SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant [X]
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[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Caribbean Cigar Company
(Name of Registrant as Specified in its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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[X] No fee required.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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[ ] Fee paid previously with preliminary materials.
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fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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4) Date Filed: .....................................
Caribbean Cigar Company
321 Troy Circle
Knoxville, Tennessee 37950
October __, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of the
Shareholders of Caribbean Cigar Company.
As shown in the formal notice enclosed, the meeting will be held on
_________, 1998 at __:00 a.m. at _______________ . At the meeting, in addition
to acting on the matters described in the Proxy Statement, we will give a
current report on the activities of the Company.
The subjects proposed for action at the meeting are the election of
seven directors, the approval of the possible issuance in excess of 19.99% of
the presently issued and outstanding Common Stock of the Company, the amendment
of the Company's Certificate of Incorporation to increase the number of
authorized shares and the approval of the Company's independent certified public
accountants and the conduct of such other business as may properly come before
the meeting.
It is important that your shares be represented at this meeting in
order that the presence of a quorum may be assured. Whether or not you plan to
attend the meeting and regardless of the number of shares you own, please mark,
sign and mail the enclosed proxy in the envelope provided.
Sincerely,
/s/ J.D. Jenkins
-------------------------------------
J.D. Jenkins
President and Chief Executive Officer
PRELIMINARY PROXY STATEMENT
CARIBBEAN CIGAR COMPANY
321 Troy Circle
Knoxville, Tennessee 37950
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
________, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders
(the "Annual Meeting") of Caribbean Cigar Company, a Florida corporation (the
"Company"), will be held at ___________ which is located at ____________,
on_______________, 1998, at __:00 am local time, for the purpose of considering
and acting upon the following matters:
(1) To elect directors to serve until the 1999 Annual Meeting of
Shareholders and until their successors shall be elected and
qualified;
(2) To approve the possible issuance of in excess of 19.99% of the
presently issued and outstanding Common Stock of the Company
upon the conversion of the Company's Series A Convertible
Preferred Stock ("Series A Convertible Preferred Stock");
(3) To consider and act upon a proposal to amend the Company's
Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 1,250,000 to
25,000,000;
(4) To approve Ahearn, Jasco + Company, P.A. as the Company's
independent certified public accountants for the fiscal year
ending March 31, 1999; and
(5) To transact such other and further business as may properly
come before the meeting.
The board of directors of the Company has fixed the close business on
September 15, 1998 as the record date for the determination of shareholders
entitled to notice of, and to vote, at the Annual Meeting. As of the record
date, there were 842,994 shares of the Company's common stock, par value $.001
per share ("Common Stock"), and 42,128 shares of the Company's Series A
Convertible Preferred Stock, $.001 par value, issued and outstanding and
entitled to vote at the Annual Meeting giving effect to the Company's 8 to 1
reverse stock split effective September 1, 1998.
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote on the record date is
necessary to constitute a quorum at the Annual Meeting. Abstentions and broker
non-votes will be counted towards a quorum. If a quorum is not present or
represented at the Annual Meeting, the shareholders present at the Annual
Meeting or represented by proxy have the power to adjourn the Annual Meeting
from time to time, without notice other than an announcement at the Annual
Meeting, until a quorum is present or represented. At any such adjournment of
the Annual Meeting at which a quorum is present or represented, any business may
be transacted that might have been transacted at the original Annual Meeting.
The enclosed Proxy Statement contains information pertaining to the
matters to be voted on at the Annual Meeting. A copy of the Company's Form
10-KSB and Form 10-KSB/A for the fiscal year ended March 31, 1998, and being
mailed with this Proxy Statement.
By Order of the Board of Directors
/s/ J.D. Jenkins
-------------------------------------
J.D. Jenkins
President and Chief Executive Officer
Miami, Florida
____________________, 1998
THE MATTERS BEING VOTED ON AT THE ANNUAL MEETING ARE IMPORTANT TO THE COMPANY.
IN ORDER THAT YOUR VOTE IS COUNTED AT THE ANNUAL MEETING, PLEASE EXECUTE, DATE
AND PROMPTLY MAIL THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE GIVING OF A PROXY WILL
NOT AFFECT YOUR RIGHT TO VOTE IN PERSON AT THE ANNUAL MEETING IF THE PROXY IS
REVOKED IN THE MANNER SET FORTH IN THE PROXY STATEMENT.
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PRELIMINARY PROXY STATEMENT
PROXY STATEMENT
1998 Annual Meeting of Shareholders
GENERAL INFORMATION
-------------------
The accompanying proxy and this Proxy Statement are furnished in
connection with the solicitation by the board of directors (the "Board" or the
"Board of Directors") of Caribbean Cigar Company, a Florida corporation (the
"Company"), of proxies for use at the Company's 1998 Annual Meeting of
Shareholders (the "Annual Meeting") to be held at _______________________,
on______________, 1998, at __:00 am or at any adjournment thereof. This Proxy
Statement and the related proxy and the Form 10-KSB and Form 10-KSB/A for the
fiscal year ended March 31, 1998 (the "Annual Report") are being mailed to
shareholders of the Company on or about October __, 1998.
