<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
CARIBBEAN CIGAR COMPANY
(Name of Issuer)
Common Stock, par value $.001 per share
(Title of Class of Securities)
141834 10 1
(CUSIP Number)
Charles D. Ganz, Esq.
Holland & Knight LLP
1201 West Peachtree Street, N.E.
Suite 2000
Atlanta, Georgia 30309-3400
(404) 898-8172
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 31, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
|_|.
(Continued on following pages)
(Page 1 of 17 Pages)
<PAGE> 2
SCHEDULE 13D
- --------------------- ------------
CUSIP NO. 141834 10 1 Page 2 of 17
- --------------------- ------------
================================================================================
1. NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Ronald G. Farrell
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
PF
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e)
|_|
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Georgia
- --------------------------------------------------------------------------------
NUMBER OF 7. Sole voting power
SHARES
BENEFICIALLY 1,250,000
OWNED BY --------------------------------------------------------------
EACH 8. Shared voting power
REPORTING
PERSON WITH None
--------------------------------------------------------------
9. Sole Dispositive power
1,250,000
--------------------------------------------------------------
10. Shared dispositive power
NONE
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,250,000
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
|_|
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.6%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
IN
================================================================================
<PAGE> 3
CUSIP No. 141834 10 1 Page 3 of 17
SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER.
This statement relates to shares of the common stock, par value $.001 per
share (the "Common Stock") of Caribbean Cigar Company (the "Issuer"). The
Issuer's principal executive offices are located at 6265 SW 8th Street, Miami,
Florida 33144.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is being filed by Ronald G. Farrell. Mr. Farrell's business
address is 6265 SW 8th Street, Miami, Florida 33144. His present principal
occupation is President and Chief Executive Officer of the Issuer, whose address
is 6265 SW 8th Street, Miami, Florida 33144. During the last five years, Mr.
Farrell has not (i) been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding, been subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activity subject to, federal
or state securities laws or finding any violation with respect to such laws. Mr.
Farrell is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Mr. Farrell borrowed the principal sum of $500,000 from the Issuer to
purchase 1,250,000 shares of Common Stock. Such $500,000 loan is evidenced by a
Non-Negotiable and Non-Assignable Promissory Note (the "Promissory Note"), dated
March 31, 1998, from Mr. Farrell in favor of the Issuer. The principal sum of
$500,000, together with interest, is due on October 1, 1999. Interest on the
Promissory Note accrues at 8.5% per annum, but is not payable until October 1,
1999. The Promissory Note is secured by a Stock Pledge Agreement (the "Pledge
Agreement"), dated March 31, 1998, by Mr. Farrell in favor of the Issuer,
pursuant to which Mr. Farrell pledged such 1,250,000 shares of Common Stock as
security for the loan's principal and interest. The Promissory Note is
non-recourse as against Mr. Farrell, and, in the event of a default in the
payment of principal or interest due under the Promissory Note, the Issuer's
only recourse would be against the 1,250,000 shares pledged by Mr. Farrell
pursuant to the Pledge Agreement. Reference is made to the Promissory Note and
the Pledge Agreement, copies of which are included herewith as Exhibits A and B,
respectively, for a complete statement of the rights and obligations of the
parties thereto.
<PAGE> 4
CUSIP No. 141834 10 1 Page 4 of 17
ITEM 4. PURPOSE OF TRANSACTION.
Mr. Farrell acquired the 1,250,000 shares of Common Stock for investment
purposes. Mr. Farrell may, as the opportunity arises, or as described below in
this Item 4, purchase additional shares of Common Stock of the Issuer.
Pursuant to an Agreement dated March 31, 1998 (the "CCC Agreement"), among
the Issuer, Mr. Farrell, Kevin Doyle and each of the directors of the Issuer,
the Issuer agreed, among other things, as follows:
(1) To elect Mr. Farrell as Chairman and President/CEO of the Issuer;
(2) To sell to Mr. Farrell 1,250,000 shares of Common Stock (such 1,250,000
shares being referred to as the "Initial Shares") on the terms set forth in Item
3 of this Statement;
(3) Subject to the approval of the Issuer's shareholders, to sell to Mr.
