the
relief of debtors, (ii) the refusal of a particular court to grant equitable
remedies, including, without limitation, specific performance and injunctive
relief, and (iii) general principles of equity (regardless of whether such
remedies are sought in a proceeding in equity or at law).

    SECTION 4.5  NO CONFLICT, REQUIRED FILINGS AND CONSENTS.

    (a) Except as set forth in Section 4.5(a) of the Parent Disclosure Schedule,
the execution and delivery of this Agreement by Parent and Merger Sub does not,
and the performance of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
will not, (i) conflict with or violate the Certificate of Incorporation or
By-Laws of Parent or Merger Sub, (ii) to the knowledge of Parent, conflict with
or violate any Laws applicable to Parent or any of its subsidiaries or by which
its or any of their respective properties are bound or affected, or (iii) to the
knowledge of Parent, result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or impair Parent's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment,

                                      A-9
<PAGE>
acceleration or cancellation of, or result in the creation of a Lien on any of
the properties or assets of Parent or any of its subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or its or
any of their respective properties are bound or affected, except in the case of
clauses (ii) and (iii) for any such conflicts, violations, breaches, defaults or
other occurrences that do not constitute a Material Adverse Effect. When used in
connection with the Parent or any of its subsidiaries, as the case may be, the
term "MATERIAL ADVERSE EFFECT" means any change, effect or circumstance that,
individually or when taken together with all other such changes, effects or
circumstances that have occurred prior to the date of determination of the
occurrence of such change, effect or circumstance, (i) is materially adverse to
the business, assets (including intangible assets), financial condition or
results of operations of the Parent and its subsidiaries taken as a whole, or
(ii) delays or prevents the consummation of the transactions contemplated
hereby.

    (b) Except as set forth in Section 4.5(b) of the Parent Disclosure Schedule,
the execution and delivery of this Agreement by Parent and Merger Sub does not,
and the performance of this Agreement by Parent and Merger Sub will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Securities Act of 1933,
as amended, the Exchange Act, state securities Laws, the pre-merger notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, the legal requirements of any foreign jurisdiction requiring
notification in connection with the Merger and the transactions contemplated
hereby and the filing and recordation of appropriate merger or other documents
as required by the DGCL, and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
(A) would not prevent or materially delay consummation of the Merger or
otherwise prevent or materially delay Parent or Merger Sub from performing their
respective obligations under this Agreement, or (B) do not constitute a Material
Adverse Effect.

    SECTION 4.6  INFORMATION SUPPLIED.  None of the information supplied or to
be supplied by Parent or Merger Sub for inclusion or incorporation by reference
in (i) the Offer Documents or the Schedule 14D-9 will, at the time such document
is filed with the SEC, at any time it is amended or supplemented or at the time
it is first published, sent or given to the Company's stockholders, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
or (ii) the Proxy Statement and any Schedule 13E-3 will, at the date the Proxy
Statement is first mailed to the Company's stockholders or at the time of the
Company Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.

    SECTION 4.7  FINANCING.  Merger Sub has received and delivered to the
Company a true and complete executed copy of the Credit Agreement, dated the
date hereof, by and among Parent and Merger Sub, as co-borrowers, the lenders
named therein and The Chase Manhattan Bank, as administrative agent (the "CREDIT
AGREEMENT"), with respect to the transactions contemplated hereby and, Merger
Sub will have available, at the expiration of the Offer and through the
consummation of the Merger, pursuant to the terms and conditions of the Credit
Agreement sufficient funds necessary for Merger Sub to consummate the Offer, the
Merger and the other transactions contemplated hereby and to pay all related
expenses.

    SECTION 4.8  BROKERS.  Except for First Union Securities, Inc. ("FIRST
UNION"), no broker, finder or investment banker or other party is entitled to
any brokerage, finder's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Merger Sub or any of their subsidiaries or affiliates.
The fees and expenses of First Union will be paid by Parent.

                                      A-10
<PAGE>
    SECTION 4.9  SALE OF THE COMPANY.  Neither Parent or Merger Sub nor any of
their affiliates has any agreement as of the date of this Agreement to sell all
or substantially all of the Company.

                                   ARTICLE V
                     CONDUCT OF BUSINESS PENDING THE MERGER

    SECTION 5.1  NO SOLICITATION.

    (a)  The Company shall not, directly or indirectly, through any officer,
director, employee, representative or agent of the Company or any of its
subsidiaries, (i) solicit or initiate any inquiries or proposals regarding any
merger, sale of substantial assets, sale of more than 35% of the outstanding
shares of capital stock (including without limitation by way of a tender offer)
or similar transactions involving the Company other than the Merger (any of the
foregoing inquiries or proposals being referred to herein as an "ACQUISITION
PROPOSAL"), (ii) engage in negotiations or discussions concerning, or provide
any nonpublic information to any person relating to, any Acquisition Proposal or
(iii) agree to, approve or recommend any Acquisition Proposal. Nothing contained
in this Section 5.1(a) shall prevent the Special Committee from considering,
negotiating, discussing, approving and recommending to the stockholders of the
Company, or providing information to any person in connection with, an
unsolicited Acquisition Proposal or unsolicited request for non-public
information concerning the Company, provided the Special Committee determines in
good faith that it is required to do so in order to discharge properly its
fiduciary duties, or taking any action and making any disclosure which the
Special Committee determines is required to be taken or made under any
applicable Law. Nothing contained in this Section 5.1 shall prohibit the Special
Committee from complying with Rules 14e-2 and 14d-9 promulgated under the
Exchange Act with regard to a tender or exchange offer under any applicable Law.

    (b)  Unless otherwise required under the applicable fiduciary duties of the
directors of the Company, the Special Committee shall promptly notify Parent
after receipt of any Acquisition Proposal, or any material modification of or
amendment to any Acquisition Proposal. Such notice to Parent shall indicate
whether the Special Committee is providing or intends to provide the person
making the Acquisition Proposal with access to information concerning the
Company as provided in Section 5.1(c).

    (c)  If the Company Board or the Special Committee receives a request for
nonpublic information by a person who makes, or indicates that it is considering
making, an Acquisition Proposal, and the Special Committee determines in good
faith that it is required to cause the Company to act as provided in this
Section 5.1(c) in order to discharge properly the directors' fiduciary duties,
then, provided such person has executed a confidentiality agreement with the
Company in form and substance satisfactory to the Special Committee, the Special
Committee may provide such person with access to such nonpublic information
regarding the Company.

                                      A-11
<PAGE>
                                   ARTICLE VI
                             ADDITIONAL AGREEMENTS

    SECTION 6.1  PREPARATION OF PROXY STATEMENT; STOCKHOLDERS MEETING.  (a) If
the adoption of this Agreement by the Company's stockholders is required by Law
("COMPANY STOCKHOLDER APPROVAL") in order to consummate the Merger, the Company
shall, at Parent's request, as soon as practicable following the expiration of
the Offer, prepare and file with the SEC an information or proxy statement (the
"PROXY STATEMENT") in preliminary form, and each of the Company and Parent shall
use its reasonable best efforts to respond as promptly as practicable to any
comments of the SEC with respect thereto. The Company shall notify Parent
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and shall supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement. If at any time prior to receipt of the Company Stockholder Approval
there shall occur any event that is required to be set forth in an amendment or
supplement to the Proxy Statement, the Company shall promptly prepare and mail
to its stockholders such an amendment or supplement. The Company shall not mail
any Proxy Statement, or any amendment or supplement thereto, to which Parent
reasonably objects. The Company shall use its reasonable best efforts to cause
the Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable after filing with the SEC.

    (b)  If the adoption of this Agreement by the Company's stockholders is
required by Law in order to consummate the Merger, the Company shall, as soon as
practicable following the expiration of the Offer, duly call, give notice of,
convene and hold a meeting of its stockholders (the "COMPANY STOCKHOLDERS
MEETING") for the purpose of seeking the Company Stockholder Approval. The
Company shall, through the Company Board based upon the recommendation of the
Special Committee, recommend to its stockholders that they give the Company
Stockholder Approval and neither the Company Board nor any committee thereof
shall withdraw or modify, or propose to withdraw or modify such recommendation
or related approval, unless the Company Board, based on the recommendation of
the Special Committee, determines in good faith, after consultation with outside
counsel, that it is necessary to do so in order to comply with its fiduciary
duties to the Company's stockholders under applicable Law; PROVIDED, that, if
Merger Sub so elects, Merger Sub shall execute a written consent approving the
Merger and, in lieu of holding a stockholders meeting, the Company shall notify
the stockholders of the Company of such written consent in accordance with the
By-Laws of the Company and Section 228 of the DGCL. Notwithstanding the
foregoing, if Merger Sub shall acquire at least 90% of the outstanding shares of
each class of capital stock of the Company, the parties shall take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a stockholders meeting in
accordance with Section 253 of the DGCL (a "SHORT-FORM MERGER").

    (c)  Parent shall cause all shares of Company Common Stock purchased by
Merger Sub pursuant to the Offer and all other shares of Company Common Stock
owned by Merger Sub to be voted in favor of the adoption of this Agreement, if
applicable.

    SECTION 6.2  ACCESS TO INFORMATION.  Upon reasonable notice, the Company and
Parent shall each (and shall cause each of their respective subsidiaries to)
afford to the officers, employees, accountants, counsel and other
representatives of the other, reasonable access, during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, the Company and Parent each shall (and shall cause each
of their respective subsidiaries to) furnish promptly to the other all
information concerning its business, properties and personnel as such other
party may reasonably request, and each shall make available to the other the
appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the other's business, properties and personnel
as either Parent or the Company may reasonably request.

                                      A-12
<PAGE>
    SECTION 6.3  CONSENTS; APPROVALS.  The Company, Parent and Merger Sub shall
each use all reasonable efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all United States and
foreign governmental and regulatory rulings and approvals), and the Company,
Parent and Merger Sub shall make all filings (including, without limitation, all
filings with United States and foreign governmental or regulatory agencies)
required in connection with the authorization, execution and delivery of this
Agreement by each of them and the consummation by them of the transactions
contemplated hereby, in each case as promptly as practicable.

    SECTION 6.4  INDEMNIFICATION AND INSURANCE

    (a)  The By-Laws of the Surviving Corporation shall contain the provisions
with respect to indemnification set forth in the By-Laws of the Company on the
date hereof, which provisions shall not be amended, repealed or otherwise
modified in any manner that would adversely affect the rights thereunder of
individuals who on or prior to the Effective Time were directors, officers,
employees or agents of the Company, unless such modification is required by Law.

    (b)  The Company shall, to the fullest extent permitted under applicable Law
or under the Company's Certificate of Incorporation or By-Laws and regardless of
whether the Merger becomes effective, indemnify and hold harmless, and, after
the Effective Time, the Surviving Corporation shall, to the fullest extent
permitted under applicable Law or under the Surviving Corporation's Certificate
of Incorporation or By-Laws as in effect at the Effective Time, indemnify and
hold harmless, each present and former director, officer or employee of the
Company or any of its subsidiaries (collectively, the "INDEMNIFIED PARTIES")
against any costs or expenses (including reasonable attorneys' fees and
disbursements), judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, (x) arising out of or pertaining to this Agreement or the
transactions contemplated by this Agreement or (y) otherwise with respect to any
acts or omissions occurring at or prior to the Effective Time, to the same
extent as provided in the Company's Certificate of Incorporation or By-Laws or
any applicable contract or agreement (including, without limitation,
indemnification agreements with the Company's directors and officers) as in
effect on the date hereof, in each case through the later of (i) six years from
the date hereof and (ii) the expiration of any statute of limitations applicable
to such claim, action, suit or proceeding. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) any counsel retained by the Indemnified Parties for any
period after the Effective Time shall be reasonably satisfactory to the
Surviving Corporation, (ii) after the Effective Time, the Surviving Corporation
shall pay the reasonable fees and expenses of such counsel, promptly after
statements therefor are received, and (iii) the Surviving Corporation will
cooperate in the defense of any such matter; PROVIDED, HOWEVER, that the
Surviving Corporation shall not be liable for any settlement effected without
its written consent (which consent shall not be unreasonably withheld); and
PROVIDED, FURTHER, that, in the event that any claim or claims for
indemnification are asserted or made within such period, all rights to
indemnification in respect of any such claim or claims shall continue until the
disposition of any and all such claims. The Indemnified Parties as a group may
retain only one law firm to represent them with respect to any single action
unless an Indemnified Party, based on advice of counsel, reasonably believes
that there may be, under applicable standards of professional conduct, a
conflict of interest between the positions of any two or more Indemnified
Parties.

    (c)  The Surviving Corporation shall honor and fulfill in all respects the
obligations of the Company pursuant to indemnification agreements with the
Company's directors and officers existing at or before the Effective Time, and
Parent shall in turn guarantee the obligations of the Surviving Corporation.

    (d)  For a period of six years after the Effective Time, the Surviving
Corporation shall maintain in effect directors' and officers' liability
insurance covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy (a copy of which has been
made available to

                                      A-13
<PAGE>
Parent) on terms no less advantageous to such persons than those now applicable
to directors and officers of the Company.

    (e)  This Section 6.4 shall survive the consummation of the Merger, is
intended to benefit the Company, the Surviving Corporation and the Indemnified
Parties, shall be binding on all successors and assigns the Surviving
Corporation and shall be enforceable by the Indemnified Parties and their
respective heirs or representatives, and is in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise. The Surviving Corporation shall
pay all expenses, including reasonable attorney's fees and disbursements, that
may be incurred by any Indemnified Party in enforcing the provisions of this
Section 6.4.

    SECTION 6.5  NOTIFICATION OF CERTAIN MATTERS.  The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which would be likely to cause any representation or warranty contained in
this Agreement to become materially untrue or inaccurate, or (ii) any failure of
the Company, Parent or Merger Sub, as the case may be, materially to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 6.5 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice, and PROVIDED FURTHER that failure
to give such notice shall not be treated as a breach of covenant for the
purposes of Section 7.2(b) or 7.3(b) unless the failure to give such notice
results in material prejudice to the other party.

    SECTION 6.6  FURTHER ACTION.  Upon the terms and subject to the conditions
hereof each of the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and otherwise to satisfy or cause to be
satisfied all conditions precedent to its obligations under this Agreement.

    SECTION 6.7  PUBLIC ANNOUNCEMENTS.  Parent and Merger Sub, on the one hand,
and the Company, on the other hand, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to the transactions
contemplated by this Agreement, including the Offer and the Merger, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable Law, court process or the
rules and regulations of the Nasdaq Stock Market.

    SECTION 6.8  CONVEYANCE TAXES.  Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes (collectively, the
"TRANSFER TAXES") which become payable in connection with the transactions
contemplated hereby that are required or permitted to be filed at or before the
Effective Time. Parent or the Surviving Corporation shall pay all Transfer Taxes
imposed in connection with the transactions contemplated hereby.

    SECTION 6.9  GUARANTEE OF MERGER SUB OBLIGATIONS.  Parent shall guarantee
the full and punctual performance by Merger Sub of all the obligations hereunder
of Merger Sub.

    SECTION 6.10  CONTRIBUTION OF PARENT STOCKHOLDER SHARES.  The Parent
Stockholders hereby agree that (i) on or prior to the initial expiration date of
the Offer or any extension thereof, as the case may be, the Parent Stockholders
shall contribute the Parent Stockholder Shares to Parent and shall cause Parent
to contribute the Parent Stockholder Shares to Merger Sub and (ii) the Parent
Stockholders shall not take any action, or omit to take any action which they
could reasonably be expected to take, if the taking of, or the omission to take,
such action could reasonably be expected to adversely affect the ability of the
Purchaser to consummate the transactions contemplated hereby; PROVIDED, HOWEVER,
that the Parent

                                      A-14
<PAGE>
Stockholders shall only be required to make the contributions described in
subsection (i) of this Section 6.10 if all of the conditions to the Offer set
forth on EXHIBIT A hereto are satisfied unless the failure to satisfy such
conditions is a result of the Parent Stockholders knowingly taking any action,
or knowingly omitting to take any action which they could reasonably be expected
to take, if the taking of, or omission to take, such action could reasonably be
expected to adversely affect the ability of the Purchaser to consummate the
transactions contemplated hereby.

                                  ARTICLE VII
                            CONDITIONS TO THE MERGER

    SECTION 7.1  CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER.  The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:

        (a)  CONSUMMATION OF OFFER.  Merger Sub shall have commenced the Offer
    and shall have purchased, pursuant to the terms and conditions of the Offer,
    a majority of the outstanding shares of Company Common Stock not owned by
    the Parent Stockholders and the other Rothman Trusts, consisting of
    1,281,150 shares of Company Common Stock.

        (b)  REQUISITE STOCKHOLDER APPROVAL.  If required by Law in order to
    consummate the Merger, the Company shall have obtained the Company
    Stockholder Approval;

        (c)  REQUIRED CONSENTS AND APPROVALS.  All material consents, waivers,
    approvals, authorizations or orders of third parties to the consummation of
    the Merger shall have been obtained; and

        (d)  NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY.  No statute, rule,
    regulation, executive order, decree, ruling, temporary restraining order,
    preliminary or permanent injunction or other order shall have been enacted,
    entered, promulgated, enforced or issued by any court or governmental
    authority of competent jurisdiction or shall otherwise be in effect which
    prohibits, restrains, enjoins or restricts the consummation of the Merger;
    provided, however, that in the case of a decree, injunction or other order,
    each of the parties shall have used reasonable efforts to prevent the entry
    of any such injunction or other order and to appeal as promptly as possible
    any decree, injunction or other order that may be entered.

    SECTION 7.2  ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
SUB.  The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:

        (a)  REPRESENTATIONS AND WARRANTIES.  The representations and warranties
    of the Company contained in this Agreement shall be true and correct in all
    respects at and as of the Effective Time as if made at and as of such time,
    except for (i) changes contemplated by this Agreement, (ii) those
    representations and warranties which address matters only as of a particular
    date (which shall have been true and correct as of such date, subject to
    clause (iii)), and (iii) where the failure to be true and correct shall not
    constitute a Material Adverse Effect, with the same force and effect as if
    made at and as of the Effective Time;

        (b)  AGREEMENTS AND COVENANTS.  The Company shall have performed or
    complied in all material respects with all agreements and covenants required
    by this Agreement to be performed or complied with by it at or prior to the
    Effective Time;

    SECTION 7.3  ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY.  The
obligation of the Company to effect the Merger is also subject to the following
conditions:

        (a)  REPRESENTATIONS AND WARRANTIES.  The representations and warranties
    of Parent and Merger Sub contained in this Agreement shall be true and
    correct in all respects on and as of the Effective

                                      A-15
<PAGE>
    Time, except for (i) changes contemplated by this Agreement, (ii) those
    representations and warranties which address matters only as of a particular
    date (which shall have been true and correct as of such date, subject to
    clause (iii)), and (iii) where the failure to be true and correct shall not
    constitute a Material Adverse Effect, with the same force and effect as if
    made on and as of the Effective Time;

        (b)  AGREEMENTS AND COVENANTS.  Parent and Merger Sub shall have
    performed or complied in all material respects with all agreements and
    covenants required by this Agreement to be performed or complied with by
    them on or prior to the Effective Time;

                                  ARTICLE VIII
                                  TERMINATION

    SECTION 8.1  TERMINATION.  This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company or Parent:

        (a) by mutual written consent of Parent, Merger Sub and the Special
    Committee on behalf of the Company; or

        (b) by either Parent or the Special Committee on behalf of the Company:

           (i) if the purchase of the shares of Company Common Stock pursuant to
       the Offer is not consummated on or before October 31, 2000, unless the
       failure to consummate the Offer is the result of a breach of this
       Agreement by the party seeking to terminate this Agreement; or

           (ii) if any governmental entity issues an order, decree or ruling or
       takes any other action permanently enjoining, restraining or otherwise
       prohibiting the Merger and such order, decree, ruling or other action
       shall have become final and nonappealable; or

        (c) by Parent or the Special Committee if the Special Committee
    determines in good faith that the Special Committee's fiduciary obligations
    under applicable law require the Special Committee to withdraw its
    recommendation of this Agreement and the transactions contemplated hereby;
    or

        (d) by the Special Committee on behalf of the Company if (i) Parent
    fails to commence the Offer as provided in Section 1.1, (ii) Parent shall
    have terminated the Offer or permitted the Offer to expire without the
    purchase of shares of Company Common Stock thereunder or (iii) Parent fails
    to purchase validly tendered shares of Company Common Stock in violation of
    the terms and conditions of the Offer or this Agreement; or

        (e) by either Parent or the Special Committee if the Merger shall not
    have been consummated by January 31, 2001 (provided that the right to
    terminate this Agreement under this Section 8.1(e) shall not be available to
    any party whose failure to fulfill any obligation under this Agreement has
    been the cause of or resulted in the failure of the Merger to occur on or
    before such date); or

        (f) by the Special Committee if there has been a material
    misrepresentation or breach of warranty in the representations and
    warranties made by Parent or Merger Sub that cannot be cured at or prior to
    the Effective Time; or

        (g) by Parent, if there has been a material misrepresentation or breach
    of warranty in the representations and warranties made by the Company that
    cannot be cured at or prior to the Effective Time; or

        (h) by Parent or the Special Committee, if the Special Committee shall
    have (i) recommended to the stockholders of the Company an Alternative
    Transaction (as defined below); or (ii) after the commencement of a tender
    offer or exchange offer for 35% or more of the outstanding shares of Company
    Common Stock (other than by Merger Sub or an affiliate of Merger Sub),
    recommended that the stockholders of the Company tender their shares in such
    tender or exchange offer.

                                      A-16
<PAGE>
    As used herein, "Alternative Transaction" means any of (i) a transaction or
series of transactions pursuant to which any person (or group of persons) other
than Parent or any of its subsidiaries or any affiliate of any thereof (a "THIRD
PARTY") acquires or would acquire more than 35% of the outstanding shares of
Common Stock of the Company, whether from the Company or pursuant to a tender
offer or exchange offer or otherwise, (ii) any acquisition or proposed
acquisition of the Company or any of its subsidiaries by a merger or other
business combination (including any so-called "merger of equals" and whether or
not the Company or any of its subsidiaries is the entity surviving any such
merger or business combination) or (iii) any other transaction pursuant to which
any Third Party acquires or would acquire control of assets (including for this
purpose the outstanding equity securities of subsidiaries of the Company and any
entity surviving any merger or business combination including any of them) of
the Company or any of its subsidiaries having a fair market value equal to more
than 35% of the fair market value of all the assets of the Company and its
subsidiaries, taken as a whole, immediately prior to such transaction.

    SECTION 8.2  EFFECT OF TERMINATION.  In the event of the termination of this
Agreement pursuant to Section 8.1, (i) this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers or stockholders, and (ii) nothing herein
shall relieve any party from liability for any breach hereof occurring prior to
termination.

    SECTION 8.3  FEES AND EXPENSES.  All fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses, whether or not the Merger is
consummated.

                                   ARTICLE IX
                               GENERAL PROVISIONS

    SECTION 9.1  EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS

    (a)  The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, as the case may be, except that the agreements set
forth in Article I, Article II, Sections 6.3 and 6.4 shall survive the Effective
Time indefinitely and those set forth in Section 8.3 shall survive such
termination (whether at the Effective Time or pursuant to Section 8.1)
indefinitely. Nothing in this Section 9.1(a) shall relieve any party for any
breach of any representation, warranty or agreement in this Agreement occurring
prior to termination.

    (b)  Any disclosure made with reference to one or more Sections of the
Parent Disclosure Schedule shall be deemed disclosed only with respect to such
Section unless such disclosure is made in such a way as to make its relevance to
the information called for by another Section of such schedule readily apparent
in which case, such disclosure shall be deemed to have been included in such
other Section, notwithstanding the omission of a cross reference thereto.

    SECTION 9.2  ACTIONS OF THE COMPANY.  Prior to the Effective Time, any
action, approval, authorization, waiver or consent of the Company (including the
Company Board) required or permitted by this Agreement shall be deemed to have
been taken or given only if such action, approval, authorization, waiver or
consent shall have received the approval of the Special Committee.

    SECTION 9.3  NOTICES.  All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with

                                      A-17
<PAGE>
confirmation of receipt, to the telecopy numbers specified below (or at such
other address or telecopy number for a party as shall be specified by like
notice):

        (a) If to Parent, Merger Sub or the Parent Stockholders:

               L&LR, Inc.
               301 Route 10 East
               Whippany, New Jersey 07981
               Telecopier No.: (973) 884-9556
               Telephone No.: (973) 884-9555
               Attention: Lewis I. Rothman

           With a copy to:

               Morgan, Lewis & Bockius LLP
               101 Park Avenue
               New York, NY 10178
               Telecopier No.: (212) 309-6273
               Telephone No.: (212) 309-6000
               Attention: Samuel B. Fortenbaugh III, Esq.

        (b) If to the Company:

               800-JR CIGAR, Inc.
               301 Route 10 East
               Whippany, New Jersey 07981
               Telecopier No.: (973) 884-9556
               Telephone No.: (973) 884-9555
               Attention: Michael E. Colleton

           With a copy to:

               Dewey Ballantine LLP
               1301 Avenue of the Americas
               New York, New York 10019-6092
               Telecopier No.: (212) 259-6333
               Telephone No.: (212) 259-8000
               Attention: Morton A. Pierce, Esq.

    SECTION 9.4  CERTAIN DEFINITIONS.  For purposes of this Agreement, the term:

        (a)  "affiliate" means a person that, directly or indirectly, through
    one or more intermediaries, controls, is controlled by, or is under common
    control with, the first mentioned person;

        (b)  "beneficial owner" with respect to any shares of Company Common
    Stock means a person who shall be deemed to be the beneficial owner of such
    shares (i) which such person or any of its affiliates or associates (as such
    term is defined in Rule 12b-2 of the Exchange Act) beneficially owns,
    directly or indirectly, (ii) which such person or any of its affiliates or
    associates has, directly or indirectly, (A) the right to acquire (whether
    such right is exercisable immediately or subject only to the passage of
    time), pursuant to any agreement, arrangement or understanding or upon the
    exercise of conversion rights, exchange rights, warrants or options, or
    otherwise, or (B) the right to vote pursuant to any agreement, arrangement
    or understanding, or (iii) which are beneficially owned, directly or
    indirectly, by any other persons with whom such person or any of its
    affiliates or associates has any agreement, arrangement or understanding for
    the purpose of acquiring, holding, voting or disposing of any shares;

                                      A-18
<PAGE>
        (c)  "business day" means any day other than a day on which banks in the
    State of New York are required or authorized to be closed;

        (d)  "control" (including the terms "controlled by" and "under common
    control with") means the possession, directly or indirectly or as trustee or
    executor, of the power to direct or cause the direction of the management or
    policies of a person, whether through the ownership of stock, as trustee or
    executor, by contract or credit arrangement or otherwise;

        (e)  "generally accepted accounting principles" or "GAAP" shall mean
    United States generally accepted accounting principles;

        (f)  "knowledge" of the Company or Parent, as the case may be, shall
    mean the actual knowledge of the executive officers of the Company or the
    executive officers of Parent, respectively, as such knowledge has been
    obtained in the normal conduct of business;

        (g)  "person" means an individual, corporation, partnership,
    association, trust, unincorporated organization, other entity or group (as
    defined in Section 13(d) (3) of the Exchange Act); and

        (h)  "subsidiary" or "subsidiaries" of the Company, the Surviving
    Corporation, Parent or any other person means any corporation, partnership,
    joint venture or other legal entity of which the Company, the Surviving
    Corporation, Parent or such other person, as the case may be (either alone
    or through or together with any other subsidiary), owns, directly or
    indirectly, more than 50% of the stock or other equity interests the holders
    of which are generally entitled to vote for the election of the board of
    directors or other governing body of such corporation or other legal entity.

    SECTION 9.5  AMENDMENT.  This Agreement may only be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; PROVIDED, HOWEVER, that, after approval
of the Merger by the stockholders of the Company, no amendment may be made which
by Law requires further approval by such stockholders without such further
approval; and PROVIDED FURTHER, that consent of the Company shall require the
approval of the Special Committee. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto.

    SECTION 9.6  WAIVER.  At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein; PROVIDED, HOWEVER, that any such extension or
waiver by the Company shall require the approval of the Special Committee. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.

    SECTION 9.7  HEADINGS.  The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

    SECTION 9.8  SEVERABILITY.  If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.

    SECTION 9.9  ENTIRE AGREEMENT.  This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof.

                                      A-19
<PAGE>
    SECTION 9.10  ASSIGNMENT.  This Agreement shall not be assigned by operation
of Law or otherwise, except that Parent and Merger Sub may assign all or any of
their rights hereunder to any direct wholly-owned subsidiary of Parent provided
that no such assignment shall relieve the assigning party of its obligations
hereunder.

    SECTION 9.11  PARTIES IN INTEREST.  This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, other than
Section 6.4 (which is intended to be for the benefit of the Indemnified Parties
and may be enforced by such Indemnified Parties).

    SECTION 9.12  FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.

    SECTION 9.13  GOVERNING LAW.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York (other than any
conflicts of law rules which might result in the application of the Laws of any
other jurisdiction), except to the extent that the DGCL applies, in which case
such Law shall apply.

    SECTION 9.14  COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.

    SECTION 9.15  CONSENT TO JURISDICTION.  Each of the parties hereto:

        (a)  consents to submit itself to the personal jurisdiction of (i) the
    United States District Court for the Southern District of New York in the
    event any dispute arises out of this Agreement or any of the transactions
    contemplated by this Agreement to the extent such court would have subject
    matter jurisdiction with respect to such dispute and (ii) the Chancery or
    other Courts of the State of Delaware otherwise;

        (b)  agrees that it will not attempt to deny or defeat such personal
    jurisdiction or venue by motion or other request for leave from any such
    court;

        (c)  agrees that it will not bring any action relating to this Agreement
    or any of the transactions contemplated by this Agreement in any court other
    than such courts;

        (d)  agrees that service of process in any such action or proceeding may
    be effected by mailing a copy thereof by registered or certified mail (or
    any substantially similar form of mail), postage prepaid, to a party at its
    address set forth in Section 9.3 or at such other address of which a party
    shall have been notified pursuant thereto; and

        (e)  agrees that nothing herein shall affect the right to effect service
    of process in any other manner permitted by Law.

                                      A-20
<PAGE>
    IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the Parent
Stockholders have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly authorized.

<TABLE>
<S>                                                    <C>  <C>
                                                       L&LR, INC.

                                                       By:  /s/ LEWIS I. ROTHMAN
                                                            -----------------------------------------
                                                            Name: Lewis I. Rothman
                                                            Title: President

                                                       JRC ACQUISITION CORP.

                                                       By:  /s/ LEWIS I. ROTHMAN
                                                            -----------------------------------------
                                                            Name: Lewis I. Rothman
                                                            Title: President

                                                       800-JR CIGAR, INC.

                                                       By:  /s/ LEWIS I. ROTHMAN
                                                            -----------------------------------------
                                                            Name: Lewis I. Rothman
                                                            Title: Chief Executive Officer

                                                       As to Section 6.10 hereof only:

                                                       /s/ LEWIS I. ROTHMAN
                                                       ---------------------------------------------
                                                       Lewis I. Rothman

                                                       /s/ LAVONDA M. ROTHMAN
                                                       ---------------------------------------------
                                                       LaVonda M. Rothman

                                                       LEWIS IRVING ROTHMAN 1998 TRUST #1
                                                       u/a/d November 10, 1998

                                                       By:  /s/ SAMUEL BORNSTEIN
                                                            -----------------------------------------
                                                            Name: Samuel Bornstein
                                                            Title: Trustee
</TABLE>

                                      A-21
<PAGE>
                                   EXHIBIT A
                            CONDITIONS TO THE OFFER

    (1) A majority of the outstanding shares of Company Common Stock not owned
by the Parent Stockholders and the Other Rothman Trusts, consisting of 1,281,150
shares of Company Common Stock, shall have been validly tendered and not
withdrawn prior to the expiration of the Offer (the "Minimum Condition").

    (2) Merger Sub shall have available at the expiration of the Offer the
financing pursuant to the Credit Agreement.

    (3) The Company Board and the Special Committee shall not have withdrawn or
modified, in a manner adverse to the Merger Sub, its approval of the Offer and
its recommendation that the stockholders of the Company tender their shares of
Company Common Stock pursuant to the Offer.

    (4) There shall not have occurred any effect that, individually or in
aggregate, is materially adverse to the condition, business, assets, or results
of the operations of the Company.

    (5) The representations and warranties of the Company shall be true and
correct in all material respects.

    (6) No governmental or judicial action shall have been taken which
materially adversely affects the consummation of the Offer.

    (7) Any material consents or authorizations, permits, orders or approvals of
any governmental body required for the consummation of the Offer shall have
obtained and any filings or registrations required to be made with any
governmental body shall have been made by the closing of the Offer.

    (8) There shall not have occurred (i) any general suspension for at least
three business days of trading in securities quoted on the Nasdaq National
Market, (ii) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States (whether or not mandatory),
(iii) the declaration of war by the Congress of the United States having had or
being reasonably likely to have a material adverse effect on the condition,
business, assets, liabilities or results of operations of the Company taken as a
whole, or (iv) any limitation or proposed limitation (whether or not mandatory)
by any governmental body, or any other event, that materially adversely affects
generally the extension of credit by banks or other financial institutions in
the United States.

    The foregoing conditions are for the sole benefit of Merger Sub, may be
asserted by Merger Sub regardless of the circumstances giving rise to such
condition and may be waived by Merger Sub in whole or in part, except for the
Minimum Condition which may not be waived by Merger Sub without the prior
written consent of the Special Committee. The failure by Merger Sub at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right.
<PAGE>
                                                                         ANNEX B

EXCERPTS FROM THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE RELATING TO
THE RIGHTS OF DISSENTING STOCKHOLDERS PURSUANT TO SECTION 262

    (a)  Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares; who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.

    (b)  Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of title 8), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec. 264
of this title:

        (1)  Provided, however, that no appraisal rights under this section
    shall be available for the shares of any class or series of stock, which
    stock, or depository receipts in respect thereof, at the record date fixed
    to determine the stockholders entitled to receive notice of and to vote at
    the meeting of stockholders to act upon the agreement of merger or
    consolidation, were either (i) listed on a national securities exchange or
    designated as a national market system security on an interdealer quotation
    system by the National Association of Securities Dealers, Inc. or (ii) held
    of record by more than 2,000 holders; and further provided that no appraisal
    rights shall be available for any shares of stock of the constituent
    corporation surviving a merger if the merger did not require for its
    approval the vote of the stockholders of the surviving corporation as
    provided in subsection (f) of sec. 251 of this title.

        (2)  Notwithstanding paragraph (1) of this subsection, appraisal rights
    under this section shall be available for the shares of any class or series
    of stock of a constituent corporation if the holders thereof are required by
    the terms of an agreement of merger or consolidation pursuant to secs. 251,
    252, 254, 257, 258, 263 and 264 of this title to accept for such stock
    anything except:

           a.  Shares of stock of the corporation surviving or resulting from
       such merger or consolidation, or depository receipts in respect thereof;

           b.  Shares of stock of any other corporation, or depository receipts
       in respect thereof, which shares of stock (or depository receipts in
       respect thereof) or depository receipts at the effective date of the
       merger or consolidation will be either listed on a national securities
       exchange or designated as a national market system security on an
       interdealer quotation system by the National Association of Securities
       Dealers, Inc. or held of record by more than 2,000 holders;

           c.  Cash in lieu of fractional shares or fractional depository
       receipts described in the foregoing subparagraphs a. and b. of this
       paragraph; or

           d.  Any combination of the shares of stock, depository receipts and
       cash in lieu of fractional shares or fractional depository receipts
       described in the foregoing subparagraphs a., b. and c. of this paragraph.

                                      B-1
<PAGE>
        (3)  In the event all of the stock of a subsidiary Delaware corporation
    party to a merger effected under sec. 253 of this title is not owned by the
    parent corporation immediately prior to the merger, appraisal rights shall
    be available for the shares of the subsidiary Delaware corporation.

    (c)  Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.

    (d)  Appraisal rights shall be perfected as follows:

        (1)  If a proposed merger or consolidation for which appraisal rights
    are provided under this section is to be submitted for approval at a meeting
    of stockholders, the corporation, not less than 20 days prior to the
    meeting, shall notify each of its stockholders who was such on the record
    date for such meeting with respect to shares for which appraisal rights are
    available pursuant to subsection (b) or (c) hereof that appraisal rights are
    available for any or all of the shares of the constituent corporations and
    shall include in such notice a copy of this section. Each stockholder
    electing to demand the appraisal of such stockholder's shares shall deliver
    to the corporation, before the taking of the vote on the merger or
    consolidation, a written demand for appraisal of such stockholder's shares.
    Such demand will be sufficient if it reasonably informs the corporation of
    the identity of the stockholder and that the stockholder intends thereby to
    demand the appraisal of such stockholder's shares. A proxy or vote against
    the merger or consolidation shall not constitute such a demand. A
    stockholder electing to take such action must do so by a separate written
    demand as herein provided. Within 10 days after the effective date of such
    merger or consolidation, the surviving or resulting corporation shall notify
    each stockholder of each constituent corporation who has complied with this
    subsection and has not voted in favor of or consented to the merger or
    consolidation of the date that the merger or consolidation has become
    effective; or

        (2)  If the merger or consolidation was approved pursuant to sec. 228 or
    sec. 253 of this title, each constituent corporation, either before the
    effective date of the merger or consolidation or within ten days thereafter,
    shall notify each of the holders of any class or series of stock of such
    constituent corporation who are entitled to appraisal rights of the approval
    of the merger or consolidation and that appraisal rights are available for
    any or all shares of such class or series of stock of such constituent
    corporation, and shall include in such notice a copy of this section;
    provided that, if the notice is given on or after the effective date of the
    merger or consolidation, such notice shall be given by the surviving or
    resulting corporation to all such holders of any class or series of stock of
    a constituent corporation that are entitled to appraisal rights. Such notice
    may, and, if given on or after the effective date of the merger or
    consolidation, shall, also notify such stockholders of the effective date of
    the merger or consolidation. Any stockholder entitled to appraisal rights
    may, within twenty days after the date of mailing of such notice, demand in
    writing from the surviving or resulting corporation the appraisal of such
    holder's shares. such demand will be sufficient if it reasonably informs the
    corporation of the identify of the stockholder and that the stockholder
    intends thereby to demand the appraisal of such holder's shares. If such
    notice did not notify stockholders of the effective date of the merger or
    consolidation, either

           (i)  each such constituent corporation shall send a second notice
       before the effective date of the merger or consolidation notifying each
       of the holders of any class or series of stock of such constituent
       corporation that are entitled to appraisal rights of the effective date
       of the merger or consolidation or

           (ii)  the surviving or resulting corporation shall send such a second
       notice to all such holders on or within 10 days after such effective
       date; provided, however, that if such second notice is sent

                                      B-2
<PAGE>
       more than 20 days following the sending of the first notice, such second
       notice need only be sent to each stockholder who is entitled to appraisal
       rights and who has demanded appraisal of such holder's shares in
       accordance with this subsection. An affidavit of the secretary or
       assistant secretary or of the transfer agent of the corporation that is
       required to give either notice that such notice has been given shall, in
       the absence of fraud, be prima facie evidence of the facts stated
       therein. For purposes of determining the stockholder entitled to receive
       either notice, each constituent corporation may fix, in advance, a record
       date that shall be not more than 10 days prior to the date the notice is
       given; provided that, if the notice is given on or after the effective
       date of the merger or consolidation, the record date shall be such
       effective date. If no record date is fixed and the notice is given prior
       to the effective date, the record date shall be the close of business on
       the day next preceding the day on which the notice is given.

    (e)  Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within
10 days after such stockholder's written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under subsection
(d) hereof, whichever is later.

    (f)  Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publication at
least one week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notice by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.

    (g)  At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.

    (h)  After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors,

                                      B-3
<PAGE>
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may proceed to
trial upon the appraisal prior to the final determination of the stockholder
entitled to an appraisal. Any stockholder whose name appears on the list filed
by the surviving or resulting corporation pursuant to subsection (f) of this
section and who has submitted such stockholder's certificates of stock to the
Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not entitled
to appraisal rights under this section.

    (i)  The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State of any state.

    (j)  The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.

    (k)  From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.

    (l)  The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.

                                      B-4
<PAGE>
    Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at the address set forth below:

                        THE DEPOSITARY FOR THE OFFER IS:

                    AMERICAN STOCK TRANSFER & TRUST COMPANY

                               ------------------

                    BY MAIL, BY HAND OR OVERNIGHT DELIVERY:
                    American Stock Transfer & Trust Company
                                 59 Maiden Lane
                            New York, New York 10007

                             FOR CONFIRMATION CALL:
                                 (800) 937-5449

                            ------------------------

    Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
the Guidelines for Certification of Taxpayer Identification on Substitute
Form W-9 may be directed to the Information Agent at the address and telephone
numbers set forth below. Stockholders may also contact their broker, dealer,
commercial bank or trust company for assistance concerning the Offer.

                    THE INFORMATION AGENT FOR THE OFFER IS:

                             D.F. KING & CO., INC.

                                77 Water Street
                              New York, N.Y. 10005
                    Banks and Brokerage Firms, Call Collect:
                                 (212) 269-5550
                          All Others, Call Toll Free:
                                 (800) 269-6427

                            ------------------------

                      THE DEALER MANAGER FOR THE OFFER IS:

                          FIRST UNION SECURITIES, INC.

                                Riverfront Plaza
                              901 East Byrd Street
                            Richmond, Virginia 23219
                                 (804) 782-3411
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(A)(1)(II)
<SEQUENCE>3
<FILENAME>ex-99_a1ii.txt
<DESCRIPTION>EXHIBIT 99.(A)(1)(II)
<TEXT>

<PAGE>
                             LETTER OF TRANSMITTAL
                        TO TENDER SHARES OF COMMON STOCK
                                       OF
                               800-JR CIGAR, INC.
                       PURSUANT TO THE OFFER TO PURCHASE
                             DATED AUGUST 29, 2000
                                       OF
                             JRC ACQUISITION CORP.

--------------------------------------------------------------------------------
    THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, SEPTEMBER 26, 2000, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------------

                        THE DEPOSITARY FOR THE OFFER IS:

                    AMERICAN STOCK TRANSFER & TRUST COMPANY

<TABLE>
<S>                                                 <C>
     BY MAIL, BY HAND OR OVERNIGHT DELIVERY:                          BY FACSIMILE:
             American Stock Transfer                         (for Eligible Institutions Only)
                 & Trust Company                                      (718) 234-5001
                  59 Maiden Lane                               For confirmation telephone:
             New York, New York 10007                                 (800) 937-5449
</TABLE>

    DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. YOU MUST
SIGN THIS LETTER OF TRANSMITTAL WHERE INDICATED AND COMPLETE THE SUBSTITUTE W-9
FORM PROVIDED BELOW.

    THE INSTRUCTIONS CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                        DESCRIPTION OF SHARES TENDERED
---------------------------------------------------------------------------------------------------------------
   NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
    (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)                           SHARES TENDERED
          APPEAR(S) ON SHARE CERTIFICATE(S))                 (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
---------------------------------------------------------------------------------------------------------------
                                                                             TOTAL NUMBER
                                                                               OF SHARES
                                                              SHARE         REPRESENTED BY
                                                           CERTIFICATE           SHARE        NUMBER OF SHARES
                                                          NUMBER(S)(1)     CERTIFICATE(S)(1)     TENDERED(2)
<S>                                                     <C>                <C>                <C>
                                                             --------------------------------------------

                                                             --------------------------------------------

                                                             --------------------------------------------

                                                             --------------------------------------------

                                                             --------------------------------------------

                                                             --------------------------------------------

                                                             --------------------------------------------
                                                          TOTAL SHARES
---------------------------------------------------------------------------------------------------------------
(1)  Need not be completed by stockholders delivering by book-entry transfer.
(2)  Unless otherwise indicated, it will be assumed that all Shares represented by Share certificates delivered
     to the Depositary are being tendered. See Instruction 4.
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
    This Letter of Transmittal is to be completed by stockholders of 800-JR
CIGAR, Inc. if certificates for Shares (as such term is defined below) are to be
forwarded herewith or, unless an Agent's message (as defined in Instruction 2
below) is utilized, if tenders of Shares are to be made by book-entry transfer
to the account maintained by the American Stock Transfer & Trust Company as
Depositary (the "Depositary") at a Book-Entry Transfer Facility (as defined in
and pursuant to the procedures set forth in "THE OFFER, Section 3--Procedure for
Tendering Shares" of the Offer to Purchase). Stockholders who deliver Shares by
book-entry transfer are referred to herein as "Book-Entry Stockholders" and
other stockholders who deliver shares are referred to herein as "Certificate
Stockholders."

    Stockholders whose certificates for Shares are not immediately available or
who cannot deliver either the certificates for, or a Book-Entry Confirmation (as
defined in "THE OFFER, Section 3--Procedure for Tendering Shares" of the Offer
to Purchase) with respect to, their Shares and all other documents required
hereby to the Depositary on or prior to the Expiration Date (as defined in "THE
OFFER, Section 1--Terms of the Offer" of the Offer to Purchase) or who cannot
comply with the book-entry transfer on a timely basis may nevertheless tender
their Shares pursuant to the guaranteed delivery procedures set forth in "THE
OFFER, Section 3--Procedure for Tendering Shares" of the Offer to Purchase. See
Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.

                          SPECIAL TENDER INSTRUCTIONS

/ /  CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE
     ACCOUNTS MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY
     AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER
     FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER:

     Name of Tendering Institution:_____________________________________________

     Account Number:____________________________________________________________

     Transaction Code Number:___________________________________________________

/ /  CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
     DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING
     (PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GURANTEED DELIVERY):

     Name(s) of Registered Owner(s):____________________________________________

     Window Ticket Number (if any):_____________________________________________

     Date of Execution of Notice of Guaranteed Delivery:________________________

     IF DELIVERY IS BY BOOK-ENTRY TRANSFER:

     Name of Institution which Guaranteed Delivery:_____________________________

     Account Number:____________________________________________________________

     Transaction Code Number:___________________________________________________

/ /  CHECK HERE IF TENDER IS BEING MADE PURSUANT TO LOST OR MUTILATED
     SECURITIES. SEE INSTRUCTION 10.

                                       2
<PAGE>
                     PLEASE READ THE INSTRUCTIONS SET FORTH
                    IN THIS LETTER OF TRANSMITTAL CAREFULLY.

Ladies and Gentlemen:

    The undersigned hereby tenders to JRC Acquisition Corp. ("Purchaser"), a
Delaware corporation, the above-described shares of common stock, par value
$0.01 per share (the "Shares"), of 800-JR CIGAR, Inc., a Delaware corporation
(the "Company"), pursuant to Purchaser's offer to purchase outstanding Shares at
a price of $13.00 per Share, net to the seller in cash, without interest thereon
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase dated August 29, 2000, receipt of which is hereby
acknowledged and in this Letter of Transmittal (which, together with any
amendments or supplements thereto or hereto, collectively constitute the
"Offer"). The undersigned understands that Purchaser reserves the right to
transfer or assign, in whole at any time, or in part from time to time, to one
or more of its affiliates, the right to purchase all or any portion of the
Shares tendered pursuant to the Offer, but the undersigned further understands
that any such transfer or assignment will not relieve Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.

    Subject to, and effective upon, acceptance for payment of, and payment for,
the Shares tendered herewith in accordance with the terms of the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), the undersigned hereby sells, assigns and
transfers to, or upon the order of, Purchaser all right, title and interest in
and to all the Shares that are being tendered hereby and any and all non-cash
dividends, distributions, rights, other Shares or other securities issued or
issuable in respect thereof on or after August 29, 2000 (collectively,
"Distributions") and irrevocably constitutes and appoints the Depositary the
true and lawful Agent and attorney-in-fact of the undersigned with respect to
such Shares and all Distributions, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (a) deliver certificates for such Shares and all Distributions, or transfer
ownership of such Shares and all Distributions on the account books maintained
by the Book-Entry Transfer Facility, together, in either such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (b) present such Shares and all Distributions for transfer on the
books of the Company, and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms and subject to the conditions of the Offer.

    The undersigned hereby irrevocably appoints the designees of the Purchaser,
and each of them, the attorneys-in-fact and proxies of the undersigned, each
with full power of substitution, to vote in such manner as each such
attorney-in-fact and proxy or any substitute thereof shall deem proper in the
sole discretion of such attorney-in-fact and proxy or such substitute, and
otherwise act (including pursuant to written consent) with respect to all of the
Shares tendered hereby and all Distributions which have been accepted for
payment by the Purchaser prior to the time of such vote or action, which the
undersigned is entitled to vote at any meeting of the stockholders (whether
annual or special and whether or not an adjourned meeting). This proxy and power
of attorney is coupled with an interest in the Shares and is irrevocable and is
granted in consideration of, and is effective upon, the acceptance for payment
of such Shares and all Distributions by the Purchaser in accordance with the
terms of the Offer. Such acceptance for payment shall revoke any other power of
attorney, proxy and consent granted by the undersigned at any time with respect
to such Shares and all Distributions and no subsequent powers of attorney,
proxies, consents or revocations will be given (or, if given, will not be deemed
effective) with respect thereto by the undersigned. The undersigned understands
that in order for the Shares to be validly tendered pursuant to the Offer,
immediately upon the Purchaser's acceptance of such Shares and all Distributions
for payment the Purchaser or its designee must be able to exercise full voting
rights with respect to such Shares and all Distributions including, without
limitation, voting at any meeting of the stockholders then scheduled.

                                       3
<PAGE>
    The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares and all
Distributions tendered hereby, and that when the same are accepted for payment
by Purchaser, Purchaser will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
the same will not be subject to any adverse claims. The undersigned will, upon
request, execute and deliver any additional documents deemed by the Depositary
or Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the Shares and all Distributions tendered hereby. In addition, the
undersigned shall promptly remit and transfer promptly to the Depositary for the
account of Purchaser any and all Distributions in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer, and, pending such
remittance and transfer or appropriate assurance thereof, Purchaser shall be
entitled to all rights and privileges as owner of any such Distributions and may
withhold the entire purchase price or deduct from such purchase price, the
amount or value thereof, as determined by Purchaser in its sole discretion.

    No authority herein conferred or agreed to be conferred shall be affected
by, and such authority shall survive the death or incapacity of the undersigned,
and any obligation of the undersigned. All obligations of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, successors and assigns of the
undersigned. Subject to the withdrawal rights set forth in "THE OFFER,
Section 4--Withdrawal Rights" of the Offer to Purchase, the tender of Shares
hereby made is irrevocable.

    The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in "THE OFFER, Section 3--Procedure for Tendering
Shares" of the Offer to Purchase and in the instructions hereto will constitute
the undersigned's acceptance of the terms and conditions of the Offer. The
Purchaser's acceptance for payment of such Shares will constitute a binding
agreement between the undersigned and Purchaser upon the terms and subject to
the conditions of the Offer. The undersigned recognizes that under certain
circumstances set forth in the Offer to Purchase, Purchaser may not be required
to accept for payment any of the Shares tendered hereby.

    Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price of all Shares purchased and/or
return any certificates for Shares not tendered or not accepted for payment in
the name(s) of the registered holder(s) appearing above under "Description of
Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price of all Shares
purchased and/or return any certificates for Shares not tendered or not accepted
for payment (and accompanying documents, as appropriate) to the address(es) of
the registered holder(s) appearing under "Description of Shares Tendered." In
the event that the boxes entitled Special Payment Instructions and Special
Delivery Instructions are both completed, please issue the check for the
purchase price and/or issue any certificates evidencing Shares not tendered or
not accepted for payment in the name(s) of, and deliver said check and/or return
any such certificates to, the person(s) so indicated. The undersigned recognizes
that Purchaser has no obligation, pursuant to the "Special Payment
Instructions," to transfer any Shares from the name of the registered holder
thereof if Purchaser does not accept for payment any of the Shares so tendered.

                                       4
<PAGE>
--------------------------------------------------------------------------------

                          SPECIAL PAYMENT INSTRUCTIONS
                        (SEE INSTRUCTIONS 1, 5, 6 AND 7)

      To be completed ONLY if the check for the purchase price of Shares
  accepted for payment is to be issued in name of someone other than the
  undersigned and/or if certificates for Shares not tendered or not accepted
  for payment are to be issued in the name of someone other than the
  undersigned.

  Issue check and/or Share certificate(s) to:

  Name _______________________________________________________________________
                                 (PLEASE PRINT)

  Address ____________________________________________________________________

  ____________________________________________________________________________

  ____________________________________________________________________________
                               (INCLUDE ZIP CODE)

   __________________________________________________________________________
              (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
                           (SEE SUBSTITUTE FORM W-9)

 _______________________________________________________________________________
   / /        Credit unpurchased shares delivered by book-entry transfer to
              the Book-Entry Facility account set forth below:

  ____________________________________________________________________________
                                (ACCOUNT NUMBER)

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                         SPECIAL DELIVERY INSTRUCTIONS
                        (SEE INSTRUCTIONS 1, 5, 6 AND 7)

      To be completed ONLY if certificates for Shares not tendered or not
  accepted for payment and/or the check for the purchase price of Shares
  accepted for payment is to be sent to someone other than the undersigned or
  to the undersigned at an address other than that shown above.

  Mail check and/or Share certificates to:

  Name _______________________________________________________________________
                                 (PLEASE PRINT)

  Address ____________________________________________________________________

  ____________________________________________________________________________

  ____________________________________________________________________________
                               (INCLUDE ZIP CODE)

   __________________________________________________________________________
              (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
                           (SEE SUBSTITUTE FORM W-9)

-----------------------------------------------------

                                       5
<PAGE>
--------------------------------------------------------------------------------

                                   IMPORTANT

                              HOLDER(S) SIGN HERE
             (PLEASE COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)

  ____________________________________________________________________________
   SIGNATURE(S) OF HOLDER(S)
   __________________________________________________________________________

  Dated: _____________, 2000

      (Must be signed by registered holder(s) exactly as name(s) appear(s) on
  the Share certificate(s) or on a security position listing or by person(s)
  authorized to become registered holder(s) by certificates and documents
  transmitted with this Letter of Transmittal. If signature is by trustee,
  executor, administrator, guardian, attorney-in-fact, officer of a
  corporation or other person acting in a fiduciary or representative
  capacity, please provide the following information and see Instruction 5.)

  Name(s) ____________________________________________________________________
                                 (PLEASE PRINT)

  Name of Firm _______________________________________________________________

  Capacity (full title) ______________________________________________________

  Address ____________________________________________________________________

  ____________________________________________________________________________
                               (INCLUDE ZIP CODE)

  Area Code and Telephone Number _____________________________________________

  Taxpayer Identification or Social Security Number __________________________
                                                   (SEE SUBSTITUTE FORM W-9)

                           GUARANTEE OF SIGNATURE(S)
                           (SEE INSTRUCTIONS 1 AND 5)

  Authorized Signature _______________________________________________________

  Name(s) ____________________________________________________________________
                             (PLEASE TYPE OR PRINT)

  Title ______________________________________________________________________

  Name of Firm _______________________________________________________________

  Address ____________________________________________________________________
                               (INCLUDE ZIP CODE)

  Area Code and Telephone Number _____________________________________________

  Dated ______________, 2000
--------------------------------------------------------------------------------

                                       6
<PAGE>
                                  INSTRUCTIONS
             FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

    1. GUARANTEE OF SIGNATURES.  Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most commercial banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (each, an "Eligible
Institution"). No signature guarantee is required on this Letter of Transmittal
(a) if this Letter of Transmittal is signed by the registered holder(s) of
Shares (which term, for purposes of this Section, includes any participant in
any of the Book-Entry Transfer Facilities' systems whose name appears on a
security position listing as the owner of the Shares) tendered herewith and such
registered holder(s) have not completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on the Letter
of Transmittal or (b) if such Shares are tendered for the account of an Eligible
Institution. See Instruction 5.

    2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES; GUARANTEED DELIVERY
PROCEDURES.  This Letter of Transmittal is to be used either if Share
certificates are to be forwarded herewith or, unless an Agent's Message is
utilized, if tenders are to be made pursuant to the procedures for tender by
book-entry transfer set in "THE OFFER, Section 3--Procedure for Tendering
Shares" of the Offer to Purchase. Share certificates evidencing all physically
tendered Shares or confirmation of any book-entry transfer into the Depositary's
account at the Book-Entry Transfer Facility of Shares tendered by book-entry
transfer, as well as this Letter of Transmittal or facsimile thereof, properly
completed and duly executed with any required signature guarantees or an Agent's
Message and any other documents required by this Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth herein prior to the
Expiration Date.

    Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary on or prior to the Expiration Date or who cannot complete the
procedures for book-entry transfer on a timely basis may nevertheless tender
their Shares by properly completing and duly executing the Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in "THE OFFER,
Section 3--Procedure for Tendering Shares" of the Offer to Purchase. Pursuant to
such procedure: (i) such tender must be made by or through an Eligible
Institution, (ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, must be received by
the Depositary on or prior to the Expiration Date and (iii) the Share
certificates or confirmation of any book-entry transfer into the Depositary's
account at the Book-Entry Transfer Facility of Shares tendered by book-entry
transfer, as well as a Letter of Transmittal, properly completed and duly
executed with any required signature guarantees (or a facsimile thereof,
properly completed and duly executed with any required signature guarantees or
an Agent's Message), and all other documents required by this Letter of
Transmittal must be received by the Depositary within three trading days after
the date of execution of such Notice of Guaranteed Delivery. A "trading day" is
any day on which the Nasdaq National Market is open for business.

    If Share certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal (or
facsimile hereof) must accompany each such delivery.

    THE METHOD OF DELIVERY OF THE SHARES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. THE SHARES
WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.

    No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. All tendering stockholders, by executing
this Letter of Transmittal or facsimile thereof, waive any right to receive any
notice of acceptance of their Shares for payment.

    3. INADEQUATE SPACE.  If the space provided herein under "Description of
Shares Tendered" is inadequate, the number of Shares tendered and the Share
certificate numbers with respect to such Shares should be listed on a separate
schedule and attached hereto.

                                       7
<PAGE>
    4. PARTIAL TENDERS. (APPLICABLE TO HOLDERS OF SHARE CERTIFICATES ONLY).  If
fewer than all the Shares evidenced by any Share certificate delivered to the
Depositary herewith are to be tendered hereby, fill in the number of Shares that
are to be tendered in the box entitled "Number of Shares Tendered." In any such
case, new certificate(s) for the remainder of the Shares that were evidenced by
the old certificates will be sent to the person signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on this Letter of Transmittal, as soon as practicable after the
Expiration Date. All Shares represented by certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.

    5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.  If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate(s) without alteration, enlargement or any change
whatsoever.

    If any of the Shares tendered hereby are held of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.

    If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.

    If this Letter of Transmittal or any Share certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of the authority of such person so to act must be
submitted.

    If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Share certificates or
separate stock powers are required unless payment or certificates for Shares not
tendered or not accepted for payment are to be issued in the name of a person
other than the registered holder(s). Signatures on any such Share certificates
or stock powers must be guaranteed by an Eligible Institution.

    If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by certificates listed and
transmitted hereby, the Share certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Share certificates. Signature(s) on any
such Share certificates or stock powers must be guaranteed by an Eligible
Institution.

    6. STOCK TRANSFER TAXES.  Except as otherwise provided in this Instruction
6, Purchaser will pay all transfer taxes with respect to the transfer and sale
of any Shares to it or its order pursuant to the Offer. If, however, payment of
the purchase price of any Shares purchased is to be made to, or if certificates
for Shares not tendered or not accepted for payment are to be registered in the
name of, any person other than the registered holder(s), or if tendered
certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any transfer taxes (whether
imposed on the registered holder(s) or such other person) payable on account of
the transfer to such other person will be deducted from the purchase price if
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
not submitted.

    EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES EVIDENCING THE
SHARES LISTED IN THIS LETTER OF TRANSMITTAL.

    7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS; WIRE TRANSFERS.  If a check
for the purchase price of any Shares accepted for payment is to be issued in the
name of, and/or Share certificates for Shares not accepted for payment or not
tendered are to be issued in the name of or returned to, a person other than the
signer of this Letter of Transmittal or if a check is to be sent, and/or such
certificates are to be returned, to a person other than the signer of this
Letter of Transmittal, or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.

    8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.  Questions or requests for
assistance may be directed to or additional copies of the Offer to Purchase,
this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 may
be obtained from the Information Agent or the Dealer Manager, at their
respective addresses or telephone numbers set forth below, or from brokers,
dealers, commercial banks or trust companies.

                                       8
<PAGE>
    9. SUBSTITUTE FORM W-9.  Under the United States federal income tax law,
unless an exemption applies under the applicable law and regulations, 31% of
certain payments to a stockholder or other payee pursuant to the Offer must be
withheld unless the stockholder or other payee provides his or her taxpayer
identification number ("TIN") (generally, the stockholder's employer
identification number or social security number) on the Substitute Form W-9 to
the Depositary and certifies that such number is correct. Certain stockholders
(including, among others, all corporations and certain foreign stockholders) are
not subject to these backup withholding and information requirements. In order
for a foreign stockholders to qualify as an exempt recipient, that stockholder
should submit an IRS Form W-8 or a Substitute Form W-8, signed under penalties
of perjury, attesting to that stockholder's exempt status. Such statements can
be obtained from the Depositary. Failure to provide the information on the form
may subject tendering stockholders to 31% backup withholding tax on the payment
of the purchase price pursuant to the Offer.

    10. LOST, DESTROYED OR STOLEN SHARE CERTIFICATES.  If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Company's transfer agent, American Stock Transfer & Trust
Company. The stockholder will then be instructed as to the steps that must be
taken in order to replace the Share certificate(s). This Letter of Transmittal
and related documents cannot be processed until the procedures for replacing
lost, destroyed or stolen Share certificates have been followed.

    IMPORTANT: THIS LETTER OF TRANSMITTAL OR FACSIMILE HEREOF OR AN AGENT'S
MESSAGE TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER,
AND ALL OTHER REQUIRED DOCUMENTS, OR THE NOTICE OF GUARANTEED DELIVERY, MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE.

                           IMPORTANT TAX INFORMATION

    Under United States federal income tax law, a stockholder that is a United
States person (other than an "exempt recipient") whose tendered Shares are
accepted for purchase is required to provide the Depositary (as payer) with such
stockholder's correct taxpayer identification number on Substitute Form W-9
below. If such stockholder is an individual, the taxpayer identification number
is his social security number. If a tendering stockholder is subject to backup
withholding, such stockholder must cross out item (2) of the Certification box
on the Substitute Form W-9. If the Depositary is not provided with the correct
taxpayer identification number, the stockholder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, payments that are made to
such stockholder with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding tax of 31%.

    Certain stockholders (including, among others, all corporations, and certain
foreign individuals) are not subject to these backup withholding tax and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that stockholder must submit an Internal Revenue Service
Form W-8, signed under penalties of perjury, attesting to that individual's
exempt status. A Form W-8 can be obtained from the Depositary. See enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions.

    If backup withholding tax applies, the Depositary is required to withhold
31% of certain payments made to the stockholder. Backup withholding tax is not
an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.

PURPOSE OF SUBSTITUTE FORM W-9

    To prevent backup withholding tax with respect to payment for Shares
purchased pursuant to the Offer, the stockholder must provide the Depositary
with his or her correct taxpayer identification number by completing the form
contained herein certifying that the taxpayer identification number provided on
Substitute Form W-9 is correct and that (1) such stockholder has not been
notified by the Internal Revenue Service that he or she is subject to backup
withholding tax as a result of failure to report all interest or dividends or
(2) the Internal Revenue Service has notified the stockholder that he or she is
no longer subject to backup withholding tax.

WHAT NUMBER TO GIVE THE DEPOSITARY

    The stockholder is required to give the Depositary the social security
number or employer identification number of such stockholder. If the Shares are
registered in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to report.

                                       9
<PAGE>

<TABLE>
<S>                               <C>                                          <C>
----------------------------------------------------------------------------------------------------------------------
                                PAYER'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY
----------------------------------------------------------------------------------------------------------------------

SUBSTITUTE                        PART 1--PLEASE PROVIDE YOUR TIN IN THE
FORM W-9                          BOX AT RIGHT AND CERTIFY BY SIGNING AND
DEPARTMENT OF THE TREASURY        DATING BELOW                                           __________________
INTERNAL REVENUE SERVICE                                                               Social Security Number
                                                                                       (If awaiting TIN write
                                                                                           "Applied For")
                                                                                                 OR
                                                                                        ____________________
                                                                                   Employer Identification Number
                                                                                       (If awaiting TIN write
                                                                                           "Applied For")
                                  -------------------------------------------------------------------------
                                  PART 2--For payees exempt from backup withholding tax, see the enclosed GUIDELINES
                                  and complete as instructed therein.
                                  -------------------------------------------------------------------------
PAYER'S REQUEST FOR               PART 3--CERTIFICATION--Under penalties of perjury, I certify that:
TAXPAYER IDENTIFICATION           (1)  The number shown on this form is my correct Taxpayer Identification
NUMBER ("TIN")                         Number (or I am waiting for a number to be issued for me), and
                                  (2)  I am not subject to backup withholding because: (a) I am exempt from backup
                                       withholding, or (b) I have not been notified by the Internal Revenue Service
                                       (the "IRS") that I am subject to backup withholding as a result of a failure to
                                       report all interest or dividends, or (c) the IRS has notified me that I am no
                                       longer subject to backup withholding.
                                  -------------------------------------------------------------------------
                                  CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been
                                  notified by the IRS that you are currently subject to backup withholding because of
                                  under-reporting interest or dividends on your tax returns. However, if after being
                                  notified by the IRS that you are subject to backup withholding, you receive another
                                  notification from the IRS that you are no longer subject to backup withholding, do
                                  not cross out such item (2). (Also see instructions in the enclosed GUIDELINES).

                                  SIGNATURE ____________________________ DATE ____________________________, 2000
----------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE:  FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
       TAX OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE
       REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
       IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

                                       10
<PAGE>
    QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES OF THE OFFER TO
PURCHASE, THIS LETTER OF TRANSMITTAL AND OTHER TENDER OFFER MATERIALS MAY BE
DIRECTED TO THE INFORMATION AGENT AS SET FORTH BELOW:

                    THE INFORMATION AGENT FOR THE OFFER IS:
                             D.F. KING & CO., INC.
                                77 Water Street
                              New York, N.Y. 10005
                    Banks and Brokerage Firms, Call Collect:
                                 (212) 269-5550
                          All Others, Call Toll Free:
                                 (800) 269-6427

                      THE DEALER MANAGER FOR THE OFFER IS:
                          FIRST UNION SECURITIES, INC.
                                Riverfront Plaza
                              901 East Byrd Street
                            Richmond, Virginia 23219
                                 (804) 782-3411
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(A)(1)(III)
<SEQUENCE>4
<FILENAME>ex-99_a1iii.txt
<DESCRIPTION>EXHIBIT 99.(A)(1)(III)
<TEXT>

<PAGE>
                         NOTICE OF GUARANTEED DELIVERY
                                      FOR
                        TENDER OF SHARES OF COMMON STOCK
                                       OF
                               800-JR CIGAR, INC.
                                       BY
                             JRC ACQUISITION CORP.

    This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below): (i) if certificates ("Share
Certificates") evidencing shares of common stock, $0.01 par value per share
("Shares"), are not immediately available; (ii) if Share Certificates and all
other required documents cannot be delivered to American Stock Transfer & Trust
Company, as Depositary (the "Depositary"), prior to the Expiration Date (as
defined in the Offer to Purchase, dated August 29, 2000 (the "Offer to
Purchase")); or (iii) if the procedure for delivery by book-entry transfer
cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand or mail to the Depositary. See "THE OFFER,
Section 3--Procedure for Tendering Shares" of the Offer to Purchase.

                        THE DEPOSITARY FOR THE OFFER IS:

                    AMERICAN STOCK TRANSFER & TRUST COMPANY
                               ------------------

<TABLE>
<S>                                                 <C>
     BY MAIL, BY HAND OR OVERNIGHT DELIVERY:                          BY FACSIMILE:
             American Stock Transfer                         (for Eligible Institutions Only)
                 & Trust Company                                      (718) 234-5001
                  59 Maiden Lane                               For confirmation telephone:
             New York, New York 10007                                 (800) 937-5449
</TABLE>

    DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION,
WILL NOT CONSTITUTE A VALID DELIVERY.

    This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.

    The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message (as defined in the Offer) and certificates for Shares to the
Depositary within the time period shown herein. Failure to do so could result in
financial loss to such Eligible Institution.

              THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE>
--------------------------------------------------------------------------------

  Ladies and Gentlemen:

      The undersigned hereby tenders to JRC Acquisition Corp., a Delaware
  corporation, upon the terms and subject to the conditions set forth in the
  Offer to Purchase, and the related Letter of Transmittal (which, as they may
  be amended and supplemented from time to time, constitute the "Offer"),
  receipt of each of which is hereby acknowledged, the number of Shares
  specified below pursuant to the guaranteed delivery procedure described in
  "THE OFFER, Section 3--Procedure for Tendering Shares" of the Offer to
  Purchase.

                  (PLEASE TYPE OR PRINT ALL INFORMATION BELOW)

  Number of Shares Tendered: _________________________________________________

  Share Certificate No(s) (if available):_____________________________________

  Total Number of Shares
  Represented by Certificate(s):______________________________________________

  Signature(s):_______________________________________________________________

  Name(s) of Record Holder(s) (Please Type or Print):_________________________

  Address(es) (Include a Zip Code):___________________________________________

  ____________________________________________________________________________

  Area Code and Telephone No(s):______________________________________________

  Name of Tendering Institution:______________________________________________

  Account Number:_____________________________________________________________

                THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED.

                                   GUARANTEE
                    (NOT TO BE USED FOR SIGNATURE GUARANTEE)

      The undersigned, a firm which is a member of the Medallion Signature
  Guarantee Program or is otherwise an "Eligible Guarantor Institution" (as
  such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
  1934, as amended), guarantees to deliver to the Depositary, at one of its
  addresses set forth on the reverse side of this page, either Share
  Certificates evidencing Shares tendered hereby, in proper form for transfer,
  or confirmation of book-entry transfer of such Shares into the Depositary's
  account at The Depository Trust Company, in each case with delivery of a
  Letter of Transmittal properly completed and duly executed with any required
  signature guarantees or a Book-Entry Confirmation (as defined in "THE OFFER,
  Section 2--Acceptance for Payment" of the Offer to Purchase) in the case of
  a book-entry delivery, and any other required documents, all within three
  Nasdaq National Market trading days of the date hereof.

  Name of Firm:_______________________________________________________________

  Address:____________________________________________________________________

  ____________________________________________________________________________
                                                                     ZIP CODE

  ____________________________________________________________________________
                              AUTHORIZED SIGNATURE

  ____________________________________________________________________________
                                     TITLE

  Name: ______________________________________________________________________
                              PLEASE PRINT OR TYPE

  Dated: _______________________________________________________________, 2000

--------------------------------------------------------------------------------

DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE
SENT WITH YOUR LETTER OF TRANSMITTAL.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(A)(1)(IV)
<SEQUENCE>5
<FILENAME>ex-99_a1iv.txt
<DESCRIPTION>EXHIBIT 99.(A)(1)(IV)
<TEXT>

<PAGE>
                           OFFER TO PURCHASE FOR CASH

                     ALL OUTSTANDING SHARES OF COMMON STOCK
                                       OF

                               800-JR CIGAR, INC.

                                       AT
                              $13.00 NET PER SHARE

                                       BY

                             JRC ACQUISITION CORP.
--------------------------------------------------------------------------------
 THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
      TIME, ON TUESDAY, SEPTEMBER 26, 2000, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------------

                                                                 August 29, 2000

To Brokers, Dealers, Commercial Banks,
    Trust Companies and Other Nominees:

    We have been appointed by JRC Acquisition Corp. (the "Purchaser"), a
Delaware corporation, to act as Dealer Manager in connection with the
Purchaser's offer to purchase for cash all of the outstanding shares of common
stock (the "Shares"), par value $0.01 per share, of 800-JR CIGAR, Inc., a
Delaware corporation (the "Company"), not already owned by Lewis I. Rothman,
LaVonda M. Rothman and the Lewis Irving Rothman 1998 Trust #1 u/a/d
November 10, 1998 (collectively, the "Parent Stockholders"), at a price of
$13.00 per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
August 29, 2000 (the "Offer to Purchase") and in the related Letter of
Transmittal (which, as they may be amended and supplemented from time to time,
together constitute the "Offer"), copies of which are enclosed herewith. The
Offer is being made in connection with the Agreement and Plan of Merger, dated
as of August 28, 2000 (the "Merger Agreement"), among the Purchaser, the Parent,
the Parent Stockholders (for purposes of Section 6.10 thereof only) and the
Company. Holders of Shares whose certificates evidencing such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to American Stock Transfer & Trust
Company, as depositary (the "Depositary"), or complete the procedures for
book-entry transfer, prior to the Expiration Date (as defined in the Offer to
Purchase) must tender their Shares according to the guaranteed delivery
procedures set forth in "THE OFFER, Section 3--Procedure for Tendering Shares"
of the Offer to Purchase.

    Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.

    Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:

        1.  The Offer to Purchase.

        2.  The Letter of Transmittal to tender Shares for your use and for the
    information of your clients. Facsimile copies of the Letter of Transmittal
    may be used to tender Shares.

        3.  The Notice of Guaranteed Delivery for Shares to be used to accept
    the Offer if neither of the two procedures for tending Shares set forth in
    "THE OFFER, Section 3--Procedure for Tendering Shares" of the Offer to
    Purchase can be contemplated on a timely basis.

        4.  Letter to stockholders of the Company from Michael E. Colleton,
    Chief Financial Officer of the Company, accompanied by the Company's
    Solicitation/Recommendation Statement on Schedule 14D-9.
<PAGE>
        5.  A printed form of the letter which may be sent to your clients for
    whose accounts you hold Shares registered in your name or in the name of
    your nominee, with space provided for obtaining such clients' instructions
    with regard to the Offer.

        6.  Guidelines of the Internal Revenue Service for Certification of
    Taxpayer Identification Number on Substitute Form W-9.

        7.  A return envelope addressed to American Stock Transfer & Trust
    Company (the "Depositary").

    WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.

    THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, SEPTEMBER 26, 2000, UNLESS THE OFFER IS EXTENDED.

    Please note the following:

        1.  The tender price is $13.00 per Share, net to the seller in cash,
    without interest thereon.

        2.  The Offer is being made for all of the Shares, not already owned by
    the Parent Stockholders.

        3.  Tendering holders of Shares will not be obligated to pay brokerage
    fees or commissions or, except as otherwise provided in Instruction 6 of the
    Letter Transmittal, transfer taxes on the purchase of Shares by the
    Purchaser pursuant to the Offer. However, United States federal income tax
    backup withholding at a rate of 31% may be required, unless an exemption is
    available or unless the required tax identification information is provided.
    See Instruction 9 of the Letter of Transmittal.

        4.  The Board of Directors of the Company, based upon among other
    factors, the unanimous recommendation of a special committee of independent
    directors of the Company, has unanimously approved the Merger Agreement and
    the Offer and has determined that the terms of the Offer are fair to, and in
    the best interests of, the Company's stockholders (other than the Parent,
    the Purchaser, the Parent Stockholders and certain other trusts of which
    Lewis I. Rothman and LaVonda M. Rothman are trustees) and has unanimously
    recommended that such stockholders accept the Offer and tender their Shares
    pursuant to the Offer.

        5.  Notwithstanding any other provision of the Offer, payment for Shares
    accepted for payment pursuant to the Offer will in all cases be made only
    after timely receipt by the Depositary of (a) certificates evidencing such
    Shares (the "Share Certificates") pursuant to the procedures set forth in
    "THE OFFER, Section 3--Procedure for Tendering Shares" of the Offer to
    Purchase, or a timely Book-Entry Confirmation (as defined in the Offer to
    Purchase) with respect to such Shares, (b) the Letter of Transmittal (or a
    manually signed facsimile thereof), properly completed and duly executed,
    with any required signature guarantees or an Agent's Message (as defined in
    the Offer to Purchase) in connection with a book-entry transfer, and
    (c) any other documents required by the Letter of Transmittal. Accordingly,
    payment may not be made to all tendering Holders at the same time depending
    upon when Share Certificates are actually received by the Depositary.

    In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof) and any
required signature guarantee or other required documents should be sent to the
Depositary and (ii) Share Certificates representing the tendered Shares or a
timely Book-Entry Confirmation should be delivered to the Depositary in
accordance with the instructions set forth in the Letter of Transmittal and the
Offer to Purchase.

    If Holders wish to tender, but if it is impracticable for them to forward
their Share Certificates or other required documents or complete the procedures
for book-entry transfer prior to the Expiration Date (as defined in the Offer to
Purchase), a tender may be effected by following the guaranteed delivery

                                       2
<PAGE>
procedures specified in "THE OFFER, Section 3--Procedure for Tendering Shares"
of the Offer to Purchase.

    None of the Rothmans, the Parent or the Purchaser will pay any fees or
commission to an broker, dealer or other person for soliciting tenders of Shares
pursuant to the Offer (other than the Dealer Manager, the Depositary and the
Information Agent, as described in the Offer to Purchase). The Purchaser will,
however, upon request, reimburse you for customary mailing and handling expenses
incurred by you in forwarding any of the enclosed materials to your clients. The
Purchaser will pay or cause to be paid any transfer taxes payable on the
transfer of Shares to it, except as otherwise provided in Instruction 6 of the
Letter of Transmittal.

    Any inquiries you may have with respect to the Offer should be addressed to
First Union Securities, Inc., the Dealer Manager, or D.F. King & Co., Inc., the
Information Agent, at their respective addresses and telephone numbers set forth
on the back cover of the Offer to Purchase.

    Additional copies of the enclosed materials may be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust companies.

                                          Very truly yours,

                                          FIRST UNION SECURITIES, INC.

    NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS THE AGENT OF THE PURCHASER, THE COMPANY, THE DEALER
MANAGER, THE DEPOSITARY, THE INFORMATION AGENT OR ANY AFFILIATE OF ANY OF THEM,
OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT
ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN STATEMENTS
EXPRESSLY MADE IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.

                                       3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(A)(1)(V)
<SEQUENCE>6
<FILENAME>ex-99_a1v.txt
<DESCRIPTION>EXHIBIT 99.(A)(1)(V)
<TEXT>

<PAGE>
                           OFFER TO PURCHASE FOR CASH
                     ALL OUTSTANDING SHARES OF COMMON STOCK

                                       OF
                               800-JR CIGAR, INC.
                                       AT
                              $13.00 NET PER SHARE
                                       BY
                             JRC ACQUISITION CORP.
--------------------------------------------------------------------------------

  THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
      TIME, ON TUESDAY, SEPTEMBER 26, 2000, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------------

                                                                 August 29, 2000

To Our Clients:

    Enclosed for your consideration are copies of the Offer to Purchase, dated
August 29, 2000 (the "Offer to Purchase"), and the related Letter of Transmittal
(which, as they may be amended and supplemented form time to time, together
constitute the "Offer") relating to the offer by JRC Acquisition Corp. (the
"Purchaser"), a Delaware corporation and wholly owned subsidiary of L&R, Inc.
(the "Parent"), to purchase all of the outstanding shares of common stock (the
"Shares"), $0.01 per share, of 800-JR CIGAR, Inc., a Delaware corporation (the
"Company"), not already owned by Lewis I. Rothman, LaVonda M. Rothman and the
Lewis Irving Rothman 1998 Trust #1 u/a/d November 10, 1998 (collectively, the
"Parent Stockholders"), at a price of $13.00 per Share, net to the sellers in
cash, without interest thereon, upon the terms and subject to the conditions set
forth in the Offer. The Offer is being made in connection with the Agreement and
Plan of Merger, dated as of August 28, 2000 (the "Merger Agreement"), among the
Purchaser, the Parent, the Parent Stockholders (for purposes of Section 6.10
thereof only) and the Company. This material is being forwarded to you as the
beneficial owner of Shares carried by us in your account but not registered in
your name.

    WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD
BY US FOR YOU ACCOUNT.

    Accordingly, we request instruction as to whether you wish to have us tender
on your behalf any or all of the Shares held by us for your account pursuant to
the terms and conditions set forth in the Offer.

    Please note the following:

        1.  The tender price is $13.00 per Share, net to the seller in cash,
    without interest thereon.

        2.  The Offer is being made for all of the Shares, not already owned by
    the Parent Stockholders.

        3.  The Offer is conditioned upon the following, among other things:
    (a) a majority of the outstanding Shares not currently owned by the Parent
    Stockholders and certain other trusts of which Lewis I. Rothman and LaVonda
    M. Rothman are trustees (the "Other Rothman Trusts") shall have been validly
    tendered and not withdrawn prior to the expiration of the tender offer;
    (b) the Purchaser shall have available at the expiration of the Offer the
    financing pursuant to a credit agreement dated August 28, 2000, by and among
    the Parent, the Purchaser and a group of lenders comprised of The Chase
    Manhattan Bank, Fleet Bank, N.A. and European Americas Bank; (c) the Board
    of Directors of the Company and the special committee of independent
    directors of the Company (the "Special Committee") shall not have withdrawn
    or modified, in a manner adverse to the Purchaser, its approval of the Offer
    and its recommendation that the stockholders of the Company tender their
    Shares pursuant to the Offer; and (d) the absence of any materially adverse
    change in the condition of
<PAGE>
    the Company's business and any judicial and governmental action prohibiting
    the Offer. The Offer also is subject to other terms and conditions. See "THE
    OFFER, Section 12--Conditions to the Offer" of the Offer to Purchase.

        4.  Tendering holders of Shares will not be obligated to pay brokerage
    fees or commissions or, except as otherwise provided in Instruction 6 of the
    Letter of Transmittal, transfer taxes on the purchase of Shares by the
    Purchaser pursuant to the Offer. However, United States federal income tax
    backup withholding at a rate of 31% may be required, unless an exemption is
    provided or unless the required taxpayer identification information is
    provided. See Instruction 9 of the Letter of Transmittal.

        5.  The Board of Directors of the Company, based upon among other
    factors, the unanimous recommendation of the Special Committee, has
    unanimously approved the Merger Agreement and the Offer and has determined
    that the terms of the Offer are fair to, and in the best interests of, the
    Company's stockholders (other than the Parent, the Purchaser, the Parent
    Stockholders and the Other Rothman Trusts) and has unanimously recommended
    that such stockholders accept the Offer and tender their Shares pursuant to
    the Offer.

        6.  Notwithstanding any other provision of the Offer, payment for Shares
    accepted for payment pursuant to the Offer will in all cases by made only
    after timely receipt by American Stock Transfer & Trust Company, as
    depositary for the Offer (the "Depositary") of (a) certificates evidencing
    the Shares (the "Share Certificates") pursuant to the procedures set forth
    in "THE OFFER, Section 3--Procedure for Tendering Shares" of the Offer to
    Purchase, or a timely Book-Entry Confirmation (as defined in the Offer to
    Purchase) with respect to such Shares, (b) the Letter of Transmittal (or a
    manually signed facsimile thereof), properly completed and duly executed,
    with any required signature guarantees or an Agent's Message (as defined in
    the Offer to Purchase in connection with a book-entry transfer), and
    (c) any other documents required by the Letter of Transmittal. Accordingly,
    payment may not be made to all tendering Holders at the same time depending
    upon when Share Certificates are actually received by the Depositary.

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
           TUESDAY, SEPTEMBER 26, 2000, UNLESS THE OFFER IS EXTENDED.

    If you wish to have us tender any or all of the Shares held by us for your
account please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth herein. If you authorize the tender of your
Shares, all such Shares will be tendered unless otherwise specified below. An
envelope to return your instructions to us is enclosed. YOUR INSTRUCTIONS SHOULD
BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF
PRIOR TO THE EXPIRATION DATE.

    The Purchaser is not aware of any state or jurisdiction where the making of
the Offer is prohibited by administrative or judicial action pursuant to any
valid statute. If the Purchaser becomes aware of any valid statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with such statute or seek to
have such statute declared inapplicable to the Offer. If, after such good faith
effort, the Purchaser cannot comply with such statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state or jurisdiction.

    In any state or jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Purchaser by First Union Securities, Inc. or
one or more registered brokers or dealers licensed under the laws of such state
of jurisdiction.

                                       2
<PAGE>
                        INSTRUCTIONS WITH RESPECT TO THE
                           OFFER TO PURCHASE FOR CASH
                     ALL OUTSTANDING SHARES OF COMMON STOCK
                                       OF
                               800-JR CIGAR, INC.

    The undersigned acknowledge(s) receipt of your letter, the enclosed Offer to
Purchase, dated August 29, 2000, and the related Letter of Transmittal (which,
as they may be amended and supplemented from time to time, together constitute
the "Offer") in connection with the offer by JRC Acquisition Corp. (the
"Purchaser"), a Delaware corporation, to purchase all of the outstanding shares
of common stock (the "Shares"), par value $0.01 per share, of 800-JR
CIGAR, Inc., a Delaware corporation (the "Company"), not already owned by Lewis
I. Rothman, LaVonda M. Rothman and the Lewis Irving Rothman 1998 Trust #1 u/a/d
November 10, 1998 (collectively, the "Parent Stockholders"), at a price of
$13.00 per Share, net to the sellers in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer. The Offer is being
made in connection with the Agreement and Plan of Merger, dated as of
August 28, 2000, among the Purchaser, the Parent, the Parent Stockholders (for
purposes of Section 6.10 thereof only) and the Company.

    This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.

--------------------------------------------------------------------------------

  Number of Shares to be Tendered*: __________________________________________

  Date: ______________________________________________________________________

  Account Number: ____________________________________________________________

                                   SIGN HERE

  Signature(s): ______________________________________________________________

  (PrintName(s)): ____________________________________________________________

  (Print Address(es)): _______________________________________________________

  (Area Code and Telephone Number(s)): _______________________________________

  (Taxpayer Identification or Social Security Number(s)): ____________________
  ----------------------------
  *  Unless otherwise indicated, it will be assumed that all of your Shares
     held by us for your account are to be tendered.

--------------------------------------------------------------------------------

                                       3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(A)(1)(VI)
<SEQUENCE>7
<FILENAME>ex-99_a1vi.txt
<DESCRIPTION>EXHIBIT 99.(A)(1)(VI)
<TEXT>

<PAGE>
            GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
                         NUMBER ON SUBSTITUTE FORM W-9

GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION TO GIVE THE PAYEE:
Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.

WHAT NAME AND NUMBER TO PROVIDE:

<TABLE>
---------------------------------------------------
                             GIVE THE NAME AND
                             SOCIAL
                             SECURITY
FOR THIS TYPE OF ACCOUNT:    NUMBER OF--
---------------------------------------------------
<S>  <C>                     <C>
1.   An individual's         The individual
     account

2.   Two or more             The actual owner of
     individuals (joint      the account or, if
     account)                combined funds, the
                             first individual on
                             the account(1)

3.   Custodian account of a  The minor(2)
     minor (Uniform Gift to
     Minors Act)

4.   (a) The usual           The grantor-trustee(1)
     revocable savings
     trust (grantor is also
     trustee)

     (b) So-called trust     The actual owner(3)
     account that is not a
     legal or valid trust
     under state law

5.   Sole proprietorship     The owner(3)
---------------------------------------------------
                             GIVE THE NAME AND
                             EMPLOYER
                             IDENTIFICATION
FOR THIS TYPE OF ACCOUNT:    NUMBER OF--
<S>  <C>                     <C>
---------------------------------------------------
6.   A valid trust, estate,  Legal entity(4)
     or pension trust

7.   Corporate               The corporation

8.   Association, club,      The organization
     religious, charitable,
     educational or other
     tax-exempt
     organization

9.   Partnership             The partnership

10.  A broker or registered  The broker or nominee
     nominee

11.  Account with the        The public entity
     Department of
     Agriculture in the
     name of a public
     entity (such as a
     state or local
     government, school
     district, or prison)
     that receives
     agricultural program
     payments
</TABLE>

---------------------------------------------
---------------------------------------------

(1) List first and circle the name of the person whose number you furnish.

(2) Circle the minor's name and furnish the minor's social security number.

(3) Provide the name of the owner.

(4) List first and circle the name of the legal trust, estate, or pension trust.
    (Do not furnish the identifying number of the personal representative or
    trustee unless the legal entity itself is not designated in the account
    title.)

NOTE:

 (i) If no name is circled when there is more than one name, the number will be
     considered to be that of the first name listed.

 (ii) If you are an individual, you must generally provide the name shown on
      your social security card. However, if you have changed your last name,
      for instance, due to marriage, without informing the Social Security
      Administration of the name change, please enter your first name, the last
      name shown on your social security card, and your new last name.

(iii) For a joint account, only the person whose taxpayer identification number
      is shown on the Substitute Form W-9 should sign the form.
<PAGE>
               GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
                            NUMBER ON SUBSTITUTE FORM W-9

OBTAINING A NUMBER

If you do not have a taxpayer identification number, apply for one immediately.
To apply, obtain Form SS-5, Application for a Social Security Card (for
individuals), from your local office of the Social Security Administration, or
Form SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local office of the Internal Revenue Service.

PAYEES EXEMPT FROM BACKUP WITHHOLDING

Payees that are specifically exempted from backup withholding tax on ALL
payments include the following:

- A corporation.

- A financial institution.

- An organization exempt from tax under section 501(a), or an individual
  retirement account or a custodial account under section 403(b)(7).

- The United States or any agency or instrumentality thereof.

- A state, the District of Columbia, a possession of the United States, or any
  subdivision or instrumentality thereof.

- A foreign government, a political subdivision of a foreign government, or any
  agency or instrumentality thereof.

- An international organization or any agency or instrumentality thereof.

- A dealer in securities or commodities required to register in the United
  States or a possession of the United States.

- A real estate investment trust.

- A common trust fund operated by a bank under section 584(a).

- An entity registered at all times under the Investment Company Act of 1940.

- A foreign central bank of issue.

PAYMENTS NOT GENERALLY SUBJECT TO BACKUP WITHHOLDING

Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:

- Payments of dividends to nonresident aliens subject to withholding under
  section 1441 of the Code.

- Payments to partnerships not engaged in a trade or business in the U.S. and
  which have at least one nonresident partner.

- Payments of patronage dividends where the amount received is not paid in
  money.

- Payments made by certain foreign organizations.

Payments of interest not generally subject to backup withholding including the
following:

- Payments of interest on obligations issued by individuals. Note: A payee may
  be subject to backup withholding if this interest is $600 or more and is paid
  in the course of the payer's trade or business and such payee has not provided
  its correct taxpayer identification number to the payer.

- Payments of tax-exempt interest (including exempt-interest dividends under
  section 852 of the Code).

- Payments described in section 6049(b)(5) of the Code to nonresident aliens.

- Payments on tax-free covenant bonds under section 1451 of the Code.

- Payments made by certain foreign organizations.

- Payments made to a nominee.

EXEMPT PAYEES DESCRIBED ABOVE SHOULD STILL COMPLETE THE SUBSTITUTE FORM W-9 TO
AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING TAX. IF YOU ARE EXEMPT, FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER
(IF YOU HAVE ONE), WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE
PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.

Certain payments other than interest, dividends and patronage dividends that are
not subject to information reporting are also not subject to backup withholding.
For details, see the regulations under sections 6041, 6041A(a), 6045, and
6050(A) of the Code.

PRIVACY ACT NOTICE. Section 6109 of the Code requires most recipients of
dividends, interest or other payments to give taxpayer identification numbers to
payers who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividends and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.

PENALTIES

(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a payer, you may be
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.

(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no backup
withholding tax, you are subject to a penalty of $500.

(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.

Unless otherwise noted herein, all reference to section numbers or regulations
are references to the Internal Revenue Code of 1986, as amended.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(A)(1)(VII)
<SEQUENCE>8
<FILENAME>ex-99_a1vii.txt
<DESCRIPTION>EXHIBIT 99.(A)(1)(VII)
<TEXT>

<PAGE>

                                                          EXHIBIT 99(a)(1)(vii)

This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The Offer (as defined below) is made
solely by the Offer to Purchase dated August 29, 2000 and the related Letter
of Transmittal and any amendments or supplements thereto and is being made to
all holders of Shares. The Purchaser (as defined below) is not aware of any
state or jurisdiction where the making of the Offer is prohibited by any
applicable law. If the Purchaser becomes aware of any state or jurisdiction
where the making of the Offer or the acceptance of Shares is not in
compliance with any applicable law, the Purchaser will make a good faith
effort to comply with such law. If, after such good faith effort, the
Purchaser cannot comply with such law, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) the holders of Shares residing
in such state or jurisdiction. If any state or jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by First Union Securities, Inc. (the "Dealer Manager") or one or
more registered brokers or dealers licensed under the laws of such state or
jurisdiction.

                      NOTICE OF OFFER TO PURCHASE FOR CASH
                     ALL OUTSTANDING SHARES OF COMMON STOCK
                                       OF
                               800-JR CIGAR, INC.
                             AT A PURCHASE PRICE OF
                                $13.00 PER SHARE
                                       BY
                             JRC ACQUISITION CORP.,
                          A WHOLLY OWNED SUBSIDIARY OF
                                   L&LR, INC.

JRC Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly
owned subsidiary of L&LR, Inc. ("Parent"), a Delaware corporation, is
offering to purchase all of the outstanding shares of common stock, par value
$ 0.01 per share (the "Shares"), of 800-JR CIGAR, Inc., a Delaware
corporation (the "Company"), not already owned by Lewis I. Rothman, LaVonda M.
Rothman and the Lewis Irving Rothman 1998 Trust #1 u/a/d November 10, 1998
(collectively, the "Parent Stockholders"), at a price of $13.00 per Share,
net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated August 29,
2000 (the "Offer to Purchase") and in the related Letter of Transmittal
(which, as they may be amended and supplemented from time, together
constitute the "Offer"). The Offer is being made in connection with an
Agreement and Plan of Merger, dated as of August 28, 2000 (the "Merger
Agreement"), among the Purchaser, the Parent, the Parent Stockholders (for
purposes of Section 6.10 thereof only) and the Company.

<PAGE>


Stockholders of record who tender directly to the Depositary (as defined below)
will not be obligated to pay brokerage fees or commissions or, subject to
Instruction 6 of the Letter of Transmittal, stock transfer taxes, if any, on the
purchase of Shares by the Purchaser pursuant to the Offer. Stockholders who hold
their shares through a broker or bank should consult such institution as to
whether it charges any service fees. The Purchaser will pay all charges and
expenses of the Dealer Manager, American Stock Transfer & Trust Company which is
acting as the depositary (the "Depositary") and D.F. King & Co., which is acting
as the information agent (the "Information Agent"), incurred in connection with
the Offer.

    THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
       TIME, ON TUESDAY, SEPTEMBER 26, 2000, UNLESS THE OFFER IS EXTENDED.

The Offer is conditioned upon, among other things, (i) there having been
validly tendered and not withdrawn prior to the expiration of the tender
offer a majority of the outstanding shares of common stock not currently
owned by the Parent Stockholders and certain other trusts of which Lewis I.
Rothman and LaVonda M. Rothman are trustees (the "Other Rothman Trusts");
(ii) the Purchaser having available at the expiration of the Offer the
financing pursuant to a credit agreement, dated August 28, 2000, by and among
the Parent, the Purchaser and a group of lenders comprised of The Chase
Manhattan Bank, Fleet Bank, N.A. and European American Bank; (iii) the Board
of Directors of the Company and the special committee of independent
directors of the Company (the "Special Committee") not having withdrawn or
modified, in a manner adverse to the Purchaser, its approval of the Offer and
its recommendation that the stockholders of the Company tender their Shares
pursuant to the Offer; and (iv) the absence of judicial and governmental
action prohibiting the Offer and any materially adverse change in the
condition of the Company's business. The Offer also is subject to other terms
and conditions described in Section 12 of the Offer to Purchase.

THE BOARD OF DIRECTORS OF THE COMPANY, INCLUDING THE SPECIAL COMMITTEE, HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER, AND HAS
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE HOLDERS OF THE SHARES (OTHER THAN THE PARENT, THE
PURCHASER, THE PARENT STOCKHOLDERS AND THE OTHER ROTHMAN TRUSTS)
(COLLECTIVELY, THE "HOLDERS") AND UNANIMOUSLY RECOMMENDS THAT THE HOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.

For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn if, as and when the Purchaser gives oral or written notice to the
Depositary of its acceptance of such Shares for payment pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, payment for Shares
accepted pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which will act as agent for tendering Holders, for
the purpose of receiving payments from the Purchaser and transmitting payments
to such tendering Holders whose Shares have theretofore been accepted for
payment. In all cases, payment for Shares pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) the


                                       2
<PAGE>


certificates evidencing such Shares or, in the case of Shares held in
book-entry form, timely confirmation of a book-entry transfer of such Shares
into the Depositary's account at the Book-Entry Transfer Facility (as defined
in "THE OFFER, Section 3" of the Offer to Purchase), (ii) a duly executed
Letter of Transmittal (or a facsimile thereof) or, in the case of a
book-entry transfer, an Agent's Message (as defined in the Offer to Purchase)
and (iii) all other documents required by the Letter of Transmittal. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR THE TENDERED
SHARES, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT OR EXTENSION OF THE
EXPIRATION DATE.

The "Expiration Date" shall mean 12:00 Midnight, New York City time, on
September 26, 2000, unless and until the Purchaser, in accordance with the
terms of the Offer and the Merger Agreement, shall have extended the period
of time during which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date at which the Offer, as so extended
by the Purchaser, shall expire.

Subject to the applicable rules and regulations of the Securities and
Exchange Commission (the "Commission") and any other U.S. or foreign
regulatory or governmental authority and applicable law, the Purchaser
expressly reserves the right, in its sole discretion (but subject to the
terms of the Offer to Purchase and the Merger Agreement), at any time or from
time to time, to extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the Depositary.

Subject to the applicable rules and regulations of the Commission and to
applicable law, the Purchaser also expressly reserves the right, in its sole
discretion (but subject to the terms and conditions of the Offer to Purchase
and the Merger Agreement), at any time and from time to time: (i) to delay
acceptance for payment of, or, regardless of whether such Shares were
theretofore accepted for payment, payment for, any Shares pending receipt of
any regulatory approval required in order to comply in whole or in part with
any applicable law; (ii) to terminate the Offer and not accept for payment
any Shares if any of the conditions referred to in "THE OFFER, Section 12" of
the Offer to Purchase are not satisfied or any of the events specified in
"THE OFFER, Section 12" of the Offer to Purchase have occurred; and (iii) to
waive any condition, or otherwise amend the Offer in any respect, in each
case by giving oral or written notice of such delay, termination, waiver or
amendment to the Depositary and by making a public announcement thereof.

During any such extension, all Shares previously tendered and not properly
withdrawn will remain subject to the Offer, subject to the right of a tendering
Holder to withdraw such Holder's Shares. Any such extension, delay, termination,
waiver or amendment will be followed, as promptly as practicable, by a public
announcement thereof by no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Subject to
applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which require
that material changes be promptly disseminated to Holders in a manner reasonably
designed to inform them of such changes) and without limiting the manner in
which the Purchaser may choose to make any public announcement, the Purchaser
will have no obligation to publish, advertise or otherwise communicate any such
public announcement.


                                       3
<PAGE>


Except as otherwise provided below, tenders of Shares made pursuant to the
Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn
any time prior to 12:00 Midnight New York City time on September 26, 2000.
Thereafter, such tenders are irrevocable, except that they may be withdrawn
at any time after October 27, 2000, unless theretofore accepted for payment
as provided in the Offer to Purchase. No Shares tendered pursuant to the
Offer during any Subsequent Offering Period (as defined in Rule l4d-l(g)(8)
of the Exchange Act), if applicable, may be withdrawn unless they are not
immediately accepted and promptly paid for as they are tendered. For a
withdrawal to be effective, a written telegraphic or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth in the Offer to Purchase. Any such notice of withdrawal
must specify the name of the person who tendered the Shares to be withdrawn,
the number of shares to be withdrawn, and the name of the registered Holder,
if different from that of the person who tendered such Shares. If
certificates for Shares have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the
serial numbers shown on such certificates must be submitted to the Depositary
and, unless such Shares have been tendered by an Eligible Institution (as
defined in "THE OFFER, Section 3" of the Offer to Purchase), the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been delivered pursuant to the procedures for book-entry transfer
as set forth in "THE OFFER, Section 3" of the Offer to Purchase, any notice
of withdrawal must also specify the name and number of the account at the
appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures.