Farrell an additional 1,250,000 shares of Common Stock (such 1,250,000
additional shares being referred to as the "Additional Shares") on substantially
the same terms as set forth in Item 3 of this Statement;
(4) To use its best efforts to sell no less than 2,500,000 shares of Common
Stock at a price of not less than $0.40 per share pursuant to an exemption from
registration under the Securities Act of 1933, as amended (such 2,500,000 shares
being referred to as the "Private Placement Shares");
(5) To offer to certain of the Issuer's existing creditors the opportunity
to convert the unpaid principal amounts of and all accrued but unpaid interest
on the indebtedness currently held by such creditors into shares of Common Stock
at a price of $0.40 per share; and
(6) To take all necessary corporate and shareholder action to authorize and
approve the sale of the Initial Shares, the Additional Shares and the Private
Placement Shares and the conversion of the indebtedness referred to in the
preceding clause (5) into Common Stock, including (i) making any necessary
filings with the U.S. Securities and Exchange Commission, (ii) holding a meeting
of the Issuer's shareholders to approve the sale of the Initial Shares, the
Additional Shares and the Private Placement Shares, and (iii) seeking
shareholder approval to increase the number of authorized shares of Common Stock
to 25,000,000 shares.
The CCC Agreement further provides that, at such time as the Issuer shall
have received not less than $1,000,000 from the sale of the Private Placement
Shares, each of the directors of the Issuer as of the date of the CCC Agreement
agrees to resign as a director, and Mr. Farrell shall have the right to
designate new directors to fill the vacancies created thereby. Reference
<PAGE> 5
CUSIP No. 141834 10 1 Page 5 of 17
is made to the CCC Agreement, a copy of which is included herewith as Exhibit C,
for a complete statement of the rights and obligations of the parties thereto.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) See Boxes 11 and 13 of the cover page and see Item 4.
(b) See Boxes 7, 8, 9, and 10 of the cover page.
(c) See Items 3 and 4.
(d) N/A
(e) N/A
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS, OR RELATIONSHIP WITH
RESPECT TO SECURITIES OF THE ISSUER.
See Items 3 and 4.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit A $500,000 Non-Negotiable and Non-Assignable Promissory Note,
dated March 31, 1998, by Ronald G. Farrell in favor of
Caribbean Cigar Company.
Exhibit B Stock Pledge Agreement, dated March 31, 1998, by Ronald G.
Farrell in favor of Caribbean Cigar Company.
Exhibit C Agreement dated March 31, 1998, among Caribbean Cigar Company,
Ronald G. Farrell, Kevin Doyle and each of the other directors
of Caribbean Cigar Company.
<PAGE> 6
CUSIP No. 141834 10 1 Page 6 of 17
SIGNATURE
After reasonable 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.
Dated: April 8, 1998
/s/ Ronald G. Farrell
----------------------------------------
Ronald G. Farrell
<PAGE> 1
CUSIP No. 141834 10 1 Page 7 of 17
EXHIBIT A
NON-NEGOTIABLE AND NON-ASSIGNABLE
PROMISSORY NOTE
$500,000.00 MARCH 31, 1998
ATLANTA, GEORGIA
FOR VALUE RECEIVED, the undersigned, RONALD G. FARRELL, a Georgia
resident (the "Borrower"), promises to pay to CARIBBEAN CIGAR COMPANY, a Florida
corporation (herein the "Lender"), the principal sum of FIVE HUNDRED THOUSAND
AND 00/100 DOLLARS ($500,000.00), together with interest on the outstanding
principal balance of this Note, on October 1, 1999 (the "Maturity Date"). Such
interest shall accrue at eight and one-half percent (8.5%) per annum, but shall
not be payable until the Maturity Date.
The principal hereof and interest hereon shall be payable in lawful money
of the United States of America, at the Lender's principal office in Miami,
Florida or at such other place as the Lender may designate in writing to the
Borrower. The Borrower may prepay this Note in full or in part at any time
without notice, penalty, prepayment fee, or payment of unearned interest. All
payments hereunder received from the Borrower by the Lender shall be applied
first to interest to the extent then accrued and then to principal, with
prepayments of principal being applied in inverse order of maturity.
This Note is secured by a Stock Pledge Agreement between Borrower and
Lender of even date herewith (the "Stock Pledge Agreement"), granting to the
Lender a security interest in 1,250,000 shares of the common stock of the Lender
owned by Borrower.
In no event shall the amount of interest due or payable hereunder exceed
the maximum rate of interest allowed by applicable law, and in the event any
such payment is inadvertently paid by the Borrower or inadvertently received by
the Lender, then such excess sum shall be credited as a payment of principal,
unless the Borrower shall notify the Lender, in writing, that the Borrower
elects to have such excess sum returned to it forthwith. It is the express
intent hereof that the Borrower not pay and the Lender not receive, directly or
indirectly, in any manner whatsoever, interest in excess of that which may be
lawfully paid by the Borrower under applicable law.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, THE
OBLIGATIONS OF THE BORROWER WHICH ARE EVIDENCED BY THIS NOTE (INCLUDING, WITHOUT
LIMITATION, PRINCIPAL, INTEREST, ATTORNEYS' FEES AND LIABILITY FOR BREACH OF ANY
AGREEMENT, WARRANTY OR COVENANT HEREUNDER OR UNDER THE STOCK PLEDGE AGREEMENT)
ARE ABSOLUTELY NON-RECOURSE AS TO THE BORROWER, SUBJECT ONLY TO THE RIGHTS
<PAGE> 2
CUSIP No. 141834 10 1 Page 8 of 17
WHICH THE LENDER HAS PURSUANT TO THE STOCK PLEDGE AGREEMENT IN THE PLEDGED
SECURITIES (AS DEFINED IN THE STOCK PLEDGE AGREEMENT) AND THE BORROWER SHALL NOT
OTHERWISE BE LIABLE FOR THE OBLIGATIONS HEREUNDER OR UNDER THE STOCK PLEDGE
AGREEMENT UPON THE OCCURRENCE OF A DEFAULT HEREUNDER OR AN EVENT OF DEFAULT
UNDER THE STOCK PLEDGE AGREEMENT. WITH RESPECT TO THE OBLIGATIONS OF THE
BORROWER HEREUNDER AND UNDER THE STOCK PLEDGE AGREEMENT, THE LENDER AGREES TO
LOOK SOLELY TO THE PLEDGED SECURITIES, OR THE PROCEEDS THEREOF, FOR THE PAYMENT
OF THE OBLIGATIONS OF THE BORROWER HEREUNDER OR UNDER THE STOCK PLEDGE
AGREEMENT. THE BORROWER SHALL NOT BE LIABLE FOR ANY DEFICIENCY JUDGMENT.
This Note shall be construed and enforced in accordance with the laws of
the State of Georgia.
This Note is not assignable without the prior written consent of the
Borrower.
All references herein to any document, instrument, or agreement shall be
deemed to refer to such document, instrument, or agreement as the same may be
amended, modified, restated, supplemented, or replaced from time to time.
IN WITNESS WHEREOF, the undersigned Borrower has executed this instrument
as of the day and year first above written.
/s/ Ronald G. Farrell
---------------------------------------------
RONALD G. FARRELL
<PAGE> 1
CUSIP No. 141834 10 1 Page 9 of 17
EXHIBIT B
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is made this 31st day of
March, 1998, by RONALD G. FARRELL, a Georgia resident (the "Pledgor"), in favor
of CARIBBEAN CIGAR COMPANY, a Florida corporation (the "Secured Party").
W I T N E S S E T H:
WHEREAS, Pledgor has borrowed $500,000.00 from Secured Party (the "Loan"),
evidenced by that certain Promissory Note of even date herewith (the "Note");
and
WHEREAS, the proceeds of the Loan have been used by Pledgor to acquire
1,250,000 shares of the common stock of Secured Party (the "Shares");
NOW, THEREFORE, in consideration of the making of the Loan and for other
good and valuable consideration, the receipt, adequacy and sufficiency of which
are hereby acknowledged, the parties agree as follows:
8. Grant of Security Interest. To secure the Indebtedness (as defined
below), the Pledgor hereby pledges, hypothecates, assigns, transfers, sets over
and delivers to the Secured Party, and grants to the Secured Party a first
priority security interest in the Shares and all proceeds thereof (all such
securities being hereinafter collectively referred to as the "Pledged
Securities").