All questions as to the form and validity including time of receipt of notices
of withdrawal will be determined by the Purchaser, in its sole discretion, which
determination shall be final and binding. None of the Purchaser, the Depositary,
the Dealer Manager, the Information Agent or any other person will be under any
duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification. Any
Shares properly withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer, but may be rendered at any time prior to the Expiration
Date by following any of the procedures described in "THE OFFER, Section 3" of
the Offer to Purchase.

The Company has provided the Purchaser with the Company's list of Holders and
security position listing in respect of Shares for the purpose of disseminating
the Offer to the Holders. The Offer to Purchase, the Letter of Transmittal and
any other related materials will be mailed to record Holders whose names appear
on the Company's list of Holders or, if applicable, who are listed as
participants in a clearing agency's security position listing.

The information required to be disclosed by paragraph (d)(1) of Rule 14d-6
under the Exchange Act is contained in the Offer to Purchase and is
incorporated herein by reference.

THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.

Any questions or requests for assistance or additional copies of the Offer to
Purchase, the Letter of Transmittal and other tender offer materials may be
directed to the Information Agent or the Dealer Manager as set forth below, and
copies will be furnished promptly at the Purchasers expense. Neither the


                                       4
<PAGE>


Purchaser nor other related persons will not pay any fees or commissions to any
broker or dealer or other person (other than the Dealer Manager, the Depositary
and the Information Agent) in connection with the solicitation of tenders of
Shares pursuant to the Offer.


                     THE INFORMATION AGENT FOR THE OFFER IS:


                              D.F. KING & CO., INC.
                                 77 Water Street
                              New York, N.Y. 10005
                    Banks and Brokerage Firms, Call Collect:
                                 (212) 269-5550
                           All Others, Call Toll Free:
                                 (800) 269-6427


                      THE DEALER MANAGER FOR THE OFFER IS:


                           FIRST UNION SECURITIES, INC.
                                Riverfront Plaza
                          901 East Byrd Street, WF2035
                               Richmond, VA 23219

                                 August 29, 2000
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(B)(1)
<SEQUENCE>9
<FILENAME>ex-99_b1.txt
<DESCRIPTION>EXHIBIT 99.(B)(1)
<TEXT>


<PAGE>

                                                               Exhibit 99.(b)(1)








================================================================================

                                CREDIT AGREEMENT
                           Dated as of August 28, 2000
                                      among
                            JRC ACQUISITION CORP. and
                                   L&LR, INC.,
                                as Co-Borrowers,
                          THE LENDERS SIGNATORY HERETO
                               FROM TIME TO TIME,
                                   as Lenders,
                                       and
                            THE CHASE MANHATTAN BANK,
         as Administrative Agent, Arranger, Syndication Agent and Lender
                                       and
                                FLEET BANK, N.A.,
                             as Documentation Agent

================================================================================

<PAGE>

                                TABLE OF CONTENTS

      This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.

                                                                            Page

1.    AMOUNT AND TERMS OF CREDIT

      1.1.     Availability                                                  1

      1.2.     Use of Proceeds                                               1

      1.3.     Notes                                                         1

      1.4.     Notice of Borrowing                                           2

      1.5.     Disbursement of Funds                                         2

      1.6.     Pro Rata Borrowings                                           3

      1.7.     Prepayments; Repayment                                        3

      1.8.     Interest                                                      3

      1.9.     Fees                                                          4

      1.10.    Method and Place of Payment                                   4

      1.11.    Application and Allocation of Payments                        4

      1.12.    Indemnity                                                     5

      1.13.    Capital Adequacy; Increased Costs; Illegality                 6

      1.14     Single Loan                                                   6

1.    CONDITIONS PRECEDENT

      2.1.     Corporate Documents                                           7

      2.2.     Officer's Certificate                                         7

      2.3.     Opinion of Counsel                                            7


                                      -i-
<PAGE>

      2.4.     Credit Agreement; Notes; Loan Documents                       7

      2.5.     Approvals                                                     8

      2.6.     Payment of Fees                                               8

      2.7.     Related Transactions Documents; Tender Offer Acquisition;
               Merger                                                        8

      2.8.     Permanent Credit Agreement                                    8

      2.9.     No Litigation                                                 9

      2.10.    Lien Search Results                                           9

      2.11.    No Default; Representations and Warranties                    9

      2.12.    Notice of Borrowing                                           9

      2.13     Form U-1                                                      9

3.    REPRESENTATIONS AND WARRANTIES

      3.1.     Corporate Existence; Compliance with Law                     10

      3.2.     Corporate Power; Authorization; Enforceable Obligations      10

      3.3.     Financial Condition; Solvency                                10

      3.4.     Special Purpose Corporation                                  11

      3.5.     Government Regulation                                        11

      3.6.     Margin Regulations                                           11

      3.7.     No Litigation                                                12

      3.8.     Full Disclosure                                              12

      3.9.     Year 2000 Problems                                           12

      3.10.    Related Transactions                                         12

      3.11.    Common Stock of Cigar                                        13

      3.12     Pledge Agreements                                            13

                                      -ii-
<PAGE>

4.    AFFIRMATIVE COVENANTS

      4.1.     Maintenance of Existence and Conduct of Business             13

      4.2.     Payment of Obligations                                       14

      4.3.     Books and Records                                            14

      4.4.     Compliance with Laws                                         14

      4.5.     Information Covenants                                        14

      4.6.     Performance of Obligations                                   14

      4.7.     Consummation of Merger                                       14

      4.8.     Further Assurances                                           15

5.    NEGATIVE COVENANTS

      5.1.     Consolidation, Merger, Sale of Assets, Etc.                  15

      5.2.     Advances, Investments, Loans, Purchase of Assets             15

      5.3.     Indebtedness                                                 15

      5.4.     Affiliate Transactions                                       16

      5.5.     Limitation on Issuance of Equity                             16

      5.6.     Modifications of Certificate of Incorporation, By-Laws and
               Certain Agreements, etc.                                     16

      5.7.     Liens                                                        16

      5.8.     Restricted Payments                                          16

      5.9.     Change of Corporate Name or Location                         16

      5.10.    Limitation on the Creation of Subsidiaries                   16

      5.11.    Business 16

      5.12.    Margin Regulations                                           17


                                      -iii-
<PAGE>

6.    EVENTS OF DEFAULT; RIGHTS AND REMEDIES

      6.1      Events of Default                                            17

      6.2.     Remedies                                                     18

      6.3.     Waivers by Co-Borrowers                                      18

7.    THE ADMINISTRATIVE AGENT

      7.1.     Appointment of Administrative Agent                          19

      7.2.     Nature of Duties                                             19

      7.3.     Lack of Reliance on the Administrative Agent                 19

      7.4.     Reliance                                                     20

      7.5.     Indemnification                                              20

      7.6.     The Administrative Agent in its Individual Capacity          21

      7.7.     Holders                                                      21

      7.8.     Documentation Agent; Syndication Agent                       21

8.    MISCELLANEOUS

      8.1.     Successors and Assigns                                       21

      8.2.     Complete Agreement; Modification of Agreement                22

      8.3.     Amendment or Waiver                                          22

      8.4.     Fees and Expenses                                            22

      8.5.     No Waiver                                                    23

      8.6.     Remedies                                                     23

      8.7.     Right of Setoff                                              23

      8.8.     Severability                                                 24

      8.9.     Governing Law                                                24


                                      -iv-
<PAGE>


      8.10.    Notices                                                      25

      8.11.    Section Titles                                               25

      8.12.    Counterparts                                                 25

      8.13.    Waiver of Jury Trial                                         25

      8.14.    Reinstatement                                                26

      8.15.    No Strict Construction                                       26


                                      -v-
<PAGE>



                               INDEX OF APPENDICES


Exhibit A                           - Form of Note
Exhibit B                           - Form of Notice of Borrowing
Exhibit C-1                         - Form of Pledge Agreement of JRC
Exhibit C-2                         - Form of Pledge Agreement of L&LR
Exhibit C-3                         - Form of Amended and Restated Pledge
                                      Agreement of L&LR
Annex A (Recitals)                  - Definitions
Annex B (from Annex A-              - Commitments as of Closing Date
     Commitments definition)
Annex C                             - Address for Notices


                                      -vi-
<PAGE>

      CREDIT AGREEMENT, dated as of August 28, 2000, among JRC ACQUISITION
CORP., a Delaware corporation ("JRC"); L&LR, INC., a Delaware corporation
("L&LR") (JRC and L&LR together with their successors and assigns, collectively,
the "Co-Borrowers"); each of the Lenders named under the caption "Lenders" on
the signature pages hereof (together with its successors and assigns,
individually, a "Lender" and, collectively, the "Lenders"); THE CHASE MANHATTAN
BANK, as Administrative Agent and Documentation Agent for the Lenders (the
"Administrative Agent"); and FLEET BANK, N.A., as Documentation Agent for the
Lenders (the "Documentation Agent").

                                    RECITALS

      WHEREAS, Co-Borrowers desire that Lenders extend Loans to Co-Borrowers,
jointly and severally, in an aggregate amount of up to the Maximum Amount for
the purpose of financing the Tender Offer Consideration, the Merger
Consideration and expenses related thereto, as more fully described herein, and
for this purpose, Lenders are willing to make certain loans to Co-Borrowers of
up to such amount upon the terms and conditions set forth herein; and

      WHEREAS, capitalized terms used in this Agreement shall have the meanings
ascribed to them in Annex A. All Annexes, Exhibits and other attachments
(collectively, "Appendices") hereto, or expressly identified in this Agreement,
are incorporated herein by reference, and taken together, shall constitute but a
single agreement. These Recitals shall be construed as part of the Agreement.

      NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:

1.    AMOUNT AND TERMS OF LOANS

      1.1. AVAILABILITY. Subject to the terms and conditions hereof, each Lender
severally agrees to make on each Borrowing Date a loan (each a "Loan" and
collectively the "Loans") to the Co-Borrowers which Loans shall (i) bear
interest as provided in Section 1.8, (ii) be made and maintained in Dollars,
(iii) not exceed for any Lender, in aggregate principal amount, that amount
which equals such Lender's Commitment, (iv) not exceed in the aggregate the
Maximum Amount, and (v) be the joint and several obligations of the
Co-Borrowers.

      1.2. USE OF PROCEEDS. All proceeds of the Loans shall be used by the
Co-Borrowers solely (i) on the Tender Offer Borrowing Date (x) to pay the Tender
Offer Consideration and (y) to pay transaction fees and expenses related to the
Tender Offer Acquisition, and (ii) on the Merger Borrowing Date (x) to pay the
Merger Consideration and (y) to pay fees and expenses related to the Merger.

      1.3. NOTES. The Loans shall be evidenced by promissory notes substantially
in the form of Exhibit A (each a "Note" and collectively, the "Notes"). Each
Note issued by Co-Borrowers to any Lender shall (i) be executed by, and be the
joint and several obligations of, Co-Borrowers, (ii) be payable to the order of
such Lender and be dated the date of issuance, (iii) be in a stated

<PAGE>

principal amount equal to the Lender's Pro Rata Share of the Loans evidenced in
part by such Note, (iv) mature on the Maturity Date, (v) bear interest as
provided in Section 1.8, (vi) be subject to voluntary prepayment as provided in
Section 1.7 and (vii) be entitled to the benefits of this Agreement and be
secured by the Collateral pursuant to the Pledge Agreements. Each Lender will
note on its internal records the amount of each Loan made by it and each payment
in respect thereof and will prior to any transfer of any of its Notes endorse on
the reverse side thereof the outstanding principal amount of Loans evidenced
thereby. Failure to make any such notation shall not affect the Co-Borrowers'
obligations in respect of such Loans.

      1.4. NOTICE OF BORROWING. (a) Whenever Co-Borrowers desire to incur Loans
hereunder, they shall give the Administrative Agent at its Notice Office at
least one Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) of each Loan, provided that any such notice shall be
deemed to have been given on a certain day only if given before 12:00 Noon (New
York time) on such day. Each such written notice or written confirmation of
telephonic notice (each a "Notice of Borrowing"), shall be in the form of
Exhibit B, shall be irrevocable and shall be given by the Co-Borrowers,
appropriately completed to specify (i) the date of such incurrence (which shall
be a Business Day), and (ii) the aggregate principal amount of the Loans to be
made. The Administrative Agent shall promptly (and in any event within one
Business Day after its receipt of a Notice of Borrowing) give each Lender notice
of such proposed incurrence, of such Lender's Pro Rata Share thereof and of the
other matters required by the immediately preceding sentence to be specified in
the Notice of Borrowing.

      (b) Without in any way limiting the obligation of the Co-Borrowers to
confirm in writing any telephonic notice of any incurrence of Loans, the
Administrative Agent may act without liability upon the basis of telephonic
notice, believed by the Administrative Agent in good faith to be from an
Authorized Officer of each Co-Borrower prior to receipt of written confirmation.
In each such case, the Co-Borrowers hereby waive the right to dispute the
Administrative Agent's record of the terms of such telephonic notice, absent
manifest error.

      1.5. DISBURSEMENT OF FUNDS. No later than 1:00 P.M. (New York time) on the
date specified in each Notice of Borrowing, each Lender will make available its
Pro Rata Share of each Borrowing requested to be made on such date, in Dollars
and in immediately available funds at the Payment Office of the Administrative
Agent. The Administrative Agent will make available to the Co-Borrowers at the
Payment Office in Dollars and in immediately available funds, the aggregate of
the amounts specified in the Notice of Borrowing and permitted hereunder prior
to 2:00 P.M. (New York time) on such day. Unless the Administrative Agent shall
have been notified by any Lender prior to the date of Borrowing that such Lender
does not intend to make available to the Administrative Agent such Lender's
portion of any Borrowing to be made on such date, the Administrative Agent may
assume that such Lender has made such amount available to the Administrative
Agent on such date of Borrowing and the Administrative Agent may, in reliance
upon such assumption, make available to the Co-Borrowers a corresponding amount.
If such corresponding amount is not in fact made available to the Administrative
Agent by such Lender, the Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender. The Administrative Agent shall
also be entitled to recover on demand from such Lender, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the


                                      -2-
<PAGE>

Administrative Agent to the Co-Borrowers until the date such corresponding
amount is recovered by the Administrative Agent, at a rate per annum equal to
the overnight Federal Funds Rate. Nothing in this Section 1.5 shall be deemed to
relieve any Lender from its obligation to make Loans hereunder or to prejudice
any rights which the Co-Borrowers may have against any Lender as a result of any
failure by such Lender to make Loans hereunder.

      1.6. PRO RATA BORROWINGS. All Borrowings under this Agreement shall be
incurred from the Lenders on the basis of their Commitments. It is understood
that no Lender shall be responsible for any default by any other Lender of its
obligation to make Loans hereunder and that each Lender shall be obligated to
make the Loans provided to be made by it hereunder, regardless of the failure of
any other Lender to make its Loans hereunder.

      1.7.  PREPAYMENTS; REPAYMENT.

      (a) Voluntary Prepayments. The Co-Borrowers shall have the right to prepay
Loans, without premium or penalty, in whole or in part from time to time.

      (b) Mandatory Repayments. All outstanding Loans together with interest
accrued thereon and unpaid Fees due and owing shall be repaid in full on the
Maturity Date.

      1.8.  INTEREST.

      (a) The Co-Borrowers agree to pay interest in respect of the unpaid
principal amount of each Loan from the date the proceeds thereof are made
available to the Co-Borrowers until the maturity (whether by acceleration or
otherwise) of such Loan, at a rate per annum equal to the Prime Rate in effect
from time to time.

      (b) If any Default or Event of Default shall have occurred and be
continuing, the interest rates applicable to the Loans shall be increased by two
percent (2%) per annum above the rate of interest otherwise applicable hereunder
("Default Rate"). Interest at the Default Rate shall accrue from the initial
date of such Default or Event of Default until that Default or Event of Default
is cured or waived and shall be payable upon demand. Overdue principal and, to
the extent permitted by law, overdue interest in respect of each Loan and any
other overdue amount payable hereunder shall, in each case, bear interest at a
rate per annum equal to Prime Rate plus two percent (2%).

      (c) Accrued (and theretofore unpaid) interest shall be payable (i) on each
Interest Payment Date applicable thereto and (ii) on any repayment or prepayment
(on the amount repaid or prepaid), at maturity (whether by acceleration or
otherwise) and, after such maturity, on demand.

      (d) All computations of interest shall be made by the Administrative Agent
on the basis of a three hundred and sixty (360) day year, in each case for the
actual number of days occurring in the period for which such interest is
payable. Each determination by Administrative Agent of an interest rate
hereunder shall be conclusive, absent manifest error.


                                      -3-
<PAGE>

      (e) Notwithstanding anything to the contrary set forth in this Section
1.8, if a court of competent jurisdiction determines in a final order that the
rate of interest payable hereunder exceeds the highest rate of interest
permissible under applicable law (the "Maximum Lawful Rate"), then so long as
the Maximum Lawful Rate would be so exceeded, the rate of interest payable
hereunder shall be equal to the Maximum Lawful Rate; provided, however, that if
at any time thereafter the rate of interest payable hereunder is less than the
Maximum Lawful Rate, Co-Borrowers shall continue to pay interest hereunder at
the Maximum Lawful Rate until such time as the total interest received by
Administrative Agent, on behalf of Lenders, is equal to the total interest which
would have been received had the interest rate payable hereunder been (but for
the operation of this paragraph) the interest rate payable since the Initial
Borrowing Date as otherwise provided in this Agreement. Thereafter, interest
hereunder shall be paid at the rate(s) of interest and in the manner provided in
Sections 1.8(a) through (d) above, unless and until the rate of interest again
exceeds the Maximum Lawful Rate, and at that time this paragraph shall again
apply. In no event shall the total interest received by any Lender pursuant to
the terms hereof exceed the amount which such Lender could lawfully have
received had the interest due hereunder been calculated for the full term hereof
at the Maximum Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to
this paragraph, such interest shall be calculated at a daily rate equal to the
Maximum Lawful Rate divided by the number of days in the year in which such
calculation is made.

      1.9. FEES.

      (a) Co-Borrowers shall pay to Chase the Fees specified in the Fee Letter
at the times specified for payment therein.

      (b) The Co-Borrowers shall pay to the Administrative Agent for
distribution to each Lender a commitment fee (the "Commitment Fee") for the
period from and including the date hereof to but not including the Termination
Date, computed at a rate equal to .325% per annum on the average daily
unutilized Commitment of such Lender. Accrued commitment fees payable to the
Lenders shall be payable on the first Business Day of each month and on the
Termination Date. For purposes of calculating the Commitment Fee hereunder,
the amount of each Lender's "Commitment" shall be deemed to be based upon a
"Maximum Amount" equal to $55,000,000.

      (c) All computation of Fees calculated on a per annum basis shall be made
by Administrative Agent on the basis of a three hundred and sixty (360) day year
for the actual number of days occurring in the period for which such Fees are
payable. Each determination by Administrative Agent of Fees hereunder shall be
conclusive, absent manifest error.

      1.10. METHOD AND PLACE OF PAYMENT. Except as otherwise specifically
provided herein, all payments under this Agreement or any Note shall be made to
the Administrative Agent for the account of the Lender or Lenders entitled
thereto no later than 12:00 Noon (New York time) on the date when due and shall
be made in immediately available funds at the Payment Office of the
Administrative Agent and in Dollars.

      1.11. APPLICATION AND ALLOCATION OF PAYMENTS. So long as no Default or
Event of Default shall have occurred and be continuing, (i) payments matching
specific scheduled payments then due shall be applied to those scheduled
payments; and (ii) voluntary prepayments


                                      -4-
<PAGE>

shall be applied pro rata to the Loans, first to unpaid interest accrued thereon
and then to reduce the unpaid principal amount of the Loans. All payments and
prepayments shall be applied ratably to the portion of the aggregate Loans held
by each Lender as determined by its Pro Rata Share. As to each payment made when
a Default or Event or Default shall have occurred and be continuing or following
the Maturity Date, Co-Borrowers hereby irrevocably waive the right to direct the
application of any and all payments received from or on behalf of Co-Borrowers,
and Co-Borrowers hereby irrevocably agree that Administrative Agent shall have
the continuing exclusive right to apply any and all such payments against the
Obligations as Administrative Agent may deem advisable notwithstanding any
previous entry by Administrative Agent in any books and records. In the absence
of a specific determination by Administrative Agent with respect thereto,
payments shall be applied to amounts then due and payable in the following
order: (1) to Fees and Administrative Agent's expenses reimbursable hereunder;
(2) to interest on the Loans, ratably in proportion to the interest accrued as
to each Loan; (3) to principal payments on the Loans, ratably to the aggregate,
combined principal balance of the Loans; and (4) to all other Obligations
including expenses of Lenders to the extent reimbursable under Section 8.4.

      1.12. INDEMNITY. Each Co-Borrower shall jointly and severally indemnify
and hold harmless each of the Administrative Agent, Lenders and their respective
Affiliates, and each such Person's respective officers, directors, employees,
attorneys, agents and representatives (each, an "Indemnified Person"), from and
against any and all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including reasonable attorneys' fees and disbursements
and other costs of investigation or defense, including those incurred upon any
appeal) which may be instituted or asserted against or incurred by any such
Indemnified Person as the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents and the
administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith and legal costs and expenses arising out of or
incurred in connection with disputes between or among any parties to any of the
Loan Documents (other than those solely among Lenders and/or Administrative
Agent) (collectively, "Indemnified Liabilities"); provided, that no such
Co-Borrower shall be liable for any indemnification to an Indemnified Person to
the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense is found by a final, non-appealable judgment of a court of
competent jurisdiction to have resulted from that Indemnified Person's gross
negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR
LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD
PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

      1.13.  CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY.

      (a) If any Lender shall have determined that any law, treaty, governmental
(or quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy, reserve


                                      -5-
<PAGE>

requirements or similar requirements or compliance by any Lender with any
request or directive regarding capital adequacy, reserve requirements or similar
requirements (whether or not having the force of law), in each case, adopted
after the date hereof, from any central bank or other Governmental Authority
increases or would have the effect of increasing the amount of capital, reserves
or other funds required to be maintained by such Lender and thereby reducing the
rate of return on such Lender's capital as a consequence of its obligations
hereunder, then Co-Borrowers shall from time to time upon demand by such Lender
(with a copy of such demand to Administrative Agent) pay to Administrative
Agent, for the account of such Lender, additional amounts sufficient to
compensate such Lender for such reduction. A certificate as to the amount of
that reduction and showing the basis of the computation thereof submitted by
such Lender to Co-Borrowers and to Administrative Agent shall, absent manifest
error, be final, conclusive and binding for all purposes.

      (b) If, due to either (i) the introduction of or any change in any law or
regulation (or any change in the interpretation thereof) or (ii) the compliance
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), in each case adopted after
the date hereof, there shall be any increase in the cost to any Lender of
agreeing to make or making, funding or maintaining any Loan, then Co-Borrowers
shall from time to time, upon demand by such Lender (with a copy of such demand
to Administrative Agent), pay to Administrative Agent for the account of such
Lender additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased cost, submitted
to Co-Borrowers and to Administrative Agent by such Lender, shall be conclusive
and binding on Co-Borrowers for all purposes, absent manifest error. Each Lender
agrees that, as promptly as practicable after it becomes aware of any
circumstances referred to above which would result in any such increased cost,
the affected Lender shall, to the extent not inconsistent with such Lender's
internal policies of general application, use reasonable commercial efforts to
minimize costs and expenses incurred by it and payable to it by Co-Borrowers
pursuant to this Section 1.13.

      (c) Failure or delay on the part of any Lender to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender's right to
demand such compensation.

      1.14. SINGLE LOAN. The Loans to Co-Borrowers and all of the other
Obligations of Co-Borrowers arising under this Agreement and the other Loan
Documents shall constitute one general obligation of Co-Borrowers.

2. CONDITIONS PRECEDENT. The obligation of each Lender to make Loans, or to
take, fulfill, or perform any other action hereunder, is subject to the
satisfaction of the following conditions on or before November 30, 2000 unless
otherwise waived by the Administrative Agent:

      2.1. CORPORATE DOCUMENTS. On the Initial Borrowing Date, the
Administrative Agent shall have received the following documents, each certified
as indicated below:

      (a) copies of the Certificates of Incorporation, as amended and in effect,
of the Co-Borrowers certified as of a recent date by the Secretary of State of
their respective jurisdictions


                                      -6-
<PAGE>

of incorporation, and a certificate from such Secretary of State dated as of a
recent date as to the good standing of and corporate documents filed by each
such Co-Borrower;

      (b) a certificate of the Secretary or an Assistant Secretary of each of
the Co-Borrowers, dated the Initial Borrowing Date and certifying (i) that
attached thereto is a true and complete copy of the By-laws of the Co-Borrower
as amended and in effect at all times from the date on which the resolutions
referred to in clause (ii) were adopted to and including the date of such
certificate, (ii) that attached thereto is a true and complete copy of
resolutions duly adopted by the board of directors of the Co-Borrower
authorizing the execution, delivery and performance of the Loan Documents and
the extensions of credit thereunder, and that such resolutions have not been
modified, rescinded or amended and are in full force and effect, (iii) that the
Certificate of Incorporation of the Co-Borrower has not been amended since the
date of the certification thereto furnished pursuant to subparagraph (a) above,
and (iv) as to the incumbency and specimen signature of each officer of the
Co-Borrower executing the Loan Documents (and the Administrative Agent and each
Lender may conclusively rely on such certificate until it receives notice in
writing from the Co-Borrower); and

      (c) a certificate of another officer of the Co-Borrower as to the
incumbency and specimen signature of the Secretary or Assistant Secretary, as
the case may be, of the Co-Borrower.

      2.2. OFFICER'S CERTIFICATE. On the Initial Borrowing Date, the
Administrative Agent shall have received a certificate dated such date of a
senior officer of each Co-Borrower, stating that all of the applicable
conditions set forth in this Section 2 have been met.

      2.3. OPINION OF COUNSEL. On the Initial Borrowing Date, the Administrative
Agent shall have received an opinion, dated the Initial Borrowing Date, of
Morgan, Lewis & Bockius LLP, counsel to the Co-Borrowers, in form and substance
satisfactory to the Administrative Agent, the Lenders and their counsel (and the
Co-Borrowers hereby instruct such counsel to deliver such opinion to the Lenders
and the Administrative Agent).

      2.4. CREDIT AGREEMENT; NOTES; LOAN DOCUMENTS. (a) On or prior to the
Initial Borrowing Date, this Agreement shall have been duly executed by, and
delivered to, Co-Borrowers, the Administrative Agent and Lenders; the Notes
shall have been duly completed and executed and delivered; all other Loan
Documents, including, without limitation, the Collateral Documents shall have
been duly executed by the Co-Borrowers party thereto; and Administrative Agent
shall have received such documents, instruments, agreements and legal opinions
as Administrative Agent shall reasonably request in connection with the
transactions contemplated by this Agreement and the other Loan Documents, each
in form and substance satisfactory to Administrative Agent.

      (b) On or prior to the Initial Borrowing Date, (i) JRC and L&LR shall have
duly authorized, executed and delivered respective pledge agreements
substantially in the forms of Exhibit C-1 and C-2, respectively, (ii) JRC shall
have (A) delivered to the Administrative Agent for the ratable benefit of the
Lenders all of the Pledged Stock referred to in the Pledge Agreement of JRC then
owned by JRC together with executed and undated irrevocable stock


                                      -7-
<PAGE>

powers, and (B) taken such other action, and executed such other documents,
including without limitation UCC-1 financing statements, to perfect the security
interests created thereunder, as the Collateral Agent shall request in its sole
discretion, and (iii) L&LR shall have (A) delivered to the Administration Agent
for the ratable benefit of the Lenders all of the Pledged Stock referred to in
the Pledge Agreement of L&LR then owned by L&LR together with executed and
undated irrevocable stock powers, and (B) taken such other action, and executed
such other documents, including without limitation UCC-1 financing statements,
to perfect the security interests created thereunder, as the Collateral Agent
shall request in its sole discretion. On the Merger Borrowing Date, L&LR shall
have duly authorized, executed and delivered an amended and restated pledge
agreement substantially in the form of Exhibit C-3 and shall have (i) delivered
to Administration Agent for the ratable benefit of the Lenders all of the
Pledged Stock referred to in such Pledge Agreement together with executed and
undated irrevocable stock powers, and (ii) taken such other action, and executed
such other documents, including without limitation, UCC-1 financing statements,
to perfect the security interests created thereunder, as the Collateral Agent
shall request in its sole discretion.

      2.5. APPROVALS. On or prior to the Initial Borrowing Date, Administrative
Agent shall have received (i) satisfactory evidence that the Co-Borrowers have
obtained all required material waivers, consents and approvals of all Persons
including all requisite Governmental Authorities in connection with the
execution, delivery and performance of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated hereby or (ii)
an officer's certificate in form and substance satisfactory to Administrative
Agent affirming that no such waivers, consents or approvals are required.

      2.6. PAYMENT OF FEES. On or prior to the Initial Borrowing Date,
Co-Borrowers shall have paid in full to the Administrative Agent and the Lenders
all costs, fees (including the Fees) and expenses payable to the Administrative
Agent and the Lenders to the extent then due pursuant hereto and the Fee Letter.

      2.7. RELATED TRANSACTIONS DOCUMENTS; TENDER OFFER ACQUISITION; Merger.
On or prior to the Initial Borrowing Date, Lenders shall have received fully
executed copies of all the Related Transactions Documents, each of which
shall be in form and substance satisfactory to Administrative Agent and its
counsel. The Tender Offer Acquisition shall be consummated contemporaneously
with the Tender Offer Borrowing Date in accordance with the terms of the
Tender Offer and without waiver of any conditions (except as expressly
permitted thereunder) unless consented to by the Administrative Agent. The
Merger shall be consummated contemporaneously with the Merger Borrowing Date.

      2.8. PERMANENT CREDIT AGREEMENT. On the Initial Borrowing Date,
Administrative Agent shall have received fully executed copies of the Permanent
Credit Agreement and all documents then required to be delivered thereunder and
the Co-Borrowers thereunder shall be in compliance with the terms and conditions
thereof.

      2.9. NO LITIGATION. On each Borrowing Date, there shall exist no action,
suit, investigation, litigation or proceeding affecting the Co-Borrowers or
Cigar pending or threatened


                                      -8-
<PAGE>

before any court, governmental agency or arbitration that could reasonably be
expected to have a Material Adverse Effect.

      2.10. LIEN SEARCH RESULTS. On the Initial Borrowing Date, the
Administrative Agent and each of the Lenders shall have received completed
requests for information showing all effective financing statements, tax liens
and judgments, filed against the Co-Borrowers, and such requests shall reveal no
liens, security interests or encumbrances against any assets of the Co-Borrowers
and no tax liens or judgments.

      2.11. NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of the
making of any Loans hereunder and also after giving effect thereto (i) there
shall exist no Default or Event of Default, (ii) all representations and
warranties contained herein or in the other Loan Documents shall be true and
correct in all material respects with the same effect as though such
representations and warranties had been made on the date of the making of such
Loans (it being understood and agreed that any representation or warranty which
by its terms is made as of a specified date shall be required to be true and
correct in all material respects only as of such specified date), (iii) all
representations and warranties of Cigar and the other Co-Borrowers contained in
the Permanent Credit Agreement shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been on the date of the making of such Loans (it being understood and agreed
that any representation or warranty which by its terms is made as of a specified
date shall be required to be true and correct in all material respects only as
of such specified date) and (iv) there shall have occurred no event or
circumstance having a Material Adverse Effect on Co-Borrowers or Cigar. The
request and acceptance by Co-Borrowers of the proceeds of any Loan shall be
deemed to constitute, as of the date of such request or acceptance, (i) a
representation and warranty by Co-Borrowers that the conditions in this Section
2.11 have been satisfied and (ii) a reaffirmation by Co-Borrowers of the
granting and continuance of Administrative Agent's Liens, on behalf of itself
and Lenders, pursuant to the Pledge Agreement.

      2.12. NOTICE OF BORROWING. Prior to the making of each Loan, the
Administrative Agent shall have received a Notice of Borrowing.

      2.13. FORM U-1. On the Initial Borrowing Date, the Administrative Agent
and each of the Lenders shall have received Federal Reserve Form U-1 provided
for in Regulation U of the Board of Governors of the Federal Reserve System, the
statements made in which shall be such, in the opinion of the Administrative
Agent and the Lenders, as to permit the transactions contemplated hereby in
accordance with said Regulation U.

3.    REPRESENTATIONS AND WARRANTIES

      To induce Lenders to make the Loans, the Co-Borrowers, jointly and
severally, make the following representations and warranties to the
Administrative Agent and each Lender, each and all of which shall survive the
execution and delivery of this Agreement.

      3.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Co-Borrower and Cigar
(a) is a corporation duly organized, validly existing and in good standing under
the laws of its respective


                                      -9-
<PAGE>

jurisdiction of incorporation; (b) is duly qualified to conduct business and is
in good standing in each other jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified would not result in a Material Adverse
Effect; (c) has the requisite corporate power and authority and the legal right
to own, pledge, mortgage or otherwise encumber and operate its properties, and
to conduct its business as now, heretofore and proposed to be conducted; (d) has
all licenses, permits, consents or approvals from or by, and has made all
filings with, and has given all notices to, all Governmental Authorities and all
Persons having jurisdiction, to the extent required for such ownership,
operation and conduct and is in compliance with all such licenses, permits,
consents or approvals; (e) is in compliance with its certificate of
incorporation and by-laws; and (f) is in compliance with all applicable
provisions of law, except where the failure to comply, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

      3.2. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by each Co-Borrower of the Loan Documents to
which it is a party and the creation of all Liens provided for therein: (a) are
within such Co-Borrower's corporate power; (b) have been duly authorized by all
necessary or proper corporate and shareholder action; (c) do not contravene any
provision of such Co-Borrower's certificate of incorporation (or similar
organizational document) or bylaws; (d) do not violate any law or regulation, or
any order or decree of any court or Governmental Authority; (e) do not conflict
with or result in the breach or termination of, constitute a default under or
accelerate or permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which such Co-Borrower is a party or by which such Co-Borrower or any of its
property is bound; (f) do not result in the creation or imposition of any Lien
upon any of the property of such Co-Borrower other than those in favor of
Administrative Agent, on behalf of itself and Lenders, pursuant to the Loan
Documents; and (g) do not require the consent or approval of any Governmental
Authority or any other Person. On or prior to the Initial Borrowing Date, each
of the Loan Documents shall have been duly executed and delivered by each
Co-Borrower and each such Loan Document shall then constitute a legal, valid and
binding obligation of such Co-Borrower enforceable against it in accordance with
its terms.

      3.3. FINANCIAL CONDITION; SOLVENCY. (a) Since inception, there has been no
material adverse change in the business, operations, property, assets,
liabilities or condition (financial or otherwise) of Co-Borrowers, either
individually or taken as a whole.

      (b) On a pro forma basis after giving effect to the Loans occurring on
such date and Liens created by the Co-Borrowers in connection therewith, each of
the Co-Borrowers on a consolidated and stand-alone basis is Solvent.

      (c) Except for liabilities or obligations of Co-Borrowers arising under
the Loan Documents, there are not as of the Initial Borrowing Date, and as of
each Borrowing Date, there will not be, any liabilities or obligations with
respect to either Co-Borrower of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether or not due).


                                      -10-
<PAGE>

      (d) Since March 31, 2000, no Material Adverse Effect has occurred with
respect to Cigar.

      3.4 SPECIAL PURPOSE CORPORATION. (a) L&LR was formed solely to effect the
Loans and the Related Transactions and, except in connection therewith (and as
contemplated by the Loan Documents), has no significant assets or liabilities
(other than (i) the capital stock of JRC or, after consummation of the Merger,
the capital stock of Cigar as surviving company and (ii) under this Agreement,
the other Loan Documents and the Related Transactions Documents to which it is a
party) and has engaged in no substantial business activities. All of the issued
and outstanding shares of Stock of L&LR are owned beneficially and of record by
Lewis I. Rothman and LaVonda M. Rothman and on the Tender Offer Borrowing Date
will be owned beneficially and of record by Lewis I. Rothman and LaVonda M.
Rothman and the 1998 Trust.

      (b) JRC was formed solely to effect the Loans and the Related Transactions
and, except in connection therewith (and as contemplated by the Loan Documents),
has no significant assets or liabilities (other than (i) the capital stock of
Cigar acquired pursuant to the Tender Offer and the Contributed Shares and (ii)
under this Agreement and the other Loan Documents to which it is a party) and
has engaged in no substantial business activities. Prior to the Merger, all of
the issued and outstanding shares of Stock of JRC are owned by L&LR.

      3.5. GOVERNMENT REGULATION. None of the Co-Borrowers or Cigar is an
"investment company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in the
Investment Company Act of 1940 as amended. None of the Co-Borrowers or Cigar is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, or any other federal or state statute that restricts or
limits its ability to incur Indebtedness or to perform its obligations
hereunder. The making of the Loans by Lenders to Co-Borrowers, the application
of the proceeds thereof and repayment thereof and the consummation of the
Related Transactions will not violate any provision of any such statute or any
rule, regulation or order issued by the Securities and Exchange Commission or
any Governmental Authority.

      3.6. MARGIN REGULATIONS. None of the Co-Borrowers or Cigar is engaged, nor
will it engage, principally or as one of its important activities, in the
business of extending credit for the purpose of "purchasing" or "carrying" any
"margin security" as such terms are defined in Regulation U of the Federal
Reserve Board as now in effect (such securities being referred to herein as
"Margin Stock"). No part of the proceeds of any Loan will be used to purchase or
carry any Margin Stock or to extend credit for the purpose of purchasing or
carrying any Margin Stock; provided that JRC may use the proceeds of the Loan
made on the Tender Offer Borrowing Date to purchase Margin Stock consisting of
Public Stock pursuant to the Tender Offer in compliance with Regulations T, U
and X of the Board of Governors of the Federal Reserve System. Neither the
making of the Loans nor the use of the proceeds thereof will violate or be
inconsistent with the provisions of Regulations T, U or X.

      3.7. NO LITIGATION. No action, claim, lawsuit, demand, investigation or
proceeding is now pending or, to the knowledge of any Co-Borrower, threatened
against any of Cigar or Co-Borrowers, before any Governmental Authority or
before any arbitrator or panel of arbitrators


                                      -11-
<PAGE>

(collectively, "Litigation"), (a) which challenges any Co-Borrower's right or
power to enter into or perform any of its obligations under the Loan Documents
to which it is a party, or the validity or enforceability of any Loan Document
or any action taken thereunder, or (b) which has a reasonable risk of being
determined adversely to Cigar or any Co-Borrower and which, if so determined,
could have a Material Adverse Effect.

      3.8. FULL DISCLOSURE. No information contained in this Agreement, any of
the other Loan Documents, any financial statements delivered by Cigar or any
other reports or written statements furnished by or on behalf of Cigar or any
Co-Borrower to Agent or any Lender pursuant to the terms of this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not misleading
in light of the circumstances under which they were made.

      3.9. YEAR 2000 PROBLEMS. Cigar and each Co-Borrower have eliminated all
Year 2000 Problems, except where the failure to correct the same could not
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate.

      3.10. RELATED TRANSACTIONS. Co-Borrowers have delivered to Administrative
Agent a complete and correct copy of the Related Transactions Documents
(including all schedules, exhibits, amendments, supplements, modifications,
assignments and all other documents delivered pursuant thereto or in connection
therewith). The total consideration paid to consummate the Tender Offer
Acquisition inclusive of all fees and costs is equal to the amount of the Loan
to be made on the Tender Offer Borrowing Date. The total consideration payable
to consummate the Merger inclusive of all fees and costs will be equal to the
amount of the Loan made on the Merger Borrowing Date. None of Cigar or any
Co-Borrower is in default in the performance or compliance with any provisions
of the Related Transactions Documents. The Related Transactions Documents comply
with, and the Tender Offer Acquisition has been or will be consummated in
accordance with, all applicable laws. The Related Transactions Documents are in
full force and effect, and have not been terminated, rescinded or withdrawn. All
requisite approvals by Governmental Authorities having jurisdiction over any
party thereto, Cigar or any Co-Borrower and other Persons referenced therein,
with respect to the transactions contemplated by the Related Transactions
Documents, have been or will be obtained, and no such approvals impose any
conditions to the consummation of the transactions contemplated by the Related
Transactions Documents or to the conduct by Cigar of its business thereafter.
Each of the representations and warranties in, and given by each party to the
Merger Agreement is true and correct in all material respects.

      3.11.  COMMON STOCK OF CIGAR.

      (a) On or prior to the Tender Offer Borrowing Date, Lewis I. Rothman,
LaVonda M. Rothman and the 1998 Trust shall have contributed to L&LR an
aggregate of 8,775,840 shares of the common stock of Cigar (the "Contributed
Shares") free and clear of all Liens, representing all of the shares of such
common stock owned of record by them. On or prior to the Tender Offer Borrowing
Date, L&LR shall have contributed the Contributed Shares to JRC, free and clear
of all Liens. The Contributed Shares constitute approximately 74% of the
aggregate issued and outstanding shares of common stock of Cigar.


                                      -12-
<PAGE>

(b) As of the Tender Offer Borrowing Date, the Trusts own 524,160 shares of the
common stock of Cigar (the "Trust Shares"), free and clear of all Liens. The
Trust Shares constitute approximately 4% of the aggregate issued and outstanding
shares of common stock of Cigar. There are no shares of any classes of capital
stock of Cigar issued and outstanding other than shares of Common Stock.

(c) The aggregate number of issued and outstanding shares of Public Stock is
2,562,299, which constitutes approximately 22% of the aggregate issued and
outstanding shares of Common Stock of Cigar.

      3.12 PLEDGE AGREEMENTS. The provisions of the Pledge Agreement of JRC
annexed hereto as Exhibit C-1 are effective, upon the acquisition by JRC of
rights in the Collateral described therein, to create in favor of the Collateral
Agent for the benefit of the Lenders a legal, valid and enforceable security
interest in, and/or Lien on, all right, title and interest of JRC in the
Collateral described therein. The provisions of the Pledge Agreement of L&LR
annexed hereto as Exhibit C-2 are effective, upon the acquisition by L&LR of
rights in the Collateral described therein, to create in favor of the Collateral
Agent for the benefit of the Lenders a legal, valid and enforceable security
interest in, and/or Lien on, all right, title and interest of L&LR in the
Collateral described therein. The provisions of the Pledge Agreement of L&LR
annexed hereto as Exhibit C-3 are effective to continue in favor of the
Collateral Agent for the benefit of the Lenders a legal, valid and enforceable
security interest in, and/or Lien on, all right, title and interest of L&LR in
the Collateral described therein. The security interests created in favor of the
Collateral Agent for the benefit of the Lenders under the Collateral Documents
will constitute first priority perfected security interests in the Collateral
described therein, subject to no security interests of any other Person. No
filings or recordings are required in order to perfect the security interests
created in the Collateral and the proceeds thereof under the Pledge Agreements.

4.    AFFIRMATIVE COVENANTS

      Each Co-Borrower hereby covenants and agrees, jointly and severally, that
on and after the date hereof and thereafter for so long as this Agreement is in
effect and until the Loans and Notes, together with all accrued but unpaid
interest, Fees and other Obligations, are paid in full:

      4.1. MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Each Co-Borrower
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence (except as permitted by Section 5.1).

      4.2. PAYMENT OF OBLIGATIONS. Each Co-Borrower shall pay and discharge or
cause to be paid and discharged promptly all Charges payable by it, including
Charges imposed upon their respective income, profits or properties.

      4.3. BOOKS AND RECORDS. Each Co-Borrower will keep proper books of record
and account in which full, true and correct entries, in conformity with GAAP and
all requirements of law, shall be made of all material dealings and transactions
in relation to its business and activities.


                                      -13-
<PAGE>

      4.4. COMPLIANCE WITH LAWS. Each Co-Borrower will comply, and will use its
best efforts to cause Cigar to comply, with all applicable statutes, regulations
or orders of, and all applicable restrictions imposed by, all Governmental
Authorities, domestic or foreign, in respect of the conduct of its respective
business and the ownership of its property, except such non compliance as could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

      4.5. INFORMATION COVENANTS. The Co-Borrowers will furnish to the
Administrative Agent (which shall promptly distribute a copy to each Lender):

      (a) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event within
five Business Days after an officer of any Co-Borrower obtains knowledge
thereof, notice of (i) the occurrence of any event which constitutes a Default
or an event of Default (provided such Default or Event of Default is continuing)
and (ii) any Litigation or governmental investigation or proceeding pending or
threatened (x) against Cigar or any Co-Borrower which could reasonably be
expected to have a Material Adverse Effect or (y) with respect to any Loan
Document.

      (b) OTHER REPORTS AND FILINGS. Promptly, copies of all financial
information, proxy materials and other information and reports, if any, which
Cigar or any Co-Borrower shall file with the Securities and Exchange Commission
or any successor thereof (the "SEC").

      (c) OTHER INFORMATION. From time to time, such other information or
documents (financial or otherwise) with respect to Cigar or any Co-Borrower as
the Administrative Agent or any Lender may reasonably request in writing.

      4.6. PERFORMANCE OF OBLIGATIONS. Each Co-Borrower will perform and will
use its best efforts to cause Cigar to perform all of its obligations under the
terms of each mortgage, deed of trust, indenture, loan agreement or credit
agreement and each other material agreement, contract or instrument by which it
is bound, except such non-performance as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

      4.7. CONSUMMATION OF MERGER. Each Co-Borrower will perform, and will use
its best efforts to cause Cigar to perform, all of its obligations required
under the Merger Agreement and will take all action necessary to consummate the
Merger. Each Co-Borrower will vote all shares of common stock of Cigar owned by
it in favor of the Merger.

      4.8.  FURTHER ASSURANCES.

      (a) Each Co-Borrower agrees that it shall, at its own expense and upon
request of Administrative Agent, duly execute and deliver, or cause to be duly
executed and delivered, to Administrative Agent such further instruments and do
and cause to be done such further acts as may be necessary or proper in the
reasonable opinion of Administrative Agent to carry out more effectively the
provisions and purposes of this Agreement or any other Loan Document.


                                      -14-
<PAGE>

      (b) Without limitation of preceding subparagraph (a), Co-Borrowers will
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such conveyances, financing statements, transfer endorsements,
powers of attorney, certificates, and other assurances or instruments and take
such further steps relating to the Collateral covered by any of the Collateral
Documents as the Collateral Agent may reasonably require to ensure the validity,
enforceability, perfection or priority of the Collateral Agent's security
interest in the Collateral or to enable the Collateral Agent to realize or
exercise the rights and benefits intended to be created by the Collateral
Documents.

5.    NEGATIVE COVENANTS

      Each Co-Borrower hereby covenants and agrees jointly and severally that on
and after the date hereof and until the Loans and Notes, together with all
accrued but unpaid interest, fees and other Obligations, are paid in full:

      5.1. CONSOLIDATION, MERGER, SALES OF ASSETS, ETC. Neither Co-Borrower will
wind up, liquidate or dissolve its affairs or enter into any transaction of
merger or consolidation, or convey, sell, lease or otherwise dispose of (or
agree to do any of the foregoing at any future time) any part of its property or
assets (including, without limitation, the capital stock of Cigar), or enter
into any sale-leaseback transactions, except that the Merger shall be permitted.

      5.2. ADVANCES, INVESTMENTS, LOANS, PURCHASE OF ASSETS. Neither Co-Borrower
will (w) lend money or grant credit or make advances to any other Person, (x)
purchase or otherwise acquire (in one or a series of related transactions) any
part of the property or assets of any other Person (including, without
limitation, any stock, obligations or securities of, or any other interest in,
any other Person), (y) make any capital contribution to any other Person, or (z)
purchase or own a futures contract or otherwise become liable for the purchase
or sale of currency or other commodities at a future date in the nature of a
futures contract, except that the following shall be permitted:
            (i)   L&LR's contribution to JRC of the Contributed Shares;
            (ii)  the Tender Offer Acquisition; and
            (iii) the Merger.

      5.3. INDEBTEDNESS. Neither Co-Borrower will contract, create, incur,
assume or suffer to exist any Indebtedness, except Indebtedness incurred
pursuant to this Agreement and the other Loan Documents.

      5.4. AFFILIATE TRANSACTIONS. Neither Co-Borrower will enter into any
transaction or series of related transactions, whether or not in the ordinary
course of business, with any Affiliate of any Co-Borrower, other than as
otherwise permitted under the provisions of this Agreement, except that:
            (i)   the Merger shall be permitted;
            (ii)  the Tender Offer and Tender Offer Acquisition shall be
                  permitted; and
            (iii) L&LR's contribution to JRC of the Contributed Shares shall be
                  permitted.


                                      -15-
<PAGE>

      5.5. LIMITATION ON ISSUANCE OF EQUITY. Neither Co-Borrower will issue any
capital stock or other equity interests (including by way of sales of treasury
stock) or any options or warrants to purchase, or securities convertible into,
capital stock or other equity interests, except (i) for replacements of then
outstanding shares of capital stock or other equity interests, or (ii) as
otherwise contemplated by the Merger Agreement.

      5.6. MODIFICATIONS OF CERTIFICATE OF INCORPORATION, BY-LAWS AND CERTAIN
AGREEMENTS, ETC. Neither Co-Borrower will amend, modify or change its
certificate of incorporation or by-laws, or any agreement entered into by it,
with respect to its capital stock or other equity interests, or enter into any
new agreement with respect to its capital stock of other equity interests except
as otherwise contemplated by the Merger Agreement; provided, however, that the
foregoing shall not prohibit JRC from extending the date on which the Tender
Offer expires.

      5.7. LIENS. Neither Co-Borrower will create, incur, assume or suffer to
exist any Lien upon or with respect to any property or assets (real or personal,
tangible or intangible) of any Co-Borrower, whether now owned or hereafter
acquired, or sell any such property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets, or
assign any right to receive income, provided that the provisions of this Section
5.7 shall not prevent the creation, incurrence, assumption or existence of Liens
created pursuant to the Pledge Agreements.

      5.8.  RESTRICTED PAYMENTS.  Neither Co-Borrower shall make any
Restricted Payments.

      5.9. CHANGE OF CORPORATE NAME OR LOCATION. Neither Co-Borrower shall (a)
change its corporate name, or (b) change its chief executive office, principal
place of business, or the location of its books and records.

      5.10. LIMITATION ON THE CREATION OF SUBSIDIARIES. No Co-Borrower will
create or acquire any Subsidiary; provided that JRC may acquire Cigar (and,
indirectly, its Subsidiaries) pursuant to the Tender Offer and L&LR may acquire
Cigar pursuant to the Merger.

      5.11. BUSINESS. (a) L&LR will not engage in any business activities and
will not have any assets or liabilities or incur any Indebtedness other than its
ownership of the equity interests of JRC, its ownership of the Contributed
Shares, liabilities imposed by law, activities in connection with the Tender
Offer and the Merger and its obligations with respect to this Agreement and the
other Loan Documents to which it is a party.

      (b) JRC will not engage in any business activities and will not have any
significant assets or liabilities other than its ownership of the capital stock
of Cigar acquired pursuant to the Tender Offer, its ownership of the Contributed
Shares, liabilities imposed by law, activities in connection with the Tender
Offer and the Merger and its obligations with respect to this Agreement and the
other Loan Documents to which it is a party.

      5.12 MARGIN REGULATIONS. The Co-Borrowers will not and will use their best
efforts to cause Cigar not to take or permit to be taken any action which might
cause any Loan Document


                                      -16-
<PAGE>

or Related Transactions Document or any transaction contemplated thereby to
violate any regulation of the Federal Reserve Board, including without
limitation Regulation T, U or X.

6.    EVENTS OF DEFAULT; RIGHTS AND REMEDIES

      6.1. EVENTS OF DEFAULT. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an "Event of
Default" hereunder:

      (a) Co-Borrowers (i) fail to make any payment of principal of the Loans
when due and payable, (ii) fail to make any payment of interest on, or Fees
owing in respect of, the Loans or any of the other Obligations when due and
payable, or (iii) fail to pay or reimburse Administrative Agent or Lenders for
any expense reimbursable hereunder or under any other Loan Document within three
(3) days following Administrative Agent's demand for such reimbursement or
payment of expenses;

      (b) Any representation, warranty or statement made by either Co-Borrower
herein or in any other Loan Document or in any certificate delivered pursuant
thereto shall prove to be untrue in any material respect on the date as of which
made or deemed made;

      (c) Either Co-Borrower shall fail or neglect to perform, keep or observe
any of the provisions of Sections 1.2 or 5;

      (d) Either Co-Borrower shall fail or neglect to perform, keep or observe
any other term, covenant or agreement contained in this Agreement or any of the
other Loan Documents (other than as provided in this Section 6.1) and the same
shall remain unremedied for ten (10) days or more;

      (e) Either Co-Borrower or Cigar shall commence a voluntary case concerning
itself under Title 11 of the United States Code entitled "Bankruptcy," as now or
hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an
involuntary case is commenced against either Co-Borrower and the petition is not
controverted within 10 days, or is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
either Co-Borrower, or either Co-Borrower commences any other proceeding under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to either Co-Borrower, or there is
commenced against either Co-Borrower any such proceeding which remains
undismissed for a period of 60 days; or either Co-Borrower is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or either Co-Borrower suffers any appointment of
any custodian or the like for it or any substantial part of its property to
continue undischarged or unstayed for a period of 60 days; or either Co-Borrower
makes a general assignment for the benefit of creditors; or any corporate action
is taken by either Co-Borrower for the purpose of effecting any of the
foregoing;

      (f) At any time after the execution and delivery thereof, any of the
Collateral Documents shall cease to be in full force and effect, or shall cease
to give the Collateral Agent for the benefit


                                      -17-
<PAGE>

of the Lenders the Liens, rights, powers and privileges purported to be created
thereby (including, without limitation, a perfected security interest in, and/or
Lien on, all of the Collateral covered thereby), in favor of the Collateral
Agent, superior to and prior to the rights of all third Persons, and subject to
no other Liens, or either Co-Borrower shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any of the Collateral Documents;

      (g) One or more judgments or decrees shall be entered against any
Co-Borrower involving in the aggregate for the Co-Borrowers a liability of
$100,000 or more (not paid or fully covered by a reputable and solvent insurance
company) and such judgments or decrees shall not have been vacated, discharged
or stayed or bonded pending appeal within 60 days from the entry thereof;

      (h) Any material provision of any Loan Document shall for any reason cease
to be in force and effective (or any Co-Borrower shall challenge the
enforceability of any Loan Document or shall assert in writing, or engage in any
action or inaction based on any such assertion, that any provision of any of the
Loan Documents has ceased to be or otherwise is not valid, binding and
enforceable in accordance with its terms);

      (i) Any Change of Control shall occur.

      6.2. REMEDIES. (a) If any Event of Default shall have occurred and be
continuing, Administrative Agent may (and at the written request of the Required
Lenders shall), without notice, take any or all of the following actions,
without prejudice to the rights of the Administrative Agent, any Lender or the
holder of any Note to enforce its claims against any Co-Borrower: (i) declare
all Commitments terminated, whereupon the Commitment of each Lender shall
forthwith terminate immediately and any Commitment Fee shall forthwith become
due and payable without any other notice of any kind; (ii) declare the principal
of and any accrued interest in respect of all Loans and the Notes and all
Obligations owing hereunder and thereunder to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by each Co-Borrower; and
(iii) enforce, as Collateral Agent, all of the Liens and security interests
created pursuant to the Pledge Agreements and exercise any and all rights
thereunder.

      6.3. WAIVERS BY CO-BORROWERS. Except as otherwise provided for in this
Agreement or by applicable law, each Co-Borrower waives: (a) presentment, demand
and protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Administrative Agent on which any Co-Borrower may in any way
be liable, and hereby ratifies and confirms whatever Administrative Agent may do
in this regard, (b) all rights to notice and a hearing prior to Administrative
Agent's taking possession or control of, or to Administrative Agent's reply,
attachment or levy upon, the Collateral or any bond or security which might be
required by any court prior to allowing Administrative Agent to exercise any of
its remedies, and (c) the benefit of all valuation, appraisal, marshaling and
exemption laws.


                                      -18-
<PAGE>

7.    THE ADMINISTRATIVE AGENT

      7.1. APPOINTMENT OF ADMINISTRATIVE AGENT. Chase is hereby appointed to act
on behalf of all Lenders as the Administrative Agent (for purposes of this
Section 7, the term "Administrative Agent" shall include Chase in its capacity
as Administrative Agent and as Collateral Agent pursuant to the Pledge
Agreements and any Lending Affiliate of Chase performing any of the duties or
functions of the Administrative Agent hereunder or under any other Loan
Document) to act as specified herein and in the other Loan Documents. Each
Lender hereby irrevocably authorizes, and each holder of any Note by the
acceptance of such Note shall be deemed irrevocably to authorize, the
Administrative Agent to take such action on its behalf under the provisions of
this Agreement, the other Loan Documents and any other instruments and
agreements referred to herein or therein and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to or
required of the Administrative Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. The Administrative Agent may
perform any of its duties hereunder by or through its respective officers,
directors, agents, employees or affiliates.

      7.2. NATURE OF DUTIES. The Administrative Agent shall not have any duties
or responsibilities except those expressly set forth in this Agreement and in
the other Loan Documents. Neither the Administrative Agent nor any of its
respective officers, directors, agents, employees or affiliates shall be liable
for any action taken or omitted by it or them hereunder or under any other Loan
Document or in connection herewith or therewith, unless determined by the
non-appealable final judgment of a court of competent jurisdiction to have been
caused by its or their gross negligence or willful misconduct. The duties of the
Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement or any other
Loan Document a fiduciary relationship in respect of any Lender or the holder of
any Note; and nothing in this Agreement or any other Loan Document, expressed or
implied, is intended to or shall be so construed as to impose upon the
Administrative Agent any obligations in respect of this Agreement or any other
Loan Document except as expressly set forth herein or therein.

      7.3. LACK OF RELIANCE ON THE ADMINISTRATIVE AGENT. Independently and
without reliance upon the Administrative Agent, each Lender and the holder of
each Note, to the extent it deems appropriate, has made and shall continue to
make (i) its own independent investigation of the financial condition and
affairs of Co-Borrowers and statements, information and representations made by
Co-Borrowers in connection with the making and the continuance of the Loans and
the taking or not taking of any action in connection herewith and (ii) its own
appraisal of the creditworthiness of Co-Borrowers and, except as expressly
provided in this Agreement, the Administrative Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to provide any Lender
or the holder of any Note with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter. The Administrative Agent shall not be responsible
to any Lender or the holder of any Note for any recitals, statements,
information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith or for the
execution, effectiveness, genuineness, validity, enforceability, perfection,
collectability, priority


                                      -19-
<PAGE>

or sufficiency of this Agreement or any other Loan Document or the financial
condition of Co-Borrowers or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
this Agreement or any other Loan Document, or the financial condition of
Co-Borrowers or the existence or possible existence of any Default or Event of
Default.

      7.4. RELIANCE. The Administrative Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that the Administrative Agent believed to be the proper Person, and,
with respect to all legal matters pertaining to this Agreement and any other
Loan Document and its duties hereunder and thereunder, upon advice of counsel
selected by the Administrative Agent. No Lender or the holder of any Note shall
have any right of action whatsoever against the Administrative Agent as a result
of the Administrative Agent acting or refraining from acting hereunder or under
any other Loan Document in accordance with the instructions of the Required
Lenders.

      7.5. INDEMNIFICATION. (a) To the extent the Administrative Agent is not
reimbursed and indemnified by the Co-Borrowers, the Lenders will reimburse and
indemnify the Administrative Agent, in proportion to their respective Pro Rata
Shares, for and against any and all liabilities, obligations, losses, damages,
penalties, claims, actions, judgments, costs, expenses or disbursements of
whatsoever kind or nature which may be imposed on, asserted against or incurred
by the Administrative Agent in performing its respective duties hereunder or
under any other Loan Document, in any way relating to or arising out of this
Agreement or any other Loan Document; provided that no Lender shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements to the extent
determined by a final non-appealable judgment of a court of competent
jurisdiction to have resulted from the Administrative Agent's gross negligence
or willful misconduct. Without limiting the foregoing, each Lender agrees to
reimburse the Administrative Agent promptly upon demand for its ratable share of
any out-of-pocket expenses (including counsel fees) incurred by Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Loan Document, to the
extent that Administrative Agent is not reimbursed for such expenses by
Co-Borrowers.

      (b) The Administrative Agent shall be fully justified in failing or
refusing to take any action hereunder and under any other Loan Document (except
actions expressly required to be taken by it hereunder or under the Loan
Documents) if such action would, in the opinion of the Administrative Agent, be
contrary to law or the terms of this Agreement or any other Loan Document.

      7.6. THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to
its obligation to make Loans under this Agreement, the Administrative Agent
shall have the rights and powers specified herein for a "Lender" and may
exercise the same rights and powers as though it were not performing the duties
specified herein; and the term "Lenders," "Required Lenders,"


                                      -20-
<PAGE>

"holders of Notes" or any similar terms shall, unless the context clearly
otherwise indicates, include the Administrative Agent in its individual
capacity. The Administrative Agent may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with any
Co-Borrower or any Affiliate of any Co-Borrower as if it were not performing the
duties specified herein, and may accept fees and other consideration from the
Co-Borrowers for services in connection with this Agreement and otherwise
without having to account for the same to the Lenders.

      7.7. HOLDERS. The Administrative Agent may deem and treat the payee of any
Note as the owner thereof for all purposes hereof unless and until a written
notice of the assignment, transfer or endorsement thereof, as the case may be,
shall have been filed with the Administrative Agent. Any request, authority or
consent of any Person who, at the time of making such request or giving such
authority or consent, is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee, assignee or indorsee, as the case may be,
of such Note or of any Note or Notes issued in exchange therefor.

      7.8. DOCUMENTATION AGENT; SYNDICATION AGENT. (a) Nothing in this Agreement
shall impose on the Documentation Agent or the Syndication Agent, in each case
in such capacity, any duties or obligations.

      (b) To the extent the Documentation Agent is not reimbursed and
indemnified by the Co-Borrowers, the Lenders will reimburse and indemnify the
Documentation Agent, in proportion to their respective Pro Rata Shares, for
and against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, costs, expenses or disbursements of whatsoever
kind or nature which may be imposed on, asserted against or incurred by the
Documentation Agent in acting as such hereunder of under any other Loan
Document, in any way relating to or arising out of this Agreement or any
other Loan Document; provided that no Lender shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements to the extent determined by
a final non-appealable judgment of a court of competent jurisdiction to have
resulted from the Documentation Agent's gross negligence or willful
misconduct.

8.    MISCELLANEOUS

      8.1. SUCCESSORS AND ASSIGNS. This Agreement and the other Loan Documents
shall be binding on and shall inure to the benefit of the Co-Borrowers,
Administrative Agent, Documentation Agent, Lenders and their respective
successors and assigns (including, in the case of any Co-Borrower, a
debtor-in-possession on behalf of such Co-Borrower), except as otherwise
provided herein or therein. No Co-Borrower may assign, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder or under
any of the other Loan Documents without the prior express written consent of
Administrative Agent and Lenders. Any Lender may assign or otherwise convey its
rights, benefits or obligations hereunder with the consent of Co-Borrowers
(which shall not be unreasonably withheld) and may assign or sell participations
in the Loans without the consent of Co-Borrowers. The terms and provisions of
this Agreement are for the purpose of defining the relative rights and
obligations of Co-Borrowers, Administrative Agent, Documentation Agent and
Lenders with respect to the transactions contemplated hereby and no Person shall
be a third party beneficiary of any of the terms and provisions of this
Agreement or any of the other Loan Documents.

      8.2. COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. The Loan Documents
constitute the complete agreement between the parties with respect to the
subject matter thereof and may not be modified, altered or amended except as set
forth in Section 8.3 below.

      8.3. AMENDMENT OR WAIVER. Neither this Agreement nor any other Loan
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by the respective Co-Borrowers and the Required Lenders; provided that no
such change, waiver, discharge or termination shall, without the consent of each
Lender directly affected thereby: (i) extend the final scheduled


                                      -21-
<PAGE>

maturity of any Loan or Note, or reduce the rate or extend the time of payment
of interest or Fees thereon (except in connection with a waiver of applicability
of any post-default increase in interest rates), or reduce the principal amount
thereof; (ii) release all or substantially all of the Collateral (except as
expressly provided in the Pledge Agreements); (iii) amend, modify or waive any
provision of this Section 8.3; (iv) reduce the percentage specified in, or
otherwise modify, the definition of Required Lenders; (v) consent to the
assignment or transfer by any Co-Borrower of any of its rights and obligations
under this Agreement; or (vi) increase the Commitments of any Lender over the
amount thereof then in effect.

      8.4. FEES AND EXPENSES. Co-Borrowers shall reimburse the Administrative
Agent for all of its out-of-pocket expenses incurred in connection with the
preparation of the Loan Documents (including the reasonable fees and expenses of
all of its special loan counsel, advisors, consultants and auditors retained in
connection with the Loan Documents and the Related Transactions and advice in
connection therewith whether or not any Borrowings shall occur). Co-Borrowers
shall reimburse Administrative Agent (and, with respect to clauses (b), (c) and
(d) below, each Lender) for all of its respective fees, costs and expenses,
including the reasonable fees, costs and expenses of counsel or other advisors
for advice, assistance, or other representation in connection with:

      (a) any amendment, modification or waiver of, or consent with respect to,
any of the Loan Documents or Related Transactions Documents or advice in
connection with the administration of the Loans made pursuant hereto or its
rights hereunder or thereunder;

      (b) any litigation, contest, dispute, suit, proceeding or action in any
way relating to the Collateral, any of the Loan Documents or any other agreement
to be executed or delivered in connection therewith or herewith, whether as
party, witness, or otherwise; provided that in the case of reimbursement of
counsel for Lenders other than Administrative Agent, such reimbursement shall be
limited to one counsel for all such Lenders;

      (c) any attempt to enforce any remedies of Administrative Agent or any
Lender against any or all of the Co-Borrowers or any other Person that may be
obligated to Administrative Agent or any Lender by virtue of any of the Loan
Documents; provided that in the case of reimbursement of counsel for Lenders
other than Administrative Agent, such reimbursement shall be limited to one
counsel for all such Lenders;

      (d) any work-out or restructuring of the Loans during the pendency of one
or more Events of Default;

      (e) efforts to (i) monitor the Loans or any of the other Obligations, (ii)
evaluate, observe or assess any of the Co-Borrowers or their respective affairs,
and (iii) verify, protect, evaluate, assess, appraise, collect, sell, liquidate
or otherwise dispose of any of the Collateral; including, as to each of clauses
(a) through (d) above, all reasonable attorneys' and other professional and
service providers' fees arising from such services; and all reasonable expenses,
costs, charges and other reasonable fees incurred by such counsel and others in
any way or respect arising in connection with or relating to any of the events
or actions described in this Section 8.4 shall be payable, on demand, by
Co-Borrowers to Administrative Agent.


                                      -22-
<PAGE>

      8.5. NO WAIVER. Neither Administrative Agent's nor any Lender's failure,
at any time or times, to require strict performance by the Co-Borrowers of any
provision of this Agreement and any of the other Loan Documents shall waive,
affect or diminish any right of such Agent or such Lender thereafter to demand
strict compliance and performance therewith. Any suspension or waiver of an
Event of Default shall not suspend, waive or affect any other Event of Default
whether the same is prior or subsequent thereto and whether the same or of a
different type. None of the undertakings, agreements, warranties, covenants and
representations of any Co-Borrower contained in this Agreement or any of the
other Loan Documents and no Default or Event of Default by any Co-Borrower shall
be deemed to have been suspended or waived by the Administrative Agent or any
Lender, unless such waiver or suspension is by an instrument in writing signed
by an officer of or other authorized employee of Administrative Agent and the
applicable Required Lenders and directed to Co-Borrower specifying such
suspension or waiver.

      8.6. REMEDIES. The Administrative Agent's and each Lenders' rights and
remedies under this Agreement shall be cumulative and nonexclusive of any other
rights and remedies which either Administrative Agent or any Lender may have
under any other agreement, including the other Loan Documents, by operation of
law or otherwise. Recourse to the Collateral shall not be required.

      8.7. RIGHT OF SETOFF. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such
rights, upon the occurrence and during the continuance of an Event of Default,
each Lender is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to any Co-Borrower or
to any other Person, any such notice being hereby expressly waived, to set off
and to appropriate and apply any and all deposits (general or special) and any
other Indebtedness at any time held or owing by such Lender (including, without
limitation, by branches and agencies of such Lender wherever located) to or for
the credit or the account of the Co-Borrowers against and on account of the
Obligations and liabilities of the Co-Borrowers to such Lender under this
Agreement or under any of the other Loan Documents.

      8.8. SEVERABILITY. Wherever possible, each provision of this Agreement and
the other Loan Documents shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

      8.9. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA EXCEPT TO THE EXTENT THAT THE
LAWS OF ANOTHER STATE GOVERN THE CREATION OR


                                      -23-
<PAGE>

PERFECTION OF LIENS UNDER ANY LOAN DOCUMENT. EACH CO-BORROWER HEREBY CONSENTS
AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE STATES OF NEW YORK OR
NEW JERSEY SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE CREDIT PARTIES, ADMINISTRATIVE AGENT, DOCUMENTATION AGENT
AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR
TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS, PROVIDED, THAT ADMINISTRATIVE AGENT, DOCUMENTATION AGENT,
LENDERS AND THE CO-BORROWERS ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY
HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK OR NEW JERSEY AND,
PROVIDED, FURTHER THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE ADMINISTRATIVE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN
ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
ADMINISTRATIVE AGENT. EACH CO-BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
CO-BORROWER HEREBY WAIVES ANY OBJECTION WHICH SUCH CO-BORROWER MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH CO-BORROWER HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CO-BORROWER AT THE ADDRESS SET
FORTH IN ANNEX C OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF SUCH CO-BORROWER'S ACTUAL RECEIPT THEREOF OR THREE
(3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

      8.10. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
8.10), (c) one (1) Business Day after deposit with a reputable overnight courier
with all charges prepaid or (d) when delivered, if hand-delivered by messenger,
all of which shall be addressed to the party to be notified and sent


                                      -24-
<PAGE>

to the address or facsimile number indicated on Annex C or to such other address
(or facsimile number) as may be substituted by notice given as herein provided.

      8.11. SECTION TITLES. The Section titles and Table of Contents contained
in this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.

      8.12.  COUNTERPARTS.  This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.

      8.13. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG ADMINISTRATIVE AGENT, LENDERS AND ANY
CO-BORROWER ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.

      8.14. REINSTATEMENT. This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against
Co-Borrowers for liquidation or reorganization, should Co-Borrowers become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of
Co-Borrowers' assets, and shall continue to be effective or to be reinstated, as
the case may be, if at any time payment and performance of the Obligations, or
any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the
Obligations, whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.

      8.15. NO STRICT CONSTRUCTION. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.


                                      -25-
<PAGE>

      IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.

                              JRC ACQUISITION CORP.

                              /s/ Lewis I. Rothman
                              --------------------------------------------------
                              By:    Lewis I. Rothman
                              Title: President



                              L&LR, INC.

                              /s/ Lewis I. Rothman
                              --------------------------------------------------
                              By:    Lewis I. Rothman
                              Title: President



                              LENDERS:
                              THE CHASE MANHATTAN BANK,
                              as Administrative Agent and Lender


                              /s/ Ivan Harlow
                              --------------------------------------------------
                              By:    Ivan Harlow
                              Title: Vice President


                              FLEET BANK, N.A.,
                              as Documentation Agent and Lender

                              /s/ Barrett Bencivenga
                              --------------------------------------------------
                              By:    Barrett Bencivenga
                              Title: Senior Vice President


                              EUROPEAN AMERICAN BANK
                              as Lender


                              /s/ Robert G. Maichin
                              --------------------------------------------------
                              By:    Robert G. Maichin
                              Title: Vice President


                                      -26-
<PAGE>

                               ANNEX A (RECITALS)
                                       TO
                                CREDIT AGREEMENT

                                   DEFINITIONS

      Capitalized terms used in the Loan Documents shall have (unless otherwise
provided elsewhere in the Loan Documents) the following respective meanings and
all Section references in the following definitions shall refer to Sections of
the Agreement:

      "Account Control Agreement" shall mean the Account Control Agreement,
dated the date hereof, by and among the Collateral Agent for the benefit of the
Lenders as creditors, the Co-Borrowers as debtors, and American Stock Transfer &
Trust Company as securities intermediary.

      "Administrative Agent" shall mean Chase or its successor appointed
pursuant to Section 7.

      "Affiliate" shall mean, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, five percent (5%) or more of the Stock having
ordinary voting power in the election of directors of such Person, (b) each
Person that controls, is controlled by or is under common control with such
Person, (c) each of such Person's officers, directors, joint venturers and
partners and (d) in the case of Co-Borrowers, the immediate family members,
spouses and lineal descendants of individuals who are Affiliates of
Co-Borrowers. For the purposes of this definition, "control" of a Person shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise; provided, however, that the term
"Affiliate" shall specifically exclude each Agent and each Lender.

      "Agreement" shall mean the Credit Agreement by and among Co-Borrowers,
Chase, as Administrative Agent, Arranger, Syndication Agent and Lender Fleet
Bank, N.A., as Documentation Agent and Lender and the other Lender(s) signatory
from time to time to the Agreement.

      "Appendices" shall have the meaning assigned to it in the recitals to
the Agreement.

      "Authorized Officer" shall mean any of the Chief Executive Officer,
President, the Chief Financial Officer, the Treasurer, the Controller, any
Assistant Treasurer, any Vice-President, the Secretary or the General Counsel of
a Co-Borrower or any other officer of such Co-Borrower which is designated in
writing to the Administrative Agent by any of the foregoing officers of such
Co-Borrower as being authorized to give such notices under this Agreement.

      "Borrowing" shall mean a borrowing of Loans by the Co-Borrowers from the
Lenders on a given date pursuant to the Agreement.


                                      -27-
<PAGE>

      "Borrowing Date" shall mean the Tender Offer Borrowing Date and the Merger
Borrowing Date, it being understood and agreed that the proceeds from any
Borrowing on any Borrowing Date shall be only for the purposes described in
Section 1.2.

      "Business Day" shall mean any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the State of New
York. If any payment on any Loan becomes due and payable on a day other than a
Business Day, the maturity thereof will be extended to the next succeeding
Business Day and interest shall be payable at the then applicable rate during
such extension.

      "Capital Lease" shall mean, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.

      "Capital Lease Obligation" shall mean, with respect to any Capital Lease
of any Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.

      "Change of Control" shall mean (i) Lewis I. Rothman, LaVonda M. Rothman
and the 1998 Trust shall cease to own 100% of the outstanding equity interests
of L&LR or (ii) L&LR shall cease to own (other than as a result of the Merger)
100% of the outstanding equity interests of JRC or (iii) following the Merger, L
& LR shall cease to own all of the Stock of Cigar.

      "Charges" shall mean all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including taxes owed to the PBGC at the
time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Obligations, (b) the employees,
payroll, income or gross receipts of any of the Co-Borrowers or, as applicable,
Cigar, (c) Cigar's or the Co-Borrower's ownership or use by Co-Borrowers or, as
applicable, Cigar of any properties or other assets, or (d) any other aspect of
the business of either Co-Borrower or, as applicable, Cigar.

      "Chase" means The Chase Manhattan Bank.

      "Cigar" means 800-JR CIGAR, Inc., a Delaware corporation.

      "Co-Borrowers" shall have the meaning assigned thereto in the recitals
to the Agreement.

      "Code" shall mean the Uniform Commercial Code as the same may, from time
to time, be enacted and in effect in the State of New York; provided, however,
in the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of Administrative Agent's, Documentation
Agent's or any Lender's security interest in any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the State of New York, the term "Code" shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes of the
provisions hereof


                                      -28-
<PAGE>

relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.

      "Collateral" shall mean all property with respect to which any security
interests have been granted (or purported to be granted), pursuant to the Pledge
Agreements.

      "Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Lenders pursuant to the Pledge Agreement and the other
Collateral Documents.

      "Collateral Documents" shall mean all documents delivered and to be
delivered under the Agreement to create, perfect or maintain a security interest
and/or Lien on the Collateral, including, without limitation, the Pledge
Agreements and the Account Control Agreement.

      "Commitments" shall mean (a) as to any Lender, the aggregate of such
Lender's Commitment as set forth on Annex B to the Agreement and (b) as to all
Lenders, the aggregate of all Lenders' Commitments, which aggregate commitments
shall not exceed the Maximum Amount, in each case as such Commitments may be
amortized from time to time in accordance with the Agreement.

      "Commitment Fee" shall have the meaning assigned to it in Section 1.9
(b).

      "Contributed Shares" shall have the meaning assigned to it in Section
3.11.

      "Default" shall mean any event which, with the passage of time or notice
or both, would, unless cured or waived, become an Event of Default.

      "Default Rate" shall have the meaning assigned to it in Section 1.8.

      "Documentation Agent" shall mean Fleet Bank, N.A.

      "Dollars" or "$" shall mean lawful currency of the United States of
America.

      "Event of Default" shall have the meaning assigned to it in Section 6.1.

      "Federal Funds Rate" shall mean, for any day, a floating rate equal to the
weighted average of the rates on overnight federal funds transactions among
members of the Federal Reserve System, as determined by Administrative Agent.

      "Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any successor thereto.

      "Fee Letter" shall mean the letter dated June 12, 2000 from Chase to Cigar
providing for certain fees relating to the Agreement and the transactions
contemplated thereby.

      "Fees" shall mean any and all fees payable to the Administrative Agent or
Lenders pursuant to the Agreement, the Fee Letter or any of the other Loan
Documents.


                                      -29-
<PAGE>

      "GAAP" shall mean generally accepted accounting principles in the United
States of America, consistently applied.

      "Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

      "Indebtedness" of any Person shall mean without duplication (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred six (6) months or more, but
excluding obligations to trade creditors incurred in the ordinary course of
business that are not overdue by more than six (6) months unless being contested
in good faith, (b) all reimbursement and other obligations with respect to
letters of credit, bankers' acceptances and surety bonds, whether or not
matured, (c) all obligations evidenced by notes, bonds, debentures or similar
instruments, (d) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (e) all Capital Lease Obligations and the present value (discounted
at the Prime Rate as in effect on the Initial Borrowing Date) of future rental
payments under all synthetic leases, (f) all obligations of such Person under
commodity purchase or option agreements or other commodity price hedging
arrangements, in each case whether contingent or matured, (g) all obligations of
such Person under any foreign exchange contract, currency swap agreement,
interest rate swap, cap or collar agreement or other similar agreement or
arrangement designed to alter the risks of that Person arising from fluctuations
in currency values or interest rates, in each case whether contingent or
matured, (h) all Indebtedness referred to above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon or in property or other assets (including accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness, and (i) the
Obligations.

      "Indemnified Liabilities" shall have the meaning assigned to it in
Section 1.12.

      "Initial Borrowing Date" shall mean the earlier of (i) the Tender Offer
Borrowing Date and (ii) the Merger Borrowing Date.

      "Interest Payment Date" means as to any Loan, the first Business Day of
each month to occur while such Loan is outstanding, provided that, in addition
to the foregoing, the Maturity Date and the date of any prepayment of principal
of a Loan shall be deemed to be "Interest Payment Dates" with respect to any
interest which is then accrued under the Agreement.

      "IRC" shall mean the Internal Revenue Code of 1986, as amended, and any
successor thereto.

      "IRS" shall mean the Internal Revenue Service, or any successor thereto.


                                      -30-
<PAGE>

      "Lending Affiliate" shall mean, with respect to any Person, any other
Person (i) directly or indirectly controlling (including, but not limited to,
all directors, officers and partners of such Person), controlled by, or under
direct or indirect common control with, such Person or (ii) that directly or
indirectly owns more than 50% of any class of the voting securities or capital
stock of or equity interests in such Person. A Person shall be deemed to control
another Person if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other
Person, whether through the ownership of voting securities, by contract or
otherwise.

      "Lenders" shall mean Chase, the other Lenders named on the signature page
of the Agreement, and, if any such Lender shall decide to assign all or any
portion of the Obligations, such term shall include such assignee.

      "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the Code or
comparable law of any jurisdiction).

      "Litigation" shall have the meaning assigned to it in Section 3.7.

      "Loan" shall have the meaning assigned to it in Section 1.1.

      "Loan Documents" shall mean the Agreement, the Notes, the Collateral
Documents and all other agreements, instruments, documents and certificates
executed and delivered to, or in favor of, Administrative Agent, Documentation
Agent and/or Lenders in connection therewith. Any reference in the Agreement or
any other Loan Document to a Loan Document shall include all appendices,
exhibits or schedules thereto, and all amendments, restatements, supplements or
other modifications thereto, and shall refer to such Agreement as the same may
be in effect at any and all times such reference becomes operative.

      "Loans" shall have the meaning assigned to it in Section 1.1.

      "Material Adverse Effect" shall mean a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of the
Co-Borrowers, either individually or taken as a whole, or of Cigar as the
context shall require, (b) Co-Borrowers' ability to pay any of the Loans or any
of the other Obligations in accordance with the terms of the Agreement, (c) the
Co-Borrowers' ability to consummate the Related Transactions; or (d) either the
Administrative Agent's or any Lender's rights and remedies under the Agreement
and the other Loan Documents.

      "Maturity Date" shall mean the earlier of (i) sixty (60) days following
the Tender Offer Borrowing Date and (ii) the next Business Day immediately
following the date on which the Merger is consummated.


                                      -31-
<PAGE>

      "Maximum Amount" shall mean the aggregate of, but no more than, the amount
of (i) the Tender Offer Consideration and the transaction fees and expenses
related to the Tender Offer Acquisition, PLUS (ii) the Merger Consideration and
the transaction fees and expenses related to the Merger, and in any event the
Maximum Amount shall not exceed $55,000,000.

      "Merger" shall mean the merger of JRC with and into Cigar pursuant to and
in accordance with the terms and conditions of the Merger Agreement.

      "Merger Agreement" shall mean the Agreement and Plan of Merger, dated as
of August 28, 2000, by and among L&LR, JRC and Cigar.

      "Merger Borrowing Date" shall mean the date on which (i) the Merger is
effective pursuant to the terms of the Merger Agreement, and (ii) each
applicable condition precedent set forth in Section 2 is satisfied or waived by
Administrative Agent.

      "Merger Consideration" shall have the meaning assigned to it in the
Merger Agreement.

      "Merger Documents" shall mean the Merger Agreement and all documents
related to the Merger.

      "1998 Trust" shall mean the Lewis Irving Rothman 1998 Trust #1 u/a/d
November 10, 1998.

      "Note" shall have the meaning assigned to it in Section 1.3.

      "Notice Office" shall mean the office of The Chase Manhattan Bank located
at 695 Route 46 West, Fairfield, New Jersey 07004.

      "Obligations" shall mean all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by the
Co-Borrowers to the Administrative Agent or any Lender, and all covenants and
duties regarding such amounts, of any kind or nature, present or future, whether
or not evidenced by any note, agreement or other instrument, arising under the
Agreement or any of the other Loan Documents. This term includes all principal,
interest (including all interest which accrues after the commencement of any
case or proceeding in bankruptcy after the insolvency of, or for the
reorganization of any Co-Borrower, whether or not allowed in such proceeding),
Fees, Charges, expenses, attorneys' fees and any other sum chargeable to any
Co-Borrower under the Agreement or any of the other Loan Documents.

      "Payment Office" shall mean the office of The Chase Manhattan Bank located
at 695 Route 46 West, Fairfield, New Jersey 07004.

      "PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.


                                      -32-
<PAGE>

      "Permanent Credit Agreement" shall mean that certain Credit Agreement
dated the date hereof among Cigar and the other Co-Borrowers thereunder, the
Lenders signatory thereto, Chase, as Administrative Agent and Lender and Fleet
Bank, N.A., as Documentation Agent and Lender.

      "Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, other entity
or government (whether federal, state, county, city, municipal, local, foreign,
or otherwise, including any instrumentality, division, agency, body or
department thereof).

     "Pledge Agreement" shall mean each of the Pledge Agreements.

     "Pledge Agreements" shall mean the pledge agreements in the forms of
Exhibit C-1, C-2 and C-3, as modified, supplemented or amended from time to
time.

     "Pledged Stock" shall have the meaning assigned to it in each of the
Pledge Agreements.

      "Prime Rate" shall mean the rate of interest publicly announced from time
to time by the Administrative Agent as its prime rate in effect at its principal
office in New York City, changing when and as the prime rate changes, each
change to be effective on the date such change is publicly announced by the
Administrative Agent.

      "Pro Rata Share" shall mean with respect to all matters relating to any
Lender, the percentage obtained by dividing (i) the aggregate Commitments of
that Lender by (ii) the aggregate Commitments of all Lenders.

      "Public Stock" shall mean the issued and outstanding shares of common
stock of Cigar which are not owned of record or beneficially by Lewis I. Rothman
and/or LaVonda M. Rothman, the 1998 Trust or the Trusts.

      "Related Transactions" means the (i) Tender Offer Acquisition, (ii) the
Merger, and (iii) the payment of all fees, costs and expenses associated with
all of the foregoing and the execution and delivery of all of the Related
Transactions Documents.

      "Related Transactions Documents" shall mean the Tender Offer Documents and
the Merger Documents.

      "Required Lenders" shall mean, Lenders having (a) prior to the Initial
Borrowing Date sixty-six and two-thirds percent (66 2/3%) or more of the
Commitments of all Lenders or (b) after the Initial Borrowing Date, sixty-six
and two-thirds percent (66 2/3%) or more of the outstanding Loans.

      "Restricted Payment" shall mean (a) the declaration or payment of any
dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of a Person's Stock,
(b) any payment on account of the purchase, redemption,


                                      -33-
<PAGE>

defeasance, sinking fund or other retirement of a Person's Stock or any other
payment or distribution made in respect thereof, either directly or indirectly,
(c) any payment, loan, contribution, or other transfer of funds or other
property to any holder of Stock of such Person other than payment of
compensation in the ordinary course to stockholders who are employees of such
Person; and (d) any payment of management fees (or other fees of a similar
nature) by such Person to any Stockholder of such Person or their Affiliates.

      "Solvent" shall mean, with respect to any Person on a particular date,
that on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including contingent liabilities, of such
Person; (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature taking
into account the timing and the amounts of cash to be received by such Person or
its Subsidiaries from any source and the timing of and amounts of cash to be
payable in respect of or in connection with the debt and liabilities of such
Person and its Subsidiaries; and (d) such Person is not engaged in a business or
transaction, and is not about to engage in a business or transaction, for which
such Person's property would constitute an unreasonably small capital taking
into account the particular capital requirements of such Person and its
projected capital requirement and availability. The amount of contingent
liabilities (such as litigation, guarantees and pension plan liabilities) at any
time shall be computed as the amount which, in light of all the facts and
circumstances existing at the time, represents the amount which can be
reasonably be expected to become actual or matured liabilities.

      "Stock" shall mean all shares, options, warrants, general or limited
partnership interests or other equivalents (regardless of how designated) of or
in a corporation, partnership or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended).

       "Subsidiary" shall mean, with respect to any Person, (a) any corporation
of which an aggregate of more than fifty percent (50%) of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, or with respect to which any such Person has the right to vote or
designate the vote of fifty percent (50%) or more of such Stock whether by
proxy, agreement, operation of law or otherwise, and (b) any partnership or
limited liability company in which such Person and/or one or more Subsidiaries
of such Person shall have an interest (whether in the form of voting or
participation in profits or capital contribution) of more than fifty percent
(50%) or of which any such Person is a general partner or may exercise the
powers of a general partner.

      "Taxes" shall mean taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income or net


                                      -34-
<PAGE>

profits of a Lender or Administrative Agent by the jurisdictions under the laws
of which Administrative Agent and Lenders are organized or any political
subdivision thereof or in which its principal office is located or in which its
principal lending office is located.

      "Tender Offer" shall mean the offer of JRC to tender for the outstanding
shares of common stock of Cigar for the Tender Offer Price, made pursuant to the
Offer to Purchase dated August 29, 2000.

      "Tender Offer Acquisition" means the acquisition by JRC of shares of
Public Stock pursuant to and in accordance with the terms and conditions of the
Tender Offer.

      "Tender Offer Borrowing Date" shall mean the date on which (i) JRC tenders
payment for the Public Stock of Cigar being acquired by JRC pursuant to the
Tender Offer Acquisition and (ii) each applicable condition precedent set forth
in Section 2 is satisfied or waived by Administrative Agent.

      "Tender Offer Consideration" shall mean the aggregate price to be paid by
JRC for all shares of Public Stock actually being purchased by JRC pursuant to
the Tender Offer.

      "Tender Offer Documents" shall mean all documentation related to the
Tender Offer, including all public filings made with the Securities and Exchange
Commission.

      "Tender Offer Price" shall mean the price of $13 per share of common stock
of Cigar offered pursuant to the Tender Offer.

      "Termination Date" shall mean the date on which the Loans have been repaid
in full and all other Obligations under the Agreement and the other Loan
Documents have been completely discharged.

      "Third Party Interactives" shall mean all Persons with whom any
Co-Borrower exchanges data electronically in the ordinary course of business,
including, without limitation, customers, suppliers, third-party vendors,
subcontractors, processors-converters, shippers and warehousemen.

      "Trust" shall mean each of the Trusts.

      "Trusts" shall mean collectively (i) that certain trust f/b/o Shane
Rothman created under a trust agreement dated November 1, 1994, Lewis I.
Rothman, Grantor, (ii) that certain trust f/b/o Marni Rothman created under a
trust agreement dated November 1, 1994, Lewis I. Rothman, Grantor, (iii) that
certain trust f/b/o Samantha Rothman created under a trust agreement dated
November 1, 1994, Lewis I. Rothman, Grantor, and (iv) that certain trust f/b/o
Luke Rothman created under a trust agreement dated November 1, 1994, Lewis I.
Rothman, Grantor.

      "Trust Shares" shall have the meaning assigned to it in Section 3.11.


                                      -35-
<PAGE>

      "Year 2000 Date-Sensitive System/Component" shall mean, as to any Person,
any software, network software, applications software, data base, computer file,
embedded microchip, firmware or hardware that accepts, creates, manipulates,
sorts, sequences, calculates, compares or outputs calendar-related data
accurately; such systems and components shall include, without limitation,
mainframe computers, file server/client systems, computer workstations, routers,
hubs, other network-related hardware, and other computer-related software,
firmware or hardware and information processing and delivery systems of any kind
and telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC systems.

      "Year 2000 Problems" shall mean, with respect to Cigar and each
Co-Borrower, limitations on the capacity or readiness of any such Person's Year
2000 Date-Sensitive Systems/Components to accurately accept, create, manipulate,
sort, sequence, calculate, compare or output calendar date information with
respect to calendar year 1999 or any subsequent calendar year beginning on or
after January 1, 2000 (including leap year computations), including, without
limitation, exchanges of information among Year 2000 Date-Sensitive
Systems/Components of Cigar or any Co-Borrower and exchanges of information
among Cigar or any Co-Borrower and Year 2000 Date-Sensitive Systems/Components
of Third Party Interactives and functionality of peripheral interfaces, firmware
and embedded microchips.

      All other undefined terms contained in any of the Loan Documents shall,
unless the context indicates otherwise, have the meanings provided for by the
Code as in effect in the State of New York to the extent the same are used or
defined therein. Unless otherwise specified, references in the Agreement or any
of the Appendices to a Section, subsection or clause refer to such Section,
subsection or clause as contained in the Agreement. The words "herein," "hereof"
and "hereunder" and other words of similar import refer to the Agreement as a
whole, including all Annexes and Exhibits, as the same may from time to time be
amended, restated, modified or supplemented, and not to any particular section,
subsection or clause contained in the Agreement or any such Annex or Exhibit.

      Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to Persons include their respective successors and assigns (to the
extent and only to the extent permitted by the Loan Documents) or, in the case
of governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of the same and any successor statutes and regulations. Whenever
any provision in any Loan Document refers to the knowledge (or an analogous
phrase) of any Co-Borrower, such words are intended to signify that such
Co-Borrower has actual knowledge or awareness of a particular fact or
circumstance or that such Co-Borrower, if it had exercised reasonable diligence,
would have known or been aware of such fact or circumstance.


                                      -36-
<PAGE>

               ANNEX B (FROM ANNEX A - COMMITMENTS DEFINITION)


LENDERS:                                  COMMITMENT:
--------                                  -----------

The Chase Manhattan Bank                  .4545454 of the Maximum Amount

Fleet Bank, N.A.                          .3636364 of the Maximum Amount

European American Bank                    .1818182 of the Maximum Amount


                                      -37-
<PAGE>

                             ANNEX C (SECTION 8.10)
                                       TO
                                CREDIT AGREEMENT


                                NOTICE ADDRESSES



(a)   If to Administrative Agent, at

      The Chase Manhattan Bank
      695 Route 46 West
      Fairfield, New Jersey  07004

      Attention:  Ivan Harlow
      Telecopier No.:  (973) 439-5011
      Telephone No.:  (973) 439-5071

      with copies to:

      McCarter & English, LLP
      Four Gateway Center
      100 Mulberry Street
      Newark, NJ  07102

      Attention:  Peter S. Twombly, Esq.
      Telecopier No.: (973) 624-7070
      Telephone No.: (973) 622-4444


(b)   If to Documentation Agent, at

      Fleet Bank, N.A.
      208 Harristown Road
      Glen Rock, New Jersey  07452

      Attention:  Barrett Bencivenga
      Telecopier No.: (201) 251-5050
      Telephone No.: (201) 251-5725


                                      -38-
<PAGE>

(c)   If to Lenders, at

      The Chase Manhattan Bank
      695 Route 46 West
      Fairfield, New Jersey  07004

      Attention:  Ivan Harlow
      Telecopier No.:  (973) 439-5011
      Telephone No.:  (973) 439-5071


      Fleet Bank, N.A.
      208 Harristown Road
      Glen Rock, New Jersey  07452

      Attention:  Barrett Bencivenga
      Telecopier No.: (201) 251-5050
      Telephone No.: (201) 251-5725

      and

      European American Bank
      335 Madison Avenue
      New York, New York  10017

      Attention:  Anthony Pantina
      Telecopier No.: (212) 503-2667
      Telephone No.: (212) 503-2428

      with copies to:

      McCarter & English, LLP
      Four Gateway Center
      100 Mulberry Street
      Newark, NJ  07102

      Attention:  Peter S. Twombly, Esq.
      Telecopier No.: (973) 624-7070
      Telephone No.: (973) 622-4444


                                      -39-
<PAGE>

(d)   If to Co-Borrowers, at

      JRC Acquisition Corp.
      301 Route 10 East
      Whippany, New Jersey  07981

      Attention:  Michael E. Colleton, Esq.
      Telecopier No.: (973) 884-9556
      Telephone No.: (973) 884-9555

      with copies to:

      Morgan, Lewis & Bockius LLP
      101 Park Avenue
      New York, NY  10178-0060

      Attention:  Samuel B. Fortenbaugh III, Esq.
      Telecopier No.: (212) 309-6273
      Telephone No.: (212) 309-6070


                                      -40-
<PAGE>

                                                                       EXHIBIT A



                                 PROMISSORY NOTE


$___________                                    , New Jersey
                                                August __, 2000

            JRC ACQUISITION CORP., a Delaware corporation ("JRC"), and L&LR,
INC., a Delaware corporation ("L&LR") (JRC and L&LR, collectively, the
"Co-Borrowers"), for value received, hereby promise, jointly and severally, to
pay to the order of [NAME OF LENDER], a national banking association (the
"Lender") at the office of The Chase Manhattan Bank, 695 Route 46 West,
Fairfield, New Jersey 07004, on the Maturity Date (as defined in the Credit
Agreement defined below), in lawful money of the United States of America and in
immediately available funds, the principal sum of ________________
($__________), or such lesser unpaid principal amount as shall be outstanding
hereunder, together with interest from the date hereof on the unpaid principal
balance of this Promissory Note (the "Note"), payable on the dates and at the
rate or rates provided for in the Credit Agreement dated as of August __, 2000,
by and among the Co-Borrowers, the Lender, _____ and ______, as the same may be
amended from time to time (the "Credit Agreement"). In no event shall the
interest rate payable hereon exceed the maximum rate of interest permitted by
law. Capitalized terms used herein which are defined in the Credit Agreement
shall have the meanings therein defined.

            This Note is one of the Notes referred to in the Credit Agreement,
and is entitled to the benefits and is subject to the terms of the Credit
Agreement. The principal of this Note is prepayable in the amounts and under the
circumstances, and its maturity is subject to acceleration upon the terms, set
forth in the Agreement. Except as otherwise provided in the Credit Agreement, if
any payment on this Note becomes due and payable on a day which is not a
Business Day, the due date thereof shall be extended to the next Business Day,
and interest shall be payable at the rate or rates specified in the Agreement
during such extension period.

            Presentment for payment, demand, notice of dishonor, protest, notice
of protest and all other demands and notices in connection with the delivery,
performance and enforcement of this Note are hereby waived.

            Upon the occurrence of any Event of Default specified in the Credit
Agreement, all amounts then remaining unpaid on

<PAGE>

this Note shall become immediately due and payable, all as and to the extent
provided in the Credit Agreement. This Note is entitled to the benefits of the
Collateral Documents which are referred to in the Credit Agreement. Reference is
made to each of the foregoing instruments for a description of the Collateral
provided thereby and the rights of the Lender thereunder and in respect of such
Collateral.

            This Note shall be construed and enforceable in accordance with, and
be governed by the internal laws of, the State of New York without regard to
principles of conflict of laws.

            This Note may not be changed orally, but only by an instrument in
writing executed pursuant to the provisions of Section 8.3 of the Credit
Agreement.

                              JRC ACQUISITION CORP.

                              By:
                                 -----------------------------------------------
                              Name:  Lewis I. Rothman
                              Title: President

                              L&LR, INC.


                              By:
                                 -----------------------------------------------
                              Name:  Lewis I. Rothman
                              Title: President

<PAGE>

                                                                       EXHIBIT B

                               NOTICE OF BORROWING


            Pursuant to Section 1.4 of the Credit Agreement dated as of August
__, 2000 by and among JRC Acquisition Corp. ("JRC"), L&LR, Inc. ("L&LR") (JRC
and L&LR, collectively, the "Co-Borrowers"), The Chase Manhattan Bank ("Chase")
and certain Lenders party thereto as the same may be amended, supplemented,
modified or restated from time to time (the "Agreement"; terms defined therein
being used herein as therein defined), each of the undersigned, the President of
each Co-Borrower, hereby requests on behalf of the Co-Borrowers, jointly and
severally, a Loan in the amount of $__________ to be made available to the
Co-Borrowers on ___________.

            The undersigned hereby certify, jointly and severally, that:

                  (i) the Co-Borrowers are in compliance with all of
      the terms, covenants and conditions of the Loan Documents;

                  (ii) the representations and warranties set forth in the Loan
      Documents, including without limitation, the Collateral Documents, are
      true and correct in all material respects on and as of the date hereof,
      with the same effect as though such representations and warranties had
      been made on the date hereof;

                  (iii) no Event of Default has occurred and is
      continuing;

                  (iv) there has been no material adverse change in the
      financial position, operations, business or properties of the Co-Borrowers
      since the execution of the Agreement; and

                  (v) the proceeds of the Loan will be used in the manner
      required by the Agreement.

                                          JRC ACQUISITION CORP.


                                          By:
                                             -----------------------------------
                                          Name:  Lewis I. Rothman
                                          Title: President


                                          L&LR, INC.