9. Delivery of Pledged Securities. Simultaneously with the execution of
this Agreement, the Pledgor shall deliver the certificate or certificates
evidencing the Pledged Securities to the Secured Party, accompanied by stock
powers duly executed in blank.
10. Indebtedness Secured. The security interest granted herein shall
secure the following (all such obligations being hereinafter referred to as the
"Indebtedness"): (a) the indebtedness evidenced by the Note, including all
interest and any other money due or which may become due thereon and (b) any
renewals of the indebtedness evidenced by the Note, and any extensions or
modifications of payments due under the terms of the Note.
11. Exercise of Voting and Other Rights. Until the occurrence of an Event
of Default (as defined below), the Pledgor shall be entitled to exercise all
voting and other corporate rights pertaining to the Pledged Securities. After
the occurrence of any Event of Default, the Secured Party shall have the right
and be entitled to exercise all voting rights of the Pledged Securities.
<PAGE> 2
CUSIP No. 141834 10 1 Page 10 of 17
12. Dividends. Unless an Event of Default (as defined below) shall have
occurred and have been declared, Pledgor shall be entitled to collect and
receive for his own use all dividends paid on or with respect to the Pledged
Securities. Upon the occurrence and during the continuance of an Event of
Default hereunder, all rights of the Pledgor to receive the dividends which
Pledgor is authorized to receive and retain pursuant to this Section shall
cease, and all such rights thereupon shall become vested in the Secured Party,
which shall have the sole and exclusive right and authority to receive and
retain the dividends which the Pledgor shall otherwise be authorized to retain
pursuant to this Section.
13. Event of Default. The following shall constitute an Event of Default
hereunder (unless the conditions which resulted in the Event of Default are
corrected within 10 days after receipt of the Secured Party's notice of
default): (a) the failure to pay when due any portion of the Indebtedness, or
(b) the default by Pledgor in the performance of any of Pledgor's covenants
herein.
14. Remedies.
(a) Upon the occurrence of an Event of Default, Secured Party may
pursue any and all remedies which may be available by agreement, under law, or
otherwise, including, without limitation, the right to foreclose and take
ownership and possession of the Pledged Securities.
(b) NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, THE
OBLIGATIONS OF THE PLEDGOR WHICH ARE EVIDENCED BY THIS AGREEMENT (INCLUDING,
WITHOUT LIMITATION, ATTORNEYS' FEES AND LIABILITY FOR BREACH OF ANY AGREEMENT,
WARRANTY OR COVENANT HEREUNDER) ARE ABSOLUTELY NON-RECOURSE AS TO THE PLEDGOR,
SUBJECT ONLY TO THE RIGHTS WHICH THE SECURED PARTY HAS PURSUANT TO THIS
AGREEMENT IN THE PLEDGED SECURITIES, AND THE PLEDGOR SHALL NOT OTHERWISE BE
LIABLE FOR THE INDEBTEDNESS UPON THE OCCURRENCE OF AN EVENT OF DEFAULT
HEREUNDER. THE SECURED PARTY AGREES TO LOOK SOLELY TO THE PLEDGED SECURITIES, OR
THE PROCEEDS THEREOF, FOR THE PAYMENT OF THE OBLIGATIONS OF THE PLEDGOR
HEREUNDER. THE PLEDGOR SHALL NOT BE LIABLE FOR ANY DEFICIENCY JUDGMENT.
15. Further Assurances. The Pledgor agrees that at any time, and from time
to time, upon written request of the Secured Party, the Pledgor will execute and
deliver such further documents and do such further acts and things as Secured
Party may reasonably request to effect the purposes of this Agreement.
<PAGE> 3
CUSIP No. 141834 10 1 Page 11 of 17
16. Remedies Cumulative. The Pledgor agrees that the rights, powers and
remedies given to the Secured Party by this Agreement are cumulative and not
exclusive of any other rights, powers or remedies available to Secured Party.