                                          By:
                                             -----------------------------------
                                          Name:  Lewis I. Rothman
                                          Title: President

DATE:

<PAGE>
                                                                     Exhibit C-1

                                PLEDGE AGREEMENT
      (by JRC Acquisition Corp. of certain shares of 800-JR CIGAR, Inc.
                  in connection with the Tender Offer Loan)

      THIS PLEDGE AGREEMENT dated August __, 2000 by JRC Acquisition Corp. (the
"Pledgor"), in favor of The Chase Manhattan Bank as collateral agent (the
"Agent") for the benefit of the lenders which are from time to time parties to
that certain Credit Agreement (the "Credit Agreement") of even date among the
Pledgor, L&LR, Inc., the Agent and such lenders.

                                    RECITALS

      A. The Pledgor is the owner of certain shares of 800-JR CIGAR, Inc., a
Delaware corporation (the "Issuer") consisting of the Contributed Shares and
shares acquired by Pledgor pursuant to the Tender Offer; and

      B. Under the terms of the Credit Agreement, the Pledgor is required to
grant to the Agent a perfected security interest in all of the shares of the
Issuer now owned or hereafter acquired by the Pledgor.

      NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgor agrees as follows:

SECTION 1.  DEFINITIONS.

      Capitalized terms whose meaning is not otherwise defined herein shall have
the meaning assigned in the Credit Agreement. The following terms, as used
herein, have the following respective meanings:

      "ACCOUNT CONTROL AGREEMENT" means that certain account control agreement
among the Agent, the Pledgor and the Depositary.

      "AGENT" has the meaning assigned to such term in the Preamble to this
Agreement.

      "AGREEMENT" means this Pledge Agreement and any modifications or
amendments thereof.

      "COLLATERAL" has the meaning assigned to such term in SECTION 3.

      "CREDIT AGREEMENT" has the meaning assigned to such term in the
Preamble to this Agreement.

      "DEPOSITARY" means American Stock and Transfer Company in its capacity as
Depositary in connection with the Tender Offer.
<PAGE>

      "ISSUER" has the meaning assigned to such term in the Recitals.

      "LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction in respect of
any of the foregoing).

      "PERSON" means an individual, partnership, corporation, business trust,
joint stock company, limited liability company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.

      "PLEDGED ACCOUNT" means account #___________ maintained by the Pledgor
with the Depositary, as securities intermediary, in connection with the Tender
Offer.

      "PLEDGED STOCK" means the shares of the capital stock of the Issuer, or
any securities entitlements related thereto, which are now or hereafter (i)
delivered in certificated form to the Agent, or (ii) held by the Depositary in
connection with the Tender Offer in the Pledged Account, which Pledged Stock and
the Pledged Account are subject to the Account Control Agreement.

      "PLEDGOR" has the meaning assigned to such term in the Preamble.

      "SECURED OBLIGATIONS" means all present and future obligations of the
Pledgor to the Lenders and the Agent, which may arise out of, under or in
connection with the Credit Agreement, this Agreement or the Loan Documents
including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding.

      "SECURITY INTERESTS" means the security interests in the Collateral
granted in favor of the Agent hereunder securing the Secured Obligations.

      Unless otherwise defined herein, or unless the context otherwise requires,
all terms used herein which are defined in the New York Uniform Commercial Code
as in effect on the date hereof shall have the meanings therein stated.

      SECTION 2.  REPRESENTATIONS AND WARRANTIES.

      The Pledgor represents and warrants as follows:

      A. TITLE TO COLLATERAL; NO RESTRICTIONS ON TRANSFER. The Pledgor owns
directly all of the Pledged Stock, free and clear of any Lien other than the
Security Interests. There is no restriction on the pledge or transfer of any of
the Pledged Stock, other than restrictions


                                      -2-
<PAGE>

referenced on the face of any certificates evidencing the Pledged Stock
delivered to the Agent.

      B. PLEDGED STOCK. None of the Pledged Stock is subject to any option to
purchase or similar rights of any Person nor is it subject to any legal or
equitable claim or interest whatsoever. The Pledgor is not nor will it become a
party to or otherwise bound by any agreement, other than this Agreement, which
restricts in any manner the rights of any present or future holder of any of the
Pledged Stock with respect thereto.

      C. VALIDITY, PERFECTION AND PRIORITY OF SECURITY INTERESTS. Upon the
delivery to the Agent of all certificates representing the Pledged Stock, the
Agent will have a valid and perfected security interest in the Collateral
subject to no prior Lien. No registration, recordation or filing with any
governmental body, agency or official is required in connection with the
execution or delivery of this Agreement or necessary for the validity or
enforceability hereof or for the perfection or enforcement of the Security
Interests. The Pledgor has not performed nor will it perform any acts which
might prevent the Agent from enforcing any of the terms and conditions of this
Agreement or which would limit the Agent in any such enforcement.

      D. NO OTHER LIENS. The Pledgor will not grant nor suffer to exist any
Liens on the Collateral, other than those permitted under this Agreement.

      SECTION 3. THE SECURITY INTERESTS.

      In order to secure the full and punctual payment of the Secured
Obligations of the Pledgor in accordance with the terms thereof, and to secure
the performance of all the obligations of the Pledgor hereunder:

      A. GRANT OF SECURITY INTERESTS. The Pledgor grants to the Agent for the
ratable benefit of the Lenders a security interest in the Pledged Stock, and all
of its rights and privileges with respect thereto, including all proceeds,
income and profits thereon, and all interest, dividends and other payments and
distributions with respect thereto (the "Collateral").

      B. ADDITIONAL PLEDGED STOCK. In the event that the Issuer at any time
issues to the Pledgor any additional or substitute shares in certificated form
of capital stock of any class with respect to any Pledged Stock which is held by
the Agent or by the Depositary in the Pledged Account, the Pledgor will
immediately deliver, or cause to be immediately delivered, to the Agent or
Depositary, as the case may be, certificates representing all such shares as
additional security for the Secured Obligations. In the event that the Issuer at
any time issues to the Pledgor, with respect to any Pledged Stock which is in
the form of a securities entitlement held in the Pledged Account, any additional
or substitute shares of capital stock of any class, the Pledgor will immediately
deliver, or cause to be immediately delivered, to the Pledged Account securities
entitlements representing all such shares as additional security for the Secured
Obligations. All such shares shall constitute Pledged Stock and are subject to
all provisions of this Agreement.

      SECTION 4. DELIVERY.


                                      -3-
<PAGE>

      All certificates representing Pledged Stock will be delivered to the Agent
by the Pledgor pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, with signatures appropriately guaranteed, and accompanied
by any required transfer tax stamps, all in form and substance satisfactory to
the Agent.

      SECTION 5. FILING; FURTHER ASSURANCES.

      The Pledgor agrees that it will, at its expense and in such manner and
form as the Agent may require, execute, deliver, file and record any financing
statement, specific assignment or other paper and take any other action that may
be necessary or desirable, or that the Agent may reasonably request, in order to
create, preserve, perfect or validate the Security Interests in the Collateral
or to enable the Agent to exercise and enforce its rights hereunder with respect
to any of the Collateral. To the extent permitted by applicable law, the Pledgor
hereby authorizes the Agent to execute and file, in the name of Pledgor or
otherwise, Uniform Commercial Code financing statements (which may be carbon,
photographic, photostatic or other reproductions of this Agreement or of a
financing statement relating to this Agreement) which the Agent in its sole
discretion may deem necessary or appropriate to further perfect the Security
Interests.

      SECTION 6. RECORD OWNERSHIP OF PLEDGED STOCK; NOTICES.

      The Agent may at any time or from time to time, in its sole discretion,
provided an Event of Default shall have occurred and be continuing, cause any or
all of the Pledged Stock to be transferred of record into the name of the Agent
or its nominee. The Pledgor will promptly give to the Agent copies of any
notices or other communications received by it with respect to Pledged Stock
registered in the name of the Pledgor and the Agent will promptly give to the
Pledgor copies of any notices and communications received by the Agent with
respect to Pledged Stock registered in the name of the Agent or its nominee.

      SECTION 7. RIGHT TO RECEIVE DISTRIBUTIONS ON COLLATERAL.

      All dividends and distributions (including without limitation all
distributions which constitute a return of capital, that is, a partial or
complete liquidation) made upon or with respect to the Collateral shall be
delivered to the Agent or credited to the Pledged Account, as the case may be,
as Collateral in the same form as received (with any necessary endorsement).

      SECTION 8. RIGHT TO VOTE PLEDGED STOCK.

      Unless an Event of Default shall have occurred and be continuing, the
Pledgor shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to any or all of the Pledged Stock.

      If an Event of Default shall have occurred and be continuing, the Agent
shall have the right, to the extent permitted by law, and the Pledgor shall take
all such action as may be necessary or appropriate to give effect to such right,
to vote and to give consents, ratifications and waivers, and take any other
action, with respect to any or all of the Pledged Stock with the


                                      -4-
<PAGE>

same force and effect as if the Agent were the absolute and sole owner thereof.

      SECTION 9. GENERAL AUTHORITY.

      The Pledgor hereby irrevocably appoints the Agent its true and lawful
attorney, with full power of substitution, in the name of the Pledgor, the Agent
or otherwise, for the sole use and benefit of the Agent, but at the expense of
the Pledgor, to the extent permitted by law to exercise, if an Event of Default
shall have occurred and is continuing, all or any of the following powers with
respect to all or any of the Collateral:

      A. to demand, sue for, collect, receive and give acquittance for any and
all monies due or to become due upon or by virtue thereof,

      B. to settle, compromise, prosecute or defend any action or proceeding
with respect thereto,

      C. to sell, transfer, assign or otherwise deal in or with the same or the
proceeds or avails thereof, as fully and effectually as if the Agent were the
absolute owner thereof, and

      D. to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto;

      PROVIDED that the Agent shall give the Pledgor not less than ten days
prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral. The Agent and the Pledgor agree that such
notice constitutes "reasonable notification" within the meaning of Section
9-504(3) of the Uniform Commercial Code.

      SECTION 10. REMEDIES UPON EVENT OF DEFAULT.

      A. SALE. If any Event of Default shall have occurred and be continuing,
the Agent may exercise all the rights of a secured party under the Uniform
Commercial Code (whether or not in effect in the jurisdiction where such rights
are exercised) and, in addition, the Agent may, without being required to give
any notice, except as herein provided or as may be required by mandatory
provisions of law, (i) apply the cash, if any, then held by it as Collateral as
specified in SECTION 12 and (ii) if there shall be no such cash or if such cash
shall be insufficient to pay all of the Secured Obligations in full, sell such
Collateral or any part thereof at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery, and at such price or prices as the Agent may deem satisfactory and
apply the proceeds thereof as specified in SECTION 12. The Agent may be the
purchaser of any or all of the Collateral so sold at any public sale. The
Pledgor covenants and agrees that it will execute and deliver such documents and
take such other action as the Agent deems necessary or advisable in order that
any such sale may be made in compliance with law. Upon any such sale the Agent
shall have the right to deliver, assign and transfer to the purchaser thereof
the collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely and free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor which may be
waived, and the Pledgor, to the extent permitted by law, hereby


                                      -5-
<PAGE>

specifically waives all rights of redemption, stay or appraisal which it has or
may have under any law now existing or hereafter adopted.

      B. PRIVATE SALE. The Pledgor further acknowledges that the Agent may deem
it impracticable to effect a public sale of any part of the securities included
in the Collateral, and therefore authorizes the Agent in connection with any
such private sale, if the Agent deems it advisable to do so, (i) to restrict the
prospective bidders on or purchasers of any of the Pledged Stock to a limited
number of sophisticated investors who will represent and agree that they are
purchasing for their own account for investment and not with a view to the
distribution or sale of any of such securities, (ii) to cause to be placed on
certificates for any or all of the Pledged Stock or on any other securities
pledged hereunder a legend to the effect that such security has not been
registered under the Securities Act of 1933 and may not be disposed of in
violation of the provisions of said Act, and (iii) to impose such other
limitations or conditions in connection with any such sale as the Agent deems
necessary or advisable in order to comply with said Act or any other law.

      C. NOTICE. The notice (if any) of such sale required by SECTION 9 shall
(i) in case of a public sale, state the time and place fixed for such sale, (ii)
in case of sale at a broker's board or on a securities exchange, state the board
or exchange at which such sale is to be made and the day on which the
Collateral, or the portion thereof so being sold, will first be offered for sale
at such board or exchange, and (iii) in the case of a private sale, state the
day after which such sale may be consummated. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Agent may fix in the notice of such sale. At any such sale, the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Agent may determine. The Agent shall not be obligated to make any such sale
pursuant to any such notice. The Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned. In case
of any sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Agent until the selling
price is paid by the purchaser thereof, but the Agent shall not incur any
liability in case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may again
be sold upon like notice.

      D. OTHER REMEDIES. The Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.

      SECTION 11. EXPENSES.

      The Pledgor agrees that it will forthwith upon demand pay to the Agent:

      A. the amount of any taxes which the Agent may have been required to pay
by reason of the Security Interests with respect to the Collateral or to free
any of the Collateral from any Lien thereon, and


                                      -6-
<PAGE>

      B. the amount of any and all reasonable out-of-pocket expenses, including
the reasonable fees and disbursements of counsel and of any other experts, which
the Agent may incur in connection with (i) the administration or enforcement of
this Agreement with respect to the Collateral, including such expenses as are
incurred to preserve the value of the Collateral and the validity, perfection,
rank and value of any Security Interests therein, (ii) the collection, sale or
other disposition of any of the Collateral, (iii) the exercise by the Agent of
any of the rights conferred upon it hereunder with respect to the Collateral or
(iv) any Default or Event of Default.

      Any such amount not paid on demand shall bear interest for each day until
paid at an interest rate of 15% per annum.

      SECTION 12. APPLICATION OF PROCEEDS.

      Upon the occurrence and during the continuance of an Event of Default, the
proceeds of any sale of, or other realization upon, all or any part of the
Collateral of the Pledgor and any cash held in respect thereof shall be applied
by the Agent in the following order of priorities:

      FIRST, to payment of the reasonable expenses of such sale or other
realization, including reasonable compensation to agents and counsel for the
Agent, and all expenses, liabilities and advances incurred or made by the Agent
in connection therewith, and any other reimbursed expenses for which the Agent
is to be reimbursed pursuant to SECTION 11 hereof;

      SECOND, to the payment of accrued but unpaid interest on the Secured
Obligations;

      THIRD, to the payment of unpaid principal of the Secured Obligations;

      FOURTH, to the payment of all other Secured Obligations, until all
Secured Obligations shall have been paid in full; and

      FINALLY, to payment to the Pledgor or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.

      SECTION 13. GENERAL TERMS.

      A. NOTICES. All notices, communications and distributions to any party
hereunder shall be in writing and shall be given to such party in the manner
specified in the Credit Agreement.

      B. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part of the Agent to
exercise, and no delay in exercising and no course of dealing with respect to,
any right under this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise by the Agent of any right under this Agreement
preclude any other or further exercise thereof or the exercise of any other
right. The rights in this Agreement are cumulative and are not exclusive of any
other remedies provided by law.


                                      -7-
<PAGE>

      C. SUCCESSORS AND ASSIGNS. This Agreement is for the benefit of the Agent
and its successors and assigns. This Agreement shall be binding on the Pledgor
and its successors and assigns.

      D. CHANGES IN WRITING. Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated orally.

      E. LAW. This Agreement shall be construed in accordance with and governed
by the laws of the State of New York (without giving effect to the conflict of
laws principles thereof) except to the extent that the laws of another state
govern the creation or perfection of the security interest hereunder.

      F. SEVERABILITY. If any provision hereof is invalid or unenforceable in
any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent in order to carry out the
intentions of the parties hereto as nearly as may be possible; and (ii) the
invalidity or enforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.

      SECTION 14. Agent.

      The Pledgor acknowledges that the rights and responsibilities of the Agent
under this Agreement with respect to any action taken by the Agent or the
exercise or non-exercise by the Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Agreement shall, as among the Agent and the Lenders, be governed by the Credit
Agreement and such other agreements with respect thereto as may exist from time
to time among them but, as between the Agent and the Pledgor, the Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and Pledgor shall not be under any
obligation or entitlement to make any inquiry respecting such authority.

      SECTION 15. SUBMISSION TO JURISDICTION; WAIVERS.

      THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:

      A. SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT
IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF
THE STATES OF NEW YORK AND NEW JERSEY, THE COURTS OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND THE DISTRICT OF NEW JERSEY AND
APPELLATE COURTS FROM ANY THEREOF; and

      B. CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN


                                      -8-
<PAGE>

ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT
COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME.

      SECTION 16. WAIVERS OF JURY TRIAL.

      THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.

      IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as
of the day and year first above written.

                                         JRC Acquisition Corp.


                                         By:
                                            -----------------------------------
                                            Name:  Lewis I. Rothman
                                            Title: President


                                      -9-
<PAGE>

                                                                     Exhibit C-2

                                PLEDGE AGREEMENT
               (by L&LR, Inc. of Capital Stock of JRC Acquisition.
                      in connection with Tender Offer Loan)

      THIS PLEDGE AGREEMENT (the "Agreement") dated August __, 2000 by L&LR,
Inc. (the "Pledgor"), in favor of The Chase Manhattan Bank as collateral agent
(the "Agent") for the benefit of the lenders which are from time to time parties
to that certain Credit Agreement (the "Credit Agreement") of even date among the
Pledgor, JRC Acquisition Corp., the Agent and such lenders.

                                    RECITALS

      A.    The Pledgor is the owner of all the capital shares of JRC
Acquisition Corp., a Delaware corporation (the "Issuer"); and

      B. Under the terms of the Credit Agreement, the Pledgor is required to
grant to the Agent a perfected security interest in all of the shares of the
Issuer now owned or hereafter acquired by the Pledgor.

      NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgor agrees as follows:

SECTION 1.  DEFINITIONS.

      Capitalized terms whose meaning is not otherwise defined herein shall have
the meaning assigned in the Credit Agreement. The following terms, as used
herein, have the following respective meanings:

      "AGENT" has the meaning assigned to such term in the Preamble to this
Agreement.

      "AGREEMENT" means this Pledge Agreement and any modifications or
amendments thereof.

      "COLLATERAL" has the meaning assigned to such term in SECTION 3.

      "CREDIT AGREEMENT" has the meaning assigned to such term in the
Preamble to this Agreement.

      "ISSUER" has the meaning assigned to such term in the Recitals.

      "LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any

<PAGE>

conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).

      "PERSON" means an individual, partnership, corporation, business trust,
joint stock company, limited liability company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.

      "PLEDGED STOCK" means all of the capital stock of the Issuer.

      "PLEDGOR" has the meaning assigned to such term in the Preamble.

      "SECURED OBLIGATIONS" means all present and future obligations of the
Pledgor to the Lenders and the Agent, which may arise out of, under or in
connection with the Credit Agreement, this Agreement or the Loan Documents
including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding.

      "SECURITY INTERESTS" means the security interests in the Collateral
granted in favor of the Agent hereunder securing the Secured Obligations.

      Unless otherwise defined herein, or unless the context otherwise requires,
all terms used herein which are defined in the New York Uniform Commercial Code
as in effect on the date hereof shall have the meanings therein stated.

      SECTION 2. REPRESENTATIONS AND WARRANTIES.

      The Pledgor represents and warrants as follows:

      A. TITLE TO COLLATERAL; NO RESTRICTIONS ON TRANSFER. The Pledgor owns
directly all of the Pledged Stock, free and clear of any Lien other than the
Security Interests. There is no restriction on the pledge or transfer of any of
the Pledged Stock, other than restrictions referenced on the face of any
certificates evidencing the Pledged Stock delivered to the Agent.

      B. PLEDGED STOCK. None of the Pledged Stock is subject to any option to
purchase or similar rights of any Person nor is it subject to any legal or
equitable claim or interest whatsoever. The Pledgor is not nor will it become a
party to or otherwise bound by any agreement, other than this Agreement, which
restricts in any manner the rights of any present or future holder of any of the
Pledged Stock with respect thereto.

      C. VALIDITY, PERFECTION AND PRIORITY OF SECURITY INTERESTS. Upon the
delivery to the Agent of all certificates evidencing the Pledged Stock, the
Agent will have a valid and perfected security interest in the Collateral
subject to no prior Lien. No registration, recordation or filing with any
governmental body, agency or official is required in connection with the
execution or delivery of this Agreement or necessary for the validity or
enforceability hereof or


                                       -2-
<PAGE>

for the perfection or enforcement of the Security Interests. The Pledgor has not
performed nor will it perform any acts which might prevent the Agent from
enforcing any of the terms and conditions of this Agreement or which would limit
the Agent in any such enforcement.

      D. NO OTHER LIENS. The Pledgor will not grant nor suffer to exist any
Liens on the Collateral, other than those permitted under this Agreement.

      SECTION 3. THE SECURITY INTERESTS.

      In order to secure the full and punctual payment of the Secured
Obligations of the Pledgor in accordance with the terms thereof, and to secure
the performance of all the obligations of the Pledgor hereunder:

      A. GRANT OF SECURITY INTERESTS. The Pledgor grants to the Agent for the
ratable benefit of the Lenders a security interest in the Pledged Stock, and all
of its rights and privileges with respect thereto, including all proceeds,
income and profits thereon, and all interest, dividends and other payments and
distributions with respect thereto (the "Collateral").

      B. ADDITIONAL PLEDGED STOCK. In the event that the Issuer at any time
issues any additional or substitute shares of capital stock of any class, the
Pledgor will immediately deliver, or cause to be immediately delivered, to the
Agent certificates representing all such shares as additional security for the
Secured Obligations. All such shares shall constitute Pledged Stock and are
subject to all provisions of this Agreement.

      SECTION 4. DELIVERY.

      All certificates representing Pledged Stock shall be delivered to the
Agent by the Pledgor pursuant hereto and shall be in suitable form for transfer
by delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, with signatures appropriately guaranteed, and accompanied
by any required transfer tax stamps, all in form and substance satisfactory to
the Agent.

      SECTION 5. FILING; FURTHER ASSURANCES.

      The Pledgor agrees that it will, at its expense and in such manner and
form as the Agent may require, execute, deliver, file and record any financing
statement, specific assignment or other paper and take any other action that may
be necessary or desirable, or that the Agent may reasonably request, in order to
create, preserve, perfect or validate the Security Interests in the Collateral
or to enable the Agent to exercise and enforce its rights hereunder with respect
to any of the Collateral. To the extent permitted by applicable law, the Pledgor
hereby authorizes the Agent to execute and file, in the name of Pledgor or
otherwise, Uniform Commercial Code financing statements (which may be carbon,
photographic, photostatic or other reproductions of this Agreement or of a
financing statement relating to this Agreement) which the Agent in its sole
discretion may deem necessary or appropriate to further perfect the Security
Interests.

      SECTION 6. RECORD OWNERSHIP OF PLEDGED STOCK; NOTICES.


                                      -3-
<PAGE>

      The Agent may at any time or from time to time, in its sole discretion,
provided an Event of Default shall have occurred and be continuing, cause any or
all of the Pledged Stock to be transferred of record into the name of the Agent
or its nominee. The Pledgor will promptly give to the Agent copies of any
notices or other communications received by it with respect to Pledged Stock
registered in the name of the Pledgor and the Agent will promptly give to the
Pledgor copies of any notices and communications received by the Agent with
respect to Pledged Stock registered in the name of the Agent or its nominee.

      SECTION 7. RIGHT TO RECEIVE DISTRIBUTIONS ON COLLATERAL.

      All dividends and distributions (including without limitation all
distributions which constitute a return of capital, that is, a partial or
complete liquidation) made upon or with respect to the Collateral shall be
delivered to the Agent as Collateral in the same form as received (with any
necessary endorsement).

      SECTION 8. RIGHT TO VOTE PLEDGED STOCK.

      Unless an Event of Default shall have occurred and be continuing, the
Pledgor shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to any or all of the Pledged Stock.

      If an Event of Default shall have occurred and be continuing, the Agent
shall have the right, to the extent permitted by law, and the Pledgor shall take
all such action as may be necessary or appropriate to give effect to such right,
to vote and to give consents, ratifications and waivers, and take any other
action, with respect to any or all of the Pledged Stock with the same force and
effect as if the Agent were the absolute and sole owner thereof.

      SECTION 9. GENERAL AUTHORITY.

      The Pledgor hereby irrevocably appoints the Agent its true and lawful
attorney, with full power of substitution, in the name of the Pledgor, the Agent
or otherwise, for the sole use and benefit of the Agent, but at the expense of
the Pledgor, to the extent permitted by law to exercise, if an Event of Default
shall have occurred and is continuing, all or any of the following powers with
respect to all or any of the Collateral:

      A. to demand, sue for, collect, receive and give acquittance for any and
all monies due or to become due upon or by virtue thereof,

      B. to settle, compromise, prosecute or defend any action or proceeding
with respect thereto,

      C. to sell, transfer, assign or otherwise deal in or with the same or the
proceeds or avails thereof, as fully and effectually as if the Agent were the
absolute owner thereof, and

      D. to extend the time of payment of any or all thereof and to make any
allowance


                                      -4-
<PAGE>

and other adjustments with reference thereto;

      PROVIDED that the Agent shall give the Pledgor not less than ten days
prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral. The Agent and the Pledgor agree that such
notice constitutes "reasonable notification" within the meaning of Section
9-504(3) of the Uniform Commercial Code.

      SECTION 10. REMEDIES UPON EVENT OF DEFAULT.

      A. SALE. If any Event of Default shall have occurred and be continuing,
the Agent may exercise all the rights of a secured party under the Uniform
Commercial Code (whether or not in effect in the jurisdiction where such rights
are exercised) and, in addition, the Agent may, without being required to give
any notice, except as herein provided or as may be required by mandatory
provisions of law, (i) apply the cash, if any, then held by it as Collateral as
specified in SECTION 12 and (ii) if there shall be no such cash or if such cash
shall be insufficient to pay all of the Secured Obligations in full, sell such
Collateral or any part thereof at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery, and at such price or prices as the Agent may deem satisfactory and
apply the proceeds thereof as specified in SECTION 12. The Agent may be the
purchaser of any or all of the Collateral so sold at any public sale. The
Pledgor covenants and agrees that it will execute and deliver such documents and
take such other action as the Agent deems necessary or advisable in order that
any such sale may be made in compliance with law. Upon any such sale the Agent
shall have the right to deliver, assign and transfer to the purchaser thereof
the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely and free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor which may be
waived, and the Pledgor, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal which it has or may have
under any law now existing or hereafter adopted.

      B. PRIVATE SALE. The Pledgor further acknowledges that the Agent may deem
it impracticable to effect a public sale of any part of the securities included
in the Collateral, and therefore authorizes the Agent in connection with any
such private sale, if the Agent deems it advisable to do so, (i) to restrict the
prospective bidders on or purchasers of any of the Pledged Stock to a limited
number of sophisticated investors who will represent and agree that they are
purchasing for their own account for investment and not with a view to the
distribution or sale of any of such securities, (ii) to cause to be placed on
certificates for any or all of the Pledged Stock or on any other securities
pledged hereunder a legend to the effect that such security has not been
registered under the Securities Act of 1933 and may not be disposed of in
violation of the provisions of said Act, and (iii) to impose such other
limitations or conditions in connection with any such sale as the Agent deems
necessary or advisable in order to comply with said Act or any other law.

      C. NOTICE. The notice (if any) of such sale required by SECTION 9 shall
(i) in case of a public sale, state the time and place fixed for such sale, (ii)
in case of sale at a broker's board or on a securities exchange, state the board
or exchange at which such sale is to be made and the day on which the
Collateral, or the portion thereof so being sold, will first be offered for


                                      -5-
<PAGE>

sale at such board or exchange, and (iii) in the case of a private sale, state
the day after which such sale may be consummated. Any such public sale shall be
held at such time or times within ordinary business hours and at such place or
places as the Agent may fix in the notice of such sale. At any such sale, the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Agent may determine. The Agent shall not be obligated to make any such sale
pursuant to any such notice. The Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned. In case
of any sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Agent until the selling
price is paid by the purchaser thereof, but the Agent shall not incur any
liability in case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may again
be sold upon like notice.

      D. OTHER REMEDIES. The Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.

      SECTION 11. EXPENSES.

      The Pledgor agrees that it will forthwith upon demand pay to the Agent:

      A. the amount of any taxes which the Agent may have been required to pay
by reason of the Security Interests with respect to the Collateral or to free
any of the Collateral from any Lien thereon, and

      B. the amount of any and all reasonable out-of-pocket expenses, including
the reasonable fees and disbursements of counsel and of any other experts, which
the Agent may incur in connection with (i) the administration or enforcement of
this Agreement with respect to the Collateral, including such expenses as are
incurred to preserve the value of the Collateral and the validity, perfection,
rank and value of any Security Interests therein, (ii) the collection, sale or
other disposition of any of the Collateral, (iii) the exercise by the Agent of
any of the rights conferred upon it hereunder with respect to the Collateral or
(iv) any Default or Event of Default.

      Any such amount not paid on demand shall bear interest for each day until
paid at an interest rate of 15% per annum.

      SECTION 12. APPLICATION OF PROCEEDS.

      Upon the occurrence and during the continuance of an Event of Default, the
proceeds of any sale of, or other realization upon, all or any part of the
Collateral of the Pledgor and any cash held in respect thereof shall be applied
by the Agent in the following order of priorities:

      FIRST, to payment of the reasonable expenses of such sale or other
realization, including reasonable compensation to agents and counsel for the
Agent, and all expenses, liabilities and


                                      -6-
<PAGE>

advances incurred or made by the Agent in connection therewith, and any other
expenses for which the Agent is to be reimbursed pursuant to SECTION 11 hereof;

      SECOND, to the payment of accrued but unpaid interest on the Secured
Obligations;

      THIRD, to the payment of unpaid principal of the Secured Obligations;

      FOURTH, to the payment of all other Secured Obligations, until all
Secured Obligations shall have been paid in full; and

      FINALLY, to payment to the Pledgor or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.

      SECTION 13. GENERAL TERMS.

      A. NOTICES. All notices, communications and distributions to any party
hereunder shall be in writing and shall be given to such party in the manner
specified in the Credit Agreement.

      B. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part of the Agent to
exercise, and no delay in exercising and no course of dealing with respect to,
any right under this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise by the Agent of any right under this Agreement
preclude any other or further exercise thereof or the exercise of any other
right. The rights in this Agreement are cumulative and are not exclusive of any
other remedies provided by law.

      C. SUCCESSORS AND ASSIGNS. This Agreement is for the benefit of the Agent
and its successors and assigns. This Agreement shall be binding on the Pledgor
and its successors and assigns.

      D. CHANGES IN WRITING. Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated orally.

      E. LAW. This Agreement shall be construed in accordance with and governed
by the laws of the State of New York (without giving effect to the conflict of
laws principles thereof) except to the extent that the laws of another state
govern the creation or perfection of the security interest hereunder.

      F. SEVERABILITY. If any provision hereof is invalid or unenforceable in
any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent in order to carry out the
intentions of the parties hereto as nearly as may be possible; and (ii) the
invalidity or enforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.

      SECTION 14. AGENT.


                                      -7-
<PAGE>

      The Pledgor acknowledges that the rights and responsibilities of the Agent
under this Agreement with respect to any action taken by the Agent or the
exercise or non-exercise by the Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Agreement shall, as among the Agent and the Lenders, be governed by the Credit
Agreement and such other agreements with respect thereto as may exist from time
to time among them but, as between the Agent and the Pledgor, the Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and Pledgor shall not be under any
obligation or entitlement to make any inquiry respecting such authority.

      SECTION 15. SUBMISSION TO JURISDICTION; WAIVERS.

      THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:

      A. SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT
IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF
THE STATES OF NEW YORK AND NEW JERSEY, THE COURTS OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND THE DISTRICT OF NEW JERSEY AND
APPELLATE COURTS FROM ANY THEREOF; and

      B. CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME;

      SECTION 16. WAIVERS OF JURY TRIAL.

      THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.

      IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as
of the day and year first above written.


                                   L&LR, Inc.


                                   By:
                                      ------------------------------------------
                                      Lewis I. Rothman
                                      President


                                      -8-
<PAGE>

                                                                     Exhibit C-3

                      AMENDED AND RESTATED PLEDGE AGREEMENT
              (by L&LR, Inc. of Capital Stock of 800-JR CIGAR, Inc.
                    after the effective date of the merger
                  in connection with the Tender Offer Loan)

      THIS AMENDED AND RESTATED PLEDGE AGREEMENT (the "Agreement") dated August
__, 2000 by L&LR, Inc. (the "Pledgor"), in favor of The Chase Manhattan Bank as
collateral agent (the "Agent") for the benefit of the lenders which are from
time to time parties to that certain Credit Agreement (the "Credit Agreement")
of even date among the Pledgor, JRC Acquisition Corp., the Agent and such
lenders.

                                    RECITALS

      A. Under the terms of Pledge Agreement dated August __, 2000 (the
"Existing Pledge Agreement"), the Pledgor has previously pledged to the Agent
all of the capital stock of JRC Acquisition Corp. to secure its obligations
under the Credit Agreement.

      B. Under the terms of Pledge Agreement dated August __, 2000, JRC
Acquisition Corp. has pledged to the Agent certain shares of 800-JR CIGAR, Inc.
to secure its obligations under the Credit Agreement.

      C. As a result of a merger (the "Merger") of JRC Acquisition Corp. with
and into 800-JR CIGAR, Inc., Pledgor is now the owner of all the capital stock
of the surviving corporation which is known as 800-JR CIGAR, Inc. (such
surviving corporation as successor to JRC Acquisition Corp. and 800-JR CIGAR,
Inc. is hereafter referred to as the "Issuer"); and

      D. Under the terms of the Credit Agreement, the Pledgor is required to
amend and restate the Existing Pledge Agreement to reflect the Merger and
Agent's perfected security interest in all of the shares of the Issuer as
surviving corporation in the Merger now owned or hereafter acquired by the
Pledgor.

      NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgor agrees as follows:

      SECTION 1. DEFINITIONS.

      Capitalized terms whose meaning is not otherwise defined herein shall have
the meaning assigned in the Credit Agreement. The following terms, as used
herein, have the following respective meanings:

      "AGENT" has the meaning assigned to such term in the Preamble to this
Agreement.

      "AGREEMENT" means this Pledge Agreement and any modifications or
amendments thereof.

<PAGE>

      "COLLATERAL" has the meaning assigned to such term in SECTION 3.

      "CREDIT AGREEMENT" has the meaning assigned to such term in the
Preamble to this Agreement.

      "ISSUER" has the meaning assigned to such term in the Recitals.

      "LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction in respect of
any of the foregoing).

      "PERSON" means an individual, partnership, corporation, business trust,
joint stock company, limited liability company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.

      "PLEDGED STOCK" means all of the capital stock of the Issuer.

      "PLEDGOR" has the meaning assigned to such term in the Preamble.

      "SECURED OBLIGATIONS" means all present and future obligations of the
Pledgor to the Lenders and the Agent, which may arise out of, under or in
connection with the Credit Agreement, this Agreement or the Loan Documents
including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding.

      "SECURITY INTERESTS" means the security interests in the Collateral
granted in favor of the Agent hereunder securing the Secured Obligations.

      Unless otherwise defined herein, or unless the context otherwise requires,
all terms used herein which are defined in the New York Uniform Commercial Code
as in effect on the date hereof shall have the meanings therein stated.

      SECTION 2. REPRESENTATIONS AND WARRANTIES.

      The Pledgor represents and warrants as follows:

      A. TITLE TO COLLATERAL; NO RESTRICTIONS ON TRANSFER. The Pledgor owns
directly all of the Pledged Stock, free and clear of any Lien other than the
Security Interests. There is no restriction on the pledge or transfer of any of
the Pledged Stock, other than restrictions referenced on the face of any
certificates evidencing the Pledged Stock delivered to the Agent.


                                      -2-
<PAGE>

      B. PLEDGED STOCK. None of the Pledged Stock is subject to any option to
purchase or similar rights of any Person nor is it subject to any legal or
equitable claim or interest whatsoever. The Pledgor is not nor will it become a
party to or otherwise bound by any agreement, other than this Agreement, which
restricts in any manner the rights of any present or future holder of any of the
Pledged Stock with respect thereto.

      C. VALIDITY, PERFECTION AND PRIORITY OF SECURITY INTERESTS. Upon the
delivery to the Agent of all certificates representing the Pledged Stock, the
Agent will have a valid and perfected security interest in the Collateral
subject to no prior Lien. No registration, recordation or filing with any
governmental body, agency or official is required in connection with the
execution or delivery of this Agreement or necessary for the validity or
enforceability hereof or for the perfection or enforcement of the Security
Interests. The Pledgor has not performed nor will it perform any acts which
might prevent the Agent from enforcing any of the terms and conditions of this
Agreement or which would limit the Agent in any such enforcement.

      D. NO OTHER LIENS. The Pledgor will not grant nor suffer to exist any
Liens on the Collateral, other than those permitted under this Agreement.

      SECTION 3. THE SECURITY INTERESTS.

      In order to secure the full and punctual payment of the Secured
Obligations of the Pledgor in accordance with the terms thereof, and to secure
the performance of all the obligations of the Pledgor hereunder:

      A. GRANT OF SECURITY INTERESTS. The Pledgor grants to the Agent for the
ratable benefit of the Lenders a security interest in the Pledged Stock, and all
of its rights and privileges with respect thereto, including all proceeds,
income and profits thereon, and all interest, dividends and other payments and
distributions with respect thereto (the "Collateral").

      B. ADDITIONAL PLEDGED STOCK. In the event that the Issuer at any time
issues any additional or substitute shares of capital stock of any class, the
Pledgor will immediately deliver, or cause to be immediately delivered, to the
Agent certificates representing all such shares as additional security for the
Secured Obligations. All such shares shall constitute Pledged Stock and are
subject to all provisions of this Agreement.

      SECTION 4. DELIVERY.

      All certificates representing Pledged Stock will be delivered to the Agent
by the Pledgor pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, with signatures appropriately guaranteed, and accompanied
by any required transfer tax stamps, all in form and substance satisfactory to
the Agent.

      SECTION 5. FILING; FURTHER ASSURANCES.


                                      -3-
<PAGE>

      The Pledgor agrees that it will, at its expense and in such manner and
form as the Agent may require, execute, deliver, file and record any financing
statement, specific assignment or other paper and take any other action that may
be necessary or desirable, or that the Agent may reasonably request, in order to
create, preserve, perfect or validate the Security Interests in the Collateral
or to enable the Agent to exercise and enforce its rights hereunder with respect
to any of the Collateral. To the extent permitted by applicable law, the Pledgor
hereby authorizes the Agent to execute and file, in the name of Pledgor or
otherwise, Uniform Commercial Code financing statements (which may be carbon,
photographic, photostatic or other reproductions of this Agreement or of a
financing statement relating to this Agreement) which the Agent in its sole
discretion may deem necessary or appropriate to further perfect the Security
Interests.

      SECTION 6. RECORD OWNERSHIP OF PLEDGED STOCK; NOTICES.

      The Agent may at any time or from time to time, in its sole discretion,
provided an Event of Default shall have occurred and be continuing, cause any or
all of the Pledged Stock to be transferred of record into the name of the Agent
or its nominee. The Pledgor will promptly give to the Agent copies of any
notices or other communications received by it with respect to Pledged Stock
registered in the name of the Pledgor and the Agent will promptly give to the
Pledgor copies of any notices and communications received by the Agent with
respect to Pledged Stock registered in the name of the Agent or its nominee.

      SECTION 7. RIGHT TO RECEIVE DISTRIBUTIONS ON COLLATERAL.

      All dividends and distributions (including without limitation all
distributions which constitute a return of capital, that is, a partial or
complete liquidation) made upon or with respect to the Collateral shall be
delivered to the Agent as Collateral in the same form as received (with any
necessary endorsement).

      SECTION 8. RIGHT TO VOTE PLEDGED STOCK.

      Unless an Event of Default shall have occurred and be continuing, the
Pledgor shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to any or all of the Pledged Stock.

      If an Event of Default shall have occurred and be continuing, the Agent
shall have the right, to the extent permitted by law, and the Pledgor shall take
all such action as may be necessary or appropriate to give effect to such right,
to vote and to give consents, ratifications and waivers, and take any other
action, with respect to any or all of the Pledged Stock with the same force and
effect as if the Agent were the absolute and sole owner thereof.

      SECTION 9. GENERAL AUTHORITY.

      The Pledgor hereby irrevocably appoints the Agent its true and lawful
attorney, with full power of substitution, in the name of the Pledgor, the Agent
or otherwise, for the sole use and benefit of the Agent, but at the expense of
the Pledgor, to the extent permitted by law to exercise, if an Event of Default
shall have occurred and is continuing, all or any of the following powers


                                      -4-
<PAGE>

with respect to all or any of the Collateral:

      A. to demand, sue for, collect, receive and give acquittance for any and
all monies due or to become due upon or by virtue thereof,

      B. to settle, compromise, prosecute or defend any action or proceeding
with respect thereto,

      C. to sell, transfer, assign or otherwise deal in or with the same or the
proceeds or avails thereof, as fully and effectually as if the Agent were the
absolute owner thereof, and

      D. to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto;

      PROVIDED that the Agent shall give the Pledgor not less than ten days,
prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral. The Agent and the Pledgor agree that such
notice constitutes "reasonable notification" within the meaning of Section
9-504(3) of the Uniform Commercial Code.

      SECTION 10. REMEDIES UPON EVENT OF DEFAULT.

      A. SALE. If any Event of Default shall have occurred and be continuing,
the Agent may exercise all the rights of a secured party under the Uniform
Commercial Code (whether or not in effect in the jurisdiction where such rights
are exercised) and, in addition, the Agent may, without being required to give
any notice, except as herein provided or as may be required by mandatory
provisions of law, (i) apply the cash, if any, then held by it as Collateral as
specified in SECTION 12 and (ii) if there shall be no such cash or if such cash
shall be insufficient to pay all of the Secured Obligations in full, sell such
Collateral or any part thereof at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery, and at such price or prices as the Agent may deem satisfactory and
apply the proceeds thereof as specified in SECTION 12. The Agent may be the
purchaser of any or all of the Collateral so sold at any public sale. The
Pledgor covenants and agrees that it will execute and deliver such documents and
take such other action as the Agent deems necessary or advisable in order that
any such sale may be made in compliance with law. Upon any such sale the Agent
shall have the right to deliver, assign and transfer to the purchaser thereof
the collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely and free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor which may be
waived, and the Pledgor, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal which it has or may have
under any law now existing or hereafter adopted.

      B. PRIVATE SALE. The Pledgor further acknowledges that the Agent may deem
it impracticable to effect a public sale of any part of the securities included
in the Collateral, and therefore authorizes the Agent in connection with any
such private sale, if the Agent deems it advisable to do so, (i) to restrict the
prospective bidders on or purchasers of any of the Pledged Stock to a limited
number of sophisticated investors who will represent and agree that they are


                                      -5-
<PAGE>

purchasing for their own account for investment and not with a view to the
distribution or sale of any of such securities, (ii) to cause to be placed on
certificates for any or all of the Pledged Stock or on any other securities
pledged hereunder a legend to the effect that such security has not been
registered under the Securities Act of 1933 and may not be disposed of in
violation of the provisions of said Act, and (iii) to impose such other
limitations or conditions in connection with any such sale as the Agent deems
necessary or advisable in order to comply with said Act or any other law.

      C. NOTICE. The notice (if any) of such sale required by SECTION 9 shall
(i) in case of a public sale, state the time and place fixed for such sale, (ii)
in case of sale at a broker's board or on a securities exchange, state the board
or exchange at which such sale is to be made and the day on which the
Collateral, or the portion thereof so being sold, will first be offered for sale
at such board or exchange, and (iii) in the case of a private sale, state the
day after which such sale may be consummated. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Agent may fix in the notice of such sale. At any such sale, the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Agent may determine. The Agent shall not be obligated to make any such sale
pursuant to any such notice. The Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned. In case
of any sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Agent until the selling
price is paid by the purchaser thereof, but the Agent shall not incur any
liability in case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may again
be sold upon like notice.

      D. OTHER REMEDIES. The Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.

      SECTION 11. EXPENSES.

      The Pledgor agrees that it will forthwith upon demand pay to the Agent:

      A. the amount of any taxes which the Agent may have been required to pay
by reason of the Security Interests with respect to the Collateral or to free
any of the Collateral from any Lien thereon, and

      B. the amount of any and all reasonable out-of-pocket expenses, including
the reasonable fees and disbursements of counsel and of any other experts, which
the Agent may incur in connection with (i) the administration or enforcement of
this Agreement with respect to the Collateral, including such expenses as are
incurred to preserve the value of the Collateral and the validity, perfection,
rank and value of any Security Interests therein, (ii) the collection, sale or
other disposition of any of the Collateral, (iii) the exercise by the Agent of
any of the rights conferred upon it hereunder with respect to the Collateral or
(iv) any Default or Event of Default.


                                      -6-
<PAGE>

      Any such amount not paid on demand shall bear interest for each day until
paid at an interest rate of 15% per annum.

      SECTION 12. APPLICATION OF PROCEEDS.

      Upon the occurrence and during the continuance of an Event of Default, the
proceeds of any sale of, or other realization upon, all or any part of the
Collateral of the Pledgor and any cash held in respect thereof shall be applied
by the Agent in the following order of priorities:

      FIRST, to payment of the reasonable expenses of such sale or other
realization, including reasonable compensation to agents and counsel for the
Agent, and all expenses, liabilities and advances incurred or made by the Agent
in connection therewith, and any other reimbursed expenses for which the Agent
is to be reimbursed pursuant to SECTION 11 hereof;

      SECOND, to the payment of accrued but unpaid interest on the Secured
Obligations;

      THIRD, to the payment of unpaid principal of the Secured Obligations;

      FOURTH, to the payment of all other Secured Obligations, until all
Secured Obligations shall have been paid in full; and

      FINALLY, to payment to the Pledgor or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.

      SECTION 13. GENERAL TERMS.

      A. NOTICES. All notices, communications and distributions to any party
hereunder shall be in writing and shall be given to such party in the manner
specified in the Credit Agreement.

      B. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part of the Agent to
exercise, and no delay in exercising and no course of dealing with respect to,
any right under this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise by the Agent of any right under this Agreement
preclude any other or further exercise thereof or the exercise of any other
right. The rights in this Agreement are cumulative and are not exclusive of any
other remedies provided by law.

      C. SUCCESSORS AND ASSIGNS. This Agreement is for the benefit of the Agent
and its successors and assigns. This Agreement shall be binding on the Pledgor
and its successors and assigns.

      D. CHANGES IN WRITING. Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated orally.

      E. LAW. This Agreement shall be construed in accordance with and governed
by


                                      -7-
<PAGE>

the laws of the State of New York (without giving effect to the conflict of
laws principles thereof) except to the extent that the laws of another state
govern the creation or perfection of the security interest hereunder.

      F. SEVERABILITY. If any provision hereof is invalid or unenforceable in
any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent in order to carry out the
intentions of the parties hereto as nearly as may be possible; and (ii) the
invalidity or enforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.

      SECTION 14. AGENT.

      The Pledgor acknowledges that the rights and responsibilities of the Agent
under this Agreement with respect to any action taken by the Agent or the
exercise or non-exercise by the Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Agreement shall, as among the Agent and the Lenders, be governed by the Credit
Agreement and such other agreements with respect thereto as may exist from time
to time among them but, as between the Agent and the Pledgor, the Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and Pledgor shall not be under any
obligation or entitlement to make any inquiry respecting such authority.

      SECTION 15. SUBMISSION TO JURISDICTION; WAIVERS.

      THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:

      A. SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT
IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF
THE STATES OF NEW YORK AND NEW JERSEY, THE COURTS OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND THE DISTRICT OF NEW JERSEY AND
APPELLATE COURTS FROM ANY THEREOF; and

      B. CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME.

      SECTION 16. WAIVERS OF JURY TRIAL.

      THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.


                                      -8-
<PAGE>

      IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as
of the day and year first above written.


                                   L&LR, Inc.


                                    By:
                                       -----------------------------------------
                                         Lewis I. Rothman
                                         President


                                      -9-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(B)(2)
<SEQUENCE>10
<FILENAME>ex-99_b2.txt
<DESCRIPTION>EXHIBIT 99.(B)(2)
<TEXT>

<PAGE>

                                                               Exhibit 99.(b)(2)




================================================================================


                                CREDIT AGREEMENT

                           Dated as of August 28, 2000

                                      among

                                   L&LR, INC.,

                               800-JR CIGAR, INC.

                                AND SUBSIDIARIES

                                as Co-Borrowers,

                          THE LENDERS SIGNATORY HERETO

                               FROM TIME TO TIME,

                                   as Lenders,

                            THE CHASE MANHATTAN BANK,

         as Administrative Agent, Arranger, Syndication Agent and Lender

                                       and

                                FLEET BANK, N.A.,

                        as Documentation Agent and Lender


================================================================================
<PAGE>

                                TABLE OF CONTENTS

      This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.

                                                                            Page

1.    AMOUNT AND TERMS OF CREDIT

      1.1.        Credit Facilities                                           2

      1.2.        Scheduled Repayment of Principal of Term Loan               5

      1.3.        Interest; Eurodollar Interest Periods; Applicable Margins   5

      1.4.        Use of Proceeds                                             8

      1.5.        Prepayments                                                 9

      1.6.        Conversions                                                11

      1.7.        Fees                                                       11

      1.8.        Method and Place of Payment                                12

      1.9.        Application and Allocation of Payments                     13

      1.10.       Indemnity                                                  13

      1.11.       Taxes                                                      15

      1.12.       Capital Adequacy; Increased Costs; Illegality              16

      1.13        Single Loan                                                18

2.    CONDITIONS PRECEDENT

      2.1.        Conditions to the Initial Loans                            19

      2.2.        Further Conditions to Each Loan                            20

3.    REPRESENTATIONS AND WARRANTIES

      3.1.        Corporate Existence; Compliance with Law                   21

      3.2.        Executive Offices                                          22

      3.3.        Corporate Power, Authorization, Enforceable Obligations    22

      3.4.        Financial Statements                                       22


                                      -i-
<PAGE>

      3.5.        Pro Forma                                                  22

      3.6.        Material Adverse Effect                                    23

      3.7.        Ownership of Property; Liens                               23

      3.8.        Labor Matters                                              24

      3.9.        Ventures, Subsidiaries and Affiliates; Outstanding Stock
                  and Indebtedness                                           24

      3.10.       Government Regulation                                      24

      3.11.       Margin Regulations                                         25

      3.12.       Taxes                                                      25

      3.13.       ERISA                                                      25

      3.14.       No Litigation                                              26

      3.15.       Brokers                                                    26

      3.16.       Intellectual Property                                      26

      3.17.       Full Disclosure                                            27

      3.18.       Environmental Matters                                      27

      3.19.       Insurance                                                  28

      3.20.       Common Business Enterprise                                 28

      3.21.       Customer and Trade Relations                               28

      3.22.       Agreements and Other Documents                             28

      3.23.       Solvency                                                   29

      3.24.       Year 2000 Problems                                         29

      3.25.       Related Transactions Documents                             29

      3.26.       The Merger                                                 29

      3.27.       The Pledge Agreements                                      29


                                      -ii-
<PAGE>

4.    FINANCIAL STATEMENTS AND INFORMATION

      4.1.        Reports and Notices                                        30

      4.2.        Communication with Accountants                             30

5.    AFFIRMATIVE COVENANTS

      5.1.        Maintenance of Existence and Conduct of Business           30

      5.2.        Payment of Charges                                         30

      5.3.        Books, Records and Inspections                             31

      5.4.        Insurance                                                  31

      5.5.        Compliance with Laws                                       32

      5.6.        Supplemental Disclosure                                    32

      5.7.        Intellectual Property                                      32

      5.8.        Environmental Matters                                      32

      5.9.        Performance of Obligations                                 33

      5.10.       Further Assurances                                         33

      5.11.       ERISA Event                                                33

      5.12.       Ownership of Subsidiaries                                  34

      5.13.       Consummation of Merger                                     34

6.    NEGATIVE COVENANTS

      6.1.        Mergers, Subsidiaries, Etc.                                34

      6.2.        Investments; Loans and Advances                            34

      6.3.        Indebtedness                                               35

      6.4.        Employee Loans and Affiliate Transactions                  35

      6.5.        Capital Structure and Business                             36

      6.6.        Guaranteed Indebtedness                                    36

      6.7.        Liens                                                      36


                                     -iii-
<PAGE>

      6.8.        Sale of Stock and Assets                                   37

      6.9.        ERISA                                                      37

      6.10.       Financial Covenants                                        37

      6.11.       Hazardous Materials                                        37

      6.12.       Sale-Leasebacks                                            37

      6.13.       Cancellation of Indebtedness                               37

      6.14.       Restricted Payments                                        37

      6.15.       Change of Corporate Name or Location; Change of Fiscal
                  Year                                                       37

      6.16.       No Impairment of Intercompany Transfers                    37

      6.17.       No Speculative Transactions                                38

      6.18.       Status of L&LR                                             38

7.    EVENTS OF DEFAULT; RIGHTS AND REMEDIES

      7.1.        Events of Default                                          38

      7.2.        Remedies                                                   40

      7.3.        Waivers by Co-Borrowers                                    40

8.    ASSIGNMENT AND PARTICIPATIONS

      8.1.        Assignment and Participations                              41

9.    THE ADMINISTRATIVE AGENT

      9.1.        Appointment of Administrative Agent                        43

      9.2.        Nature of Duties                                           43

      9.3.        Lack of Reliance on the Administrative Agent               43

      9.4.        Reliance                                                   44

      9.5.        Indemnification                                            44

      9.6.        The Administrative Agent in its Individual Capacity        44

      9.7.        Holders                                                    45


                                      -iv-
<PAGE>

      9.8.        Documentation Agent; Syndication Agent                     45

      9.9.        Resignation by the Administrative Agent                    45

10.   MISCELLANEOUS

      10.1.       Successors and Assigns                                     46

      10.2.       Complete Agreement; Modification of Agreement              46

      10.3.       Amendments and Waivers                                     47

      10.4.       Fees and Expenses                                          48

      10.5.       No Waiver                                                  49

      10.6.       Remedies                                                   50

      10.7.       Setoff and Sharing of Payments                             50

      10.8.       Severability                                               50

      10.9.       Conflict of Terms                                          50

      10.10.      GOVERNING LAW

      10.11.      Notices                                                    51

      10.12.      Section Titles                                             52

      10.13.      Counterparts                                               52

      10.14.      WAIVER OF JURY TRIAL

      10.15.      Press Releases                                             52

      10.16.      Reinstatement                                              53

      10.17.      Advice of Counsel                                          53

      10.18.      No Strict Construction                                     53

      10.19.      Survival of Obligations Upon Termination of
                  Financing Arrangements                                     53

      10.20.      Confidentiality                                            54

      10.21       Effectiveness                                              54

                                      -v-
<PAGE>

                               INDEX OF APPENDICES



Exhibit 1.1(a)(i)                   - Form of Notice of Revolving
                                          Credit Loan

Exhibit 1.1(a)(ii)                  - Form of Revolving Credit Note

Exhibit 1.1(b)(ii)                  - Form of Term Note

Exhibit 1.1(e)                      - Form of Request for Letter of Credit

Exhibit 1.6                         - Form of Notice of Conversion/Continuation

Exhibit 2.1(d)-1                    - Form of L&LR Pledge Agreement

Exhibit 2.1(d)-2                    - Form of Cigar Pledge Agreement

Exhibit 8.1(a)                      - Form of Assignment Agreement

Disclosure Schedule (1.4)           - Use of Proceeds

Disclosure Schedule (3.2)           - Executive Offices

Disclosure Schedule (3.5)           - Pro Forma

Disclosure Schedule (3.7)           - Real Estate

Disclosure Schedule (3.8)           - Labor Matters

Disclosure Schedule (3.9)           - Ventures, Subsidiaries and Affiliates;
                                          Outstanding Stock and Indebtedness

Disclosure Schedule (3.12)          - Taxes

Disclosure Schedule (3.13)          - ERISA

Disclosure Schedule (3.14)          - No Litigation

Disclosure Schedule (3.16)          - Intellectual Property

Disclosure Schedule (3.18)          - Environmental Matters

Disclosure Schedule (3.19)          - Insurance

Disclosure Schedule (3.21)          - Customer and Trade Relations

Disclosure Schedule (3.22)          - Agreements and Other Documents

Disclosure Schedule (6.2(g))        - Investment Contracts


                                      -vi-
<PAGE>

Disclosure Schedule (6.3)           - Indebtedness

Disclosure Schedule (6.4(a))        - Transactions with Affiliates

Annex A (Recitals)                  - Definitions

Annex B (Section 4.1(a))            - Financial Statements - Reporting

Annex C (Section 6.10)              - Financial Covenants

Annex D (Section 11.10)             - Notice Addresses

Annex E (from Annex A-              - Commitments as of Closing Date
     Commitments definition)



                                     -vii-
<PAGE>

      CREDIT AGREEMENT ("Agreement"), dated as of August 28, 2000, among L&LR,
Inc., a Delaware corporation ("L&LR"), 800-JR CIGAR, Inc. a Delaware corporation
("Cigar"), J.R. Tobacco of America, Inc., a North Carolina corporation
("JR-America"); Santa Clara, Inc., a North Carolina corporation ("JR-Santa
Clara"); J.N.R. Grocery Corp., a New York corporation ("JR-Grocery"); J.R.
Tobacco NC, Inc., a North Carolina corporation ("JR-NC"); J&R Tobacco (New
Jersey) Corp., a New Jersey corporation ("JR-New Jersey"); J.R. Tobacco Company
of Michigan, Inc., a Michigan corporation ("JR-Michigan"); J.R.-46th Street,
Inc., a New York corporation ("JR-46th"); J.R. Tobacco Outlet, Inc., a New
Jersey corporation ("JR-Outlet"); J.R. Statesville, Inc., a North Carolina
corporation ("JR-Statesville"); J R Cigar (DC), Inc., a corporation organized
under the laws of the District of Columbia ("JR-DC"); J.R. Tobacco of
Burlington, Inc., a North Carolina corporation ("JR-Burlington"); Casa Blanca,
Inc., a New Jersey corporation ("JR-Casa Blanca"); jrcigars.com, Inc., a North
Carolina corporation ("JR.COM") (L&LR, Cigar, JR-America, JR-Santa Clara,
JR-Grocery, JR-NC, JR-New Jersey, JR-Michigan, JR-46th, JR-Outlet,
JR-Statesville, JR-DC, JR-Burlington, JR-Casa Blanca and JR.COM together with
their successors and assigns, each individually, a "Co-Borrower" and,
collectively, the "Co-Borrowers"); each of the Lenders named under the caption
"Lenders" on the signature pages hereof (together with its successors and
assigns, individually, a "Lender" and, collectively, the "Lenders"); THE CHASE
MANHATTAN BANK, as Administrative Agent for the Lenders (the "Administrative
Agent"); and FLEET BANK, N.A., as Documentation Agent for the Lenders (the
"Documentation Agent").

                                    RECITALS

      WHEREAS, Co-Borrowers desire that Lenders extend revolving and term credit
facilities to Co-Borrowers of up to Fifty-Five Million Dollars ($55,000,000) in
the aggregate for the purpose of refinancing certain indebtedness and to provide
working capital, and for these purposes, Lenders are willing to make certain
loans and other extensions of credit to Co-Borrowers of up to such amount upon
the terms and conditions set forth herein; and

      WHEREAS, capitalized terms used in this Agreement shall have the meanings
ascribed to them in Annex A. All Annexes, Disclosure Schedules, Exhibits and
other attachments (collectively, "Appendices") hereto, or expressly identified
to this Agreement, are incorporated herein by reference, and taken together,
shall constitute but a single agreement. These Recitals shall be construed as
part of the Agreement.

      NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:


                                      -1-
<PAGE>

1.    AMOUNT AND TERMS OF CREDIT

      1.1. CREDIT FACILITIES.

      (A) REVOLVING CREDIT FACILITY.

            (i) Subject to the terms and conditions hereof, each Revolving
Credit Lender severally agrees to make revolving credit loans (each a "Revolving
Credit Loan" and collectively, the "Revolving Credit Loans") to the Co-Borrowers
in Dollars from time to time following consummation of the Merger until the
Commitment Termination Date in an aggregate principal amount at any one time
outstanding up to, but not exceeding, the amount of the Revolving Credit Loan
Commitment of such Lender as in effect from time to time. The aggregate
principal amount of all Revolving Credit Lenders' Revolving Credit Loans
outstanding shall not exceed at any time the Maximum Amount ("Borrowing
Availability"). The principal amount of each Lender's Revolving Credit Loan made
on a Borrowing Date shall be in an amount equal to its Pro Rata Share of all
Revolving Credit Loans made on such date, but shall not exceed (together with
all other outstanding Revolving Credit Loans of such Lender) such Lender's Pro
Rata Share of the Borrowing Availability. Until the Commitment Termination Date,
Co-Borrowers may from time to time borrow, repay and reborrow under this Section
1.1(a). Each Revolving Credit Loan shall be made on notice by Cigar, on behalf
of the Co-Borrowers, to the Administrative Agent at its Notice Office. Those
notices must be given at least one Business Day prior to the Borrowing Date of
the proposed Revolving Credit Loan, in the case of a Prime Rate Loan, or (2) no
later than 11:00 a.m. (New York time) on the date which is three (3) Business
Days prior to the Borrowing Date of the proposed Revolving Credit Loan, in the
case of a Eurodollar Loan. Each such notice (a "Notice of Revolving Credit
Loan") must be given in writing (by telecopy or overnight courier), shall be in
the form of Exhibit 1.1(a)(i), shall be signed by an Authorized Officer of Cigar
and shall include such information as may be reasonably required by
Administrative Agent. Each Revolving Credit Loan shall be either a Eurodollar
Loan having a Eurodollar Interest Period selected by Co-Borrowers pursuant to
Section 1.3 or a Prime Rate Loan.

            (ii) Co-Borrowers shall execute and deliver to each Revolving Credit
Lender a note to evidence the Revolving Credit Loan Commitment of that Revolving
Credit Lender. Each note shall be in the principal amount of the Revolving
Credit Loan Commitment of the applicable Revolving Credit Lender, dated the
Closing Date and substantially in the form of Exhibit 1.1(a)(ii) (each a
"Revolving Credit Note" and, collectively, the "Revolving Credit Notes"). Each
Revolving Credit Note shall represent the joint and several obligations of
Co-Borrowers to pay the amount of each Revolving Credit Lender's Revolving
Credit Loan Commitment or, if less, the aggregate unpaid principal amount of all
Revolving Credit Loans made by each such Lender to Co-Borrowers together with
interest thereon as prescribed in Section 1.3.

            (iii) The entire unpaid balance of the Revolving Credit Loans shall
be immediately due and payable in full in immediately available funds on the
Commitment Termination Date.


                                      -2-
<PAGE>

            (iv) The aggregate amount of Revolving Credit Loans to be made by
the Lenders to the Co-Borrowers on a Borrowing Date shall not be less than the
Minimum Borrowing Amount.

      (B) TERM LOAN.

            (i) Subject to the terms and conditions hereof, each Term Loan
Lender severally agrees to make a term loan on the Closing Date to Co-Borrowers
in the original principal amount of its Term Loan Commitment. The aggregate term
loans of all Term Loan Lenders shall be referred to collectively as the "Term
Loan."

            (ii) The Term Loan shall be evidenced by promissory notes
substantially in the form of Exhibit 1.1(b)(ii) (each a "Term Note" and
collectively the "Term Notes"), and Co-Borrowers shall execute and deliver a
Term Note to each Term Lender. Each Term Note shall represent the obligation of
Co-Borrowers to pay the amount of the applicable Term Lender's respective Term
Loan Commitment, together with interest thereon as prescribed in Section 1.3.

      (C) DISBURSEMENT OF REVOLVING CREDIT LOANS. No later than 1:00 P.M. (New
York time) on the date specified in each Notice of Revolving Credit Loan, each
Lender will make available its Pro Rata Share of each Borrowing requested to be
made on such date, in Dollars and in immediately available funds at the Payment
Office of the Administrative Agent. After receipt of such funds, subject to the
terms hereof, the Administrative Agent will make available to the Co-Borrowers
at the Payment Office in Dollars and in immediately available funds, the
aggregate of the amounts specified in the Notice of Revolving Credit Loan and
permitted hereunder prior to 2:00 P.M. (New York time) on such day. Unless the
Administrative Agent shall have been notified by any Lender prior to the date of
Borrowing that such Lender does not intend to make available to the
Administrative Agent such Lender's portion of any Borrowing to be made on such
date, the Administrative Agent may assume that such Lender has made such amount
available to the Administrative Agent on such date of Borrowing and the
Administrative Agent may, in reliance upon such assumption, make available to
the Co-Borrowers a corresponding amount. If such corresponding amount is not in
fact made available to the Administrative Agent by such Lender, the
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Lender without set-off, counterclaim or deduction of any kind.
The Administrative Agent shall also be entitled to recover on demand from such
Lender, interest on such corresponding amount in respect of each day from the
date such corresponding amount was made available by the Administrative Agent to
the Co-Borrowers until the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to the overnight Federal Funds
Rate. Nothing in this Section 1.5 shall be deemed to relieve any Lender from its
obligation to make Loans hereunder or to prejudice any rights which the
Co-Borrowers may have against any Lender as a result of any failure by such
Lender to make Loans hereunder. To the extent the Administrative Agent advances
funds to Co-Borrowers on behalf of any Revolving Credit Lender and is not
reimbursed therefor by such Lender on the same Business Day as such Revolving
Credit Loan is made, Administrative Agent shall be entitled to set-off the
funding shortfall against such Lender's Pro Rata Share of all payments received
from Co-Borrowers.


                                      -3-
<PAGE>

      (D) PRO RATA BORROWINGS. All Borrowings under this Agreement shall be
incurred from the Lenders on the basis of their Commitments. It is understood
that no Lender shall be responsible for any default by any other Lender of
its obligation to make Loans hereunder and that each Lender shall be
obligated to make the Loans provided to be made by it hereunder, regardless
of the failure of any other Lender to make its Loans hereunder.


      (E) LETTERS OF CREDIT. (i) Upon the terms and subject to the conditions
of this Agreement, including Section 2 hereof, from time to time on and after
the Closing Date prior to the Commitment Termination Date, Cigar, on behalf
of the Co-Borrowers may request that Chase (the "Issuing Bank") issue on its
behalf, standby letters of credit or commercial letters of credit
(individually, a "Letter of Credit" and, collectively, the "Letters of
Credit"), in an aggregate amount outstanding at any time not to exceed the
lesser of (x) $2,000,000 and (y) the Maximum Amount less the outstanding
principal balance of the Revolving Credit Loans. The term of any Letter of
Credit shall not exceed one year and shall not extend beyond the Commitment
Termination Date. Cigar, on behalf of the Co-Borrowers shall notify the
Issuing Bank in writing at least three (3) Business Days prior to the date on
which the Issuing Bank is requested to issue one or more Letters of Credit.
Each such notice shall be binding upon all Co-Borrowers irrevocable and
confirmed immediately by delivery to the Issuing Bank of a Request for Letter
of Credit substantially in the form of Exhibit 1.1(e) hereto. Upon issuance
of a Letter of Credit, the Issuing Bank shall promptly notify each other
Lender of the issuance and the terms thereof.

          (ii) Each Revolving Credit Lender shall, upon the issuance of a
Letter of Credit, be deemed to have irrevocably and unconditionally purchased
from the Issuing Bank an undivided interest and participation in each such
Letter of Credit equal to such Revolving Credit Lender's Pro Rata Shares of
the Letter of Credit amount. In the event that Issuing Bank shall make any
payment on or pursuant to any Letter of Credit, such payment (a "Letter of
Credit Loan") shall then be deemed automatically to constitute a Revolving
Credit Loan under Section 1.1(a) of this Agreement (subject to all the terms
and conditions of this Agreement applicable to Revolving Credit Loans)
regardless of whether a Default or Event of Default shall have occurred and
be continuing and notwithstanding Co-Borrowers' failure to satisfy the
conditions precedent set forth in Section 2, and each Revolving Credit Lender
shall be obligated to pay its Pro Rata Share thereof in the same manner as
provided in this Agreement with respect to Revolving Credit Loans.

          (iii) Any issuance of a Letter of Credit pursuant to this Section
1.1(e) shall reduce the available amount under the Lender's aggregate
Revolving Credit Loan Commitments and each Lender's Revolving Credit Loan
Commitment in an amount equal to such Lender's Pro Rata Share of such Letter
of Credit and the issuance of each such Letter of Credit shall be deemed to
be a use of each Lender's Revolving Credit Loan Commitment.

          (iv) The obligation of the Co-Borrowers to repay each Letter of
Credit Loan in full, together with accrued interest thereon in accordance
with this Agreement, shall be absolute, unconditional and irrevocable, under
all circumstances whatsoever, and (without limiting the generality of the
foregoing) shall not be affected by:

      (A) the use which may be made of the Letter of Credit Loan or any acts
or omissions of the drawer in connection therewith;

      (B) the validity, sufficiency or genuineness of documents presented in
connection with a drawing, or of any endorsement thereon, even if such
documents should in fact prove to be in any and all respects invalid,
insufficient, fraudulent or forged, provided that such documents appear on
their face to comply with the terms of the Letter of Credit;

      (C) any irregularity in the transaction with respect to which the
Letter of Credit is issued; or

      (D) the existence of any claim, set-off, defense or other right which
the Co-Borrowers might have against the Lenders, or any of them, or any other
Person, whether in connection with the Letter of Credit, the transaction
contemplated by the Letter of Credit, or any unrelated transaction.

          (v) the Co-Borrowers shall pay to the Issuing Bank for the benefit
of the Revolving Credit Lenders a fee (the "Letter of Credit Fee") in respect
of the undrawn portion of each Letter of Credit issued hereunder at a rate
per annum equal to the Applicable Eurodollar Margin in effect at the time
such Letter of Credit is issued multiplied by the maximum amount available
from time to time to be drawn under the applicable Letter of Credit. All
Letter of Credit Fees in respect of each Letter of Credit shall be paid to
Administrative Agent for the benefit of the Revolving Credit Lenders in
advance at the time of issuance of such Letter of Credit. In addition, the
Co-Borrowers shall pay directly to the Issuing Bank with respect to each
Letter of Credit issued for its account, all costs and expenses incurred by
the Issuing Bank in connection with any Letter of Credit, including without
limitation, all charges for the negotiation of any draft paid pursuant to any
Letter of Credit and any amendments or supplements thereto.

      1.2   SCHEDULED REPAYMENT OF PRINCIPAL OF TERM LOAN.

      (a) Co-Borrowers shall pay the principal amount of the Term Loan in twenty
(20) consecutive equal quarterly installments on the first day of January,
April, July and October of each year, commencing January 1, 2001, each in the
amount of $1,750,000. In any event, the aggregate outstanding principal balance
of the Term Loan shall be due and payable in full in immediately available funds
on October 1, 2005, if not sooner paid in full.

      (b) Each payment of principal with respect to the Term Loan shall be paid
to Administrative Agent for the ratable benefit of each Term Loan Lender in
proportion to each such Term Loan Lender's respective Term Loan Commitment.

      1.3.  INTEREST; EURODOLLAR INTEREST PERIODS; APPLICABLE MARGINS.

      (A) INTEREST. Co-Borrowers shall pay interest to Administrative Agent, for
the ratable benefit of Lenders in accordance with the various Loans being made
by each Lender, in arrears on each applicable Interest Payment Date, at the
following rates:

            (i) with respect to the Revolving Credit Loans, the Prime Rate plus
the Applicable Prime Margin per annum or, at the election of Co-Borrowers, for
each Eurodollar Interest Period applicable thereto, the applicable Eurodollar
Rate plus the Applicable Eurodollar Margin per annum, based on the aggregate
Revolving Credit Loans outstanding from time to time; and

            (ii) with respect to the Term Loan, the Prime Rate plus the
Applicable Prime Margin per annum or, at the election of Co-Borrowers, for each
Eurodollar Interest Period applicable thereto, the applicable Eurodollar Rate
plus the Applicable Eurodollar Margin per annum.

      (B) EURODOLLAR INTEREST PERIODS. At least three (3) days prior to the
Closing Date in respect of the Term Loan, or at the time they give any Notice of
Revolving Credit Loan in respect of the making of any Eurodollar Loan or any
Notice of Conversion/Confirmation in respect of a Eurodollar Loan, or on the
third Business Day prior to the expiration of a Eurodollar Interest Period
applicable to a Eurodollar Loan, Cigar on behalf of itself and the other
Co-Borrowers shall have the right to elect, by giving the Administrative Agent
notice thereof, the interest period (each an "Eurodollar Interest Period")
applicable to such Eurodollar Loan, which Eurodollar Interest Period shall, at
the option of the Co-Borrowers, be a one, two or three month period provided
that:

      (i) all Eurodollar Loans comprising a Borrowing shall at all times have
the same Eurodollar Interest Period;

      (ii) the initial Eurodollar Interest Period for any Borrowing of
Eurodollar Loans shall


                                      -4-
<PAGE>

commence on the date of such Borrowing (including the date of any conversion
thereto from a Borrowing of Prime Rate Loans) and each Eurodollar Interest
Period occurring thereafter in respect of such Eurodollar Loans shall commence
on the day on which the next preceding Eurodollar Interest Period applicable
thereto expires;

      (iii) if any Eurodollar Interest Period relating to a Eurodollar Loan
begins on a day for which there is no numerically corresponding day in the
calendar month at the end of such Eurodollar Interest Period, such Eurodollar
Interest Period shall end on the last Business Day of such calendar month;

      (iv) if any Eurodollar Interest Period would otherwise expire on a day
which is not a Business Day, such Eurodollar Interest Period shall expire on the
next succeeding Business Day; provided, however, that if any Eurodollar Interest
Period would otherwise expire on a day which is not a Business Day but is a day
of the month after which no further Business Day occurs in such month, such
Eurodollar Interest Period shall expire on the next preceding Business Day;

      (v) no Eurodollar Interest Period shall extend beyond the Expiration Date
and any Eurodollar Interest Period that would otherwise extend beyond the
Expiration Date shall end two (2) Business Days prior to such date; and

      (vi) Co-Borrowers shall select Eurodollar Interest Periods so that there
shall be no more than three (3) separate Eurodollar Loans in existence at any
one time. If upon the expiration of any Eurodollar Interest Period applicable to
a Borrowing of Eurodollar Loans, the Co-Borrower have failed to elect, or are
not permitted to elect, a new Eurodollar Interest Period to be applicable to
such Eurodollar Loans as provided above, the Co-Borrowers shall be deemed to
have elected to convert such Eurodollar Loans into Prime Rate Loans effective as
of the expiration date of such current Eurodollar Interest Period.

      (C) APPLICABLE PRIME MARGIN AND APPLICABLE EURODOLLAR MARGIN. The
Applicable Prime Margin and Applicable Eurodollar Margin shall be 0% and 1.5%
per annum, respectively, as of the Closing Date. So long as no Event of Default
shall have occurred and be continuing, the Applicable Margins will be adjusted
prospectively on a quarterly basis by reference to Co-Borrowers' Financial
Statements for each Fiscal Quarter delivered pursuant to Section 4.1. The first
adjustment, if any, in the Applicable Margins shall be based upon Co-Borrowers'
Financial Statements for the Fiscal Quarter ended September 30, 2000.
Adjustments in the Applicable Margins will become effective, in the case of
Eurodollar Loans, on the first day of the first Eurodollar Interest Period to
occur at least two (2) Business Days after delivery of Co-Borrowers' quarterly
Financial Statements and, in the case of Prime Rate Loans , one (1) Business
Days after delivery of Co-Borrowers' quarterly Financial Statements. Adjustments
in Applicable Margins will be determined by reference to the following grids:


                                      -5-
<PAGE>

                                                LEVEL OF
      IF LEVERAGE RATIO IS:                     APPLICABLE MARGINS:
      ---------------------                     -------------------


      is greater than or = to 2.50:1                  Level I

      is greater than or = to 2.25:1,
      but is less than 2.50:1                         Level II

      is less than 2.25:1                             Level III

                                  LEVEL I    LEVEL II   LEVEL III
                                  -------    --------   ---------


            Applicable              .25%       0%         0%

            Prime Margin


            Applicable Eurodollar   1.75%      1.625%     1.50%
            Margin


      Concurrently with the delivery of the foregoing Financial Statements for
each Fiscal Quarter, Cigar shall deliver, on behalf of itself and the other
Co-Borrowers, to Administrative Agent and Lenders a certificate, signed by its
chief financial officer, setting forth in reasonable detail the basis for the
continuance of, or any change in, the Applicable Margins. Failure to timely
deliver such Financial Statements shall, in addition to any other remedy
provided for in this Agreement (including without limitation imposition of the
Default Rate), result in an increase in the Applicable Margins to the highest
level set forth in the foregoing grid, until the fifth Business Day following
the delivery of those Financial Statements demonstrating that such an increase
is not required. If a Default or an Event of Default shall have occurred or be
continuing at the time any reduction in the Applicable Margins is to be
implemented, that reduction shall be deferred until the fifth Business Day
following the date on which such Default or Event of Default is waived or cured,
if at all.

      (D) COMPUTATIONS OF INTEREST. All computations of interest shall be made
by Administrative Agent on the basis of a three hundred and sixty (360) day
year, for the actual number of days occurring in the period for which such
interest is payable. Each determination by Administrative Agent of an interest
rate hereunder shall be conclusive, absent manifest error.

      (E) DEFAULT RATE. Following the occurrence and during the continuation of
any Default or Event of Default, the interest rates applicable to the Loans
shall be increased by two percent (2%) per annum above the rates of interest
otherwise applicable hereunder ("Default Rate").


                                      -6-
<PAGE>

Interest at the Default Rate shall accrue from the initial date of such Default
or Event of Default until that Default or Event of Default is cured or waived
and shall be payable upon demand. Overdue principal and, to the extent permitted
by law, overdue interest in respect of each Loan and any other overdue amount
payable hereunder shall, in each case, bear interest at a rate per annum equal
to Prime Rate plus 2%.

      (F) MAXIMUM LAWFUL RATE. Notwithstanding anything to the contrary set
forth in this Section 1.3, if a court of competent jurisdiction determines in a
final order that the rate of interest payable hereunder exceeds the highest rate
of interest permissible under applicable law (the "Maximum Lawful Rate"), then
so long as the Maximum Lawful Rate would be so exceeded, the rate of interest
payable hereunder shall be equal to the Maximum Lawful Rate; provided, however,
that if at any time thereafter the rate of interest payable hereunder is less
than the Maximum Lawful Rate, Co-Borrowers shall continue to pay interest
hereunder at the Maximum Lawful Rate until such time as the total interest
received by Administrative Agent, on behalf of Lenders, is equal to the total
interest which would have been received had the interest rate payable hereunder
been (but for the operation of this paragraph) the interest rate payable since
the initial Borrowing Date as otherwise provided in this Agreement. Thereafter,
interest hereunder shall be paid at the rate(s) of interest and in the manner
provided in Sections 1.3(a) through (f) above, unless and until the rate of
interest again exceeds the Maximum Lawful Rate, and at that time this paragraph
shall again apply. In no event shall the total interest received by any Lender
pursuant to the terms hereof exceed the amount which such Lender could lawfully
have received had the interest due hereunder been calculated for the full term
hereof at the Maximum Lawful Rate. If the Maximum Lawful Rate is calculated
pursuant to this paragraph, such interest shall be calculated at a daily rate
equal to the Maximum Lawful Rate divided by the number of days in the year in
which such calculation is made.

      1.4. USE OF PROCEEDS. Co-Borrowers shall utilize the proceeds of the Term
Loan and the Revolving Credit Loans solely to (i) repay and refinance the unpaid
obligations under the Existing Credit Agreement and (ii) to finance the
Co-Borrowers' ordinary working capital and general corporate needs (but
excluding in any event the making of any Restricted Payment not specifically
permitted by Section 6.14). Disclosure Schedule (1.4) contains a description of
Co-Borrowers' uses of Loans as of the Closing Date.

      1.5.  PREPAYMENTS; REDUCTION OF UNUTILIZED COMMITMENT.

      (A) VOLUNTARY PREPAYMENTS; REDUCTION OF UNUTILIZED COMMITMENT.

            (i) Co-Borrowers may at any time on at least three (3) Business
Days' prior written notice to Administrative Agent (a) voluntarily prepay all or
part of the Term Loan and/or (b) voluntarily prepay all or part of any Revolving
Credit Loan; provided that any such prepayments in each case shall be in a
minimum amount of $1,000,000 and integral multiples thereof and provided,
further, that no partial prepayment of any Revolving Credit Loan shall reduce
the outstanding amount of such Revolving Credit Loan to an amount less than the
Minimum Borrowing Amount. Any prepayment of a Loan shall also be accompanied by
payment in full of all accrued, unpaid interest on the amount being prepaid up
to and including the date of such prepayment. Any prepayment of a Revolving
Credit Loan shall be accompanied


                                      -7-
<PAGE>

by the payment of any Eurodollar Loan funding breakage costs in accordance with
Section 1.10(b).

Each notice of partial prepayment shall designate the Loan or other Obligations
to which such prepayment is to be applied, provided that any partial prepayments
of the Term Loan made by Co-Borrowers shall be applied to prepay the scheduled
principal installments of the Term Loan in inverse order of maturity.

(ii) Co-Borrowers may at any time on at least three (3) Business Days' prior
written notice to Administrative Agent permanently reduce or terminate the
Unutilized Commitment, provided that upon any such termination all Loans and
other Obligations shall be immediately due and payable in full, and provided,
further, that any such voluntary reduction or termination of Unutilized
Commitment must be accompanied by the payment of the Fee required by Section
1.7, if any. Upon any such reduction or termination of the Unutilized
Commitment, Co-Borrowers right to request Revolving Credit Loans shall
simultaneously be permanently reduced or terminated, as the case may be.

      (B) MANDATORY PREPAYMENTS.

            (i) If at any time the aggregate outstanding balance of the
Revolving Credit Loan exceeds the Maximum Amount, Co-Borrowers shall immediately
repay the aggregate outstanding Revolving Credit Loans to the extent required to
eliminate such excess and at Co-Borrowers' option, such payment shall be applied
first to such Revolving Credit Loans which are Prime Rate Loans.

            (ii) Promptly, but in any event within five (5) Business Days,
following receipt by any Co-Borrower of cash proceeds of any asset sale,
assignment, transfer, loss, casualty or other disposition (including
condemnation proceeds and insurance proceeds from loss unless such insurance
proceeds are otherwise used to restore, replenish or repair assets and such loss
does not exceed $1,000,000), but excluding proceeds of asset dispositions
permitted by Section 6.8(a), (c), (d), (e) or (f), Co-Borrowers shall prepay the
Loans in an amount equal to all such proceeds, net of (A) commissions and other
reasonable and customary transaction costs, fees and expenses properly
attributable to such transaction and payable by Co-Borrowers in connection
therewith (in each case, paid to non-Affiliates), (B) all sales, transfer and
recording taxes, (C) amounts payable to holders of senior Liens (to the extent
such Liens constitute Permitted Encumbrances hereunder), if any, (D) an
appropriate reserve for income taxes in accordance with GAAP in connection
therewith and (E) appropriate amounts to be provided by Co-Borrowers as a
reserve, in accordance with GAAP, against any liabilities associated with the
assets sold or disposed of in such asset disposition, including, without
limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such asset
disposition; provided that to the extent any reserve, or part thereof, under
this Section 1.5(b)(ii) is reversed or is no longer applicable, such amount
shall be applied toward prepayment of the Loans as provided in this Section. Any
such prepayment shall be applied in accordance with clause (c) below.


                                      -8-
<PAGE>

            (iii) If Cigar or any other Co-Borrower issues Stock or debt
securities permitted hereunder, no later than the Business Day following the
date of receipt of the proceeds thereof, Co-Borrower shall prepay the Loans in
an amount equal to all such cash proceeds, net of all discounts and commissions
or brokerage fees and other reasonable costs paid to non-Affiliates in
connection therewith and net of any transfer, recording or similar taxes. The
foregoing shall not apply to (A) sales of Stock pursuant to stock options or
incentive plans of Cigar, (B) intercompany equity and debt issuances permitted
hereunder between and among Cigar or any other Co-Borrower and (C) all
Indebtedness permitted under Section 6.3(a)(ii), (iv) or (vi) and any
refinancing thereof. Any such prepayment shall be applied in accordance with
clause (c) below.

      (C) APPLICATION OF CERTAIN MANDATORY PREPAYMENTS. Any prepayments made by
Co-Borrowers pursuant to clauses (b)(ii), or (b)(iii) above shall be applied as
follows: first, to Fees and reimbursable expenses of the Administrative Agent
then due and payable pursuant to any of the Loan Documents; second, to interest
then due and payable on each of the Loans on a pro rata basis; third, to prepay
the scheduled principal installments of the Term Loan in inverse order of
maturity, until the Term Loan shall have been prepaid in full; and fourth, to
the outstanding principal balance of Revolving Credit Loans which are Prime Rate
Loans first, then to those which are Eurodollar Loans, until the same shall have
been paid in full. The Revolving Loan Commitment shall be permanently reduced by
the amount of any such prepayments applied to Revolving Credit Loans.

      (D) APPLICATION OF PREPAYMENTS FROM INSURANCE PROCEEDS. Prepayments from
insurance proceeds in accordance with Section 1.5(b)(2) shall be applied in the
same manner as set forth in the preceding Section 1.5(c). The Revolving Credit
Loan Commitment shall be permanently reduced by the amount of any such
prepayments applied to Revolving Credit Loans.

      (E) NO CONSENT. Nothing in this Section 1.5 shall be construed to
constitute Administrative Agent's or any Lender's consent to any transaction
referred to in clauses (b)(ii) and (b)(iii) above which is not permitted by
other provisions of this Agreement or the other Loan Documents.

      1.6. CONVERSIONS. So long as no Default or Event of Default shall have
occurred and be continuing, and subject to the additional conditions precedent
set forth in Section 2.2, Co-Borrowers shall have the option to (i) convert at
any time all or a portion, equal to at least the Minimum Borrowing Amount and
multiples thereof, of any outstanding (A) Prime Rate Loan to a Eurodollar Loan,
or (B) Eurodollar Loan to a Prime Rate Loan, subject to payment of Eurodollar
Loan breakage costs in accordance with Section 1.10(b) if such conversion is
made prior to the expiration of the Eurodollar Interest Period applicable
thereto, or (ii) continue all or any portion of any Loan as a Eurodollar Loan
upon the expiration of the applicable Eurodollar Interest Period and the
succeeding Eurodollar Interest Period of that continued Loan shall commence on
the last day of the Eurodollar Interest Period of the Loan to be continued,
provided, that (i) no partial conversion of Eurodollar Loans shall reduce the
outstanding principal amount of such Eurodollar Loans made pursuant to a single
Borrowing to less than the Minimum Borrowing Amount and (ii) no conversion
pursuant to this Section 1.6 shall result in a greater number of Borrowings of
Eurodollar Loans than is permitted under Section 1.3(b). Any such election must
be made by 11:00 a.m. (New York time) on the third (3rd) Business Day prior to


                                      -9-
<PAGE>

(1) the end of each Eurodollar Interest Period with respect to any Eurodollar
Loans to be continued as such, or (2) the date on which Co-Borrowers wish to
convert any Prime Rate Loan to a Eurodollar Loan for a Eurodollar Interest
Period designated by Co-Borrowers in such election or (3) the date on which
Co-Borrowers wish to convert any Eurodollar Loan to a Prime Rate Loan. If no
election is received with respect to a Eurodollar Loan by 11:00 a.m. (New York
time) on the third (3rd) Business Day prior to the end of the Eurodollar
Interest Period with respect thereto (or if a Default or an Event of Default
shall have occurred and be continuing or the additional conditions precedent set
forth in Section 2.2 shall not have been satisfied), that Eurodollar Loan shall
be converted to a Prime Rate Loan at the end of its Eurodollar Interest Period.
Cigar, on behalf of the Co-Borrowers, must make such election by written notice
(a "Notice of Conversion/Continuation") to Administrative Agent in the form of
Exhibit 1.6.

      1.7. FEES.

      (A) FEE LETTER. Co-Borrowers shall pay to Chase, without duplication of
Fees previously paid pursuant thereto, the Fees specified in the Fee Letter at
the times specified for payment therein.

      (B) COMMITMENT FEE. The Co-Borrowers shall pay to the Administrative
Agent for distribution to each Lender a commitment fee on the Unutilized
Commitments of the Lenders (the "Commitment Fee") for the period from and
including the Effective Date to but not including the Termination Date. The
Commitment Fee as of the Effective Date, shall be computed at a rate equal to
 .325% per annum on the average daily Unutilized Commitment of such Lender.
The Commitment Fee shall be adjusted prospectively on a quarterly basis by
reference to Co-Borrowers' Financial Statements delivered for each Fiscal
Quarter pursuant to Section 4.1. The first adjustment, if any, in the
Commitment Fee shall be based upon Co-Borrowers' Financial Statements for the
Fiscal Quarter ended September 30, 2000. Adjustments in the Commitment Fee
will become effective two (2) Business Days after delivery of Co-Borrowers'
quarterly Financial Statements Adjustments in the Commitment Fee will be
determined by reference to the following grids:

      IF LEVERAGE RATIO IS:               APPLICABLE COMMITMENT FEE:
      ---------------------               --------------------------

      is greater than or = to 2.50:1                 Level I

      is greater than or = to 2.25:1,
      but is less than 2.50:1                        Level II

      is less than 2.25:1                            Level III


                                      -10-
<PAGE>

                                    LEVEL I    LEVEL II   LEVEL III
                                    -------    --------   ---------


            Applicable              .475%*     .40%*      .325%*

            Commitment Fee


      * Rate per annum on the average daily Unutilized Commitment.

      Failure to timely deliver the foregoing Financial Statements shall, in
addition to any other remedy provided for in this Agreement, result in an
increase in the applicable Commitment Fee to the highest level (I.E., Level I
above). Accrued Commitment Fees payable to the Lenders shall be payable on the
first Business Day of each month and the Termination Date.

      (C) COMPUTATION. All computation of Fees shall be made by Administrative
Agent on the basis of a three hundred and sixty (360) day year, in each case for
the actual number of days occurring in the period for which such Fees are
payable. Each determination by Administrative Agent of Fees hereunder shall be
conclusive, absent manifest error.

      1.8.  METHOD AND PLACE OF PAYMENT.

      (A) GENERAL. Except as otherwise specifically provided herein, all
payments under this Agreement or any Note shall be made to the Administrative
Agent for the account of the Lender or Lenders entitled thereto no later than
12:00 Noon (New York time) on the date when due and shall be made in immediately
available funds at the Payment Office of the Administrative Agent and in
Dollars.

      (B) PAYMENTS ON NON-BUSINESS DAY. If any payment on any Loan becomes due
and payable on a day other than a Business Day, the maturity thereof will be
extended to the next succeeding Business Day (except as set forth in the
definition of Eurodollar Interest Period) and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension.

      1.9.  APPLICATION AND ALLOCATION OF PAYMENTS.

      (a) So long as no Default or Event of Default shall have occurred and be
continuing, (i) payments matching specific scheduled payments then due shall be
applied to those scheduled payments; (ii) voluntary prepayments shall be applied
as determined by Co-Borrowers, subject to the provisions of Section 1.5(a); and
(iii) mandatory prepayments shall be applied as set forth in Sections 1.5(c) and
1.3(d). All payments and prepayments applied to a particular Loan shall be
applied ratably to the portion thereof held by each Lender as determined by its
Pro Rata Share. As to each other payment, and as to all payments made when a
Default or Event or Default shall have occurred and be continuing or following
the Commitment Termination Date, Co-Borrowers hereby irrevocably waive the right
to direct the application of any and all payments received


                                      -11-
<PAGE>

from or on behalf of Co-Borrowers, and Co-Borrowers hereby irrevocably agree
that Administrative Agent shall have the continuing exclusive right to apply any
and all such payments against the Obligations as Administrative Agent may deem
advisable notwithstanding any previous entry by Administrative Agent in any
books and records. In the absence of a specific determination by Administrative
Agent with respect thereto, payments shall be applied to amounts then due and
payable in the following order: (1) to Fees and Administrative Agent's expenses
reimbursable hereunder; (2) to interest on the Loans, ratably in proportion to
the interest accrued as to each Loan; (3) to principal payments on the Loans,
ratably to the aggregate, combined principal balance of the Loans; and (4) to
all other Obligations including expenses of Lenders to the extent reimbursable
under this Agreement.

      (b) Administrative Agent is authorized to, and at its sole election may,
charge to the Revolving Credit Loan balance on behalf of Co-Borrowers and cause
to be paid all Fees, expenses, Charges, costs (including insurance premiums in
accordance with Section 5.4(a)) and interest and principal, other than principal
of the Revolving Credit Loans, owing by Co-Borrowers under this Agreement or any
of the other Loan Documents if and to the extent Co-Borrowers fail to promptly
pay any such amounts as and when due, even if such charges would cause the
aggregate balance of the Revolving Credit Loans to exceed Borrowing
Availability. At Administrative Agent's option and to the extent permitted by
law, any charges so made shall constitute part of the Revolving Credit Loans
hereunder.

      1.10. INDEMNITY.

      (a) Each Co-Borrower shall jointly and severally indemnify and hold
harmless each of the Administrative Agent, Lenders and their respective
Affiliates, and each such Person's respective officers, directors, employees,
attorneys, agents and representatives (each, an "Indemnified Person"), from and
against any and all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including reasonable attorneys' fees and disbursements
and other costs of investigation or defense, including those incurred upon any
appeal) which may be instituted or asserted against or incurred by any such
Indemnified Person as the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents and the
administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith, including any and all Environmental Liabilities
and legal costs and expenses arising out of or incurred in connection with
disputes between or among any parties to any of the Loan Documents (other than
those solely among Lenders and/or Administrative Agent) (collectively,
"Indemnified Liabilities"); provided, that no such Co-Borrower shall be liable
for any indemnification to an Indemnified Person to the extent that any such
suit, action, proceeding, claim, damage, loss, liability or expense is
determined in the final, non-applicable judgment of a court of competent
jurisdiction to have resulted from that Indemnified Person's gross negligence or
willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY
OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY
BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR


                                      -12-
<PAGE>

TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION
CONTEMPLATED HEREUNDER OR THEREUNDER.

      (b) To induce Lenders to provide the Eurodollar Rate option on the terms
provided herein, if (i) any Eurodollar Loans are repaid in whole or in part
prior to the last day of any applicable Eurodollar Interest Period (whether that
repayment is made pursuant to any provision of this Agreement or any other Loan
Document or is the result of acceleration, by operation of law or otherwise);
(ii) Co-Borrowers shall default in payment when due of the principal amount of
or interest on any Eurodollar Loan; (iii) Co-Borrowers shall default in making
any borrowing of, conversion into or continuation of Eurodollar Loans after
Co-Borrower has given notice requesting the same in accordance herewith; or (iv)
Co-Borrowers shall fail to make any prepayment of a Eurodollar Loan after
Co-Borrowers have given a notice thereof in accordance herewith, Co-Borrowers
shall indemnify and hold harmless each Lender from and against all losses, costs
and expenses resulting from or arising from any of the foregoing. Such
indemnification shall include any loss (including loss of margin) or expense
arising from the reemployment of funds obtained by it or from fees payable to
terminate deposits from which such funds were obtained. In the case of a
Eurodollar Loan, the loss to any Lender attributable to any such event shall be
deemed to include an amount determined by such Lender to be equal to the excess,
if any, of (i) the amount of interest that such Lender would pay for a deposit
equal to the principal amount of such Loan for the period from the date of such
payment, conversion, failure or assignment to the last day of the then current
Eurodollar Interest Period for such Loan (or, in the case of a failure to
borrow, convert or continue, the duration of the Eurodollar Interest Period that
would have resulted from such borrowing, conversion or continuation) if the
interest rate payable on such deposit were equal to the Eurodollar Rate for such
Eurodollar Interest Period, over (ii) the amount of interest that such Lender
would earn on such principal amount for such period if such Lender were to
invest such principal amount for such period at the interest rate that would be
bid by such Lender (or an affiliate of such Lender) for Dollar deposits from
other banks in the eurodollar market at the commencement of such period. For the
purpose of calculating amounts payable to a Lender under this subsection, each
Lender shall be deemed to have actually funded its relevant Eurodollar Loan
through the purchase of a deposit bearing interest at the Eurodollar Rate in an
amount equal to the amount of that Eurodollar Loan and having a maturity
comparable to the relevant Eurodollar Interest Period; provided, however, that
each Lender may fund each of its Eurodollar Loans in any manner it sees fit, and
the foregoing assumption shall be utilized only for the calculation of amounts
payable under this subsection. This covenant shall survive the termination of
this Agreement and the payment of the Notes and all other amounts payable
hereunder. As promptly as practicable under the circumstances, each Lender shall
provide Co-Borrowers with its written calculation of all amounts payable
pursuant to this Section 1.10, and such calculation shall be binding on the
parties hereto absent manifest error unless Co-Borrowers shall object in writing
within ten (10) Business Days of receipt thereof, specifying the basis for such
objection in detail.

      1.11. TAXES.

      (a) Any and all payments by Co-Borrowers under this Agreement or under the
Notes shall be made, in accordance with this Section 1.11, free and clear of and
without deduction for any and all present or future Taxes. If Co-Borrowers shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Notes, (i) the sum payable


                                      -13-
<PAGE>

shall be increased as much as shall be necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this Section 1.11) Administrative Agent or Lenders, as
applicable, receive an amount equal to the sum they would have received had
no such deductions been made, (ii) Co-Borrowers shall make such deductions,
and (iii) Co-Borrowers shall pay the full amount deducted to the relevant
taxing or other authority in accordance with applicable law. Within thirty
(30) days after the date of any payment of Taxes, Co-Borrowers shall furnish
to Administrative Agent the original or a certified copy of a receipt
evidencing payment thereof.

      (b) Each Co-Borrower shall indemnify and, within ten (10) days of demand
therefor, pay Administrative Agent and each Lender for the full amount of Taxes
(including any Taxes imposed by any jurisdiction on amounts payable under this
Section 1.11) attributable to payments by or on behalf of the Co-Borrowers
hereunder or under any of the other Loan Documents paid by Administrative Agent
or such Lender, as appropriate, and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes were correctly or legally asserted.

      (c) Each Lender organized under the laws of a jurisdiction outside the
United States (a "Foreign Lender") as to which payments to be made under this
Agreement or under the Notes are exempt from United States withholding tax under
an applicable statute or tax treaty shall provide to Co-Borrowers and
Administrative Agent a properly completed and executed IRS Form 4224 or Form
1001 or other applicable form, certificate or document prescribed by the IRS or
the United States certifying as to such Foreign Lender's entitlement to such
exemption (a "Certificate of Exemption"). Any foreign Person that seeks to
become a Lender under this Agreement shall provide a Certificate of Exemption to
Co-Borrowers and Administrative Agent prior to becoming a Lender hereunder. No
foreign Person may become a Lender hereunder if such Person is unable to deliver
a Certificate of Exemption.

      (d) If any Lender shall become aware that it is entitled to receive a
refund or credit (such credit to include any increase in any foreign tax credit)
as a result of indemnified Taxes (including any penalties or interest with
respect thereto) as to which it has been indemnified by Co-Borrowers pursuant to
this Section 1.11, it shall promptly notify Co-Borrowers of the availability of
such refund or credit and shall, within 30 days after receipt of a request by
the Co-Borrowers, apply for such refund or credit at Co-Borrowers' expense, and
in the case of any application for such refund or credit by Co-Borrowers, shall,
if legally able to do so, deliver to Co-Borrowers such certificates, forms or
other documentation as may be reasonably necessary to assist Co-Borrowers in
such application. If any Lender receives a refund or credit (such credit to
include any increase in any foreign tax credit) in respect to any indemnified
Taxes as to which it has been indemnified by Co-Borrowers pursuant to this
Section 1.11, it shall promptly notify Co-Borrowers of such refund or credit and
shall, within 30 days after receipt of such refund or the benefit of such credit
(such benefit to include any reduction of the taxes for which any Lender would
otherwise be liable due to any increase in any foreign tax credit available to
such Lender), repay the amount of such refund or benefit of such credit (with
respect to the credit, as determined by the Lender in its sole judgment) to
Co-Borrowers to the extent of amounts that have been paid by Co-Borrowers under
this Section 1.11 with respect to indemnified Taxes giving rise to such refund
or credit), plus any interest received with respect thereto, net of all
reasonable out-of-pocket expenses of such Lender and without interest (other
than interest


                                      -14-
<PAGE>

actually received from the relevant taxing authority or other Governmental
Authority with respect to such refund or credit); provided, however, that the
Co-Borrowers, upon the request of such Lender, agree to return the amount of
such refund or benefit of such credit (plus interest) to such Lender in the
event such Lender is required to repay the amount of such refund or benefit of
such credit to the relevant taxing authority or other Governmental Authority.