17. Payment and Discharge of Indebtedness; Return of Pledged Securities.
Pledgor and Secured Party acknowledge that the terms of the Note permit the
Predgor to prepay the Note in full or in part at any time without notice,
penalty, prepayment fee, or payment of unearned interest. Accordingly, for each
$0.40 in principal of the Note prepaid by the Pledgor from time to time, the
Secured Party shall return to Pledgor one Share of the Pledged Securities.
Following any such prepayment of the Note by Pledgor, such Shares shall no
longer be deemed "Pledged Securities" for the purposes of this Agreement. Upon
full payment and discharge of the Indebtedness, the Secured Party shall return
all such Pledged Securities that then may be in its custody hereunder to the
Pledgor or to whomsoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction shall direct.
18. Miscellaneous. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Georgia, shall be
binding upon the Pledgor, and its successors and assigns, and may not be
terminated or modified orally but only in writing making specific reference
hereto and signed by all the parties hereto. Headings in this Agreement are for
reference purposes only and shall not limit or otherwise affect the meaning
thereof. This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
agreement.
IN WITNESS WHEREOF, the parties hereto have each duly executed and
delivered this Agreement as of the date first above written.
PLEDGOR:
/s/ Ronald G. Farrell
---------------------------------------------
RONALD G. FARRELL
SECURED PARTY:
CARIBBEAN CIGAR COMPANY
By:/s/ Edward C. Williams
---------------------------------------------
Name: Edward C. Williams
Title: CFO
<PAGE> 1
CUSIP No. 141834 10 1 Page 12 of 17
EXHIBIT C
EXECUTION COPY
AGREEMENT
THIS AGREEMENT is made the 31st day of March, 1998, by and among CARIBBEAN
CIGAR COMPANY, a Florida corporation (the "Company"), Ronald G. Farrell, having
an address at ________________________________________ ("Farrell"), Kevin Doyle,
having an address at 8305 N.W. 27th Street, Miami, Florida 33122 (" Doyle") and
each of the other directors of the Company.
RECITALS:
A. WHEREAS Farrell has knowledge and experience in general management and
raising capital;
B. WHEREAS the Company, following due deliberation by its Board of
Directors, and the Stockholders believe it would benefit the Company and the
Stockholders if Farrell became Chairman and Chief Executive Officer of the
Company and assisted the Company in raising capital on the terms set forth
herein;
NOW, THEREFORE, in consideration of the premises and the material covenants
and conditions contained herein, the Company, the Stockholders and Farrell agree
as follows:
1. Appointment as Chairman and President/Chief Executive Officer.
(a) Effective upon the execution and delivery of this Agreement, Doyle
shall resign as Chairman and President/Chief Executive Officer ("CEO") of the
Company, and the Company shall elect Farrell as Chairman and President/CEO. For
the fiscal year beginning April 1, (i) 1998, Farrell shall be paid an annual
salary of $78,000, commencing July 1, 1998, and (ii) 1999, Farrell shall be paid
an annual salary of $156,000. In connection therewith, Farrell shall enter into
an employment agreement in form, scope and substance satisfactory to Farrell and
the Company.
(b) As promptly as practicable following the execution and delivery of
this Agreement, the Company will make all necessary filings with the Securities
and Exchange Commission (the "Commission") in connection with Farrell's election
as Chairman and President/CEO. Until the Company shall have received gross
proceeds of at least $1,000,000 from the sale of the Private Placement Shares
(as hereinafter defined), Farrell agrees that the Company's primary business
shall remain the manufacturing, sale and distribution of cigars.
<PAGE> 2
CUSIP No. 141834 10 1 Page 13 of 17
2. Agreements Relating to Doyle.
(a) Doyle and the Company shall enter into an employment agreement
(the "Doyle Employment Agreement") in form, scope and substance reasonably
satisfactory to Doyle and Company. The Doyle Employment Agreement shall (i) be
for a term of two years, and shall automatically renew for one year periods,
unless terminated for cause, (ii) provide for a base salary of $156,000 and
(iii) entitle Doyle to participate in or receive the same benefits he presently
receives. Doyle's title shall be Executive Vice President/Founder.