      1.12.  CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY.

      (a) If any Lender shall have determined that any law, treaty, governmental
(or quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy, reserve requirements or similar requirements or compliance by any
Lender with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law),
in each case, adopted after the Closing Date, from any central bank or other
Governmental Authority increases or would have the effect of increasing the
amount of capital, reserves or other funds required to be maintained by such
Lender or any Affiliate and reducing the rate of return on such Lender's capital
as a consequence of its obligations hereunder, then Co-Borrowers shall from time
to time upon demand by such Lender (with a copy of such demand to Administrative
Agent) pay to Administrative Agent, for the account of such Lender, additional
amounts sufficient to compensate such Lender for such reduction. A certificate
as to the amount of that reduction and showing the basis of the computation
thereof submitted by such Lender to Co-Borrowers and to Administrative Agent
shall, absent manifest error, be final, conclusive and binding for all purposes.

      (b) If, due to either (i) the introduction of or any change in any law or
regulation (or any change in the interpretation thereof) or (ii) the compliance
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), in each case adopted after
the Closing Date, there shall be any increase in the cost to any Lender of
agreeing to make or making, funding or maintaining any Loan, then Co-Borrowers
shall from time to time, upon demand by such Lender (with a copy of such demand
to Administrative Agent), pay to Administrative Agent for the account of such
Lender additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased cost, submitted
to Co-Borrowers and to Administrative Agent by such Lender, shall be conclusive
and binding on Co-Borrowers for all purposes, absent manifest error. Each Lender
agrees that, as promptly as practicable after it becomes aware of any
circumstances referred to above which would result in any such increased cost,
the affected Lender shall, to the extent not inconsistent with such Lender's
internal policies of general application, use reasonable commercial efforts to
minimize costs and expenses incurred by it and payable to it by Co-Borrowers
pursuant to this Section 1.12.

      (c) Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any Eurodollar Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
Eurodollar Loan at another branch or office of that Lender without, in that
Lender's opinion, adversely affecting it or its Loans or the income obtained
therefrom, on notice thereof and demand therefor by such Lender to Co-Borrowers
through Administrative Agent, (i) the obligation of such Lender


                                      -15-
<PAGE>

to agree to make or to make or to continue to fund or maintain Eurodollar Loans
shall terminate and (ii) Co-Borrowers shall forthwith prepay in full all
outstanding Eurodollar Loans owing to such Lender, together with interest
accrued thereon, unless Co-Borrowers, within five (5) Business Days after the
delivery of such notice and demand, convert all such Loans into a Loan bearing
interest based on the Prime Rate.

      (d) Within fifteen (15) days after receipt by Co-Borrowers of written
notice and demand from any Lender (an "Affected Lender") for payment of
additional amounts or increased costs as provided in Section 1.12(a), 1.12(b) or
1.11(a), Co-Borrowers may, at their option, notify Administrative Agent and such
Affected Lender of its intention to replace the Affected Lender. So long as no
Default or Event of Default shall have occurred and be continuing, Co-Borrowers,
with the consent of Administrative Agent, which shall not be unreasonably
withheld, may obtain, at Co-Borrowers' expense, a replacement Lender
("Replacement Lender") for the Affected Lender, which Replacement Lender must be
reasonably satisfactory to Administrative Agent. If Co-Borrowers obtain a
Replacement Lender within ninety (90) days following notice of their intention
to do so, the Affected Lender must sell and assign its Loans and Commitments to
such Replacement Lender for an amount equal to the principal balance of all
Loans held by the Affected Lender and all accrued interest and Fees with respect
thereto through the date of such sale, provided that Co-Borrowers shall have
reimbursed such Affected Lender for the additional amounts or increased costs
that it is entitled to receive under this Agreement through the date of such
sale and assignment.

      Notwithstanding the foregoing, Co-Borrowers shall not have the right to
obtain a Replacement Lender if the Affected Lender rescinds its demand for
increased costs or additional amounts within fifteen (15) days following its
receipt of Co-Borrowers' notice of intention to replace such Affected Lender.
Furthermore, if Co-Borrowers give a notice of intention to replace and do not so
replace such Affected Lender within ninety (90) days thereafter, Co-Borrowers'
rights under this Section 1.12(d) with respect to such Affected Lender shall
terminate and Co-Borrowers shall promptly pay all increased costs or additional
amounts demanded by such Affected Lender pursuant to Sections 1.11(a), 1.12(a)
and 1.12(b).

      (e) Failure or delay on the part of any Lender to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender's right to
demand such compensation; provided, that the Co-Borrowers shall not be required
to compensate a Lender (or such Lender's holding company) pursuant to this
Section for any increased costs or reductions incurred more than one hundred and
eighty (180) days prior to the date that such Lender notifies the Co-Borrowers
of the change in law or regulation (or change in interpretation thereof) giving
rise to such increased costs or reductions and of such Lender's intention to
claim compensation thereof; provided, further, that, if the change in law giving
rise to such increased costs or reductions is retroactive, then the 180-day
period referred to above shall be extended to include the period of retroactive
effect thereof.

      1.13. SINGLE LOAN. All Loans to Co-Borrowers and all of the other
Obligations of Co-Borrowers arising under this Agreement and the other Loan
Documents shall constitute one general obligation of Co-Borrowers.


                                      -16-
<PAGE>

2.  CONDITIONS PRECEDENT

      2.1. CONDITIONS TO THE INITIAL LOANS. No Lender shall be obligated to make
any Loan on the Closing Date, or to take, fulfill, or perform any other action
hereunder, until the following conditions have been satisfied or provided for on
or before November 30, 2000 in a manner satisfactory to Administrative Agent, or
waived in writing by Administrative Agent and Lenders:

      (A) CORPORATE DOCUMENTS. The Administrative Agent shall have received the
following documents, each certified as indicated below:

            (i) copies of the Certificates of Incorporation, as amended and in
effect, of the Co-Borrowers certified as of a recent date by the Secretary of
State of their respective jurisdictions of incorporation, and a certificate from
such Secretary of State dated as of a recent date as to the good standing of and
corporate documents filed by such Co-Borrower;

            (ii) a certificate of the Secretary or an Assistant Secretary of
each of the Co-Borrowers, dated the Closing Date and certifying (A) that
attached thereto is a true and complete copy of the by-laws of such Co-Borrower
as amended and in effect at all times from the date on which the resolutions
referred to in clause (B) were adopted to and including the date of such
certificate, (B) that attached thereto is a true and complete copy of
resolutions duly adopted by the board of directors of such Co-Borrower
authorizing the execution, delivery and performance of such of the Loan
Documents to which such Co-Borrower is a party, and the extensions of credit
hereunder, and that such resolutions have not been modified, rescinded or
amended and are in full force and effect, (C) that the Certificate of
Incorporation of such Co-Borrower has not been amended since the date of the
certification thereto furnished pursuant to subparagraph (i) above, and (D) as
to the incumbency and specimen signature of each officer of such Co-Borrower
executing the Loan Documents to which such Co-Borrower is a party (and the
Administrative Agent and each Lender may conclusively rely on such certificate
until it receives notice in writing from such Co-Borrower); and

            (iii) a certificate of another officer of each of the Co-Borrowers
as to the incumbency and specimen signature of the Secretary or Assistant
Secretary, as the case may be, of the Co-Borrower.

      (B) OFFICER'S CERTIFICATE. The Administrative Agent shall have received a
certificate of a senior officer of each Co-Borrower, dated the Closing Date,
stating that all of the applicable conditions set forth in this Section 2 have
been met.

      (C) OPINION OF COUNSEL TO THE OBLIGORS. An opinion, dated the Closing
Date, of Morgan, Lewis & Bockius LLP , counsel to the Co-Borrowers,
substantially in form and substance satisfactory to the Administrative Agent,
the Lenders and their counsel (and the Co-Borrowers hereby instruct such counsel
to deliver such opinion to the Lenders and the Administrative Agent).

      (D) CREDIT AGREEMENT; PLEDGE AGREEMENTS; NOTES; LOAN DOCUMENTS. (i) This
Agreement shall have been duly executed by, and delivered to, each Co-Borrower,
the Administrative Agent and the Lenders; (ii) the Notes shall have been duly
authorized, executed and delivered; (iii) L&LR shall have duly authorized,
executed and delivered a second amended


                                      -17-
<PAGE>

and restated pledge agreement substantially in the form of Exhibit 2.1(d)-1 (the
"L&LR Pledge Agreement"); (iv) Cigar shall have duly authorized, executed and
delivered a pledge agreement substantially in the form of Exhibit 2.1(d)-2 (the
"Cigar Pledge Agreement"); (v) each of L&LR and Cigar shall have (A) delivered
to the Collateral Agent all of the Pledged Stock referred to in the Pledge
Agreement to which it is a party together with executed and undated irrevocable
stock powers and such other instruments of transfer as shall be requested by the
Collateral Agent and (B) taken such other action to perfect the security
interests created thereunder as the Collateral Agent shall reasonably request;
and (vi) Administrative Agent shall have received such documents, instruments
and agreements as Administrative Agent shall reasonably request in connection
with the transactions contemplated by this Agreement and the other Loan
Documents, each in form and substance satisfactory to Administrative Agent.

      (E) REPAYMENT OF EXISTING OBLIGATIONS. Administrative Agent shall have
received evidence that the principal of and interest on, and all other
amounts owing (including, without limitation, under the Existing Credit
Agreement and any contingent or other amounts payable in respect of letters
of credit) in respect of, any Indebtedness (other than the Loans and the
Permitted Indebtedness) shall have been (or shall be simultaneously) repaid
in full, that all agreements evidencing and such Indebtedness and all
commitments to extend credit thereunder shall have been canceled or
terminated and that any Liens securing any such Indebtedness shall have been
released (or arrangements for such release satisfactory to the Administrative
Agent shall have been made).

      (F) APPROVALS. Administrative Agent shall have received (i) satisfactory
evidence that the Co-Borrowers have obtained all required material waivers,
consents and approvals of all Persons including all requisite Governmental
Authorities, to the execution, delivery and performance of this Agreement and
the other Loan Documents and the consummation of the transactions contemplated
hereby or (ii) an officer's certificate in form and substance satisfactory to
Administrative Agent affirming that no such waivers, consents or approvals are
required.

      (G) PAYMENT OF FEES. Co-Borrowers shall have paid in full to the
Administrative Agent and the Lenders all costs, fees (including the Fees) and
expenses payable to the Administrative Agent and the Lenders to the extent then
due pursuant hereto and the Fee Letter.

      (H) CONSUMMATION OF RELATED TRANSACTIONS. Lenders shall have received
fully executed copies of the Related Transactions Documents, each of which
shall be in form and substance satisfactory to Administrative Agent and its
counsel, it being understood that the forms of the Related Transactions
Documents, each dated the date hereof, are acceptable to Administrative
Agent. The Tender Offer Acquisition and the Merger shall have been
consummated or be contemporaneously consummated on the Closing Date
substantially in accordance with the terms of the Related Transactions
Documents and without waiver of any conditions (except as expressly permitted
thereunder) unless consented to by the Administrative Agent.

      (I) NO LITIGATION. There shall exist no action, suit, investigation,
litigation or proceeding affecting the any Co-Borrower pending or, to the
knowledge of Co-Borrowers, threatened before


                                      -18-
<PAGE>

any court, governmental agency or arbitration that could reasonably be expected
to have a Material Adverse Effect.

      (J) FINANCIAL STATEMENTS. The Administrative Agent and each of the Lenders
shall have received (i) the consolidated income statements, statements of cash
flows and balance sheets of the Co-Borrowers for the year ended December 31,
1999, each prepared in accordance with GAAP and certified by Ernst & Young LLP,
(ii) a reliance letter from Ernst & Young LLP with respect to the audited
financial statements referred to in the preceding clause (i), and (iii) the
unaudited consolidated and, if available, consolidating income statements,
statements of cash flows and balance sheets of the Co-Borrowers for each Fiscal
Quarter to occur subsequent to December 31, 1999, each prepared in accordance
with GAAP, and each of such financial statements referred to in preceding
clauses (i) and (iii) and the reliance letter referred to in preceding clause
(ii) shall be satisfactory to the Administrative Agent and the Lenders.

      (K) PRO FORMA FINANCIAL STATEMENTS. The Administrative Agent and each of
the Lenders shall have received the Pro Forma which shall be satisfactory to the
Lenders in their sole discretion.

      (L) BUSINESS PLAN. The Administrative Agent and each of the Lenders shall
have received the business plan of Co-Borrowers for the Fiscal Years through
December 31, 2003, which business plan shall include a written analysis of the
business and prospects of the Co-Borrowers and shall be satisfactory in form and
substance to the Lenders in their sole discretion.

      (M) LIEN SEARCH RESULTS. The Administrative Agent and each of the Lenders
shall have received completed requests for information showing all effective
financing statements, tax liens and judgments, filed against the Co-Borrowers,
and such requests shall reveal no Liens, security interests or encumbrances
against any assets of the Co-Borrowers other than Permitted Encumbrances or
liens discharged as of the Closing Date and no tax liens or judgments.

      (N) TANGIBLE NET WORTH. The Co-Borrowers on a consolidated basis shall
have a Tangible Net Worth, after giving effect to Loans made on the Closing Date
and the Related Transactions, of no less than $30 million, which shall be
reflected on the Pro Forma.

      (O) CLOSING DATE. The Closing Date shall have occurred on or prior to
September 30, 2000.

      (P) MC MANAGEMENT AGREEMENT. The Administrative Agent shall have received
a copy of the MC Management Agreement executed by the parties thereto.

      2.2. FURTHER CONDITIONS TO EACH LOAN. Except as otherwise expressly
provided herein, no Lender shall be obligated to fund any Loan, or convert or
continue any Loan, if, as of the date thereof:

      (a) Any representation or warranty by any Co-Borrower contained herein or
in any of the other Loan Documents shall be untrue or incorrect in any material
respect (except for


                                      -19-
<PAGE>

representations or warranties subject to a materiality or Material Adverse
Effect exception, which shall be true and correct in all respects) as of such
date, except to the extent that such representation or warranty expressly
relates to an earlier date and except for changes therein expressly permitted by
this Agreement; or

      (b) Any event or circumstance having a Material Adverse Effect shall have
occurred since the date hereof; or

      (c) (i) Any Event of Default shall have occurred and be continuing or
would result after giving effect to any Loan or (ii) a Default shall have
occurred and be continuing or would result after giving effect to any Loan, and
Administrative Agent or Required Lenders shall have determined not to make any
Loan so long as that Default is continuing; or

      (d) After giving effect to any Revolving Credit Loan, the outstanding
aggregate principal amount of all Revolving Loans would exceed the Maximum
Amount. The request and acceptance by Co-Borrowers of the proceeds of any Loan,
or the conversion or continuation of any Loan, as the case may be, shall be
deemed to constitute, as of the date of such request or acceptance, a
representation and warranty by Co-Borrowers that the conditions in this Section
2.2 have been satisfied.

3.    REPRESENTATIONS AND WARRANTIES

      To induce Lenders to make the Loans, the Co-Borrowers, jointly and
severally, make the following representations and warranties to the
Administration Agent and each Lender with respect to all Co-Borrowers, each and
all of which shall survive the execution and delivery of this Agreement.

      3.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Co-Borrower (a) is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation; (b) is duly qualified to conduct business
and is in good standing in each other jurisdiction where its ownership or lease
of property or the conduct of its business requires such qualification, except
where the failure to be so qualified would not result in a Material Adverse
Effect; (c) has the requisite corporate power and authority and the legal right
to own, pledge, mortgage or otherwise encumber and operate its properties, to
lease the property it operates under lease and to conduct its business as now,
heretofore and proposed to be conducted; (d) subject to specific representations
regarding Environmental Laws, has all licenses, permits, consents or approvals
from or by, and has made all filings with, and has given all notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct and is in compliance with all such licenses,
permits, consents or approvals, except where the failure to do so, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect; (e) is in compliance with its certificate or articles of incorporation
(or equivalent governing document) and by-laws; and (f) subject to specific
representations set forth herein regarding ERISA, Environmental Laws, tax and
other laws, is in compliance with all applicable provisions of law and all
rules, regulations and orders of any Governmental Authority, except where the
failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.


                                      -20-
<PAGE>

      3.2. EXECUTIVE OFFICES. As of the Closing Date, the current location of
each Co-Borrower's chief executive office and principal place of business is set
forth in Disclosure Schedule (3.2), and except as set forth on such Disclosure
Schedule (3.2), none of such locations have changed within the twelve (12)
months preceding the Closing Date.

      3.3. CORPORATE POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by each Co-Borrower of the Loan Documents to
which it is a party (a) are within such Person's corporate power; (b) have been
duly authorized by all necessary or proper corporate and shareholder action; (c)
do not contravene any provision of such Person's certificate or articles of
incorporation (or similar governing documents) or bylaws; (d) do not violate any
law or regulation, or any order or decree of any court or Governmental
Authority; (e) do not conflict with or result in the breach or termination of,
constitute a default under or accelerate or permit the acceleration of any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which such Person is a party or by which such
Person or any of its property is bound; (f) do not result in the creation or
imposition of any Lien, other than Liens created under the Loan Documents, upon
any of the property of such Person; and (g) do not require the consent or
approval of any Governmental Authority or any other Person. On or prior to the
Closing Date, each of the Loan Documents shall have been duly executed and
delivered by each Co-Borrower thereto and each such Loan Document shall then
constitute a legal, valid and binding obligation of such Co-Borrower enforceable
against it in accordance with its terms.

      3.4. FINANCIAL STATEMENTS. All Financial Statements concerning
Co-Borrowers which are referenced below have been prepared in accordance with
GAAP consistently applied throughout the periods covered (except as disclosed
therein and except, with respect to unaudited Financial Statements, for the
absence of footnotes and normal year-end audit adjustments) and present fairly
in all material respects the financial position of the Persons covered thereby
as at the dates thereof and the results of their operations and cash flows for
the periods then ended:

            (a) The audited consolidated balance sheets at December 31, 1999 and
the related statements of income and cash flows of Co-Borrowers for the Fiscal
Year then ended, certified by Ernst & Young LLP.

            (b) The unaudited consolidated and, if available, consolidating
balance sheets at March 31, 2000 and the related statements of income and cash
flows of Co-Borrowers for the Fiscal Quarter then ended.

            (c) The unaudited consolidated and, if available, consolidating
balance sheets at June 30, 2000 and the related statements of income and cash
flows of Co-Borrowers for the Fiscal Quarter then ended.

      3.5. PRO FORMA. The Pro Forma delivered on the date hereof and attached
hereto as Disclosure Schedule (3.5) was prepared by Co-Borrowers giving pro
forma effect to the Loans on the Closing Date and the Related Transactions, was
based on the unaudited consolidated and consolidating balance sheets of
Co-Borrowers dated June 30, 2000, and was prepared in accordance with GAAP, with
only such adjustments thereto as would be required in accordance


                                      -21-
<PAGE>

with GAAP, provided that such Pro Forma is updated immediately prior to the
Closing Date and is acceptable to Administrative Agent.

      3.6. MATERIAL ADVERSE EFFECT. Between December 31, 1999 and the Closing
Date, (a) no Co-Borrower has incurred any obligations, contingent or
non-contingent liabilities, liabilities for Charges, long-term leases or unusual
forward or long-term commitments and there has been no decrease in the assets of
the Co-Borrowers, which are not reflected in the Pro Forma and which, alone or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect, (b) no contract, lease or other agreement or instrument has been entered
into by any Co-Borrower or has become binding upon any Co-Borrower's assets and
no law or regulation applicable to any Co-Borrower has been adopted, which has
had or could reasonably be expected to have a Material Adverse Effect, (c) no
Co-Borrower is in default and to the best of each Co-Borrower's knowledge no
third party is in default under any material contract, lease or other agreement
or instrument, which alone or in the aggregate, could reasonably be expected to
have a Material Adverse Effect, and (d) no event has occurred, which alone or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.
Between December 31, 1999 and the Closing Date no event, including, without
limitation, the commencement of any Litigation, has occurred, which alone or
together with other events, could reasonably be expected to have a Material
Adverse Effect.

      3.7. OWNERSHIP OF PROPERTY; LIENS. As of the Closing Date, the real estate
("Real Estate") listed on Disclosure Schedule (3.7) constitutes all of the real
property owned, leased, subleased, or used by any Co-Borrower. Each Co-Borrower
owns good and marketable fee simple title to all of its owned real estate, and
valid and marketable leasehold interests in all of its leased Real Estate, all
as described on Disclosure Schedule (3.7), and copies of all such leases or a
summary of terms thereof satisfactory to Administrative Agent have been
delivered to Administrative Agent. Disclosure Schedule (3.7) further describes
any Real Estate with respect to which any Co-Borrower is a lessor or sublessor
as of the Closing Date. Each Co-Borrower also has good and marketable title to,
or valid leasehold interests in, all of its personal properties and assets. As
of the Closing Date, none of the properties and assets of any Co-Borrower are
subject to any Liens other than Permitted Encumbrances and Liens being released
on the Closing Date, and there are no facts, circumstances or conditions known
to any Co-Borrower that may result in any Liens (including Liens arising under
Environmental Laws) other than Permitted Encumbrances and Liens being released
on the Closing Date. Each Co-Borrower has received all deeds, assignments,
waivers, consents, bills of sale and other documents, and has duly effected all
recordings, filings and other actions necessary to establish, protect and
perfect such Co-Borrower's right, title and interest in and to all such Real
Estate and other properties and assets, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. Disclosure Schedule (3.7) also describes any purchase
options, rights of first refusal or other similar contractual rights to acquire
a fee simple interest in real property pertaining to any Real Estate. Except as
set forth in Disclosure Schedule (3.7), no portion of any Co-Borrower's Real
Estate has suffered any material damage by fire or other casualty loss which has
not heretofore been repaired and restored in all material respects to its
original condition or otherwise remedied. All permits required to have been
issued or appropriate to enable the Real Estate to be lawfully occupied and used
for all of the purposes for which they are currently occupied and used have been
lawfully issued and are in full force and


                                      -22-
<PAGE>

effect, except where the failure to do so, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.

      3.8. LABOR MATTERS. As of the Closing Date (a) no strikes or other
material labor disputes against any Co-Borrower are pending or, to any
Co-Borrower's knowledge, threatened; (b) hours worked by and payment made to
employees of each Co-Borrower comply with the Fair Labor Standards Act and each
other federal, state, local or foreign law applicable to such matter; (c) all
payments due from any Co-Borrower for employee health and welfare insurance have
been paid or accrued as a liability on the books of such Co-Borrower; (d) except
as set forth in Disclosure Schedule (3.8), no Co-Borrower is a party to or bound
by any collective bargaining agreement or any management agreement, consulting
agreement or employment agreement involving annual payment in excess of $100,000
(and true and complete copies of any agreements described on Disclosure Schedule
(3.8) have been delivered to Administrative Agent); (e) there is no organizing
activity involving any Co-Borrower pending or, to any Co-Borrower's knowledge,
threatened by any labor union or group of employees; (f) there are no
representation proceedings pending or, to any Co-Borrower's knowledge,
threatened with the National Labor Relations Board, and no labor organization or
group of employees of any Co-Borrower has made a pending demand for recognition;
and (g) except as set forth in Disclosure Schedule (3.7), there are no
complaints or charges against any Co-Borrower pending or, to the knowledge of
any Co-Borrower, threatened to be filed with any Governmental Authority or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment by any Co-Borrower of any
individual.

      3.9. VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK AND
INDEBTEDNESS. Except as set forth in Disclosure Schedule (3.9), no Co-Borrower
is engaged in any joint venture or partnership with any other Person. All of the
issued and outstanding Stock of each Co-Borrower (other than L&LR and Cigar) is
owned beneficially and of record by Cigar. Set forth in Disclosure Schedule
(3.9) is (i) a description of all the issued and outstanding shares of Stock of
each Co-Borrower before giving effect to the Tender Offer and the Merger (other
than shares of Cigar which are not owned of record or beneficially by the 1998
Trust, the Trusts, Lewis I. Rothman or LaVonda M. Rothman) and a description of
all the issued and outstanding shares of Stock of each Co-Borrower after giving
effect to the Merger and, in each case, a list of the record and beneficial
owners thereof and (ii) a list of each subsidiary of L&LR and each subsidiary of
Cigar and the direct and indirect ownership interests therein . After giving
effect to the Merger, all of the Stock of Cigar will be owned by L&LR. Except as
set forth in Disclosure Schedule (3.9), there are no outstanding rights to
purchase, options, warrants or similar rights or agreements pursuant to which
any Co-Borrower may be required to issue, sell, repurchase or redeem any of its
Stock or other equity securities or any Stock or other equity securities of its
Subsidiaries. All outstanding Indebtedness of each Co-Borrower as of the Closing
Date is described in Section 6.3 (including Disclosure Schedule (6.3)). L&LR
does not have any assets except, before giving effect to the Merger, Stock of
JRC and, after giving effect to the Merger, Stock of Cigar, nor any Indebtedness
or Guaranteed Indebtedness.

      3.10. GOVERNMENT REGULATION. No Co-Borrower is an "investment company" or
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940 as amended. No Co-Borrower is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power


                                      -23-
<PAGE>

Act, or any other federal or state statute that restricts or limits its ability
to incur Indebtedness or to perform its obligations hereunder. The making of the
Loans by Lenders to Co-Borrowers, the application of the proceeds thereof and
repayment thereof and the consummation of the Related Transactions will not
violate any provision of any such statute or any rule, regulation or order
issued by the Securities and Exchange Commission.

      3.11. MARGIN REGULATIONS. No Co-Borrower is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin security" as
such terms are defined in Regulation U of the Federal Reserve Board as now and
from time to time hereafter in effect (such securities being referred to herein
as "Margin Stock"). No Co-Borrower owns any Margin Stock, and none of the
proceeds of the Loans or other extensions of credit under this Agreement will be
used, directly or indirectly, for the purpose of purchasing or carrying any
Margin Stock, for the purpose of reducing or retiring any Indebtedness which was
originally incurred to purchase or carry any Margin Stock or for any other
purpose which might cause any of the Loans or other extensions of credit under
this Agreement to be considered a "purpose credit" within the meaning of
Regulation T, U or X of the Federal Reserve Board. No Co-Borrower will take or
permit to be taken any action which might cause any Loan Document to violate any
regulation of the Federal Reserve Board.

      3.12. TAXES. All tax returns, reports and statements, including
information returns, required by any Governmental Authority to have been filed
by any Co-Borrower have been filed with the appropriate Governmental Authority
and all Charges have been paid prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment thereof (or any such
fine, penalty, interest, late charge or loss has been paid), excluding Charges
or other amounts being contested in accordance with Section 5.2(b). Proper and
accurate amounts have been withheld by each Co-Borrower from its respective
employees for all periods in full and complete compliance with all applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective Governmental Authorities. Disclosure Schedule (3.12)
lists those tax returns since 1996 that have been audited, and indicates those
tax returns that are currently the subject of audit and any assessments or
threatened assessments in connection with such audit, or otherwise currently
outstanding. Except as described on Disclosure Schedule (3.12) as of the Closing
Date, no Co-Borrower has executed or filed with the IRS or any other
Governmental Authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any Charges.
None of the Co-Borrowers and their respective predecessors are liable for any
Charges: (a) under any agreement (including any tax sharing agreements) or (b)
to each Co-Borrower's knowledge, as a transferee. As of the Closing Date, no
Co-Borrower has agreed or been requested to make any adjustment under IRC
Section 481(a), by reason of a change in accounting method or otherwise, which
would have a Material Adverse Effect. The Pro Forma delivered pursuant to
Section 3.5 reflects all estimated Taxes resulting from transactions
contemplated by the Related Transactions Documents and the Loans as of the
Closing Date.

      3.13. ERISA.

      (a) Disclosure Schedule (3.13) lists and separately identifies all Title
IV Plans, Multiemployer Plans, ESOPs and Retiree Welfare Plans. Copies of all
such listed plans, together


                                      -24-
<PAGE>

with a copy of the latest IRS Form 5500 for each such plan, have been delivered
to Administrative Agent. Except with respect to Multiemployer Plans, each
Qualified Plan has been determined by the IRS to qualify under Section 401(a) of
the IRC, and the trusts created thereunder have been determined to be exempt
from tax under Section 501(a) of the IRC, and, other than the application to the
IRS made on January 22, 2000 under the IRS' Walk-in-CAP, to the Co-Borrowers'
knowledge, nothing has occurred which would cause the loss of such qualification
or tax-exempt status. Each Plan is in compliance with the applicable provisions
of ERISA and the IRC, including the filing of reports required under the IRC or
ERISA except to the extent that any failure to so comply would not have a
Material Adverse Effect. No Co-Borrower or ERISA Affiliate has failed to make
any contribution or pay any amount due as required by either Section 412 of the
IRC or Section 302 of ERISA or the terms of any Plan. No Co-Borrower or ERISA
Affiliate has engaged in a prohibited transaction, as defined in Section 4975 of
the IRC, in connection with any Plan, which would subject any Co-Borrower to a
material tax on prohibited transactions imposed by Section 4975 of the IRC.

      (b) Except as set forth in Disclosure Schedule (3.13): (i) no Title IV
Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event described
in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is
reasonably expected to occur; (iii) there are no pending, or to the knowledge of
any Co-Borrower, threatened claims (other than claims for benefits in the normal
course), sanctions, actions or lawsuits, asserted or instituted against any Plan
or any Person as fiduciary or sponsor of any Plan; (iv) no Co-Borrower or ERISA
Affiliate has incurred or reasonably expects to incur any liability as a result
of a complete or partial withdrawal from a Multiemployer Plan; (v) within the
last five years no Title IV Plan with Unfunded Pension Liabilities has been
transferred outside of the "controlled group" (within the meaning of Section
4001(a)(14)(A) of ERISA) of any Co-Borrower or ERISA Affiliate; and (vi) no
liability under any Title IV Plan has been satisfied with the purchase of a
contract from an insurance company that is not rated AAA by the Standard &
Poor's Corporation or the equivalent by another nationally recognized rating
agency.

      3.14. NO LITIGATION. No action, claim, lawsuit, demand, investigation or
proceeding is now pending or, to the knowledge of any Co-Borrower, threatened
against any Co-Borrower, before any Governmental Authority or before any
arbitrator or panel of arbitrators (collectively, "Litigation"), (a) which
challenges any Co-Borrower's right or power to enter into or perform any of its
obligations under the Loan Documents to which it is a party, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (b) which
has a reasonable risk of being determined adversely to any Co-Borrower and
which, if so determined, could have a Material Adverse Effect. Except as set
forth on Disclosure Schedule (3.14), as of the Closing Date there is no
Litigation pending or, to the knowledge of any Co-Borrower, threatened against
any Co-Borrower.

      3.15. BROKERS. No broker or finder acting on behalf of any Co-Borrower
brought about the obtaining, making or closing of the Loans or the Related
Transactions, and no Co-Borrower has any obligation to any other Person in
respect of any finder's or brokerage fees in connection therewith.

      3.16. INTELLECTUAL PROPERTY. As of the Closing Date, each Co-Borrower owns
or has rights to use all Intellectual Property necessary to continue to conduct
its business as now


                                      -25-
<PAGE>

conducted by it, and each Patent, Trademark, Copyright and License is listed,
together with application or registration numbers, as applicable, in Disclosure
Schedule (3.16) hereto. All of the foregoing are in full force and effect, and
each of the Co-Borrowers is in substantial compliance with the foregoing without
any known conflict with the valid rights of others which has resulted, or
creates a risk of resulting, in any Material Adverse Effect. No event has
occurred which permits, or after notice or lapse of time or both would permit
the revocation or termination of any such right or which affects the rights of
any of the Co-Borrowers thereunder so as to result, or to create a reasonable
risk of resulting, in any Material Adverse Effect. No litigation or other
proceeding or dispute exists with respect to the validity or, where applicable,
the extension or renewal, of any of the foregoing which has resulted, or creates
a reasonable risk of resulting, in any Material Adverse Effect.

      3.17. FULL DISCLOSURE. No information contained in this Agreement, any of
the other Loan Documents, any Financial Statements or other reports from time to
time delivered hereunder or any written statement furnished by or on behalf of
any Co-Borrower to Agent or any Lender pursuant to the terms of this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made; provided that, with respect to any projected financial information,
the Co-Borrowers represent only that such information was prepared in good faith
based upon assumptions believed to be reasonable at the time. Any forward
looking statements contained therein are inherently subject to risk and
uncertainties, many of which cannot be predicted with accuracy, and some of
which might not be anticipated. Future events and actual results, financial or
otherwise, could differ materially from those set forth therein or contemplated
by the forward looking statements contained therein.

      3.18. ENVIRONMENTAL MATTERS.

      (a) Except as set forth in Disclosure Schedule (3.18), as of the Closing
Date: (i) to the knowledge of the Co-Borrowers, the Real Estate is free of
contamination from any Hazardous Material except for such contamination that
would not adversely impact the value or marketability of such Real Estate and
which would not result in Environmental Liabilities which could reasonably be
expected to have a Material Adverse Effect; (ii) no Co-Borrower has caused or
suffered to occur any Release of Hazardous Materials on, at, in, under, above,
to, from or about any of its Real Estate; (iii) the Co-Borrowers are and have
been in compliance with all Environmental Laws, except for such noncompliance
which would not result in Environmental Liabilities which could reasonably be
expected to have a Material Adverse Effect; (iv) the Co-Borrowers have obtained,
and are in compliance with, all Environmental Permits required by Environmental
Laws for the operations of their respective businesses as presently conducted,
except where the failure to so obtain or comply with such Environmental Permits
would not result in Environmental Liabilities which could reasonably be expected
to have a Material Adverse Effect, and all such Environmental Permits are valid,
uncontested and in good standing; (v) no Co-Borrower is involved in operations
or knows of any facts, circumstances or conditions, including any Releases of
Hazardous Materials, that are likely to result in any Environmental Liabilities
of such Co-Borrower which could reasonably be expected to have a Material
Adverse Effect, and no Co-Borrower has permitted any current or former tenant or
occupant of the Real Estate to engage in any such operations; (vi) there is no
pending or, to the knowledge of any Co-


                                      -26-
<PAGE>

Borrower, threatened Litigation arising under or related to any Environmental
Laws, Environmental Permits or Hazardous Material which seeks damages,
penalties, fines, costs or expenses in excess of $25,000 or injunctive relief
from any Co-Borrower, or which alleges criminal misconduct by any Co-Borrower;
(vii) no notice has been received by any Co-Borrower identifying it as a
"potentially responsible party" or requesting information under CERCLA or
analogous state statutes, and to the knowledge of the Co-Borrowers, there are no
facts, circumstances or conditions that would reasonably be expected to result
in any Co-Borrower being identified as a "potentially responsible party" under
CERCLA or analogous state statutes; and (viii) the Co-Borrowers have provided to
Administrative Agent copies of all existing environmental reports, reviews and
audits pertaining to actual or potential Environmental Liabilities, in each case
relating to any Co-Borrower.

      (b) Each Co-Borrower acknowledges and agrees that Administrative Agent (i)
is not now, and, to the knowledge of the Co-Borrowers, has not ever been in
control of any of the Real Estate or any Co-Borrower's affairs, and (ii) does
not have the capacity through the provisions of the Loan Documents or otherwise
to influence any Co-Borrower's conduct with respect to the ownership, operation
or management of any of its Real Estate or compliance with Environmental Laws or
Environmental Permits.

      3.19. INSURANCE. Disclosure Schedule (3.19) lists all insurance policies
of any nature maintained, as of the Closing Date, for current occurrences by
each Co-Borrower, as well as a summary of the terms of each such policy.

      3.20. COMMON BUSINESS ENTERPRISE. Co-Borrowers are engaged in a common
business enterprise and are directly dependant upon each other for or in
connection with their respective business activities and their respective
financial resources. Each Co-Borrower will receive a direct economic and
financial benefit from the Obligations incurred under this Agreement by
Co-Borrowers, and the incurrence of such Obligations is in the best interests of
each Co-Borrower.

      3.21. CUSTOMER AND TRADE RELATIONS. Except as set forth in Disclosure
Schedule (3.21), as of the Closing Date, there exists no actual or, to the
knowledge of any Co-Borrower, threatened termination or cancellation of, or any
material adverse modification or change in: the business relationship of any
Co-Borrower with any customer or group of customers whose purchases during the
preceding twelve (12) months caused them to be ranked among the ten largest
customers of such Co-Borrower; or the business relationship of any Co-Borrower
with any supplier material to its operations.

      3.22. AGREEMENTS AND OTHER DOCUMENTS. As of the Closing Date, each
Co-Borrower has provided to Administrative Agent or its counsel, on behalf of
Lenders, accurate and complete copies (or summaries) of all of the following
agreements or documents to which it is subject and each of which are listed on
Disclosure Schedule (3.22): supply agreements and purchase agreements not
terminable by such Co-Borrower within sixty (60) days following written notice
issued by such Co-Borrower and involving transactions in excess of $100,000 per
annum; any lease of Equipment having a remaining term of one year or longer and
requiring aggregate rental and other payments in excess of $100,000 per annum;
any agreement (or group of related agreements) under which such Co-Borrower has
created, incurred, assumed, or guaranteed any Indebtedness in excess of
$100,000, including any Capital Lease Obligation; and instruments and


                                      -27-
<PAGE>

agreements evidencing the issuance of any equity securities, warrants, rights or
options to purchase equity securities of such Co-Borrower.

      3.23. SOLVENCY. Both before and after giving effect to (a) the Loans to be
made or extended on the Closing Date or such other date as Loans requested
hereunder are made or extended, (b) the disbursement of the proceeds of such
Loans pursuant to the instructions of Co-Borrowers, (c) the consummation of the
Related Transactions and (d) the payment and accrual of all transaction costs in
connection with the foregoing, each Co-Borrower is Solvent.

      3.24. YEAR 2000 PROBLEMS. Each Co-Borrower has eliminated all Year 2000
Problems, except where the failure to correct the same could not reasonably be
expected to have a Material Adverse Effect, individually or in the aggregate.

      3.25. RELATED TRANSACTIONS DOCUMENTS. As of the Closing Date, Co-Borrowers
have delivered to Administrative Agent complete and correct copies of the
Related Transactions Documents (including all schedules, exhibits, amendments,
supplements, modifications, assignments and all other documents delivered
pursuant thereto or in connection therewith). The total consideration payable to
consummate the Tender Offer Acquisition inclusive of all fees and costs does not
exceed the amount of the loan made by Existing Lenders to JRC and L&LR on the
Tender Offer Borrowing Date as defined in and pursuant to the Existing Credit
Agreement. The total consideration payable to consummate the Merger inclusive of
all fees and costs will not exceed the amount of the loan made by Existing
Lenders to JRC and L&LR on the Merger Borrowing Date as defined in and pursuant
to the Existing Credit Agreement. No Co-Borrower party thereto and, to the
knowledge of the Co-Borrowers, no other Person party thereto is in default in
the performance or compliance with any provisions of any Related Transactions
Documents. The Related Transactions Documents comply with, and the Tender Offer
Acquisition and Merger have been or will be, prior to any Loan hereunder,
consummated in accordance with, all applicable laws. The Related Transactions
Documents are in full force and effect, and have not been terminated, rescinded
or withdrawn. All requisite approvals by Governmental Authorities having
jurisdiction over any party thereto, with respect to the transactions
contemplated by the Related Transactions Documents, have been or will be, prior
to any Loan hereunder, obtained and no such approvals impose any conditions to
the consummation of the transactions contemplated by the Related Transactions
Documents or to the conduct by any Co-Borrower of its business thereafter. Each
of the representations and warranties in, and given by each party to the Merger
Agreement is true and correct in all material respects (except to the extent
that such representation or warranty expressly relates to an earlier date).

      3.26. THE MERGER. Upon effectiveness of the Merger, all Obligations of,
and all loans and amounts due and owing by, JRC to the Existing Lenders pursuant
to the Existing Credit Agreement shall become the Obligations of Cigar. Each
Co-Borrower agrees and acknowledges that the full amount of such Obligations are
payable without defense, set-off, deduction or counterclaim for any reason
whatsoever.

      3.27. THE PLEDGE AGREEMENTS. The provisions of the Pledge Agreements are
effective to create, upon effectiveness of the Merger, in favor of the
Collateral Agent for the benefit of the Lenders a legal, valid and enforceable
security interest in, and/or Lien on, all right, title and interest of L&LR and
Cigar in the Collateral described therein. The security interests created in


                                      -28-
<PAGE>

favor of the Collateral Agent, as Pledgee, for the benefit of the Lenders under
the Pledge Agreements, upon delivery of the Pledged Stock to the Collateral
Agent, will constitute first priority perfected security interests in the
Pledged Stock described therein, subject to no security interests of any other
Person. No filings or recordings are required in order to perfect (or, assuming
the Collateral Agent's continuous possession of the Pledged Stock, maintain the
perfection or priority of) the security interests created in the Pledged Stock
and the proceeds thereof under the Pledge Agreements.

4. FINANCIAL STATEMENTS AND INFORMATION

      4.1. REPORTS AND NOTICES. Each Co-Borrower hereby agrees that from and
after the Closing Date and until the Termination Date, it shall deliver to
Administrative Agent and/or Lenders, as required, the Financial Statements,
notices, and other information at the times, to the Persons and in the manner
set forth in Annex B.

      4.2. COMMUNICATION WITH ACCOUNTANTS. Each Co-Borrower authorizes
Administrative Agent upon notice to Cigar and, so long as a Default or Event of
Default shall have occurred and be continuing, each Lender, to communicate
directly with its independent certified public accountants including Ernst &
Young LLP, and authorizes and shall instruct those accountants and advisors to
disclose and make available to Administrative Agent and each Lender any and all
Financial Statements and other supporting financial documents, schedules and
information relating to any Co-Borrower (including copies of any issued
management letters) with respect to the business, financial condition and other
affairs of any Co-Borrower.

5. AFFIRMATIVE COVENANTS

      Each Co-Borrower jointly and severally agrees as to all Co-Borrowers that
from and after the date hereof and until the Termination Date:

      5.1. MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Each Co-Borrower
shall: do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence (except as permitted by Section 6.1)
and its rights and franchises material to the conduct of the business of
Co-Borrowers taken as a whole; continue to conduct its business substantially as
now conducted or as otherwise permitted hereunder; at all times maintain,
preserve and protect all of its assets and properties used or useful in the
conduct of its business, and keep the same in good repair, working order and
condition in all material respects (taking into consideration ordinary wear and
tear) and from time to time make, or cause to be made, all necessary or
appropriate repairs, replacements and improvements thereto consistent with
industry practices; and transact business only in such corporate and trade names
as are set forth in Disclosure Schedule (5.1), as the same may be supplemented
from time to time by 30 days' advance written notice to Administrative Agent.

      5.2. PAYMENT OF CHARGES.

      (a) Subject to Section 5.2(b), each Co-Borrower shall pay and discharge or
cause to be paid and discharged promptly all Charges payable by it, including
(i) Charges imposed upon it, its income and profits, or any of its property
(real, personal or mixed) and all Charges with respect to tax, social security
and unemployment withholding with respect to its employees, and


                                      -29-
<PAGE>

(ii) lawful claims for labor, materials, supplies and services or otherwise,
before any thereof shall become past due except as provided in (b) below.

      (b) Each Co-Borrower may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges or claims described in
Section 5.2(a); provided, that (i) adequate reserves with respect to such
contest are maintained on the books of such Co-Borrower, in accordance with
GAAP, (ii) no Lien (other than Permitted Encumbrances) shall be imposed upon any
properties or assets of any Co-Borrower (whether now owned or hereafter
acquired) and such contest is maintained and prosecuted continuously and with
diligence and operates to suspend collection or enforcement of such Charges, and
(iii) such Co-Borrower shall promptly pay or discharge such contested Charges or
claims and all additional charges, interest, penalties and expenses, if any, and
shall deliver to Administrative Agent evidence acceptable to Administrative
Agent of such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to such Co-Borrower or the conditions set forth in this
Section 5.2(b) are no longer met.

      5.3. BOOKS, RECORDS AND INSPECTIONS. Co-Borrowers will keep proper books
of record and account in which full, true and correct entries in conformity with
generally accepted accounting principles (or the comparable foreign equivalent
thereof) and all requirements of law shall be made of all material dealings and
transactions in relation to its business and activities. Co-Borrowers will
permit officers and designated representatives of the Administrative Agent or
any Lender to visit and inspect, during regular business hours and under
guidance of an officer of a Co-Borrower, any of the respective properties of
Co-Borrowers, and, subject to the foregoing requirements, to examine the books
of account of Co-Borrowers and discuss the affairs, finances and accounts of any
of the Co-Borrowers with, and be advised as to the same by, its and their
officers and independent accountants, all at such reasonable times and
intervals, upon such reasonable notice and to such reasonable extent as the
Administrative Agent or such Lender may request.

      5.4. INSURANCE.

      (a) The Co-Borrowers shall, at their sole cost and expense, maintain the
policies of insurance described on Disclosure Schedule (3.19) as in effect on
the date hereof, or otherwise in forms and amounts substantially similar to such
policies in effect on the date hereof and with insurers with an A.M. Best rating
of at least equivalent to that of Co-Borrowers' existing insurers. The
Co-Borrowers shall provide thirty (30) days advance notice to Administrative
Agent of any non-renewal, cancellation or amendment of such policies of
insurance. If any Co-Borrower at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay all
premiums relating thereto, Administrative Agent may at any time or times
thereafter obtain and maintain such policies of insurance and pay such premiums
and take any other action with respect thereto which Administrative Agent deems
advisable. Administrative Agent shall have no obligation to obtain insurance for
any Co-Borrower or pay any premiums therefor. By doing so, Administrative Agent
shall not be deemed to have waived any Default or Event of Default arising from
any Co-Borrower's failure to maintain such insurance or pay any premiums
therefor. All sums so disbursed, including attorneys' fees, court costs and
other charges related thereto, shall be payable on demand by Co-Borrowers to
Administrative Agent and shall be additional Obligations hereunder.


                                      -30-
<PAGE>

      (b) Administrative Agent reserves the right at any time upon any change in
any Co-Borrower's risk profile (including any change in the product mix
maintained by any Co-Borrower or any laws affecting the potential liability of
such Co-Borrower) to require additional forms and limits of insurance to, in
Administrative Agent's opinion, ensure that each Co-Borrower is protected by
insurance in amounts and with coverage customary for its industry. If requested
by Administrative Agent, each Co-Borrower shall deliver to Administrative Agent
from time to time a report of a reputable insurance broker, reasonably
satisfactory to Administrative Agent, with respect to its insurance policies.

      5.5. COMPLIANCE WITH LAWS. Each Co-Borrower shall comply with all federal,
state, local and foreign laws and regulations applicable to it, including,
without limitation, those relating to ERISA and labor matters and Environmental
Laws and Environmental Permits, except to the extent that the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.

      5.6. SUPPLEMENTAL DISCLOSURE. From time to time as may be requested by
Administrative Agent, the Co-Borrowers shall supplement each Disclosure Schedule
hereto, or any representation herein or in any other Loan Document, with respect
to any matter hereafter arising which, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or which is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to any such Disclosure Schedule or representation shall be or be
deemed a waiver of any Default or Event of Default resulting from the matters
disclosed therein, except as consented to by Administrative Agent and Requisite
Lenders in writing; and (b) no supplement shall be required as to
representations and warranties that relate solely to the Closing Date.

      5.7. INTELLECTUAL PROPERTY. Each Co-Borrower will conduct its business and
affairs without infringement of or interference with any Intellectual Property
of any other Person in any material respect.

      5.8. ENVIRONMENTAL MATTERS. Each Co-Borrower shall and shall cause each
Person within its control to: (a) conduct its operations and keep and maintain
its Real Estate in compliance with all Environmental Laws and Environmental
Permits other than noncompliance which could not reasonably be expected to have
a Material Adverse Effect; (b) implement any and all investigation, remediation,
removal and response actions which are necessary to maintain the value of the
Real Estate or to otherwise comply with Environmental Laws and Environmental
Permits pertaining to the presence, generation, treatment, storage, use,
disposal, transportation or Release of any Hazardous Material on, at, in, under,
above, to, from or about any of its Real Estate other than where the failure to
implement such actions could not reasonably be expected to result in a Material
Adverse Effect; (c) notify Administrative Agent promptly after such Co-Borrower
becomes aware of any violation of Environmental Laws or Environmental Permits or
any Release on, at, in, under, above, to, from or about any Real Estate which is
reasonably likely to result in Environmental Liabilities having a Material
Adverse Effect; and (d) promptly forward to Administrative Agent a copy of any
order, notice, request for information or any


                                      -31-
<PAGE>

communication or report received by such Co-Borrower in connection with any such
violation or Release or any other matter relating to any Environmental Laws or
Environmental Permits that could reasonably be expected to result in
Environmental Liabilities having a Material Adverse Effect in each case whether
or not the Environmental Protection Agency or any Governmental Authority has
taken or threatened any action in connection with any such violation, Release or
other matter. If Administrative Agent at any time has a reasonable basis to
believe that there may be a violation of any Environmental Laws or Environmental
Permits by any Co-Borrower or any Environmental Liability arising thereunder, or
a Release of Hazardous Materials on, at, in, under, above, to, from or about any
of its Real Estate, which, in each case, could reasonably be expected to have a
Material Adverse Effect, then each Co-Borrower shall, upon Administrative
Agent's written request (i) cause the performance of such environmental audits
including subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at Co-Borrower's expense, as Administrative Agent may
from time to time reasonably request, which shall be conducted by reputable
environmental consulting firms reasonably acceptable to Administrative Agent and
shall be in form and substance reasonably acceptable to Administrative Agent,
and (ii) permit Administrative Agent or its representatives to have access to
all Real Estate for the purpose of conducting such environmental audits and
testing as Administrative Agent deems appropriate, including subsurface sampling
of soil and groundwater. Co-Borrowers shall reimburse Administrative Agent for
the reasonable costs of such audits and tests and the same will constitute a
part of the Obligations secured hereunder.

      5.9 PERFORMANCE OF OBLIGATIONS. Each Co-Borrower will perform all of its
obligations under each material agreement, contract or instrument by which it is
bound, except such non-performances as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect; provided
that the failure to pay any Indebtedness shall not constitute a breach of this
Section 5.9 unless it shall give rise to an Event of Default under Section
7.1(e).

      5.10. FURTHER ASSURANCES. (a) Each Co-Borrower agrees that it shall, at
such Co-Borrower's expense and upon request of Administrative Agent, duly
execute and deliver, or cause to be duly executed and delivered, to
Administrative Agent such further instruments and do and cause to be done such
further acts as may be necessary or proper in the reasonable opinion of
Administrative Agent to carry out more effectively the provisions and purposes
of this Agreement or any other Loan Document.

            (b) L&LR and Cigar will make, execute, endorse, acknowledge, file
and/or deliver to the Collateral Agent from time to time such conveyances,
financing statements, transfer endorsements, powers of attorney, certificates,
and other assurances or instruments and take such further steps relating to the
Collateral covered by any of the Pledge Agreements as the Collateral Agent may
reasonably require to ensure the validity, enforceability, perfection or
priority of the Collateral Agent's security interest in the Collateral or to
enable the Collateral Agent to realize or exercise the rights and benefits
intended to be created by the Pledge Agreements.

      5.11. ERISA EVENT. Each Co-Borrower shall, or shall cause (to the extent
it has such ability) an ERISA Affiliate to, notify the Administrative Agent
promptly, but in no event later than 10 days, following the occurrence of any
ERISA Event of the details of such ERISA Event


                                      -32-
<PAGE>

and the course of action which such Co-Borrower or ERISA Affiliate intends to
take to correct such ERISA Event.

      5.12. OWNERSHIP OF SUBSIDIARIES. Cigar will at all times, directly or
indirectly, own all of the issued and outstanding Stock of the other
Co-Borrowers (other than L&LR).

      5.13. CONSUMMATION OF MERGER. Cigar will perform all of its obligations
pursuant to the Merger Agreement and will take all action necessary to
consummate the Merger.

6. NEGATIVE COVENANTS

      Each Co-Borrower jointly and severally agrees as to all Co-Borrowers that,
without the prior written consent of Administrative Agent and the Requisite
Lenders, from and after the date hereof until the Termination Date:

      6.1. MERGERS, SUBSIDIARIES, ETC. No Co-Borrower shall directly or
indirectly, by operation of law or otherwise (a) form or acquire any
Subsidiary (other than Subsidiaries in existence as of the date hereof or
Subsidiaries which, at the time of formation or acquisition, become a
Co-Borrower and the Stock of which is pledged as collateral security for the
Obligations arising hereunder under terms acceptable to the Administrative
Agent and Lenders), or (b) merge with (except for the Merger) or consolidate
with, acquire all or substantially all of the assets or (except as permitted
in preceding clause (a)) capital stock of, or otherwise combine with or
acquire, any Person or any division of any Person; provided, however, any
co-Borrower may merge or consolidate with, or sell its assets to, any other
Co-Borrower.

      6.2. INVESTMENTS; LOANS AND ADVANCES. Except as otherwise expressly
permitted by this Section 6, no Co-Borrower shall make or permit to exist any
investment in, or make, accrue or permit to exist loans or advances of money to,
any Person, through the direct or indirect lending of money, holding of
securities or otherwise, except:

      (a) investments consisting of: (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within one year from the date of acquisition thereof; (ii) commercial
paper maturing no more than one year from the date of creation thereof and
currently having an investment grade rating from either Standard & Poor's
Ratings Group or Moody's Investors Service, Inc.; and (iii) certificates of
deposit, bankers acceptances, time deposits, Eurocurrency deposits and similar
types of investments routinely offered by commercial banks with final maturities
of one year or less issued by commercial banks organized in the United States,
or foreign branches thereof, having capital and surplus in excess of
$300,000,000 or any commercial bank of any other country that is a member of the
Organization for Economic Cooperation and Development ("OECD") and has total
assets in excess of $300,000,000;

      (b) receivables owing to Co-Borrowers and advances (including deposits) to
customers and receivables owing to suppliers, in each case if created, acquired
or made in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms;

      (c) investments (including debt obligations) received in connection with
the bankruptcy or reorganization of suppliers and customers and in settlement of
delinquent obligations of, and


                                      -33-
<PAGE>

other disputes with, customers and suppliers arising in the ordinary course of
business or upon foreclosure of any Lien in favor of the Co-Borrowers;

      (d) to the extent permitted by Section 6.4, investments in Affiliates;

      (e) guarantees permitted by Section 6.6;

      (f) investments contemplated by the Related Transaction Documents;

      (g) investments which the Co-Borrowers are contractually committed to make
pursuant to contracts existing on the Closing Date as set forth on Disclosure
Schedule (6.2(g));

      (h) any Co-Borrower may make intercompany loans to or other investments in
any other Co-Borrower and any Co-Borrower may borrow money from any other
Co-Borrower if done in the ordinary course of and pursuant to the reasonable
requirements of such Co-Borrower's business and upon fair and reasonable terms
that are no less favorable to such Co-Borrower than would be obtained in a
comparable arm's length transaction with a Person who is not a Co-Borrower; and

      (i) investments consisting of the transactions contemplated by Interest
Hedge Obligations permitted by Section 6.3(a).

      6.3. INDEBTEDNESS.

      (a) No Co-Borrower shall create, incur, assume or permit to exist any
Indebtedness, except (without duplication) the following ("Permitted
Indebtedness"): (i) Indebtedness secured by purchase money security interests
and Capitalized Leases permitted in clause (b) of Section 6.7, (ii) the Loans
and the other Obligations, (iii) unfunded pension fund and other employee
benefit plan obligations and liabilities to the extent they are permitted to
remain unfunded under applicable law, (iv) existing Indebtedness described in
Disclosure Schedule (6.3) and amendments or modifications thereof which do
not have the effect of increasing the principal amount thereof or changing
the amortization or expiration thereof and which are otherwise on terms and
conditions no less favorable to any Co-Borrower, as reasonably determined by
Administrative Agent, than the terms of the Indebtedness being amended or
modified, (v) Guarantees permitted by Section 6.6, and (vi) intercompany
indebtedness permitted by Section 6.2 hereof, and (vii) Indebtedness of
Co-Borrowers in a maximum aggregate amount of $20 million under Interest
Hedge Obligations incurred in connection with the Term Loan.

      (b) No Co-Borrower shall, directly or indirectly, voluntarily purchase,
redeem, defease or prepay any principal of, premium, if any, interest or other
amount payable in respect of any Indebtedness, other than (i) the Obligations,
or (ii) Indebtedness secured by a Permitted Encumbrance.


                                      -34-
<PAGE>

      6.4. EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS.

      (a) No Co-Borrower shall enter into or be a party to any transaction with
any Affiliate thereof (other than an Affiliate which is another Co-Borrower to
the extent permitted by Section 6.2(h)) except in the ordinary course of and
pursuant to the reasonable requirements of such Co-Borrower's business and upon
fair and reasonable terms that are no less favorable to such Co-Borrower than
would be obtained in a comparable arm's length transaction with a Person not an
Affiliate of such Co-Borrower. In addition, if any such transaction or series of
related transactions involves payments in excess of $150,000 in the aggregate,
the terms of these transactions must be disclosed in advance to Administrative
Agent and Lenders. All transactions with Affiliates existing as of the date
hereof are described on Disclosure Schedule (6.4(a)).

      (b) No Co-Borrower shall enter into any lending or borrowing transaction
with any employees of any Co-Borrower.

      6.5. CAPITAL STRUCTURE AND BUSINESS. No Co-Borrower shall (a) change in
any material respect the nature of its business as conducted on the date hereof,
(b) make any change in its capital structure as described on Disclosure Schedule
(3.9), including the issuance of any shares of Stock, warrants or other
securities convertible into Stock or any revision of the terms of its
outstanding Stock, or (c) amend its charter or bylaws in a manner which would
adversely affect Administrative Agent, Documentation Agent or Lenders or such
Co-Borrower's duty or ability to repay the Obligations. No Co-Borrower shall
engage in any business other than the businesses currently engaged in by it or
businesses which are complementary or reasonable extensions thereto.

      6.6. GUARANTEED INDEBTEDNESS. No Co-Borrower shall create, incur, assume
or permit to exist any Guaranteed Indebtedness except (a) by endorsement of
instruments or items of payment for deposit to the general account of any
Co-Borrower, and (b) for Guaranteed Indebtedness incurred for the benefit of any
other Co-Borrower if the primary obligation is expressly permitted by this
Agreement.

      6.7. LIENS. No Co-Borrower shall create, incur, assume or permit to
exist any Lien on or with respect to any of its properties or assets (whether
now owned or hereafter acquired) except for (a) Permitted Encumbrances; (b)
Liens created after the date hereof by conditional sale or other title
retention agreements (including Capital Leases) or in connection with
purchase money Indebtedness with respect to Equipment and Fixtures acquired
by any individual Co-Borrower or the Co-Borrowers collectively in the ordinary
course of business, involving the incurrence of an aggregate amount of
purchase money Indebtedness and Capital Lease Obligations of not more than
$150,000 (in the case of any individual Co-Borrower) or $500,000 (in the case
of the Co-Borrowers collectively) outstanding at any one time for all such
Liens (provided that such Liens in favor of the Term Loan Lenders attach only
to the assets, accessions, improvements and proceeds subject to such purchase
money debt and such Indebtedness is incurred at the time of such purchase and
does not exceed 100% of the purchase price of the subject assets or the cost
of construction or improvements); and (c) Liens on the Pledged Stock to
secure the Co-Borrowers' obligations under any Interest Hedge Obligation
permitted by Section 6.3(a) in favor of the Term Loan Lenders. In addition,
no Co-Borrower shall become a party to any agreement, note, indenture or
instrument, or take any other action, which would prohibit the creation of a
Lien on any of its properties or other assets in favor of Administrative
Agent, on behalf of itself, Documentation Agent and Lenders, as

                                      -35-
<PAGE>

collateral for the Obligations, except for Liens listed in (a) and (b) above and
operating leases, Capital Leases or Licenses which prohibit Liens only upon the
assets that are subject thereto.

      6.8. SALE OF STOCK AND ASSETS. No Co-Borrower shall sell, transfer,
convey, assign or otherwise dispose of any of its properties or other assets,
including the capital Stock of any of its Subsidiaries (whether in a public
or a private offering or otherwise) or any of their Accounts, other than (a)
the sale of Inventory in the ordinary course of business, (b) the sale,
transfer, conveyance or other disposition by a Co-Borrower of Equipment,
Fixtures or Real Estate that are obsolete or no longer used or useful in such
Co-Borrower's business having a value not exceeding $100,000 in the aggregate
in any Fiscal Year, provided the proceeds thereof are reinvested in the
business of the Co-Borrowers within 360 days thereafter, and if not so
reinvested, shall be applied as a mandatory prepayment pursuant to Section
1.5(b), (c) other Equipment and Fixtures having a value not exceeding
$100,000 in the aggregate in any Fiscal Year, provided the proceeds thereof
are reinvested in the business of the Co-Borrowers within 360 days
thereafter, and if not so reinvested, shall be applied as a mandatory
prepayment pursuant to Section 1.5(b), (d) cash and cash equivalents for fair
equivalent value in the ordinary course of business, (e) intercompany loans
and investments between Co-Borrowers permitted by Section 6.2(h) or (f)
Restricted Payments permitted by Section 6.14.

      6.9. ERISA. No Co-Borrower shall, or shall cause or permit any ERISA
Affiliate to, cause or permit to occur an event which could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA or cause or permit to occur an ERISA Event.

      6.10. FINANCIAL COVENANTS. The Co-Borrowers shall not breach or fail to
comply with any of the Financial Covenants (the "Financial Covenants") set forth
in Annex C.

      6.11. HAZARDOUS MATERIALS. No Co-Borrower shall cause or permit a Release
of any Hazardous Material on, at, in, under, above, to, from or about any of the
Real Estate where such Release would (a) violate in any respect, or form the
basis for any Environmental Liabilities under, any Environmental Laws or
Environmental Permits or (b) otherwise adversely impact the value of any of the
Real Estate, other than such violations or Environmental Liabilities which could
not reasonably be expected to have a Material Adverse Effect.

      6.12. SALE-LEASEBACKS.  No Co-Borrower shall engage in any
sale-leaseback, synthetic lease or similar transaction in respect of any of
its assets.

      6.13. CANCELLATION OF INDEBTEDNESS. No Co-Borrower shall voluntarily
cancel any claim or debt owing to it, except for reasonable consideration
negotiated on an arm's-length basis and in the ordinary course of its business
consistent with past practices.

      6.14. RESTRICTED PAYMENTS. No Co-Borrower shall make any Restricted
Payment, except intercompany loans and advances to the extent permitted by
Section 6.2(h) above.

      6.15. CHANGE OF CORPORATE NAME OR LOCATION; CHANGE OF FISCAL YEAR. No
Co-Borrower shall (a) change its corporate name, or (b) change its chief
executive office, principal place of business, corporate offices or warehouses
or locations at which it conducts business in


                                      -36-
<PAGE>

any case without at least thirty (30) days prior written notice to
Administrative Agent. No Co-Borrower shall change its Fiscal Year.

      6.16. NO IMPAIRMENT OF INTERCOMPANY TRANSFERS. No Co-Borrower shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) which could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or the making of
other distributions or the making or repayment of intercompany loans by any
Co-Borrower to another Co-Borrower, except:

      (a) customary non-assignment provisions in Licenses and leases entered
into in the ordinary course of business and consistent with past practices;

      (b) purchase money obligations otherwise permitted hereunder for property
acquired in the ordinary course of business that impose restrictions on the
property so acquired;

      (c) the refinancing of Indebtedness permitted by Section 6.3(a)(iv),
provided that the restrictions contained in the agreements governing such
refinancing Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced; and

      (d) restrictions provided under the Loan Documents.

      6.17. NO SPECULATIVE TRANSACTIONS. No Co-Borrower shall engage in any
transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it and the values of foreign currencies
receivable or payable by it and Interest Hedge Obligations permitted by
Section 6.3(a).

      6.18. STATUS OF L&LR. After the consummation of the Merger, L&LR shall be
a company which shall not engage in any activities other than those associated
with being the sole shareholder of Cigar and, without limiting the foregoing,
shall not incur any liabilities of any nature whatsoever other than pursuant to
this Agreement, the other Loan Documents and Interest Hedge Obligations
permitted by Section 6.3(a).

7. EVENTS OF DEFAULT; RIGHTS AND REMEDIES

      7.1. EVENTS OF DEFAULT. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an "Event of
Default" hereunder:

      (a) Co-Borrowers (i) fail to make any payment of principal of the Loans
when due and payable, (ii) fail to make any payment of interest on, or Fees
owing in respect of, the Loans or any of the other Obligations when due and
payable, or (iii) fail to pay or reimburse Administrative Agent, Documentation
Agent or Lenders for any expense reimbursable hereunder or under any other Loan
Document within three (3) Business Days following Administrative Agent's demand
for such reimbursement or payment of expenses; or

      (b) Any representation, warranty or statement made by any Co-Borrower
herein or in any other Loan Document or in any certificate delivered pursuant
thereto shall prove to be untrue in any material respect on the date of which
made or deemed made; or


                                      -37-
<PAGE>


      (c) Any Co-Borrower shall fail or neglect to perform, keep or observe any
of the provisions of Sections 1.4 or 6; or

      (d) Any Co-Borrower shall fail or neglect to perform, keep or observe any
other provision of this Agreement or of any of the other Loan Documents (other
than any provision embodied in or covered by any other clause of this Section
7.1) and the same shall remain unremedied for ten (10) days or more after notice
thereof from the Administrative Agent; or

      (e) A default or breach shall occur under any other agreement, document
or instrument to which any Co-Borrower is a party which is not cured within
any applicable grace period, and such default or breach (i) involves the
failure to make any payment when due in respect of any Indebtedness (other
than the Obligations) of any Co-Borrower in excess of $100,000 in the
aggregate or, when added together with all such defaults or breaches of the
Co-Borrowers collectively, results in the failure of the Co-Borrowers to make
payments when due in respect of Indebtedness (other than the Obligations) in
excess of $500,000 in the aggregate, or (ii) causes, or permits any holder of
such Indebtedness or a trustee to cause, Indebtedness or a portion thereof in
excess of $250,000 in the aggregate to become due prior to its stated
maturity or prior to its regularly scheduled dates of payment, regardless of
whether such default is waived, or such right is exercised, by such holder or
trustee; or

      (f) A case or proceeding shall have been commenced against any Co-Borrower
seeking a decree or order in respect of any Co-Borrower (i) under Title 11 of
the United States Code, as now constituted or hereafter amended or any other
applicable federal, state or foreign bankruptcy or other similar law, (ii)
appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator
(or similar official) for any Co-Borrower or of any substantial part of any such
Person's assets, or (iii) ordering the winding-up or liquidation of the affairs
of any Co-Borrower, and such case or proceeding shall remain undismissed or
unstayed for sixty (60) days or more or such court shall enter a decree or order
granting the relief sought in such case or proceeding; or

      (g) Any Co-Borrower (i) shall file a petition seeking relief under Title
11 of the United States Code, as now constituted or hereafter amended, or any
other applicable federal, state or foreign bankruptcy or other similar law, (ii)
shall fail to contest in a timely and appropriate manner or shall consent to the
institution of proceedings thereunder or to the filing of any such petition or
to the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of any Co-Borrower or of
any substantial part of any such Person's assets, (iii) shall make an assignment
for the benefit of creditors, or (iv) shall take any corporate action in
furtherance of any of the foregoing, or (v) shall admit in writing its inability
to, or shall be generally unable to, pay its debts as such debts become due; or

      (h) A final judgment or judgments for the payment of money in excess of
$50,000 in the aggregate at any time outstanding shall be rendered against any
Co-Borrower and the same shall not, within thirty (30) days after the entry
thereof, have been discharged or execution thereof stayed or bonded pending
appeal, or shall not have been discharged prior to the expiration of any such
stay; or

      (i) Any material provision of any Loan Document shall for any reason cease
to be in force and effective (or any Co-Borrower shall challenge the
enforceability of any Loan Document or shall assert in writing, or engage in any
action or inaction based on any such assertion, that any provision of any of the
Loan Documents has ceased to be or otherwise is not valid, binding and
enforceable in accordance with its terms); or


                                      -38-
<PAGE>

      (j) At any time after the execution and delivery thereof, any of the
Pledge Agreements shall cease to be in full force and effect, or shall cease to
give the Collateral Agent for the benefit of the Lenders the Liens, rights,
powers and privileges purported to be created thereby (including, without
limitation, a perfected security interest in, and Lien on all of the
Collateral), in favor of the Collateral Agent, superior to and prior to the
rights of all third Persons, and subject to no other Liens (except as otherwise
expressly provided in the Pledge Agreements), or L&LR or Cigar shall default in
the due performance or observance of any term, covenant or agreement on its part
to be performed or observed pursuant to any of the Pledge Agreements; or

      (k) An "event of default" shall occur pursuant to any Interest Hedge
Obligation permitted by Section 6.3(a); or

      (l) Any Change of Control shall occur.

      7.2. REMEDIES. (a) If any Event of Default shall have occurred and be
continuing, Administrative Agent may (and at the written request of the
Requisite Revolving Credit Lenders shall), without notice, suspend the Revolving
Credit Loan facility whereupon any further Revolving Credit Loans shall be made
or extended in Administrative Agent's sole discretion (or in the sole discretion
of the Requisite Revolving Credit Lenders, if such suspension occurred at their
direction) so long as such Default or Event of Default is continuing. If any
Default or Event of Default shall have occurred and be continuing,
Administrative Agent shall, in addition to all other rights and remedies,
without notice except as otherwise expressly provided herein, increase the rate
of interest applicable to the Loans to the Default Rate.

      (b) If any Event of Default shall have occurred and be continuing,
Administrative Agent may (and at the written request of the Requisite Lenders
shall), without notice, (i) terminate the Revolving Credit Loan facility with
respect to further Revolving Credit Loans; (ii) declare all or any portion of
the Obligations, including all or any portion of any Loan to be forthwith due
and payable, all without presentment, demand, protest or further notice of any
kind, all of which are expressly waived by Co-Borrowers; (iii) enforce, as
Collateral Agent, all of the Liens and security interests created pursuant to
the Pledge Agreements; and (iv) exercise any rights and remedies provided to
Administrative Agent under the Loan Documents and/or at law or equity; provided,
however, that upon the occurrence of an Event of Default specified in Sections
7.1(f) or (g), the Revolving Credit Loan facility shall be immediately
terminated and all of the Obligations, including the Revolving Credit Loans and
the Term Loan, shall become immediately due and payable without declaration,
notice or demand by any Person.

      7.3. WAIVERS BY CO-BORROWERS. Except as otherwise provided for in this
Agreement or by applicable law, each Co-Borrower waives: (a) presentment, demand
and protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Administrative Agent on which any Co-Borrower may in any way
be liable, and hereby ratifies and confirms whatever Administrative Agent may do
in this regard, and (b) the benefit of all valuation, appraisal, marshaling and
exemption laws.

                                      -39-
<PAGE>

8. ASSIGNMENT AND PARTICIPATIONS

      8.1. ASSIGNMENT AND PARTICIPATIONS.

      (a) Each Lender may assign to any entity, at any time or times, the
Loans, the Loan Documents and any Commitment or of any portion thereof or
interest therein, including any Lender's rights, title, interests, remedies,
powers or duties thereunder, whether evidenced by a writing or not; provided,
however, that any assignment (other than to another Lender or to an Affiliate
of a Lender) shall (i) so long as no Event of Default shall have occurred and
be continuing, require the consent of the Co-Borrowers (which shall not be
unreasonably withheld or delayed); (ii) require the consent of Administrative
Agent (which shall not be unreasonably withheld or delayed); (iii) require
the execution of an assignment agreement (an "Assignment Agreement"
substantially in the form attached hereto as Exhibit 8.1(a) and otherwise in
form and substance satisfactory to, and acknowledged by, Administrative
Agent; (iv) be conditioned on such assignee Lender representing to the
assigning Lender and Administrative Agent that it is purchasing the
applicable Loans to be assigned to it for its own account, for investment
purposes and not with a view to the distribution thereof; (v) if a partial
assignment, be in an amount at least equal to $5,000,000 (unless otherwise
agreed to by Co-Borrowers and the Administrative Agent) and, after giving
effect to any such partial assignment, the assigning Lender shall have
retained Commitments in an amount at least equal to $5,000,000; and (vi)
include a payment to Administrative Agent of an assignment fee of $3,500. In
the case of an assignment by a Lender under this Section 8.1, the assignee
shall have, to the extent of such assignment, the same rights, benefits and
obligations as it would if it were a Lender hereunder. The assigning Lender
shall be relieved of its obligations hereunder with respect to its
Commitments or assigned portion thereof from and after the date of such
assignment. Co-Borrowers hereby acknowledge and agree that any assignment
will give rise to a direct obligation of Co-Borrowers to the assignee and
that the assignee shall be considered to be a "Lender". In all instances,
each Lender's liability to make Loans hereunder shall be several and not
joint and shall be limited to such Lender's pro rata share of the applicable
Commitment. In the event Administrative Agent or any Lender assigns or
otherwise transfers all or any part of the Obligations, Administrative Agent
or any such Lender shall so notify Co-Borrowers and Co-Borrowers shall, upon
the request of Administrative Agent or such Lender, execute new Notes in
exchange for the Notes, if any, being assigned. Notwithstanding the foregoing
provisions of this Section 8.1(a), any Lender may at any time pledge the
Obligations held by it and such Lender's rights under this Agreement and the
other Loan Documents to a Federal Reserve Bank, and any Lender that is an
investment fund may assign the Obligations held by it and such Lender's
rights under this Agreement and the other Loan Documents to another
investment fund managed by the same investment advisor; provided, however,
that no such pledge to a Federal Reserve Bank shall release such Lender from
such Lender's obligations hereunder or under any other Loan Document.

      (b) Each Lender may sell or assign participations in, at any time or
times, the Loans without the consent of the Co-Borrowers. Any participation by a
Lender of all or any part of its Commitments shall be made with the
understanding that all amounts payable by Co-Borrowers hereunder shall be
determined as if that Lender had not sold such participation. Although any
Lender may grant participations in its rights hereunder, such Lender shall
remain a "Lender" for all purposes hereunder and the participant shall not
constitute a "Lender" hereunder. Without


                                      -40-
<PAGE>

limiting the foregoing, any participation by a Lender of all or any part of its
Commitments shall be made with the understanding that the holder of any such
participation shall not be entitled to approve any amendment to or waiver of
this Agreement or any other Loan Document pursuant to Section 10.3 except to the
extent such amendment or waiver would extend the final scheduled maturity of any
Loan or Note, or reduce the rate or extend the time of payment of interest or
Fees thereon (except in connection with a waiver of applicability of any
past-default increase in interest rates), or reduce the principal amount
thereof. Solely for purposes of Sections 1.10, 1.11 (assuming the Lender
complies with the provisions applicable to a foreign Lender), 1.12 (but not
higher than that which the Lender who granted the applicable participation would
have been entitled to receive) and 10.7, Co-Borrowers acknowledge and agree that
a participation shall give rise to a direct obligation of Co-Borrowers to the
participant and the participant shall be considered to be a "Lender". Except as
set forth in the preceding sentence no Co-Borrower shall have any obligation or
duty to any participant. Neither Administrative Agent nor any Lender (other than
the Lender selling a participation) shall have any duty to any participant and
may continue to deal solely with the Lender selling a participation as if no
such sale had occurred.

      (c) Except as expressly provided in this Section 8.1, no Lender shall, as
between Borrower and that Lender, or Administrative Agent and that Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Loans, the Notes or other Obligations owed to such Lender.

      (d) Each Co-Borrower shall assist any Lender permitted to sell assignments
or participations under this Section 7.1 as reasonably required to enable the
assigning or selling Lender to effect any such assignment or participation,
including the execution and delivery of any and all agreements, notes and other
documents and instruments as shall be requested. Until the completion of the
syndication of the Loans hereunder, as reasonably determined by Administrative
Agent, in its sole discretion, each Co-Borrower executing this Agreement shall
(i) assist in the preparation of informational materials for, and the
participation of management in meetings with, potential assignees or
participants, and (ii) certify the correctness, completeness and accuracy of all
descriptions of the Co-Borrowers and their affairs contained in any selling
materials provided by it and all other information provided by it and included
in such materials.

      (e) A Lender may furnish any information concerning Co-Borrowers in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants).

      9. THE ADMINISTRATIVE AGENT

      9.1. APPOINTMENT OF ADMINISTRATIVE AGENT. Chase is hereby appointed to act
on behalf of all Lenders as the Administrative Agent (for purposes of this
Section 9, the term "Administrative Agent" shall include Chase in its capacity
as Administrative Agent and as Collateral Agent pursuant to the Pledge
Agreements and any Lending Affiliate of Chase performing any of the duties or
functions of the Administrative Agent hereunder or under any other Loan
Document) to act as specified herein and in the other Loan Documents. Each
Lender hereby irrevocably authorizes, and each holder of any Note by the
acceptance of such Note shall be deemed irrevocably to authorize, the
Administrative Agent to take such action on its behalf under the provisions of
this Agreement, the other Loan Documents and any other instruments


                                      -41-
<PAGE>

and agreements referred to herein or therein and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to or
required of the Administrative Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. The Administrative Agent may
perform any of its duties hereunder by or through its respective officers,
directors, agents, employees or affiliates.

      9.2. NATURE OF DUTIES. The Administrative Agent shall not have any duties
or responsibilities except those expressly set forth in this Agreement and in
the other Loan Documents. Neither the Administrative Agent nor any of its
respective officers, directors, agents, employees or affiliates shall be liable
for any action taken or omitted by it or them hereunder or under any other Loan
Document or in connection herewith or therewith, unless determined by the
non-appealable final judgment of a court of competent jurisdiction to have been
caused by its or their gross negligence or willful misconduct. The duties of the
Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement or any other
Loan Document a fiduciary relationship in respect of any Lender or the holder of
any Note; and nothing in this Agreement or any other Loan Document, expressed or
implied, is intended to or shall be so construed as to impose upon the
Administrative Agent any obligations in respect of this Agreement or any other
Loan Document except as expressly set forth herein or therein.

      9.3. LACK OF RELIANCE ON THE ADMINISTRATIVE AGENT. Independently and
without reliance upon the Administrative Agent, each Lender and the holder of
each Note, to the extent it deems appropriate, has made and shall continue to
make (i) its own independent investigation of the financial condition and
affairs of Co-Borrowers and statements, information and representations made by
Co-Borrowers in connection with the making and the continuance of the Loans and
the taking or not taking of any action in connection herewith and (ii) its own
appraisal of the creditworthiness of Co-Borrowers and, except as expressly
provided in this Agreement, the Administrative Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to provide any Lender
or the holder of any Note with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter. The Administrative Agent shall not be responsible
to any Lender or the holder of any Note for any recitals, statements,
information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith or for the
execution, effectiveness, genuineness, validity, enforceability, perfection,
collectability, priority or sufficiency of this Agreement or any other Loan
Document or the financial condition of Co-Borrowers or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any other Loan Document, or the
financial condition of Co-Borrowers or the existence or possible existence of
any Default or Event of Default.

      9.4. RELIANCE. The Administrative Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that the Administrative Agent believed to be the proper Person, and,
with respect to all legal matters pertaining to this Agreement and any other
Loan Document and its duties hereunder and thereunder, upon advice of counsel
selected by the Administrative Agent. No Lender or the holder of any Note shall
have any right of action


                                      -42-
<PAGE>

whatsoever against the Administrative Agent as a result of the Administrative
Agent acting or refraining from acting hereunder or under any other Loan
Document in accordance with the instructions of the Requisite Revolving Credit
Lenders, or Requisite Lenders, as the case may be.

      9.5. INDEMNIFICATION. (a) To the extent the Administrative Agent is not
reimbursed and indemnified by the Co-Borrowers, the Lenders will reimburse and
indemnify the Administrative Agent, in proportion to their respective Pro Rata
Shares, for and against any and all liabilities, obligations, losses, damages,
penalties, claims, actions, judgments, costs, expenses or disbursements of
whatsoever kind or nature which may be imposed on, asserted against or incurred
by the Administrative Agent in performing its respective duties hereunder or
under any other Loan Document, in any way relating to or arising out of this
Agreement or any other Loan Document; provided that no Lender shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements to the extent
determined by a final non-appealable judgment of a court of competent
jurisdiction to have resulted from the Administrative Agent's gross negligence
or willful misconduct. Without limiting the foregoing, each Lender agrees to
reimburse the Administrative Agent promptly upon demand for its ratable share of
any out-of-pocket expenses (including counsel fees) incurred by Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Loan Document, to the
extent that Administrative Agent is not reimbursed for such expenses by
Co-Borrowers.

      (b) The Administrative Agent shall be fully justified in failing or
refusing to take any action hereunder and under any other Loan Document (except
actions expressly required to be taken by it hereunder or under the Loan
Documents) if such action would, in the opinion of the Administrative Agent, be
contrary to law or the terms of this Agreement or any other Loan Document.

      9.6. THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to
its obligation to make Loans under this Agreement, the Administrative Agent
shall have the rights and powers specified herein for a "Lender" and may
exercise the same rights and powers as though it were not performing the duties
specified herein; and the term "Lenders," "Requisite Lenders," "holders of
Notes" or any similar terms shall, unless the context clearly otherwise
indicates, include the Administrative Agent in its individual capacity. The
Administrative Agent may accept deposits from, lend money to, and generally
engage in any kind of banking, trust or other business with any Co-Borrower or
any Affiliate of any Co-Borrower as if it were not performing the duties
specified herein, and may accept fees and other consideration from the
Co-Borrowers for services in connection with this Agreement and otherwise
without having to account for the same to the Lenders.

      9.7. HOLDERS. The Administrative Agent may deem and treat the payee of any
Note as the owner thereof for all purposes hereof unless and until a written
notice of the assignment, transfer or endorsement thereof, as the case may be,
shall have been filed with the Administrative Agent. Any request, authority or
consent of any Person who, at the time of making such request or giving such
authority or consent, is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee, assignee or indorsee, as the case


                                      -43-
<PAGE>

may be, of such Note or of any Note or Notes issued in exchange therefor.

      9.8. DOCUMENTATION AGENT; SYNDICATION AGENT. (a) Nothing in this
Agreement shall impose on the Documentation Agent or the Syndication Agent,
in each case in such capacity, any duties or obligations.

      (b) To the extent the Documentation Agent is not reimbursed and
indemnified by the Co-Borrowers, the Lenders will reimburse and indemnify the
Documentation Agent, in proportion to their respective Pro Rata Shares, for
and against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, costs, expenses or disbursements of whatsoever
kind or nature which may be imposed on, asserted against or incurred by the
Documentation Agent in acting as such hereunder or under any other Loan
Document, in any way relating to or arising out of this Agreement or any
other Loan Document; provided that no Lender shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements to the extent determined
by a final non-appealable judgment of a court of competent jurisdiction to
have resulted from the Documentation Agent's gross negligence or willful
misconduct.

      9.9. RESIGNATION BY THE ADMINISTRATIVE AGENT. (a) The Administrative Agent
may resign from the performance of all its functions and duties hereunder and/or
under the other Loan Documents at any time by giving 15 Business Days' prior
written notice to the Co-Borrowers and the Lenders. Such resignation shall take
effect upon the appointment of a successor Administrative Agent pursuant to
clauses (b) and (c) below or as otherwise provided below.

      (b) Upon any such notice of resignation, the Requisite Lenders shall
appoint a successor Administrative Agent hereunder and under the other Loan
Documents who shall be a Lender, a commercial bank or a trust company in each
case reasonably acceptable to the Co-Borrowers.

      (c) If a successor Administrative Agent shall not have been so appointed
within such 15 Business Day period, the Administrative Agent, with the consent
of the Co-Borrowers (which shall not be unreasonably withheld), shall then
appoint a successor Administrative Agent who shall serve as Administrative Agent
hereunder and under the other Loan Documents until such time, if any, as the
Requisite Lenders appoint a successor Administrative Agent as provided above.

      (d) If no successor Administrative Agent has been appointed pursuant to
clause (b) or (c) above by the 30th Business Day after the date such notice of
resignation was given by the Administrative Agent, the Administrative Agent's
resignation shall become effective and the Lenders shall thereafter perform all
the duties of the Administrative Agent hereunder and/or under any of the Loan
Documents until such time, if any, as the Requisite Lenders appoint a successor
Administrative Agent as provided above.

      (e) Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall succeed to and become vested with all the rights, powers, privileges
and duties of the resigning Administrative Agent.

      (f) Upon the earlier of the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent or the
effective date of the resigning Administrative Agent's resignation, the
resigning Administrative Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents, except that any
indemnity rights or other rights in favor of such resigning Administrative Agent
shall continue. After any resigning Administrative Agent's resignation
hereunder, the provisions of this Section 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Administrative Agent
under this Agreement and the other Loan Documents.

      (g) Anything in this Agreement to the contrary notwithstanding, each
Lender hereby agrees with each other Lender that no Lender shall take any action
to protect or enforce its rights arising out of this Agreement or the Notes
(including exercising any rights of set-off) without first obtaining the prior
written consent of Administrative Agent and Requisite Lenders, it being


                                      -44-
<PAGE>

the intent of Lenders that any such action to protect or enforce rights under
this Agreement and the Notes shall be taken in concert and at the direction or
with the consent of Administrative Agent.

10. MISCELLANEOUS

      10.1. SUCCESSORS AND ASSIGNS. This Agreement and the other Loan Documents
shall be binding on and shall inure to the benefit of each Co-Borrower,
Administrative Agent, Documentation Agent, Lenders and their respective
successors and assigns (including, in the case of any Co-Borrower, a
debtor-in-possession on behalf of such Co-Borrower), except as otherwise
provided herein or therein. No Co-Borrower may assign, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder or under
any of the other Loan Documents without the prior express written consent of
Administrative Agent and Lenders. Any such purported assignment, transfer,
hypothecation or other conveyance by any Co-Borrower without the prior express
written consent of Administrative Agent and Lenders shall be void. The terms and
provisions of this Agreement are for the purpose of defining the relative rights
and obligations of each Co-Borrower, Administrative Agent, Documentation Agent
and Lenders with respect to the transactions contemplated hereby and no Person
shall be a third party beneficiary of any of the terms and provisions of this
Agreement or any of the other Loan Documents.

      10.2. COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. The Loan Documents
constitute the complete agreement between the parties with respect to the
subject matter thereof and may not be modified, altered or amended except as set
forth in Section 10.3 below. Any letter of interest, commitment letter and/or
fee letter (other than the Fee Letter) between any Co-Borrower and either
Administrative Agent or any Lender or any of their respective affiliates,
predating this Agreement and relating to a financing of substantially similar
form, purpose or effect shall be superseded by this Agreement.

      10.3. AMENDMENTS AND WAIVERS. (a) Except for actions expressly
permitted to be taken by Administrative Agent, no amendment, modification,
termination or waiver of any provision of this Agreement or any of the Notes,
or any consent to any departure by any Co-Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed by
Administrative Agent and Co-Borrowers, and by Requisite Lenders, Requisite
Revolving Credit Lenders or all affected Lenders, as applicable. Except as
set forth in clauses (b) and (c) below, all such amendments, modifications,
terminations or waivers requiring the consent of any Lenders shall require
the written consent of Requisite Lenders.

      (b) No amendment, modification, termination or waiver of or consent with
respect to any provision of this Agreement which waives compliance with the
conditions precedent set forth in Section 2.2 to the making of any Loan shall be
effective unless the same shall be in writing and signed by Administrative
Agent, Documentation Agent, all Lenders and Co-Borrowers. Notwithstanding
anything contained in this Agreement to the contrary, no waiver or consent with
respect to any Default (if in connection therewith Administrative Agent or
Requisite Revolving Credit Lenders, as the case may be, have exercised its or
their right to suspend the making or incurrence of further Revolving Credit
Loans pursuant to Section 7.2) or any Event of Default shall be effective for
purposes of the conditions precedent to the making of Loans set forth in


                                      -45-
<PAGE>

Section 2.2 unless the same shall be in writing and signed by Administrative
Agent, all Lenders and Co-Borrowers.

      (c) No amendment, modification, termination or waiver shall, unless in
writing and signed by Administrative Agent, Documentation Agent and each
Lender directly affected thereby, do any of the following: (i) increase the
principal amount of any Lender's Commitment (which action shall be deemed to
directly affect all Lenders); (ii) reduce the principal of, rate of interest
on or Fees payable with respect to any Loan of any affected Lender; (iii)
extend any scheduled payment date or final maturity date of the principal
amount of any Loan of any affected Lender; (iv) waive, forgive, defer, extend
or postpone any payment of interest or Fees as to any affected Lender; (v)
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the Loans which shall be required for Lenders or any of them to
take any action hereunder (which action shall be deemed to directly affect
all Lenders); and (vi) amend or waive this Section 10.3 or the definitions of
the terms "Requisite Lenders" or "Requisite Revolving Credit Lenders" insofar
as such definitions affect the substance of this Section 10.3 (which action
shall be deemed to directly affect all Lenders). Furthermore, no amendment,
modification, termination or waiver affecting the rights or duties of the
Administrative Agent under this Agreement or any other Loan Document shall be
effective unless in writing and signed by the Administrative Agent, in
addition to Lenders required hereinabove to take such action. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the holder of that Note. No
notice to or demand on any Co-Borrower in any case shall entitle such
Co-Borrower or any other Co-Borrower to any other or further notice or demand
in similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 10.3 shall be
binding upon each holder of the Notes at the time outstanding and each future
holder of the Notes.

      (d) If, in connection with any proposed amendment, modification, waiver
or termination (a "Proposed Change") requiring the consent of all affected
Lenders, the consent of Requisite Lenders is obtained, but the consent of
other Lenders whose consent is required is not obtained (any such Lender
whose consent is not obtained being referred to as a "Non-Consenting
Lender"), then, so long as Administrative Agent is not a Non-Consenting
Lender, at Co-Borrowers' request Administrative Agent, or a Person acceptable
to Administrative Agent, shall have the right with Administrative Agent's
consent and in Administrative Agent's sole discretion (but shall have no
obligation) to purchase from such Non-Consenting Lenders, and such
Non-Consenting Lenders agree that they shall, upon Administrative Agent's
request, sell and assign to Administrative Agent or such Person, all of the
Commitments of such Non-Consenting Lender for an amount equal to the
principal balance of all Loans held by the Non-Consenting Lender and all
accrued interest and Fees, the amounts, if any, required to be paid pursuant
to Section 1.10(b) (it being understood that such sale and assignment of any
Eurodollar Loan shall constitute a repayment of such Loan) and other payments
required hereunder with respect thereto through the date of sale, such
purchase and sale to be consummated pursuant to an executed Assignment
Agreement.

      (e) Notwithstanding anything set forth herein to the contrary, a Lender
that fails to fund any payments or Revolving Credit Loans required under this
Agreement and the other Loan Documents, shall not have any voting or consent
rights under or with respect to any Loan Document or constitute a "Lender" or
"Revolving Credit Lender" (or be included in the calculation of "Requisite
Lenders" or "Requisite Revolving Credit Lenders" hereunder) for any


                                      -46-
<PAGE>

voting or consent rights under or with respect to any Loan Document if such
failure to fund exists as at the time of the required voting action.

      10.4. FEES AND EXPENSES. Co-Borrowers shall reimburse the Administrative
Agent for all of its out-of-pocket expenses incurred in connection with the
preparation of the Loan Documents (including the reasonable fees and expenses of
all of its special loan counsel, advisors, consultants and auditors retained in
connection with the Loan Documents and the Related Transactions and advice in
connection therewith). Co-Borrowers shall reimburse Administrative Agent (and,
with respect to clauses (c), (d) and (e) below, each Lender) for all of its
respective fees, costs and expenses, including the reasonable fees, costs and
expenses of counsel or other advisors (including environmental and management
consultants and appraisers) for advice, assistance, or other representation in
connection with:

      (a) the forwarding to Co-Borrowers or any other Person on behalf of
Co-Borrowers by Administrative Agent of the proceeds of the Loans;

      (b) any amendment, modification or waiver of, or consent with respect to,
any of the Loan Documents or Related Transactions Documents or advice in
connection with the administration of the Loans made pursuant hereto or its
rights hereunder or thereunder;

      (c) any litigation, contest, dispute, suit, proceeding or action (whether
instituted by Administrative Agent, any Lender, Co-Borrowers or any other
Person) in any way relating to any of the Loan Documents or any other agreement
to be executed or delivered in connection therewith or herewith, whether as
party, witness, or otherwise, including any litigation, contest, dispute, suit,
case, proceeding or action, and any appeal or review thereof, in connection with
a case commenced by or against Co-Borrowers or any other Person that may be
obligated to Administrative Agent by virtue of the Loan Documents; including any
such litigation, contest, dispute, suit, proceeding or action arising in
connection with any work-out or restructuring of the Loans during the pendency
of one or more Events of Default; provided that in the case of reimbursement of
counsel for Lenders other than Administrative Agent, such reimbursement shall be
limited to one counsel for all such Lenders;

      (d) any attempt to enforce any remedies of Administrative Agent or any
Lender against any or all of the Co-Borrowers or any other Person (but excluding
Administrative Agent or any Lender including any successor or assign thereof)
that may be obligated to Administrative Agent or any Lender by virtue of any of
the Loan Documents; including any such attempt to enforce any such remedies in
the course of any work-out or restructuring of the Loans during the pendency of
one or more Events of Default; provided that in the case of reimbursement of
counsel for Lenders other than Administrative Agent, such reimbursement shall be
limited to one counsel for all such Lenders;

      (e) any work-out or restructuring of the Loans during the pendency of one
or more Events of Default;

      (f) efforts to (i) monitor the Loans or any of the other Obligations and
(ii) evaluate, observe or assess any of the Co-Borrowers or their respective
affairs, including, as to each of clauses (a) through (f) above, all reasonable
attorneys' and other professional and service


                                      -47-
<PAGE>

providers' fees arising from such services, including those in connection with
any appellate proceedings; and all reasonable expenses, costs, charges and other
reasonable fees incurred by such counsel and others in any way or respect
arising in connection with or relating to any of the events or actions described
in this Section 10.4 shall be payable, on demand, by Co-Borrowers to
Administrative Agent. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: fees, costs and expenses of
accountants, environmental advisors, appraisers, investment bankers, management
and other consultants and paralegals; court costs and expenses; photocopying and
duplication expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram or telecopy charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or other advisory
services.

      10.5. NO WAIVER. Neither Administrative Agent's nor any Lender's failure,
at any time or times, to require strict performance by the Co-Borrowers of any
provision of this Agreement or any of the other Loan Documents shall not waive,
affect or diminish any right of Administrative Agent or such Lender thereafter
to demand strict compliance and performance therewith. Any suspension or waiver
of an Event of Default shall not suspend, waive or affect any other Event of
Default whether the same is prior or subsequent thereto and whether the same or
of a different type. Subject to the provisions of Section 10.3, none of the
undertakings, agreements, warranties, covenants and representations of any
Co-Borrower contained in this Agreement or any of the other Loan Documents and
no Default or Event of Default by any Co-Borrower shall be deemed to have been
suspended or waived by Administrative Agent or any Lender, unless such waiver or
suspension is by an instrument in writing signed by an officer of or other
authorized employee of such Administrative Agent and the applicable required
Lenders and directed to Borrower specifying such suspension or waiver.

      10.6. REMEDIES. Administrative Agent's and each Lenders' rights and
remedies under this Agreement shall be cumulative and nonexclusive of any other
rights and remedies which Administrative Agent or any Lender may have under any
other agreement, including the other Loan Documents, by operation of law or
otherwise.

      10.7. SETOFF AND SHARING OF PAYMENTS. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender and each holder of any Note is hereby authorized at any time or from
time to time, without notice to any Co-Borrower or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all balances held by it at any of its offices for the account of
Co-Borrower (regardless of whether such balances are then due to Co-Borrower)
and any other properties or assets at any time held or owing by that Lender or
that holder to or for the credit or for the account of Co-Borrower against and
on account of any of the Obligations which are not paid when due. Any Lender or
holder of any Note exercising a right to set off or otherwise receiving any
payment on account of the Obligations in excess of its Pro Rata Share thereof
shall purchase for cash (and the other Lenders or holders shall sell) such
participations in each such other Lender's or holder's Pro Rata Share of the
Obligations as would be necessary to cause such Lender to share the amount so
set off or otherwise received with each other Lender or holder in accordance
with their respective Pro Rata Shares. Co-Borrowers agree, to the fullest extent
permitted by law, that (a) any Lender or holder may exercise its right to set
off with respect to


                                      -48-
<PAGE>

amounts in excess of its Pro Rata Share of the Obligations and may sell
participations in such amount so set off to other Lenders and holders and (b)
any Lender or holders so purchasing a participation in the Loans made or other
Obligations held by other Lenders or holders may exercise all rights of set-off,
bankers' lien, counterclaim or similar rights with respect to such participation
as fully as if such Lender or holder were a direct holder of the Loans and the
other Obligations in the amount of such participation. Notwithstanding the
foregoing, if all or any portion of the set-off amount or payment otherwise
received is thereafter recovered from the Lender that has exercised the right of
set-off, the purchase of participations by that Lender shall be rescinded and
the purchase price restored without interest.

      10.8. SEVERABILITY. Wherever possible, each provision of this Agreement
and the other Loan Documents shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

      10.9. CONFLICT OF TERMS. Except as otherwise provided in this Agreement or
any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.

      10.10. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA (EXCEPT TO THE EXTENT THAT THE
LAWS OF ANOTHER STATE GOVERN THE CREATION OR PERFECTION OF LIENS UNDER ANY LOAN
DOCUMENT). EACH CO-BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN THE STATES OF NEW YORK OR NEW JERSEY SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE
CO-BORROWERS, ADMINISTRATIVE AGENT, DOCUMENTATION AGENT AND LENDERS PERTAINING
TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS,
PROVIDED, THAT ADMINISTRATIVE AGENT, DOCUMENTATION AGENT, LENDERS AND THE
CO-BORROWERS ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD
BY A COURT LOCATED OUTSIDE OF NEW YORK OR NEW JERSEY AND, PROVIDED, FURTHER
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE ADMINISTRATIVE
AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF ADMINISTRATIVE AGENT.
EACH CO-BORROWER EXPRESSLY SUBMITS AND CONSENTS IN


                                      -49-
<PAGE>

ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND EACH CO-BORROWER HEREBY WAIVES ANY OBJECTION WHICH SUCH CO-BORROWER MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT. EACH CO-BORROWER HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR
SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY
BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CO-BORROWER AT THE
ADDRESS SET FORTH IN ANNEX D OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF SUCH CO-BORROWER'S ACTUAL RECEIPT THEREOF
OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

      10.11. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
10.11), (c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number indicated on Annex D or to such other address
(or facsimile number) as may be substituted by notice given as herein provided.
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Failure or delay in delivering copies of
any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than Co-Borrowers or Administrative Agent)
designated on Annex D to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.

      10.12. SECTION TITLES. The Section titles and Table of Contents contained
in this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.

      10.13. COUNTERPARTS.  This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.

      10.14. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY


                                      -50-
<PAGE>

(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG AGENTS, LENDERS AND ANY CO-BORROWER ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED THERETO.

      10.15. PRESS RELEASES. Each Co-Borrower executing this Agreement agrees
that neither it nor its Affiliates will in the future issue any press releases
or other public disclosure using the name of Chase or any of their respective
affiliates or referring to this Agreement, the other Loan Documents or the
Related Transactions Documents without at least two (2) Business Days' prior
notice to Chase and without the prior written consent of Chase unless (and only
to the extent that) such Co-Borrower or Affiliate is required to do so under law
and then, in any event, such Co-Borrower or Affiliate will consult with Chase
before issuing such press release or other public disclosure. Each Co-Borrower
consents to the publication by Administrative Agent or any Lender of a tombstone
or similar advertising material relating to the financing transactions
contemplated by this Agreement with the prior consent of Co-Borrowers, which
shall not be unreasonably withheld or delayed. Administrative Agent or such
Lender shall provide a draft of any such tombstone or similar advertising
material to each Co-Borrower for review and comment prior to the publication
thereof. Administrative Agent reserves the right to provide to industry trade
organizations information necessary and customary for inclusion in league table
measurements with Co-Borrowers' consent which shall not be unreasonably withheld
or delayed.

      10.16. REINSTATEMENT. This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against
Co-Borrowers for liquidation or reorganization, should Co-Borrowers become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of
Co-Borrowers' assets, and shall continue to be effective or to be reinstated, as
the case may be, if at any time payment and performance of the Obligations, or
any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the
Obligations, whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.

      10.17. ADVICE OF COUNSEL. Each of the parties represents to each other
party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 10.10 and 10.14, with its counsel.

      10.18. NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto


                                      -51-
<PAGE>

and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement.

      10.19. SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING ARRANGEMENTS.
Except as otherwise expressly provided for in the Loan Documents, no termination
or cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the obligations, duties
and liabilities of the Co-Borrowers or the rights of Administrative Agent,
Documentation Agent and Lenders relating to any unpaid portion of the Loans or
any other Obligations, due or not due, liquidated, contingent or unliquidated or
any transaction or event occurring prior to such termination, or any transaction
or event, the performance of which is required after the Commitment Termination
Date or Termination Date, as applicable. Except as otherwise expressly provided
herein or in any other Loan Document, all undertakings, agreements, covenants,
warranties and representations of or binding upon the Co-Borrowers, and all
rights of Administrative Agent, Documentation Agent and each Lender, all as
contained in the Loan Documents, shall not terminate or expire, but rather shall
survive any such termination or cancellation and shall continue in full force
and effect and in all events the provisions of Section 10, and the indemnities
contained in the Loan Documents shall survive the Termination Date.

      10.20. CONFIDENTIALITY. The Administrative Agent and each Lender agree to
use commercially reasonable efforts (equivalent to the efforts such Agent or
such Lender applies to maintain the confidentiality of its own confidential
information) to maintain as confidential all confidential information provided
to them by the Co-Borrowers and designated as confidential for a period of two
(2) years following receipt thereof, except that Administrative Agent and each
Lender may disclose such information (a) to Persons employed or engaged by such
Agent or such Lender in evaluating, approving, structuring or administering the
Loans and the Commitments provided that such Persons shall be subject to the
provisions of this Section 10.20 to the same extent as such Administrative Agent
or Lender; (b) to any bona fide assignee or participant or potential assignee or
participant that has agreed to comply with the covenant contained in this
Section 10.20 (and any such bona fide assignee or participant or potential
assignee or participant may disclose such information to Persons employed or
engaged by them as described in clause (a) above); (c) as required or requested
by any Governmental Authority or reasonably believed by Administrative Agent or
such Lender to be compelled by any court decree, subpoena or legal or
administrative order or process; (d) as, on the advice of Administrative Agent's
or such Lender's counsel, required by law; (e) in connection with the exercise
of any right or remedy under the Loan Documents or in connection with any
litigation to which Administrative Agent or such Lender is a party; or (f) which
ceases to be confidential through no fault of such Agent or Administrative
Lender.

      10.21. EFFECTIVENESS. Anything herein to the contrary notwithstanding
(including, without limitation, Section 10.19 hereof or any reference herein
or therein to a date prior to the Effective Date) this Agreement shall not
become effective unless and until the Effective Date shall have occurred as
provided below. In furtherance of the foregoing, each of the parties hereto
acknowledges and agrees that the obligations, duties, liabilities,
undertakings, agreements, covenants, warranties and representations of each
of the parties hereto set forth herein shall not become valid, binding or
enforceable unless and until the occurrence of the Effective Date nor shall
any party hereto have any liability hereunder for any failure of the
Effective Date to occur. For purposes hereof, the "Effective Date" shall mean
the next Business Day immediately following the date on which the Merger is
consummated and each Lender, the Administrative Agent, the Documentation
Agent and each Co-Borrower shall have signed a copy hereof (whether the same
or different copies) and shall have delivered the same to the Administrative
Agent.

                                      -52-
<PAGE>

      IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.

                                    CO-BORROWERS:
                                    L&LR, INC.

                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                    800-JR CIGAR, Inc.

                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: Chief Executive Officer


                                    J.R. TOBACCO OF AMERICA, INC.


                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                    SANTA CLARA, INC.


                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                    J.N.R. GROCERY CORP.


                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                    J.R. TOBACCO NC, INC.


                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                      -53-
<PAGE>

                                    J&R TOBACCO (NEW JERSEY) CORP.

                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                    J.R. TOBACCO COMPANY OF MICHIGAN, INC.


                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                    J.R.-46TH STREET, INC.


                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                    J.R. TOBACCO OUTLET, INC.


                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                    J.R. STATESVILLE, INC.


                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                    J R CIGAR (DC) INC.


                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                      -54-
<PAGE>

                                    J.R. TOBACCO OF BURLINGTON, INC.


                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                    CASA BLANCA, INC.


                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                    JRCIGARS.COM, INC.


                                    /s/ Lewis I. Rothman
                                    ------------------------------
                                    By: Lewis I. Rothman
                                    Title: President


                                    LENDERS:

                                    THE CHASE MANHATTAN BANK,
                                    as Administrative Agent and Lender

                                    /s/ Ivan Harlow
                                    ------------------------------
                                    By: Ivan Harlow
                                    Title: Vice President

                                    FLEET BANK, N.A.,
                                    as Documentation Agent and Lender

                                    /s/ Barrett Bencivenga
                                    ------------------------------
                                    By: Barrett Bencivenga
                                    Title: Senior Vice President


                                    LENDERS:
                                    EUROPEAN AMERICAN BANK, as Lender

                                    /s/ Robert G. Maichin
                                    ------------------------------
                                    By: Rober G. Maichin
                                    Title: Vice President


                                      -55-
<PAGE>

                               ANNEX A (RECITALS)

                                       TO

                                CREDIT AGREEMENT



                                   DEFINITIONS



      Capitalized terms used in the Loan Documents shall have (unless otherwise
provided elsewhere in the Loan Documents) the following respective meanings and
all Section references in the following definitions shall refer to Sections of
the Agreement:

      "Accounts" shall mean all "accounts," as such term is defined in the Code,
now owned or hereafter acquired by any Co-Borrower.

      "Administrative Agent" shall mean Chase or its successor appointed
pursuant to Section 9.9.

      "Affiliate" shall mean, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, five percent (5%) or more of the Stock having
ordinary voting power in the election of directors of such Persons, (b) each
Person that controls, is controlled by or is under common control with such
Person, (c) each of such Person's officers, directors, joint venturers and
partners and (d) in the case of Co-Borrowers, the immediate family members,
spouses and lineal descendants of individuals who are Affiliates of
Co-Borrowers. For the purposes of this definition, "control" of a Person shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise; provided, however, that the term
"Affiliate" shall specifically exclude each Administrative Agent and each
Lender.

      "Agent" shall mean the Administrative Agent or the Documentation Agent.

      "Agreement" shall mean the Credit Agreement by and among Co-Borrowers,
Chase, as Administrative Agent, Arranger, Syndication Agent and Lender, Fleet
Bank, N.A., as Documentation Agent and Lender and the other Lenders signatory
from time to time to the Agreement.

      "Appendices" shall have the meaning assigned to it in the recitals to
the Agreement.

      "Applicable Margins" means collectively the Applicable Prime Margin and
the Applicable Eurodollar Margin.


                                      -56-
<PAGE>

      "Applicable Prime Margin" shall mean the per annum interest rate margin
from time to time in effect and payable in addition to the Prime Rate applicable
to Prime Rate Loans, as determined by reference to Section 1.3 of the Agreement.

      "Applicable Eurodollar Margin" shall mean the per annum interest rate from
time to time in effect and payable in addition to the Eurodollar Rate applicable
to the Eurodollar Loans, as determined by reference to Section 1.3 of the
Agreement.

      "Assignment Agreement" shall have the meaning assigned to it in Section
8.1(a).

      "Authorized Officer" shall mean any of the Chief Executive Officer,
President, the Chief Financial Officer, the Treasurer, the Controller, any
Assistant Treasurer, any Vice-President, the Secretary or the General Counsel of
such Co-Borrower or any other officer of such Co-Borrower which is designated in
writing to the Administrative Agent by any of the foregoing officers of such
Co-Borrower as being authorized to give such notices under this Agreement.

      "Borrowing" shall mean a borrowing of Loans by the Co-Borrowers from the
Lenders on a given date (or resulting from a conversion or conversions on such
date) and, in the case of Eurodollar Loans, having the same Eurodollar Interest
Period.

      "Borrowing Availability" shall have the meaning assigned to it in
Section 1.1(a)(i).

      "Borrowing Date" shall mean any date on which the Lenders shall make
Revolving Credit Loans hereunder.

      "Budget" shall mean the operating budget of the Co-Borrowers as adopted or
approved by the board of directors of Cigar.

      "Business Day" shall mean any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the State of New
York and in reference to Eurodollar Loans shall mean any such day that is also a
Eurodollar Business Day.

      "Capital Expenditures" shall mean, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under GAAP.

      "Capital Lease" shall mean, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.

      "Capital Lease Obligation" shall mean, with respect to any Capital Lease
of any Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.


                                      -57-
<PAGE>

      "Change of Control" shall mean (i) Lewis Rothman, LaVonda Rothman and the
1998 Trust shall cease to own, directly or indirectly, 100% of the outstanding
equity interests of Co-Borrowers, or (ii) Lewis Rothman shall cease to be the
Chief Executive Officer of Cigar.

      "Charges" shall mean all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including taxes owed to the PBGC at the
time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Obligations, (b) the employees,
payroll, income or gross receipts of any Co-Borrower, (c) any Co-Borrower's
ownership or use of any properties or other assets, or (d) any other aspect of
any Co-Borrower's business.

      "Chase" means The Chase Manhattan Bank.

      "Cigar" shall mean 800-JR CIGAR, Inc., a Delaware corporation.

      "Cigar Pledge Agreement" shall have the meaning assigned to it in
Section 2.1(d).

      "Closing Date" shall mean the date on which each of the conditions
precedent in Sections 2.1 and 2.2 are satisfied or waived by Administrative
Agent in accordance with the terms of this Agreement and the funding of the Term
Loan occurs.

      "Co-Borrower" and "Co-Borrowers" shall have the meanings assigned
thereto in the Agreement.

      "Code" shall mean the Uniform Commercial Code as the same may, from time
to time, be enacted and in effect in the State of New York; provided, however,
in the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of Administrative Agent's, Documentation
Agent's or any Lender's security interest in any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the State of New York, the term "Code" shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes of the
provisions hereof relating to such attachment, perfection or priority and for
purposes of definitions related to such provisions.

      "Collateral" shall mean all property with respect to which any security
interests have been, or are to be, granted (or purported to be granted) pursuant
to any Pledge Agreement.

      "Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Lenders pursuant to the Pledge Agreements and the other
Collateral Documents.

      "Collateral Documents" shall mean all documents delivered and to be
delivered under the Agreement to create, perfect or maintain a security interest
in, and/or Lien on, the Collateral, including, without limitation, the Pledge
Agreements.

      "Commitment Termination Date" shall mean the earliest of (a) , 2003, (b)
the date of termination of Lenders' obligations to make Revolving Credit Loans
or permit existing Revolving Credit Loans to remain outstanding pursuant to
Section 7, and (c) the date of


                                      -58-
<PAGE>

prepayment in full by Co-Borrowers of the Revolving Credit Loans and the
permanent reduction of the Revolving Credit Loan Commitment to zero dollars
($0).

      "Commitments" shall mean (a) as to any Lender, the aggregate of such
Lender's Revolving Credit Loan Commitment and Term Loan Commitment as set forth
on Annex E to the Agreement or in the most recent Assignment Agreement executed
by such Lender and (b) as to all Lenders, the aggregate of all Lenders'
Revolving Credit Loan Commitments and Term Loan Commitments, which aggregate
commitment shall be Fifty-Five Million Dollars ($55,000,000) on the Closing
Date, as to each of clauses (a) and (b), as such Commitments may be reduced,
amortized or adjusted from time to time in accordance with the Agreement.

      "Copyright License" shall mean any and all rights now owned or hereafter
acquired by any Co-Borrower under any written agreement granting any right to
use any Copyright or Copyright registration.

      "Copyrights" shall mean all of the following now owned or hereafter
acquired by any Co-Borrower: (a) all copyrights and general intangibles of like
nature (whether registered or unregistered), now owned or existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connections therewith, including all registrations, recordings
and applications in the United States Copyright Office or in any similar office
or agency of the United States, any state or territory thereof, or any other
country or any political subdivision thereof, and (b) all reissues, extensions,
or renewals thereof.

      "Default" shall mean any event which, with the passage of time or notice
or both, would, unless cured or waived, become an Event of Default.

      "Default Rate" shall have the meaning assigned to it in Section 1.3(f).

      "Disclosure Schedules" shall mean the Schedules prepared by Co-Borrowers
and denominated as Disclosure Schedules (1.4) through 6.4(a)) in the Index to
the Agreement.

      "Documentation Agent" shall mean Fleet Bank, N.A. or its successor.

      "Documents" shall mean any "documents," as such term is defined in the
Code, now owned or hereafter acquired by any Co-Borrower, wherever located.

      "Dollars" or "$" shall mean lawful currency of the United States of
America.

      "EBITDA" shall mean, with respect to any Person for any fiscal period, an
amount equal to (a) consolidated net income of such Person for such period,
minus (b) the sum of (i) income tax credits, (ii) gain from extraordinary items
for such period, (iii) any aggregate net gain (but not any aggregate net loss)
during such period arising from the sale, exchange or other disposition of
capital assets by such Person (including any fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the disposition of fixed
assets and all securities), and (iv) any other non-cash gains, in each instance
in this clause (b), which have been added in determining consolidated net
income, in each case to the extent included in the calculation of consolidated
net income of such Person for such period in accordance with GAAP, but without
duplication, plus (c) the sum of (i) any provision for income taxes, (ii)
Interest


                                      -59-
<PAGE>

Expense, (iii) loss from extraordinary items for such period, (iv) the amount of
non-cash charges (including depreciation and amortization) for such period, and
(v) amortized debt discount for such period. For purposes of this definition,
the following items shall be excluded in determining consolidated net income of
a Person: (1) the income (or deficit) of any other Person (other than a
Subsidiary) in which such Person has an ownership interest, except to the extent
any such income has actually been received by such Person in the form of cash
dividends or distributions; (2) the undistributed earnings of any Subsidiary of
such Person to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by the
terms of any contractual obligation or requirement of law applicable to such
Subsidiary; (3) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of income accrued during
such period or a prior period; (4) any write-up of any asset; (5) any net gain
from the collection of the proceeds of life insurance policies; (6) any net gain
arising from the acquisition of any securities, or the extinguishment, under
GAAP, of any Indebtedness, of such Person, (7) in the case of a successor to
such Person by consolidation or merger or as a transferee of its assets, any
earnings of such successor prior to such consolidation, merger or transfer of
assets, (8) any deferred credit representing the excess of equity in any
Subsidiary of such Person at the date of acquisition of such Subsidiary over the
cost to such Person of the investment in such Subsidiary, and (9) any fees,
expenses, costs, or other charges incurred or paid arising out of the Related
Transactions, including under this Agreement and relating to the retirement or
repayment of Indebtedness on the Closing Date.

      "Environmental Laws" shall mean all applicable federal, state, local and
foreign laws, statutes, ordinances, codes, rules, standards and regulations, now
or hereafter in effect, and in each case as amended or supplemented from time to
time, any applicable binding judicial or administrative order, interpretation,
consent decree, order or judgment, imposing liability or standards of conduct
for or relating to the regulation and protection of human health, safety, the
environment and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation). Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.
Sections 9601 et seq.) ("CERCLA"); the Hazardous Materials Transportation
Authorization Act of 1994 (49 U.S.C. Sections 5101 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Sections 136 et seq.); the
Solid Waste Disposal Act (42 U.S.C. Sections 6901 et seq.); the Toxic Substances
Control Act (15 U.S.C. Sections 2601 et seq.); the Clean Air Act (42 U.S.C.
Sections 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C.
Sections 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C.
Sections 651 et seq.); and the Safe Drinking Water Act (42 U.S.C. Sections
300(f) et seq.), each as from time to time amended, and any and all regulations
promulgated thereunder, and all analogous state, local and foreign counterparts
or equivalents and any transfer of ownership notification or approval statutes.

      "Environmental Liabilities" shall mean, with respect to any Person, all
liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim,


                                      -60-
<PAGE>

suit, action, investigation, proceeding or demand by any Person, whether based
in contract, tort, implied or express warranty, strict liability, criminal or
civil statute or common law, arising under or related to any Environmental Laws,
Environmental Permits, or in connection with any Release or threatened Release
or presence of a Hazardous Material whether on, at, in, under, from or about or
in the vicinity of any real or personal property.

      "Environmental Permits" shall mean all permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Authority
under any Environmental Laws.

      "Equipment" shall mean all "equipment," as such term is defined in the
Code, now owned or hereafter acquired by any Co-Borrower, wherever located and,
in any event, including all such Co-Borrower's machinery and equipment,
including processing equipment, conveyors, machine tools, data processing and
computer equipment with software and peripheral equipment (other than software
constituting part of the Accounts), and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials handling
equipment, tools, attachments, accessories, automotive equipment, trailers,
trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other
equipment of every kind and nature, trade fixtures and fixtures not forming a
part of real property, all whether now owned or hereafter acquired, and wherever
situated, together with all additions and accessions thereto, replacements
therefor, all parts therefor, all substitutes for any of the foregoing, fuel
therefor, and all manuals, drawings, instructions, warranties and rights with
respect thereto, and all products and proceeds thereof and condemnation awards
and insurance proceeds with respect thereto.

      "ERISA" shall mean the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.

      "ERISA Affiliate" shall mean, with respect to any Co-Borrower, any trade
or business (whether or not incorporated) which, together with such Co-Borrower,
are treated as a single employer within the meaning of Sections 414(b) or (c) of
the IRC, and for the purpose of Section 302 of ERISA and/or Section 412, 4971,
4977 and/or each "applicable section" under Section 414(t)(2) of the IRC, within
the meaning of Section 414(b), (c), (m) or (o) of the IRC.

      "ERISA Event" shall mean, with respect to any Co-Borrower or any ERISA
Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to a
Title IV Plan, other than those events as to which the 30-day notice period is
waived; (b) the withdrawal of any Co-Borrower or ERISA Affiliate from a Title IV
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the
complete or partial withdrawal of any Co-Borrower or any ERISA Affiliate from
any Multiemployer Plan; (d) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title
IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Co-Borrower or
ERISA Affiliate to make when due required contributions to a Multiemployer Plan
or Title IV Plan unless such failure is cured within 30 days; (g) any other
event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Title IV Plan or Multiemployer


                                      -61-
<PAGE>

Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA;
(h) the termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 of
ERISA; (i) the loss of a Qualified Plan's qualification or tax exempt status; or
(j) the termination of a Plan described in Section 4064 of ERISA.

      "ESOP" shall mean a Plan which is intended to satisfy the requirements
of Section 4975(e)(7) of the IRC.

      "Eurodollar Business Day" shall mean a Business Day on which banks in the
city of London are generally open for interbank or foreign exchange
transactions.

      "Eurodollar Loan" shall mean a Loan or any portion thereof bearing
interest by reference to the Eurodollar Rate.

      "Eurodollar Loans" shall mean Loans bearing interest by reference to the
Eurodollar Rate.

      "Eurodollar Interest Period" shall have the meaning assigned to it in
Section 1.3.

      "Eurodollar Rate" shall mean for each Eurodollar Period, a rate of
interest determined by Administrative Agent equal to:

      (a) the offered rate for deposits in United States Dollars for the
applicable Eurodollar Period which appears on Telerate Page 3750 as of 11:00
a.m., London time, on the second full Eurodollar Business Day next preceding the
first day of each Eurodollar Period (unless such date is not a Business Day, in
which event the next succeeding Business Day will be used); divided by

      (b) a number equal to 1.0 minus the aggregate (but without duplication) of
the rates (expressed as a decimal fraction) of reserve requirements in effect on
the day which is two (2) Eurodollar Business Days prior to the beginning of such
Eurodollar Period (including basic, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal Reserve
system or other governmental authority having jurisdiction with respect thereto,
as now and from time to time in effect) for Eurocurrency funding (currently
referred to as "Eurocurrency liabilities" in Regulation D of such Board which
are required to be maintained by a member bank of the Federal Reserve System.

      If such interest rates shall cease to be available from Telerate News
Service, the Eurodollar Rate shall be determined from such financial reporting
service or other information as shall be mutually acceptable to Administrative
Agent and Co-Borrowers.

      "Event of Default" shall have the meaning assigned to it in Section 7.1.

      "Existing Credit Agreement" shall mean that certain Credit Agreement,
dated August 28, 2000, among JRC and L&LR, as Co-Borrowers, Chase, as
administrative agent and lender, Fleet Bank as documentation agent and lender
and the lenders signatory thereto.


                                      -62-
<PAGE>

      "Existing Credit Facility" shall mean the credit facility pursuant to the
Existing Credit Agreement.

      "Existing Lenders" shall mean the lenders under the Existing Credit
Agreement.

      "Expiration Date" shall mean August 28, 2003.

      "Federal Funds Rate" shall mean, for any day, a floating rate equal to the
weighted average of the rates on overnight federal funds transactions among
members of the Federal Reserve System, as determined by Administrative Agent.

      "Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any successor thereto.

      "Fee Letter" shall mean the letter dated June 12, 2000 from Chase to Cigar
providing for certain fees relating to the Agreement and the transactions
contemplated thereby.

      "Fees" shall mean any and all fees payable to Administrative Agent or
Lenders pursuant to the Agreement, the Fee Letter or any of the other Loan
Documents.

      "Financial Statements" shall mean the consolidated and consolidating
income statements, statements of cash flows and balance sheets of the
Co-Borrowers delivered in accordance with Section 3.4 of the Agreement and Annex
B to the Agreement.

      "Fiscal Month" shall mean any of the monthly accounting periods of
Co-Borrowers.

      "Fiscal Quarter" shall mean any of the quarterly accounting periods of
Co-Borrowers, ending on March 31, June 30, September 30 and December 31 of each
year.

      "Fiscal Year" shall mean any of the annual accounting periods of
Co-Borrowers ending on December 31 of each year.

      "Fixed Charges" shall mean, with respect to any Person for any fiscal
period, (a) the aggregate of all Interest Expense paid or accrued during such
period without duplication if previously paid or accrued in a prior fiscal
period plus (b) scheduled payments of principal with respect to Indebtedness
during such period, plus (c) the aggregate amount of all Taxes paid or
accrued during such period.

      "Fixed Charge Coverage Ratio" shall mean, with respect to any Person for
any fiscal period, the ratio of (i) EBITDA less Capital Expenditures paid to
(ii) Fixed Charges. In computing Fixed Charges for any fiscal period, interest
and principal payments that are due within one week after the end of that fiscal
period, without duplication, shall be deemed to have been paid on the last day
of that fiscal period.

      "Fixtures" shall mean any "Fixtures" as such term is defined in the Code,
now owned or hereafter acquired by an Co-Borrower.


                                      -63-
<PAGE>

      "Funded Debt" shall mean, with respect to any Person, all Indebtedness for
borrowed money evidenced by notes, bonds, debentures, or similar evidences of
Indebtedness and which by its terms matures more than one year from, or is
directly or indirectly renewable or extendible at such Person's option under a
revolving credit or similar agreement obligating the lender or lenders to extend
credit over a period of more than one year from the date of creation thereof,
and specifically including Capital Lease Obligations, current maturities of
long-term debt, revolving credit and short-term debt extendible beyond one year
at the option of the debtor, and also including the Loans and, without
duplication, Guaranteed Indebtedness consisting of guaranties of Funded Debt of
other Persons. Solely for purposes of calculating the Leverage Ratio, the
outstanding amount of the Revolving Credit Loan for the purposes of determining
the amount of Funded Debt shall be the lesser of (a) the actual outstanding
amount of the Revolving Credit Loan as of the measurement date or (b) the
outstanding amount of the Revolving Loan at the end of each Fiscal Month for the
12 most recently ended Fiscal Months divided by 12.

      "GAAP" shall mean generally accepted accounting principles in the United
States of America, consistently applied, as such term is further defined in
Annex C to the Agreement.

      "Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

      "Guaranteed Indebtedness" shall mean, as to any Person, any obligation of
such Person guaranteeing any indebtedness, lease, dividend, or other obligation
("primary obligations") of any other Person (the "primary obligor") in any
manner, including any obligation or arrangement of such Person (a) to purchase
or repurchase any such primary obligation, (b) to advance or supply funds (i)
for the purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet condition of the primary
obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (d) to
indemnify the owner of such primary obligation against loss in respect thereof.
The amount of any Guaranteed Indebtedness at any time shall be deemed to be an
amount equal to the lesser at such time of (x) the stated or determinable amount
of the primary obligation in respect of which such Guaranteed Indebtedness is
made and (y) the maximum amount for which such Person may be liable pursuant to
the terms of the instrument embodying such Guaranteed Indebtedness; or, if not
stated or determinable, the maximum reasonably anticipated liability (assuming
full performance) in respect thereof.

      "Hazardous Material" shall mean any substance, material or waste which is
regulated by or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance which is (a) defined as
a "solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws, (b) petroleum or any
fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's), or
any radioactive substance.


                                      -64-
<PAGE>

      "Indebtedness" of any Person shall mean without duplication (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred six (6) months or more, but
excluding obligations to trade creditors incurred in the ordinary course of
business that are not overdue by more than six (6) months unless being contested
in good faith, (b) all reimbursement and other obligations with respect to
letters of credit, bankers' acceptances and surety bonds, whether or not
matured, (c) all obligations evidenced by notes, bonds, debentures or similar
instruments, (d) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (e) all Capital Lease Obligations and the present value (discounted
at the Index Rate as in effect on the Closing Date) of future rental payments
under all synthetic leases, (f) all obligations of such Person under commodity
purchase or option agreements or other commodity price hedging arrangements, in
each case whether contingent or matured, (g) all obligations of such Person
under any foreign exchange contract, currency swap agreement, interest rate
swap, cap or collar agreement or other similar agreement or arrangement designed
to alter the risks of that Person arising from fluctuations in currency values
or interest rates, in each case whether contingent or matured, (h) all
Indebtedness referred to above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property or other assets (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, and (i) the Obligations.

      "Indemnified Liabilities" shall have the meaning assigned to it in
Section 1.10.

      "Intellectual Property" shall mean any and all Licenses, Patents,
Copyrights, Trademarks, trade secrets and customer lists.

      "Intercompany Notes" shall have the meaning assigned to it in Section
6.3.

      "Interest Expense" shall mean, with respect to any Person for any fiscal
period and net of interest income, interest expense payable in cash (excluding
any original issue discount, interest paid in kind and amortized debt discount)
of such Person determined in accordance with GAAP for the relevant period ended
on such date, including, in any event, interest expense with respect to any
Funded Debt of such Person and interest expense for the relevant period that has
been capitalized on the balance sheet of such Person.

      "Interest Hedge Obligations" shall mean, with respect to any Person,
the obligations of such Person pursuant to any interest rate swap agreement,
interest rate cap, collar or floor agreement or other similar agreement or
arrangement designed to protect against or manage such Person's or any of its
Subsidiaries' exposure to fluctuations and interest rates; provided that such
Interest Hedge Obligations are not speculative in nature.

      "Interest Payment Date" means (a) as to any Prime Rate Loan, the first
Business Day of each month to occur while such Loan is outstanding, (b) as to
any Eurodollar Loan, the last day of the applicable Eurodollar Interest Period
and (c) in respect of each Loan, on any repayment or prepayment (on the amount
repaid or prepaid), at maturity (whether by acceleration or otherwise and, after
such maturity, on demand.

      "Inventory" shall mean any "inventory," as such term is defined in the
Code, now or hereafter owned or acquired by any Co-Borrower, wherever located,
and in any event including inventory, merchandise, goods and other personal
property which are held by or on behalf of any Co-Borrower for sale or lease or
are furnished or are to be furnished under a contract of service,


                                      -65-
<PAGE>

or which constitute raw materials, work in process or materials used or consumed
or to be used or consumed in such Co-Borrower's business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
other supplies.

      "IRC" shall mean the Internal Revenue Code of 1986 (or any successor
legislation thereto), as amended from time to time, and any regulations
promulgated thereunder.

      "IRS" shall mean the Internal Revenue Service, or any successor thereto.

      "JRC" means JRC Acquisition Corp., a Delaware corporation.

      "Lenders" shall mean Chase, the other Lenders named on the signature page
of the Agreement, and, if any such Lender shall decide to assign all or any
portion of the Obligations, such term shall include such assignee.

      "Leverage Ratio" shall mean, with respect to Co-Borrowers, on a
consolidated basis, the ratio of (a) Funded Debt as of any date of
determination, to (b) the sum of EBITDA less Capital Expenditures for the twelve
months ending on that date of determination.

      "License" shall mean any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by any Co-Borrower.

      "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the Code or
comparable law of any jurisdiction).

      "Litigation" shall have the meaning assigned to it in Section 3.13.
      "L&LR" means L&LR, Inc., a Delaware corporation.

      "L&LR Pledge Agreement" shall have the meaning assigned to it in
Section 2.1(d).

      "Loan" shall mean each of the Revolving Credit Loans and the Term Loan.

      "Loans" shall mean the Revolving Credit Loans and the Term Loan,
collectively.

      "Loan Documents" shall mean the Agreement, the Notes, the Pledge
Agreements and all other agreements, instruments, documents and certificates
executed and delivered to, or in favor of, Administrative Agent, Documentation
Agent, Collateral Agent and/or Lenders in connection therewith and including all
other pledges, stock powers, powers of attorney, consents, assignments,
contracts, notices, and all other written matter whether heretofore, now or
hereafter executed by or on behalf of any Co-Borrower, or any employee of any
Co-Borrower, and delivered to Administrative Agent, Collateral Agent or any
Lender in connection with the Agreement or the transactions contemplated
thereby, but shall not include the Swap Agreement.


                                      -66-
<PAGE>

Any reference in the Agreement or any other Loan Document to a Loan Document
shall include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to
such Agreement as the same may be in effect at any and all times such reference
becomes operative.

      "Material Adverse Effect" shall mean a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of the
Co-Borrowers considered individually or as a whole, (b) Co-Borrowers' ability to
pay any of the Loans or any of the other Obligations in accordance with the
terms of the Agreement, (c) the Co-Borrowers' ability to consummate the
transactions contemplated by the Agreement; or (d) either the Administrative
Agent's or any Lender's rights and remedies under the Agreement and the other
Loan Documents.

      "Maximum Amount" shall mean, at any particular time, an amount equal to
the aggregate Revolving Credit Loan Commitments of all Lenders.

      "MC Management Agreement" shall mean that certain Management Agreement
by and between                 and Cigar, dated                   .

      "Merger" shall mean the merger of JRC with and into Cigar pursuant to and
in accordance with the terms and conditions of the Merger Agreement.

      "Merger Agreement" shall mean the Agreement and Plan of Merger, dated
as of August 28, 2000, by and among L&LR, JRC and Cigar.

      "Minimum Borrowing Amount" shall mean (i) with respect to Revolving Credit
Loans that are Eurodollar Loans, $1,000,000 and (ii) with respect to Revolving
Credit Loans that are Prime Rate Loans, $1,000,000.

      "Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which any Co-Borrower or ERISA Affiliate is
making, is obligated to make, has made or been obligated to make within the five
year period immediately preceding the Closing Date, contributions on behalf of
participants who are or were employed by any of them.

      "Net Income" shall mean, for any Person in any period the excess, if any
of (i) the gross revenues and other proper income credits for such period
determined in accordance with GAAP, PROVIDED, HOWEVER, that in any event there
shall not be included in such gross revenues and income credits any of the
following items:

      (a) any proceeds of any life insurance policy;

      (b) any gain or loss arising from any write-up or write-off of capital
assets or from the acquisition or retirement or sale of securities of such
Person; or

      (c) any restoration of any contingency reserve to income unless such
contingency reserve was taken during such period, over (ii) an amount equal to
the aggregate of all expenses and other proper income charges for such period,
determined in accordance with GAAP, but in any event including the following
items:


                                      -67-
<PAGE>

      (a) amortization of debt discount and expenses and amortization of all
other deferred charges properly subject to amortization;

      (b) provision for all taxes in respect of property and in respect of
income, excess profits and otherwise;

      (c) provision for all contingency reserves, whether general or special;
and

      (d) provision for depreciation, depletion, obsolescence, and amortization
(including amortization of leasehold improvements) in amounts not less than
those actually charged against income on its books, and, if not yet actually
charged on such books, then in an amount not less than at the rates and not less
than the amounts which would be charged in accordance with GAAP.

      "1998 Trust" shall mean the Lewis Irving Rothman 1998 Trust #1 u/a/d
November 10, 1998.

      "Notes" shall mean the Revolving Notes and the Term Note, collectively.

      "Notice Office" shall mean the office of The Chase Manhattan Bank located
at 695 Route 46 West, Fairfield, New Jersey 07004 or such other office or
offices as the Administrative Agent may designate to Co-Borrowers and Lenders.

      "Notice of Conversion/Continuation" shall have the meaning assigned to
it in Section 1.6.

      "Notice of Revolving Credit Loan" shall have the meaning assigned to it in
Section 1.1.

      "Obligations" shall mean all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any
Co-Borrower to either Agent or any Lender, and all covenants and duties
regarding such amounts, of any kind or nature, present or future, whether or not
evidenced by any note, agreement or other instrument, arising under the
Agreement or any of the other Loan Documents. This term includes all principal,
interest (including all interest which accrues after the commencement of any
case or proceeding in bankruptcy after the insolvency of, or for the
reorganization of any Co-Borrower, whether or not allowed in such proceeding),
Fees, Charges, expenses, attorneys' fees and any other sum chargeable to any
Co-Borrower under the Agreement or any of the other Loan Documents, and solely
for purposes of the Collateral Documents (other than the Guaranty), owing to any
Lender (or any Affiliate of any Lender).

      "Patents" shall mean all of the following in which any Co-Borrower now
holds or hereafter acquires any interest: (a) all letters patent of the United
States or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State or Territory thereof, or any other country, and (b) all reissues,
continuations, continuations-in-part or extensions thereof.


                                      -68-
<PAGE>

      "Payment Office" shall mean the office of The Chase Manhattan Bank located
at 695 Route 46 West, Fairfield, New Jersey 07004 or such other office or
offices as the Administrative Agent may designate to Co-Borrowers and Lenders.

      "PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.

      "Permitted Encumbrances" shall mean the following encumbrances: (a) Liens
for taxes or assessments or other governmental Charges not yet due and payable
or are being contested in good faith in compliance with Section 5.2(b); (b)
pledges or deposits of money securing statutory obligations under workmen's
compensation, unemployment insurance, social security or public liability laws
or similar legislation (excluding Liens under ERISA); (c) pledges or deposits of
money securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Co-Borrower is a party as lessee made in the
ordinary course of business; (d) workers', mechanics' or similar liens arising
in the ordinary course of business, so long as such Liens attach only to
Equipment, Fixtures and/or Real Estate; (e) carriers', warehousemen's,
suppliers' or other similar possessory liens arising in the ordinary course of
business and securing liabilities in an outstanding aggregate amount not in
excess of $100,000 at any time, so long as such Liens attach only to Inventory;
(f) any attachment or judgment lien not constituting an Event of Default under
Section 7.1(h); (g) zoning restrictions, easements, licenses, or other
restrictions on the use of any Real Estate or other minor irregularities in
title (including leasehold title) thereto, so long as the same do not materially
impair the use, value, or marketability of such Real Estate; (h) hereafter
created Liens in favor of Administrative Agent, on behalf of itself,
Documentation Agent and Lenders; (i) customary landlord Liens pursuant to leases
entered into in the ordinary course of business which apply to property or
assets of the lessee located at the premises and those landlord Liens imposed by
law, and (j) any and all Liens (including without limitation, mortgages, deeds
of trust and/or ground leases) affecting any Real Estate with respect to which
any Co-Borrower is a tenant or subtenant, to the extent such Lien(s) were not
created or granted by such Co-Borrower.

      "Permitted Indebtedness" shall have the meaning assigned to it in
Section 6.3.

      "Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, other entity
or government (whether federal, state, county, city, municipal, local, foreign,
or otherwise, including any instrumentality, division, agency, body or
department thereof).

      "Plan" shall mean an employee benefit plan, as defined in Section 3(3) of
ERISA, which any Co-Borrower maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by any
Co-Borrower.

      "Pledge Agreement" shall mean each of the L&LR Pledge Agreement and the
Cigar Pledge Agreement.

      "Pledge Agreements" shall mean the L&LR Pledge Agreement and the Cigar
Pledge Agreement.

      "Pledged Stock" shall have the meaning provided in the Pledge
Agreements.


                                      -69-
<PAGE>

      "Prime Rate" shall mean the rate of interest publicly announced from time
to time by the Administrative Agent as its prime rate in effect at its principal
office in New York City, changing when and as the prime rate changes, each
change to be effective on the date such change is publicly announced by the
Administrative Agent.

      "Prime Rate Loan" shall mean a Loan or portion thereof bearing interest by
reference to the Prime Rate.

      "Proceeds" shall mean "proceeds," as such term is defined in the Code and,
in any event, shall include (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to any Co-Borrower from time to time
with respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to any Co-Borrower from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of governmental authority), (c) any claim of
any Co-Borrower against third parties (i) for past, present or future
infringement of any Patent or Patent License, or (ii) for past, present or
future infringement or dilution of any Copyright, Copyright License, Trademark
or Trademark License, or for injury to the goodwill associated with any
Trademark or Trademark License, (d) any recoveries by any Co-Borrower against
third parties with respect to any litigation or dispute concerning any of the
Collateral, and (e) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral, upon disposition or
otherwise.

      "Pro Forma" means the unaudited consolidated and consolidating balance
sheets of Co-Borrowers as of June 30, 2000 after giving pro forma effect to the
Loans as of the Closing Date and the Related Transactions.

      "Pro Rata Share" shall mean with respect to all matters relating to any
Lender (a) with respect to Revolving Credit Loans the percentage obtained by
dividing (i) the Revolving Credit Loan Commitment of that Lender by (ii) the
aggregate Revolving Credit Loan Commitments, as any such percentages may be
adjusted by assignments pursuant to Section 8, (b) with respect to the Term
Loan, the percentage obtained by dividing (i) the Term Loan Commitment of that
Lender by (ii) the aggregate Term Loan Commitments of all Lenders, as any such
percentages may be adjusted by assignments permitted pursuant to Section 8.1,
(c) with respect to all Loans, the percentage obtained by dividing (i) the
aggregate Commitments of that Lender by (ii) the aggregate Commitments of all
Lenders, and (d) with respect to all Loans on and after the Commitment
Termination Date, the percentage obtained by dividing (i) the aggregate
outstanding principal balance of the Loans held by that Lender, by (ii) the
outstanding principal balance of the Loans held by all Lenders.

      "Public Stock" shall mean the issued and outstanding shares of common
stock of Cigar which are not owned of record or beneficially by Lewis I. Rothman
and/or LaVonda M. Rothman, the 1998 Trust or the Trusts.

      "Qualified Plan" shall mean a Plan which is intended to be tax-qualified
under Section 401(a) of the IRC.

      "Real Estate" shall have the meaning assigned to it in Section 3.6.


                                      -70-
<PAGE>

      "Related Transactions" means the (i) Tender Offer Acquisition, (ii) the
Merger and (iii) the payment of all fees, costs and expenses associated with all
of the foregoing and the execution and delivery of all of the Related
Transactions Documents.

      "Related Transactions Documents" shall mean the Tender Offer Documents
and the Merger Documents.

      "Release" shall mean any release, spill, emission, leaking, pumping,
pouring, emitting, emptying, escape, injection, deposit, disposal, discharge,
dispersal, dumping, leaching or migration of Hazardous Material in the indoor or
outdoor environment, including the movement of Hazardous Material through or in
the air, soil, surface water or ground water.

      "Requisite Lenders" shall mean Lenders having (a) prior to the Closing
Date, sixty-six and two-thirds percent (66 2/3%) or more of the Commitments of
all Lenders, or (b) after the Closing Date, sixty-six and two-thirds percent (66
2/3%) or more of the sum of (i) outstanding Revolving Credit Loan Commitments
plus (ii) the aggregate outstanding amount of the Term Loans, or (c) if the
Commitments have been terminated, sixty-six and two-thirds percent (66-2/3%) or
more of the aggregate outstanding amount of the Loans.

      "Requisite Revolving Credit Lenders" shall mean Lenders having (a)
sixty-six and two-thirds percent (66 2/3%) or more of the Revolving Credit Loan
Commitments of all Lenders, or (b) if the Commitments have been terminated,
sixty-six and two-thirds percent (66 2/3%) or more of the aggregate outstanding
amount of the Revolving Credit Loans.

      "Restricted Payment" shall mean (a) the declaration or payment of any
dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of a Person's
Stock, (b) any payment on account of the purchase, redemption, defeasance,
sinking fund or other retirement of a Person's Stock or any other payment or
distribution made in respect thereof, either directly or indirectly, (c) any
payment made to redeem, purchase, repurchase or retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
Stock of such Person now or hereafter outstanding; (d) any payment of a claim
for the rescission of the purchase or sale of, or for material damages
arising from the purchase or sale of, any shares of such Person's Stock or of
a claim for reimbursement, indemnification or contribution arising out of or
related to any such claim for damages or rescission; (e) any payment, loan,
contribution, or other transfer of funds or other property to any Stockholder
of such Person other than payment of compensation in the ordinary course to
stockholders who are employees of such Person; and (f) any payment of
management fees (or other fees of a similar nature) by such Person to any
Stockholder of such Person or their Affiliates other than pursuant to the MC
Management Agreement.

      "Retiree Welfare Plan" shall mean, at any time, a Plan that is a "welfare
plan" as defined in Section 3(1) of ERISA, that provides for continuing coverage
or benefits for any participant or any beneficiary of a participant after such
participant's termination of employment, other than continuation coverage
provided pursuant to Section 4980B of the IRC and at the sole expense of the
participant or the beneficiary of the participant or under any comparable state
law.

      "Revolving Credit Lender" shall mean, as of any date of determination,
each Lender having a Revolving Credit Loan Commitment.


                                      -71-
<PAGE>

      "Revolving Credit Lenders" shall mean, as of any date of determination,
Lenders having a Revolving Credit Loan Commitment.

      "Revolving Credit Loan" shall have the meaning assigned to it in Section
1.1(a) hereof.

      "Revolving Credit Loans" shall have the meaning assigned to it in Section
1.1(a) hereof.

      "Revolving Credit Loan Commitment" shall mean (a) as to any Revolving
Credit Lender, the aggregate commitment of such Revolving Credit Lender to make
Revolving Credit Loans as set forth on Annex E to the Agreement or in the most
recent Assignment Agreement executed by such Revolving Credit Lender and (b) as
to all Revolving Credit Lenders, the aggregate commitment of all Revolving
Credit Lenders to make Revolving Credit Loans which aggregate commitment shall
be Twenty Million Dollars ($20,000,000) on the Closing Date, as such amount may
be adjusted, if at all, from time to time in accordance with the Agreement.

      "Revolving Credit Note" shall have the meaning assigned to it in
Section 1.1(a)(ii).

      "Revolving Credit Notes" shall have the meaning assigned to it in
Section 1.1(a)(ii).

      "Solvent" shall mean, with respect to any Person on a particular date,
that on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including contingent liabilities, of such
Person; (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probably liability of such
Person on its debts as they become absolute and matured; (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature taking
into account the timing and the amounts of cash to be received by such Person or
its Subsidiaries from any source and the timing of and amounts of cash to be
payable in respect of or in connection with the debts and liabilities of such
Person and its Subsidiaries; and (d) such Person is not engaged in a business or
transaction, and is not about to engage in a business or transaction, for which
such Person's property would constitute an unreasonably small capital taking
into account the particular capital requirements of such Person and its
projected capital requirement and availability. The amount of contingent
liabilities (such as litigation, guarantees and pension plan liabilities) at any
time shall be computed as the amount which, in light of all the facts and
circumstances existing at the time, represents the amount which can be
reasonably be expected to become an actual or matured liability.

      "Stock" shall mean all shares, options, warrants, general or limited
partnership interests or other equivalents (regardless of how designated) of or
in a corporation, partnership or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended).

      "Subsidiary" shall mean, with respect to any Person, (a) any corporation
of which an aggregate of more than fifty percent (50%) of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,


                                      -72-
<PAGE>

owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, or with respect to which any such Person has the right to vote or
designate the vote of fifty percent (50%) or more of such Stock whether by
proxy, agreement, operation of law or otherwise, and (b) any partnership or
limited liability company in which such Person and/or one or more Subsidiaries
of such Person shall have an interest (whether in the form of voting or
participation in profits or capital contribution) of more than fifty percent
(50%) or of which any such Person is a general partner or may exercise the
powers of a general partner.

      "Tangible Net Worth" shall mean , for any Person, the excess of total
assets over total liabilities as reflected in Co-Borrowers' Financial Statements
for the relevant period, EXCLUDING, HOWEVER, from the determination of total
assets (i) all assets which would be classified as intangible assets under GAAP,
including, without limitation, goodwill, patents, trademarks, trade names,
copyrights, franchises, and deferred charges (including, without limitation,
unamortized debt discount and expense, organization cost, and research and
development costs), and (ii) if any, cash set apart and held in a sinking or
other analogous fund established for the purpose of redemption or other
retirement of capital stock.

      "Taxes" shall mean taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income or net profits of a Lender of the
Administrative Agent or a Lender by the jurisdictions under the laws of which
Agents and Lenders are organized or any political subdivision thereof or in
which its principal office is located or in which its principal lending office
is located.

      "Tender Offer" shall mean the offer of JRC to tender for the
outstanding shares of common stock of Cigar made pursuant to the Offer to
Purchase dated August 29, 2000, as amended.

      "Tender Offer Acquisition" shall mean the acquisition by JRC of Public
Stock pursuant to and in accordance with the terms and conditions of the Tender
Offer.

      "Tender Offer Documents" shall mean all documentation related to the
Tender Offer, including all public filings made with the Securities and Exchange
Commission.

      "Term Loan" shall have the meaning assigned to it in Section 1.1(b).

      "Term Loan Lender" shall mean each Lender having a Term Loan Commitment.

      "Term Loan Lenders" shall mean those Lenders having a Term Loan
Commitment.

      "Term Loan Commitment" shall mean (a) as to any Term Loan Lender, the
commitment of such Term Loan Lender to make its Pro Rata Share of the Term Loan
as set forth on Annex E to the Agreement or in the most recent Assignment
Agreement executed by such Term Loan Lender, and (b) as to all Term Loan
Lenders, the aggregate commitment of all Term Loan


                                      -73-
<PAGE>

Lenders to make the Term Loan on the Closing Date, which aggregate commitment
shall be Thirty-Five Million Dollars ($35,000,000) on the Closing Date.

      "Term Note" shall have the meaning assigned to it in Section 1.1(b).

      "Term Notes" shall have the meaning assigned to it in Section 1.1(b).

      "Termination Date" shall mean the date on which the Loans have been repaid
in full and all other Obligations under the Agreement and the other Loan
Documents have been completely discharged and Co-Borrowers shall not have any
further right to borrow any monies under the Agreement.

      "Third Party Interactives" shall mean all Persons with whom any
Co-Borrower exchanges data electronically in the ordinary course of business,
including, without limitation, customers, suppliers, third-party vendors,
subcontractors, processors-converters, shippers and warehousemen.

      "Title IV Plan" shall mean an employee pension benefit plan, as defined in
Section 3 (2) of ERISA (other than a Multiemployer Plan), which is covered by
Title IV of ERISA, and which any Co-Borrower or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any of them.

      "Trademarks" shall mean all of the following now owned or hereafter
acquired by any Co-Borrower: (a) all trademarks, trade names, corporate names,
business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature (whether registered or
unregistered), now owned or existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state or territory thereof, or any other country or any
political subdivision thereof; (b) all reissues, extensions or renewals thereof;
and (c) all goodwill associated with or symbolized by any of the foregoing.

      "Trust" shall mean each of the Trusts.

      "Trusts" shall mean collectively (i) that certain trust f/b/o Shane
Rothman created under a trust agreement dated November 1, 1994, Lewis I.
Rothman, Grantor, (ii) that certain trust f/b/o Marni Rothman created under a
trust agreement dated November 1, 1994, Lewis I. Rothman, Grantor, (iii) that
certain trust f/b/o Samantha Rothman created under a trust agreement dated
November 1, 1994, Lewis I. Rothman, Grantor, and (iv) that certain trust f/b/o
Luke Rothman created under a trust agreement dated November 1, 1994, Lewis I.
Rothman, Grantor.

      "Unfunded Pension Liability" shall mean the aggregate amount, if any, of
the sum of (a) the amount by which the present value of all accrued benefits
under each Title IV Plan exceeds the fair market value of all assets of such
Title IV Plan allocable to such benefits in accordance with Title IV of ERISA,
all determined as of the most recent valuation date for each such Title IV Plan
using the actuarial assumptions for funding purposes in effect under such Title
IV Plan, and (b) for a period of five (5) years following a transaction which
might reasonably be expected


                                      -74-
<PAGE>

to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued)
that could be imposed upon any Co-Borrower or any ERISA Affiliate as a result of
such transaction.

      "Unutilized Commitment" shall mean (i) with respect to any Revolving
Credit Lender at any time (A) such Lender's Revolving Credit Loan Commitment
at such time, if any, less (B) the aggregate outstanding Revolving Credit
Loans including Letter of Credit Loans (as defined in Section 1.1(e)) made by
such Lender, and (ii) with respect to all Revolving Credit Lenders at any
time (x) all Lenders' Revolving Credit Loan Commitments at such time, if any,
less (y) the aggregate outstanding Revolving Credit Loans including Letter of
Credit Loans (as defined in Section 1.1(e)) made by all such Lenders.

      "Year 2000 Date-Sensitive System/Component" shall mean, as to any Person,
any em software, network software, applications software, data base, computer
file, embedded microchip, firmware or hardware that accepts, creates,
manipulates, sorts, sequences, calculates, compares or outputs calendar-related
data accurately; such systems and components shall include, without limitation,
mainframe computers, file server/client systems, computer workstations, routers,
hubs, other network-related hardware, and other computer-related software,
firmware or hardware and information processing and delivery systems of any kind
and telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC systems.

      "Year 2000 Problems" shall mean, with respect to each Co-Borrower,
limitations on the capacity or readiness of any such Co-Borrower's Year 2000
Date-Sensitive Systems/Components to accurately accept, create, manipulate,
sort, sequence, calculate, compare or output calendar date information with
respect to calendar year 1999 or any subsequent calendar year beginning on or
after January 1, 2000 (including leap year computations), including, without
limitation, exchanges of information among Year 2000 Date-Sensitive
Systems/Components of the Co-Borrowers and exchanges of information among the
Co-Borrowers and Year 2000 Date-Sensitive Systems/Components of Third Party
Interactives and functionality of peripheral interfaces, firmware and embedded
microchips.

      All other undefined terms contained in any of the Loan Documents shall,
unless the context indicates otherwise, have the meanings provided for by the
Code as in effect in the State of New York to the extent the same are used or
defined therein. Unless otherwise specified, references in the Agreement or any
of the Appendices to a Section, subsection or clause refer to such Section,
subsection or clause as contained in the Agreement. The words "herein," "hereof"
and "hereunder" and other words of similar import refer to the Agreement as a
whole, including all Annexes, Exhibits and Schedules, as the same may from time
to time be amended, restated, modified or supplemented, and not to any
particular section, subsection or clause contained in the Agreement or any such
Annex, Exhibit or Schedule.

      Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to Persons include their respective successors and assigns (to the
extent and only to the extent permitted by the Loan Documents) or, in the case
of governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to


                                      -75-
<PAGE>

statutes and related regulations shall include any amendments of the same and
any successor statutes and regulations. Whenever any provision in any Loan
Document refers to the knowledge (or an analogous phrase) of any Co-Borrower,
such words are intended to signify that such Co-Borrower has actual knowledge or
awareness of a particular fact or circumstance or that such Co-Borrower, if it
had exercised reasonable diligence, would have known or been aware of such fact
or circumstance.


                                      -76-
<PAGE>

                            ANNEX B (SECTION 4.1(a))

                                       TO

                                CREDIT AGREEMENT

      FINANCIAL STATEMENTS -- REPORTING

      Co-Borrowers shall deliver or cause to be delivered to Administrative
Agent or to Administrative Agent and Lenders, as indicated, the following:

      (a) QUARTERLY FINANCIALS. To Administrative Agent and Lenders, within
forty-five (45) days after the end of each of the first three Fiscal Quarters of
each Fiscal Year, consolidated and, if available, consolidating financial
information regarding Co-Borrowers certified by the Chief Financial Officer of
Co-Borrowers, including (i) unaudited balance sheets as of the close of such
Fiscal Quarter and the related statements of income and cash flow for that
portion of the Fiscal Year ending as of the close of such Fiscal Quarter and
(ii) unaudited statements of income and cash flows for such Fiscal Quarter, in
each case setting forth in comparative form the figures for the corresponding
period in the prior year all prepared in accordance with GAAP (subject to normal
year-end adjustments and the absence of footnotes). Such financial information
shall be accompanied by (A) a statement in reasonable detail (each, a
"Compliance Certificate") showing the calculations used in determining
compliance with each of the financial covenants set forth on Annex C which is
tested on a quarterly basis and (B) the certification of the Chief Financial
Officer of Co-Borrowers that (i) such financial information presents fairly in
accordance with GAAP (subject to normal year-end adjustments) the financial
position, results of operations and statements of cash flows of Co-Borrowers, on
both a consolidated and, if available, consolidating basis, as at the end of
such Fiscal Quarter and for the period then ended, and (ii) that there was no
Default or Event of Default in existence as of such time or, if a Default or
Event of Default shall have occurred and be continuing, describing the nature
thereof and all efforts undertaken to cure such Default or Event of Default. In
addition, Co-Borrowers shall deliver to Administrative Agent and Lenders, within
forty-five (45) days after the end of each Fiscal Quarter, a management
discussion and analysis which includes a comparison of performance for that
Fiscal Quarter to the corresponding period in the prior year;

      (b) ANNUAL AUDITED FINANCIALS. To Administrative Agent and Lenders, within
ninety (90) days after the end of each Fiscal Year, audited Financial Statements
for Co-Borrowers on a consolidated and, if available, (unaudited) consolidating
basis, consisting of balance sheets and statements of income and retained
earnings and cash flows, setting forth in comparative form in each case the
figures for the previous Fiscal Year, which Financial Statements shall be
prepared in accordance with GAAP, certified without qualification, by Ernst &
Young, LLP or other independent certified public accounting firm of national
standing or otherwise acceptable to Administrative Agent. Such Financial
Statements shall be accompanied by (i) a statement prepared in reasonable detail
showing the calculations used in determining compliance with each of the
financial covenants set forth on Annex C, (ii) a report from such accounting
firm to the effect that, in connection with their audit examination, nothing has
come to their attention to cause them to believe that a Default or Event of
Default has occurred (or specifying those Defaults and Events of Default that
they became aware of) which report may be limited to the


                                      -77-
<PAGE>

extent required by accounting rules or guidelines, it being understood that such
audit examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or Events of
Default, (iii) a letter addressed to Administrative Agent, on behalf of itself
and Lenders, in form and substance reasonably satisfactory to Administrative
Agent and subject to standard qualifications taken by nationally recognized
accounting firms, signed by such accounting firm acknowledging that
Administrative Agent and Lenders are entitled to rely upon such accounting
firm's certification of such audited Financial Statements, (iv) the annual
letters to such accountants in connection with their audit examination detailing
contingent liabilities and material litigation matters, and (v) the
certification of the Chief Executive Officer or Chief Financial Officer of
Co-Borrowers that all such Financial Statements present fairly in accordance
with GAAP the financial position, results of operations and statements of cash
flows of Co-Borrowers on a consolidated and, if available, consolidating basis,
as at the end of such year and for the period then ended, and that there was no
Default or Event of Default in existence as of such time or, if a Default or
Event of Default shall have occurred and be continuing, describing the nature
thereof and all efforts undertaken to cure such Default or Event of Default;

      (c) MANAGEMENT LETTERS. To Administrative Agent and Lenders, within five
(5) Business Days after receipt thereof by any Co-Borrower, copies of all
management letters, exception reports or similar letters or reports received by
such Co-Borrower from its independent certified public accountants;

      (d) DEFAULT NOTICES. To Administrative Agent and Lenders, as soon as
practicable, and in any event within five (5) Business Days after an executive
officer of Co-Borrowers has actual knowledge of the existence of any Default,
Event of Default or other event which has had a Material Adverse Effect,
telephonic or telecopied notice specifying the nature of such Default or Event
of Default or other event, including the anticipated effect thereof, which
notice, if given telephonically, shall be promptly confirmed in writing on the
next Business Day;

      (e) SUPPLEMENTAL SCHEDULES. To Administrative Agent, supplemental
disclosures, if any, required by Section 5.6 of the Agreement;

      (f) LITIGATION. To Administrative Agent in writing, promptly upon learning
thereof, notice of any Litigation commenced or threatened against any
Co-Borrower that (i) seeks damages in excess of $100,000 whether or not covered
by insurance, (ii) seeks injunctive relief, (iii) is asserted or instituted
against any Plan, its fiduciaries or its assets or against any Co-Borrower or
ERISA Affiliate in connection with any Plan, (iv) alleges criminal misconduct by
any Co-Borrower, or (v) alleges the violation of any law regarding, or seeks
remedies in connection with, any Environmental Liabilities;

      (g) INSURANCE NOTICES. To Administrative Agent, disclosure of losses or
casualties required by Section 5.4 of the Agreement;

      (h) LEASE AMENDMENTS. To Administrative Agent, copies of all material
amendments to real estate leases involving annual payments of more than
$100,000; and


                                      -78-
<PAGE>

      (i) OTHER DOCUMENTS. To Administrative Agent and Lenders, such other
financial and other information respecting any Co-Borrower's business or
financial condition, including without limitation, Co-Borrower's annual Budget,
as Agent or any Lender shall, from time to time, request.


                                      -79-
<PAGE>

                             ANNEX C (SECTION 6.10)

                                       TO

                                CREDIT AGREEMENT

                               FINANCIAL COVENANTS

      Co-Borrowers shall not breach or fail to comply with any of the following
financial covenants, each of which shall be calculated in accordance with GAAP
consistently applied:

      (a) MINIMUM FIXED CHARGE COVERAGE RATIO. Co-Borrowers shall have on a
consolidated basis at the end of each Fiscal Quarter, a Fixed Charge Coverage
Ratio for the 12-month period then ended of not less than 1.15:1.00.

      (b) MINIMUM TANGIBLE NET WORTH. Co-Borrowers on a consolidated basis shall
have, at the end of each Fiscal Quarter commencing with the Fiscal Quarter ended
September 30, 2000, Tangible Net Worth of no less than the sum of (i) the amount
of Tangible Net Worth as at the end of the immediately preceding Fiscal Quarter
plus (ii) 50% of the amount of the current Fiscal Quarter's Net Income.

      (c) MAXIMUM LEVERAGE RATIO. Co-Borrowers on a consolidated basis shall
have, at the end of each Fiscal Quarter, a Leverage Ratio as of the last day of
such Fiscal Quarter and for the 12-month period then ended of not more than the
2.75: 1.00.

      Unless otherwise specifically provided herein, any accounting term used in
the Agreement shall have the meaning customarily given such term in accordance
with GAAP, and all financial computations hereunder shall be computed in
accordance with GAAP consistently applied. That certain items or computations
are explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any "Accounting Changes" (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Co-Borrowers, Administrative Agent and Lenders agree to enter
into negotiations in order to amend such provisions of the Agreement so as to
equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating Co-Borrowers' financial condition shall be the same
after such Accounting Changes as if such Accounting Changes had not been made;
provided, however, that the agreement of Requisite Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders.
"Accounting Changes" means (a) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions), (b)
changes in accounting principles concurred in by Co-Borrowers' certified public
accountants; (c) purchase accounting adjustments under A.P.B. 16 and/or 17 and
EITF 88-16, and the application of the accounting principles set forth in FASB
109, including the establishment of reserves pursuant thereto and any subsequent
reversal (in whole or in part) of such reserves; and (d) the reversal of any
reserves established as a result of purchase accounting adjustments. All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the


                                      -80-
<PAGE>

period the expenditures are made and deducted as part of the calculation of
EBITDA in such period. If Administrative Agent, Co-Borrowers and Requisite
Lenders agree upon the required amendments, then after appropriate amendments
have been executed and the underlying Accounting Change with respect thereto has
been implemented, any reference to GAAP contained in the Agreement or in any
other Loan Document shall, only to the extent of such Accounting Change, refer
to GAAP, consistently applied after giving effect to the implementation of such
Accounting Change. If Administrative Agent, Borrower and Requisite Lenders
cannot agree upon the required amendments within thirty (30) days following the
date of implementation of any Accounting Change, then all Financial Statements
delivered and all calculations of financial covenants and other standards and
terms in accordance with the Agreement and the other Loan Documents shall be
prepared, delivered and made without regard to the underlying Accounting Change.


                                      -81-
<PAGE>

                             ANNEX D (SECTION 11.10)



                                       TO

                                CREDIT AGREEMENT

                                NOTICE ADDRESSES

(A)  If to Administrative Agent, at

     The Chase Manhattan Bank
     695 Route 46 West
     Fairfield, New Jersey  07004
     Attention:  Ivan Harlow
     Telecopier No.:  (973) 439-5011
     Telephone No.:  (973) 439-5071

     with copies to:

     McCarter & English, LLP
     Four Gateway Center
     100 Mulberry Street
     Newark, New Jersey  07102

     Attention:  Peter S. Twombly, Esq.
     Telecopier No.: (973) 624-7070
     Telephone No.: (973) 622-4444

(B)  If to Documentation Agent, at

     Fleet Bank, N.A.
     208 Harristown Road
     Glen Rock, New Jersey  07452

     Attention: Barrett Bencivenga
     Telecopier No.: (201) 251-5050
     Telephone No.: (201) 251-5725


                                      -82-
<PAGE>

(C)  If to Lenders, at

     The Chase Manhattan Bank
     695 Route 46 West
     Fairfield, New Jersey  07004

     Attention: Ivan Harlow
     Telecopier No.: (973) 439-5011
     Telephone No.: (973) 439-5071

     Fleet Bank, N.A.
     208 Harristown Road
     Glen Rock, New Jersey  07452

     Attention: Barrett Bencivenga
     Telecopier No.: (201) 251-5050
     Telephone No.: (201) 251-5725

     European American Bank
     335 Madison Avenue
     New York, New York  10017

     Attention: Anthony Pantina
     Telecopier No.: (212) 503-2667
     Telephone No.: (212) 503-2428

     with Copies to:

     McCarter & English, LLP
     Four Gateway Center
     100 Mulberry Street
     Newark, New Jersey  07102

     Attention: Peter S. Twombly, Esq.
     Telecopier No.: (973) 624-7070
     Telephone No.: (973) 622-4444

(D)  If to Co-Borrowers, at

     800-JR CIGAR, Inc.
     301 Route 10 East
     Whippany, New Jersey  07981

     Attention:  Michael E. Colleton, Esq.
     Telecopier No.:  (973) 884-9556
     Telephone No.:  (973) 884-9555


                                      -83-
<PAGE>

     With copies to:

     Morgan, Lewis & Bockius LLP
     101 Park Avenue
     New York, New York  10178-0060

     Attention:  Samuel B. Fortenbaugh III, Esq.
     Telecopier No.:  (212) 309-6273
     Telephone No.:  (212) 309-6070


                                      -84-
<PAGE>

               ANNEX E (FROM ANNEX A - COMMITMENTS DEFINITION)

                                       TO

                                CREDIT AGREEMENT



Lender(s):

THE CHASE MANHATTAN BANK

Revolving Credit Loan Commitment:   Lesser of (i) $20,000,000 and(ii)
                                    $20,000,000 MINUS the aggregate amount of
                                    Revolving Credit Loans made by the other
                                    Lenders

Term Loan Commitment:               Lesser of (i) $35,000,000 and (ii)
                                    $35,000,000 MINUS the aggregate amount of
                                    Term Loans made by the other Lenders



FLEET BANK, N.A.

Revolving Credit Loan Commitment:   .3636364 of the aggregate Revolving
                                    Credit Loan Commitments of all Lenders

Term Loan Commitment:               .3636364 of the aggregate Term Loan
                                    Commitments of all Lenders



EUROPEAN AMERICAN BANK

Revolving Credit Loan Commitment:   .1818182 of the aggregate Revolving
                                    Credit Loan Commitments of all Lenders

Term Loan Commitment:               .1818182 of the aggregate Term Loan
                                    Commitments of all Lenders


                                      -85-

<PAGE>


                                                               EXHIBIT 1.1(a)(i)


                         NOTICE OF REVOLVING CREDIT LOAN


            Pursuant to Section 1.1(a)(i) of the Credit Agreement (the "Credit
Agreement") dated as of August __, 2000 by and among 800-JR CIGAR, Inc., a
Delaware corporation ("Cigar"); L&LR, Inc., a Delaware corporation ("L&LR");
J.R. Tobacco of America, Inc., a North Carolina corporation ("JR-America");
Santa Clara, Inc., a North Carolina corporation ("JR-Santa Clara"); J.N.R.
Grocery Corp., a New York corporation ("JR-Grocery"); J.R. Tobacco NC, Inc., a
North Carolina corporation ("JR-NC"); J&R Tobacco (New Jersey) Corp., a New
Jersey corporation ("JR-New Jersey"); J.R. Tobacco Company of Michigan, Inc., a
Michigan corporation ("JR-Michigan"); J.R.-46th Street, Inc., a New York
corporation ("JR-46th"); J.R. Tobacco Outlet, Inc., a New Jersey corporation
("JR-Outlet"); J.R. Statesville, Inc., a North Carolina corporation
("JR-Statesville"); J R Target (DC), Inc., a corporation organized under the
laws of the District of Columbia ("JR-DC"); J.R. Tobacco of Burlington, Inc., a
North Carolina corporation ("JR-Burlington"); Casa Blanca, Inc., a New Jersey
corporation ("JR-Casa Blanca"); jrcigars.com, Inc., a North Carolina corporation
("JR.COM") (Cigar, L&LR, JR-America, JR-Santa Clara, JR-Grocery, JR-NC, JR-New
Jersey, JR-Michigan, JR-46th, JR-Outlet, JR-Statesville, JR-DC, JR-Burlington,
JR-Casa Blanca and JR.COM, collectively the "Co-Borrowers"), The Chase Manhattan
Bank, as Agent for the Lenders party to the Credit Agreement, the several
Lenders and Fleet Bank, N.A., as Documentation Agent. Terms defined in the
Credit Agreement are being used herein as therein defined unless otherwise
defined herein. The undersigned, the [Authorized Officer] of Cigar, hereby
requests on behalf of the Co-Borrowers a Revolving Credit Loan in the amount of
$__________ to be made available to the Co-Borrowers on ___________.

            The Co-Borrowers hereby elect that such requested Revolving Credit
Loan shall be a _______________ [Eurodollar] [Prime Rate] Loan [and the
Eurodollar Interest Period applicable to such Loan shall be __________.]

            The undersigned hereby certifies that:

                  (i) the Co-Borrowers are in compliance with all of
      the terms, covenants and conditions of the Loan Documents;

                  (ii) the representations and warranties set forth in the Loan
      Documents, including without limitation, the Collateral Documents, are
      true and correct in all material respects on and as of the date hereof,
      with the same effect as though such representations and warranties had
      been made on the date hereof;

                  (iii) no Event of Default has occurred and is
      continuing;

                  (iv) there has been no material adverse change in the
      financial position, operations, business or Property of the Co-Borrowers
      since the execution of the Credit Agreement and the other Loan Documents;
      and

                  (v) the amount of Revolving Credit Loans which will be
      outstanding after


<PAGE>

      making the Revolving Credit Loan(s) pursuant to this Notice of Revolving
      Credit Loan will not exceed the Maximum Amount.

                                          800-JR CIGAR, INC.


                                          By:
                                             -----------------------------------
                                          Name:
                                               ---------------------------------
                                          Title:
                                                --------------------------------

DATE:


                                       -2-
<PAGE>


                                                            EXHIBIT 1.1(a)(ii)

                              REVOLVING CREDIT NOTE


$_______________                                                  , New Jersey
                                                            August __, 2000

            800-JR CIGAR, Inc., a Delaware corporation ("Cigar"); L&LR, Inc., a
Delaware corporation ("L&LR"); J.R. Tobacco of America, Inc., a North Carolina
corporation ("JR-America"); Santa Clara, Inc., a North Carolina corporation
("JR-Santa Clara"); J.N.R. Grocery Corp., a New York corporation ("JR-Grocery");
J.R. Tobacco NC, Inc., a North Carolina corporation ("JR-NC"); J&R Tobacco (New
Jersey) Corp., a New Jersey corporation ("JR-New Jersey"); J.R. Tobacco Company
of Michigan, Inc., a Michigan corporation ("JR-Michigan"); J.R.-46th Street,
Inc., a New York corporation ("JR-46th"); J.R. Tobacco Outlet, Inc., a New
Jersey corporation ("JR-Outlet"); J.R. Statesville, Inc., a North Carolina
corporation ("JR-Statesville"); J R Cigar (DC), Inc., a corporation organized
under the laws of the District of Columbia ("JR-DC"); J.R. Tobacco of
Burlington, Inc., a North Carolina corporation ("JR-Burlington"); Casa Blanca,
Inc., a New Jersey corporation ("JR-Casa Blanca"); jrcigars.com, Inc., a North
Carolina corporation ("JR.COM") (Cigar, L&LR, JR-America, JR-Santa Clara,
JR-Grocery, JR-NC, JR-New Jersey, JR-Michigan, JR-46th, JR-Outlet,
JR-Statesville, JR-DC, JR-Burlington, JR-Casa Blanca and JR.COM together with
their successors and assigns, each individually, a "Co-Borrower" and
collectively, the "Co-Borrowers"), for value received, hereby promise, jointly
and severally, to pay to the order of ("Lender") at the office of The Chase
Manhattan Bank, 695 Route 46 West, Fairfield, New Jersey 07004, on
_____________, 2003, in lawful money of the United States of America and in
immediately available funds, the principal sum of ________________________
DOLLARS ($__________), or such lesser unpaid principal amount as shall be
outstanding hereunder, together with interest from the date hereof on the unpaid
principal balance of this Revolving Credit Note (the "Revolving Credit Note"),
payable on the dates and at the rate or rates provided for in the Credit
Agreement dated as of August __, 2000, by and among the Co-Borrowers, the
Lender, the other lenders party thereto, The Chase Manhattan Bank, as Agent, and
Fleet Bank, N.A., as Documentation Agent, as the same may be amended from time
to time (the "Agreement"). In no event shall the interest rate payable hereon
exceed the maximum rate of interest permitted by law. Capitalized terms used
herein not otherwise defined herein which are defined in the Agreement shall
have the meanings therein defined.

            The holder of this Revolving Credit Note is authorized, but shall
not be required, to record, the date and principal amount of each Revolving
Credit Loan made by the Lender and each payment or prepayment of principal made
by the Co-Borrowers with respect thereto on the schedule annexed hereto and
constituting a part hereof, or on a continuation thereof which shall be attached
hereto and made a part hereof, which endorsement shall constitute presumptive
evidence of the accuracy of the information endorsed, provided that the failure
of the Lender to make such recordation or endorsement shall not affect the
obligations of the Co-Borrowers


<PAGE>

hereunder or under the Agreement. The aggregate unpaid principal amount of all
Revolving Credit Loans set forth in such schedule or as evidenced by the books
and records of the Lender shall be presumptive evidence of the principal amount
owing and unpaid on this Revolving Credit Note. The Lender may attach one or
more continuations to such schedule as and when required.

            This Revolving Credit Note is one of the Revolving Credit Notes
referred to in the Agreement, and is entitled to the benefits and is subject to
the terms of the Agreement. The principal of this Revolving Credit Note is
prepayable in the amounts and under the circumstances, and its maturity is
subject to acceleration upon the terms, set forth in the Agreement. Except as
otherwise provided in the Agreement, if any payment on this Revolving Credit
Note becomes due and payable on a day which is not a Business Day, the due date
thereof shall be extended to the next Business Day, and interest shall be
payable at the rate or rates specified in the Agreement during such extension
period.

            Presentment for payment, demand, notice of dishonor, protest, notice
of protest and all other demands and notices in connection with the delivery,
performance and enforcement of this Revolving Credit Note are hereby waived.

            Upon the occurrence of any Event of Default specified in the
Agreement, all amounts then remaining unpaid on this Revolving Credit Note shall
become, or may be declared to be, immediately due and payable, all as and to the
extent provided in the Agreement. This Revolving Credit Note is entitled to the
benefits of the Collateral Documents which are referred to in the Agreement.
Reference is made to each of the foregoing instruments for a description of the
Collateral provided thereby and the rights of the Lender thereunder and in
respect of Collateral.

            This Revolving Credit Note shall be construed and enforceable in
accordance with, and be governed by the internal laws of, the State of New York
without regard to principles of conflict of laws.

            This Revolving Credit Note may not be changed orally, but only by an
instrument in writing executed pursuant to the provisions of Article X of the
Agreement.


                                    800-JR CIGAR, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                      -2-
<PAGE>


                                    L&LR, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.R. Tobacco of America, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    Santa Clara, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.N.R. Grocery Corp.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.R. Tobacco NC, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                      -3-
<PAGE>

                                    J&R Tobacco (New Jersey) Corp.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.R. Tobacco Company of Michigan, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.R.-46th Street, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.R. Tobacco Outlet, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.R. Statesville, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                      -4-
<PAGE>

                                    J R Cigar (DC), Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.R. Tobacco of Burlington, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    Casa Blanca, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    jrcigars.com, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                      -5-
<PAGE>



               REVOLVING CREDIT LOANS AND PAYMENTS OF PRINCIPAL
               ------------------------------------------------

                                   AMOUNT OF
                                   PRINCIPAL     UNPAID
                                   PAID OR       PRINCIPAL
      DATE       AMOUNT OF LOAN    PREPAID       AMOUNT        NOTATION MADE BY
      ----       --------------    -------       ------        ----------------




                                      -6-

<PAGE>


                                                              EXHIBIT 1.1(b)(ii)
                                    TERM NOTE
$_______________                                                  , New Jersey
                                                            August __, 2000


      800-JR CIGAR, Inc., a Delaware corporation ("Cigar"); L&LR, Inc., a
Delaware corporation ("L&LR"); J.R. Tobacco of America, Inc., a North Carolina
corporation ("JR-America"); Santa Clara, Inc., a North Carolina corporation
("JR-Santa Clara"); J.N.R. Grocery Corp., a New York corporation ("JR-Grocery");
J.R. Tobacco NC, Inc., a North Carolina corporation ("JR-NC"); J&R Tobacco (New
Jersey) Corp., a New Jersey corporation ("JR-New Jersey"); J.R. Tobacco Company
of Michigan, Inc., a Michigan corporation ("JR-Michigan"); J.R.-46th Street,
Inc., a New York corporation ("JR-46th"); J.R. Tobacco Outlet, Inc., a New
Jersey corporation ("JR-Outlet"); J.R. Statesville, Inc., a North Carolina
corporation ("JR-Statesville"); J R Cigar (DC), Inc., a corporation organized
under the laws of the District of Columbia ("JR-DC"); J.R. Tobacco of
Burlington, Inc., a North Carolina corporation ("JR-Burlington"); Casa Blanca,
Inc., a New Jersey corporation ("JR-Casa Blanca"); and jrcigars.com, Inc., a
North Carolina corporation ("JR.COM") (Cigar, L&LR, JR-America, JR-Santa Clara,
JR-Grocery, JR-NC, JR-New Jersey, JR-Michigan, JR-46th, JR-Outlet,
JR-Statesville, JR-DC, JR-Burlington, JR-Casa Blanca and JR.COM together with
their successors and assigns, each individually, a "Co-Borrower" and
collectively, the "Co-Borrowers"), for value received, hereby promise, jointly
and severally, to pay the order of _____ (the "Lender"), at the office of The
Chase Manhattan Bank, 695 Route 46 West, Fairfield, New Jersey 07004, in lawful
money of the United States of America and in immediately available funds, the
principal sum of _________ DOLLARS ($_________), in twenty consecutive equal
quarterly installments, each in the amount of [Lender's share of $1,750,000,]
payable on the first Business Day of January, April, July and October of each
year, commencing January 1, 2001 with the final installment and outstanding
unpaid principal balance hereof due and payable on October 1, 2005, together
with interest from the date hereof on the unpaid principal balance of this Term
Note, at the rate or rates provided for in the Credit Agreement, dated August
__, 2000, by and among the Co-Borrowers, the Lender, the other lenders party
thereto, The Chase Manhattan Bank, as Agent and Fleet Bank, N.A., as
Documentation Agent, as the same may be amended form time to time (the
"Agreement"). In no event shall the interest rate payable hereon exceed the
maximum rate of interest permitted by law. Capitalized terms used herein which
are defined in the Agreement shall have the meanings therein defined.

      This Term Note is one of the Term Notes referred to in the Agreement, and
is entitled to the benefits and is subject to the terms of the Agreement. The
principal of this Term Note is prepayable in the amounts and under the
circumstances, and its maturity is subject to acceleration upon the terms, set
forth in the Agreement. Except as otherwise provided in the Agreement, if any
payment on this Term Note becomes due and payable on a day which is not a


<PAGE>

Business Day, the due date thereof shall be extended to the next Business Day,
and interest shall be payable at the rate or rates specified in the Agreement
during such extension period.

      Presentment for payment, demand, notice of dishonor, protest, notice of
protest and all other demands and notices in connection with the delivery,
performance and enforcement of this Term Note are hereby waived.

      Upon the occurrence of any Event of Default specified in the Agreement,
all amounts then remaining unpaid on this Term Note shall become, or may be
declared to be, immediately due and payable, all as provided in the Agreement.
This Term Note is entitled to the benefits of the Collateral Documents which are
referred to in the Agreement. Reference is made to each of the foregoing
instruments for a description of the Collateral provided thereby and the rights
of the Lender thereunder and in respect of such Collateral.

      This Term Note shall be construed and enforceable in accordance with, and
be governed by, the internal laws of the State of New York without regard to
principles of conflict of laws.

      This Term Note may not be changed orally, but only by an instrument in
writing executed pursuant to the provisions of Article X of the Agreement.

                                    800-JR CIGAR, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                   L&LR, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.R. Tobacco of America, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------



                                      -2-
<PAGE>

                                    Santa Clara, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.N.R. Grocery Corp.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.R. Tobacco NC, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J&R Tobacco (New Jersey) Corp.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.R. Tobacco Company of Michigan, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.R.-46th Street, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                      -3-
<PAGE>

                                    J.R. Tobacco Outlet, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J.R. Statesville, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    J R Cigar (DC), Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------

                                    J.R. Tobacco of Burlington, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    Casa Blanca, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                    jrcigars.com, Inc.


                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------


                                      -4-

<PAGE>

                                                                  EXHIBIT 1.1(e)

                          REQUEST FOR LETTER OF CREDIT


      Pursuant to Section 1.1(e) of the Credit Agreement by and among L&LR,
Inc., 800-JR CIGAR, INC. ("Cigar") and their Subsidiaries (L&LR, Inc., Cigar and
such Subsidiaries, each individually, a "Co-Borrower" and, collectively, the
"Co-Borrowers"), The Chase Manhattan Bank, as Administrative Agent, Fleet Bank,
N.A., as Documentation Agent, and the Lenders party thereto, dated August ___,
2000 (the "Agreement"), Cigar, on behalf of the Co-Borrowers, hereby requests
that a Letter of Credit in the amount of $________ be issued for the benefit of
____________ on _______________. Capitalized terms used herein which are defined
in the Agreement shall have the meanings herein defined.

      The Co-Borrowers hereby elect that drawings under such Letter of Credit
shall be deemed a [Eurodollar Loan] [Prime Rate Loan] [and the Interest Period
applicable to such Revolving Credit Loan shall be ____________.]

      The Co-Borrowers, jointly and severally, certify that:

      (i)   the Co-Borrowers are in compliance with all of the terms,
covenants and conditions of the Agreement, the Notes, the Collateral
Documents and the other Loan Documents;

      (ii)  the conditions contained in Section 2 of the Agreement in respect of
the making of Loans are satisfied in full with the same effect as though
issuance of the Letter of Credit constituted the making of a Loan; and




<PAGE>



      (iii) no event has occurred and is continuing which constitutes an Event
of Default or with the giving of notice or lapse of time would constitute an
Event of Default under the Agreement.

                                          800-JR CIGAR, INC.

                                          By:_____________________________
Dated:




<PAGE>


                                                                     EXHIBIT 1.6


                        NOTICE OF CONVERSION/CONTINUATION


TO:   The Chase Manhattan Bank, as Agent for the Lenders party to the Credit
      Agreement dated as of August __, 2000 (as from time to time amended,
      extended, restated, modified or supplemented, the "Credit Agreement")
      among 800-JR CIGAR, Inc., a Delaware corporation ("Cigar"); L&LR, Inc.,
      a Delaware corporation ("L&LR"); J.R. Tobacco of America, Inc., a North
      Carolina corporation ("JR-America"); Santa Clara, Inc., a North
      Carolina corporation ("JR-Santa Clara"); J.N.R. Grocery Corp., a New
      York corporation ("JR-Grocery"); J.R. Tobacco NC, Inc., a North
      Carolina corporation ("JR-NC"); J&R Tobacco (New Jersey) Corp., a New
      Jersey corporation ("JR-New Jersey"); J.R. Tobacco Company of Michigan,
      Inc., a Michigan corporation ("JR-Michigan"); J.R.-46th Street, Inc., a
      New York corporation ("JR-46th"); J.R. Tobacco Outlet, Inc., a New
      Jersey corporation ("JR-Outlet"); J.R. Statesville, Inc., a North
      Carolina corporation ("JR-Statesville"); J R Cigar (DC), Inc., a
      corporation organized under the laws of the District of Columbia
      ("JR-DC"); J.R. Tobacco of Burlington, Inc., a North Carolina
      corporation ("JR-Burlington"); Casa Blanca, Inc., a New Jersey
      corporation ("JR-Casa Blanca"); jrcigars.com, Inc., a North Carolina
      corporation ("JR.COM") (Cigar, L&LR, JR-America, JR-Santa Clara,
      JR-Grocery, JR-NC, JR-New Jersey, JR-Michigan, JR-46th, JR-Outlet,
      JR-Statesville, JR-DC, JR-Burlington, JR-Casa Blanca and JR.COM,
      collectively, the "Co-Borrowers"), the Agent, the several Lenders and
      Fleet Bank, N.A., as Documentation Agent.

Ladies and Gentlemen:

      The undersigned 800-JR CIGAR, Inc., on behalf of the Co-Borrowers, refers
to the Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives notice, pursuant to Section 1.6 of the Credit
Agreement, of the Co-Borrowers' desire to convert or continue the Loans
specified below:

      (1) $___________ of the presently outstanding principal amount of the Term
Loan presently being maintained as [a Prime Rate Loan] [a Eurodollar Loan] be
[converted into] [continued as] [a Eurodollar Loan having a Eurodollar Interest
Period of [one] [two] [three] months] [a Prime Rate Loan].

      (2) $___________ of the presently outstanding principal amount of the
Eurodollar Loan presently being maintained as a Eurodollar Loan with an Interest
Period ending on __________ be [converted into] [continued as] [a Eurodollar
Loan having a Eurodollar Interest Period of [one] [two] [three] months] [a Prime
Rate Loan].


<PAGE>

The undersigned represents and warrants that conversions and continuations
requested hereby comply with the requirements of Section 1.6 of the Credit
Agreement.

                                          800-JR CIGAR, INC.


                                          By:
                                             -----------------------------------
                                          Name:
                                               ---------------------------------
                                          Title:
                                                --------------------------------


<PAGE>

                                                                Exhibit 2.1(d)-1

                 SECOND AMENDED AND RESTATED PLEDGE AGREEMENT
                 --------------------------------------------
            (by L&LR, Inc. of Capital Stock of 800-JR CIGAR, Inc.
                 in connection with Permanent Loan Agreement)

      THIS PLEDGE AGREEMENT (the "Agreement") dated August __, 2000 by L&LR,
Inc. (the "Pledgor"), in favor of The Chase Manhattan Bank as agent (the
"Agent") for the benefit of the lenders which are from time to time parties
to that certain Credit Agreement (the "Credit Agreement") of even date among
the Pledgor, 800-JR CIGAR, Inc., the other Co-Borrowers, such lenders, the
Agent and Fleet Bank, N.A., as Documentation Agent.

                                    RECITALS

      A.    The Pledgor is the owner of all the shares of the capital stock
of 800-JR CIGAR, Inc., a Delaware corporation (the "Issuer");

      B. To secure the obligations of Pledgor under that certain Credit
Agreement (the "Existing Credit Agreement") dated August __, 2000 among the
Pledgor, JRC Acquisition Corp., the Agent and the lenders which are a party
thereto, Pledgor has previously amended and restated its grant of a security
interest in all the shares of the capital stock of the Issuer to the Agent for
the ratable benefit of the lenders which are a party to the Existing Credit
Agreement;

      C. A portion of the loan proceeds to be disbursed under the Credit
Agreement will be used to satisfy the obligations of the Pledgor under the
Existing Credit Agreement;

      D. Under the terms of the Credit Agreement, the Pledgor is required to
further amend and restate its prior grant to the Agent of a perfected security
interest in all of the shares of capital stock of the Issuer now owned or
hereafter acquired by the Pledgor;

      NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgor agrees as follows:

      SECTION 1. DEFINITIONS.

      Capitalized terms whose meaning is not otherwise defined herein shall have
the meaning assigned in the Credit Agreement. The following terms, as used
herein, have the following respective meanings:

      "AGENT" has the meaning assigned to such term in the Preamble to this
Agreement.

      "AGREEMENT" means this Pledge Agreement and any modifications or
amendments thereof.


<PAGE>

      "COLLATERAL" has the meaning assigned to such term in SECTION 3.

      "CREDIT AGREEMENT" has the meaning assigned to such term in the
Preamble to this Agreement.

      "ISSUER" has the meaning assigned to such term in the Recitals.

      "LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction in respect of
any of the foregoing).

      "PERSON" means an individual, partnership, corporation, business trust,
joint stock company, limited liability company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.

      "PLEDGED STOCK" means all of the capital stock of the Issuer.

      "PLEDGOR" has the meaning assigned to such term in the Preamble.

      "SECURED OBLIGATIONS" means all present and future obligations of the
Pledgor to the Lenders and the Agent, which may arise out of, under or in
connection with the Credit Agreement, this Agreement or the Loan Documents
including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding.

      "SECURITY INTERESTS" means the security interests in the Collateral
granted in favor of the Agent hereunder securing the Secured Obligations.

      Unless otherwise defined herein, or unless the context otherwise requires,
all terms used herein which are defined in the New York Uniform Commercial Code
as in effect on the date hereof shall have the meanings therein stated.

      SECTION 2. REPRESENTATIONS AND WARRANTIES.

      The Pledgor represents and warrants as follows:

      A. TITLE TO COLLATERAL; NO RESTRICTIONS ON TRANSFER. The Pledgor owns
directly all of the Pledged Stock, free and clear of any Lien other than the
Security Interests. There is no restriction on the pledge or transfer of any of
the Pledged Stock, other than restrictions referenced on the face of any
certificates evidencing the Pledged Stock delivered to the Agent.

      B. PLEDGED STOCK. None of the Pledged Stock is subject to any option to


                                      -2-
<PAGE>

purchase or similar rights of any Person nor is it subject to any legal or
equitable claim or interest whatsoever. The Pledgor is not nor will it become a
party to or otherwise bound by any agreement, other than this Agreement, which
restricts in any manner the rights of any present or future holder of any of the
Pledged Stock with respect thereto.

      C. VALIDITY, PERFECTION AND PRIORITY OF SECURITY INTERESTS. Upon the
delivery to the Agent of all certificates evidencing the Pledged Stock, the
Agent will have a valid and perfected security interest in the Collateral
subject to no prior Lien. No registration, recordation or filing with any
governmental body, agency or official is required in connection with the
execution or delivery of this Agreement or necessary for the validity or
enforceability hereof or for the perfection or enforcement of the Security
Interests. The Pledgor has not performed nor will it perform any acts which
might prevent the Agent from enforcing any of the terms and conditions of this
Agreement or which would limit the Agent in any such enforcement.

      D. NO OTHER LIENS. The Pledgor will not grant nor suffer to exist any
Liens on the Collateral, other than those permitted under this Agreement.

      SECTION 3. THE SECURITY INTERESTS.

      In order to secure the full and punctual payment of the Secured
Obligations of the Pledgor in accordance with the terms thereof, and to secure
the performance of all the obligations of the Pledgor hereunder:

      A. GRANT OF SECURITY INTERESTS. The Pledgor grants to the Agent for the
ratable benefit of the Lenders a security interest in the Pledged Stock, and all
of its rights and privileges with respect thereto, including all proceeds,
income and profits thereon, and all interest, dividends and other payments and
distributions with respect thereto (the "Collateral").

      B. ADDITIONAL PLEDGED STOCK. In the event that the Issuer at any time
issues any additional or substitute shares of capital stock of any class, the
Pledgor will immediately deliver, or cause to be immediately delivered, to the
Agent certificates representing all such shares as additional security for the
Secured Obligations. All such shares shall constitute Pledged Stock and are
subject to all provisions of this Agreement.

      SECTION 4. DELIVERY.

      All certificates representing Pledged Stock will be delivered to the Agent
by the Pledgor pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, with signatures appropriately guaranteed, and accompanied
by any required transfer tax stamps, all in form and substance satisfactory to
the Agent.

      SECTION 5. FILING; FURTHER ASSURANCES.

      The Pledgor agrees that it will, at its expense and in such manner and
form as the Agent may require, execute, deliver, file and record any financing
statement, specific assignment or


                                      -3-
<PAGE>

other paper and take any other action that may be necessary or desirable, or
that the Agent may reasonably request, in order to create, preserve, perfect or
validate the Security Interests in the Collateral or to enable the Agent to
exercise and enforce its rights hereunder with respect to any of the Collateral.
To the extent permitted by applicable law, the Pledgor hereby authorizes the
Agent to execute and file, in the name of Pledgor or otherwise, Uniform
Commercial Code financing statements (which may be carbon, photographic,
photostatic or other reproductions of this Agreement or of a financing statement
relating to this Agreement) which the Agent in its sole discretion may deem
necessary or appropriate to further perfect the Security Interests.

      SECTION 6. RECORD OWNERSHIP OF PLEDGED STOCK; NOTICES.

      The Agent may at any time or from time to time, in its sole discretion,
provided an Event of Default shall have occurred and be continuing, cause any or
all of the Pledged Stock to be transferred of record into the name of the Agent
or its nominee. The Pledgor will promptly give to the Agent copies of any
notices or other communications received by it with respect to Pledged Stock
registered in the name of the Pledgor and the Agent will promptly give to the
Pledgor copies of any notices and communications received by the Agent with
respect to Pledged Stock registered in the name of the Agent or its nominee.

      SECTION 7. RIGHT TO RECEIVE DISTRIBUTIONS ON COLLATERAL.

      Except as otherwise provided in the Credit Agreement, all dividends and
distributions (including without limitation all distributions which constitute a
return of capital, that is, a partial or complete liquidation) made upon or with
respect to the Collateral shall be delivered to the Agent as Collateral in the
same form as received (with any necessary endorsement).

      SECTION 8. RIGHT TO VOTE PLEDGED STOCK.

      Unless an Event of Default shall have occurred and be continuing, the
Pledgor shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to any or all of the Pledged Stock.

      If an Event of Default shall have occurred and be continuing, the Agent
shall have the right, to the extent permitted by law, and the Pledgor shall take
all such action as may be necessary or appropriate to give effect to such right,
to vote and to give consents, ratifications and waivers, and take any other
action, with respect to any or all of the Pledged Stock with the same force and
effect as if the Agent were the absolute and sole owner thereof.

      SECTION 9. GENERAL AUTHORITY.

      The Pledgor hereby irrevocably appoints the Agent its true and lawful
attorney, with full power of substitution, in the name of the Pledgor, the Agent
or otherwise, for the sole use and benefit of the Agent, but at the expense of
the Pledgor, to the extent permitted by law to exercise, if and Event of Default
shall have occurred and be continuing, all or any of the following powers with
respect to all or any of the Collateral:


                                      -4-
<PAGE>

      A. to demand, sue for, collect, receive and give acquittance for any and
all monies due or to become due upon or by virtue thereof,

      B. to settle, compromise, prosecute or defend any action or proceeding
with respect thereto,

      C. to sell, transfer, assign or otherwise deal in or with the same or the
proceeds or avails thereof, as fully and effectually as if the Agent were the
absolute owner thereof, and

      D. to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto;

      PROVIDED that the Agent shall give the Pledgor not less than ten days
prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral. The Agent and the Pledgor agree that such
notice constitutes "reasonable notification" within the meaning of Section
9-504(3) of the Uniform Commercial Code.

      SECTION 10. REMEDIES UPON EVENT OF DEFAULT.

      A. SALE. If any Event of Default shall have occurred and be continuing,
the Agent may exercise all the rights of a secured party under the Uniform
Commercial Code (whether or not in effect in the jurisdiction where such rights
are exercised) and, in addition, the Agent may, without being required to give
any notice, except as herein provided or as may be required by mandatory
provisions of law, (i) apply the cash, if any, then held by it as Collateral as
specified in SECTION 12 and (ii) if there shall be no such cash or if such cash
shall be insufficient to pay all of the Secured Obligations in full, sell such
Collateral or any part thereof at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery, and at such price or prices as the Agent may deem satisfactory and
apply the proceeds thereof as specified in SECTION 12. The Agent may be the
purchaser of any or all of the Collateral so sold at any public sale. The
Pledgor covenants and agrees that it will execute and deliver such documents and
take such other action as the Agent deems necessary or advisable in order that
any such sale may be made in compliance with law. Upon any such sale the Agent
shall have the right to deliver, assign and transfer to the purchaser thereof
the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely and free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor which may be
waived, and the Pledgor, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal which it has or may have
under any law now existing or hereafter adopted.

      B. PRIVATE SALE. The Pledgor further acknowledges that the Agent may deem
it impracticable to effect a public sale of any part of the securities included
in the Collateral, and therefore authorizes the Agent in connection with any
such private sale, if the Agent deems it advisable to do so, (i) to restrict the
prospective bidders on or purchasers of any of the Pledged Stock to a limited
number of sophisticated investors who will represent and agree that they are
purchasing for their own account for investment and not with a view to the
distribution or sale of any of such securities, (ii) to cause to be placed on
certificates for any or all of the Pledged Stock


                                      -5-
<PAGE>

or on any other securities pledged hereunder a legend to the effect that such
security has not been registered under the Securities Act of 1933 and may not be
disposed of in violation of the provisions of said Act, and (iii) to impose such
other limitations or conditions in connection with any such sale as the Agent
deems necessary or advisable in order to comply with said Act or any other law.

      C. NOTICE. The notice (if any) of such sale required by SECTION 9 shall
(i) in case of a public sale, state the time and place fixed for such sale, (ii)
in case of sale at a broker's board or on a securities exchange, state the board
or exchange at which such sale is to be made and the day on which the
Collateral, or the portion thereof so being sold, will first be offered for sale
at such board or exchange, and (iii) in the case of a private sale, state the
day after which such sale may be consummated. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Agent may fix in the notice of such sale. At any such sale, the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Agent may determine. The Agent shall not be obligated to make any such sale
pursuant to any such notice. The Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned. In case
of any sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Agent until the selling
price is paid by the purchaser thereof, but the Agent shall not incur any
liability in case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may again
be sold upon like notice.

      D. OTHER REMEDIES. The Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.

      SECTION 11. EXPENSES.

      The Pledgor agrees that it will forthwith upon demand pay to the Agent:

      A. the amount of any taxes which the Agent may have been required to pay
by reason of the Security Interests with respect to the Collateral or to free
any of the Collateral from any Lien thereon, and

      B. the amount of any and all reasonable out-of-pocket expenses, including
the reasonable fees and disbursements of counsel and of any other experts, which
the Agent may incur in connection with (i) the administration or enforcement of
this Agreement with respect to the Collateral, including such expenses as are
incurred to preserve the value of the Collateral and the validity, perfection,
rank and value of any Security Interests therein, (ii) the collection, sale or
other disposition of any of the Collateral, (iii) the exercise by the Agent of
any of the rights conferred upon it hereunder with respect to the Collateral or
(iv) any Default or Event of Default.

      Any such amount not paid on demand shall bear interest for each day until
paid at an

                                      -6-
<PAGE>

interest rate of 15% per annum.

      SECTION 12. APPLICATION OF PROCEEDS.

      Upon the occurrence and during the continuance of an Event of Default, the
proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held in respect thereof shall be applied by the Agent in
the following order of priorities:

      FIRST, to payment of the reasonable expenses of such sale or other
realization, including reasonable compensation to agents and counsel for the
Agent, and all expenses, liabilities and advances incurred or made by the Agent
in connection therewith, and any other expenses for which the Agent is to be
reimbursed pursuant to SECTION 11 hereof;

      SECOND, to the payment of accrued but unpaid interest on the Secured
Obligations;

      THIRD, to the payment of unpaid principal of the Secured Obligations;

      FOURTH, to the payment of all other Secured Obligations, until all
Secured Obligations shall have been paid in full; and

      FINALLY, to payment to the Pledgor or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.

      SECTION 13. GENERAL TERMS.

      A. NOTICES. All notices, communications and distributions to any party
hereunder shall be in writing and shall be given to such party in the manner
specified in the Credit Agreement.

      B. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part of the Agent to
exercise, and no delay in exercising and no course of dealing with respect to,
any right under this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise by the Agent of any right under this Agreement
preclude any other or further exercise thereof or the exercise of any other
right. The rights in this Agreement are cumulative and are not exclusive of any
other remedies provided by law.

      C. SUCCESSORS AND ASSIGNS. This Agreement is for the benefit of the Agent
and its successors and assigns. This Agreement shall be binding on the Pledgor
and its successors and assigns.

      D. CHANGES IN WRITING. Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated orally.

      E. LAW. This Agreement shall be construed in accordance with and governed
by the laws of the State of New York (without giving effect to the conflict of
laws principles thereof) except to the extent that the laws of another state
govern the creation or perfection of the


                                      -7-
<PAGE>

security interest hereunder.

      F. SEVERABILITY. If any provision hereof is invalid or unenforceable in
any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent in order to carry out the
intentions of the parties hereto as nearly as may be possible; and (ii) the
invalidity or enforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.

SECTION 14. AGENT.