(b) Concurrently with the execution and delivery of this Agreement,
Doyle and Farrell shall enter into an agreement in form, scope and substance
satisfactory to Doyle and Farrell (i) prohibiting Doyle from selling or
transferring any shares of common stock, par value $0.001 per share (the "Common
Stock") of the Company, which Doyle currently owns for a period of one year
after the date of such agreement without the prior written consent of Farrell
and (ii) granting Farrell the right for two years to vote any shares of the
Company's Common Stock owned by Doyle as of the date of such agreement or
hereafter acquired by Doyle.
3. Additional Capital.
(a) Concurrently with the execution and delivery of this Agreement,
the Company agrees to sell to Farrell 1,250,000 shares of Common Stock at a
price of $0.40 per share (the "Initial Shares"). Farrell shall pay for such
shares by executing and delivering to the Company a note, payable 18 months
following the date of this Agreement in the amount of $500,000 (the "First Stock
Note"). Until the First Stock Note has been paid in full, the Initial Shares
shall be pledged to the Company pursuant to a pledge agreement in form and
substance reasonably satisfactory to the Company and Farrell.
(b) Subject to the approval of the Company's stockholders, the Company
agrees to sell to Farrell an additional 1,250,000 shares of Common Stock at a
price of $0.40 per share (the "Additional Shares"). Farrell shall pay for the
Additional Shares by executing and delivering to the Company a note, payable 18
months following the date of this agreement in the amount of $500,000 (the
"Second Stock Note"). Until the Second Stock Note has been paid in full, the
Additional Shares shall be pledged to the Company pursuant to a pledge agreement
in form and substance reasonably satisfactory to the Company and Farrell.
(c) Farrell may at any time or from time to time prepay the First
Stock Note or the Second Stock Note without premium or penalty. Upon any such
prepayment, the Company shall release from the applicable pledge a number of
shares of Initial Shares or Additional Shares equal to the amount of such
prepayment divided by $.40.
(d) Promptly following the executing and delivery of this Agreement,
but in any event pursuant to an exemption from registration under the Act, the
Company shall use its
<PAGE> 3
CUSIP No. 141834 10 1 Page 14 of 17
best efforts to sell no less than 2,500,000 shares of the Common Stock at a
price of not less than $0.40 per share (the "Private Placement Shares"). Farrell
agrees that he or any entity designated by him and reasonably acceptable to the
Company (the "Guarantor") will purchase not less than 625,000 of the Private
Placement Shares, provided, however, that the obligation of the Guarantor
hereunder shall not exceed $250,000. Farrell agrees that the net proceeds from
the sale of the Private Placement Shares shall be used in the Company's cigar
business.
(e) As promptly as possible following the execution and delivery of
this Agreement, the Company shall offer its existing creditors known as the
"Bridge Note" holders the opportunity to convert the unpaid principal amounts of
and all accrued but unpaid interest on such Bridge Notes into shares of Common
Stock at a price of $0.40 per share.
4. Further Corporate Action
(a) The Company agrees to take all necessary corporate action to
authorize and approve the sale of the Initial Shares, the Additional Shares and
the Private Placement Shares and the conversion of the Bridge Notes into Common
Stock. Such actions shall include, without limitation (i) making any necessary
filings with the Commission, (ii) holding a meeting of its stockholders to
approve the sale of the Initial Shares, the Additional Shares and the Private
Placement Shares, and (iii) seeking stockholder approval to increase the number
of authorized shares of Common Stock to 25,000,000 shares.
(b) At such time as the Company shall have received not less than
$1,000,000 from the sale of the Private Placement Shares, each of the directors
of the Company as to the date hereof agrees to resign as a director, and Farrell
shall have the right to designate new directors (the "New Directors") to fill
the vacancies created thereby.