      The Pledgor acknowledges that the rights and responsibilities of the Agent
under this Agreement with respect to any action taken by the Agent or the
exercise or non-exercise by the Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Agreement shall, as among the Agent and the Lenders, be governed by the Credit
Agreement and such other agreements with respect thereto as may exist from time
to time among them but, as between the Agent and the Pledgor, the Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and Pledgor shall not be under any
obligation or entitlement to make any inquiry respecting such authority.

SECTION 15. SUBMISSION TO JURISDICTION; WAIVERS.

      THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:

      A. SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT
IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF
THE STATES OF NEW JERSEY AND NEW YORK, THE COURTS OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND THE DISTRICT OF NEW JERSEY AND
APPELLATE COURTS FROM ANY THEREOF; and

      B. CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME.

      SECTION 16. WAIVERS OF JURY TRIAL.

      THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.

      IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as
of the


                                      -8-
<PAGE>

day and year first above written.

                                    L&LR, Inc.


                                    By:
                                       -----------------------------------------
                                       Lewis I. Rothman
                                       President


                                      -9-
<PAGE>


<PAGE>

                                                                Exhibit 2.1(d)-2

                                PLEDGE AGREEMENT
               (by 800 JR CIGAR, Inc. of the stock of Subsidiaries
                 in connection with Permanent Loan Agreement)

      THIS PLEDGE AGREEMENT (the "Agreement") dated August __, 2000 by 800-JR
CIGAR, Inc. (the "Pledgor"), in favor of The Chase Manhattan Bank as agent
(the "Agent") for the benefit of the lenders which are from time to time
parties to that certain Credit Agreement (the "Credit Agreement") of even
date among the Pledgor, L&LR, Inc., the other Co Borrowers, such lenders, the
Agent and Fleet Bank N.A., as Documentation Agent.

                                    RECITALS

      A.    The Pledgor is the owner of all the shares of the capital stock
of each of the entities listed on Exhibit A ("Issuers"); and

      B. Under the terms of the Credit Agreement, the Pledgor is required to
grant to the Agent a perfected security interest in all of the shares of capital
stock of Issuers now owned or hereafter acquired by the Pledgor.

      NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgor agrees as follows:

SECTION 1.  DEFINITIONS.

      Capitalized terms whose meaning is not otherwise defined herein shall have
the meaning assigned in the Credit Agreement. The following terms, as used
herein, have the following respective meanings:

      "AGENT" has the meaning assigned to such term in the Preamble to this
Agreement.

      "AGREEMENT" means this Pledge Agreement and any modifications or
amendments thereof.

      "COLLATERAL" has the meaning assigned to such term in SECTION 3.

      "CREDIT AGREEMENT" has the meaning assigned to such term in the
Preamble to this Agreement.

      "ISSUERS" has the meaning assigned to such term in the Recitals.

      "LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any


<PAGE>

conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).

      "PERSON" means an individual, partnership, corporation, business trust,
joint stock company, limited liability company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.

      "PLEDGED STOCK" means all of the capital stock of each of the Issuers.

      "PLEDGOR" has the meaning assigned to such term in the Preamble.

      "SECURED OBLIGATIONS" means all present and future obligations of the
Pledgor to the Lenders and the Agent, which may arise out of, under or in
connection with the Credit Agreement, this Agreement or the Loan Documents
including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding.

      "SECURITY INTERESTS" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.

      Unless otherwise defined herein, or unless the context otherwise requires,
all terms used herein which are defined in the New York Uniform Commercial Code
as in effect on the date hereof shall have the meanings therein stated.

      SECTION 2. REPRESENTATIONS AND WARRANTIES.

      The Pledgor represents and warrants as follows:

      A. TITLE TO COLLATERAL; NO RESTRICTIONS ON TRANSFER. The Pledgor owns
directly all of the Pledged Stock, free and clear of any Lien other than the
Security Interests. There is no restriction on the pledge or transfer of any of
the Pledged Stock, other than restrictions referenced on the face of any
certificates evidencing the Pledged Stock delivered to the Agent.

      B. PLEDGED STOCK. None of the Pledged Stock is subject to any option to
purchase or similar rights of any Person nor is it subject to any legal or
equitable claim or interest whatsoever. The Pledgor is not nor will it become a
party to or otherwise bound by any agreement, other than this Agreement, which
restricts in any manner the rights of any present or future holder of any of the
Pledged Stock with respect thereto.

      C. VALIDITY, PERFECTION AND PRIORITY OF SECURITY INTERESTS. Upon the
delivery to the Agent of all certificates evidencing the Pledged Stock, the
Agent will have a valid and perfected security interest in the Collateral
subject to no prior Lien. No registration, recordation or filing with any
governmental body, agency or official is required in connection with the
execution or delivery of this Agreement or necessary for the validity or
enforceability hereof or


                                      -2-
<PAGE>

for the perfection or enforcement of the Security Interests. The Pledgor has not
performed nor will it perform any acts which might prevent the Agent from
enforcing any of the terms and conditions of this Agreement or which would limit
the Agent in any such enforcement.

      D. NO OTHER LIENS. The Pledgor will not grant nor suffer to exist any
Liens on the Collateral, other than those permitted under this Agreement.

      SECTION 3. THE SECURITY INTERESTS.

      In order to secure the full and punctual payment of the Secured
Obligations of the Pledgor in accordance with the terms thereof, and to secure
the performance of all the obligations of the Pledgor hereunder:

      A. GRANT OF SECURITY INTERESTS. The Pledgor grants to the Agent for the
ratable benefit of the Lenders a security interest in the Pledged Stock, and all
of its rights and privileges with respect thereto, including all proceeds,
income and profits thereon, and all interest, dividends and other payments and
distributions with respect thereto (the "Collateral").

      B. ADDITIONAL PLEDGED STOCK. In the event that the Issuer at any time
issues any additional or substitute shares of capital stock of any class, the
Pledgor will immediately deliver, or cause to be immediately delivered, to the
Agent certificates representing all such shares as additional security for the
Secured Obligations. All such shares shall constitute Pledged Stock and are
subject to all provisions of this Agreement.

      SECTION 4. DELIVERY.

      All certificates representing Pledged Stock shall be delivered to the
Agent by the Pledgor pursuant hereto and shall be in suitable form for transfer
by delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, with signatures appropriately guaranteed, and accompanied
by any required transfer tax stamps, all in form and substance satisfactory to
the Agent.

      SECTION 5. FILING; FURTHER ASSURANCES.

      The Pledgor agrees that it will, at its expense and in such manner and
form as the Agent may require, execute, deliver, file and record any financing
statement, specific assignment or other paper and take any other action that may
be necessary or desirable, or that the Agent may request, in order to create,
preserve, perfect or validate the Security Interests in the Collateral or to
enable the Agent to exercise and enforce its rights hereunder with respect to
any of the Collateral. To the extent permitted by applicable law, the Pledgor
hereby authorizes the Agent to execute and file, in the name of Pledgor or
otherwise, Uniform Commercial Code financing statements (which may be carbon,
photographic, photostatic or other reproductions of this Agreement or of a
financing statement relating to this Agreement) which the Agent in its sole
discretion may deem necessary or appropriate to further perfect the Security
Interests.

      SECTION 6. RECORD OWNERSHIP OF PLEDGED STOCK; NOTICES.


                                      -3-
<PAGE>

      The Agent may at any time or from time to time, in its sole discretion,
provided an Event of Default shall have occurred and be continuing, cause any or
all of the Pledged Stock to be transferred of record into the name of the Agent
or its nominee. The Pledgor will promptly give to the Agent copies of any
notices or other communications received by it with respect to Pledged Stock
registered in the name of the Pledgor and the Agent will promptly give to the
Pledgor copies of any notices and communications received by the Agent with
respect to Pledged Stock registered in the name of the Agent or its nominee.

      SECTION 7. RIGHT TO RECEIVE DISTRIBUTIONS ON COLLATERAL.

      Except as otherwise provided in the Credit Agreement, all dividends and
distributions (including without limitation all distributions which constitute a
return of capital, that is, a partial or complete liquidation) made upon or with
respect to the Collateral shall be delivered to the Agent as Collateral in the
same form as received (with any necessary endorsement).

      SECTION 8. RIGHT TO VOTE PLEDGED STOCK.

      Unless an Event of Default shall have occurred and be continuing, the
Pledgor shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to any or all of the Pledged Stock.

      If an Event of Default shall have occurred and be continuing, the Agent
shall have the right, to the extent permitted by law, and the Pledgor shall take
all such action as may be necessary or appropriate to give effect to such right,
to vote and to give consents, ratifications and waivers, and take any other
action, with respect to any or all of the Pledged Stock with the same force and
effect as if the Agent were the absolute and sole owner thereof.

      SECTION 9. GENERAL AUTHORITY.

      The Pledgor hereby irrevocably appoints the Agent its true and lawful
attorney, with full power of substitution, in the name of the Pledgor, the Agent
or otherwise, for the sole use and benefit of the Agent, but at the expense of
the Pledgor, to the extent permitted by law to exercise, if an Event of Default
shall have occurred and is continuing, all or any of the following powers with
respect to all or any of the Collateral:

      a. to demand, sue for, collect, receive and give acquittance for any and
all monies due or to become due upon or by virtue thereof,

      b. to settle, compromise, prosecute or defend any action or proceeding
with respect thereto,

      c. to sell, transfer, assign or otherwise deal in or with the same or the
proceeds or avails thereof, as fully and effectually as if the Agent were the
absolute owner thereof, and

      d. to extend the time of payment of any or all thereof and to make any
allowance


                                      -4-
<PAGE>

and other adjustments with reference thereto;

      PROVIDED that the Agent shall give the Pledgor not less than ten days
prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral. The Agent and the Pledgor agree that such
notice constitutes "reasonable notification" within the meaning of Section
9-504(3) of the Uniform Commercial Code.

      SECTION 10. REMEDIES UPON EVENT OF DEFAULT.

      A. SALE. If any Event of Default shall have occurred and be continuing,
the Agent may exercise all the rights of a secured party under the Uniform
Commercial Code (whether or not in effect in the jurisdiction where such rights
are exercised) and, in addition, the Agent may, without being required to give
any notice, except as herein provided or as may be required by mandatory
provisions of law, (i) apply the cash, if any, then held by it as Collateral as
specified in SECTION 12 and (ii) if there shall be no such cash or if such cash
shall be insufficient to pay all of the Secured Obligations in full, sell such
Collateral or any part thereof at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery, and at such price or prices as the Agent may deem satisfactory and
apply the proceeds thereof as specified in SECTION 12. The Agent may be the
purchaser of any or all of the Collateral so sold at any public sale. The
Pledgor covenants and agrees that it will execute and deliver such documents and
take such other action as the Agent deems necessary or advisable in order that
any such sale may be made in compliance with law. Upon any such sale the Agent
shall have the right to deliver, assign and transfer to the purchaser thereof
the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely and free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor which may be
waived, and the Pledgor, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal which it has or may have
under any law now existing or hereafter adopted.

      B. PRIVATE SALE. The Pledgor further acknowledges that the Agent may deem
it impracticable to effect a public sale of any part of the securities included
in the Collateral, and therefore authorizes the Agent in connection with any
such private sale, if the Agent deems it advisable to do so, (i) to restrict the
prospective bidders on or purchasers of any of the Pledged Stock to a limited
number of sophisticated investors who will represent and agree that they are
purchasing for their own account for investment and not with a view to the
distribution or sale of any of such securities, (ii) to cause to be placed on
certificates for any or all of the Pledged Stock or on any other securities
pledged hereunder a legend to the effect that such security has not been
registered under the Securities Act of 1933 and may not be disposed of in
violation of the provisions of said Act, and (iii) to impose such other
limitations or conditions in connection with any such sale as the Agent deems
necessary or advisable in order to comply with said Act or any other law.

      C. NOTICE. The notice (if any) of such sale required by SECTION 9 shall
(i) in case of a public sale, state the time and place fixed for such sale, (ii)
in case of sale at a broker's board or on a securities exchange, state the board
or exchange at which such sale is to be made and the day on which the
Collateral, or the portion thereof so being sold, will first be offered for


                                      -5-
<PAGE>

sale at such board or exchange, and (iii) in the case of a private sale, state
the day after which such sale may be consummated. Any such public sale shall be
held at such time or times within ordinary business hours and at such place or
places as the Agent may fix in the notice of such sale. At any such sale, the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Agent may determine. The Agent shall not be obligated to make any such sale
pursuant to any such notice. The Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned. In case
of any sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Agent until the selling
price is paid by the purchaser thereof, but the Agent shall not incur any
liability in case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may again
be sold upon like notice.

      D. OTHER REMEDIES. The Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.

      SECTION 11. EXPENSES.

      The Pledgor agrees that it will forthwith upon demand pay to the Agent:

      a. the amount of any taxes which the Agent may have been required to pay
by reason of the Security Interests with respect to the Collateral or to free
any of the Collateral from any Lien thereon, and

      b. the amount of any and all reasonable out-of-pocket expenses, including
the reasonable fees and disbursements of counsel and of any other experts, which
the Agent may incur in connection with (i) the administration or enforcement of
this Agreement with respect to the Collateral, including such expenses as are
incurred to preserve the value of the Collateral and the validity, perfection,
rank and value of any Security Interests therein, (ii) the collection, sale or
other disposition of any of the Collateral, (iii) the exercise by the Agent of
any of the rights conferred upon it hereunder with respect to the Collateral or
(iv) any Default or Event of Default.

      Any such amount not paid on demand shall bear interest for each day until
paid at an interest rate of 15% per annum.

      SECTION 12. APPLICATION OF PROCEEDS.

      Upon the occurrence and during the continuance of an Event of Default, the
proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held in respect thereof shall be applied by the Agent in
the following order of priorities:

      FIRST, to payment of the reasonable expenses of such sale or other
realization, including reasonable compensation to agents and counsel for the
Agent, and all expenses, liabilities and


                                      -6-
<PAGE>

advances incurred or made by the Agent in connection therewith, and any other
expenses for which the Agent is to be reimbursed pursuant to SECTION 11 hereof;

      SECOND, to the payment of accrued but unpaid interest on the Secured
Obligations;

      THIRD, to the payment of unpaid principal of the Secured Obligations;

      FOURTH, to the payment of all other Secured Obligations, until all
Secured Obligations shall have been paid in full; and

      FINALLY, to payment to the Pledgor or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.

      SECTION 13. GENERAL TERMS.

      A. NOTICES. All notices, communications and distributions to any party
hereunder shall be in writing and shall be given to such party in the manner
specified in the Credit Agreement.

      B. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part of the Agent to
exercise, and no delay in exercising and no course of dealing with respect to,
any right under this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise by the Agent of any right under this Agreement
preclude any other or further exercise thereof or the exercise of any other
right. The rights in this Agreement are cumulative and are not exclusive of any
other remedies provided by law.

      C. SUCCESSORS AND ASSIGNS. This Agreement is for the benefit of the Agent
and its successors and assigns. This Agreement shall be binding on the Pledgor
and its successors and assigns.

      D. CHANGES IN WRITING. Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated orally.

      E. LAW. This Agreement shall be construed in accordance with and governed
by the laws of the State of New York (without giving effect to the conflict of
laws principles thereof) except to the extent that the laws of another state
govern the creation or perfection of the security interest hereunder.

      F. SEVERABILITY. If any provision hereof is invalid or unenforceable in
any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent in order to carry out the
intentions of the parties hereto as nearly as may be possible; and (ii) the
invalidity or enforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.


                                      -7-
<PAGE>

      SECTION 14. AGENT.

      The Pledgor acknowledges that the rights and responsibilities of the Agent
under this Agreement with respect to any action taken by the Agent or the
exercise or non-exercise by the Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Agreement shall, as among the Agent and the Lenders, be governed by the Credit
Agreement and such other agreements with respect thereto as may exist from time
to time among them but, as between the Agent and the Pledgor, the Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and Pledgor shall not be under any
obligation or entitlement to make any inquiry respecting such authority.

      SECTION 15. SUBMISSION TO JURISDICTION; WAIVERS.

      THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:

      A. SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT
IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF
THE STATES OF NEW JERSEY AND NEW YORK, THE COURTS OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND THE DISTRICT OF NEW JERSEY AND
APPELLATE COURTS FROM ANY THEREOF; and

      B. CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME.

      SECTION 16. WAIVERS OF JURY TRIAL.

      THE PLEDGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.

      IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as
of the day and year first above written.

                                    800-JR CIGAR, Inc.


                                    By:
                                       -----------------------------------------
                                         Lewis I. Rothman
                                         President

                                      -8-
<PAGE>

                                                                  EXHIBIT 8.1(A)

                              ASSIGNMENT AGREEMENT


                                                   Dated:_________________, 20__


      Reference is made to the certain Credit Agreement dated as of August __,
2000 (as from time to time amended, extended, restated, modified or
supplemented, the "Credit Agreement"; capitalized terms used herein shall have
the meaning assigned to them in the Credit Agreement), among 800-JR CIGAR, Inc.,
a Delaware corporation ("Cigar"); L&LR, Inc., a Delaware corporation ("L&LR");
J.R. Tobacco of America, Inc., a North Carolina corporation ("JR-America");
Santa Clara, Inc., a North Carolina corporation ("JR-Santa Clara"); J.N.R.
Grocery Corp., a New York corporation ("JR-Grocery"); J.R. Tobacco NC, Inc., a
North Carolina corporation ("JR-NC"); J&R Tobacco (New Jersey) Corp., a New
Jersey corporation ("JR-New Jersey"); J.R. Tobacco Company of Michigan, Inc., a
Michigan corporation ("JR-Michigan"); J.R.-46th Street, Inc., a New York
corporation ("JR-46th"); J.R. Tobacco Outlet, Inc., a New Jersey corporation
("JR-Outlet"); J.R. Statesville, Inc., a North Carolina corporation
("JR-Statesville"); J R Cigar (DC), Inc., a corporation organized under the laws
of the District of Columbia ("JR-DC"); J.R. Tobacco of Burlington, Inc., a North
Carolina corporation ("JR-Burlington"); Casa Blanca, Inc., a New Jersey
corporation ("JR-Casa Blanca"); jrcigars.com, Inc., a North Carolina corporation
("JR.COM") (Cigar, L&LR, Jr-America, Jr-Santa Clara, JR-Grocery, JR-NC, JR-New
Jersey, JR-Michigan, JR-46th, JR-Outlet, JR-Statesville, JR-DC, JR-Burlington,
JR-Casa Blanca and JR.COM, collectively, the "Co-Borrowers"), The Chase
Manhattan Bank, as Agent for the Lenders party to the Credit Agreement, the
several Lenders and Fleet Bank, N.A., as Documentation Agent.

      _________________________ (the "ASSIGNOR") and ___________________________
 (the "Assignee"), agree as follows:

      1. The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, WITHOUT RECOURSE, a ______%1
interest in and to all of the Assignor's rights and obligations under the Credit
Agreement as of the Effective Date (as defined below) including, without
limitation, such percentage interest in the Assignor's Commitment as in effect
on the Effective Date, the Commitment Fee and the Loans owing to the Assignor on
the Effective Date.

      2. The Assignor (i) represents and warrants that, as of the date hereof,
its Commitment (without giving effect to assignments thereof which have not yet
become effective) is $ and the aggregate outstanding principal amount of Loans
owing to it (without giving effect to assignments thereof which have not yet
become effective) is $ ; (ii) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any

----------
(1)Specify percentage equal in value to at least $5,000,000.

<PAGE>

adverse claim; (iii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any of the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or any of the Loan Documents or any other
instrument or document furnished pursuant thereto; and (iv) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Co-Borrowers or the performance or observance by
Co-Borrowers of any of their obligations under the Credit Agreement or any of
the Loan Documents or any other instrument or document furnished pursuant
thereto.

      3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
SECTION 3.4 and delivered by Co-Borrowers pursuant to SECTION 4.1 thereof and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment Agreement; (ii)
agrees that it will, independently and without reliance upon the Agent, the
Assignor or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement; (iii) appoints and
authorizes the Agent to take such actions on its behalf and to exercise such
powers under the Loan Documents as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; (iv)
agrees that it will become a party to the Credit Agreement on the Effective Date
and perform in accordance with its terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Lender;
(v) specifies as its address for notices the office set forth beneath its name
on the signature pages hereof; and (vi) represents and warrants that it is
purchasing the foregoing interest in Assignor's rights and obligations pursuant
to the Credit Agreement for its own account, for investment purposes and not
with a view to the distribution thereof.

      4. The effective date of this Assignment Agreement shall be ______________
_____________the "Effective Date").2 Following the execution of this Assignment
Agreement and receipt of Co-Borrowers' consent thereto, it will be delivered to
the Agent for acceptance and recording by the Agent.

      5. Upon such acceptance, consent and recording, as of the Effective Date,
(i) the Assignee shall be a party to the Credit Agreement and., to the extent
provided in this Assignment Agreement, have the rights and obligations of a
Lender thereunder and under the Loan Documents and (ii) the Assignor shall, to
the extent provided in this Assignment Agreement, relinquish its rights and be
released from its obligations under the Credit Agreement.

      6. Upon such acceptance, consent and recording, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest

----------

(2) Such date shall be at least _________ Business Days after the execution of
this Assignment Agreement.

                                      -2-
<PAGE>

and commitment and other fees with respect thereto) to the Assignee. The
Assignor and Assignee shall make all appropriate adjustments in payments under
the Credit Agreement for periods prior to the Effective Date directly between
themselves.

      7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.

                                    [NAME OF ASSIGNOR]



                                    By:
                                       -----------------------------------------
                                        Name:
                                        Title:


                                    After the Effective Date:
                                      Commitment:           $
                                      Outstanding Loans:    $


                                    [NAME OF ASSIGNEE]



                                    By:
                                       -----------------------------------------
                                        Name:
                                        Title:


                                    After the Effective Date:
                                      Commitment:           $
                                      Outstanding Loans:    $

Consented to this ___ day of
_______________, 20__

800-JR CIGAR, Inc.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


                                      -3-

<PAGE>

L&LR, Inc.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


J.R. Tobacco of America, Inc.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


Santa Clara, Inc.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


J.N.R. Grocery Corp.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


J.R. Tobacco NC, Inc.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


                                      -4-
<PAGE>

J&R Tobacco (New Jersey) Corp.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


J.R. Tobacco Company of Michigan, Inc.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


J.R.-46th Street, Inc.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


J.R. Tobacco Outlet, Inc.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


J.R. Statesville, Inc.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


J R Cigar (DC), Inc.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


                                      -5-
<PAGE>

J.R. Tobacco of Burlington, Inc.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


Casa Blanca, Inc.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


jrcigars.com, Inc.


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------


Accepted this ___ day of
______________, 20__


The Chase Manhattan Bank, as Agent


By:
   ---------------------------
Name:
     -------------------------
Title:
      ------------------------

                                      -6-


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(C)(2)
<SEQUENCE>11
<FILENAME>ex-99_c2.txt
<DESCRIPTION>EXHIBIT 99.(C)(2)
<TEXT>



<PAGE>

                                                                    EX-99.(c)(2)

                                PRESENTATION TO THE SPECIAL COMMITTEE OF THE
                                BOARD OF DIRECTORS OF:

                                LEAF

                                AUGUST 28, 2000


<PAGE>



TABLE OF CONTENTS
--------------------------------------------------------------------------------

1.       Situation Overview

2.       Industry Overview

3.       Historical Financial Performance of Leaf

4.       Public Market Overview of Leaf

5.       Preliminary Valuation of Leaf

Appendix

LOGO MERRILL LYNCH--------------------------------------------------------------
<PAGE>



--------------------------------------------------------------------------------




                               SITUATION OVERVIEW




--------------------------------------------------------------------------------
<PAGE>


SITUATION OVERVIEW
--------------------------------------------------------------------------------
SUMMARY OF KEY TERMS OF PROPOSAL


-------------------------------
Price Per Share:                  o   $13.00 per share


------------------------------
Form of Consideration             o   Cash

------------------------------
Transaction Structure             o   Tender Offer with back-end merger


------------------------------
Minimum Acceptance                o   Majority of the outstanding shares not
Condition:                            owned by the majority shareholders

------------------------------
Break-Up Fee                      o   None


------------------------------
Existing Ownership of             o   9.3 million shares owned by the Rothmans
Acquiror:                             and all Rothman Trusts (78.4% of the
                                      outstanding primary shares)


<PAGE>



SITUATION OVERVIEW
--------------------------------------------------------------------------------
IMPLIED VALUATION MATRIX

(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                       Offer Price
          Premium to                            As a Multiple of:      Transaction Value as Multiple of:
                                                -----------------      ----------------------------------
Offer     Current      Offer        Trans               EPS                         Sales
                                                ------------------     ----------------------------------
Price     Price        Value (a)    Value (b)   2000E       2001E        LTM         2000E        2001E
-----    ---------   -----------   ----------   ------     -------     -------       ------      --------



<S>       <C>          <C>          <C>          <C>        <C>          <C>         <C>          <C>

 $13.00   20.9%        $156.1       $142.8       12.7x      11.5x        0.45x       0.44x        0.41x






          LEAF DATA                              $1.02      $1.13       $316.1      $324.1       $349.5
---------------------------------------------------------------------------------------------------------

<CAPTION>


  Transaction Value as Multiple of:
----------------------------------------------------------------------
             EBITDA                               EBIT
----------------------------------   ---------------------------------
  LTM         2000E        2001E       LTM         2000E       2001E
------       -------     ---------   -------       ------     --------



  <C>          <C>         <C>         <C>          <C>         <C>

  6.5x         6.4x        6.0x        7.4x         7.2x        6.7x






 $21.9        $22.3        $23.9       $19.4       $19.9        $21.4
----------------------------------------------------------------------
</TABLE>


----------------------------
(a)  Based on 11.9 million shares outstanding, 0.480 million options proceeds of
$4.3 million.

(b) Transaction value is equal to offer value plus net debt ($13.3) million
(as of 6/30/00).

[LOGO] MERRILL LYNCH------------------------------------------------------------

                                                                               2
<PAGE>


--------------------------------------------------------------------------------




                               INDUSTRY OVERVIEW



--------------------------------------------------------------------------------

<PAGE>



INDUSTRY OVERVIEW
--------------------------------------------------------------------------------
HISTORICAL CIGAR CONSUMPTION TRENDS
(UNITS IN MILLIONS)


                                [LINE-BAR CHART]

        Total Cigars    Premium Cigars
1990    3553.659        101.977
1991    3530.432        98.2
1992    3518.098        99.472
1993    3423.424        110.026
1994    3718.115        125.882
1995    4040.277        164.279
1996    4588.612        274.569
1997    5163.169        463.977
1998    5350.894        363.876
1999    6023            320.792

Sources: Cigar Association of America.

[LOGO] MERRILL LYNCH------------------------------------------------------------


                                                                               3
<PAGE>


INDUSTRY OVERVIEW
--------------------------------------------------------------------------------
CASE STUDY:  CIGAR MANUFACTURERS


[LOGO]

o  On August 15, 1996, Mafco Consolidated Group sold 5.4 million Class A shares
   to the public priced at $23.00 per share. The sale represented an 18 percent
   stake in the Company

                                  [LINE CHART]

Date            Close
16-Aug-96       28.375
19-Aug-96       30
20-Aug-96       28.5
21-Aug-96       28.75
22-Aug-96       30.25
23-Aug-96       31.25
26-Aug-96       31
27-Aug-96       31.25
28-Aug-96       31.5
29-Aug-96       31.5
30-Aug-96       31.5
3-Sep-96        30.5
4-Sep-96        30.125
5-Sep-96        30.125
6-Sep-96        30.25
9-Sep-96        30.875
10-Sep-96       30.75
11-Sep-96       30.875
12-Sep-96       31.25
13-Sep-96       30.75
16-Sep-96       32
17-Sep-96       32.125
18-Sep-96       32.5
19-Sep-96       32
20-Sep-96       31.375
23-Sep-96       31
24-Sep-96       31.375  45
25-Sep-96       31.125
26-Sep-96       31
27-Sep-96       30.75
30-Sep-96       30.625
1-Oct-96        30.375
2-Oct-96        30.625
3-Oct-96        30.625
4-Oct-96        30.5
7-Oct-96        30.375
8-Oct-96        30
9-Oct-96        29.375
10-Oct-96       29.125
11-Oct-96       28.75
14-Oct-96       28.625
15-Oct-96       29
16-Oct-96       28
17-Oct-96       27
18-Oct-96       25.875
21-Oct-96       25.875
22-Oct-96       26.75
23-Oct-96       27
24-Oct-96       27.75
25-Oct-96       27.75
28-Oct-96       27.5
29-Oct-96       26.25   42.8125
30-Oct-96       27
31-Oct-96       27.25   45
1-Nov-96        27.25
4-Nov-96        26.125
5-Nov-96        25.75
6-Nov-96        26
7-Nov-96        24.75
8-Nov-96        24
11-Nov-96       24.25
12-Nov-96       25.5
13-Nov-96       25.5
14-Nov-96       24.625
15-Nov-96       24.5
18-Nov-96       24.875
19-Nov-96       24.75
20-Nov-96       24.75
21-Nov-96       24.75
22-Nov-96       25
25-Nov-96       24.625
26-Nov-96       24.75
27-Nov-96       24.5
29-Nov-96       24.375
2-Dec-96        24.25
3-Dec-96        24.875
4-Dec-96        24.75
5-Dec-96        25.5
6-Dec-96        25
9-Dec-96        26.125
10-Dec-96       26
11-Dec-96       25.875
12-Dec-96       26.125
13-Dec-96       26.5
16-Dec-96       26.5
17-Dec-96       26.125
18-Dec-96       25.625
19-Dec-96       25.375
20-Dec-96       24.875
23-Dec-96       25.5
24-Dec-96       25.125
26-Dec-96       25.25   46.5
27-Dec-96       25.375
30-Dec-96       24.875
31-Dec-96       24.75
2-Jan-97        24.625
3-Jan-97        24.625
6-Jan-97        24.75
7-Jan-97        25
8-Jan-97        25.625
9-Jan-97        26.75
10-Jan-97       27.125
13-Jan-97       26.75
14-Jan-97       25.875
15-Jan-97       24.625
16-Jan-97       24.875
17-Jan-97       24.875
20-Jan-97       24.5
21-Jan-97       24.375
22-Jan-97       24
23-Jan-97       23.5
24-Jan-97       23
27-Jan-97       23
28-Jan-97       23.375
29-Jan-97       23.625
30-Jan-97       23.75
31-Jan-97       24.25
3-Feb-97        24
4-Feb-97        23.25
5-Feb-97        22.875
6-Feb-97        22.875
7-Feb-97        23
10-Feb-97       22.875
11-Feb-97       22.25
12-Feb-97       23.375
13-Feb-97       24.25
14-Feb-97       25.25   39.1875
18-Feb-97       25.25

19-Feb-97       25
20-Feb-97       24.875
21-Feb-97       25
24-Feb-97       26
25-Feb-97       27.25
26-Feb-97       26.875
27-Feb-97       25.75
28-Feb-97       25.375
3-Mar-97        25.375
4-Mar-97        25
5-Mar-97        24.875
6-Mar-97        24.375
7-Mar-97        24.125
10-Mar-97       23.875
11-Mar-97       24.125
12-Mar-97       24.5
13-Mar-97       24.125
14-Mar-97       24.25
17-Mar-97       23.875
18-Mar-97       23.75
19-Mar-97       23.625
20-Mar-97       23.875
21-Mar-97       24
24-Mar-97       23.75
25-Mar-97       23.5
26-Mar-97       23.5
27-Mar-97       23.875
31-Mar-97       23.625
1-Apr-97        23.625
2-Apr-97        23.75
3-Apr-97        24.125
4-Apr-97        24.125
7-Apr-97        23.875
8-Apr-97        23.875
9-Apr-97        24
10-Apr-97       23.875
11-Apr-97       23.625
14-Apr-97       23.5
15-Apr-97       23.25
16-Apr-97       23.625
17-Apr-97       23.375  25.75
18-Apr-97       23.625
21-Apr-97       22.875
22-Apr-97       22.25
23-Apr-97       22
24-Apr-97       22.125
25-Apr-97       21.75
28-Apr-97       22.5
29-Apr-97       22.75
30-Apr-97       23
1-May-97        22.875
2-May-97        23.25
5-May-97        24.125
6-May-97        24.25
7-May-97        24.125
8-May-97        24.75
9-May-97        26.125
12-May-97       26.25
13-May-97       26.625
14-May-97       26.5
15-May-97       26.5
16-May-97       26.5    23.75
19-May-97       26.625
20-May-97       26.375
21-May-97       27.125
22-May-97       28
23-May-97       28.125
27-May-97       28.125
28-May-97       29
29-May-97       29.875
30-May-97       30.25
2-Jun-97        29.875
3-Jun-97        29.125
4-Jun-97        29.875
5-Jun-97        30
6-Jun-97        30
9-Jun-97        29.125
10-Jun-97       29.875
11-Jun-97       29.625
12-Jun-97       29.125
13-Jun-97       28.625
16-Jun-97       28.625
17-Jun-97       28.625
18-Jun-97       28.625
19-Jun-97       28.5
20-Jun-97       28.625
23-Jun-97       28.5
24-Jun-97       28.25
25-Jun-97       27.5625
26-Jun-97       27.625  28.4375
27-Jun-97       27.625

30-Jun-97       27.75
1-Jul-97        27.0625
2-Jul-97        27.5
3-Jul-97        27
7-Jul-97        26.9375
8-Jul-97        27.125
9-Jul-97        26.875
10-Jul-97       26.875  30.4375
11-Jul-97       26.5625
14-Jul-97       25.375
15-Jul-97       24.6875
16-Jul-97       25.75
17-Jul-97       25.1875
18-Jul-97       25
21-Jul-97       25.875
22-Jul-97       27.1875
23-Jul-97       27.125
24-Jul-97       27.1875
25-Jul-97       26.875
28-Jul-97       26.6875
29-Jul-97       27.0625
30-Jul-97       28.8125
31-Jul-97       29.875
1-Aug-97        31.6875
4-Aug-97        31
5-Aug-97        31.5
6-Aug-97        31.375
7-Aug-97        30.875
8-Aug-97        30.375
11-Aug-97       30
12-Aug-97       30.625
13-Aug-97       30.875
14-Aug-97       32.875
15-Aug-97       33.3125
18-Aug-97       34.5
19-Aug-97       35.375
20-Aug-97       35
21-Aug-97       34.25
22-Aug-97       33.625
25-Aug-97       34.25
26-Aug-97       33.8125
27-Aug-97       33.5
28-Aug-97       33.0625
29-Aug-97       33.125
2-Sep-97        33.4375
3-Sep-97        32.3125
4-Sep-97        32.25
5-Sep-97        31.75
8-Sep-97        31.125
9-Sep-97        33.1875
10-Sep-97       33.125
11-Sep-97       33.75
12-Sep-97       34.25
15-Sep-97       34.0625
16-Sep-97       34.8125
17-Sep-97       34.9375
18-Sep-97       36.5
19-Sep-97       39
22-Sep-97       39.5
23-Sep-97       39.5
24-Sep-97       40.3125
25-Sep-97       40
26-Sep-97       40.3125
29-Sep-97       40.6875
30-Sep-97       40.875
1-Oct-97        43
2-Oct-97        44.1875
3-Oct-97        43.625
6-Oct-97        40.5
7-Oct-97        39.625
8-Oct-97        40.125
9-Oct-97        40.25
10-Oct-97       41.5625
13-Oct-97       42.3125
14-Oct-97       42.0625
15-Oct-97       41
16-Oct-97       41.5
17-Oct-97       40.75
20-Oct-97       40.5625
21-Oct-97       41.875
22-Oct-97       43.375
23-Oct-97       42.8125
24-Oct-97       41.125
27-Oct-97       38.5
28-Oct-97       38.6875
29-Oct-97       39
30-Oct-97       38.25
31-Oct-97       39.25
3-Nov-97        39
4-Nov-97        37.75
5-Nov-97        35
6-Nov-97        34.25
7-Nov-97        32.6875
10-Nov-97       32.6875
11-Nov-97       32.5
12-Nov-97       30.5
13-Nov-97       31.125
14-Nov-97       31.8125
17-Nov-97       32.5
18-Nov-97       32.5
19-Nov-97       32.5
20-Nov-97       32.375
21-Nov-97       32.25
24-Nov-97       31
25-Nov-97       30
26-Nov-97       28.375
28-Nov-97       27.5625
1-Dec-97        26.0625
2-Dec-97        26.8125
3-Dec-97        26.6875
4-Dec-97        27.375
5-Dec-97        27.0625
8-Dec-97        28.5
9-Dec-97        28.5625
10-Dec-97       27.75
11-Dec-97       26.875
12-Dec-97       27.875
15-Dec-97       28.125
16-Dec-97       27.875
17-Dec-97       28.1875
18-Dec-97       28
19-Dec-97       27.6875
22-Dec-97       27.125
23-Dec-97       27.25
24-Dec-97       26.8125
26-Dec-97       27.0625
29-Dec-97       27
30-Dec-97       27
31-Dec-97       27.5625
2-Jan-98        28.0625
5-Jan-98        27.8125
6-Jan-98        25.9375
7-Jan-98        26.3125
8-Jan-98        25.625
9-Jan-98        24.5625
12-Jan-98       23.5
13-Jan-98       25.625
14-Jan-98       25.375
15-Jan-98       24.625
16-Jan-98       24.375
20-Jan-98       24.5
21-Jan-98       24.875
22-Jan-98       23.875
23-Jan-98       24.3125
26-Jan-98       24.125
27-Jan-98       23.625
28-Jan-98       23.1875
29-Jan-98       23.0625
30-Jan-98       24.125
2-Feb-98        24.9375
3-Feb-98        21.875
4-Feb-98        22.125
5-Feb-98        23.1875
6-Feb-98        22.75
9-Feb-98        22.875
10-Feb-98       22.5625
11-Feb-98       22.875
12-Feb-98       23.1875
13-Feb-98       22.75
17-Feb-98       22.0625
18-Feb-98       22.25
19-Feb-98       22.125
20-Feb-98       22.1875
23-Feb-98       22.3125
24-Feb-98       21.9375
25-Feb-98       22.1875
26-Feb-98       23.375
27-Feb-98       23.1875
2-Mar-98        23.3125
3-Mar-98        24.125
4-Mar-98        24.5
5-Mar-98        23.8125
6-Mar-98        24.3125
9-Mar-98        24.75
10-Mar-98       21
11-Mar-98       19
12-Mar-98       18.375
13-Mar-98       17.625
16-Mar-98       17.6875
17-Mar-98       17.125
18-Mar-98       16.875
19-Mar-98       16.8125
20-Mar-98       16.4375
23-Mar-98       15.75
24-Mar-98       16
25-Mar-98       16.375
26-Mar-98       16.1875
27-Mar-98       16.625
30-Mar-98       16.3125
31-Mar-98       15.8125
1-Apr-98        15.5
2-Apr-98        15.3125
3-Apr-98        14.9375
6-Apr-98        14.8125
7-Apr-98        14.5625
8-Apr-98        15.125
9-Apr-98        15.625
13-Apr-98       14.6875
14-Apr-98       14.4375
15-Apr-98       14.1875
16-Apr-98       14.125
17-Apr-98       14
20-Apr-98       14.4375
21-Apr-98       14.8125
22-Apr-98       14.1875
23-Apr-98       14.125
24-Apr-98       13.875
27-Apr-98       13.875
28-Apr-98       14.125
29-Apr-98       13.875
30-Apr-98       13.8125
1-May-98        13.8125
4-May-98        13.875
5-May-98        13.75
6-May-98        15.6875
7-May-98        15.6875
8-May-98        15.6875
11-May-98       15.5
12-May-98       15.4375
13-May-98       15.375
14-May-98       15.1875
15-May-98       14.6875
18-May-98       14.1875
19-May-98       14.125
20-May-98       13.75
21-May-98       14
22-May-98       13.875
26-May-98       13.75
27-May-98       13.6875
28-May-98       13.6875
29-May-98       13.8125
1-Jun-98        13.75
2-Jun-98        13.75
3-Jun-98        13.75
4-Jun-98        12.8125
5-Jun-98        13.125
8-Jun-98        13.0625
9-Jun-98        12.6875
10-Jun-98       11.3125
11-Jun-98       10.4375
12-Jun-98       10.1875
15-Jun-98       9.75
16-Jun-98       10.25
17-Jun-98       10.8125
18-Jun-98       11.0625
19-Jun-98       11.5
22-Jun-98       11.9375
23-Jun-98       12.125
24-Jun-98       12
25-Jun-98       11.875
26-Jun-98       11.6875
29-Jun-98       11.9375
30-Jun-98       12.25
1-Jul-98        11.8125
2-Jul-98        11.625
6-Jul-98        11.5
7-Jul-98        11.375
8-Jul-98        11.375
9-Jul-98        11.1875
10-Jul-98       10.75
13-Jul-98       10.3125
14-Jul-98       10.375
15-Jul-98       10.25
16-Jul-98       10
17-Jul-98       10.0625
20-Jul-98       9.9375
21-Jul-98       10
22-Jul-98       9.9375
23-Jul-98       9.5
24-Jul-98       9.6875
27-Jul-98       9.9375
28-Jul-98       10.0625
29-Jul-98       9.9375
30-Jul-98       9.875
31-Jul-98       9.8125
3-Aug-98        10
4-Aug-98        9.9375
5-Aug-98        10
6-Aug-98        9.625
7-Aug-98        9.75
10-Aug-98       9.75
11-Aug-98       9.4375
12-Aug-98       9.75
13-Aug-98       9.5
14-Aug-98       9.3125
17-Aug-98       9.4375
18-Aug-98       9.3125
19-Aug-98       9.0625
20-Aug-98       8.875
21-Aug-98       8.5
24-Aug-98       8.3125
25-Aug-98       8.1875
26-Aug-98       7.5625
27-Aug-98       7.1875
28-Aug-98       7.5625
31-Aug-98       7.4375
1-Sep-98        8
2-Sep-98        8.625
3-Sep-98        9.125
4-Sep-98        8.8125
8-Sep-98        9.1875
9-Sep-98        8.8125
10-Sep-98       8.5625
11-Sep-98       8.5625
14-Sep-98       8.625
15-Sep-98       8.5
16-Sep-98       8.3125
17-Sep-98       8.4375
18-Sep-98       8.5
21-Sep-98       8.4375
22-Sep-98       8.5625
23-Sep-98       8.8125
24-Sep-98       9.0625
25-Sep-98       9.875
28-Sep-98       10.0625
29-Sep-98       10.25
30-Sep-98       9.9375
1-Oct-98        9.5625
2-Oct-98        9.25
5-Oct-98        8.875
6-Oct-98        8.625
7-Oct-98        8.3125
8-Oct-98        8.375
9-Oct-98        8.5625
12-Oct-98       8.8125
13-Oct-98       9
14-Oct-98       9.4375
15-Oct-98       9.25
16-Oct-98       9.3125
19-Oct-98       10.0625
20-Oct-98       10.1875
21-Oct-98       10.5
22-Oct-98       10.1875
23-Oct-98       10.5625
26-Oct-98       10.4375
27-Oct-98       10.8125
28-Oct-98       11.0625
29-Oct-98       11.25
30-Oct-98       11.5
2-Nov-98        12.1875
3-Nov-98        12.5
4-Nov-98        12.5
5-Nov-98        10.8125
6-Nov-98        9.8125
9-Nov-98        9.75
10-Nov-98       10.125
11-Nov-98       10.5
12-Nov-98       10
13-Nov-98       9.6875
16-Nov-98       9.6875
17-Nov-98       9.9375
18-Nov-98       9.5625
19-Nov-98       10.0625
20-Nov-98       10.9375
23-Nov-98       11.4375
24-Nov-98       11.3125
25-Nov-98       11.625
27-Nov-98       11.625
30-Nov-98       11.375
1-Dec-98        11.5
2-Dec-98        11.5625
3-Dec-98        12
4-Dec-98        12.125
7-Dec-98        12.125
8-Dec-98        12.5625
9-Dec-98        13.375
10-Dec-98       13.375
11-Dec-98       14.3125
14-Dec-98       14.8125
15-Dec-98       15.875
16-Dec-98       17.375

o  On February 11, 1998 Consolidated Cigar authorized a four million share
   repurchase program

o  On March 10, 1998 Consolidated Cigar announced that 2 Qtr earnings would be
   below analyst expectations

o  On December 16, 1998 Consolidated Cigar announced that it had entered into a
   definitive agreement to merge with Seita

[LOGO]

o  On February 27, 1997, Colbro Corporation sold 6 million Class A shares of
   General Cigar to the public priced at $18.00 per share. The sale represented
   a 23 percent stake in General Cigar

                                  [LINE CHART]

Date            Close
28-Feb-97       23
3-Mar-97        22.125
4-Mar-97        22
5-Mar-97        22
6-Mar-97        21.375
7-Mar-97        21
10-Mar-97       20.75
11-Mar-97       21.875
12-Mar-97       21.875
13-Mar-97       21.125
14-Mar-97       21
17-Mar-97       20.875
18-Mar-97       20.375
19-Mar-97       20.375
20-Mar-97       20.75
21-Mar-97       22
24-Mar-97       22.125
25-Mar-97       22
26-Mar-97       22.125
27-Mar-97       23.125
31-Mar-97       22.25
1-Apr-97        22
2-Apr-97        21.75
3-Apr-97        22.375
4-Apr-97        23
7-Apr-97        23
8-Apr-97        23.375  45
9-Apr-97        23.375
10-Apr-97       22.875
11-Apr-97       22.5
14-Apr-97       22.25
15-Apr-97       22.625
16-Apr-97       22.125
17-Apr-97       22.25
18-Apr-97       23
21-Apr-97       23.25
22-Apr-97       23
23-Apr-97       23.25
24-Apr-97       23.125
25-Apr-97       22.625
28-Apr-97       22.625
29-Apr-97       23.375
30-Apr-97       23.625
1-May-97        23.5
2-May-97        23.75
5-May-97        25
6-May-97        26.5
7-May-97        28.125
8-May-97        28.625
9-May-97        27.75
12-May-97       28
13-May-97       28.375  42.8125
14-May-97       28.375
15-May-97       28.25   45

16-May-97       26.75
19-May-97       27.125
20-May-97       26.875
21-May-97       26.5
22-May-97       27.125
23-May-97       28.375
27-May-97       29
28-May-97       29
29-May-97       29.625
30-May-97       29.5
2-Jun-97        29.875
3-Jun-97        30.875
4-Jun-97        31.75
5-Jun-97        31.5
6-Jun-97        30.75
9-Jun-97        30.5
10-Jun-97       30
11-Jun-97       30.25
12-Jun-97       29.625
13-Jun-97       30.875
16-Jun-97       30.375
17-Jun-97       30.5
18-Jun-97       30.25
19-Jun-97       30.5
20-Jun-97       29.875
23-Jun-97       29.375
24-Jun-97       28.25
25-Jun-97       27.875
26-Jun-97       28.0625
27-Jun-97       29.375
30-Jun-97       29.4375
1-Jul-97        28.875
2-Jul-97        28.625
3-Jul-97        28.375
7-Jul-97        27.5625
8-Jul-97        26.875
9-Jul-97        25.125
10-Jul-97       25.125  46.5
11-Jul-97       25
14-Jul-97       23.3125
15-Jul-97       24
16-Jul-97       24.875
17-Jul-97       24.0625
18-Jul-97       23.75
21-Jul-97       23.5
22-Jul-97       23
23-Jul-97       23.6875
24-Jul-97       24.75
25-Jul-97       24.125
28-Jul-97       23.6875
29-Jul-97       23.875
30-Jul-97       24.125
31-Jul-97       24.625
1-Aug-97        24.5625
4-Aug-97        24.125
5-Aug-97        23.875
6-Aug-97        23.25
7-Aug-97        22.875
8-Aug-97        22.6875
11-Aug-97       22.5
12-Aug-97       23.375
13-Aug-97       23.4375
14-Aug-97       23.25
15-Aug-97       22.9375
18-Aug-97       22.6875
19-Aug-97       23
20-Aug-97       22.75
21-Aug-97       22.5625
22-Aug-97       22.375
25-Aug-97       22.0625
26-Aug-97       22
27-Aug-97       21.375
28-Aug-97       21.875  39.1875
29-Aug-97       21.625

2-Sep-97        20.25
3-Sep-97        22.6875
4-Sep-97        22.6875
5-Sep-97        22.5625
8-Sep-97        22.6875
9-Sep-97        22.6875
10-Sep-97       22.375
11-Sep-97       21.625
12-Sep-97       22
15-Sep-97       22
16-Sep-97       25.375
17-Sep-97       25.75
18-Sep-97       25.5625
19-Sep-97       26.625
22-Sep-97       27.5
23-Sep-97       26.6875
24-Sep-97       27
25-Sep-97       26.6875
26-Sep-97       27.5625
29-Sep-97       27.625
30-Sep-97       28.875
1-Oct-97        28.5
2-Oct-97        28.875
3-Oct-97        29.4375
6-Oct-97        29.4375
7-Oct-97        31.25
8-Oct-97        32.125
9-Oct-97        33.0625
10-Oct-97       33.125
13-Oct-97       32.8125
14-Oct-97       33.25
15-Oct-97       32.4375
16-Oct-97       30.75
17-Oct-97       30.375
20-Oct-97       31.5
21-Oct-97       31.5
22-Oct-97       30.125
23-Oct-97       29.625
24-Oct-97       28.375
27-Oct-97       25.9375
28-Oct-97       26.6875 25.75
29-Oct-97       29
30-Oct-97       28.75
31-Oct-97       28.9375
3-Nov-97        29.75
4-Nov-97        29.75
5-Nov-97        29.0625
6-Nov-97        26.625
7-Nov-97        25.75
10-Nov-97       25.375
11-Nov-97       26.125
12-Nov-97       25.3125
13-Nov-97       25.25
14-Nov-97       25.5
17-Nov-97       25.75
18-Nov-97       26.625
19-Nov-97       26.75
20-Nov-97       26.875
21-Nov-97       26.9375
24-Nov-97       25
25-Nov-97       24.4375
26-Nov-97       23.5    23.75
28-Nov-97       23.5
1-Dec-97        23
2-Dec-97        23
3-Dec-97        22.6875
4-Dec-97        22.25
5-Dec-97        22.1875
8-Dec-97        23.5625
9-Dec-97        22.875
10-Dec-97       22.25
11-Dec-97       21.4375
12-Dec-97       23.1875
15-Dec-97       22.875
16-Dec-97       22.9375
17-Dec-97       22.0625
18-Dec-97       21.875
19-Dec-97       21.5
22-Dec-97       21.4375
23-Dec-97       21.125
24-Dec-97       20.5
26-Dec-97       20.3125
29-Dec-97       19.9375
30-Dec-97       20.625
31-Dec-97       21.3125
2-Jan-98        21.0625
5-Jan-98        21.4375
6-Jan-98        20.4375
7-Jan-98        20.9375
8-Jan-98        20.75   28.4375
9-Jan-98        20
12-Jan-98       19.8125
13-Jan-98       21.625
14-Jan-98       20.5625
15-Jan-98       20.375
16-Jan-98       20.9375
20-Jan-98       20
21-Jan-98       19.8125

22-Jan-98       18.75   30.4375
23-Jan-98       18
26-Jan-98       17.6875

27-Jan-98       18
28-Jan-98       17.9375
29-Jan-98       17.75
30-Jan-98       18.375
2-Feb-98        19.9375
3-Feb-98        18.5625
4-Feb-98        18
5-Feb-98        18.1875
6-Feb-98        17.875
9-Feb-98        17.25
10-Feb-98       16
11-Feb-98       16.375
12-Feb-98       16.125
13-Feb-98       16
17-Feb-98       16.5
18-Feb-98       17
19-Feb-98       16.375
20-Feb-98       16
23-Feb-98       15.6875
24-Feb-98       15.25
25-Feb-98       15.8125
26-Feb-98       16.1875
27-Feb-98       16.625
2-Mar-98        17.1875
3-Mar-98        18.125
4-Mar-98        18.3125
5-Mar-98        18.3125
6-Mar-98        18.5625
9-Mar-98        18.5
10-Mar-98       17.3125
11-Mar-98       15.25
12-Mar-98       16
13-Mar-98       15.5
16-Mar-98       15.125
17-Mar-98       15.25
18-Mar-98       15.625
19-Mar-98       15.125
20-Mar-98       15.5
23-Mar-98       15.375
24-Mar-98       15.125
25-Mar-98       15.125
26-Mar-98       15.5
27-Mar-98       15.6875
30-Mar-98       15.6875
31-Mar-98       15.3125
1-Apr-98        14.3125
2-Apr-98        14.4375
3-Apr-98        14.5625
6-Apr-98        14.8125
7-Apr-98        14
8-Apr-98        14.5
9-Apr-98        14.6875
13-Apr-98       13.9375
14-Apr-98       14.625
15-Apr-98       14.75
16-Apr-98       14.125
17-Apr-98       13.9375
20-Apr-98       14.125
21-Apr-98       14.5
22-Apr-98       14.5625
23-Apr-98       14.3125
24-Apr-98       14.3125
27-Apr-98       13.8125
28-Apr-98       14.25
29-Apr-98       14.25
30-Apr-98       13.8125
1-May-98        14.3125
4-May-98        13.875
5-May-98        13.875
6-May-98        15.5625
7-May-98        16
8-May-98        15.75
11-May-98       15.3125
12-May-98       13.75
13-May-98       13.1875
14-May-98       12.875
15-May-98       11.75
18-May-98       11.6875
19-May-98       10.9375
20-May-98       10.625
21-May-98       11.125
22-May-98       10.9375
26-May-98       10.25
27-May-98       9.9375
28-May-98       10.1875
29-May-98       9.9375
1-Jun-98        9.75
2-Jun-98        9.75
3-Jun-98        9.375
4-Jun-98        9.8125
5-Jun-98        10
8-Jun-98        10
9-Jun-98        9.6875
10-Jun-98       9.25
11-Jun-98       8.875
12-Jun-98       9
15-Jun-98       8.875
16-Jun-98       9.125
17-Jun-98       9.875
18-Jun-98       10
19-Jun-98       10.375
22-Jun-98       10.6875
23-Jun-98       10.9375
24-Jun-98       11
25-Jun-98       10.3125
26-Jun-98       10.0625
29-Jun-98       10.1875
30-Jun-98       9.875
1-Jul-98        9.8125
2-Jul-98        9.375
6-Jul-98        9.4375
7-Jul-98        9.8125
8-Jul-98        9.375
9-Jul-98        9.375
10-Jul-98       9.25
13-Jul-98       8.875
14-Jul-98       8.75
15-Jul-98       8.375
16-Jul-98       8.0625
17-Jul-98       8.25
20-Jul-98       8.0625
21-Jul-98       8
22-Jul-98       7.8125
23-Jul-98       7.625
24-Jul-98       7.5
27-Jul-98       7.75
28-Jul-98       7.6875
29-Jul-98       7.75
30-Jul-98       7.625
31-Jul-98       7.5625
3-Aug-98        7.0625
4-Aug-98        6.5625
5-Aug-98        6.9375
6-Aug-98        7.0625
7-Aug-98        7.3125
10-Aug-98       7.0625
11-Aug-98       7.25
12-Aug-98       7.625
13-Aug-98       6.8125
14-Aug-98       6.4375
17-Aug-98       6.3125
18-Aug-98       7.4375
19-Aug-98       7.3125
20-Aug-98       7.125
21-Aug-98       6.625
24-Aug-98       6.9375
25-Aug-98       6.25
26-Aug-98       6.125
27-Aug-98       5.875
28-Aug-98       5.9375
31-Aug-98       5.5
1-Sep-98        5.875
2-Sep-98        5.875
3-Sep-98        5.8125
4-Sep-98        5.875
8-Sep-98        5.8125
9-Sep-98        5.75
10-Sep-98       5.6875
11-Sep-98       5.8125
14-Sep-98       6
15-Sep-98       5.875
16-Sep-98       6.1875
17-Sep-98       6.4375
18-Sep-98       7.375
21-Sep-98       7.125
22-Sep-98       6.9375
23-Sep-98       7.125
24-Sep-98       7
25-Sep-98       6.875
28-Sep-98       6.75
29-Sep-98       6.5
30-Sep-98       6.4375
1-Oct-98        6.125
2-Oct-98        6.625
5-Oct-98        6.5625
6-Oct-98        6.9375
7-Oct-98        6.9375
8-Oct-98        7
9-Oct-98        7.25
12-Oct-98       8.0625
13-Oct-98       8.1875
14-Oct-98       8.1875
15-Oct-98       7.9375
16-Oct-98       7.8125
19-Oct-98       8.375
20-Oct-98       9.1875
21-Oct-98       10
22-Oct-98       10.0625
23-Oct-98       9.8125
26-Oct-98       9.75
27-Oct-98       9
28-Oct-98       8.4375
29-Oct-98       8.375
30-Oct-98       8.875
2-Nov-98        9.375
3-Nov-98        9.125
4-Nov-98        9
5-Nov-98        8.75
6-Nov-98        8.8125
9-Nov-98        9.0625
10-Nov-98       9.4375
11-Nov-98       9.4375
12-Nov-98       9.625
13-Nov-98       9.6875
16-Nov-98       9.9375
17-Nov-98       9.75
18-Nov-98       10.1875
19-Nov-98       10.375
20-Nov-98       10.25
23-Nov-98       10.4375
24-Nov-98       10.25
25-Nov-98       9.6875
27-Nov-98       9.9375
30-Nov-98       9.8125
1-Dec-98        9.6875
2-Dec-98        9.6875
3-Dec-98        9.3125
4-Dec-98        9.3125
7-Dec-98        9.4375
8-Dec-98        9
9-Dec-98        9.3125
10-Dec-98       9.25
11-Dec-98       9.0625
14-Dec-98       8.9375
15-Dec-98       9.75
16-Dec-98       10.25
17-Dec-98       9.9375
18-Dec-98       9.5625
21-Dec-98       9.25
22-Dec-98       8.5
23-Dec-98       9.5625
24-Dec-98       9.125
28-Dec-98       8.75
29-Dec-98       8.625
30-Dec-98       8.5
31-Dec-98       8.6875
4-Jan-99        9.3125
5-Jan-99        9.4375
6-Jan-99        9.375
7-Jan-99        9.0625
8-Jan-99        9.6875
11-Jan-99       9.75
12-Jan-99       9.6875
13-Jan-99       9.5625
14-Jan-99       9.5625
15-Jan-99       9.375
19-Jan-99       9.25
20-Jan-99       9.375
21-Jan-99       9.25
22-Jan-99       9.4375
25-Jan-99       9.4375
26-Jan-99       9
27-Jan-99       8.9375
28-Jan-99       9.4375
29-Jan-99       9
1-Feb-99        8.625
2-Feb-99        8.6875
3-Feb-99        9
4-Feb-99        8.9375
5-Feb-99        8.9375
8-Feb-99        8.75
9-Feb-99        8.75
10-Feb-99       8.6875
11-Feb-99       8.625
12-Feb-99       8.6875
16-Feb-99       8.4375
17-Feb-99       7.875
18-Feb-99       7.875
19-Feb-99       7.5625
22-Feb-99       7.4375
23-Feb-99       7.125
24-Feb-99       7.125
25-Feb-99       7.25
26-Feb-99       7.3125
1-Mar-99        7.625
2-Mar-99        7.4375
3-Mar-99        7.5
4-Mar-99        7.3125
5-Mar-99        7.5
8-Mar-99        7.5
9-Mar-99        7.4375
10-Mar-99       7.5
11-Mar-99       7.25
12-Mar-99       7.5
15-Mar-99       8.1875
16-Mar-99       7.5625
17-Mar-99       7.875
18-Mar-99       7.5
19-Mar-99       7.3125
22-Mar-99       7.25
23-Mar-99       7.4375
24-Mar-99       7.625
25-Mar-99       9.5
26-Mar-99       10.5
29-Mar-99       9.6875
30-Mar-99       9.25
31-Mar-99       9.3125
1-Apr-99        9.5
5-Apr-99        9.5
6-Apr-99        9
7-Apr-99        9.125
8-Apr-99        9
9-Apr-99        9.375
12-Apr-99       9.375
13-Apr-99       9.125
14-Apr-99       9.0625
15-Apr-99       8.75
16-Apr-99       8.6875
19-Apr-99       8.3125
20-Apr-99       8.25
21-Apr-99       8.375
22-Apr-99       8.625
23-Apr-99       8.5
26-Apr-99       8.5
27-Apr-99       8.5
28-Apr-99       8.125
29-Apr-99       8
30-Apr-99       8.4375
3-May-99        8.3125
4-May-99        8.1875
5-May-99        8.125
6-May-99        8
7-May-99        7.9375
10-May-99       7.8125
11-May-99       7.5
12-May-99       7.25
13-May-99       7.1875
14-May-99       7.375
17-May-99       7.25
18-May-99       7.4375
19-May-99       7.1875
20-May-99       7.5625
21-May-99       8.375
24-May-99       8
25-May-99       7.6875
26-May-99       7.75
27-May-99       8
28-May-99       8
1-Jun-99        7.9375
2-Jun-99        8
3-Jun-99        7.9375
4-Jun-99        8.125
7-Jun-99        8
8-Jun-99        7.6406
9-Jun-99        7.75
10-Jun-99       7.75
11-Jun-99       7.6875
14-Jun-99       7.625
15-Jun-99       7.625
16-Jun-99       7.875
17-Jun-99       7.75
18-Jun-99       7.625
21-Jun-99       7.5625
22-Jun-99       7.625
23-Jun-99       7.5625
24-Jun-99       7.4375
25-Jun-99       7.625
28-Jun-99       7.6875
29-Jun-99       7.6875
30-Jun-99       7.8125
1-Jul-99        7.875
2-Jul-99        8.125
6-Jul-99        8.0625
7-Jul-99        8.375
8-Jul-99        8.0625
9-Jul-99        8.25
12-Jul-99       8.125
13-Jul-99       7.6875
14-Jul-99       7.3125
15-Jul-99       7.375
16-Jul-99       7.625
19-Jul-99       7.5625
20-Jul-99       7.625
21-Jul-99       7.625
22-Jul-99       7.75
23-Jul-99       7.8125
26-Jul-99       7.6875
27-Jul-99       7.6875
28-Jul-99       7.625
29-Jul-99       7.625
30-Jul-99       7.5625
2-Aug-99        7.375
3-Aug-99        7.375
4-Aug-99        7.25
5-Aug-99        6.875
6-Aug-99        7.125
9-Aug-99        6.875
10-Aug-99       6.875
11-Aug-99       6.875
12-Aug-99       6.8125
13-Aug-99       6.8125
16-Aug-99       6.75
17-Aug-99       7
18-Aug-99       6.8125
19-Aug-99       6.6875
20-Aug-99       6.5625
23-Aug-99       6.375
24-Aug-99       6.1875
25-Aug-99       6.25
26-Aug-99       6.0625
27-Aug-99       6.1875
30-Aug-99       6.25
31-Aug-99       6.4375
1-Sep-99        6.3125
2-Sep-99        6.25
3-Sep-99        6.3125
7-Sep-99        6.5
8-Sep-99        6.5625
9-Sep-99        6.625
10-Sep-99       7
13-Sep-99       7
14-Sep-99       6.625
15-Sep-99       6.9375
16-Sep-99       6.75
17-Sep-99       6.875
20-Sep-99       6.5
21-Sep-99       6.4375
22-Sep-99       6.875
23-Sep-99       6.8125
24-Sep-99       6.8125
27-Sep-99       6.75
28-Sep-99       6.75
29-Sep-99       6.625
30-Sep-99       6.75
1-Oct-99        6.375
4-Oct-99        6.125
5-Oct-99        6.5
6-Oct-99        6.375
7-Oct-99        6.625
8-Oct-99        6.75
11-Oct-99       6.75
12-Oct-99       6.5
13-Oct-99       6.5
14-Oct-99       6.625
15-Oct-99       6.625
18-Oct-99       6.6875
19-Oct-99       6.5625
20-Oct-99       6.5625
21-Oct-99       6.5
22-Oct-99       6.0625
25-Oct-99       6.125
26-Oct-99       6.125
27-Oct-99       5.875
28-Oct-99       5.9375
29-Oct-99       5.75
1-Nov-99        5.625
2-Nov-99        5.75
3-Nov-99        6
4-Nov-99        6
5-Nov-99        6.4375
8-Nov-99        6.5
9-Nov-99        6.5625
10-Nov-99       6.75
11-Nov-99       6.5625
12-Nov-99       6.5625
15-Nov-99       6.625
16-Nov-99       6.6875
17-Nov-99       6.625
18-Nov-99       6.625
19-Nov-99       6.6875
22-Nov-99       6.6875
23-Nov-99       6.5625
24-Nov-99       7.0625
26-Nov-99       7.5
29-Nov-99       7.625
30-Nov-99       7.5625
1-Dec-99        7.25
2-Dec-99        7.125
3-Dec-99        7.75
6-Dec-99        7.3125
7-Dec-99        7.125
8-Dec-99        7
9-Dec-99        6.9375
10-Dec-99       7.8125
13-Dec-99       7.3125
14-Dec-99       7.0625
15-Dec-99       7.25
16-Dec-99       7.75
17-Dec-99       7.875
20-Dec-99       8.3125
21-Dec-99       8.5625
22-Dec-99       8.6875
23-Dec-99       8.25
27-Dec-99       8
28-Dec-99       7.5
29-Dec-99       7.5
30-Dec-99       7.5625
31-Dec-99       8.3125
3-Jan-00        8.625
4-Jan-00        8.0625
5-Jan-00        8.25
6-Jan-00        7.875
7-Jan-00        7.9375
10-Jan-00       8
11-Jan-00       8.4375
12-Jan-00       8.6875
13-Jan-00       8.4375
14-Jan-00       8.6875
18-Jan-00       8.625
19-Jan-00       8.9375

o  On May 11, 1998 General Cigar Holdings announced that 2Qtr earnings would be
   below analyst expectations

o  On May 21, 1998 announced that its Board of Directors had authorized the
   repurchase of up to 5% of the Company's Class A common stock in open market
   transactions

o  On January 19, 2000 Swedish Match AB acquired 3.5 million common shares from
   the Cullman family for $15.00 per share in cash in a private negotiated
   transaction. Concurrently, Swedish Match acquired all outstanding shares from
   the public for $15.25 per share in cash. The two transactions represent an
   equity stake of 63.5% in General Cigar Holdings and a transaction value of
   $210 million

[LOGO]


o  On December 17, 1996, Swisher International sold 6 million Class A shares to
   the public priced at $17.00 per share representing a 17.6 percent stake in
   the Company

                                  [LINE CHART]

Date            Close
18-Dec-96       17.25
19-Dec-96       16.375
20-Dec-96       16
23-Dec-96       16.5
24-Dec-96       16.75
26-Dec-96       16.5
27-Dec-96       16.25
30-Dec-96       15.75
31-Dec-96       15.875
2-Jan-97        16
3-Jan-97        16
6-Jan-97        16
7-Jan-97        16.25
8-Jan-97        16.375
9-Jan-97        16.125
10-Jan-97       17
13-Jan-97       18.75
14-Jan-97       17.875
15-Jan-97       17.75
16-Jan-97       17.5
17-Jan-97       16.75
20-Jan-97       16.625
21-Jan-97       16.625
22-Jan-97       16
23-Jan-97       15.625
24-Jan-97       15.25
27-Jan-97       14.75   45
28-Jan-97       14.125
29-Jan-97       14.5
30-Jan-97       15.25
31-Jan-97       15
3-Feb-97        15
4-Feb-97        14.5
5-Feb-97        14.625
6-Feb-97        14.375
7-Feb-97        14.125
10-Feb-97       13.625
11-Feb-97       13.375
12-Feb-97       13.875
13-Feb-97       13.625
14-Feb-97       13.5
18-Feb-97       13.625
19-Feb-97       14.5
20-Feb-97       14.125
21-Feb-97       14.625
24-Feb-97       14.5
25-Feb-97       14.75
26-Feb-97       15.25
27-Feb-97       15.75
28-Feb-97       16.25
3-Mar-97        15.875
4-Mar-97        16      42.8125
5-Mar-97        16.125
6-Mar-97        15.375  45
7-Mar-97        15.5
10-Mar-97       15
11-Mar-97       15.375
12-Mar-97       15.125
13-Mar-97       14.75
14-Mar-97       14.75
17-Mar-97       14.25
18-Mar-97       14
19-Mar-97       13.875
20-Mar-97       14
21-Mar-97       13.625
24-Mar-97       14.125
25-Mar-97       13.75
26-Mar-97       13.875
27-Mar-97       15
31-Mar-97       14.625
1-Apr-97        14.25
2-Apr-97        14.625
3-Apr-97        14.625
4-Apr-97        14.5
7-Apr-97        14.5
8-Apr-97        14.125
9-Apr-97        14
10-Apr-97       14
11-Apr-97       13.625
14-Apr-97       14
15-Apr-97       13.75
16-Apr-97       13.875
17-Apr-97       14
18-Apr-97       14.75
21-Apr-97       15.125
22-Apr-97       15.375
23-Apr-97       15.125
24-Apr-97       15.5
25-Apr-97       15.125
28-Apr-97       15
29-Apr-97       15.375
30-Apr-97       15.75   46.5
1-May-97        15.875
2-May-97        16
5-May-97        16.25
6-May-97        17
7-May-97        17.25
8-May-97        17
9-May-97        17.25
12-May-97       17.375
13-May-97       17.625
14-May-97       17.625
15-May-97       17.625
16-May-97       17.5
19-May-97       16.875
20-May-97       16.625
21-May-97       17.375
22-May-97       17.75
23-May-97       18.25
27-May-97       18.125
28-May-97       17.5
29-May-97       18
30-May-97       18.25
2-Jun-97        18.5
3-Jun-97        18.5
4-Jun-97        18
5-Jun-97        18.5
6-Jun-97        18.5
9-Jun-97        18
10-Jun-97       18.125
11-Jun-97       18.5
12-Jun-97       17.75
13-Jun-97       18.5
16-Jun-97       19.5
17-Jun-97       18.875
18-Jun-97       18.875
19-Jun-97       18.125  39.1875
20-Jun-97       18.125
23-Jun-97       17.75
24-Jun-97       17.125
25-Jun-97       16.625
26-Jun-97       17.0625
27-Jun-97       17
30-Jun-97       17.25
1-Jul-97        17.5
2-Jul-97        17.875
3-Jul-97        18.25
7-Jul-97        17.75
8-Jul-97        17
9-Jul-97        17.5625
10-Jul-97       17.75
11-Jul-97       17.6875
14-Jul-97       17.125
15-Jul-97       16.5
16-Jul-97       17.75
17-Jul-97       14.375
18-Jul-97       14.5
21-Jul-97       14.8125
22-Jul-97       14.625
23-Jul-97       14.6875
24-Jul-97       14.625
25-Jul-97       14.5
28-Jul-97       15.0625
29-Jul-97       15.25
30-Jul-97       15.5
31-Jul-97       16
1-Aug-97        15.625
4-Aug-97        15.75
5-Aug-97        15.625
6-Aug-97        15.6875
7-Aug-97        15.3125
8-Aug-97        14.6875
11-Aug-97       15
12-Aug-97       15.625
13-Aug-97       16
14-Aug-97       15.625
15-Aug-97       15.75
18-Aug-97       15.625
19-Aug-97       15.5    25.75
20-Aug-97       14.875
21-Aug-97       15
22-Aug-97       14.5
25-Aug-97       14.875
26-Aug-97       15.125
27-Aug-97       15.25
28-Aug-97       15.375
29-Aug-97       15.5625
2-Sep-97        15.4375
3-Sep-97        15.5
4-Sep-97        16.875
5-Sep-97        16.875
8-Sep-97        17.6875
9-Sep-97        17.75
10-Sep-97       17.375
11-Sep-97       16.9375
12-Sep-97       17.375
15-Sep-97       17.5
16-Sep-97       17.5
17-Sep-97       17.875
18-Sep-97       17.5    23.75
19-Sep-97       17.75
22-Sep-97       18.25
23-Sep-97       18.3125
24-Sep-97       18.875
25-Sep-97       18
26-Sep-97       18.1875
29-Sep-97       18
30-Sep-97       18.0625
1-Oct-97        17.9375
2-Oct-97        18.25
3-Oct-97        18.6875
6-Oct-97        19.5
7-Oct-97        19.25
8-Oct-97        18.75
9-Oct-97        19.25
10-Oct-97       19.875
13-Oct-97       20
14-Oct-97       20.875
15-Oct-97       20.125
16-Oct-97       20.25
17-Oct-97       19.5
20-Oct-97       19.9375
21-Oct-97       19.625
22-Oct-97       19.5
23-Oct-97       19.625
24-Oct-97       19.875
27-Oct-97       19.125
28-Oct-97       19.375  28.4375
29-Oct-97       19.625
30-Oct-97       19.9375
31-Oct-97       19.8125
3-Nov-97        19.5
4-Nov-97        18.875
5-Nov-97        19.4375
6-Nov-97        18.875
7-Nov-97        18.5
10-Nov-97       18.625  30.4375
11-Nov-97       18.75
12-Nov-97       18.3125
13-Nov-97       17.875
14-Nov-97       17.875
17-Nov-97       18.375
18-Nov-97       18
19-Nov-97       17.3125
20-Nov-97       17.375
21-Nov-97       18
24-Nov-97       16.6875
25-Nov-97       15.875
26-Nov-97       15.625
28-Nov-97       15.5
1-Dec-97        15
2-Dec-97        16.125
3-Dec-97        16.375
4-Dec-97        16.25
5-Dec-97        16.3125
8-Dec-97        15.75
9-Dec-97        15.9375
10-Dec-97       15.75
11-Dec-97       15.5
12-Dec-97       15.5
15-Dec-97       15.4375
16-Dec-97       15.5
17-Dec-97       16
18-Dec-97       16.75
19-Dec-97       16.4375
22-Dec-97       16.25
23-Dec-97       15.875
24-Dec-97       15.625
26-Dec-97       15.75
29-Dec-97       15.75
30-Dec-97       15.75
31-Dec-97       17
2-Jan-98        17.625
5-Jan-98        17.375
6-Jan-98        16.875
7-Jan-98        16.625
8-Jan-98        16.4375
9-Jan-98        16.25
12-Jan-98       15.875
13-Jan-98       15.8125
14-Jan-98       16
15-Jan-98       16
16-Jan-98       16
20-Jan-98       16.125
21-Jan-98       15.875
22-Jan-98       15.875
23-Jan-98       15.875
26-Jan-98       15.75
27-Jan-98       15.25
28-Jan-98       15.25
29-Jan-98       14.8125
30-Jan-98       14.75
2-Feb-98        14.4375
3-Feb-98        14.375
4-Feb-98        14.5
5-Feb-98        14.25
6-Feb-98        14.375
9-Feb-98        13.625
10-Feb-98       13.625
11-Feb-98       13.5
12-Feb-98       13.25
13-Feb-98       14.375
17-Feb-98       14.25
18-Feb-98       14.375
19-Feb-98       14.625
20-Feb-98       14.375
23-Feb-98       14.25
24-Feb-98       13.875
25-Feb-98       14.1875
26-Feb-98       14.125
27-Feb-98       14.3125
2-Mar-98        14.5625
3-Mar-98        14.6875
4-Mar-98        14.625
5-Mar-98        14.9375
6-Mar-98        15.125
9-Mar-98        15.0625
10-Mar-98       14.75
11-Mar-98       13.125
12-Mar-98       13.125
13-Mar-98       13.0625
16-Mar-98       13.0625
17-Mar-98       13.0625
18-Mar-98       13
19-Mar-98       13
20-Mar-98       13
23-Mar-98       13
24-Mar-98       13
25-Mar-98       13.0625
26-Mar-98       13.125
27-Mar-98       13
30-Mar-98       13.0625
31-Mar-98       13
1-Apr-98        12.375
2-Apr-98        11.625
3-Apr-98        11
6-Apr-98        10.875
7-Apr-98        10.75
8-Apr-98        10.8125
9-Apr-98        10.9375
13-Apr-98       10.5625
14-Apr-98       10.375
15-Apr-98       10.625
16-Apr-98       10.625
17-Apr-98       11.125
20-Apr-98       11.375
21-Apr-98       11.625
22-Apr-98       11.75
23-Apr-98       11.875
24-Apr-98       12.125
27-Apr-98       11.875
28-Apr-98       12
29-Apr-98       12
30-Apr-98       12.3125
1-May-98        12.375
4-May-98        12
5-May-98        12.125
6-May-98        12.4375
7-May-98        12.3125
8-May-98        12.5
11-May-98       12.4375
12-May-98       12.5
13-May-98       12.75
14-May-98       12.5625
15-May-98       12.375
18-May-98       11.5625
19-May-98       9.6875
20-May-98       9.3125
21-May-98       9.125
22-May-98       9.125
26-May-98       9.25
27-May-98       8.9375
28-May-98       9
29-May-98       8.875
1-Jun-98        8.5625
2-Jun-98        9
3-Jun-98        9
4-Jun-98        8.9375
5-Jun-98        8.9375
8-Jun-98        8.9375
9-Jun-98        8.875
10-Jun-98       8.4375
11-Jun-98       8.25
12-Jun-98       8.5625
15-Jun-98       7.875
16-Jun-98       7.875
17-Jun-98       7.875
18-Jun-98       8
19-Jun-98       8.0625
22-Jun-98       8.125
23-Jun-98       8.25
24-Jun-98       8.25
25-Jun-98       8.1875
26-Jun-98       8
29-Jun-98       8
30-Jun-98       8
1-Jul-98        8
2-Jul-98        7.8125
6-Jul-98        7.6875
7-Jul-98        7.875
8-Jul-98        7.875
9-Jul-98        7.875
10-Jul-98       7.875
13-Jul-98       7.6875
14-Jul-98       7.75
15-Jul-98       7.3125
16-Jul-98       7.125
17-Jul-98       7.125
20-Jul-98       7.125
21-Jul-98       6.75
22-Jul-98       6.75
23-Jul-98       6.625
24-Jul-98       6.75
27-Jul-98       6.75
28-Jul-98       6.375
29-Jul-98       6.125
30-Jul-98       6.1875
31-Jul-98       6.375
3-Aug-98        6.5625
4-Aug-98        6.5
5-Aug-98        6.375
6-Aug-98        6.375
7-Aug-98        6.25
10-Aug-98       6.125
11-Aug-98       6.1875
12-Aug-98       6.25
13-Aug-98       6.25
14-Aug-98       6.1875
17-Aug-98       6.25
18-Aug-98       6.25
19-Aug-98       6.1875
20-Aug-98       6.125
21-Aug-98       6.0625
24-Aug-98       6.125
25-Aug-98       6.0625
26-Aug-98       6.125
27-Aug-98       5.8125
28-Aug-98       5.9375
31-Aug-98       6
1-Sep-98        5.875
2-Sep-98        5.4375
3-Sep-98        5.375
4-Sep-98        5.375
8-Sep-98        5.5625
9-Sep-98        5.5
10-Sep-98       5.4375
11-Sep-98       5.4375
14-Sep-98       5.5
15-Sep-98       5.4375
16-Sep-98       5.5
17-Sep-98       5.3125
18-Sep-98       5.375
21-Sep-98       5.3125
22-Sep-98       5.375
23-Sep-98       5.4375
24-Sep-98       5.5625
25-Sep-98       5.625
28-Sep-98       5.6875
29-Sep-98       5.875
30-Sep-98       6
1-Oct-98        6
2-Oct-98        5.9375
5-Oct-98        5.8125
6-Oct-98        5.625
7-Oct-98        5.5
8-Oct-98        5.125
9-Oct-98        4.875
12-Oct-98       4.375
13-Oct-98       4.875
14-Oct-98       4.875
15-Oct-98       4.625
16-Oct-98       4.5
19-Oct-98       4.75
20-Oct-98       4.8125
21-Oct-98       5.375
22-Oct-98       5.25
23-Oct-98       5.3125
26-Oct-98       5.125
27-Oct-98       5.25
28-Oct-98       6.0625
29-Oct-98       6.375
30-Oct-98       6.75
2-Nov-98        6.75
3-Nov-98        6.8125
4-Nov-98        6.875
5-Nov-98        6.75
6-Nov-98        6.25
9-Nov-98        6.25
10-Nov-98       6
11-Nov-98       5.6875
12-Nov-98       5.6875
13-Nov-98       5.8125
16-Nov-98       6
17-Nov-98       6
18-Nov-98       6.25
19-Nov-98       6.1875
20-Nov-98       6.3125
23-Nov-98       6.375
24-Nov-98       6.3125
25-Nov-98       6.375
27-Nov-98       6.375
30-Nov-98       6.25
1-Dec-98        6.5
2-Dec-98        6.375
3-Dec-98        6.5
4-Dec-98        6.5
7-Dec-98        6.5625
8-Dec-98        6.8125
9-Dec-98        6.8125
10-Dec-98       8.875
11-Dec-98       8.9375
14-Dec-98       8.8125
15-Dec-98       8.8125
16-Dec-98       8.875
17-Dec-98       8.875
18-Dec-98       8.9766
21-Dec-98       8.9375
22-Dec-98       8.9375
23-Dec-98       8.9375
24-Dec-98       8.9375
28-Dec-98       8.9375
29-Dec-98       8.9375
30-Dec-98       8.9375
31-Dec-98       9
4-Jan-99        9
5-Jan-99        9
6-Jan-99        9.0625
7-Jan-99        9
8-Jan-99        9
11-Jan-99       9.125
12-Jan-99       9.0625
13-Jan-99       9
14-Jan-99       9
15-Jan-99       8.9375
19-Jan-99       8.9375
20-Jan-99       8.9375
21-Jan-99       9
22-Jan-99       9
25-Jan-99       8.9375
26-Jan-99       8.9375
27-Jan-99       8.8125
28-Jan-99       9
29-Jan-99       9.0625
1-Feb-99        9.125
2-Feb-99        9.125
3-Feb-99        9.1875
4-Feb-99        9.125
5-Feb-99        9.125
8-Feb-99        9.125
9-Feb-99        9.125
10-Feb-99       9.125
11-Feb-99       9.125
12-Feb-99       9.125
16-Feb-99       9
17-Feb-99       9
18-Feb-99       8.875
19-Feb-99       9
22-Feb-99       9
23-Feb-99       8.9375
24-Feb-99       8.9375
25-Feb-99       9
26-Feb-99       8.9375
1-Mar-99        8.9375
2-Mar-99        8.875
3-Mar-99        8.9375
4-Mar-99        9
5-Mar-99        9.0625
8-Mar-99        9.0625
9-Mar-99        8.9375
10-Mar-99       8.875
11-Mar-99       8.9375
12-Mar-99       9
15-Mar-99       9
16-Mar-99       9
17-Mar-99       9.125
18-Mar-99       8.9375
19-Mar-99       9.125
22-Mar-99       9.125
23-Mar-99       8.9375
24-Mar-99       8.9375
25-Mar-99       9
26-Mar-99       9
29-Mar-99       8.9375
30-Mar-99       8.9375
31-Mar-99       8.9375
1-Apr-99        9
5-Apr-99        8.9375
6-Apr-99        8.9375
7-Apr-99        8.9375
8-Apr-99        9
9-Apr-99        9.0625
12-Apr-99       8.9375
13-Apr-99       9
14-Apr-99       8.9375
15-Apr-99       9
16-Apr-99       9
19-Apr-99       9.0625
20-Apr-99       9.0625
21-Apr-99       9
22-Apr-99       9
23-Apr-99       9
26-Apr-99       8.9375
27-Apr-99       9
28-Apr-99       8.9375
29-Apr-99       8.9375
30-Apr-99       9.125
3-May-99        9.0625
4-May-99        9
5-May-99        9
6-May-99        9
7-May-99        9.125
10-May-99       9.125
11-May-99       9.0625
12-May-99       9
13-May-99       9
14-May-99       9.125
17-May-99       9.125
18-May-99       9.125
19-May-99       9.125
20-May-99       9.1875
21-May-99       9.1875
24-May-99       9.1875
25-May-99       9.1875
26-May-99       9.1875
27-May-99       9.1875
28-May-99       9.375
1-Jun-99        9.25
2-Jun-99        9.25
3-Jun-99        9.375
4-Jun-99        9.4375
7-Jun-99        9.4375
8-Jun-99        9.3125
9-Jun-99        9.375
10-Jun-99       9.375
11-Jun-99       9.375
14-Jun-99       9.4375
24-Aug-99       6.1875
25-Aug-99       6.25
26-Aug-99       6.0625
27-Aug-99       6.1875
30-Aug-99       6.25
31-Aug-99       6.4375
1-Sep-99        6.3125
2-Sep-99        6.25
3-Sep-99        6.3125
7-Sep-99        6.5
8-Sep-99        6.5625
9-Sep-99        6.625
10-Sep-99       7
13-Sep-99       7
14-Sep-99       6.625
15-Sep-99       6.9375
16-Sep-99       6.75
17-Sep-99       6.875
20-Sep-99       6.5
21-Sep-99       6.4375
22-Sep-99       6.875
23-Sep-99       6.8125
24-Sep-99       6.8125
27-Sep-99       6.75
28-Sep-99       6.75
29-Sep-99       6.625
30-Sep-99       6.75
1-Oct-99        6.375
4-Oct-99        6.125
5-Oct-99        6.5
6-Oct-99        6.375
7-Oct-99        6.625
8-Oct-99        6.75
11-Oct-99       6.75
12-Oct-99       6.5
13-Oct-99       6.5
14-Oct-99       6.625
15-Oct-99       6.625
18-Oct-99       6.6875
19-Oct-99       6.5625
20-Oct-99       6.5625
21-Oct-99       6.5
22-Oct-99       6.0625
25-Oct-99       6.125
26-Oct-99       6.125
27-Oct-99       5.875
28-Oct-99       5.9375
29-Oct-99       5.75
1-Nov-99        5.625
2-Nov-99        5.75
3-Nov-99        6
4-Nov-99        6
5-Nov-99        6.4375
8-Nov-99        6.5
9-Nov-99        6.5625
10-Nov-99       6.75
11-Nov-99       6.5625
12-Nov-99       6.5625
15-Nov-99       6.625
16-Nov-99       6.6875
17-Nov-99       6.625
18-Nov-99       6.625
19-Nov-99       6.6875
22-Nov-99       6.6875
23-Nov-99       6.5625
24-Nov-99       7.0625
26-Nov-99       7.5
29-Nov-99       7.625
30-Nov-99       7.5625
1-Dec-99        7.25
2-Dec-99        7.125
3-Dec-99        7.75
6-Dec-99        7.3125
7-Dec-99        7.125
8-Dec-99        7
9-Dec-99        6.9375

o  On February 5, 1998, Swisher International announced that its Board of
   Directors had authorized the repurchase of up to $15 million of the Company's
   Class A common stock through open market purchases and privately negotiated
   transactions

o  On March 10, 1998, Swisher International stock declined on earnings warnings

o  On December 9, 1998 Swisher announced its intention to self-tender for 100%
   of its Class A common shares for $9.50 per share; the 5.8 million Class A
   shares represent 17% of the outstanding shares held by the public at the time
   of announcement

(a) Source: Company press releases.
                                                                               4
<PAGE>


--------------------------------------------------------------------------------



                    HISTORICAL FINANCIAL PERFORMANCE OF LEAF



--------------------------------------------------------------------------------
<PAGE>



HISTORICAL FINANCIAL PERFORMANCE OF LEAF

ANALYSIS OF REVENUE MIX




<TABLE>
<CAPTION>

                                  YTD 2000               1999                   1998                     1997
                              -----------------   --------------------   -------------------   ------------------------
<S>                                <C>                  <C>                     <C>                      <C>
PRODUCT:
Cigars/Tobacco                      45.1%                47.3%                   53.4%                    56.9%
Cigarettes                          46.0%                43.3%                   37.9%                    34.6%
Fragrances                           2.2%                 2.5%                    2.6%                     3.1%
Other Merchandise                    6.7%                 6.9%                    6.0%                     5.3%
                              -----------------   --------------------   -------------------   ------------------------
Total Net Sales                    100.0%               100.0%                  100.0%                   100.0%

RETAIL OPERATIONS:
Direct Mail Cigars                  16.9%                17.7%                   22.0%                    22.3%
Cigar Stores                         9.3%                10.3%                    9.0%                     9.6%
Discount Outlet Stores              21.3%                21.4%                   23.7%                    26.5%
Internet                             3.0%                 1.2%                      --                       --
                              -----------------   --------------------   -------------------   ------------------------
Total Retail Sales                  50.6%                50.6%                   54.7%                    58.4%

WHOLESALE OPERATIONS:
Direct Mail Cigars                  15.8%                18.1%                   19.5%                    18.8%
Cash & Carry Cigarettes             33.6%                31.2%                   25.8%                    22.8%
                              -----------------   --------------------   -------------------   ------------------------
Total Wholesale Sales               49.4%                49.4%                   45.3%                    41.6%

Total Net Sales                    100.0%               100.0%                  100.0%                   100.0%
                              -----------------   --------------------   -------------------   ------------------------

<CAPTION>


                                     Indicative Gross Margin (a)
                             ----------------------------------------
<S>                              <C>
PRODUCT:
Cigars/Tobacco                   10% (wholesale)/30%(retail)
Cigarettes                        2% (wholesale)/6%(retail)
Fragrances                                   30%
Other Merchandise                            30%

Total Net Sales

RETAIL OPERATIONS:
Direct Mail Cigars                       29%-31%
Cigar Stores                             28%-33%
Discount Outlet Stores                        6%
Internet                                     30%

Total Retail Sales

WHOLESALE OPERATIONS:
Direct Mail Cigars                           10%
Cash & Carry Cigarettes                       2%

Total Wholesale Sales

Total Net Sales
</TABLE>

Source: Leaf management.
(a)  Indicative gross margin as per management estimate.

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                                                                               5

<PAGE>



HISTORICAL FINANCIAL PERFORMANCE OF LEAF
--------------------------------------------------------------------------------
ANALYSIS OF SALES TRENDS - ANNUAL AND YTD



<TABLE>
<CAPTION>
                                                       YTD                                     Annual
                                           --------------------------------      -----------------------------------
                                              2000       1999     % Change          1999        1998      % Change
                                           ---------- --------- -----------      ---------- ----------- ------------
PRODUCT:

<S>                                         <C>         <C>          <C>             <C>         <C>           <C>
Cigars/Tobacco                               $68.0       $70.6       (3.6%)          $150.0      $153.1        (2.1%)
Cigarettes                                    69.3        68.8        0.7%            137.1       108.6        26.3%
Fragrances                                     3.3         3.2        3.2%              8.0         7.6         5.3%
Other Merchandise                             10.1         9.1       11.0%             22.0        17.3        27.1%
                                           -------     -------     --------        ---------   ---------    ---------
Total Net Sales                             $150.7      $151.6       (0.6%)          $317.0      $286.5        10.6%

RETAIL OPERATIONS:

Direct Mail Cigars                           $25.5       $27.6       (7.8%)           $56.3       $63.0       (10.7%)
Cigar Stores                                  14.1        15.3       (7.8%)            32.6        25.7        26.7%
Discount Outlet Stores                        32.1        32.9       (2.2%)            67.9        68.0        (0.1%)
Internet                                       4.6         0.7          --              3.7          --           --
                                           -------     -------     --------        ---------   ---------    ---------
Total Retail Stores                          $76.3       $76.5       (0.3%)          $160.5      $156.6         2.4%

Wholesale Operations:

Direct Mail Cigars                           $23.8       $26.8      (11.5%)           $57.5       $56.0         2.7%
Cash & Carry Cigarettes                       50.7        48.3        4.8%             99.0        73.9        34.1%
                                           -------     -------     --------        ---------   ---------    ---------
Total Wholesale Sales                         74.4        75.2       (1.0%)           156.5       129.9        20.5%
                                           -------     -------     --------        ---------   ---------    ---------
Total Net Sales                             $150.7      $151.6       -0.6%           $317.0      $286.5        10.6%
                                           =======     =======     ========        =========   =========    =========

<CAPTION>


                                                        Annual
                                           ----------------------------------
                                            1998         1997      % Change
                                           --------  -----------  ----------
PRODUCT:

<S>                                           <C>          <C>          <C>
Cigars/Tobacco                                $153.1       $136.8       11.9%
Cigarettes                                     108.6         83.2       30.5%
Fragrances                                       7.6          7.5        1.2%
Other Merchandise                               17.3         12.9       34.5%
                                             -------      --------     -------
Total Net Sales                               $286.5       $240.3       19.2%

RETAIL OPERATIONS:

Direct Mail Cigars                             $63.0        $53.6       17.6%
Cigar Stores                                    25.7         23.1       11.3%
Discount Outlet Stores                          68.0         63.6        6.8%
Internet                                         1.9           --         --
                                             -------      --------     -------
Total Retail Stores                           $156.6       $140.3       11.7%


Wholesale Operations:

Direct Mail Cigars                             $56.0        $45.3       23.6%
Cash & Carry Cigarettes                         73.9         54.8       34.9%
                                             -------      --------     -------
Total Wholesale Sales                          129.9        100.1       29.8%

Total Net Sales                               $286.5       $240.3       19.2%
                                             =======      =======      =======
</TABLE>

----------------------------------------
Source: Leaf management.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                               6


<PAGE>


--------------------------------------------------------------------------------



                         PUBLIC MARKET OVERVIEW OF LEAF



--------------------------------------------------------------------------------
<PAGE>



PUBLIC MARKET OVERVIEW OF LEAF
--------------------------------------------------------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)


                      MARKET VALUATION AND CAPITALIZATION

Current Market Price 8/25/00                                      $10.75
52-Week High                                                       11.00
52-Week Low                                                         7.63
Diluted Shares Outstanding (TS Method) (a)                          11.9

Market Value                                                      $128.4
Plus:  Total Debt and Preferred (b)                                  0.0
Less:  Cash (b)                                                    (13.3)
                                                                  -------
Market Capitalization                                             $115.1


                           FORWARD TRADING MULTIPLES


<TABLE>
<CAPTION>
                        Market Capitalization as a Multiple of:              Stock Price as a         P/E to 5-Year
                     -------------------------------------------------
Year                    Sales             EBITDA            EBIT             Multiple of EPS          Growth Rate
------------------   ------------      -------------     -------------   ---------------------   ----------------------
<S>                     <C>                 <C>              <C>                 <C>                      <C>
LTM 6/30/00 (e)         0.36x               5.3x             5.9x                11.2x                    1.12x
2000E (f)               0.36x               5.2x             5.8x                10.5x                    1.05x
2001E (f)               0.33x               4.8x             5.4x                9.5x                     0.95x

<CAPTION>

                                   Estimated Financial Results                            5-Year EPS
                     ---------------------------------------------------------------
         Year           Sales             EBITDA         EBIT             EPS             Growth Rate
------------------   -------------    --------------  ------------  ---------------   -------------------
<S>                     <C>                <C>            <C>            <C>                <C>
LTM 6/30/00 (d)         $316               $22            $19            $0.96              10.0%(C)
2000E (c)                324                22            20             1.02
2001E (c)                350                24            21             1.13
</TABLE>



(A) BASED ON 11.9 MILLION SHARES OUTSTANDING AND 0.480 MILLION OPTIONS
    OUTSTANDING AT A WEIGHTED AVERAGE STRIKE PRICE OF
    $8.90.
(B) AS OF JUNE 30, 2000.
(C) LEAF MANAGEMENT ESTIMATES.
(D) BASED ON LEAF PUBLIC SEC FILINGS.
(E) CALCULATIONS BASED ON FINANCIAL RESULTS OBTAINED FROM LEAF PUBLIC SEC
    FILINGS.
(F) CALCULATIONS BASED ON FINANCIAL RESULTS PROVIDED BY LEAF MANAGEMENT.


[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                               7
<PAGE>



PUBLIC MARKET OVERVIEW OF LEAF
--------------------------------------------------------------------------------
ANNOTATED STOCK PRICE PERFORMANCE SINCE IPO






                                    [CHART]

Date            Close
26-Jun-97       19.875
27-Jun-97       21.25
30-Jun-97       20.75
1-Jul-97        20.75
2-Jul-97        20.75
3-Jul-97        21.75
7-Jul-97        22
8-Jul-97        20.875
9-Jul-97        20.25
10-Jul-97       20.5
11-Jul-97       20.75
14-Jul-97       20.75
15-Jul-97       20.6875
16-Jul-97       20.625
17-Jul-97       20.5
18-Jul-97       20.5
21-Jul-97       21.375
22-Jul-97       21.25
23-Jul-97       21.375
24-Jul-97       22.125
25-Jul-97       22.75
28-Jul-97       23.375
29-Jul-97       25.375
30-Jul-97       24.625
31-Jul-97       24.625
1-Aug-97        24
4-Aug-97        23
5-Aug-97        24.875
6-Aug-97        26.375
7-Aug-97        26.625
8-Aug-97        30.5
11-Aug-97       33.625
12-Aug-97       33.125
13-Aug-97       31.875
14-Aug-97       31.5
15-Aug-97       30.25
18-Aug-97       31.25
19-Aug-97       31.5
20-Aug-97       32.25
21-Aug-97       31.5
22-Aug-97       31.125
25-Aug-97       31.5
26-Aug-97       30.5
27-Aug-97       29.875
28-Aug-97       30.75
29-Aug-97       32
2-Sep-97        32.5
3-Sep-97        34
4-Sep-97        33.875
5-Sep-97        33.75
8-Sep-97        35.375
9-Sep-97        36
10-Sep-97       34.5
11-Sep-97       34.5625
12-Sep-97       34.5
15-Sep-97       35
16-Sep-97       35
17-Sep-97       34.25
18-Sep-97       34.625
19-Sep-97       35.75
22-Sep-97       35.75
23-Sep-97       35.75
24-Sep-97       35
25-Sep-97       34.5
26-Sep-97       35.5
29-Sep-97       35.5
30-Sep-97       35
1-Oct-97        35.875
2-Oct-97        37
3-Oct-97        38
6-Oct-97        38.1875
7-Oct-97        35.375
8-Oct-97        35.375
9-Oct-97        33.625
10-Oct-97       33.25
13-Oct-97       34
14-Oct-97       33
15-Oct-97       33.5
16-Oct-97       33
17-Oct-97       31.25
20-Oct-97       31.375
21-Oct-97       31.375
22-Oct-97       31
23-Oct-97       29.5
24-Oct-97       32
27-Oct-97       30.5
28-Oct-97       32
29-Oct-97       31.6875
30-Oct-97       31.6875
31-Oct-97       31.25
3-Nov-97        30.875
4-Nov-97        30.8125
5-Nov-97        29.875
6-Nov-97        30.625
7-Nov-97        30.125
10-Nov-97       30.25
11-Nov-97       30.25
12-Nov-97       28
13-Nov-97       27.5
14-Nov-97       26.625
17-Nov-97       26.875
18-Nov-97       27.25
19-Nov-97       27.25
20-Nov-97       27.25
21-Nov-97       29
24-Nov-97       26.875
25-Nov-97       27.125
26-Nov-97       27.5625
28-Nov-97       27.5
1-Dec-97        26.875
2-Dec-97        27
3-Dec-97        26.625
4-Dec-97        26.25
5-Dec-97        25
8-Dec-97        24.375
9-Dec-97        23.625
10-Dec-97       23.5
11-Dec-97       22
12-Dec-97       21.375
15-Dec-97       21.5
16-Dec-97       21.75
17-Dec-97       22
18-Dec-97       20.5
19-Dec-97       22.75
22-Dec-97       24.25
23-Dec-97       24.125
24-Dec-97       23.875
26-Dec-97       23.875
29-Dec-97       23.875
30-Dec-97       25
31-Dec-97       25
2-Jan-98        25.5
5-Jan-98        25.25
6-Jan-98        25
7-Jan-98        24.875
8-Jan-98        24
9-Jan-98        23.5
12-Jan-98       23.125
13-Jan-98       23
14-Jan-98       23.375
15-Jan-98       23.375
16-Jan-98       23.25
20-Jan-98       23.875
21-Jan-98       24.125
22-Jan-98       25.5
23-Jan-98       25.75
26-Jan-98       25.5
27-Jan-98       25.5
28-Jan-98       26.25
29-Jan-98       26.25
30-Jan-98       26
2-Feb-98        25.875
3-Feb-98        26
4-Feb-98        26.75
5-Feb-98        27
6-Feb-98        26.75
9-Feb-98        26
10-Feb-98       23.8125
11-Feb-98       24.5
12-Feb-98       24.375
13-Feb-98       25.25
17-Feb-98       25
18-Feb-98       24.25
19-Feb-98       24.625
20-Feb-98       24.25
23-Feb-98       24
24-Feb-98       23.75
25-Feb-98       22
26-Feb-98       22.75
27-Feb-98       22.75
2-Mar-98        24.25
3-Mar-98        24.25
4-Mar-98        24.875
5-Mar-98        24
6-Mar-98        24.3125
9-Mar-98        24.125
10-Mar-98       21.75
11-Mar-98       21.625
12-Mar-98       22
13-Mar-98       21.75
16-Mar-98       21.3125
17-Mar-98       21.6875
18-Mar-98       21
19-Mar-98       21
20-Mar-98       20.5625
23-Mar-98       20.1875
24-Mar-98       20.75
25-Mar-98       20.75
26-Mar-98       21.125
27-Mar-98       21
30-Mar-98       19.875
31-Mar-98       20
1-Apr-98        20
2-Apr-98        19.75
3-Apr-98        19.625
6-Apr-98        19.25
7-Apr-98        19.125
8-Apr-98        19.75
9-Apr-98        20.25
13-Apr-98       20.625
14-Apr-98       20.625
15-Apr-98       23
16-Apr-98       22.875
17-Apr-98       21.875
20-Apr-98       21.75
21-Apr-98       22
22-Apr-98       23
23-Apr-98       23.25
24-Apr-98       22.125
27-Apr-98       22.25
28-Apr-98       22.125
29-Apr-98       21.5
30-Apr-98       21.625
1-May-98        22.25
4-May-98        23
5-May-98        23.5
6-May-98        23.875
7-May-98        22.75
8-May-98        23.5
11-May-98       23.875
12-May-98       23.625
13-May-98       23.25
14-May-98       22.8125
15-May-98       22.125
18-May-98       21.75
19-May-98       20.9375
20-May-98       20.25
21-May-98       20
22-May-98       20.125
26-May-98       19.625
27-May-98       19
28-May-98       19.125
29-May-98       19.875
1-Jun-98        20
2-Jun-98        20.0625
3-Jun-98        20.125
4-Jun-98        20.125
5-Jun-98        20.125
8-Jun-98        21.125
9-Jun-98        20.5625
10-Jun-98       19.5
11-Jun-98       19
12-Jun-98       18.875
15-Jun-98       19.125
16-Jun-98       19
17-Jun-98       19.625
18-Jun-98       20.125
19-Jun-98       20
22-Jun-98       19.5
23-Jun-98       20.125
24-Jun-98       20.25
25-Jun-98       20.125
26-Jun-98       20.75
29-Jun-98       21.9375
30-Jun-98       19.75
1-Jul-98        21.4688
2-Jul-98        20.625
6-Jul-98        20.875
7-Jul-98        21.5
8-Jul-98        21.875
9-Jul-98        22.375
10-Jul-98       22.125
13-Jul-98       22.375
14-Jul-98       20.75
15-Jul-98       20.5
16-Jul-98       21
17-Jul-98       20.5
20-Jul-98       20.5
21-Jul-98       20.5
22-Jul-98       20.125
23-Jul-98       20.0625
24-Jul-98       19.5
27-Jul-98       19.125
28-Jul-98       18.875
29-Jul-98       19.125
30-Jul-98       19.25
31-Jul-98       19.5
3-Aug-98        18.75
4-Aug-98        19.25
5-Aug-98        18.5
6-Aug-98        14
7-Aug-98        13.875
10-Aug-98       13.75
11-Aug-98       12.875
12-Aug-98       13.625
13-Aug-98       13
14-Aug-98       13.125
17-Aug-98       12.75
18-Aug-98       12.9375
19-Aug-98       12.625
20-Aug-98       12.25
21-Aug-98       11.875
24-Aug-98       10.5
25-Aug-98       11.8125
26-Aug-98       11.375
27-Aug-98       11.125
28-Aug-98       11.0625
31-Aug-98       11
1-Sep-98        11.375
2-Sep-98        11
3-Sep-98        11
4-Sep-98        11
8-Sep-98        12.25
9-Sep-98        11.75
10-Sep-98       11.5
11-Sep-98       12
14-Sep-98       11.875
15-Sep-98       11.625
16-Sep-98       12
17-Sep-98       11.5
18-Sep-98       11.25
21-Sep-98       11.5625
22-Sep-98       11.75
23-Sep-98       12
24-Sep-98       11.625
25-Sep-98       12.0625
28-Sep-98       12
29-Sep-98       11.375
30-Sep-98       11.125
1-Oct-98        10.875
2-Oct-98        11.5
5-Oct-98        10.875
6-Oct-98        10.75
7-Oct-98        10.5
8-Oct-98        10.625
9-Oct-98        10.25
12-Oct-98       10.5
13-Oct-98       10.25
14-Oct-98       10.75
15-Oct-98       10.5
16-Oct-98       10.75
19-Oct-98       11.25
20-Oct-98       11.0625
21-Oct-98       12.125
22-Oct-98       12.0625
23-Oct-98       13
26-Oct-98       14.375
27-Oct-98       16.5
28-Oct-98       15.5
29-Oct-98       15
30-Oct-98       14.75
2-Nov-98        16.125
3-Nov-98        15.25
4-Nov-98        15.875
5-Nov-98        15.9375
6-Nov-98        16
9-Nov-98        15.125
10-Nov-98       14.5625
11-Nov-98       14.5
12-Nov-98       14.4375
13-Nov-98       13.25
16-Nov-98       13.25
17-Nov-98       13.25
18-Nov-98       12.75
19-Nov-98       12.75
20-Nov-98       13.0625
23-Nov-98       13.1875
24-Nov-98       13.25
25-Nov-98       13.4375
27-Nov-98       13.5
30-Nov-98       14.5
1-Dec-98        17.25
2-Dec-98        16.5
3-Dec-98        16.5
4-Dec-98        16.25
7-Dec-98        16.5
8-Dec-98        17.25
9-Dec-98        17.5
10-Dec-98       17
11-Dec-98       17
14-Dec-98       17.25
15-Dec-98       17
16-Dec-98       17.0625
17-Dec-98       17
18-Dec-98       17.875
21-Dec-98       17.875
22-Dec-98       18
23-Dec-98       17.625
24-Dec-98       17.25
28-Dec-98       17.875
29-Dec-98       19
30-Dec-98       22
31-Dec-98       23.25
4-Jan-99        21.0625
5-Jan-99        21
6-Jan-99        20.75
7-Jan-99        21.5
8-Jan-99        20.5
11-Jan-99       20
12-Jan-99       19.5625
13-Jan-99       18.5
14-Jan-99       18.5
15-Jan-99       18.3125
19-Jan-99       19.0625
20-Jan-99       19.5
21-Jan-99       19.375
22-Jan-99       19.5
25-Jan-99       20.25
26-Jan-99       19.625
27-Jan-99       19.375
28-Jan-99       19.25
29-Jan-99       19.625
1-Feb-99        21
2-Feb-99        20
3-Feb-99        20.75
4-Feb-99        18.9375
5-Feb-99        18.75
8-Feb-99        18.9375
9-Feb-99        18.9375
10-Feb-99       18.875
11-Feb-99       18.75
12-Feb-99       18.3125
16-Feb-99       18.1875
17-Feb-99       18.625
18-Feb-99       18.125
19-Feb-99       18.125
22-Feb-99       18.3125
23-Feb-99       18.125
24-Feb-99       18.4375
25-Feb-99       18.5
26-Feb-99       18.625
1-Mar-99        18.125
2-Mar-99        18.25
3-Mar-99        18.125
4-Mar-99        18
5-Mar-99        18
8-Mar-99        15.8125
9-Mar-99        15.625
10-Mar-99       15.25
11-Mar-99       8.3125
12-Mar-99       9.25
15-Mar-99       9.25
16-Mar-99       8.5625
17-Mar-99       8.75
18-Mar-99       8.75
19-Mar-99       8.875
22-Mar-99       8.75
23-Mar-99       8
24-Mar-99       7.5625
25-Mar-99       8.375
26-Mar-99       7.875
29-Mar-99       8
30-Mar-99       8.125
31-Mar-99       7.75
1-Apr-99        8
5-Apr-99        8
6-Apr-99        7.75
7-Apr-99        7.75
8-Apr-99        7.5625
9-Apr-99        7.875
12-Apr-99       7.625
13-Apr-99       8
14-Apr-99       8.375
15-Apr-99       8.3125
16-Apr-99       8.25
19-Apr-99       7.4375
20-Apr-99       7.9375
21-Apr-99       7.75
22-Apr-99       7.6875
23-Apr-99       7.75
26-Apr-99       9.125
27-Apr-99       9.0625
28-Apr-99       8.25
29-Apr-99       8.5
30-Apr-99       8.4375
3-May-99        8.875
4-May-99        8.5
5-May-99        8.8125
6-May-99        8.9375
7-May-99        8.6563
10-May-99       8.625
11-May-99       8.5625
12-May-99       8.5625
13-May-99       8.5625
14-May-99       8.5313
17-May-99       8.5
18-May-99       8.5
19-May-99       8.5625
20-May-99       8.75
21-May-99       8.875
24-May-99       9.375
25-May-99       9.25
26-May-99       9.125
27-May-99       9.125
28-May-99       9.125
1-Jun-99        9
2-Jun-99        8.9375
3-Jun-99        9.25
4-Jun-99        9
7-Jun-99        9.3125
8-Jun-99        9
9-Jun-99        9.125
10-Jun-99       9.0625
11-Jun-99       9.125
14-Jun-99       9.0938
15-Jun-99       9.125
16-Jun-99       9.0938
17-Jun-99       9.125
18-Jun-99       9.3125
21-Jun-99       9.8125
22-Jun-99       9.625
23-Jun-99       9.9375
24-Jun-99       9.8125
25-Jun-99       9.9375
28-Jun-99       9.875
29-Jun-99       11
30-Jun-99       12.375
1-Jul-99        12.75
2-Jul-99        12
6-Jul-99        12.375
7-Jul-99        12.125
8-Jul-99        12
9-Jul-99        11.0625
12-Jul-99       10.75
13-Jul-99       11.125
14-Jul-99       11.625
15-Jul-99       11.375
16-Jul-99       11.375
19-Jul-99       11.1875
20-Jul-99       11.125
21-Jul-99       11.4375
22-Jul-99       10.9375
23-Jul-99       10.75
26-Jul-99       10.75
27-Jul-99       10.75
28-Jul-99       10.75
29-Jul-99       10.75
30-Jul-99       10.625
2-Aug-99        10.75
3-Aug-99        10.75
4-Aug-99        10.5
5-Aug-99        9.875
6-Aug-99        9.5
9-Aug-99        9.625
10-Aug-99       10.0625
11-Aug-99       9.75
12-Aug-99       9.9375
13-Aug-99       9.9375
16-Aug-99       9.875
17-Aug-99       9.875
18-Aug-99       10.3125
19-Aug-99       10.25
20-Aug-99       10.25
23-Aug-99       10.5
24-Aug-99       11.25
25-Aug-99       10.875
26-Aug-99       10.75
27-Aug-99       10.5625
30-Aug-99       10.625
31-Aug-99       10.5
1-Sep-99        10.5
2-Sep-99        10.875
3-Sep-99        10.875
7-Sep-99        11
8-Sep-99        10.75
9-Sep-99        10.5
10-Sep-99       10.5625
13-Sep-99       10.5
14-Sep-99       10.5
15-Sep-99       10.75
16-Sep-99       10.5
17-Sep-99       10.5
20-Sep-99       10.5
21-Sep-99       10.375
22-Sep-99       10.5
23-Sep-99       10.375
24-Sep-99       10.375
27-Sep-99       10.375
28-Sep-99       10.375
29-Sep-99       10.5
30-Sep-99       10.625
1-Oct-99        10.3125
4-Oct-99        9.75
5-Oct-99        9.875
6-Oct-99        9.875
7-Oct-99        10
8-Oct-99        9.8438
11-Oct-99       9.875
12-Oct-99       9.625
13-Oct-99       9.9375
14-Oct-99       9.4375
15-Oct-99       9.125
18-Oct-99       9.0625
19-Oct-99       9.875
20-Oct-99       9.0625
21-Oct-99       9.125
22-Oct-99       9.125
25-Oct-99       9.0313
26-Oct-99       9
27-Oct-99       7.625
28-Oct-99       8.375
29-Oct-99       8.125
1-Nov-99        7.875
2-Nov-99        8
3-Nov-99        8.25
4-Nov-99        8.25
5-Nov-99        8.25
8-Nov-99        8.0625
9-Nov-99        8.5
10-Nov-99       8.5625
11-Nov-99       9
12-Nov-99       8.75
15-Nov-99       8.25
16-Nov-99       8.3125
17-Nov-99       8.5938
18-Nov-99       8.3125
19-Nov-99       8.3125
22-Nov-99       7.75
23-Nov-99       8.1875
24-Nov-99       8
26-Nov-99       8
29-Nov-99       8
30-Nov-99       8.3125
1-Dec-99        8.5
2-Dec-99        8.5625
3-Dec-99        8.625
6-Dec-99        8.25
7-Dec-99        8.5
8-Dec-99        8.875
9-Dec-99        8.875
10-Dec-99       8.625
13-Dec-99       8.625
14-Dec-99       8.5
15-Dec-99       8.625
16-Dec-99       8.9688
17-Dec-99       8.9375
20-Dec-99       8.5
21-Dec-99       8.625
22-Dec-99       8.6563
23-Dec-99       8.75
27-Dec-99       8.625
28-Dec-99       8.625
29-Dec-99       8.75
30-Dec-99       8.75
31-Dec-99       8.6875
3-Jan-00        9.125
4-Jan-00        8.75
5-Jan-00        8.75
6-Jan-00        8.6875
7-Jan-00        8.6875
10-Jan-00       8.875
11-Jan-00       8.9375
12-Jan-00       9
13-Jan-00       9.125
14-Jan-00       9
18-Jan-00       9.25
19-Jan-00       9.0625
20-Jan-00       9.5
21-Jan-00       9.3125
24-Jan-00       9.375
25-Jan-00       9.3125
26-Jan-00       9.875
27-Jan-00       10
28-Jan-00       9.625
31-Jan-00       8.6875
1-Feb-00        9.625
2-Feb-00        9.125
3-Feb-00        9.75
4-Feb-00        9.5625
7-Feb-00        9.25
8-Feb-00        9.625
9-Feb-00        9.375
10-Feb-00       9.75
11-Feb-00       9.5625
14-Feb-00       9.5
15-Feb-00       9.6875
16-Feb-00       9.5
17-Feb-00       9.5
18-Feb-00       9.125
22-Feb-00       9.0625
23-Feb-00       9.3438
24-Feb-00       9.5
25-Feb-00       9.1875
28-Feb-00       9.2813
29-Feb-00       9.375
1-Mar-00        9.25
2-Mar-00        8.5
3-Mar-00        9
6-Mar-00        8.75
7-Mar-00        9
8-Mar-00        9
9-Mar-00        8.75
10-Mar-00       8.75
13-Mar-00       8.6875
14-Mar-00       8.625
15-Mar-00       8.875
16-Mar-00       9.3125
17-Mar-00       9.0625
20-Mar-00       9.25
21-Mar-00       9
22-Mar-00       9.0625
23-Mar-00       9.125
24-Mar-00       9.375
27-Mar-00       9.4688
28-Mar-00       9.4375
29-Mar-00       9.125
30-Mar-00       9.7188
31-Mar-00       9.75
3-Apr-00        9.25
4-Apr-00        9.5
5-Apr-00        9.5
6-Apr-00        9.375
7-Apr-00        9.5
10-Apr-00       9.75
11-Apr-00       9.6875
12-Apr-00       9.8125
13-Apr-00       9.75
14-Apr-00       9.75
17-Apr-00       9.75
18-Apr-00       10.6875
19-Apr-00       10
20-Apr-00       10
24-Apr-00       10
25-Apr-00       10
26-Apr-00       10
27-Apr-00       10
28-Apr-00       10
1-May-00        10.0313
2-May-00        9.75
3-May-00        9.875
4-May-00        10.25
5-May-00        10.3125
8-May-00        10.0938
9-May-00        10.3125
10-May-00       9.75
11-May-00       10.25
12-May-00       10.0625
15-May-00       9.875
16-May-00       10
17-May-00       9.9375
18-May-00       10
19-May-00       10.125
22-May-00       10.125
23-May-00       10.125
24-May-00       9.875
25-May-00       9.9375
26-May-00       9.8125
30-May-00       9.8125
31-May-00       10.1875
1-Jun-00        10.25
2-Jun-00        10.25
5-Jun-00        10.25
6-Jun-00        10.25
7-Jun-00        10.25
8-Jun-00        9.875
9-Jun-00        9.875
12-Jun-00       9.8125
13-Jun-00       9.8438
14-Jun-00       9.8125
15-Jun-00       9.625
16-Jun-00       9.625
19-Jun-00       9.75
20-Jun-00       9.8125
21-Jun-00       9.625
22-Jun-00       9.625
23-Jun-00       9.625
26-Jun-00       9.5625
27-Jun-00       9.125
28-Jun-00       9.625
29-Jun-00       9.25
30-Jun-00       9.875
3-Jul-00        10
5-Jul-00        9.8125
6-Jul-00        10.0625
7-Jul-00        10
10-Jul-00       10.1875
11-Jul-00       10
12-Jul-00       10
13-Jul-00       9.875
14-Jul-00       9.875
17-Jul-00       10.25
18-Jul-00       10.0625
19-Jul-00       9.875
20-Jul-00       10.0938
21-Jul-00       10
24-Jul-00       10
25-Jul-00       10
26-Jul-00       10
27-Jul-00       10
28-Jul-00       10
31-Jul-00       11
1-Aug-00        10.5
2-Aug-00        10.125
3-Aug-00        10
4-Aug-00        10
7-Aug-00        10.25
8-Aug-00        10.4375
9-Aug-00        10.2813
10-Aug-00       10.2813
11-Aug-00       10.125
14-Aug-00       10.125
15-Aug-00       10.125
16-Aug-00       10.3125
17-Aug-00       10.25
18-Aug-00       10.625
21-Aug-00       10.9375
22-Aug-00       10.7188
23-Aug-00       10.625
8/24/2000       10.5
8/25/2000       10.75

AUGUSUT 7, 1997:
In its first report to stockholders as a public company, Leaf announces record
sales and earnings for the quarter ended 6/30/97.

MARCH 4, 1998:
Leaf reports record year-end results, including a 25% increase in sales and 44%
increase in gross profit.

AUGUST 7, 1998:
Leaf's stock falls 24% after the Company reports lower than expected second
quarter earnings.

AUGUST 25, 1998:
Leaf announces that its Board has authorized a stock repurchase of up to $10
million.

MARCH 10, 1999:
Leaf reports record quarterly sales, but declining year end results for gross
profit, operating income and EPS.

MARCH 17, 1999:
Leaf announces it has resumed its $10 million share repurchase program.

APRIL 26, 1999:
Leaf announces the launch of sales on its website, www.jrcigars.com

MARCH 8, 2000:
Leaf announces FYE 1999 earnings of $0.96 per share, down 11% from the prior
year's EPS of $1.08.

MAY 8, 2000:
Leaf announces Q1 2000 revenue of $70.4 million, down 3.3% from Q1 1999 and EPS
of $0.19 unchanged from Q1 1999

AUGUST 2, 2000:
Leaf reports Q2 2000 revenue of $80.2 million, up 1.8% from Q2 1999, and EPS
of $0.25 per share


Current: $10.75



---------------------------------------
Source:  Factset and Bloomberg.


[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                               8
<PAGE>



PUBLIC MARKET OVERVIEW OF LEAF
--------------------------------------------------------------------------------
FORWARD P/E SINCE IPO



                                    [CHART]

               Summary Statistics

Time Period     Average         High    Low
-----------     -------         ----    ---
1-Year            8.7x         10.5x   7.3x
2-Year            8.7          13.8    6.0

Since IPO        10.7          24.6    6.0


Date
26-Jun-97       15.77380952
27-Jun-97       16.86507937
30-Jun-97       16.46825397
1-Jul-97        16.46825397
2-Jul-97        16.46825397
3-Jul-97        17.26190476
7-Jul-97        17.46031746
8-Jul-97        16.56746032
9-Jul-97        16.07142857
10-Jul-97       16.26984127
11-Jul-97       16.46825397
14-Jul-97       16.46825397
15-Jul-97       16.41865079
16-Jul-97       16.36904762
17-Jul-97       16.26984127
18-Jul-97       16.26984127
21-Jul-97       16.96428571
22-Jul-97       16.86507937
23-Jul-97       16.96428571
24-Jul-97       17.55952381
25-Jul-97       18.05555556
28-Jul-97       18.5515873
29-Jul-97       20.13888889
30-Jul-97       19.54365079
31-Jul-97       19.54365079
1-Aug-97        19.04761905
4-Aug-97        18.25396825
5-Aug-97        19.74206349
6-Aug-97        20.93253968
7-Aug-97        21.13095238
8-Aug-97        19.67742
11-Aug-97       21.69355
12-Aug-97       21.37097
13-Aug-97       20.56452
8/14/1997       20.32258065
8/15/1997       19.51612903
8/18/1997       20.16129032
8/19/1997       20.32258065
8/20/1997       20.80645161
8/21/1997       20.32258065
8/22/1997       20.08064516
8/25/1997       20.32258065
8/26/1997       19.67741935
8/27/1997       19.27419355
8/28/1997       19.83870968
8/29/1997       20.64516129
9/2/1997        20.96774194
9/3/1997        21.93548387
9/4/1997        21.85483871
9/5/1997        21.77419355
9/8/1997        22.82258065
9/9/1997        23.22580645
9/10/1997       22.25806452
9/11/1997       22.2983871
9/12/1997       22.25806452
9/15/1997       22.58064516
9/16/1997       22.58064516
9/17/1997       22.09677419
9/18/1997       22.33870968
9/19/1997       23.06451613
9/22/1997       23.06451613
9/23/1997       23.06451613
9/24/1997       22.58064516
9/25/1997       22.25806452
9/26/1997       22.90322581
9/29/1997       22.90322581
9/30/1997       22.58064516
10/1/1997       23.14516129
10/2/1997       23.87096774
10/3/1997       24.51612903
10/6/1997       24.63709677
10/7/1997       22.82258065
10/8/1997       22.82258065
10/9/1997       21.69354839
10/10/1997      21.4516129
10/13/1997      21.93548387
10/14/1997      21.29032258
10/15/1997      21.61290323
10/16/1997      21.29032258
10/17/1997      20.16129032
10/20/1997      20.24193548
10/21/1997      20.24193548
10/22/1997      20
10/23/1997      19.03225806
10/24/1997      19.69230769
10/27/1997      18.76923077
10/28/1997      19.69230769
10/29/1997      19.5
10/30/1997      19.5
10/31/1997      19.23076923
11/3/1997       19
11/4/1997       18.96153846
11/5/1997       18.38461538
11/6/1997       18.56060606
11/7/1997       18.25757576
11/10/1997      18.33333333
11/11/1997      18.33333333
11/12/1997      16.96969697
11/13/1997      16.66666667
11/14/1997      16.13636364
11/17/1997      16.28787879
11/18/1997      16.51515152
11/19/1997      16.51515152
11/20/1997      16.51515152
11/21/1997      17.57575758
11/24/1997      16.28787879
11/25/1997      16.43939394
11/26/1997      16.70454545
11/28/1997      16.66666667
12/1/1997       16.28787879
12/2/1997       16.36363636
12/3/1997       16.13636364
12/4/1997       15.90909091
12/5/1997       15.15151515
12/8/1997       14.77272727
12/9/1997       14.31818182
12/10/1997      14.24242424
12/11/1997      13.33333333
12/12/1997      12.95454545
12/15/1997      13.03030303
12/16/1997      13.18181818
12/17/1997      13.33333333
12/18/1997      12.42424242
12/19/1997      13.78787879
12/22/1997      14.6969697
12/23/1997      14.62121212
12/24/1997      14.46969697
12/26/1997      14.46969697
12/29/1997      14.46969697
12/30/1997      15.15151515
12/31/1997      15.15151515
1/2/1998        15.45454545
1/5/1998        15.3030303
1/6/1998        15.15151515
1/7/1998        15.07575758
1/8/1998        14.54545455
1/9/1998        14.24242424
1/12/1998       14.01515152
1/13/1998       13.93939394
1/14/1998       14.16666667
1/15/1998       14.16666667
1/16/1998       14.09090909
1/20/1998       14.46969697
1/21/1998       14.62121212
1/22/1998       15.45454545
1/23/1998       15.60606061
1/26/1998       15.45454545
1/27/1998       15.45454545
1/28/1998       15.90909091
1/29/1998       15.90909091
1/30/1998       15.75757576
2/2/1998        15.68181818
2/3/1998        15.75757576
2/4/1998        16.21212121
2/5/1998        16.36363636
2/6/1998        16.21212121
2/9/1998        15.75757576
2/10/1998       14.43181818
2/11/1998       14.84848485
2/12/1998       14.77272727
2/13/1998       15.3030303
2/17/1998       15.15151515
2/18/1998       14.6969697
2/19/1998       14.92424242
2/20/1998       14.6969697
2/23/1998       14.54545455
2/24/1998       14.39393939
2/25/1998       13.33333333
2/26/1998       13.78787879
2/27/1998       13.78787879
3/2/1998        14.6969697
3/3/1998        14.6969697
3/4/1998        15.07575758
3/5/1998        11.67883212
3/6/1998        11.83090024
3/9/1998        11.73965937
3/10/1998       10.58394161
3/11/1998       10.52311436
3/12/1998       10.70559611
3/13/1998       10.58394161
3/16/1998       10.37104623
3/17/1998       10.55352798
3/18/1998       10.2189781
3/19/1998       10.2189781
3/20/1998       10.00608273
3/23/1998       9.823600973
3/24/1998       10.0973236
3/25/1998       10.0973236
3/26/1998       10.27980535
3/27/1998       10.2189781
3/30/1998       9.671532847
3/31/1998       9.732360097
4/1/1998        9.732360097
4/2/1998        9.610705596
4/3/1998        9.549878345
4/6/1998        9.367396594
4/7/1998        9.306569343
4/8/1998        9.610705596
4/9/1998        9.854014599
4/13/1998       10.03649635
4/14/1998       10.03649635
4/15/1998       11.19221411
4/16/1998       11.13138686
4/17/1998       10.64476886
4/20/1998       10.58394161
4/21/1998       10.70559611
4/22/1998       11.19221411
4/23/1998       11.31386861
4/24/1998       10.76642336
4/27/1998       10.82725061
4/28/1998       10.76642336
4/29/1998       10.4622871
4/30/1998       10.52311436
5/1/1998        10.82725061
5/4/1998        11.19221411
5/5/1998        11.43552311
5/6/1998        11.61800487
5/7/1998        11.07055961
5/8/1998        11.43552311
5/11/1998       11.61800487
5/12/1998       11.49635036
5/13/1998       11.31386861
5/14/1998       11.10097324
5/15/1998       10.76642336
5/18/1998       10.58394161
5/19/1998       10.18856448
5/20/1998       9.854014599
5/21/1998       9.732360097
5/22/1998       9.793187348
5/26/1998       9.549878345
5/27/1998       9.245742092
5/28/1998       9.306569343
5/29/1998       9.671532847
6/1/1998        9.732360097
6/2/1998        9.762773723
6/3/1998        9.793187348
6/4/1998        9.793187348
6/5/1998        9.793187348
6/8/1998        10.27980535
6/9/1998        10.00608273
6/10/1998       9.489051095
6/11/1998       9.245742092
6/12/1998       9.184914842
6/15/1998       9.306569343
6/16/1998       9.245742092
6/17/1998       9.549878345
6/18/1998       9.793187348
6/19/1998       9.732360097
6/22/1998       9.489051095
6/23/1998       9.793187348
6/24/1998       9.854014599
6/25/1998       9.793187348
6/26/1998       10.0973236
6/29/1998       10.67518248
6/30/1998       9.610705596
7/1/1998        10.44708029
7/2/1998        10.03649635
7/6/1998        10.15815085
7/7/1998        10.4622871
7/8/1998        10.64476886
7/9/1998        10.88807786
7/10/1998       10.76642336
7/13/1998       10.88807786
7/14/1998       10.0973236
7/15/1998       9.9756691
7/16/1998       10.2189781
7/17/1998       9.9756691
7/20/1998       9.9756691
7/21/1998       9.9756691
7/22/1998       9.793187348
7/23/1998       9.762773723
7/24/1998       9.489051095
7/27/1998       9.306569343
7/28/1998       9.184914842
7/29/1998       9.306569343
7/30/1998       9.367396594
7/31/1998       9.489051095
8/3/1998        9.124087591
8/4/1998        9.367396594
8/5/1998        9.00243309
8/6/1998        8.235294118
8/7/1998        8.161764706
8/10/1998       8.088235294
8/11/1998       7.573529412
8/12/1998       8.014705882
8/13/1998       7.647058824
8/14/1998       7.720588235
8/17/1998       7.5
8/18/1998       7.610294118
8/19/1998       7.426470588
8/20/1998       7.205882353
8/21/1998       6.985294118
8/24/1998       6.176470588
8/25/1998       6.948529412
8/26/1998       6.691176471
8/27/1998       6.544117647
8/28/1998       6.507352941
8/31/1998       6.470588235
9/1/1998        6.691176471
9/2/1998        6.470588235
9/3/1998        6.470588235
9/4/1998        6.470588235
9/8/1998        7.205882353
9/9/1998        6.911764706
9/10/1998       6.764705882
9/11/1998       7.058823529
9/14/1998       6.985294118
9/15/1998       6.838235294
9/16/1998       7.058823529
9/17/1998       6.764705882
9/18/1998       6.617647059
9/21/1998       6.801470588
9/22/1998       6.911764706
9/23/1998       7.058823529
9/24/1998       6.838235294
9/25/1998       7.095588235
9/28/1998       7.058823529
9/29/1998       6.691176471
9/30/1998       6.544117647
10/1/1998       6.397058824
10/2/1998       6.764705882
10/5/1998       6.397058824
10/6/1998       6.323529412
10/7/1998       6.176470588
10/8/1998       6.25
10/9/1998       6.029411765
10/12/1998      6.176470588
10/13/1998      6.029411765
10/14/1998      6.323529412
10/15/1998      6.176470588
10/16/1998      6.323529412
10/19/1998      6.617647059
10/20/1998      6.507352941
10/21/1998      7.132352941
10/22/1998      7.095588235
10/23/1998      7.647058824
10/26/1998      8.455882353
10/27/1998      9.705882353
10/28/1998      9.117647059
10/29/1998      8.823529412
10/30/1998      8.676470588
11/2/1998       9.485294118
11/3/1998       8.970588235
11/4/1998       9.338235294
11/5/1998       9.430473373
11/6/1998       9.467455621
11/9/1998       8.949704142
11/10/1998      8.616863905
11/11/1998      8.579881657
11/12/1998      8.542899408
11/13/1998      7.840236686
11/16/1998      7.840236686
11/17/1998      7.840236686
11/18/1998      7.544378698
11/19/1998      7.544378698
11/20/1998      7.729289941
11/23/1998      7.803254438
11/24/1998      7.840236686
11/25/1998      7.951183432
11/27/1998      7.98816568
11/30/1998      8.579881657
12/1/1998       10.20710059
12/2/1998       9.763313609
12/3/1998       9.763313609
12/4/1998       9.615384615
12/7/1998       9.763313609
12/8/1998       10.20710059
12/9/1998       10.35502959
12/10/1998      10.0591716
12/11/1998      10.0591716
12/14/1998      10.20710059
12/15/1998      10.0591716
12/16/1998      10.09615385
12/17/1998      10.0591716
12/18/1998      10.57692308
12/21/1998      10.57692308
12/22/1998      10.65088757
12/23/1998      10.42899408
12/24/1998      10.20710059
12/28/1998      10.57692308
12/29/1998      11.24260355
12/30/1998      13.01775148
12/31/1998      13.75739645
1/4/1999        12.46301775
1/5/1999        12.4260355
1/6/1999        12.27810651
1/7/1999        12.72189349
1/8/1999        12.13017751
1/11/1999       11.83431953
1/12/1999       11.57544379
1/13/1999       10.94674556
1/14/1999       10.94674556
1/15/1999       10.83579882
1/19/1999       11.2795858
1/20/1999       11.53846154
1/21/1999       11.46449704
1/22/1999       11.53846154
1/25/1999       11.98224852
1/26/1999       11.61242604
1/27/1999       11.46449704
1/28/1999       11.39053254
1/29/1999       11.61242604
2/1/1999        12.4260355
2/2/1999        11.83431953
2/3/1999        12.27810651
2/4/1999        11.2056213
2/5/1999        11.09467456
2/8/1999        11.2056213
2/9/1999        11.2056213
2/10/1999       11.16863905
2/11/1999       11.09467456
2/12/1999       10.83579882
2/16/1999       10.69852941
2/17/1999       10.95588235
2/18/1999       10.66176471
2/19/1999       10.66176471
2/22/1999       10.77205882
2/23/1999       10.66176471
2/24/1999       10.84558824
2/25/1999       10.88235294
2/26/1999       10.95588235
3/1/1999        10.66176471
3/2/1999        10.73529412
3/3/1999        10.66176471
3/4/1999        10.58823529
3/5/1999        10.58823529
3/8/1999        9.301470588
3/9/1999        9.191176471
3/10/1999       8.970588235
3/11/1999       7.556818182
3/12/1999       8.409090909
3/15/1999       8.409090909
3/16/1999       7.784090909
3/17/1999       7.954545455
3/18/1999       7.954545455
3/19/1999       8.068181818
3/22/1999       7.954545455
3/23/1999       7.272727273
3/24/1999       6.875
3/25/1999       7.613636364
3/26/1999       7.159090909
3/29/1999       7.272727273
3/30/1999       7.386363636
3/31/1999       7.045454545
4/1/1999        7.272727273
4/5/1999        7.272727273
4/6/1999        7.045454545
4/7/1999        7.045454545
4/8/1999        6.875
4/9/1999        7.159090909
4/12/1999       6.931818182
4/13/1999       7.272727273
4/14/1999       7.613636364
4/15/1999       7.556818182
4/16/1999       7.5
4/19/1999       6.761363636
4/20/1999       7.215909091
4/21/1999       7.045454545
4/22/1999       6.988636364
4/23/1999       7.045454545
4/26/1999       8.295454545
4/27/1999       8.238636364
4/28/1999       7.5
4/29/1999       7.727272727
4/30/1999       7.670454545
5/3/1999        8.068181818
5/4/1999        7.727272727
5/5/1999        8.011363636
5/6/1999        8.125
5/7/1999        7.213541667
5/10/1999       7.1875
5/11/1999       7.135416667
5/12/1999       7.135416667
5/13/1999       7.135416667
5/14/1999       7.109375
5/17/1999       7.083333333
5/18/1999       7.083333333
5/19/1999       7.135416667
5/20/1999       7.291666667
5/21/1999       7.395833333
5/24/1999       7.8125
5/25/1999       7.708333333
5/26/1999       7.604166667
5/27/1999       7.604166667
5/28/1999       7.604166667
6/1/1999        7.5
6/2/1999        7.447916667
6/3/1999        7.708333333
6/4/1999        7.5
6/7/1999        7.760416667
6/8/1999        7.5
6/9/1999        7.604166667
6/10/1999       7.552083333
6/11/1999       7.604166667
6/14/1999       7.578125
6/15/1999       7.604166667
6/16/1999       7.578125
6/17/1999       7.604166667
6/18/1999       7.760416667
6/21/1999       8.177083333
6/22/1999       8.020833333
6/23/1999       8.28125
6/24/1999       8.177083333
6/25/1999       8.28125
6/28/1999       8.229166667
6/29/1999       9.166666667
6/30/1999       10.3125
7/1/1999        10.625
7/2/1999        10
7/6/1999        10.3125
7/7/1999        10.10416667
7/8/1999        10
7/9/1999        9.21875
7/12/1999       8.958333333
7/13/1999       9.270833333
7/14/1999       9.6875
7/15/1999       9.479166667
7/16/1999       9.479166667
7/19/1999       9.322916667
7/20/1999       9.270833333
7/21/1999       9.53125
7/22/1999       9.114583333
7/23/1999       8.958333333
7/26/1999       8.958333333
7/27/1999       8.958333333
7/28/1999       8.958333333
7/29/1999       8.958333333
7/30/1999       8.854166667
8/2/1999        8.958333333
8/3/1999        8.958333333
8/4/1999        8.75
8/5/1999        9.404761905
8/6/1999        9.047619048
8/9/1999        9.166666667
8/10/1999       9.583333333
8/11/1999       9.285714286
8/12/1999       9.464285714
8/13/1999       9.464285714
8/16/1999       9.404761905
8/17/1999       9.404761905
8/18/1999       9.821428571
8/19/1999       9.761904762
8/20/1999       9.761904762
8/23/1999       10
8/24/1999       10.71428571
8/25/1999       10.35714286
8/26/1999       10.23809524
8/27/1999       10.05952381
8/30/1999       10.11904762
8/31/1999       10
9/1/1999        10
9/2/1999        10.35714286
9/3/1999        10.35714286
9/7/1999        10.47619048
9/8/1999        10.23809524
9/9/1999        10
9/10/1999       10.05952381
9/13/1999       10
9/14/1999       10                       9.625
9/15/1999       10.23809524              9.875
9/16/1999       10                      11.125
9/17/1999       10
9/20/1999       10
9/21/1999       9.880952381
9/22/1999       10
9/23/1999       9.880952381
9/24/1999       9.880952381
9/27/1999       9.880952381
9/28/1999       9.880952381
9/29/1999       10
9/30/1999       10.11904762
10/1/1999       9.821428571
10/4/1999       9.285714286
10/5/1999       9.404761905
10/6/1999       9.404761905             10.75
10/7/1999       9.523809524              9.3125
10/8/1999       9.375                   11.4375
10/11/1999      9.404761905             28.25
10/12/1999      9.166666667
10/13/1999      9.464285714
10/14/1999      8.988095238
10/15/1999      8.69047619
10/18/1999      8.630952381
10/19/1999      9.404761905
10/20/1999      8.630952381
10/21/1999      8.69047619
10/22/1999      8.69047619
10/25/1999      8.601190476
10/26/1999      8.571428571
10/27/1999      7.261904762
10/28/1999      7.976190476
10/29/1999      7.738095238
11/1/1999       7.5
11/2/1999       7.619047619
11/3/1999       7.857142857             28
11/4/1999       7.857142857
11/5/1999       7.857142857
11/8/1999       7.678571429
11/9/1999       8.095238095
11/10/1999      8.154761905
11/11/1999      8.571428571
11/12/1999      8.333333333
11/15/1999      7.857142857
11/16/1999      7.916666667
11/17/1999      8.18452381
11/18/1999      7.916666667
11/19/1999      7.916666667
11/22/1999      7.380952381
11/23/1999      7.797619048
11/24/1999      7.619047619
11/26/1999      7.619047619
11/29/1999      7.619047619
11/30/1999      7.916666667
12/1/1999       8.095238095
12/2/1999       8.154761905
12/3/1999       8.214285714
12/6/1999       7.857142857
12/7/1999       8.095238095             42.5625
12/8/1999       8.452380952
12/9/1999       8.452380952
12/10/1999      8.214285714
12/13/1999      8.214285714
12/14/1999      8.095238095
12/15/1999      8.214285714             31.25
12/16/1999      8.541666667
12/17/1999      8.511904762
12/20/1999      8.095238095
12/21/1999      8.214285714
12/22/1999      8.244047619
12/23/1999      8.333333333             32
12/27/1999      8.214285714             29.625
12/28/1999      8.214285714
12/29/1999      8.333333333
12/30/1999      8.333333333
12/31/1999      8.273809524
1/3/2000        8.69047619
1/4/2000        8.333333333
1/5/2000        8.333333333
1/6/2000        8.273809524
1/7/2000        8.273809524
1/10/2000       8.452380952
1/11/2000       8.511904762
1/12/2000       8.571428571
1/13/2000       8.69047619
1/14/2000       8.571428571
1/18/2000       8.80952381
1/19/2000       8.630952381
1/20/2000       9.047619048
1/21/2000       8.869047619
1/24/2000       8.928571429
1/25/2000       8.869047619
1/26/2000       9.404761905
1/27/2000       9.523809524             20.375
1/28/2000       9.166666667
1/31/2000       8.273809524
2/1/2000        9.166666667
2/2/2000        8.69047619
2/3/2000        9.285714286
2/4/2000        9.107142857
2/7/2000        8.80952381
2/8/2000        9.166666667
2/9/2000        8.928571429
2/10/2000       9.285714286
2/11/2000       9.107142857
2/14/2000       9.047619048
2/15/2000       9.226190476
2/16/2000       9.047619048
2/17/2000       9.047619048
2/18/2000       8.69047619
2/22/2000       8.630952381
2/23/2000       8.898809524
2/24/2000       9.047619048
2/25/2000       8.75
2/28/2000       8.839285714
2/29/2000       8.928571429
3/1/2000        8.80952381
3/2/2000        8.095238095
3/3/2000        8.571428571
3/6/2000        8.333333333
3/7/2000        8.571428571
3/8/2000        8.571428571
3/9/2000        8.333333333
3/10/2000       8.333333333
3/13/2000       7.554347826
3/14/2000       7.5
3/15/2000       7.717391304
3/16/2000       8.097826087
3/17/2000       7.880434783             18.75
3/20/2000       8.043478261
3/21/2000       7.826086957
3/22/2000       7.880434783
3/23/2000       7.934782609
3/24/2000       8.152173913
3/27/2000       8.233695652
3/28/2000       8.206521739
3/29/2000       7.934782609
3/30/2000       8.451086957
3/31/2000       8.47826087
4/3/2000        8.043478261
4/4/2000        8.260869565
4/5/2000        8.260869565
4/6/2000        8.152173913
4/7/2000        8.260869565
4/10/2000       8.47826087
4/11/2000       8.423913043
4/12/2000       8.532608696
4/13/2000       8.47826087
4/14/2000       8.47826087
4/17/2000       8.47826087
4/18/2000       9.293478261
4/19/2000       8.695652174
4/20/2000       8.695652174
4/24/2000       8.695652174
4/25/2000       8.695652174
4/26/2000       8.695652174
4/27/2000       8.695652174
4/28/2000       8.695652174             20.875
5/1/2000        8.722826087
5/2/2000        8.47826087              21.375
5/3/2000        8.586956522
5/4/2000        8.913043478
5/5/2000        8.967391304             18.25
5/8/2000        8.777173913
5/9/2000        8.967391304
5/10/2000       8.47826087
5/11/2000       8.913043478
5/12/2000       8.75
5/15/2000       8.586956522
5/16/2000       8.695652174
5/17/2000       8.641304348
5/18/2000       8.695652174
5/19/2000       8.804347826
5/22/2000       8.804347826
5/23/2000       8.804347826
5/24/2000       8.586956522
5/25/2000       8.641304348
5/26/2000       8.532608696
5/30/2000       8.532608696
5/31/2000       8.858695652
6/1/2000        8.913043478
6/2/2000        8.913043478
6/5/2000        8.913043478
6/6/2000        8.913043478
6/7/2000        8.913043478
6/8/2000        8.586956522
6/9/2000        8.586956522
6/12/2000       8.532608696
6/13/2000       8.559782609
6/14/2000       8.532608696
6/15/2000       8.369565217
6/16/2000       8.369565217
6/19/2000       8.47826087
6/20/2000       8.532608696
6/21/2000       8.369565217
6/22/2000       8.369565217
6/23/2000       8.369565217
6/26/2000       8.315217391
6/27/2000       7.934782609
6/28/2000       8.369565217
6/29/2000       8.043478261             21.5417
6/30/2000       8.586956522
7/3/2000        8.695652174
7/5/2000        8.532608696
7/6/2000        8.75
7/7/2000        8.695652174
7/10/2000       8.858695652
7/11/2000       8.695652174
7/12/2000       8.695652174
7/13/2000       8.586956522
7/14/2000       8.586956522
7/17/2000       8.913043478
7/18/2000       8.75
7/19/2000       8.586956522
7/20/2000       8.777173913
7/21/2000       8.695652174
7/24/2000       8.695652174
7/25/2000       8.695652174
7/26/2000       8.695652174
7/27/2000       8.695652174
7/28/2000       8.695652174
7/31/2000       9.565217391
8/1/2000        9.130434783
8/2/2000        8.804347826
8/3/2000        8.695652174
8/4/2000        8.7
8/7/2000        8.91                    12.5833
8/8/2000        9.08
8/9/2000        8.94
8/10/2000       8.94
8/11/2000       8.8
8/14/2000       8.8                      8.9
8/15/2000       8.8
8/16/2000       8.97
8/17/2000       8.91
8/18/2000       9.24
8/21/2000       9.51
22-Aug-00       9.320652174
23-Aug-00       9.239130435            141.75
24-Aug-00       9.130434783            35607
25-Aug-00       9.347826087            36741
1 Year Average  8.7x

---------------------------------------
SOURCE: FACTSET CLOSING PRICES AND FIRST CALL MEAN 2-YEAR FORWARD EPS. WHERE
FIRST CALL MEAN 2-YEAR FORWARD EPS ESTIMATE WAS NOT AVAILABLE, THE PREVIOUS
ESTIMATE WAS USED UNTIL A NEW ESTIMATE BECAME AVAILABLE.



[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                               9
<PAGE>



PUBLIC MARKET OVERVIEW OF LEAF
--------------------------------------------------------------------------------
INDEXED STOCK PRICE PERFORMANCE SINCE IPO



                                    [CHART]

Date             Leaf    S&P Small Cap 600       S&P 500   Holt's Cigar Holdings
26-Jun-97       100.00%       100.00%            100.00%
27-Jun-97       106.92%       100.51%            100.41%         35636
30-Jun-97       104.40%       101.92%            100.17%         36741
1-Jul-97        104.40%       101.60%            100.83%         138.125
2-Jul-97        104.40%       102.16%            102.30%
3-Jul-97        109.43%       102.82%            103.76%         137
4-Jul-97        109.43%       102.82%            103.76%
7-Jul-97        110.69%       102.59%            103.23%
8-Jul-97        105.03%       103.30%            103.97%
9-Jul-97        101.89%       103.02%            102.70%
10-Jul-97       103.14%       103.55%            103.41%
11-Jul-97       104.40%       104.30%            103.73%
14-Jul-97       104.40%       104.61%            103.93%
15-Jul-97       104.09%       105.22%            104.76%
16-Jul-97       103.77%       106.70%            105.99%
17-Jul-97       103.14%       105.94%            105.42%
18-Jul-97       103.14%       105.42%            103.58%
21-Jul-97       107.55%       104.60%            103.31%
22-Jul-97       106.92%       105.58%            105.69%
23-Jul-97       107.55%       106.08%            105.98%
24-Jul-97       111.32%       106.13%            106.41%
25-Jul-97       114.47%       106.13%            106.24%
28-Jul-97       117.61%       106.18%            105.97%
29-Jul-97       127.67%       106.74%            106.63%
30-Jul-97       123.90%       107.72%            107.76%
31-Jul-97       123.90%       108.27%            107.99%
1-Aug-97        120.75%       108.30%            107.18%
4-Aug-97        115.72%       108.73%            107.54%
5-Aug-97        125.16%       109.61%            107.77%
6-Aug-97        132.70%       110.45%            108.67%
7-Aug-97        133.96%       110.14%            107.64%
8-Aug-97        153.46%       108.24%            105.64%
11-Aug-97       169.18%       107.93%            106.03%
12-Aug-97       166.67%       107.92%            104.85%
13-Aug-97       160.38%       108.06%            104.34%
14-Aug-97       158.49%       108.20%            104.65%
15-Aug-97       152.20%       107.20%            101.94%
18-Aug-97       157.23%       107.21%            103.26%
19-Aug-97       158.49%       108.64%            104.79%
20-Aug-97       162.26%       109.87%            106.30%
21-Aug-97       158.49%       109.21%            104.68%
22-Aug-97       156.60%       108.81%            104.51%
25-Aug-97       158.49%       109.58%            104.13%
26-Aug-97       153.46%       109.16%            103.32%
27-Aug-97       150.31%       110.02%            103.40%
28-Aug-97       154.72%       110.26%            102.26%
29-Aug-97       161.01%       110.91%            101.79%
1-Sep-97        161.01%       110.91%            101.79%
2-Sep-97        163.52%       112.43%            104.97%
3-Sep-97        171.07%       112.61%            105.00%
4-Sep-97        170.44%       112.49%            105.34%
5-Sep-97        169.81%       113.26%            105.13%
8-Sep-97        177.99%       113.98%            105.38%
9-Sep-97        181.13%       114.59%            105.65%
10-Sep-97       173.58%       114.34%            104.00%
11-Sep-97       173.90%       114.04%            103.27%
12-Sep-97       173.58%       114.98%            104.55%
15-Sep-97       176.10%       115.07%            104.08%
16-Sep-97       176.10%       116.50%            107.01%
17-Sep-97       172.33%       116.37%            106.71%
18-Sep-97       174.21%       116.49%            107.20%
19-Sep-97       179.87%       116.56%            107.56%
22-Sep-97       179.87%       117.24%            108.12%
23-Sep-97       179.87%       117.56%            107.72%
24-Sep-97       176.10%       117.27%            106.88%
25-Sep-97       173.58%       116.87%            106.14%
26-Sep-97       178.62%       117.12%            106.96%
29-Sep-97       178.62%       117.87%            107.88%
30-Sep-97       176.10%       118.17%            107.20%
1-Oct-97        180.50%       118.58%            108.12%
2-Oct-97        186.16%       119.37%            108.69%
3-Oct-97        191.19%       119.97%            109.21%
6-Oct-97        192.14%       120.47%            110.07%
7-Oct-97        177.99%       120.96%            111.25%
8-Oct-97        177.99%       121.08%            110.20%
9-Oct-97        169.18%       121.33%            109.84%
10-Oct-97       167.30%       121.43%            109.43%
13-Oct-97       171.07%       121.33%            109.55%
14-Oct-97       166.04%       121.18%            109.80%
15-Oct-97       168.55%       120.81%            109.28%
16-Oct-97       166.04%       119.31%            108.10%
17-Oct-97       157.23%       117.07%            106.84%
20-Oct-97       157.86%       118.31%            108.14%
21-Oct-97       157.86%       119.61%            110.03%
22-Oct-97       155.97%       119.46%            109.60%
23-Oct-97       148.43%       117.28%            107.58%
24-Oct-97       161.01%       116.95%            106.56%
27-Oct-97       153.46%       109.77%            99.24%
28-Oct-97       161.01%       112.52%            104.32%
29-Oct-97       159.43%       113.43%            104.02%
30-Oct-97       159.43%       111.80%            102.26%
31-Oct-97       157.23%       113.01%            103.50%
3-Nov-97        155.35%       115.20%            106.26%
4-Nov-97        155.03%       115.67%            106.46%
5-Nov-97        150.31%       116.47%            106.69%
6-Nov-97        154.09%       115.90%            106.15%
7-Nov-97        151.57%       113.84%            104.96%
10-Nov-97       152.20%       114.02%            104.24%
11-Nov-97       152.20%       113.84%            104.53%
12-Nov-97       140.88%       110.96%            102.52%
13-Nov-97       138.36%       110.81%            103.73%
14-Nov-97       133.96%       112.05%            105.05%
17-Nov-97       135.22%       114.15%            107.07%
18-Nov-97       137.11%       113.08%            106.17%
19-Nov-97       137.11%       112.60%            106.89%
20-Nov-97       137.11%       113.82%            108.52%
21-Nov-97       145.91%       113.70%            108.99%
24-Nov-97       135.22%       111.65%            107.13%
25-Nov-97       136.48%       111.29%            107.60%  100.00%
26-Nov-97       138.68%       111.52%            107.69%  105.88%
27-Nov-97       138.68%       111.52%            107.69%  105.88%
28-Nov-97       138.36%       112.11%            108.12%  104.71%
1-Dec-97        135.22%       113.32%            110.31%  104.71%
2-Dec-97        135.85%       112.90%            109.96%  104.71%
3-Dec-97        133.96%       113.16%            110.53%  104.71%
4-Dec-97        132.08%       113.23%            110.12%  103.53%
5-Dec-97        125.79%       113.84%            111.33%  104.71%
8-Dec-97        122.64%       114.99%            111.17%  103.53%
9-Dec-97        118.87%       114.23%            110.42%  104.12%
10-Dec-97       118.24%       112.92%            109.74%  103.53%
11-Dec-97       110.69%       110.67%            108.06%  103.53%
12-Dec-97       107.55%       110.40%            107.89%  103.53%
15-Dec-97       108.18%       110.04%            109.02%   94.71%
16-Dec-97       109.43%       111.43%            109.55%   94.12%
17-Dec-97       110.69%       111.41%            109.26%   94.12%
18-Dec-97       103.14%       109.88%            108.10%   94.12%
19-Dec-97       114.47%       109.80%            107.14%   95.29%
22-Dec-97       122.01%       110.75%            107.92%   94.12%
23-Dec-97       121.38%       110.30%            106.27%   92.94%
24-Dec-97       120.13%       109.94%            105.55%   83.53%
25-Dec-97       120.13%       109.94%            105.55%   83.53%
26-Dec-97       120.13%       110.01%            105.97%   87.65%
29-Dec-97       120.13%       111.56%            107.88%   88.24%
30-Dec-97       125.79%       113.43%            109.86%   87.06%
31-Dec-97       125.79%       114.29%            109.82%   85.88%
1-Jan-98        125.79%       114.29%            109.82%   85.88%
2-Jan-98        128.30%       114.19%            110.34%   85.88%
5-Jan-98        127.04%       114.21%            110.57%   87.06%
6-Jan-98        125.79%       113.03%            109.38%   89.41%
7-Jan-98        125.16%       112.26%            109.09%   89.41%
8-Jan-98        120.75%       110.89%            108.19%   89.41%
9-Jan-98        118.24%       107.23%            104.98%   90.59%
12-Jan-98       116.35%       106.49%            106.28%   87.06%
13-Jan-98       115.72%       108.65%            107.74%   85.29%
14-Jan-98       117.61%       109.67%            108.40%   84.71%
15-Jan-98       117.61%       109.78%            107.59%   84.71%
16-Jan-98       116.98%       111.10%            108.81%   84.71%
19-Jan-98       116.98%       111.10%            108.81%   84.71%
20-Jan-98       120.13%       112.49%            110.74%   85.88%
21-Jan-98       121.38%       112.14%            109.86%   85.29%
22-Jan-98       128.30%       110.88%            108.98%   85.88%
23-Jan-98       129.56%       110.57%            108.36%   84.71%
26-Jan-98       128.30%       109.68%            108.29%   85.88%
27-Jan-98       128.30%       110.09%            109.66%   82.35%
28-Jan-98       132.08%       111.68%            110.61%   80.00%
29-Jan-98       132.08%       112.48%            111.52%   80.00%
30-Jan-98       130.82%       112.01%            110.93%   80.00%
2-Feb-98        130.19%       113.44%            113.31%   80.59%
3-Feb-98        130.82%       114.54%            113.84%   76.47%
4-Feb-98        134.59%       115.66%            113.94%   74.12%
5-Feb-98        135.85%       116.13%            113.56%   74.12%
6-Feb-98        134.59%       116.47%            114.57%   70.59%
9-Feb-98        130.82%       116.94%            114.38%   68.24%
10-Feb-98       119.81%       118.12%            115.31%   68.24%
11-Feb-98       123.27%       118.77%            115.43%   68.24%
12-Feb-98       122.64%       118.95%            115.89%   68.82%
13-Feb-98       127.04%       119.47%            115.44%   70.59%
16-Feb-98       127.04%       119.47%            115.44%   70.59%
17-Feb-98       125.79%       119.31%            115.74%   71.76%
18-Feb-98       122.01%       119.85%            116.79%   72.94%
19-Feb-98       123.90%       120.03%            116.36%   80.00%
20-Feb-98       122.01%       119.90%            117.03%   80.00%
23-Feb-98       120.75%       120.79%            117.48%   80.00%
24-Feb-98       119.50%       120.43%            116.62%   81.18%
25-Feb-98       110.69%       121.58%            118.02%   76.47%
26-Feb-98       114.47%       122.50%            118.67%   76.47%
27-Feb-98       114.47%       122.12%            118.75%   71.76%
2-Mar-98        122.01%       122.51%            118.56%   80.00%
3-Mar-98        122.01%       122.52%            119.05%   75.88%
4-Mar-98        125.16%       122.31%            118.52%   80.00%
5-Mar-98        120.75%       120.53%            117.13%   75.29%
6-Mar-98        122.33%       122.23%            119.47%   75.29%
9-Mar-98        121.38%       121.28%            119.08%   77.65%
10-Mar-98       109.43%       122.55%            120.43%   81.18%
11-Mar-98       108.81%       123.35%            120.91%   75.29%
12-Mar-98       110.69%       123.44%            121.08%   74.12%
13-Mar-98       109.43%       123.58%            120.93%   76.47%
16-Mar-98       107.23%       124.50%            122.13%   75.29%
17-Mar-98       109.12%       124.14%            122.27%   72.94%
18-Mar-98       105.66%       124.40%            122.84%   74.12%
19-Mar-98       105.66%       125.12%            123.32%   75.29%
20-Mar-98       103.46%       124.86%            124.38%   72.94%
23-Mar-98       101.57%       124.73%            123.98%   76.47%
24-Mar-98       104.40%       125.48%            125.12%   75.29%
25-Mar-98       104.40%       125.61%            124.70%   76.47%
26-Mar-98       106.29%       126.00%            124.57%   76.47%
27-Mar-98       105.66%       125.72%            123.96%   78.82%
30-Mar-98       100.00%       125.30%            123.75%   78.82%
31-Mar-98       100.63%       126.70%            124.68%   74.12%
1-Apr-98        100.63%       128.02%            125.40%   75.29%
2-Apr-98        99.37%        128.26%            126.74%   72.94%
3-Apr-98        98.74%        128.11%            127.05%   72.94%
6-Apr-98        96.86%        127.12%            126.90%   71.18%
7-Apr-98        96.23%        125.10%            125.56%   71.76%
8-Apr-98        99.37%        124.95%            124.67%   71.76%
9-Apr-98        101.89%       127.20%            125.69%   70.59%
10-Apr-98       101.89%       127.20%            125.69%   70.59%
13-Apr-98       103.77%       126.76%            125.58%   69.41%
14-Apr-98       103.77%       128.02%            126.26%   67.06%
15-Apr-98       115.72%       128.68%            126.67%   65.88%
16-Apr-98       115.09%       127.81%            125.40%   64.71%
17-Apr-98       110.06%       128.70%            127.05%   64.71%
20-Apr-98       109.43%       129.04%            127.16%   63.53%
21-Apr-98       110.69%       130.07%            127.50%   58.82%
22-Apr-98       115.72%       129.83%            127.94%   60.59%
23-Apr-98       116.98%       128.14%            126.70%   61.76%
24-Apr-98       111.32%       126.97%            125.37%   61.18%
27-Apr-98       111.95%       123.63%            122.96%   61.76%
28-Apr-98       111.32%       124.57%            122.79%   65.88%
29-Apr-98       108.18%       125.71%            123.87%   71.18%
30-Apr-98       108.81%       127.39%            125.81%   67.65%
1-May-98        111.95%       128.11%            126.86%   62.94%
4-May-98        115.72%       128.12%            126.98%   61.18%
5-May-98        118.24%       127.08%            126.23%   61.18%
6-May-98        120.13%       126.60%            125.04%   62.35%
7-May-98        114.47%       125.53%            123.93%   68.24%
8-May-98        118.24%       126.59%            125.40%   69.41%
11-May-98       120.13%       125.99%            125.23%   65.88%
12-May-98       118.87%       125.86%            126.27%   63.53%
13-May-98       116.98%       126.14%            126.61%   62.35%
14-May-98       114.78%       125.43%            126.45%   63.53%
15-May-98       111.32%       124.27%            125.47%   61.18%
18-May-98       109.43%       123.15%            125.14%   65.88%
19-May-98       105.35%       124.24%            125.56%   67.06%
20-May-98       101.89%       123.49%            126.64%   65.88%
21-May-98       100.63%       123.73%            126.14%   67.06%
22-May-98       101.26%       122.82%            125.66%   62.35%
25-May-98       101.26%       122.82%            125.66%   62.35%
26-May-98       98.74%        120.50%            123.80%   64.71%
27-May-98       95.60%        118.86%            123.60%   62.94%
28-May-98       96.23%        120.72%            124.21%   62.35%
29-May-98       100.00%       120.57%            123.44%   64.71%
1-Jun-98        100.63%       119.10%            123.46%   63.53%
2-Jun-98        100.94%       118.89%            123.71%   64.71%
3-Jun-98        101.26%       118.62%            122.53%   61.18%
4-Jun-98        101.26%       119.48%            123.89%   62.35%
5-Jun-98        101.26%       119.82%            126.05%   65.29%
8-Jun-98        106.29%       120.41%            126.26%   63.53%
9-Jun-98        103.46%       120.17%            126.56%   61.76%
10-Jun-98       98.11%        118.50%            125.87%   61.18%
11-Jun-98       95.60%        117.01%            123.87%   61.76%
12-Jun-98       94.97%        116.22%            124.35%   57.65%
15-Jun-98       96.23%        114.18%            121.88%   57.65%
16-Jun-98       95.60%        115.58%            123.08%   57.65%
17-Jun-98       98.74%        117.06%            125.28%   58.82%
18-Jun-98       101.26%       115.66%            125.20%   58.82%
19-Jun-98       100.63%       115.23%            124.55%   57.65%
22-Jun-98       98.11%        116.23%            124.85%   56.47%
23-Jun-98       101.26%       117.73%            126.68%   56.47%
24-Jun-98       101.89%       119.10%            128.20%   55.88%
25-Jun-98       101.26%       119.10%            127.79%   57.06%
26-Jun-98       104.40%       119.45%            128.24%   57.65%
29-Jun-98       110.38%       120.09%            128.84%   56.47%
30-Jun-98       99.37%        120.84%            128.31%   54.12%
1-Jul-98        108.02%       121.71%            129.97%   55.29%
2-Jul-98        103.77%       121.58%            129.73%   57.06%
3-Jul-98        103.77%       121.58%            129.73%   57.06%
6-Jul-98        105.03%       121.89%            130.97%   55.29%
7-Jul-98        108.18%       121.45%            130.66%   57.06%
8-Jul-98        110.06%       122.21%            131.99%   47.06%
9-Jul-98        112.58%       122.18%            131.11%   52.94%
10-Jul-98       111.32%       121.74%            131.76%   51.47%
13-Jul-98       112.58%       122.00%            131.86%   49.41%
14-Jul-98       104.40%       122.06%            133.26%   50.59%
15-Jul-98       103.14%       122.56%            132.95%   48.24%
16-Jul-98       105.66%       122.67%            133.98%   47.06%
17-Jul-98       103.14%       122.38%            134.30%   45.29%
20-Jul-98       103.14%       121.98%            134.00%   44.71%
21-Jul-98       103.14%       120.50%            131.84%   44.71%
22-Jul-98       101.26%       118.76%            131.73%   45.88%
23-Jul-98       100.94%       116.35%            128.98%   45.88%
24-Jul-98       98.11%        115.56%            129.10%   48.24%
27-Jul-98       96.23%        114.20%            129.83%   45.88%
28-Jul-98       94.97%        113.00%            127.90%   45.88%
29-Jul-98       96.23%        113.05%            127.33%   45.88%
30-Jul-98       96.86%        113.77%            129.34%   45.88%
31-Jul-98       98.11%        111.53%            126.82%   44.71%
3-Aug-98        94.34%        109.75%            125.89%   42.35%
4-Aug-98        96.86%        106.38%            121.32%   41.18%
5-Aug-98        93.08%        105.99%            122.38%   40.00%
6-Aug-98        70.44%        108.38%            123.31%   47.06%
7-Aug-98        69.81%        110.93%            123.29%   47.06%
10-Aug-98       69.18%        109.48%            122.57%   47.65%
11-Aug-98       64.78%        106.81%            120.97%   49.41%
12-Aug-98       68.55%        109.24%            122.69%   50.59%
13-Aug-98       65.41%        107.55%            121.64%   49.41%
14-Aug-98       66.04%        107.25%            120.26%   40.00%
17-Aug-98       64.15%        107.60%            122.63%   39.41%
18-Aug-98       65.09%        109.50%            124.62%   42.35%
19-Aug-98       63.52%        107.83%            124.26%   43.53%
20-Aug-98       61.64%        106.50%            123.53%   39.41%
21-Aug-98       59.75%        104.96%            122.36%   40.00%
24-Aug-98       52.83%        104.57%            123.14%   40.00%
25-Aug-98       59.43%        103.91%            123.67%   40.00%
26-Aug-98       57.23%        101.28%            122.69%   40.00%
27-Aug-98       55.97%        97.34%             117.98%   40.00%
28-Aug-98       55.66%        95.30%             116.23%   40.59%
31-Aug-98       55.35%        89.94%             108.33%   37.65%
1-Sep-98        57.23%        92.11%             112.51%   37.65%
2-Sep-98        55.35%        93.63%             112.08%   40.80%
3-Sep-98        55.35%        91.83%             111.16%   39.00%
4-Sep-98        55.35%        92.06%             110.21%   38.40%
7-Sep-98        55.35%        92.06%             110.21%   38.40%
8-Sep-98        61.64%        96.11%             115.82%   36.00%
9-Sep-98        59.12%        93.43%             113.86%   34.80%
10-Sep-98       57.86%        91.42%             110.92%   34.80%
11-Sep-98       60.38%        93.85%             114.19%   33.00%
14-Sep-98       59.75%        95.55%             116.53%   37.20%
15-Sep-98       58.49%        95.55%             117.43%   37.20%
16-Sep-98       60.38%        95.96%             118.31%   38.40%
17-Sep-98       57.86%        94.45%             115.30%   37.20%
18-Sep-98       56.60%        96.40%             115.44%   37.20%
21-Sep-98       58.18%        95.87%             115.87%   38.40%
22-Sep-98       59.12%        97.39%             116.52%   36.00%
23-Sep-98       60.38%        99.09%             120.64%   36.00%
24-Sep-98       58.49%        97.24%             118.00%   37.20%
25-Sep-98       60.69%        97.11%             118.23%   37.20%
28-Sep-98       60.38%        97.00%             118.67%   34.80%
29-Sep-98       57.23%        96.06%             118.71%   39.60%
30-Sep-98       55.97%        95.37%             115.09%   39.60%
1-Oct-98        54.72%        91.82%             111.62%   38.40%
2-Oct-98        57.86%        91.75%             113.46%   36.00%
5-Oct-98        54.72%        88.15%             111.87%   34.80%
6-Oct-98        54.09%        87.10%             111.42%   35.40%
7-Oct-98        52.83%        84.37%             109.85%   34.80%
8-Oct-98        53.46%        81.19%             108.57%   33.60%
9-Oct-98        51.57%        83.63%             111.40%   34.20%
12-Oct-98       52.83%        85.40%             112.90%   35.40%
13-Oct-98       51.57%        84.29%             112.57%   37.50%
14-Oct-98       54.09%        85.31%             113.79%   37.80%
15-Oct-98       52.83%        87.94%             118.54%   37.80%
16-Oct-98       54.09%        90.32%             119.55%   38.10%
19-Oct-98       56.60%        92.66%             120.22%   37.80%
20-Oct-98       55.66%        94.42%             120.40%   36.60%
21-Oct-98       61.01%        95.85%             121.08%   38.40%
22-Oct-98       60.69%        97.20%             122.04%   44.40%
23-Oct-98       65.41%        97.53%             121.16%   42.00%
26-Oct-98       72.33%        98.20%             121.35%   45.60%
27-Oct-98       83.02%        98.20%             120.56%   46.80%
28-Oct-98       77.99%        98.11%             120.87%   66.60%
29-Oct-98       75.47%        99.12%             122.89%   74.40%
30-Oct-98       74.21%        99.73%             124.33%   64.80%
2-Nov-98        81.13%        102.29%            125.79%   67.20%
3-Nov-98        76.73%        102.57%            125.71%   62.40%
4-Nov-98        79.87%        104.14%            126.59%   58.80%
5-Nov-98        80.19%        104.63%            128.31%   61.20%
6-Nov-98        80.50%        105.34%            129.12%   57.60%
9-Nov-98        76.10%        104.67%            127.90%   55.20%
10-Nov-98       73.27%        104.90%            127.68%   56.40%
11-Nov-98       72.96%        103.61%            126.85%   54.60%
12-Nov-98       72.64%        103.38%            126.48%   60.00%
13-Nov-98       66.67%        102.44%            127.39%   57.60%
16-Nov-98       66.67%        102.61%            128.54%   58.80%
17-Nov-98       66.67%        102.32%            128.93%   57.60%
18-Nov-98       64.15%        102.56%            129.51%   54.00%
19-Nov-98       64.15%        103.96%            130.43%   53.40%
20-Nov-98       65.72%        104.25%            131.67%   56.30%
23-Nov-98       66.35%        105.44%            134.46%   58.75%
24-Nov-98       66.67%        105.11%            133.87%   56.30%
25-Nov-98       67.61%        105.56%            134.31%   56.30%
26-Nov-98       67.61%        105.56%            134.31%   56.30%
27-Nov-98       67.92%        106.19%            134.93%   55.08%
30-Nov-98       72.96%        105.26%            131.68%   57.53%
1-Dec-98        86.79%        105.66%            133.00%   57.53%
2-Dec-98        83.02%        105.05%            132.54%   57.53%
3-Dec-98        83.02%        104.05%            130.15%   57.53%
4-Dec-98        81.76%        105.59%            133.16%   57.53%
7-Dec-98        83.02%        105.89%            134.40%   55.08%
8-Dec-98        86.79%        105.94%            133.69%   56.30%
9-Dec-98        88.05%        105.73%            133.93%   55.08%
10-Dec-98       85.53%        103.94%            131.84%   55.08%
11-Dec-98       85.53%        103.73%            132.00%   53.86%
14-Dec-98       86.79%        101.73%            129.14%   52.63%
15-Dec-98       85.53%        101.99%            131.59%   52.63%
16-Dec-98       85.85%        101.80%            131.49%   58.75%
17-Dec-98       85.53%        103.11%            133.53%   53.86%
18-Dec-98       89.94%        104.83%            134.44%   55.08%
21-Dec-98       89.94%        105.97%            136.12%   55.08%
22-Dec-98       90.57%        105.40%            136.20%   56.30%
23-Dec-98       88.68%        106.92%            139.03%   52.63%
24-Dec-98       86.79%        106.94%            138.77%   55.08%
25-Dec-98       86.79%        106.94%            138.77%   55.08%
28-Dec-98       89.94%        107.41%            138.68%   52.02%
29-Dec-98       95.60%        108.20%            140.53%   51.41%
30-Dec-98       110.69%       108.93%            139.41%   52.02%
31-Dec-98       116.98%       111.90%            139.10%   53.86%
1-Jan-99        116.98%       111.90%            139.10%   53.86%
4-Jan-99        105.97%       111.29%            138.98%   52.02%
5-Jan-99        105.66%       111.24%            140.86%   51.41%
6-Jan-99        104.40%       112.58%            143.98%   53.86%
7-Jan-99        108.18%       112.26%            143.69%   53.86%
8-Jan-99        103.14%       112.86%            144.29%   51.41%
11-Jan-99       100.63%       113.05%            143.02%   53.24%
12-Jan-99       98.43%        111.43%            140.27%   52.63%
13-Jan-99       93.08%        111.25%            139.69%   51.71%
14-Jan-99       93.08%        109.37%            137.18%   55.08%
15-Jan-99       92.14%        111.28%            140.69%   52.63%
18-Jan-99       92.14%        111.28%            140.69%   52.63%
19-Jan-99       95.91%        111.39%            141.68%   50.18%
20-Jan-99       98.11%        112.04%            142.20%   50.18%
21-Jan-99       97.48%        109.80%            139.77%   51.41%
22-Jan-99       98.11%        109.65%            138.65%   51.41%
25-Jan-99       101.89%       109.31%            139.64%   48.96%
26-Jan-99       98.74%        110.08%            141.72%   48.96%
27-Jan-99       97.48%        108.62%            140.68%   47.74%
28-Jan-99       96.86%        109.22%            143.19%   47.74%
29-Jan-99       98.74%        110.44%            144.81%   48.96%
1-Feb-99        105.66%       110.23%            144.06%   46.51%
2-Feb-99        100.63%       108.54%            142.81%   46.51%
3-Feb-99        104.40%       108.93%            143.95%   42.84%
4-Feb-99        95.28%        107.22%            141.28%   44.06%
5-Feb-99        94.34%        105.69%            140.25%   42.84%
8-Feb-99        95.28%        105.60%            140.75%   41.62%
9-Feb-99        95.28%        103.65%            137.62%   44.68%
10-Feb-99       94.97%        102.61%            138.46%   41.62%
11-Feb-99       94.34%        104.32%            141.91%   43.45%
12-Feb-99       92.14%        102.72%            139.21%   44.06%
15-Feb-99       92.14%        102.72%            139.21%   44.06%
16-Feb-99       91.51%        102.30%            140.53%   44.06%
17-Feb-99       93.71%        100.56%            138.52%   44.06%
18-Feb-99       91.19%        100.74%            140.01%   42.84%
19-Feb-99       91.19%        100.98%            140.23%   42.45%
22-Feb-99       92.14%        102.66%            143.96%   46.82%
23-Feb-99       91.19%        102.66%            143.85%   43.70%
24-Feb-99       92.77%        102.20%            141.84%   46.19%
25-Feb-99       93.08%        101.14%            140.89%   46.19%
26-Feb-99       93.71%        100.40%            140.13%   46.51%
1-Mar-99        91.19%        101.24%            139.89%   44.95%
2-Mar-99        91.82%        101.41%            138.68%   44.95%
3-Mar-99        91.19%        100.96%            138.93%   43.70%
4-Mar-99        90.57%        101.85%            141.07%   44.32%
5-Mar-99        90.57%        102.55%            144.34%   43.38%
8-Mar-99        79.56%        102.98%            145.16%   42.45%
9-Mar-99        78.62%        102.66%            144.83%   42.45%
10-Mar-99       76.73%        103.01%            145.62%   42.76%
11-Mar-99       41.82%        102.94%            146.85%   42.45%
12-Mar-99       46.54%        102.53%            146.50%   41.20%
15-Mar-99       46.54%        102.97%            147.93%   40.58%
16-Mar-99       43.08%        102.81%            147.83%   39.95%
17-Mar-99       44.03%        102.45%            146.87%   39.95%
18-Mar-99       44.03%        102.27%            148.98%   39.95%
19-Mar-99       44.65%        101.20%            147.03%   39.95%
22-Mar-99       44.03%        100.12%            146.77%   38.70%
23-Mar-99       40.25%        97.68%             142.83%   39.95%
24-Mar-99       38.05%        97.93%             143.56%   38.70%
25-Mar-99       42.14%        100.54%            145.98%   39.95%
26-Mar-99       39.62%        100.34%            145.17%   37.77%
29-Mar-99       40.25%        101.68%            148.26%   38.08%
30-Mar-99       40.88%        102.14%            147.20%   39.95%
31-Mar-99       38.99%        101.62%            145.57%   38.70%
1-Apr-99        40.25%        101.57%            146.40%   39.95%
2-Apr-99        40.25%        101.57%            146.40%   39.95%
5-Apr-99        40.25%        102.26%            149.50%   36.21%
6-Apr-99        38.99%        100.92%            149.14%   36.21%
7-Apr-99        38.99%        100.15%            150.16%   34.33%
8-Apr-99        38.05%        99.85%             152.09%   33.71%
9-Apr-99        39.62%        101.44%            152.58%   38.70%
12-Apr-99       38.36%        101.96%            153.75%   33.71%
13-Apr-99       40.25%        102.47%            152.75%   33.71%
14-Apr-99       42.14%        103.64%            150.33%   37.45%
15-Apr-99       41.82%        104.18%            149.70%   37.45%
16-Apr-99       41.51%        105.55%            149.26%   37.45%
19-Apr-99       37.42%        105.10%            145.92%   41.20%
20-Apr-99       39.94%        104.90%            147.81%   39.95%
21-Apr-99       38.99%        107.36%            151.20%   39.95%
22-Apr-99       38.68%        107.56%            153.77%   36.21%
23-Apr-99       38.99%        107.66%            153.55%   39.64%
26-Apr-99       45.91%        107.91%            153.91%   39.95%
27-Apr-99       45.60%        108.68%            154.22%   43.07%
28-Apr-99       41.51%        108.72%            152.87%   44.95%
29-Apr-99       42.77%        108.52%            151.96%   40.58%
30-Apr-99       42.45%        108.27%            151.09%   40.58%
3-May-99        44.65%        109.31%            153.29%   44.95%
4-May-99        42.77%        109.29%            150.73%   41.20%
5-May-99        44.34%        109.34%            152.47%   44.95%
6-May-99        44.97%        109.34%            150.74%   42.76%
7-May-99        43.55%        109.72%            152.20%   46.82%
10-May-99       43.40%        111.05%            151.67%   44.95%
11-May-99       43.08%        111.85%            153.41%   46.19%
12-May-99       43.08%        112.04%            154.35%   44.95%
13-May-99       43.08%        113.19%            154.76%   45.57%
14-May-99       42.92%        111.63%            151.39%   45.57%
17-May-99       42.77%        110.87%            151.58%   44.95%
18-May-99       42.77%        111.07%            150.88%   45.57%
19-May-99       43.08%        111.56%            152.12%   48.69%
20-May-99       44.03%        112.74%            151.51%   48.07%
21-May-99       44.65%        113.46%            150.54%   43.70%
24-May-99       47.17%        112.16%            147.86%   46.19%
25-May-99       46.54%        110.83%            145.35%   46.19%
26-May-99       45.91%        110.64%            147.65%   43.70%
27-May-99       45.91%        109.99%            145.01%   45.57%
28-May-99       45.91%        110.81%            147.32%   43.70%
31-May-99       45.91%        110.81%            147.32%   43.70%
1-Jun-99        45.28%        111.27%            146.46%   43.70%
2-Jun-99        44.97%        111.24%            146.52%   43.70%
3-Jun-99        46.54%        111.09%            147.06%   43.70%
4-Jun-99        45.28%        112.10%            150.25%   43.70%
7-Jun-99        46.86%        112.99%            151.02%   43.70%
8-Jun-99        45.28%        112.57%            149.07%   43.70%
9-Jun-99        45.91%        113.03%            149.22%   46.19%
10-Jun-99       45.60%        112.31%            147.43%   44.95%
11-Jun-99       45.91%        111.84%            146.39%   44.95%
14-Jun-99       45.75%        111.05%            146.43%   46.19%
15-Jun-99       45.91%        111.50%            147.24%   44.95%
16-Jun-99       45.75%        112.50%            150.55%   44.95%
17-Jun-99       45.91%        113.00%            151.63%   45.26%
18-Jun-99       46.86%        113.04%            151.96%   44.95%
21-Jun-99       49.37%        113.74%            152.66%   44.95%
22-Jun-99       48.43%        113.91%            151.17%   43.70%
23-Jun-99       50.00%        113.95%            150.85%   44.32%
24-Jun-99       49.37%        113.12%            148.90%   44.32%
25-Jun-99       50.00%        113.22%            148.84%   44.32%
28-Jun-99       49.69%        114.86%            150.66%   43.70%
29-Jun-99       55.35%        115.70%            152.93%   45.57%
30-Jun-99       62.26%        117.04%            155.34%   43.70%
1-Jul-99        64.15%        117.58%            156.27%   43.70%
2-Jul-99        60.38%        118.12%            157.43%   43.70%
5-Jul-99        60.38%        118.12%            157.43%   43.70%
6-Jul-99        62.26%        118.16%            157.08%   43.70%
7-Jul-99        61.01%        117.00%            157.96%   42.76%
8-Jul-99        60.38%        117.32%            157.80%   43.85%
9-Jul-99        55.66%        117.94%            158.80%   42.45%
12-Jul-99       54.09%        118.47%            158.33%   42.45%
13-Jul-99       55.97%        118.07%            157.70%   42.29%
14-Jul-99       58.49%        118.67%            158.22%   41.51%
15-Jul-99       57.23%        119.58%            159.52%   41.51%
16-Jul-99       57.23%        119.96%            160.55%   41.51%
19-Jul-99       56.29%        118.77%            159.29%   41.20%
20-Jul-99       55.97%        117.02%            155.84%   39.95%
21-Jul-99       57.55%        117.13%            156.08%   42.45%
22-Jul-99       55.03%        116.58%            154.01%   40.26%
23-Jul-99       54.09%        116.18%            153.56%   39.95%
26-Jul-99       54.09%        114.97%            152.52%   39.95%
27-Jul-99       54.09%        115.62%            154.22%   41.20%
28-Jul-99       54.09%        115.85%            154.51%   39.95%
29-Jul-99       54.09%        115.25%            151.76%   41.20%
30-Jul-99       53.46%        115.95%            150.36%   39.95%
2-Aug-99        54.09%        115.52%            150.29%   40.11%
3-Aug-99        54.09%        114.06%            149.62%   39.95%
4-Aug-99        52.83%        112.91%            147.72%   39.95%
5-Aug-99        49.69%        112.39%            148.66%   39.95%
6-Aug-99        47.80%        111.82%            147.14%   39.95%
9-Aug-99        48.43%        111.46%            146.86%   40.58%
10-Aug-99       50.63%        110.70%            145.01%   40.58%
11-Aug-99       49.06%        111.80%            147.33%   41.82%
12-Aug-99       50.00%        111.99%            146.90%   41.82%
13-Aug-99       50.00%        113.46%            150.24%   41.82%
16-Aug-99       49.69%        113.23%            150.59%   41.82%
17-Aug-99       49.69%        113.70%            152.11%   41.82%
18-Aug-99       51.89%        113.22%            150.83%   41.82%
19-Aug-99       51.57%        113.13%            149.78%   41.82%
20-Aug-99       51.57%        113.38%            151.25%   41.82%
23-Aug-99       52.83%        114.11%            153.93%   41.82%
24-Aug-99       56.60%        113.94%            154.30%   41.20%
25-Aug-99       54.72%        113.73%            156.37%   40.58%
26-Aug-99       54.09%        112.94%            154.13%   41.51%
27-Aug-99       53.14%        111.92%            152.57%   41.51%
30-Aug-99       53.46%        111.34%            149.83%   42.02%
31-Aug-99       52.83%        110.76%            149.42%   38.84%
1-Sep-99        52.83%        112.23%            150.63%   38.20%
2-Sep-99        54.72%        111.32%            149.27%   40.75%
3-Sep-99        54.72%        113.63%            153.59%   40.75%
6-Sep-99        54.72%        113.63%            153.59%   40.75%
7-Sep-99        55.35%        114.19%            152.82%   38.52%
8-Sep-99        54.09%        113.53%            152.11%   41.23%
9-Sep-99        52.83%        113.97%            152.51%   41.23%
10-Sep-99       53.14%        114.67%            152.96%   34.38%
13-Sep-99       52.83%        114.17%            152.11%   36.29%
14-Sep-99       52.83%        113.82%            151.22%   38.20%
15-Sep-99       54.09%        113.53%            149.15%   38.20%
16-Sep-99       52.83%        112.23%            149.20%   38.20%
17-Sep-99       52.83%        113.01%            151.12%   38.20%
20-Sep-99       52.83%        112.50%            151.13%   38.20%
21-Sep-99       52.20%        110.97%            147.97%   42.02%
22-Sep-99       52.83%        111.01%            148.30%   43.30%
23-Sep-99       52.20%        109.08%            144.90%   38.20%
24-Sep-99       52.20%        108.11%            144.55%   40.75%
27-Sep-99       52.20%        109.73%            145.22%   42.98%
28-Sep-99       52.20%        108.87%            145.10%   40.43%
29-Sep-99       52.83%        109.70%            143.53%   40.59%
30-Sep-99       53.46%        111.16%            145.16%   38.20%
1-Oct-99        51.89%        110.10%            145.17%   36.93%
4-Oct-99        49.06%        110.97%            147.63%   36.93%
5-Oct-99        49.69%        110.77%            147.26%   37.57%
6-Oct-99        49.69%        111.80%            149.99%   35.66%
7-Oct-99        50.31%        111.08%            149.11%   39.16%
8-Oct-99        49.53%        110.85%            151.19%   36.29%
11-Oct-99       49.69%        111.53%            151.10%   36.29%
12-Oct-99       48.43%        110.19%            148.59%   38.84%
13-Oct-99       50.00%        108.73%            145.48%   39.48%
14-Oct-99       47.48%        108.82%            145.24%   38.20%
15-Oct-99       45.91%        107.85%            141.16%   36.29%
18-Oct-99       45.60%        106.59%            141.92%   36.29%
19-Oct-99       49.69%        107.20%            142.73%   36.29%
20-Oct-99       45.60%        107.62%            145.92%   36.61%
21-Oct-99       45.91%        107.34%            145.26%   36.29%
22-Oct-99       45.91%        108.77%            147.30%   36.29%
25-Oct-99       45.44%        108.25%            146.39%   35.66%
26-Oct-99       45.28%        107.99%            145.06%   35.66%
27-Oct-99       38.36%        108.03%            146.74%   36.93%
28-Oct-99       42.14%        109.84%            151.91%   35.66%
29-Oct-99       40.88%        110.83%            154.23%   35.66%
1-Nov-99        39.62%        111.73%            153.24%   35.66%
2-Nov-99        40.25%        111.85%            152.51%   38.20%
3-Nov-99        41.51%        113.20%            153.33%   38.20%
4-Nov-99        41.51%        113.47%            154.20%   36.29%
5-Nov-99        41.51%        113.69%            155.06%   38.20%
8-Nov-99        40.57%        113.73%            155.83%   36.29%
9-Nov-99        42.77%        113.83%            154.50%   39.48%
10-Nov-99       43.08%        114.10%            155.43%   38.20%
11-Nov-99       45.28%        114.06%            156.33%   40.75%
12-Nov-99       44.03%        114.84%            157.98%   38.20%
15-Nov-99       41.51%        115.56%            157.79%   38.52%
16-Nov-99       41.82%        116.68%            160.70%   37.25%
17-Nov-99       43.24%        116.88%            159.64%   38.20%
18-Nov-99       41.82%        118.04%            161.25%   38.20%
19-Nov-99       41.82%        117.55%            160.92%   37.57%
22-Nov-99       38.99%        117.31%            160.80%   39.48%
23-Nov-99       41.19%        115.90%            158.95%   36.93%
24-Nov-99       40.25%        115.93%            160.36%   45.84%
25-Nov-99       40.25%        115.93%            160.36%   45.84%
26-Nov-99       40.25%        116.46%            160.31%   44.57%
29-Nov-99       40.25%        115.87%            159.31%   43.93%
30-Nov-99       41.82%        115.37%            157.17%   47.12%
1-Dec-99        42.77%        115.35%            158.17%   44.57%
2-Dec-99        43.08%        116.76%            159.45%   43.30%
3-Dec-99        43.40%        118.08%            162.20%   40.75%
6-Dec-99        41.51%        118.00%            161.07%   42.66%
7-Dec-99        42.77%        117.54%            159.47%   39.48%
8-Dec-99        44.65%        118.09%            158.87%   44.57%
9-Dec-99        44.65%        116.75%            159.35%   40.75%
10-Dec-99       43.40%        117.30%            160.36%   39.48%
13-Dec-99       43.40%        117.11%            160.15%   40.43%
14-Dec-99       42.77%        115.45%            158.79%   40.11%
15-Dec-99       43.40%        115.63%            159.94%   40.11%
16-Dec-99       45.13%        116.53%            160.55%   40.75%
17-Dec-99       44.97%        116.50%            160.81%   40.75%
20-Dec-99       42.77%        116.83%            160.48%   40.75%
21-Dec-99       43.40%        118.62%            162.21%   39.48%
22-Dec-99       43.55%        118.89%            162.52%   39.48%
23-Dec-99       44.03%        119.78%            165.03%   37.57%
24-Dec-99       44.03%        119.78%            165.03%   37.57%
27-Dec-99       43.40%        121.25%            164.89%   34.38%
28-Dec-99       43.40%        121.87%            164.95%   34.38%
29-Dec-99       44.03%        123.32%            165.61%   34.38%
30-Dec-99       44.03%        122.76%            165.72%   35.97%
31-Dec-99       43.71%        124.78%            166.26%   36.93%
3-Jan-00        45.91%        122.59%            164.68%   35.66%
4-Jan-00        44.03%        118.22%            158.36%   36.93%
5-Jan-00        44.03%        118.72%            158.67%   36.29%
6-Jan-00        43.71%        117.99%            158.82%   35.66%
7-Jan-00        43.71%        121.05%            163.12%   35.66%
10-Jan-00       44.65%        123.41%            164.95%   35.66%
11-Jan-00       44.97%        121.73%            162.79%   36.61%
12-Jan-00       45.28%        121.13%            162.08%   35.66%
13-Jan-00       45.91%        124.72%            164.05%   36.29%
14-Jan-00       45.28%        126.49%            165.80%   35.66%
17-Jan-00       45.28%        126.49%            165.80%   35.66%
18-Jan-00       46.54%        127.22%            164.67%   36.29%
19-Jan-00       45.60%        128.31%            164.75%   35.66%
20-Jan-00       47.80%        129.41%            163.59%   35.82%
21-Jan-00       46.86%        130.69%            163.11%   37.57%
24-Jan-00       47.17%        128.25%            158.60%   38.84%
25-Jan-00       46.86%        127.41%            159.56%   38.84%
26-Jan-00       49.69%        126.92%            158.89%   38.84%
27-Jan-00       50.31%        125.84%            158.27%   39.48%
28-Jan-00       48.43%        122.82%            153.92%   38.20%
31-Jan-00       43.71%        120.86%            157.80%   38.20%
1-Feb-00        48.43%        122.98%            159.48%   40.75%
2-Feb-00        45.91%        123.87%            159.46%   39.16%
3-Feb-00        49.06%        126.15%            161.25%   38.20%
4-Feb-00        48.11%        126.90%            161.19%   38.20%
7-Feb-00        46.54%        127.54%            161.17%   38.84%
8-Feb-00        48.43%        128.55%            163.15%   38.20%
9-Feb-00        47.17%        127.79%            159.75%   38.20%
10-Feb-00       49.06%        128.84%            160.33%   38.20%
11-Feb-00       48.11%        127.59%            156.97%   38.84%
14-Feb-00       47.80%        128.30%            157.29%   39.48%
15-Feb-00       48.74%        128.53%            158.66%   38.52%
16-Feb-00       47.80%        130.01%            157.03%   39.00%
17-Feb-00       47.80%        132.40%            157.10%   37.57%
18-Feb-00       45.91%        129.14%            152.33%   36.93%
21-Feb-00       45.91%        129.14%            152.33%   36.93%
22-Feb-00       45.60%        128.54%            153.02%   35.66%
23-Feb-00       47.01%        130.89%            153.98%   35.02%
24-Feb-00       47.80%        131.47%            153.16%   34.38%
25-Feb-00       46.23%        132.12%            150.89%   34.38%
28-Feb-00       46.70%        132.76%            152.55%   33.75%
29-Feb-00       47.17%        136.96%            154.63%   34.70%
1-Mar-00        46.54%        138.52%            156.07%   34.70%
2-Mar-00        42.77%        137.49%            156.36%   33.75%
3-Mar-00        45.28%        141.05%            159.47%   34.38%
6-Mar-00        44.03%        140.73%            157.44%   34.70%
7-Mar-00        45.28%        138.74%            153.41%   33.11%
8-Mar-00        45.28%        138.91%            154.66%   35.02%
9-Mar-00        44.03%        140.80%            158.62%   34.38%
10-Mar-00       44.03%        139.75%            157.87%   33.75%
13-Mar-00       43.71%        137.24%            156.57%   36.29%
14-Mar-00       43.40%        134.32%            153.81%   33.75%
15-Mar-00       44.65%        132.27%            157.54%   35.66%
16-Mar-00       46.86%        137.35%            165.05%   34.38%
17-Mar-00       45.60%        137.61%            165.72%   34.38%
20-Mar-00       46.54%        133.60%            164.84%   31.84%
21-Mar-00       45.28%        134.55%            169.05%   31.20%
22-Mar-00       45.60%        137.39%            169.82%   33.11%
23-Mar-00       45.91%        137.97%            172.84%   33.75%
24-Mar-00       47.17%        138.25%            172.85%   33.75%
27-Mar-00       47.64%        137.58%            172.44%   42.02%
28-Mar-00       47.48%        135.23%            170.62%   40.75%
29-Mar-00       45.91%        132.57%            170.71%   39.48%
30-Mar-00       48.90%        130.17%            168.38%   39.48%
31-Mar-00       49.06%        131.82%            169.58%   42.66%
3-Apr-00        46.54%        128.54%            170.42%   55.87%
4-Apr-00        47.80%        126.20%            169.15%   47.12%
5-Apr-00        47.80%        128.39%            168.32%   43.93%
6-Apr-00        47.17%        131.89%            169.90%   45.84%
7-Apr-00        47.80%        133.73%            171.59%   50.30%
10-Apr-00       49.06%        129.32%            170.25%   50.30%
11-Apr-00       48.74%        127.94%            169.81%   50.30%
12-Apr-00       49.37%        125.29%            166.03%   45.84%
13-Apr-00       49.06%        124.11%            163.01%   45.84%
14-Apr-00       49.06%        116.93%            153.51%   44.57%
17-Apr-00       49.06%        118.36%            158.59%   43.30%
18-Apr-00       53.77%        123.59%            163.14%   48.39%
19-Apr-00       50.31%        124.04%            161.54%   48.39%
20-Apr-00       50.31%        123.67%            162.34%   46.48%
21-Apr-00       50.31%        123.67%            162.34%   46.48%
24-Apr-00       50.31%        120.88%            161.81%   47.12%
25-Apr-00       50.31%        125.76%            167.19%   48.39%
26-Apr-00       50.31%        125.09%            165.33%   49.66%
27-Apr-00       50.31%        127.23%            165.77%   48.39%
28-Apr-00       50.31%        129.51%            164.36%   48.39%
1-May-00        50.47%        131.65%            166.15%   49.51%
2-May-00        49.06%        128.55%            163.67%   50.94%
3-May-00        49.69%        126.01%            160.14%   53.48%
4-May-00        51.57%        127.76%            159.51%   53.48%
5-May-00        51.89%        130.98%            162.12%   49.66%
8-May-00        50.79%        128.52%            161.16%   50.94%
9-May-00        51.89%        127.10%            159.80%   53.48%
10-May-00       49.06%        123.27%            156.51%   56.03%
11-May-00       51.57%        127.26%            159.31%   57.31%
12-May-00       50.63%        127.53%            160.80%   66.22%
15-May-00       49.69%        129.25%            164.35%   61.13%
16-May-00       50.31%        130.77%            165.90%   66.22%
17-May-00       50.00%        129.27%            163.84%   61.13%
18-May-00       50.31%        127.74%            162.64%   63.99%
19-May-00       50.94%        125.22%            159.21%   62.40%
22-May-00       50.94%        123.58%            158.51%   59.85%
23-May-00       50.94%        121.80%            155.47%   57.31%
24-May-00       49.69%        122.60%            158.32%   43.93%
25-May-00       50.00%        120.92%            156.34%   53.48%
26-May-00       49.37%        121.05%            155.94%   51.57%
29-May-00       49.37%        121.05%            155.94%   51.57%
30-May-00       49.37%        125.04%            160.97%   51.57%
31-May-00       51.26%        125.58%            160.76%   54.76%
1-Jun-00        51.57%        128.35%            163.95%   56.35%
2-Jun-00        51.57%        132.36%            167.17%   54.76%
5-Jun-00        51.57%        132.09%            166.08%   56.67%
6-Jun-00        51.57%        131.34%            164.97%   55.40%
7-Jun-00        51.57%        132.11%            166.50%   54.76%
8-Jun-00        49.69%        131.13%            165.41%   54.76%
9-Jun-00        49.69%        132.50%            164.87%   50.94%
12-Jun-00       49.37%        130.31%            163.63%   59.22%
13-Jun-00       49.53%        131.38%            166.29%   57.31%
14-Jun-00       49.37%        130.79%            166.41%   58.90%
15-Jun-00       48.43%        131.34%            167.34%   50.94%
16-Jun-00       48.43%        131.58%            165.72%   50.94%
19-Jun-00       49.06%        133.13%            168.16%   52.85%
20-Jun-00       49.37%        132.85%            167.02%   52.85%
21-Jun-00       48.43%        132.67%            167.38%   52.21%
22-Jun-00       48.43%        130.30%            164.33%   53.80%
23-Jun-00       48.43%        129.09%            163.12%   45.84%
26-Jun-00       48.11%        131.30%            164.69%   56.99%
27-Jun-00       45.91%        130.28%            164.15%   48.39%
28-Jun-00       48.43%        134.74%            164.63%   53.48%
29-Jun-00       46.54%        133.01%            163.23%   55.71%
30-Jun-00       49.69%        132.92%            164.61%   57.94%
3-Jul-00        50.31%        134.53%            166.30%   54.28%
4-Jul-00        50.31%        134.53%            166.30%   54.28%
5-Jul-00        49.37%        132.68%            163.66%   51.57%
6-Jul-00        50.63%        134.15%            164.84%   57.31%
7-Jul-00        50.31%        136.09%            167.36%   57.31%
10-Jul-00       51.26%        137.06%            166.99%   56.03%
11-Jul-00       50.31%        136.94%            167.58%   54.76%
12-Jul-00       50.31%        138.85%            168.94%   57.94%
13-Jul-00       49.69%        138.66%            169.27%   53.80%
14-Jul-00       49.69%        138.58%            170.87%   53.48%
17-Jul-00       51.57%        139.61%            170.93%   54.76%
18-Jul-00       50.63%        137.77%            169.04%   56.03%
19-Jul-00       49.69%        135.64%            167.70%   56.03%
20-Jul-00       50.79%        136.94%            169.24%   56.03%
21-Jul-00       50.31%        133.81%            167.50%   56.03%
24-Jul-00       50.31%        132.49%            165.70%   53.48%
25-Jul-00       50.31%        132.58%            166.86%   53.48%
26-Jul-00       50.31%        132.36%            164.36%   50.94%
27-Jul-00       50.31%        129.68%            164.04%   50.94%
28-Jul-00       50.31%        126.64%            160.68%   50.94%
31-Jul-00       55.35%        129.60%            161.92%   52.21%
1-Aug-00        52.83%        129.35%            162.74%   53.48%
2-Aug-00        50.94%        130.24%            162.81%   48.39%
3-Aug-00        50.31%        129.67%            164.38%   50.94%
4-Aug-00        50.31%        130.85%            165.55%   53.48%
7-Aug-00        51.57%        132.25%            167.40%   52.53%
8-Aug-00        52.52%        131.85%            167.80%   49.66%
9-Aug-00        51.73%        131.97%            166.67%   45.84%
10-Aug-00       51.73%        130.79%            165.25%   45.84%
11-Aug-00       50.94%        132.94%            166.56%   47.12%
14-Aug-00       50.94%        134.30%            168.79%   47.12%
15-Aug-00       50.94%        133.11%            167.98%   47.12%
16-Aug-00       51.89%        134.01%            167.46%   48.39%
17-Aug-00       51.57%        135.32%            169.30%   47.12%
18-Aug-00       53.46%        135.06%            168.81%   44.57%
21-Aug-00       55.03%        135.20%            169.69%   40.75%
22-Aug-00       53.93%        135.47%            169.53%   43.14%
23-Aug-00       53.46%        135.72%            170.42%   43.30%
24-Aug-00       52.83%        137.40%            170.69%   43.30%
25-Aug-00       54.09%        137.40%            170.48%   38.20%




---------------------------------------
SOURCE:  FACTSET.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              10
<PAGE>


PUBLIC MARKET OVERVIEW OF LEAF
--------------------------------------------------------------------------------
1-YEAR STOCK VOLUME TRADING ANALYSIS


                                   [BAR CHART]

Percent of Volume Traded in Share Price Range

<TABLE>
<CAPTION>
            Shares Traded   % of Total Shares Traded   % of Total Shares (a)   % of Min. Shares (b)
<S>            <C>               <C>                      <C>                       <C>
$7.00-$8.00      178              7                        2%                         7%
$8.00-$9.00     1031             40.2                      9%                        40%
$9.00-$10.00     905             35.3                      8%                        35%
$10.00-$11.00    449             17.5                      4%                        17%
</TABLE>


Percent of Volume Traded Below Share Price


<TABLE>
<CAPTION>
        Shares Traded   % of Total Shares Traded    % of Total Shares (a)   % of Min. Shares (b)
<S>        <C>                <C>                       <C>                        <C>
$8.00       178                 7                           2%                        7%
$9.00      1209                47.1                        10%                       47%
$10.00     2114                82.5                        18%                       82%
$11.00     2562               100                          22%                      100%
</TABLE>

---------------------------------------
SOURCE:  FACTSET AS OF AUGUST 25, 2000.
(A)      ASSUMES 11.9 MILLION SHARES OUTSTANDING.
(B)      ASSUMES 2.6 MILLION MINORITY SHARES OUTSTANDING.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              11
<PAGE>




PUBLIC MARKET OVERVIEW OF LEAF
--------------------------------------------------------------------------------
STOCK VOLUME TRADING ANALYSIS




                                  [BAR CHART]

One-Year Daily Trading Volume Analysis

                                 Number of Days
0-10,000                              180
10,000-20,000                          43
20,000-30,000                          16
30,000-40,000                           6
40,000-50,000                           3
greater than 50,000                     7


Annual Trading Volume Analysis

           Number of Days    % of Total Shares (b)   % of Minority Shares (c)
YTD 2000 (a)    995,700            8%                        39%
1999          7,713,900           65%                       300%
1998         10,523,300           89%                       410%
1997         13,845,500          117%                       539%


---------------------------------------
SOURCE:  FACTSET.
(A)   AS OF AUGUST 25, 2000
(B)   ASSUMES 11.9 MILLION SHARES OUTSTANDING.
(C)   ASSUMES 2.6 MILLION MINORITY SHARES OUTSTANDING.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              12
<PAGE>



--------------------------------------------------------------------------------




PUBLIC MARKET OVERVIEW OF LEAF
--------------------------------------------------------------------------------
SHAREHOLDER PROFILE




<TABLE>
<CAPTION>
                                                                      Percent of   Stock Options                   Percent of
                                                      Basic Shares   Basic Shares      Held       Diluted Shares      Total
                                                     -------------  ------------- --------------  --------------  -----------

<S>                                                      <C>             <C>         <C>            <C>             <C>
INSTITUTIONAL HOLDERS (A)

Royce & Associates                                       734,300         6.2%            --           734,300         5.9%
Wachovia Asset Management                                349,300         2.9%            --           349,300         2.8%
MSDW Advisors                                            260,300         2.2%            --           260,300         2.1%
Dimensional FD Advisors                                  121,500         1.0%            --           121,500         1.0%
Vanguard Group                                           109,000         0.9%            --           109,000         0.9%
Advisory Research                                         46,800         0.4%            --            46,800         0.4%
Mellon Private Asset Management                           20,600         0.2%            --            20,600         0.2%
Barclays Bank                                             18,800         0.2%            --            18,800         0.2%
La Salle National Bank                                    10,000         0.1%            --            10,000         0.1%
Charles Schwab                                               600         0.0%            --               600         0.0%
                                                       ---------        -----                       ---------        -----
Top Ten Institutions                                   1,671,200        14.1%            --         1,671,200        13.5%
Other                                                    140,200         1.2%            --           140,200         1.1%
                                                       ---------        -----                       ---------        -----
    TOTAL INSTITUTIONAL HOLDINGS (B)                   1,811,400        15.3%            --         1,811,400        14.7%

MANAGEMENT & DIRECTORS (C )

Lew and Lavonda Rothman (d)                            8,775,840        73.9%         100,000       8,875,840        71.9%
Lewis Irving Rothman Children's Trust                    524,160         4.4%            --           524,160         4.2%
Jane Vargas                                                 --           0.0%          35,000          35,000         0.3%
Michael E. Colleton                                         --           0.0%          35,000          35,000         0.3%
Maureen Colleton                                            --           0.0%          35,000          35,000         0.3%
John Oliva                                                47,900         0.4%          10,000          57,900         0.5%
Other                                                       --           0.0%         265,000         265,000         2.1%
                                                       ---------        -----       ---------       ---------        -----

    TOTAL MANAGEMENT & DIRECTORS                       9,347,900        78.8%         480,000       9,827,900        79.6%

OTHER/PUBLIC                                             708,251         6.0%            --           708,251         5.7%
                                                       ---------        -----       ---------       ---------        -----

    TOTAL SHARES OUTSTANDING (D)                      11,867,551       100.0%         480,000      12,347,551       100.0%

</TABLE>


----------------------------------
(A)     SOURCE: CDA/SPECTRUM REPORT FOR THE QUARTER ENDED 6/30/00.
(B)     INCLUDES ALL 13F INSTITUTIONS, MUTUAL FUNDS, PENSION FUNDS, VARIABLE
        ANNUITIES, FOREIGN MUTUAL FUNDS, AND INSURANCE COMPANIES THAT DO NOT
        FILE 13FS.
(C)     SOURCE: PROXY DATED 12/31/99; INCLUDES ALL OPTIONS REGARDLESS OF
        EXERCISABILITY.
(D)     TOTAL SHARES AND OPTIONS OUTSTANDING BASED ON MANAGEMENT GUIDANCE.