5. Representations, Warranties and Covenants of Farrell. Farrell
represents and warrants:
(a) Farrell is an "accredited investor" within the meaning of Rule 501
promulgated under the Act, and has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the merits
and the risks of this investment. Farrell is acquiring the Initial Shares, the
Additional Shares and any Private Placement Shares he may acquire (collectively,
the "Securities") for his own account for investment purposes only and not with
a view to the distribution or resale thereof. Farrell will not sell or transfer
any of the Securities in violation of applicable federal, state or foreign
securities laws. Farrell agrees not to sell any of the Securities for at least
one year following the date of this Agreement.
<PAGE> 4
CUSIP No. 141834 10 1 Page 15 of 17
(b) Prior to the purchase of the Securities, Farrell had the
opportunity to ask questions and receive answers from the Company and its
representatives concerning the Company and the terms and conditions of the sale
of the Securities.
(c) In connection with the acquisition by Farrell of the Securities,
Farrell acknowledges that he has received, read, understands and is familiar
with:
(i) the Company's Annual report (Form 10-KSB) filed with the
Commission for the fiscal year ended March 31, 1997; and
(ii) Quarterly Reports (Form 10-KSB) filed with the Commission for
the quarters ended June 30, 1997 (as amended), September 30, 1997 and December
31, 1997.
Farrell further acknowledges that, except (i) for the projections and other
financial information provided to Farrell by the Company, (ii) as set forth in
this Agreement and (iii) such reports and other public information statements
made available to Farrell by the Company, no representations or warranties have
been made to Farrell or Farrell's advisors by the Company, or by any person
acting on behalf of the Company, with respect to the offer or sale of the
Securities and/or the economic, tax, or any other aspects or consequences of a
purchase of the Securities and/or the investment made thereby. Further, Farrell
has not relied upon any information concerning the Company, written or oral,
other than (i) the projections and other financial information provided to
Farrell by the Company, (ii) that contained in this Agreement and (iii) the
aforementioned reports and public information statements.
(d) Farrell acknowledges that any Securities issued to him pursuant to
this Agreement will be "restricted securities" within the meaning of the
Securities Act of 1933, as amended (the "Act"), and will bear a legend
restricting their transferability in accordance with the Act.
6. Additional Employment Agreements. As promptly as practicable
following the date of this Agreement, the Company shall enter into employment
agreements with Edward C. Williams, Norman Buck and any executive sales staff
hired with Norman Buck.
7. Retention of Professionals. The Company shall retain Ernst & Young
as the independent auditors for the Company (if such firm will accept the
engagement) and the law firm of Holland & Knight as its outside legal counsel
(provide such firm can advise the Company that it can accept the engagement
without having conflicts of interest). In the event that either of such firms
cannot act for the Company for any reason, or Farrell determines not to engage
either firm, Farrell shall have the right to designate the legal counsel and
independent auditors for the Company.
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CUSIP No. 141834 10 1 Page 16 of 17
8. Further Assurances. The parties hereto agree to negotiate in good
faith to agree on the terms of, and to execute and deliver, any and all such
further instruments and documents that are contemplated by this Agreement, but
which are drafted and/or negotiated as of the date hereof, all with a view to
providing each party to this with the full benefits thereof.
9. Headings. The headings of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF FLORIDA. THIS AGREEMENT MAY NOT BE CHANGED ORALLY BUT ONLY BY AN
AGREEMENT IN WRITING SIGNED BY THE PARTY AGAINST WHOM ENFORCEMENT OF ANY WAIVER,
CHANGE, MODIFICATION OR DISCHARGE IS SOUGHT.
11. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CARIBBEAN CIGAR COMPANY
By: /s/ Kevin Doyle
------------------------------------------
Title: President
---------------------------------------
/s/ Ronald G. Farrell
---------------------------------------------
Ronald G. Farrell
/s/ Kevin Doyle
---------------------------------------------
Kevin Doyle
/s/ Edward C. Williams
---------------------------------------------
Edward C. Williams,
as a director of the Company
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CUSIP No. 141834 10 1 Page 17 of 17
/s/ Curtis Zimmerman
---------------------------------------------
Curtis Zimmerman,
as a director of the Company
/s/ Stephen Wertheimer
---------------------------------------------
Stephen Wertheimer,
as a director of the Company