[LOGO] MERRILL LYNCH

<PAGE>




--------------------------------------------------------------------------------




                         PRELIMINARY VALUATION OF LEAF




--------------------------------------------------------------------------------
<PAGE>



PRELIMINARY VALUATION OF LEAF
--------------------------------------------------------------------------------
SUMMARY FINANCIAL RESULTS




<TABLE>
<CAPTION>
                                             Historical                                       Projected
                                     ---------------------------------    ----------------------------------------------------------
                                        1997        1998       1999         2000E        2001E       2002E       2003E        2004E
                                     ---------  ---------  ----------     ---------  ----------  ----------  ----------  -----------

<S>                                   <C>         <C>         <C>          <C>         <C>         <C>          <C>         <C>
INCOME STATEMENT (A)

Revenue                               $240.3      $286.5      $317.0       $324.1      $349.5      $367.0       $385.3      $404.6
  Growth                                  --        19.2%       10.6%         2.3%        7.8%        5.0%         5.0%        5.0%

Gross Profit                            49.5        52.8        55.3         57.9        61.0        64.0         67.2        70.6
  Margin                                20.6%       18.4%       17.4%        17.9%       17.4%       17.4%        17.4%       17.4%

EBITDA                                  24.7        24.0        21.7         22.3        23.9        25.1         26.4        27.7
  Margin                                10.3%        8.4%        6.9%         6.9%        6.9%        6.9%         6.9%        6.9%

EBIT                                    23.8        22.5        19.6         19.9        21.4        22.6         23.8        25.0
  Margin                                 9.9%        7.8%        6.2%         6.1%        6.1%        6.2%         6.2%        6.2%

Net Income                              14.8        13.7        11.9         12.2        13.5        14.4         15.4        16.4

EPS (b)                                   --       $ 1.08       $0.96        $1.02       $1.13       $1.20        $1.28       $1.37
  Growth                                  --           --      (10.4%)        6.0%       10.3%        6.8%         6.8%        6.4%

Adjusted EPS (c )                         --        $1.08       $0.96        $1.08       $1.28       $1.48        $1.71       $1.96
  Growth                                  --           --      (10.4%)       12.2%       18.6%       15.4%        15.3%       15.1%

Diluted Shares Outstanding                --         12.8       12.3         11.3        10.3         9.4          8.6         7.8

CASH FLOW ITEMS

Change in Working Capital (d)         ($18.9)      ($8.6)       $7.2        ($0.6)      ($2.6)      ($1.7)       ($1.8)      ($1.9)

Capital Expenditures (d)                 8.5        10.7         8.8          1.0         1.3         1.3          1.3         1.3

Depreciation (a)                         0.9         1.6         2.2          2.5         2.5         2.6          2.6         2.8


<CAPTION>


                                                     CAGR
                                                -------------
                                                   2000-2004
                                                -------------

<S>                                                <C>
INCOME STATEMENT (A)

Revenue                                            5.7%
  Growth

Gross Profit                                       5.1%
  Margin

EBITDA                                             5.6%
  Margin

EBIT                                               5.9%
  Margin

Net Income                                         7.6%

EPS (b)                                            7.6%
  Growth

Adjusted EPS (c )                                16.1%
  Growth                                            --

Diluted Shares Outstanding                          --

CASH FLOW ITEMS

Change in Working Capital (d)                       --

Capital Expenditures (d)                           5.7%

Depreciation (a)                                   2.9%
</TABLE>

-------------------------------
(A)  BASED ON LEAF MANAGEMENT ESTIMATES.
(B)  ASSUMES 11.9 MILLION SHARES OUTSTANDING FOR 2000 THROUGH 2004.
(C)  ASSUMES EXCESS CASH IS USED TO REPURCHASE SHARES AT THE AVERAGE FORWARD
     P/E MULTIPLE OF 8.7X.
(D)  MERRILL LYNCH IBK ESTIMATES.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              14

<PAGE>



PRELIMINARY VALUATION OF LEAF
--------------------------------------------------------------------------------
PRELIMINARY VALUATION SUMMARY



                              [FLOATING BAR CHART]

                                                    Equity Value Per Share
                                                    ----------------------
                                                        High    Low
Public Comparables (LTM EBITDA)                         12       8.5
Public Comparables (2001 EPS)                           11.25    8
Illustrative Stock Price Based on Forward EPS           11       8.5
Transaction Comparables                                 15.5    12
Premiums Paid Analysis                                  12.5    11
DCF - Analysis                                          12.75    9.5
Leveraged Buyout Analysis                               10       9
52-Week Share Price High/Low                            11       7.63

Proposed Offer: $13.00

Current Price: $10.75


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Relevant Statistic  LTM EBITDA   2001 EPS   2000-2004   LTM EBITDA    8/4/00    2004 EBITDA  5th Yr. Return
                                           Forward EPS              Price (c)               to Equity Sponsor
<S>                  <C>          <C>      <C>           <C>         <C>         <C>               <C>
Leaf Results (b)     $21.9mm      $1.13    $1.08-$1.96   $21.9mm     $10.00      $27.7mm
Multiple Range:
High                   6.0x       10.0x      10.0x         8.0x         25%         6.0x           25%
Low                    4.0x        7.0x       8.0x         6.0x         10%         4.0x           35%
--------------------------------------------------------------------------------------------------------------
</TABLE>

-------------------------------
(A)  BASED ON 11.9 MILLION SHARES OUTSTANDING, 0.480 MILLION OPTIONS
     OUTSTANDING, OPTION PROCEEDS OF $4.3 MILLION AND NET CASH OF $13.3 MILLION.
(B)  FINANCIAL RESULTS BASED ON LEAF MANAGEMENT PROJECTIONS.
(C)  LEAF CLOSING PRICE ONE DAY PRIOR TO THE DAY THAT THE PURCHASER MADE A
     $13.00 OFFER PRICE PER SHARE.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              15
<PAGE>



PRELIMINARY VALUATION OF LEAF
--------------------------------------------------------------------------------
PUBLIC COMPARABLE COMPANIES - SPECIALTY RETAILERS



                                [BAR CHARTS (4)]

Market Capitalization/LTM Sales(a)

Sunglass Hut International      0.69x
Holt's Cigar Holdings           0.56x
Cole National                   0.35x
PETsMART                        0.35x
Jo-Ann Stores - Class A         0.25x
Offer = 0.45x
Mean  = 0.44x


Market Capitalization/LTM EBITDA(a)

PETsMART                          6.1x
Cole National                     6.0x
Sunglass Hut International        5.5x
Holt's Cigar Holdings             4.1x
Jo-Ann Stores - Class A           3.2x
Offer = 6.5x
Mean  = 5.0x


2001 P/E Multiples(b)

Cole National                   9.3x
Sunglass Hut International      9.2x
PETsMART                        7.8x
Jo-AnnStores -Class A           5.7x
Holt's CigarHoldings            NA
Offer = 11.5x
Mean  =  8.0x



2001E P/E to Growth Rate(b)

Sunglass Hut International      0.49x
Cole National                   0.47x
Jo-Ann Stores - Class A         0.47x
PETsMART                        0.30x
Holt's Cigar Holdings           N/A
Offer = 1.15x
Mean  = 0.43x


---------------------------------------
  *  EXCLUDED FROM CALCULATION OF MEAN.
(A)  SOURCE:  COMPANY SEC FILINGS.
(B)  SOURCE:  FIRST CALL ESTIMATES AND I/B/E/S MEAN GROWTH RATES.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              16
<PAGE>



PRELIMINARY VALUATION OF LEAF

PUBLIC COMPARABLE COMPANIES - DIRECT MAIL RETAILERS




                                [BAR CHARTS (4)]

Market Capitalization/LTM Sales(a)

Coldwater Creek         0.90x
Sharper Image           0.70x
Spiegel                 0.55x
J. Jill Group           0.53x
Blair                   0.34x
Lillian Vernon          0.25x
Mean  = 0.55x
Offer = 0.45x


Market Capitalization/LTM EBITDA(a)

J. Jill Group*          20.9x
Coldwater Creek          9.6x
Sharper Image            9.1x
Spiegel                  5.2x
Blair                    4.7x
Lillian Vernon           4.0x
Mean  = 6.5x
Offer = 6.5x


2001 P/E Multiples(b)

Sharper Image           15.6x
Coldwater Creek         14.8x
J.Jill Group            13.8x
Lillian Vernon          10.3x
Spiegel                  6.8x
Blair                   NA
Mean  = 12.3x
Offer = 11.5x


2001 P/E to Growth Rate(b)

Sharper Image           0.73x
Coldwater Creek         0.70x
Lillian Vernon          0.69x
J. Jill Group           0.61x
Spiegel                 0.27x
Blair                   NA
Mean  = 1.15x
Offer = 0.60x


---------------------------------------
  *  EXCLUDED FROM CALCULATION OF MEAN.
(A)  SOURCE:  COMPANY SEC FILINGS.
(B)  SOURCE:  FIRST CALL ESTIMATES AND I/B/E/S MEAN GROWTH RATES AS OF
     AUGUST 25, 2000.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              17
<PAGE>



PRELIMINARY VALUATION OF LEAF
--------------------------------------------------------------------------------
SELECTED COMPARABLE TRANSACTIONS IN THE CIGAR INDUSTRY (A)

(DOLLARS IN MILLIONS)


<TABLE>
<CAPTION>

   ANN.       TARGET                                   DESCRIPTION                                                   OFFER
   DATE       ACQUIROR                                 OF TARGET                DESCRIPTION OF TRANSACTION         VALUE(B)

<S>           <C>                                     <C>                       <C>                                <C>
   Jan-00     GENERAL CIGAR HOLDINGS                  MNFR CIGARS               PURCHASE OF SHARES REPRESENTING    $430.00
                SWEDISH MATCH AB                      (UNITED STATES)           A 64% EQUITY STAKE

   DEC-99     CORPORACIO HABANOS                      MNFR CIGARS               ALTADIS ACQUIRED A 50% STAKE IN    1,000.0
                ALTADIS                               (CUBA                     HABANOS FOR $500 MILLION

   MAY-99     SWEDISH MATCH CIGARETTE OPER.           MNFR CIGARS               ACQUISITION OF ASSETS                570.0
                AUSTRIA TABAK AG                      (SWEDEN)

   DEC-98     SWISHER INTL (AMERICAN MAIZE)*          MNFR CIGARS               SHARE BUY-BACK OF CLASS A SHARES     321.8
                SWISHER INTL (AMERICAN MALZE)         (UNITED STATED)           (CLASS A HOLDERS HAVE 2%
                                                                                VOTING RIGHTS, 17% OF SHARES

   DEC-98     CONSOLIDATED CIGAR HOLDINGS             MNFR CIGARETTS,CIGARS     MERGER                               531.4
                SEITA                                 (UNITED STATES)

   SEP-97     HAVATAMPA INC.-CIGAR DIVISION           MNFR CIGARS               PURCHASE OF ASSETS                   275.0
              TABACALERA CIGARS INT'L SA              (UNITED STATES

   NOV-96     VILLAZON & CO.                          MNFR CIGARS               PURCHASE OF A PRIVATELY HELD          64.0
                GENERAL CIGAR HOLDINGS                (United States)           company

              LEAF PROPOSAL*                                                                                        $156.1
<CAPTION>

                                                                         TRANSACTION VALUE TO:
                                                                     ------------------------------
   ANN.       TARGET                                    TRANSACTION  LTM         LTM          LTM
   DATE       ACQUIROR                                  VALUE(c)(d)  EBITDA      EBIT         SALES

<S>           <C>                                      <C>          <C>           <C>         <C>
   Jan-00     GENERAL CIGAR HOLDINGS                    $316.00      10.4X        14.4X       2.1X
                SWEDISH MATCH AB

   DEC-99     CORPORACIO HABANO                        1,000.0        8.4X(E)     11.9X(E)    3.5X(E)
                ALTADIA

   MAY-99     SWEDISH MATCH CIGARETTE OPER.              570.0       11.3X        12.2X       3.3X
                AUSTRIA TABAK AG

   DEC-98     SWISHER INTL (AMERICAN MAIZE)*             413.3        6.2X(F)      6.9X       1.5X
                SWISHER INTL (AMERICAN MALZE)


   DEC-98     CONSOLIDATED CIGAR HOLDIGS                 730.4        7.3X        7.9X        2.4X
                SEITZ

   SEP-97     HAVATAMPA INC.-CIGAR DIVISION              275.0        N/A          N/A        2.0X
              TABACALERA CIGARS INT'L SA

   NOV-96     VILLAZON & CO.                              89.0         7.9X        8.0X        2.1X
                GENERAL CIGAR HOLDINGS



              LEAF PROPOSAL*                             142.8         6.5x        7.4x        0.5x
</TABLE>

---------------------------------------
SOURCE:  PUBLIC COMPANY FILINGS AND PRESS RELEASES
(A)   CERTAIN TRANSACTIONS REPRESENT THE ACQUISITION OF CONTROL WHICH MAY NOT
      BE DIRECTLY COMPARABLE TO THE ACQUISITION OF A MINORITY STAKE.
      ACQUISITIONS OF A MINORITY STAKE ARE DENOTED BY "*". (B) OFFER VALUE =
      OFFER PRICE PER SHARE X FULLY DILUTED SHARES OUTSTANDING.

(C)   TRANSACTION VALUE = OFFER VALUE + TOTAL DEBT + NON CONVERTIBLE PREFERRED
      STOCK + MINORITY INTEREST - CASH EQUIVALENTS - OPTION PROCEEDS.
(D)   SOURCES WHERE NOT DISCLOSED:  TEXTLINES; ANALYSTS' ESTIMATES.
(E)   ESTIMATED BASED ON NET INCOME MULTIPLE.
(F)   REPRESENTS MORE COMPARABLE TRANSACTION DUE TO MAJORITY OWNERSHIP POSITION
      OF ACQUIROR AT THE TIME OF THE TRANSACTION.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              18
<PAGE>



PRELIMINARY VALUATION OF LEAF
--------------------------------------------------------------------------------
PREMIUMS PAID IN SELECTED TRANSACTIONS SINCE 1/1/98 - U.S. TARGETS


<TABLE>
<CAPTION>
                                               % HELD AT DATE OF   OFFER VALUE                     OFFER PREMIUM
                                                                                    ---------------------------------------------
                                                ANNOUNCEMENT        ($ MM)             1 DAY      1 WEEK   4 WEEKS   52-WK. HIGH
                                              ------------------  --------------    ----------  ---------  -------   ------------

ACQUIROR OWNERSHIP AT ANNOUNCEMENT >50%

<S>                                                  <C>           <C>                 <C>        <C>        <C>         <C>
Maximum                                              98.2%         $1,324.6            100.0%     112.5%     107.4%      52.7%
Mean                                                 72.9%            140.0             27.5%      30.4%      37.6%     (11.5%)
Median                                               73.9%             59.1             23.7%      26.1%      40.4%      (9.1%)
Minimum                                              50.0%              1.9            (11.1%)     (11.6%)   (40.8%)    (69.3%)
Number of Transactions: 54

ACQUIROR OWNERSHIP AT ANNOUNCEMENT >75%

Maximum                                              98.2%         $1,324.6             75.0%      61.5%     107.4%       40.8%
Mean                                                 84.3%            145.6             19.9%      21.7%      37.0%      (12.6%)
Median                                               81.7%             43.3             15.4%      17.3%      42.2%       (4.1%)
Minimum                                              76.8%              6.5             -8.5%     (11.6%)    (40.8%)     (69.3%)
Number of Transactions: 26


LEAF PROPOSAL (a)                                    78.4%            $34.9             30.0%      25.9%      29.0%       11.8%
</TABLE>


-----------------------
SOURCE:  THOMSON FINANCIAL SECURITIES DATA AND COMPANY PRESS RELEASES.  FOR A
         DETAILED LIST OF THESE TRANSACTIONS, PLEASE SEE APPENDIX.
(A)  LEAF CLOSING PRICE ONE DAY PRIOR TO THE DAY THAT THE PURCHASER MADE A
     $13.00 OFFER PRICE PER SHARE.


[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              19
<PAGE>



PRELIMINARY VALUATION OF LEAF
--------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS

                            EBITDA MULTIPLE METHOD(A)

<TABLE>
<CAPTION>
Discount           Equity Value Per Share (b)       Implied Perprtuity Growth Rate
              ---------------------------------   ---------------------------------
Rates            4.0x        5.0x         6.0x        4.0x         5.0x        6.0x
--------      ---------------------------------   ---------------------------------

<S>            <C>          <C>         <C>            <C>         <C>         <C>
13.0%          $10.03       $11.33      $12.63         1.0%        3.2%        4.7%

13.5%            9.89        11.16       12.43         1.4%        3.6%        5.2%

14.0%            9.75        11.00       12.25         1.9%        4.1%        5.6%

14.5%            9.62        10.84       12.08         2.3%        4.6%        6.1%

15.0%            9.49        10.69       11.89         2.8%        5.0%        6.6%
-----------------------------------------------------------------------------------
</TABLE>


---------------------------------------
NOTE:  DISCOUNTED BACK TO JUNE 30, 2000; ASSUMES NET CASH OF $13.3 MILLION AS OF
       JUNE 30, 2000.
(A)  BASED ON PROJECTIONS PROVIDED BY LEAF MANAGEMENT. BASED ON 2004 EBITDA OF
     $27.7 MILLION.
(B)  ASSUMES 11.9 MILLION SHARES OUTSTANDING, 0.480 MILLION OPTIONS OUTSTANDING
     AND OPTION PROCEEDS OF $4.3 MILLION.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              20


<PAGE>



PRELIMINARY VALUATION OF LEAF
--------------------------------------------------------------------------------
ILLUSTRATIVE STOCK PRICE BASED ON CURRENT P/E




                                  [BAR CHART]

2000            $10.81 (c)
                 $9.73 (d)
                 $8.64 (e)
EPS(b)           $1.08

2001            $12.82 (c)
               ($11.05)(c)(f)
                $11.53 (d)
                ($9.94)(d)(f)
                $10.25 (e)
                ($8.84)(e)(f)
EPS(b)           $1.28


2002            $14.79 (c)
               ($10.99)(c)(f)
                $13.31 (d)
                ($9.89)(d)(f)
                $11.83 (e)
                ($8.79)(e)(f)
EPS(b)           $1.48

2003            $17.05 (c)
               ($10.92)(c)(f)
                $15.35 (d)
                ($9.83)(d)(f)
                $13.64 (e)
                ($8.74)(e)(f)
EPS(b)           $1.71


2004            $19.62 (c)
               ($10.83)(c)(f)
                $17.65 (d)
                ($9.75)(d)(f)
                $15.69 (e)
                ($8.67)(e)(f)
EPS(b)           $1.96



---------------------------------------
(a)  BASED ON A COST OF EQUITY OF 16.0%.
(b)  BASED ON PROJECTIONS PROVIDED BY LEAF MANAGEMENT.
(c)  Calculated using a current P/E multiple of 8.0x
(d)  Calculated using a current P/E multiple of 9.0x
(e)  Calculated using a current P/E multiple of 10.0x
(f)  Discounted back to December 31, 2000

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              21
<PAGE>



PRELIMINARY VALUATION OF LEAF
--------------------------------------------------------------------------------
LEVERAGED BUYOUT ANALYSIS


                                  CONSTRAINTS
<TABLE>
<S>                                                              <C>

Minimum 2000 EBITDA/Interest Coverage                                    2.0x
o  Maximum Debt to EBITDA                                                3.5x
o  Minimum Equity Investment                                              25%
o  Minimum 5th Year Return on Equity                                    25%-35%
o  Minimum 5th Year Return to Subordinated Debtholders                    22%


                                                                     LOW         HIGH
                                                                 -----------  -----------
                                    Results

o  Offer Price Per Share                                             $9.05      $10.05
o  Transaction Value                                                 $93.8      $106.1
o  Capital Structure (% of Sources)
     Senior Bank Debt
     (Term Loan and Revolver) @ 9.75%                                  58%         52%
     13.0% Subordinated Debentures                                      4%          4%
     Common Equity                                                     23%         30%
     Cash                                                              12%         11%
     Option Proceeds                                                    3%          3%
o  5th Year Return to Equity Sponsor @ 5.0x EBITDA Exit                35%         25%
</TABLE>

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              22
<PAGE>


--------------------------------------------------------------------------------





                                    APPENDIX





--------------------------------------------------------------------------------
<PAGE>



APPENDIX
--------------------------------------------------------------------------------
PREMIUMS PAID IN SELECTED TRANSACTIONS SINCE 1/1/98 - U.S. TARGETS ONLY
(DOLLARS IN MILLIONS)


<TABLE>
<CAPTION>
                                                                                                             OFFER
        DATE                                                                        % HELD AT DATE OF        VALUE
      ANNOUNCED             TARGET                             ACQUIROR                   ANNOUNCEMENT       ($MM)
     ----------      -----------------------------      ----------------------------    -----------------    -------
<S>                  <C>                                <C>                                 <C>              <C>
      05/03/00       Roadhouse Grill*                   Investor Group                      66.20%             23.0
      04/25/00       MPW Industrial Services Group*     Investor Group                      52.4               43.8
      04/24/00       Cherry Corp.*                      Investor Group                      54.8               85.1
      03/31/00       Solomon-Page Group*                Investor Group                      55.5               10.2
      03/27/00       Hartford Life                      Hartford Financial Services         80.4            1,324.6
      03/23/00       Homestead Village                  Security Capital Group              72.3              156.8
      03/14/00       Howmet International               Alcoa                               81.1              349.3
      01/31/00       ThermoQuest                        Theormo Instrument Systems          85.4               96.9
      01/31/00       Thermo Sentron                     Themedics                           80.5               30.7
      01/31/00       Thermo Optek                       Thermo Instrument Systems           90.0               51.8
      01/31/00       Thermo Bio Analysis                Thermo Instrument Systems           70.1              167.9
      01/31/00       Thermedics Detection               Themedics                           88.2               17.0
      01/31/00       Metrika Systems                    Thermo Instrument Systems           78.3               14.2
      01/19/00       Conning                            Metropolitan Life Insurance         56.6               73.5
      11/05/99       Synthetic Industries*              Investor Group                      66.0              102.2
      11/05/99       PEC Israel Economic Corp           Discount Investment                 56.3              320.0
      10/20/99       Thermoretec                        Thermo Electron                     55.4               56.9
      10/20/99       Randers Killam  Gr.                Thermo Electron                     91.2                6.7
      07/13/99       Thermo Vision                      Thermo Instrument Systems           77.5               11.9
      06/04/99       Intek Global                       Securicor Communications            56.3               51.9
      05/21/99       ThermoSpectra                      Thermo Instrument Systems           85.5               26.1
      05/07/99       J  Ray McDermott SA                McDermott International             63.0              514.5
      05/05/99       Thermo Power                       Thermo Electron                     69.3               34.8
      04/29/99       Killearn Properties                Killern                             62.0                1.9
      04/12/99       Meadowcraft                        Investor Group                      73.0               53.2
      04/01/99       Aqua Alliance                      Vivendl SA                          77.8              117.1
      03/24/99       Knoll Inc.                         Warburg, Pincus Ventures            58.2              490.8
      03/21/99       Spelling  Entertainment            Viacom Inc.                         80.9              191.6
      03/09/99       Sun Energy Partners LP             Kerr-McGee                          98.2               43.4
      03/08/99       LabOne                             Lab Holdings                        76.8               34.3
      03/08/99       ENStar                             Investor Group                      64.5               13.2
      12/09/98       Swisher International              Investor Group                      83.0                9.8
      12/03/98       Banner Aerospace                   Fairchild                           69.2               82.4
      11/16/98       Western Beef                       Cactus Acquisitions                 71.9               13.6

<CAPTION>
                                                                         OFFER PREMIUM
        DATE                                               -----------------------------------------------
      ANNOUNCED             TARGET                          1 DAY       1 WEEK      4 WEEKS     52-WK.HIGH
     ----------      -----------------------------          --------    ------      -------     ----------
<S>                  <C>                                    <C>          <C>         <C>         <C>
      05/03/00       Roadhouse Grill*                       38.3%        36.6%       62.3%        1.8%
      04/25/00       MPW Industrial Services Group*          56.1         56.1        15.3       (27.3)
      04/24/00       Cherry Corp.*                           44.2         38.2        18.8         1.5
      03/31/00       Solomon-Page Group*                     47.8         47.8        41.7        52.7
      03/27/00       Hartford Life                           18.6         40.3        43.3        (8.2)
      03/23/00       Homestead Village                       49.1         56.2        98.8       (20.0)
      03/14/00       Howmet International                    13.5         12.8        14.3         1.8
      01/31/00       ThermoQuest                             36.0         47.0        61.9         3.4
      01/31/00       Thermo Sentron                           7.4          6.9         6.9        (0.8)
      01/31/00       Thermo Optek                             6.7         (5.1)       41.2       (11.1)
      01/31/00       Thermo Bio Analysis                     51.4         55.6        53.4         6.7
      01/31/00       Thermedics Detection                     0.8          0.8        14.3       (26.4)
      01/31/00       Metrika Systems                         (6.5)         0.0        46.9       (10.0)
      01/19/00       Conning                                 15.6         38.9        52.1       (35.5)
      11/05/99       Synthetic Industries*                   13.5         16.8        20.0         1.7
      11/05/99       PEC Israel Economic Corp                 0.2          1.0         2.8        (0.2)
      10/20/99       Thermoretec                             27.3         33.3        34.9        (3.7)
      10/20/99       Randers Killam  Gr.                     12.5         12.5        33.3         5.9
      07/13/99       Thermo Vision                           75.0         60.0       107.4        (3.4)
      06/04/99       Intek Global                            32.1         26.9        22.0       (25.9)
      05/21/99       ThermoSpectra                           39.1         43.8        61.0         4.1
      05/07/99       J  Ray McDermott SA                     16.8         13.1        19.2       (24.8)
      05/05/99       Thermo Power                             5.5         (1.5)       41.2        (3.0)
      04/29/99       Killearn Properties                     10.0         10.0         7.3       (48.2)
      04/12/99       Meadowcraft                             64.9         63.3        77.8       (41.6)
      04/01/99       Aqua Alliance                           28.9         19.0       101.7       (69.3)
      03/24/99       Knoll Inc.                              83.6         51.9        46.4       (32.5)
      03/21/99       Spelling  Entertainment                  8.3         43.1        54.5         2.0
      03/09/99       Sun Energy Partners LP                  41.5         43.8        50.8        21.1
      03/08/99       LabOne                                  17.2         10.3         8.5       (21.1)
      03/08/99       ENStar                                  56.3         58.7        51.5        25.0
      12/09/98       Swisher International                   24.8         33.3        49.4       (46.5)
      12/03/98       Banner Aerospace                        25.7         41.9        40.8       (15.4)
      11/16/98       Western Beef                            25.0         14.8        22.8       (12.5)
</TABLE>


---------------------------------------
SOURCE:  THOMSON FINANCIAL SECURITIES DATA.  OFFER PREMIUMS FOR TRANSACTIONS
MARKED WITH "*" HAVE BEEN CALCULATED BASED ON COMPANY PRESS RELEASES.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              23

<PAGE>



APPENDIX

PREMIUMS PAID IN SELECTED TRANSACTIONS SINCE 1/1/98 - U.S. TARGETS ONLY (CONT'D)
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>

        DATE                                                                        % HELD AT DATE OF        VALUE
      ANNOUNCED             TARGET                             ACQUIROR                   ANNOUNCEMENT       ($MM)
     ----------      -----------------------------      ----------------------------    -----------------    -------
<S>                  <C>                                <C>                                 <C>              <C>

      11/12/98       Aquila Gas Pipeline                UtiliCorp United                    81.6%                43.2
      10/27/98       Citizens Corp.                     Allmerica Financial                 81.8                212.4
      10/21/98       Capital Factors Holdings           Union Planters Bk Nat Assoc         87.3                 22.2
      10/16/98       BRC Holdings                       Affiliated Computer Services        51.0                131.9
      09/29/98       Newmont Gold                       Newmont Mining                      93.8                264.8
      09/23/98       Ryerson Tull                       Inland Steel Industries             86.4                 61.2
      09/23/98       J&L Specially Steel                Usinor SA                           53.5                115.0
      09/08/98       PEC Israel Economic Corp           Investor Group                      81.4                125.0
      08/24/98       Tele-Commun Intl                   Liberty Media                       81.1                379.1
      07/21/98       Forum Retirement Partners          Forum Group                         92.6                  6.5
      06/11/98       Imo Industries                     Constellation Capital Partners      92.8                  9.1
      04/30/98       Mycogen Corp                       Dow AgroSciences                    62.2                379.3
      04/29/98       Group 1 Software                   COMNET                              78.3                 11.8
      03/31/98       Thermo Voltek                      Thermedics                          50.0                 43.9
      03/27/98       Intl Specialty Prods               ISP Holdings                        79.9                324.5
      03/17/98       BET Holdings                       Investor Group                      57.9                462.3
      03/05/98       XLConnect Solutions              Xerox                               69.7                 93.0
      01/22/98       BT Office Products Intl            Koninklijke KNPBTNV                 70.0                138.1
      01/20/98       NACT Telecommunications            World Access                        61.0                 53.1
      01/08/98       Raynier Timberlands LP             Rayonier                            74.7                 65.8

                                                    ACQUIROR OWNERSHIP AT ANNOUNCEMENT IS GREATER THAN 50%
                                                    ------------------------------------------------------

                                                    Maximum                                 98.2%           $1,324.6
                                                    Mean                                    72.9%              140.1
                                                    Median                                  73.9%               59.1
                                                    Minimum                                 50.0%                1.9
                                                    Number of Transactions: 54

                                                    ACQUIROR OWNERSHIP AT ANNOUNCEMENT IS GREATER THAN 75%
                                                    ------------------------------------------------------

                                                    Maximum                                 98.2%            $1,324.6
                                                    Mean                                    84.3%               145.6
                                                    Median                                  81.7%                43.3
                                                    Minimum                                 76.8%                 6.5
                                                    Number of Transactions: 26

<CAPTION>
                                                                                                         OFFER PREMIUM
        DATE                                                                             -------------------------------------------
      ANNOUNCED             TARGET                             ACQUIROR                  1 DAY    1 WEEK      4 WEEKS     52-WK.HIGH
     ----------      -----------------------------      ----------------------------     -------- ------      -------     ----------
<S>                  <C>                                <C>                              <C>       <C>         <C>         <C>

      11/12/98       Aquila Gas Pipeline                UtiliCorp United                   23.1%     17.4%       68.4%      (57.9%)
      10/27/98       Citizens Corp.                     Allmerica Financial                 20.6      17.2        20.9        (4.8)
      10/21/98       Capital Factors Holdings           Union Planters Bk Nat Assoc          4.5       8.9         2.9       (12.5)
      10/16/98       BRC Holdings                       Affiliated Computer Services        17.1      16.9        15.2       (13.4)
      09/29/98       Newmont Gold                       Newmont Mining                      (5.2)     20.8        62.4       (46.6)
      09/23/98       Ryerson Tull                       Inland Steel Industries             (8.5)    (11.6)      (40.8)      (62.5)
      09/23/98       J&L Specially Steel                Usinor SA                          100.0     112.5        37.8       (55.0)
      09/08/98       PEC Israel Economic Corp           Investor Group                      60.0      55.7        50.5        44.6
      08/24/98       Tele-Commun Intl                   Liberty Media                       (1.1)     (4.5)       (9.9)      (19.1)
      07/21/98       Forum Retirement Partners          Forum Group                         24.3      24.3        24.3        (2.1)
      06/11/98       Imo Industries                     Constellation Capital Partners      (1.1)      4.4         2.5        (2.8)
      04/30/98       Mycogen Corp                       Dow AgroSciences                    41.8      40.0        52.4         9.8
      04/29/98       Group 1 Software                   COMNET                              71.6      61.5        71.6        40.8
      03/31/98       Thermo Voltek                      Thermedics                          45.5      60.0        40.0       (27.3)
      03/27/98       Intl Specialty Prods               ISP Holdings                         4.3       1.7        14.5        (1.4)
      03/17/98       BET Holdings                       Investor Group                      53.7      58.5        58.2         3.7
      03/05/98       XLConnect Solutions                Xerox                              (11.1)     15.1        22.1       (11.1)
      01/22/98       BT Office Products Intl            Koninklijke KNP BT NV               32.5      78.9        78.9       (15.7)
      01/20/98       NACT Telecommunications            World Access                        12.0      12.5        16.7        (2.8)
      01/08/98       Raynier Timberlands LP             Rayonier                            11.2      25.3        17.5       (30.7)



                                                    Maximum                                100.0%    112.5%      107.4%       52.7%
                                                    Mean                                   27.5%     30.4%       37.6%      (11.5%)
                                                    Median                                 23.7%     26.1%       40.4%       (9.1%)
                                                    Minimum                               (11.1%)   (11.6%)     (40.8%)     (69.3%)
                                                    Number of Transactions: 54

                                                    Maximum                                75.0%     61.5%      107.4%       40.8%
                                                    Mean                                   19.9%     21.7%       37.0%       12.6%
                                                    Median                                 15.4%     17.3%      (42.2%)      (4.1%)
                                                    Minimum                                (8.5%)   (11.6%)     (40.8%)     (69.3%)
                                                    Number of Transactions: 26
</TABLE>


---------------------------------------
SOURCE:  THOMSON FINANCIAL SECURITIES DATA.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              24
<PAGE>



APPENDIX

ANALYSIS OF SALES TRENDS




<TABLE>
<CAPTION>
                                        Comp Quarter Trends                YTD 2000                          Indicative
                                   Positive         Negative        Revenue Contribution                  Gross Margin (a)
                                  ----------------------------     --------------------------    ---------------------------------
PRODUCT:

<S>                                   <C>              <C>                 <C>                     <C>
Cigars/Tobacco                         4                6                   45.1%                  10% (wholesale)/30%(retail)
Cigarettes                             9                1                   46.0%                   2% (wholesale)/6%(retail)
Fragrances                             9                1                    2.5%                              30%
Other Merchandise                     10                0                    6.9%                              30%
                                  -------------  -------------     --------------------------
Total Net Sales                        9                1                  100.0%

RETAIL OPERATIONS:

Direct Mail Cigars                     3                7                   17.7%                          29%-31%
Cigar Stores                           3                7                   10.3%                          28%-33%
Discount Outlet Stores                 8                2                   21.4%                               6%
Internet                              NM               NM                    1.2%                              30%
                                  -------------  -------------     --------------------------
Total Retail Sales                     7                3                   50.6%

WHOLESALE OPERATIONS:
Direct Mail Cigars                     5                5                   18.1%                              10%
Cash & Carry Cigarettes               10                0                   31.2%                               2%
                                  -------------  -------------     --------------------------
Total Wholesale Sales                  8                2                   49.4%
</TABLE>


---------------------------------
Source: Leaf management.
(a)  Indicative gross margin as per management estimate

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              25
<PAGE>



APPENDIX
--------------------------------------------------------------------------------
ANALYSIS OF QUARTERLY SALES TRENDS - YTD 2000
(DOLLARS IN MILLIONS)


<TABLE>
<CAPTION>

                                               Q2                                      Q1
                                     -----------------------------          --------------------------------
                                     2000        1999      % Change          2000        1999       % Change
                                     -----------------------------          --------------------------------
<S>                                  <C>         <C>         <C>             <C>         <C>          <C>
PRODUCT:
Cigars/Tobacco                       $36.8       $37.7       (2.4%)          $31.2       $32.9        (5.1%)
Cigarettes                            36.1        34.0        6.2%            33.2        34.8        (4.6%)
Fragrances                             1.9         1.8        2.7%             1.4         1.3         3.7%
Other Merchandise                      5.4         5.3        3.0%             4.6         3.8        22.3%
                                    -------     -------     ------          -------     -------      -------
Total Net Sales                      $80.2       $78.8        1.8%           $70.4       $72.8        (3.3%)

RETAIL OPERATIONS:
Direct Mail Cigars                   $13.5       $14.6       (7.8%)          $12.0       $13.0        (7.9%)
Cigar Stores                           7.9         8.3       (5.5%)            6.2         6.9       (10.4%)
Discount Outlet Stores                17.8        16.5        7.6%            14.4        16.4       (12.1%)
Internet                               2.7         0.7      285.5%             1.9          --          --
                                    -------     -------     ------          -------     -------      -------
Total Retail Sales                   $41.8       $40.1        4.1%           $34.5       $36.3        (5.1%)

WHOLESALE OPERATIONS:
Direct Mail Cigars                   $12.7       $14.1      (10.0%)          $11.1       $12.8       (13.1%)
Cash & Carry Cigarettes               25.8        24.6        4.9%            24.9        23.7         4.8%
                                    -------     -------     ------          -------     -------      -------
Total Wholesale Sales                 38.5        38.7       (0.5%)           35.9        36.5        (1.5%)

Total Net Sales                      $80.2       $78.8        1.8%           $70.4       $72.8        (3.3%)
                                    =======     =======     =======         =======     =======      =======
</TABLE>

-------------------------------
SOURCE:  LEAF MANAGEMENT.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              26
<PAGE>



APPENDIX
--------------------------------------------------------------------------------
ANALYSIS OF QUARTERLY SALES TRENDS - 1999 VS. 1998
(DOLLARS IN MILLIONS)




<TABLE>
<CAPTION>
                                           Q4                                    Q3
                           -------------------------------  --------------------------------------
                             1999       1998      % Change        1999        1998       % Change
                           -------------------------------  --------------------------------------
<S>                         <C>        <C>          <C>          <C>         <C>           <C>
PRODUCT:
Cigars/Tobacco              $40.6      $38.8        4.6%         $38.8       $41.7        (7.0%)
Cigarettes                   34.4       32.8        4.6%          33.9        25.7        32.2%
Fragrances                    2.9        2.8        4.8%           1.9         1.7         8.3%
Other Merchandise             7.6        6.6       14.8%           5.3         4.1        29.2%
                           ------     ------     -------        -------    --------     -------
Total Net Sales             $85.5      $81.1        5.4%         $79.9       $73.2         9.1%

RETAIL OPERATIONS:
Direct Mail Cigars          $14.0      $16.2      (13.5%)        $14.6       $17.7       (17.5%)
Cigar Stores                  9.2       10.4      (11.8%)          8.1         8.8        (7.7%)
Discount Outlet Stores       18.9       18.8        0.6%          16.1        15.1         6.4%
Internet                      1.7         --         --            1.3          --          --
                           ------     ------     -------        -------    --------     -------
Total Retail Sales          $43.8      $45.4       (3.4%)        $40.1       $41.7        (3.6%)

WHOLESALE OPERATIONS:
Direct Mail Cigars          $16.2      $13.4       20.9%         $14.5       $15.3        (5.1%)
Cash & Carry Cigarettes      25.5       22.3       14.2%          25.2        16.3        55.2%
                           ------     ------     -------        -------    --------     -------
Total Wholesale Sales        41.7       35.7       16.7%          39.7        31.5        26.0%

Total Net Sales             $85.5      $81.1        5.4%         $79.9       $73.2         9.1%
                           ======     ======     =======        ======     =======      =======

<CAPTION>


                                                Q2                                      Q1
                           ---------------------------------    ------------------------------------
                              1999        1998      % Change          1999        1998      % Change
                           ---------------------------------    ------------------------------------
<S>                          <C>         <C>         <C>             <C>         <C>         <C>
PRODUCT:
Cigars/Tobacco               $37.7       $38.5       (2.1%)          $32.9       $34.1       (3.5%)
Cigarettes                    34.0        26.0       30.7%            34.8        24.0       44.9%
Fragrances                     1.8         1.8        2.2%             1.3         1.3        6.7%
Other Merchandise              5.3         3.7       41.6%             3.8         2.8       33.5%
                            ------      ------      ------          ------      -------     -------
Total Net Sales              $78.8       $70.0       12.5%           $72.8       $62.2       17.1%

RETAIL OPERATIONS:
Direct Mail Cigars           $14.6       $15.5       (6.0%)          $13.0       $13.5       (3.6%)
Cigar Stores                   8.3        10.2      (18.0%)            6.9         7.3       (5.6%)
Discount Outlet Stores        16.5        11.4       44.7%            16.4        11.6       40.9%
Internet                       0.7          --         --               --          --         --
                            ------      ------      ------          ------      -------     -------
Total Retail Sales           $40.1       $37.1        8.2%           $36.3       $32.5       11.9%

WHOLESALE OPERATIONS:
Direct Mail Cigars           $14.1       $14.3       (1.3%)          $12.8       $13.1       (2.5%)
Cash & Carry Cigarettes       24.6        18.7       31.7%            23.7        16.6       42.7%
                            ------      ------      ------          ------      -------     -------
Total Wholesale Sales         38.7        32.9       17.4%            36.5        29.7       22.8%

Total Net Sales              $78.8       $70.0       12.5%           $72.8       $62.2       17.1%
                            ======      ======      ======          ======      ======      =======
</TABLE>

-------------------------------
SOURCE:  LEAF MANAGEMENT.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              27
<PAGE>



APPENDIX
--------------------------------------------------------------------------------
ANALYSIS OF SALES TRENDS - 1998 VS. 1997
(DOLLARS IN MILLIONS)




<TABLE>
<CAPTION>
                                              Q4                                   Q3
                               ---------------------------------     ----------------------------------
                                 1998        1997      % Change       1998        1997       % Change
                               ---------------------------------     ----------------------------------
PRODUCT:
<S>                              <C>         <C>         <C>          <C>         <C>          <C>
Cigars/Tobacco                   $38.8       $39.0       (0.4%)       $41.7       $36.0        15.9%
Cigarettes                        32.8        22.4       46.4%         25.7        21.4        19.6%
Fragrances                         2.8         2.7        3.6%          1.7         1.7         0.0%
Other Merchandise                  6.6         4.1       62.3%          4.1         2.9        43.8%
                                ------      ------     -------      --------     -------     -------
Total Net Sales                  $81.1       $68.2       18.9%        $73.2       $62.0        18.0%

RETAIL OPERATIONS:
Direct Mail Cigars               $16.2       $16.6       (2.5%)       $17.7       $13.6        30.8%
Cigar Stores                       9.2         6.8       35.1%          5.9         6.2        (4.2%)
Discount Outlet Stores            20.0        18.5        8.3%         18.0        15.5        16.2%
Internet                            --          --         --            --          --          --
                                ------      ------     -------      --------     -------     -------
Total Retail Sales               $45.4       $41.9        8.4%        $41.7       $35.2        18.2%

WHOLESALE OPERATIONS:
Direct Mail Cigars               $13.4       $12.0       11.1%        $15.3       $12.0        26.8%
Cash & Carry Cigarettes           22.3        14.3       56.1%         16.3        14.7        10.4%
                                ------      ------     -------      --------     -------     -------
Total Wholesale Sales             35.7        26.3       35.5%         31.5        26.8        17.8%

Total Net Sales                  $81.1       $68.2       18.9%        $73.2       $62.0        18.0%
                                ======      ======     =======      ========     =======     =======

<CAPTION>


                                              Q2                                      Q1
                               -----------------------------------     ----------------------------------
                                1998         1997      % Change          1998        1997      % Change
                               -----------------------------------     ----------------------------------
<S>                             <C>          <C>         <C>             <C>         <C>         <C>
PRODUCT:

Cigars/Tobacco                  $38.5        $34.5       11.5%           $34.1       $27.3       24.8%
Cigarettes                       26.0         21.0       24.0%            24.0        18.3       31.1%
Fragrances                        1.8          1.7        2.3%             1.3         1.3       (3.3%)
Other Merchandise                 3.7          3.2       17.2%             2.8         2.7        3.3%
                                ------       ------     -------        --------     -------     -------
Total Net Sales                 $70.0        $60.4       15.9%           $62.2       $49.7       25.2%

RETAIL OPERATIONS:
Direct Mail Cigars              $15.5        $13.3       17.2%           $13.5       $10.2       33.1%
Cigar Stores                      5.9          5.7        3.2%             4.7         4.4        6.6%
Discount Outlet Stores           15.7         15.3        2.9%            14.3        14.4       (0.8%)
Internet                           --           --         --               --          --         --
                                ------       ------     -------        --------     -------     -------
Total Retail Sales              $37.1        $34.2        8.5%           $32.5       $29.0       12.2%

WHOLESALE OPERATIONS:
Direct Mail Cigars              $14.3        $11.9       19.7%           $13.1        $9.3       40.7%
Cash & Carry Cigarettes          18.7         14.3       30.4%            16.6        11.4       45.4%
                                ------       ------     -------        --------     -------     -------
Total Wholesale Sales            32.9         26.2       25.6%            29.7        20.7       43.3%

Total Net Sales                 $70.0        $60.4       15.9%           $62.2       $49.7       25.2%
                                ======      =======     =======        ========     =======     =======
</TABLE>


-------------------------------
Source:  Leaf management.

[LOGO] MERRILL LYNCH------------------------------------------------------------
                                                                              28
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(C)(3)
<SEQUENCE>12
<FILENAME>ex-99_c3.txt
<DESCRIPTION>EXHIBIT 99.(C)(3)
<TEXT>


<PAGE>

                                                                 Exhibit 99.c(3)

================================================================================

                          FIRST UNION SECURITIES, INC.

                                Presentation to

                               BOARD OF DIRECTORS

                                  June 5, 2000

================================================================================
<PAGE>

================================================================================
                                             Presentation to: BOARD OF DIRECTORS
                                                                          page 1
================================================================================


--------------------------------------------------------------------------------
      Introduction
--------------------------------------------------------------------------------

      Situation Overview

      Proposed Offer from Lew and LaVonda Rothman

      Exhibits

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
INTRODUCTION                                 Presentation to: BOARD OF DIRECTORS
                                                                          page 2
================================================================================


OVERVIEW

      o     Frustrated by lack of interest and movement in the common stock of
            Cutter (the "Company"), Messrs. Rothman and Colleton decided to
            investigate ways to maximize shareholder value.

      o     On April 7, 2000, representatives of the Company met with First
            Union Securities, Inc. ("FUSI") to discuss various strategic
            alternatives to maximize shareholder value, including a potential
            sale of the Company and a going private transaction.

            -     At the meeting, the Company authorized FUSI to conduct a
                  limited market check to determine the interest of strategic
                  buyers.

      o     FUSI contacted the two most likely strategic buyers, Altadis and
            Swedish Match, to determine their level of interest in a potential
            acquisition of the Company.

            -     Both Altadis and Swedish Match declined to pursue an
                  acquisition of the Company.

      o     On May 18, 2000, FUSI met with representatives of the Company to
            update them on the results of the market check, as well as to
            discuss further the possibility of a going private transaction.

      o     At the meeting, the Company's President and Chief Executive Officer,
            Lew Rothman, concluded that he believed a going private transaction
            would be in the best interests of the Company's shareholders.

      o     Lew Rothman called a special meeting of the Board of Directors to be
            held on June 5, 2000 for the purpose of discussing such a
            transaction.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
                                             Presentation to: BOARD OF DIRECTORS
                                                                          page 3
================================================================================


      Introduction

--------------------------------------------------------------------------------
      Situation Overview
--------------------------------------------------------------------------------

      Proposed Offer from Lew and LaVonda Rothman

      Exhibits

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
SITUATION OVERVIEW                           Presentation to: BOARD OF DIRECTORS
                                                                          page 4
================================================================================


SUMMARY

      o     The Company currently does not benefit from remaining public, given
            its industry segment, size, growth characteristics and institutional
            visibility.

      o     Investor interest in the cigar industry has waned.

            -     Global tobacco industry consolidation continues.

            -     Most of the publicly held domestic manufacturers or
                  distributors of cigars have been acquired or taken private.

      o     Lack of interest by public markets has led to poor returns for
            shareholders of the remaining companies, as well as other companies
            of similar size and potential growth.

            -     Small cap and moderate growth companies significantly
                  underperforming NASDAQ and S&P 500.

            -     Trading volume waning in smaller cap issues.

            -     Institutional support fading.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
SITUATION OVERVIEW                           Presentation to: BOARD OF DIRECTORS
                                                                          page 5
================================================================================


TIMELINE RELATING TO KEY PALYERS IN THE U.S. CIGAR INDUSTRY

--------------------------------------------------------------------------------
Date                                      Significant Event
--------------------------------------------------------------------------------
August 1996       >     Consolidated Cigar Holdings, Inc. completes IPO of 5.4
                        million shares at $23.00 per share.

                  >     President Clinton approves proposed FDA regulations that
                        give the FDA the authority to regulate cigarettes as a
                        drug delivery device.

--------------------------------------------------------------------------------
December 1996     >     Swisher International Group Inc. completes IPO of 6.0
                        million shares at $17.00 per share.

--------------------------------------------------------------------------------
February 1997     >     General Cigar Holdings, Inc. completes IPO of 6.0
                        million shares at $18.00 per share.

--------------------------------------------------------------------------------
March 1997        >     Liggett Group settles lawsuits with 22 states. The
                        company admits that smoking is addictive and can cause
                        cancer. The company also admits that the industry
                        intentionally markets to minors.

--------------------------------------------------------------------------------
June 1997         >     Cutter completes IPO of 3.0 million shares at $17.00 per
                        share.

                  >     Tobacco companies settle with state attorney generals.

--------------------------------------------------------------------------------
August 1997       >     Tobacco companies settle Florida Medicaid lawsuit for
                        $11.3 billion. The companies agree to eliminate all
                        designated billboard ads, to eliminate vending machine
                        sales and to support educational programs.

--------------------------------------------------------------------------------
October 1997      >     Tobacco companies settle the Broin class action suit.
                        This becomes the first-ever second-hand smoke trial.

--------------------------------------------------------------------------------
December 1997     >     A class action lawsuit for 60 union health care funds in
                        Washington is filed alleging intentional targeting by
                        tobacco companies of blue collar workers. The 60 funds
                        involve 500,000 workers. Eight more states are expected
                        to file soon.

                  >     Liggett Group will list ingredients on the packages of
                        L&M cigarettes.

                  >     Lorillard pays more than $1.5 million to the family of a
                        California smoker who died of cancer. This is the
                        first-ever payment by a tobacco company for a
                        smoking-related personal injury claim.

                  >     Havatampa Inc. is sold to Tabacalera International SA.

--------------------------------------------------------------------------------
December 1998     >     Swisher International Group Inc. announces going private
                        transaction at $9.50 per share (44.1% discount to IPO
                        price).

                  >     Consolidated Cigar Holdings, Inc. announces sale to
                        Seita for $17.85 per share (22.4% discount to IPO
                        price).

--------------------------------------------------------------------------------
January 2000      >     General Cigar Holdings, Inc. announces sale of majority
                        ownership to Swedish Match for $15.25 per share (15.3%
                        discount to IPO price).
--------------------------------------------------------------------------------

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
SITUATION OVERVIEW                           Presentation to: BOARD OF DIRECTORS
                                                                          page 6
================================================================================


SMALL CAP INDEX, MODERATE GROWTH INDEX AND THE COMPANY VERSUS NASDAQ AND S&P 500
(1)(2)
(Since Company's IPO)

--------------------------------------------------------------------------------
                                             Small Caps Trading Discount to
                                        ----------------------------------------
                                                  NASDAQ              S&P 500
                                                  ------              -------

Current                                               66.6%                49.1%
One Year                                              44.6%                36.5%

                                        Moderate Growth Cos. Trading Discount to
                                        ----------------------------------------
                                                  NASDAQ              S&P 500
                                                  ------              -------
Current                                               58.1%                36.3%
One Year                                              29.5%                19.1%

                                              Company Trading Discount to
                                        ----------------------------------------
                                                  NASDAQ              S&P 500
                                                  ------              -------
Current                                               79.3%                68.5%
One Year                                              73.0%                69.1%
--------------------------------------------------------------------------------

                              [LINE CHART OMITTED]

Footnote:
---------
(1)   Small cap index composed of all companies with market capitalization below
      $100.0 million.
(2)   Moderate growth index composed of all companies with 3-5 year earnings
      growth of 10.0% or less.

      o     The discount to the NASDAQ and S&P 500 for both the small cap and
            moderate growth indices has gotten significantly larger over time
            and will continue to increase as more capital flows into "New
            Economy" companies.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
SITUATION OVERVIEW                           Presentation to: BOARD OF DIRECTORS
                                                                          page 7
================================================================================


ANALYSIS OF INSTITUTIONAL SUPPORT FOR THE COMPANY'S STOCK

      o     The Company's stock is very thinly traded and has very little
            institutional support and visibility.

            -     From the IPO date to January 1, 1999, the median trading
                  volume of the Company's stock was 27,400 shares a day.

            -     Since January 1, 1999, the median daily trading volume of the
                  Company's stock has been 9,100 shares a day.

            -     Of the sixteen brokerage firms that actively traded the
                  Company's stock between the IPO and December 31, 1999, only
                  six are trading the stock in calendar 2000.

            -     Only one institution, FUSI, provides research on the Company
                  vs. three at the time of the Company's IPO.

      o     Without significant institutional interest, research or trading
            support, catalysts for near to intermediate term price appreciation
            are very limited.

                            Trading Volume Analysis
                            -----------------------
                             (Latest Twelve Months)

                               [BAR CHART OMITTED]


                Comparison of Total Shares Traded Year Over Year
                ------------------------------------------------

                              [BAR CHART OMITTED]


Footnote:
---------
(1)   IPO on June 25, 1997.
(2)   YTD as of June 5, 2000.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
SITUATION OVERVIEW                           Presentation to: BOARD OF DIRECTORS
                                                                          page 8
================================================================================


THE COMPANY'S FORWARD P/E MULTIPLE(1)
(From July 21, 1997 to Present)

      o     Despite achieving consistent historical revenue growth (14.8% CAGR
            from 1997 to 1999) and stable cash flows, the Company's forward P/E
            multiple has contracted dramatically since September 1997.

                             [LINE GRAPHIC OMITTED]


Footnote:
--------
(1)   Data was unavailable for the period of April 1999 to February 2000 due to
      lack of forward twelve months quarter-over-quarter EPS projections.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
SITUATION OVERVIEW                           Presentation to: BOARD OF DIRECTORS
                                                                          page 9
================================================================================


SHIFT IN INSTITUTIONAL OWNERSHIP - QUARTER OVER QUARTER SINCE IPO

                              [BAR CHART OMITTED]

      o     Total shares purchased by institutions has declined dramatically
            since quarter ended June 30, 1999.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
SITUATION OVERVIEW                           Presentation to: BOARD OF DIRECTORS
                                                                         page 10
================================================================================


LACK OF INTEREST FROM STRATEGIC BUYERS

      o     On April 7, 2000, the Company's management team authorized FUSI to
            conduct a market check to gauge the interest of the Company's two
            most likely strategic buyers regarding a possible acquisition of the
            Company.

      o     FUSI contacted Altadis and Swedish Match to determine their level of
            interest in a potential acquisition of the Company. Both companies
            declined to pursue an acquisition.

--------------------------------------------------------------------------------
                              Overview of Altadis
--------------------------------------------------------------------------------

            Ticker:                                    ALT
            Location:                            Eloy Gonzalo 10
                                               28010 Madrid, Spain
            Market Capitalization:                    $4,862.9

            Description:      Altadis was formed in December 1999 as a result of
                              a merger of equals between Tabacalera SA located
                              in Madrid, Spain and Sieta, located in Paris,
                              France. The terms of the transaction required the
                              exchange of 19 Tabacalera shares for six Sieta
                              shares and an extraordinary dividend of Euro 5 to
                              Seita shareholders. Altadis is currently the
                              fourth-largest tobacco company in the world by
                              market capitalization and the sixth largest by
                              cigarette production.

            Brands:           Cigar brands include Dutch Treats, Antonio y
                              Cleopatra, Dutch Masters, Upmann, Montecristo and
                              Por Larranga.

                                  Market Share
--------------------------------------------------------------------------------
   [The following table was depicted as a pie chart in the printed material.]

                               Other                  8%
                               Rest of Europe         9%
                               U.S.                  15%
                               France                34%
                               Spain                 34%

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                            Overview of Swedish Match
--------------------------------------------------------------------------------

            Ticker:                                 SWMA
            Location:                        Rosenlundsgatan 36
                                           118 85 Stockholm, Sweden
            Market Capitalization:                 $1,295.9

            Description:      Swedish Match is a Swedish-based international
                              group that manufactures and markets a broad range
                              of tobacco products and tobacco-related products
                              including cigars, snuff, chewing tobacco, pipe
                              tobacco, disposable lighters and matches. The
                              company is one of the largest manufacturers and
                              distributors of cigars and cigarillos and ranks
                              second in terms of sales value in the world cigar
                              market.

            Brands:           Cigar brands include Macanudo, Garcia y Vega,
                              White Owl, El Credito, El Rico Habano, La Hoya
                              Selecta and Montague.

                                  Market Share
--------------------------------------------------------------------------------

   [The following table was depicted as a pie chart in the printed material.]

                               Other                   2%
                               South America           6%
                               North America          20%
                               Other Europe           25%
                               East Europe             2%
                               Sweden                 45%

--------------------------------------------------------------------------------

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
                                             Presentation to: BOARD OF DIRECTORS
                                                                         page 11
================================================================================


      Introduction

      Situation Overview

--------------------------------------------------------------------------------
      Proposed Offer from Lew and LaVonda Rothman
--------------------------------------------------------------------------------

      Exhibits

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
PROPOSED OFFER FROM LEW AND LAVONDA          Presentation to: BOARD OF DIRECTORS
ROTHMAN                                                                  Page 12
================================================================================


REASONS FOR TAKING THE COMPANY PRIVATE

      o     Lew and LaVonda M. Rothman have carefully considered all options and
            believe that the proposed transaction is in the best interests of
            both the Company and its shareholders.

      o     Minority shareholders receive a significant premium to current share
            price and immediate liquidity.

      o     Logical strategic buyers do not appear to have any interest in
            acquiring the Company.

      o     There is little likelihood of significant multiple expansion in the
            near term.

      o     The Company has very limited growth prospects.

            -     Publicly announced plans regarding no further expansion of
                  retail operations.

            -     The only research analyst covering the Company projects modest
                  organic growth going forward.

      o     The Company is not currently enjoying the benefits of public
            ownership.

      o     All existing employees, stores, operations and other "stakeholders"
            remain in place.

      o     Financing is readily available.

      o     Ability to close the transaction quickly.

      o     The proposed transaction does not preclude the Board's consideration
            of potentially superior proposals.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
PROPOSED OFFER FROM LEW AND LAVONDA          Presentation to: BOARD OF DIRECTORS
ROTHMAN                                                                  page 13
================================================================================


SUMMARY OF PROPOSED OFFER BY LEW AND LAVONDA M. ROTHMAN

      Offer Price:                 $12.00 per share.

      Consideration Offered:       Cash.

      Transaction Structure:       Tender Offer.

      Offer Predicated Upon:       Majority of the minority shares are tendered.

      Financing Sources:           Negotiating with three financial institutions
                                   to provide 100% of the financing.

      Breakup Fee:                 None.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
PROPOSED OFFER FROM LEW AND LAVONDA          Presentation to: BOARD OF DIRECTORS
ROTHMAN                                                                  page 14
================================================================================


BREAKDOWN OF LEW AND LAVONDA M. ROTHMAN'S OFFER

      o     Following a review of strategic alternatives, Lew and LaVonda M.
            Rothman are proposing a tender offer of $12.00 a share for all
            outstanding shares of the Company's stock.

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Price Offered By Lew and LaVonda M. Rothman                               $12.00
--------------------------------------------------------------------------------

Company's Total Shares Outstanding (1)                                11,882,955

Less: Shares Contributed By Lew and LaVonda M. Rothman (2)             8,775,840
                                                                     -----------
                 Total Shares Subject To Tender Offer                  3,107,115

--------------------------------------------------------------------------------
Capital Required To Purchase All Minority Shares                     $37,285,380
--------------------------------------------------------------------------------

Plus: Refinancing Existing Debt (3)                                    5,983,000

Plus: Estimated Fees Relating To Transaction                           3,000,000
                                                                     -----------
Total Capital Required To Execute Transaction                        $46,268,380
                                                                     ===========

--------------------------------------------------------------------------------

Footnote:
---------
(1)   Obtained from Proxy filed December 31, 1999.
(2)   Obtained from management and excludes shares held in trust.
(3)   As of March 31, 2000.

--------------------------------------------------------------------------------
                          Sources And Use of Funds (1)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                              Sources Of Funds (2)
--------------------------------------------------------------------------------

                                                                       Debt /
                                            Amount                  FY99 EBITDA
                                          -----------               -----------

Senior Term Loan                          $46,268,380                      2.1x
                                          ===========               ===========

--------------------------------------------------------------------------------
                               Uses Of Funds (3)
--------------------------------------------------------------------------------

                                           Number Of              Total Purchase
                                             Shares                    Price
                                          -----------             -------------

Institutional Shares                        1,641,142              $19,693,704

Trust Shares                                  524,160                6,289,920

Retail & Other                                941,813               11,301,756

Current Debt                                       --                5,983,000

Transaction Fees                                   --                3,000,000
                                          -----------             ------------
                  Total                     3,107,115              $46,268,380
                                          ===========             ============

Footnote:
---------
(1)   Sources and uses of funds excludes $15.2 million of cash on the balance
      sheet as of March 31, 2000.
(2)   Sources of funds excludes an additional $5.0 million revolver for working
      capital purposes.
(3)   Shares obtained from 13F filings and management.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
PROPOSED OFFER FROM LEW AND LAVONDA          Presentation to: BOARD OF DIRECTORS
ROTHMAN                                                                  page 15
================================================================================


IMPLIED VALUTION OF THE COMPANY BASED ON LEW AND LAVONDA M. ROTHMAN'S OFFER

                    ($ in Thousands, Except Per Share Data)

--------------------------------------------------------------------------------
                                   Valuation
--------------------------------------------------------------------------------

Purchase Price Per Share                                                $12.00

Company's Total Shares Outstanding                                      11,883
                                                                      --------
Implied Equity Value                                                  $142,595
Plus: Net Debt(1)(2)                                                    (9,251)
                                                                      --------
Implied Enterprise Value                                              $133,344
                                                                      ========

--------------------------------------------------------------------------------

Footnote:
---------
(1)   Net debt equals total debt and capitalized leases less excess cash.
(2)   As of March 31, 2000, the Company had approximately $6.0 million in debt
      and $15.2 million in cash on its balance sheet.

--------------------------------------------------------------------------------
                             Valuation Mutliples (1)
--------------------------------------------------------------------------------

                                              Amount                 Multiple
                                             --------                ---------
LTM Sales                                    $314,615                     0.4x
LTM EBITDA                                     21,575                     6.2x
LTM EBIT                                       19,253                     6.9x

--------------------------------------------------------------------------------
                              Premiums Analysis (2)
--------------------------------------------------------------------------------

      One Day                       One Week                      Four Weeks
      -------                       --------                      ----------
        17.1%                          21.5%                           20.0%

--------------------------------------------------------------------------------

Footnote:
---------
(1)   LTM as of March 31, 2000.
(2)   Assumes announcement date is June 5, 2000.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
PROPOSED OFFER FROM LEW AND LAVONDA          Presentation to: BOARD OF DIRECTORS
ROTHMAN                                                                  page 16
================================================================================


ANALYSIS OF TRADING VOLUME OF THE COMPANY'S STOCK BETWEEN VARIOUS PRICE RANGES
(Latest Twelve Months)

   [The following table was depicted as a bar chart in the printed material.]

                          Number
                         of Shares
                         ---------
$7.00 - $9.50            [NEED VALUE]        53.6% of all
$9.51 - $12.00           [NEED VALUE]        41.2%
> $12.00                 [NEED VALUE]         5.2%

o     Since June 5, 1999, approximately 94.8% of all trades have occurred below
      $12.00.

o     The last time the Company's stock price was at or above $12.00 was July 8,
      1999, almost one year ago.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
PROPOSED OFFER FROM LEW AND LAVONDA          Presentation to: BOARD OF DIRECTORS
ROTHMAN                                                                  page 17
================================================================================


COMPARABLE GOING PRIVATE CASE STUDY
SWISHER INTERNATIONAL GROUP INC.'S ACQUISITION BY INVESTOR GROUP

      Description of Company: Swisher International Group Inc. ("Swisher") and
      its subsidiaries manufacture and sell cigars and smokeless tobacco
      products. Swisher is one of the largest manufacturers and marketers of
      cigars in the world, as measured by units sold. On December 17, 1996,
      Swisher completed an initial public offering of 6.0 million Class A Common
      Shares ("Class A") for $17.00 per share, with aggregate proceeds of $102.0
      million. Swisher's Chairman and CEO, William Ziegler, III, held 28.1
      million Class B Common Shares ("Class B"). The Class B represented
      approximately 83.0% of the total outstanding common shares and 98.0% of
      the outstanding voting power.

      During 1998, Swisher's stock price fell approximately 47% as a result of a
      general slowdown in demand for cigars. As a result, Mr. Ziegler decided to
      take Swisher private and allow the existing Class A shareholders the
      opportunity to receive a premium of approximately 40% over the market
      price. The transaction was structured as a tender offer and was announced
      on December 9, 1998. The transaction closed on June 14, 1999.

                         Stock Price / Volume Analysis

                              [STOCK CHART OMITTED]

                             [PLOT POINTS TO COME]

                             Valuation Analysis (1)

--------------------------------------------------------------------------------
                                ($ in Thousands)
--------------------------------------------------------------------------------

------------------------------------
Per Share Equity Value         $9.50
------------------------------------

Total Shares Outstanding                  LTM Valuation Multiples

Class A Common Shares        5,778                    Financials   Multiple
Class B Common Shares       28,100                    ---------------------
                           -------        Sales         $266,998       1.5x
   Total Common Shares      33,878        EBITDA          66,456       6.2x
                                          EBIT            59,742       6.9x
Equity Value              $321,844
Plus: Net Debt              91,439        ----------------------------------
                          --------                Premiums Analysis
     Enterprise Value     $413,283        ----------------------------------
                          ========         One Day    One Week    Four Weeks
                                          ----------------------------------
                                            39.5%      49.0%        67.0%
                                          ----------------------------------

--------------------------------------------------------------------------------

Footnote:
---------
(1)   LTM as of December 31, 1998.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
PROPOSED OFFER FROM LEW AND LAVONDA          Presentation to: BOARD OF DIRECTORS
ROTHMAN                                                                  page 18
================================================================================


VALUATION COMPARISON - THE COMPANY'S IMPLIED VALUATION BASED UPON OFFER PRICE
VS. SWISHER'S VALUATION

--------------------------------------------------------------------------------
                     ($ in Thousands, Except Per Share Data)
--------------------------------------------------------------------------------

-------------------------------------     --------------------------------------
       Company's Valuation                         Swisher's Valuation
-------------------------------------     --------------------------------------

                             --------                                  ---------
Per Share Equity Value         $12.00     Per Share Equity Value          $9.50
                             --------                                  ---------

Total Shares Outstanding                  Total Shares Outstanding

Total Common Shares (1)        11,883     Class A Common Shares           5,778
                                          Class B Common Shares          28,100
                                                                       --------
                                             Total Shares                33,878

Equity Value                 $142,595     Equity Value                 $321,844
Plus: Net Debt                 (9,251)    Plus: Net Debt                 91,439
                             --------                                  --------
   Enterprise Value          $133,344        Enterprise Value          $413,283
                             ========                                  ========

    LTM Valuation Multiples (2)               LTM Valuation Multiples (3)
-------------------------------------     -------------------------------------
         Amount     Margin   Multiple              Amount     Margin   Multiple
        -----------------------------             -----------------------------
Sales   $314,615         --      0.4x     Sales   $266,998         --      1.5x
EBITDA    21,575       6.9%      6.2x     EBITDA    66,456      24.9%      6.2x
EBIT      19,253       6.1%      6.9x     EBIT      59,742      22.4%      6.9x
--------------------------------------------------------------------------------

Footnote:
---------
(1)   Obtained from Proxy filed December 31, 1999.
(2)   LTM values as of March 31, 2000.
(3)   LTM values as of December 31, 1998.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
PROPOSED OFFER FROM LEW AND LAVONDA          Presentation to: BOARD OF DIRECTORS
ROTHMAN                                                                  page 19
================================================================================


PREMIUMS PAID ANALYSIS (1)

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                             Premiums Paid Analysis
--------------------------------------------------------------------------------

                                             One Day     One Week     Four Weeks
                                             -----------------------------------

Company's Stock Price                         $10.25        $9.88         $10.00

Premium Over Stock Price (2)(3)                11.8%        16.7%          21.2%

--------------------------------------------------------------------------------
Implied Valuation For Company's Stock Price   $11.46       $11.52         $12.12
--------------------------------------------------------------------------------

                                                           ------
Median Per Share Equity Value Based Upon Premiums Analysis $11.52
                                                           ------
--------------------------------------------------------------------------------

Footnote:
---------
(1)   Assumes announcement date is June 5, 2000.
(2)   Source: Securities Data Corporation.
(3)   Premiums reflect initial premiums offered in transactions from January 1,
      1998 to present where the acquiror was a majority shareholder.

      o     The premiums paid analysis yielded an implied per share equity value
            range of $11.46 to $12.12, resulting in a median per share equity
            value of $11.52.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
                                             Presentation to: BOARD OF DIRECTORS
                                                                         page 20
================================================================================


          Introduction

          Situation Overview

          Proposed Offer from Lew and LaVonda Rothman

          ----------------------------------------------------------------------
          Exhibits
          ----------------------------------------------------------------------

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
EXHIBITS                                     Presentation to: BOARD OF DIRECTORS
                                                                         page 21
================================================================================


TABLE OF CONTENTS

                                                                         Exhibit
                                                                         -------

Proposed Timetable.........................................................A

Historical and Projected Financial Statements..............................B

Ownership Analysis.........................................................C

Transactions Used in Premiums Analysis.....................................D

Valuation Observations.....................................................E

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
EXHIBIT A                                    Presentation to: BOARD OF DIRECTORS
                                                                         page 22
================================================================================


PROPOSED TIMETABLE

[GRAPHIC OMITTED]

    Date                           Key Event                      Responsibility
------------   -----------------------------------------------   ---------------

Week of        o  FUSI makes a formal presentation to the         FUSI, Company
June 5th          Board of Directors informing the Board of          Counsel
                  Mr. Rothman's buyout offer.

               o  Outside directors of the Board form a
                  Special Committee to evaluate the proposal
                  by Mr. Rothman.

               o  Special Committee engages independent
                  financial and legal advisors.

Week of        o  Special Committee and its advisors              FUSI, Company
June 12th         negotiate with Mr. Rothman and his                 Counsel
                  advisors to finalize a definitive
                  agreement.

               o  Financial institutions complete their due
                  diligence and submit final proposals.

               o  The financial institution with the winning
                  proposal prepares appropriate
                  documentation to finalize financing.

               o  Mr. Rothman, FUSI and Counsel select a
                  Dealer Manager, Depository Institution and
                  Information Agent.

               o  Management calls a special meeting of the
                  Board of Directors to approve Mr.
                  Rothman's offer.

               o  Legal Counsel prepares appropriate
                  documentation to form an acquisition
                  subsidiary ("Acquisition Corp.")
                  controlled by Mr. Rothman into which the
                  Company will be merged upon completion of
                  the Transaction.

Week of        o  Special Committee's financial advisor           FUSI, Company
June 19th         delivers a fairness opinion.                       Counsel

               o  Board and Special Committee vote in favor
                  of the Transaction and recommend it to the
                  Shareholders.

               o  Acquisition Corp. signs a commitment
                  letter with the financial institution.

               o  Acquisition Corp. formally commences the
                  tender offer.

July 24        o  Parties obtain regulatory clearances and
(Monday)          consummate tender offer.

               o  Parties consummate short form merger.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
EXHIBIT B                                    Presentation to: BOARD OF DIRECTORS
                                                                         page 23
================================================================================


HISTORICAL AND PROJECTED FINANCIAL STATEMENTS (1)

                                 $ in Thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
               Company's Income Statements - Fiscal Years Ended December 31, 1998(A) to December 31, 2001(P)
------------------------------------------------------------------------------------------------------------------------

                                       1998(A)                1999(A)                2000(P)               2001(P)
                                 ------------------     ------------------     ------------------     ------------------
                                   Amount      %          Amount      %          Amount      %          Amount      %
                                 ---------  -------     ---------  -------     ---------  -------     ---------  -------
<S>                              <C>         <C>        <C>         <C>        <C>         <C>        <C>         <C>
Net Sales                        $286,512    100.0%     $317,001    100.0%     $339,640    100.0%     $366,810    100.0%
  Cost of Goods Sold              233,717     81.6       261,706     82.6       279,840     82.4       301,510     82.2
                                 --------    -----      --------    -----      --------    -----      --------    -----
Gross Profit                       52,795     18.4        55,295     17.4        59,800     17.6        65,300     17.8
  Operating Expenses               30,344     10.6        35,729     11.3        39,460     11.6        42,950     11.7
                                 --------    -----      --------    -----      --------    -----      --------    -----
Operating Income                   22,451      7.8        19,566      6.2        20,340      6.0        22,350      6.1
  Other (Income) Expense, Net        (716)    (0.2)         (169)    (0.1)            0      0.0             0      0.0
                                 --------    -----      --------    -----      --------    -----      --------    -----
EBIT                               23,167      8.1        19,735      6.2        20,340      6.0        22,350      6.1
  Interest Expense                    239      0.1          (127)    (0.0)         (620)    (0.2)         (700)    (0.2)
                                 --------    -----      --------    -----      --------    -----      --------    -----
Earnings Before Taxes              22,928      8.0        19,862      6.3        20,960      6.2        23,050      6.3
  Provision for Taxes               9,194      3.2         7,981      2.5         8,410      2.5         9,240      2.5
                                 --------    -----      --------    -----      --------    -----      --------    -----
Net Income                        $13,734      4.8%      $11,881      3.7%      $12,550      3.7%      $13,810      3.8%
                                 ========    =====      ========    =====      ========    =====      ========    =====

EBITDA                            $24,744      8.6%      $21,890      6.9%      $22,870      6.7%      $25,100      6.8%
Depreciation & Amortization         1,577      0.6         2,155      0.7         2,530      0.7         2,750      0.7
Capital Expenditures               10,673      3.7         8,831      2.8         1,000      0.3         1,250      0.3
------------------------------------------------------------------------------------------------------------------------
</TABLE>

Footnote:
---------
(1)   Projections obtained from FUSI research report dated May 5, 2000.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
EXHIBIT C                                    Presentation to: BOARD OF DIRECTORS
                                                                         page 24
================================================================================


OWNERSHIP ANALYSIS

--------------------------------------------------------------------------------
                    Total Shares Outstanding(1) = 11,882,955
--------------------------------------------------------------------------------

------------------------------------------------------------------------
                       Institutional Holders(2)
------------------------------------------------------------------------
                             Date                           % of Shares
Institution                  Filed        Shares Held       Outstanding
-------------------------    ------       -----------       -----------
Royce & Associates           Mar-00           731,500              6.2%
Wachovia Asset Management    Mar-00           303,200              2.6%
Morgan Stanley               Mar-00           260,300              2.2%
Dimensional Fund             Mar-00           121,500              1.0%
Vanguard Group               Mar-00           113,500              1.0%
Advisory Research            Mar-00            46,800              0.4%
Barclays Global              Mar-00            31,842              0.3%
Mellon Bank                  Mar-00            20,600              0.2%
LaSalle National             Mar-00            10,000              0.1%
Other Institutions                              1,900              0.0%
                                            ---------             ----
                     Total                  1,641,142             13.8%

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

-----------------------------------------------------------------
                 Shares Rolled By Insiders (3)
-----------------------------------------------------------------
                                                      % of Shares
Insider                              Shares Held      Outstanding
------------------------             -----------      -----------
Lew & LaVonda M. Rothman               8,775,840            73.9%

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

-----------------------------------------------------------------
                All Other Shares Outstanding (3)
-----------------------------------------------------------------

                                                      % of Shares
                                     Shares Held      Outstanding
                                     -----------      -----------
Rothman Trusts                           524,160             4.4%
Estimated Retail and Other               941,813             7.9%

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

   [The following table was depicted as a pie chart in the printed material.]

Ownership Breakdown
-------------------

Lew & LaVonda Rothman (4)     78.3%
Institutions                  13.8%
Retail & Other                 7.9%

--------------------------------------------------------------------------------

Footnote:
---------
(1)   Provided by latest Proxy filed December 31, 1999.
(2)   As of latest 13F filing.
(3)   Provided by management.
(4)   Includes shares held in trust.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
EXHIBIT D                                    Presentation to: BOARD OF DIRECTORS
                                                                         page 25
================================================================================


TRANSACTIONS USED IN PREMIUMS ANALYSIS(1)(2)

                                 ($ in Millions)

<TABLE>
<CAPTION>
                                                                         % Owned By                     Initial Offer Premium
  Date                                                                   Acquiror at      Equity    --------------------------------
Announced          Target Name                     Acquiror Name         Announcement      ($mil)   One Day   One Week   Four Weeks
---------   -----------------------------   ---------------------------  ------------    --------   --------  ---------  -----------
<S>         <C>                             <C>                                 <C>      <C>           <C>       <C>          <C>
04/30/98    Mycogen Corp                    Dow AgroSciences                    62.2%    $1,067.3       0.0%       2.5%        11.6%

10/27/98    Citizens Corp                   Allmerica Financial Corp            81.8      1,165.0       5.2        2.2          5.4

11/12/98    Aquila Gas Pipeline Corp        UtiliCorp United Inc                81.6        235.2      23.1       17.4         68.4

11/16/98    Western Beef Inc                Cactus Acquisitions                 71.9         48.1       7.1       (1.6)         5.3

12/09/98    Swisher Intl(American Maize)    Investor Group                      83.0         54.9      24.8       33.3         49.4

03/08/99    EN Star Inc                     Investor Group                      64.5         37.2      25.0       27.0         21.2

03/21/99    Spelling Entertainment Group    Viacom Inc                          80.9        927.1       0.0       32.1         42.6

04/12/99    Meadowcraft Inc                 Investor Group                      73.0        197.1      31.9       30.6         42.2

05/07/99    J Ray McDermott SA              McDermott International Inc         63.0      1,391.3      16.8       13.1         19.2

06/04/99    Intek Global Corp               Securicor Communications            56.3        130.0      (7.9)     (11.5)       (15.0)

07/29/99    Concord Fabrics Inc             Investor Group                      63.0         18.0      33.3       29.0         27.6

11/05/99    Synthetic Industries Inc        Investor Group                      66.0        300.7      11.8       15.0         18.2

01/19/00    Conning Corp                    Metropolitan Life Insurance         56.6        177.3      (2.9)      16.7         27.8

03/31/00    Solomon-Page Group Ltd          Investor Group                      55.5         22.9        --         --           --

04/24/00    Cherry Corp                     Investor Group                      54.8        188.3        --         --           --

04/25/00    MPW Industrial Services Group   Investor Group                      52.4         92.0        --         --           --

05/03/00    Roadhouse Grill Inc             Investor Group                      66.2         68.0        --         --           --

                                                              ----------------------------------------------------------------------
                                                              Median:           64.5%                  11.8%      16.7%        21.2%
                                                              ----------------------------------------------------------------------
</TABLE>

Footnote:
---------
(1)   Source: Securities Data Corporation. From January 1, 1998 to present.
(2)   Acquiror had majority ownership of company.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
EXHIBIT E                                    Presentation to: BOARD OF DIRECTORS
                                                                         page 26
================================================================================


INTRODUCTION TO VALUATION OBSERVATIONS

      o     Our valuation is based on information provided by the Company's
            management and FUSI research reports.

      o     In valuing the Company, FUSI has utilized the following methods:

            -     Comparison to publicly held companies.

            -     Comparison to the Swisher transaction.

            -     Discounted cash flow analysis.

            -     Leveraged buyout analysis.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
EXHIBIT E                                    Presentation to: BOARD OF DIRECTORS
                                                                         page 27
================================================================================


COMPARABLE COMPANIES ANALYSIS

                     ($ in Millions, Except Per Share Data)

<TABLE>
<CAPTION>
                                       -----------------------------------------   ----------------------------------------
                                                       Market Data                         Earnings Per Share Data
                                       -----------------------------------------   ----------------------------------------
                                          6/2/00     Shares             Adjusted                                     Growth
Company Name                              Price        Out.     Mkt.     Market                                      2000E-
Latest Qtr.- FYE             Ticker      Low-High    (Mils.)   Value    Value (1)   LTM    2000E (2)   2001E (2)     2001E
---------------------------  ------    -----------   -------   ------   ---------  -----   ---------   ---------     ------
<S>                           <C>      <C>            <C>      <C>       <C>       <C>       <C>        <C>           <C>
Holt's Cigar Holdings, Inc.   HOLT        $5.38        6.2      $33.6     $21.7    $0.54     $0.64        NA           NA
              12/31/99 Mar.            3.06 - 6.75


---------------------------------------------------------------------------------------------------------------------------
Company                                  $10.25       11.9     $121.8    $112.5    $0.96     $1.05      $1.15         9.5%
               3/31/00 Dec.            7.56 -12.81
---------------------------------------------------------------------------------------------------------------------------

<CAPTION>
                             -----------------------------------------------------------------
                                                       Valuation Data
                             -----------------------------------------------------------------
                                   P/E Multiples       2001 P/E         EnterpriseValue/
Company Name                 ------------------------   to Proj.    --------------------------
Latest Qtr.- FYE              LTM     2000E     2001E   Growth      Sales      EBITDA     EBIT
---------------------------  -----    -----     -----  ---------    -----      ------     ----
<S>                          <C>       <C>       <C>     <C>         <C>         <C>      <C>
Holt's Cigar Holdings, Inc.  10.0x     8.4x       NA      NA         0.7x        4.6x     5.0x
              12/31/99 Mar.
                             -----------------------------------------------------------------

----------------------------------------------------------------------------------------------
Company                      10.7x     9.8x      8.9x    93.6%       0.4x        5.2x     5.8x
               3/31/00 Dec.
----------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                               --------------------------------------------    --------------------------------------------
                                           Income Statement Data                          Profitability & Returns
                               --------------------------------------------    --------------------------------------------

                                            Latest Twelve Months                       Percent of Sales
                               --------------------------------------------    --------------------------------    Return
                                         Gross                      Net        Gross                       Net       on
                                Sales    Profit   EBITDA    EBIT  Income(3)    Profit   EBITDA    EBIT   Income   Equity(4)
                               ------    ------   ------   -----  ---------    ------   ------   -----   ------   ---------
<S>                            <C>        <C>      <C>     <C>       <C>        <C>      <C>     <C>      <C>         <C>
Holt's Cigar Holdings, Inc.     $32.0     $14.3     $4.7    $4.4      $3.2      44.6%    14.6%   13.6%    10.0%       11.9%

---------------------------------------------------------------------------------------------------------------------------
Company                        $314.6     $54.6    $21.6   $19.3     $11.8      17.4%     6.9%    6.1%     3.7%       14.5%
---------------------------------------------------------------------------------------------------------------------------

<CAPTION>
                                 ------------------------------------      -----------------------------
                                           Historical Growth                      Capitalization
                                 ------------------------------------      -----------------------------

                                             Operating
                                  Sales        Income      Net Income      Net Debt
                                 2 - Year     2 - Year      2 - Year       to Total     Book      Net
                                   CAGR         CAGR          CAGR          Capital     Value    Debt(5)
                                 --------    ---------     ----------      --------     -----    -------
<S>                                 <C>          <C>           <C>               <C>    <C>      <C>
Holt's Cigar Holdings, Inc.         32.9%        32.4%          26.5%            NM     $26.8    ($11.9)

--------------------------------------------------------------------------------------------------------
Company                             14.8%        (9.5%)        (21.6%)           NM     $80.8     ($9.3)
--------------------------------------------------------------------------------------------------------
</TABLE>

Footnote:
---------
(1)   Market value of equity plus net debt.
(2)   Estimates obtained from the First Call Network on June 2, 2000.
(3)   Before one-time charges.
(4)   Equal to net income divided by period-end book equity.
(5)   Equal to the sum of short-term debt, long-term debt and capital leases
      less cash and marketable securities.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
EXHIBIT E                                    Presentation to: BOARD OF DIRECTORS
                                                                         page 28
================================================================================


VALUATION BASED UPON COMPARABLE COMPANIES ANALYSIS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                           ($ in Thousands)
--------------------------------------------------------------------------------------------------------------
                                                     Median                         Debt -
    Capitalization Rate              Company    x   Multiple   =   Gross Value  -   Cash(1)   =   Equity Value
----------------------------        --------        --------       -----------      -------       ------------
<S>                                 <C>               <C>             <C>           <C>               <C>
Enterprise Value / Net Sales        $314,615           0.7 x          $213,293      ($9,251)          $222,544
Enterprise Value / EBITDA             21,575           4.6             100,145       (9,251)           109,396
Enterprise Value / EBIT               19,253           5.0              95,703       (9,251)           104,954
Market Value / Net Income             11,755          10.0                  --           --            117,006
                                                                                                      --------
                                                                                                      --------
Implied Equity Value Based Upon Median Multiple                                                       $113,201
                                                                                                      --------

--------------------------------------------------------------------------------------------------------------
Implied Equity Per Share Value                                                                           $9.53
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
</TABLE>

Footnote:
---------
(1)   As of March 31, 2000, the Company had approximately $6.0 million in
      third-party debt and $15.2 million in excess cash on the balance sheet.

      o     Based upon a comparison to publicly traded companies, the median
            equity value per share for the Company is approximately $9.53.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
EXHIBIT E                                    Presentation to: BOARD OF DIRECTORS
                                                                         page 29
================================================================================


VALUATION BASED UPON SWISHER TRANSACTION

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                           ($ in Thousands)
--------------------------------------------------------------------------------------------------------------
                                                     Median                         Debt -
    Capitalization Rate              Company    x   Multiple   =   Gross Value  -   Cash(1)   =   Equity Value
----------------------------        --------        --------       -----------      -------       ------------
<S>                                 <C>               <C>             <C>           <C>               <C>
Enterprise Value / Net Sales        $314,615           1.5 x          $486,989      ($9,251)          $496,240
Enterprise Value / EBITDA             21,575           6.2             134,173       (9,251)           143,424
Enterprise Value / EBIT               19,253           6.9             133,188       (9,251)           142,439
                                                                                                      --------
                                                                                                      --------
Implied Equity Value Based Upon Median Multiple                                                       $143,424
                                                                                                      --------

--------------------------------------------------------------------------------------------------------------
Implied Equity Per Share Value                                                                          $12.07
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
</TABLE>

Footnote:
---------
(1)   As of March 31, 2000, the Company had approximately $6.0 million in
      third-party debt and $15.2 million in excess cash on the balance sheet.

      o     Based upon a comparison to valuation multiples obtained from the
            Swisher transaction, the median equity value per share for the
            Company is approximately $12.07.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
EXHIBIT E                                    Presentation to: BOARD OF DIRECTORS
                                                                         page 30
================================================================================


DISCOUNTED CASH FLOW ANALYSIS

      o     Based upon the valuation analysis used by many strategic and
            financial buyers.

      o     FUSI calculated a weighted average cost of capital of 16.78% for the
            Company.

      o     Using a range of discount rates between 14.78-18.78% for the Company
            and a range of multiples of fiscal year 2004 EBITDA, the following
            range of per share equity values for the Company was obtained:

--------------------------------------------------------------------------------

                         ------------------------------
                         Implied Equity Value Per Share
                         ------------------------------

                                      Exit Year EBITDA Multiple
                             ---------------------------------------------------
                              5.25x     5.75x     6.25x      6.75x      7.25x
                             ---------------------------------------------------
                    14.78%    $11.43    $12.10    $12.77     $13.44     $14.11
                                        ---------------------------
                    15.78%     11.05     11.69     12.33      12.97      13.61
                                                   -----
Weighted Average    16.78%     10.68     11.29     11.90      12.52      13.13
Cost of Capital                                    -----
                    17.78%     10.33     10.91     11.50      12.09      12.68
                                        ---------------------------
                    18.78%      9.99     10.56     11.12      11.68      12.24

--------------------------------------------------------------------------------

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
EXHIBIT E                                    Presentation to: BOARD OF DIRECTORS
                                                                         page 31
================================================================================


LEVERAGED BUYOUT ANALYSIS

      o     Sources and uses of funds, as well as potential returns to debt and
            equity holders, are based on market guidelines.

      o     The analysis assumes an exit multiple of 6.25x fiscal year 2004
            EBITDA, total asset-based leverage at 70.0% of inventory and 50.0%
            of PPE and does not assume recap accounting.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                   ($ in Thousands)
---------------------------------------------------------------------------------------------------------------------

          Uses                     Amount              Sources          Amount      % Total   5 - Year Returns
--------------------------         --------       -----------------     --------    -------   -----------------------
<S>                                <C>            <C>                   <C>          <C>      <C>
Purchase Price of Equity           $124,771       Senior Term Loan       $30,000      25.3%    8.3%

Repayment of Existing Debt            5,983       Bank Revolver           19,229      16.2     8.5

Transaction Costs                     3,000       Subordinated Debt            0       0.0     0.0 -   0.0% warrants

Required Cash (Excess)              (15,234)      Investor Equity         69,291      58.5    24.8 - 100.0% ownership
                                   --------                             --------     -----
Total                              $118,520       Total                 $118,520     100.0%
                                   ========                             ========     =====
-------------------------------------------
Equity Value Per Share               $10.50
-------------------------------------------

---------------------------------------------------------------------------------------------------------------------
</TABLE>

      o     Based upon projections obtained from FUSI's research reports, the
            implied equity value per share resulting in approximately 25.0% IRR
            for the investor equity is $10.50.

                          ----------------------------
                          First Union Securities, Inc.
<PAGE>

================================================================================
EXHIBIT E                                    Presentation to: BOARD OF DIRECTORS
                                                                         page 32
================================================================================


SUMMARY VALUATION RANGE

      o     FUSI's analysis yielded the following per share equity valuation
            ranges for the Company.

                              [BAR CHART OMITTED]

Footnote:
---------
(1)   Valuation range for comparable companies based upon current stock price
      and implied per share equity valuation yielded by comparable companies
      analysis.
(2)   Range for LBO analysis obtained through analyzing equity values providing
      IRRs between 25-30%.

                          ----------------------------
                          First Union Securities, Inc.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(D)(2)
<SEQUENCE>13
<FILENAME>ex-99_d2.txt
<DESCRIPTION>EXHIBIT 99.(D)(2)
<TEXT>

<PAGE>


                                                               EXHIBIT 99.(d)(2)

                                                                August 28, 2000

Board of Directors
JRC Acquisition Corp.
301 Route 10 East
Whippany, New Jersey 07981

Ladies and Gentlemen:

We have been advised by you that JRC Acquisition Corp., a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of L&LR, Inc. (the "Parent") is
offering to purchase (the "Offer") all of the outstanding shares of common
stock, par value $0.01 per share (the "Shares") of 800-JR CIGAR, Inc., a
Delaware corporation (the "Company"), not already owned by Lewis I. Rothman,
LaVonda M. Rothman and the Lewis Irving Rothman 1998 Trust #1 u/a/d November 10,
1998 (collectively, the "Parent Stockholders"), at a price of $13.00 per Share,
net to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase and that certain Agreement and
Plan of Merger, dated as of August 28, 2000, by and among the Purchaser, the
Parent, the Parent Stockholders (for purposes of Section 6.10 thereof only) and
the Company, copies of which have been provided to the undersigned.

We also understand from you that the Offer is conditioned upon receipt by the
Purchaser of a bank loan (the "Loan") from a group of three lenders comprised of
The Chase Manhattan Bank, Fleet Bank, N.A. and European American Bank
(collectively, the "Lenders"). You have advised us that the Lenders will only
provide the Loan to the Purchaser if the Trust f/b/o Shane Rothman u/a/d
November 1, 1994, Lewis Rothman, Grantor, the Trust f/b/o Marni Rothman u/a/d
November 1, 1994, Lewis Rothman, Grantor, the Trust f/b/o Samantha Rothman u/a/d
November 1, 1994, Lewis Rothman, Grantor, and the Trust f/b/o Luke Rothman u/a/d
November 1, 1994, Lewis Rothman, Grantor (collectively, the "Rothman Trusts")
agree not to tender their Shares in the Offer.

Taking into account our fiduciary obligations as trustees of the Rothman Trusts,
we have determined that it is in the best interests of the Rothman Trusts to
refrain from participating in the Offer. We hereby agree that in our capacity as
trustees of the Rothman Trusts we will not tender the Shares owned by the
Rothman Trusts in the Offer, but will instead wait to receive the merger
consideration, if any, to be paid to stockholders of the Company in the
second-step merger of the Purchaser with and into the Company following the
close of the Offer.

Very truly yours,

TRUST F/B/O SHANE ROTHMAN
U/A/D NOVEMBER 1, 1994

By: /s/ Lewis I. Rothman
   -----------------------------
   Name:  Lewis I. Rothman
   Title: Trustee

By: /s/ Lavonda M. Rothman
   -----------------------------


<PAGE>


   Name:  LaVonda M. Rothman
   Title: Trustee

By: /s/ Samuel Bornstein
   -----------------------------
   Name:  Samuel Bornstein
   Title: Special Trustee

TRUST F/B/O MARNI ROTHMAN
U/A/D NOVEMBER 1, 1994

By: /s/ Lewis I. Rothman
   -----------------------------
   Name:  Lewis I. Rothman
   Title: Trustee

By: /s/ Lavonda M. Rothman
   -----------------------------
   Name:  LaVonda M. Rothman
   Title: Trustee

By: /s/ Samuel Bornstein
   -----------------------------
   Name:  Samuel Bornstein
   Title: Special Trustee

TRUST F/B/O SAMANTHA ROTHMAN
U/A/D NOVEMBER 1, 1994

By: /s/ Lewis I. Rothman
   -----------------------------
   Name:  Lewis I. Rothman
   Title: Trustee

By: /s/ LaVonda M. Rothman
   -----------------------------
   Name:  LaVonda M. Rothman
   Title: Trustee

By: /s/ Samuel Bornstein
   -----------------------------
   Name:  Samuel Bornstein
   Title: Special Trustee

TRUST F/B/O LUKE ROTHMAN
U/A/D NOVEMBER 1, 1994

By: /s/ Lewis I. Rothman
   -----------------------------
   Name:  Lewis I. Rothman
   Title: Trustee

By: /s/ LaVonda M. Rothman
   -----------------------------
    Name:  LaVonda M. Rothman
    Title: Trustee


<PAGE>


By: /s/ Samuel Bornstein
   -----------------------------
   Name:  Samuel Bornstein
   Title: Special Trustee

</TEXT>
</DOCUMENT>
</SUBMISSION>