At the Annual Meeting, shareholders will vote on (a) the election of
seven directors to serve until the 1999 Annual Meeting of Shareholders and until
their successors shall be elected and qualified, (b) the approval of the
possible issuance of in excess of 19.99% of the presently issued and outstanding
Common Stock upon the conversion of the Series A Convertible Preferred Stock,
(c) the amendment of the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 1,250,000 to 25,000,000 (of
which approximately 1,000,000 shares will be reserved for issuance, (d) the
approval of Ahearn, Jasco + Company, P.A. as the Company's independent certified
public accountants for the fiscal year ended March 31, 1999, and (e) the
transaction of such other and further business as may properly come before the
meeting. The Board of Directors does not know of any other matters which will be
voted upon at the Annual Meeting.
The shares held by each shareholder who executes and returns the proxy
will be counted for purposes of determining the presence of a quorum at the
Annual Meeting unless such proxy is timely revoked. If the proxy is executed and
returned, it may, nevertheless, be revoked at any time before it is voted by
written notice to the Secretary of the Company, by executing and returning a
subsequent proxy or by a shareholder personally attending and voting his or her
shares at the Annual Meeting.
Each properly executed proxy received in time for the Annual Meeting
will be voted as specified therein. If a shareholder does not specify otherwise,
the shares represented by his or her proxy will be voted in accordance with the
recommendations by the Board of Directors as follows: FOR the election of J.D.
Jenkins, Ron Jenkins, Edward C. Williams, Gabriel Ripoll, Jr., Daniel Daley,
Thomas Cristiano and Curtis Zimmerman to the Board of Directors of the Company;
FOR the approval of the possible issuance of in excess of 19.99% of the
presently issued and outstanding Common Stock of the Company; FOR the amendment
of the Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 1,250,000 to 25,000,000; and FOR the
approval of Ahearn, Jasco + Company, P.A. as the Company's independent certified
public accountants for the year ended March 31, 1999.
The election of the directors nominated requires the affirmative vote
of a plurality of the shares of the Company's Common Stock voting at the Annual
Meeting in person or by proxy. The ratification of the appointment of the
Company's auditors and the issuance of in excess of 19.99% of the presently
issued outstanding Common Stock will require the affirmative vote of a majority
of the shares of the Company's Common Stock voting at the Annual Meeting in
person or by proxy. The approval of the amendment to the Company's Articles of
Incorporation will require the affirmative vote of a majority of the shares of
Common Stock outstanding as of September 15, 1998. Abstentions will have the
same effect as a vote against a proposal and broker non-votes will be
disregarded.
All shares represented by properly executed proxies, unless such
proxies previously have been revoked, will be voted at the Meeting in accordance
with the directions on the proxies. IF NO DIRECTION IS INDICATED, THE SHARES
WILL BE VOTED FOR EACH PROPOSAL. The enclosed proxy, even though executed and
returned, may be revoked at any time prior to the voting of the proxy by one of
the following methods: (a) execution and submission of a revised proxy, (b)
written notice to the Secretary of the Company, or (c) voting in person at the
Meeting.
Shareholders are encouraged to review the detailed discussion presented
in this Proxy Statement and either return the completed and executed proxy or
attend the Annual Meeting. All statements in the Proxy Statement, except as
otherwise indicated, give effect to an 8 to 1 reverse stock split of the
Company's Common Stock effective September 1, 1998.
COMMON STOCK OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows information as to "beneficial ownership" of
the Common Stock of the Company, as of September 15, 1998, by each person known
by the Company to be the "beneficial owner" of more than five percent (5%) of
such Common Stock, by each director and executive officer of the Company and by
all directors and executive officers of the Company as a group (six persons).
The determinations of "beneficial ownership" of the Company's Common Stock are
based upon responses to Company inquiries which cited Rule 13d-3 under the
Securities and Exchange Act of 1934, as amended (the "1934 Act"). Such Rule
provides that shares shall be deemed to be beneficially owned where a person
has, either solely or in conjunction with others, the power to vote or to direct
the voting of shares and/or the power to dispose or to direct the disposition of
shares; or where a person has the right to acquire any such power within 60 days
after the date such "beneficial ownership" is determined. Except as disclosed in
the notes to the table, each person has sole voting and investment powers with
respect to the entire number of shares shown as beneficially owned by him or
her.
Number of Percent of
Shares Outstanding
Beneficially Common
Name and Address Owned(1) Stock
- ---------------- ------------ -----
J.D. Jenkins(2) - -
Ron Jenkins 4,000,000 (3) 82.6
Edward C. Williams 143,291 (4) 14.5%
Curtis Zimmerman 625 (5) *
Kevin Doyle 210,531 (6) 20%
Michael Risley 64,581 (7) 7.1%
Gabriel Ripoll 625 (8) *
Thomas Cristiano 625 (9) *
Daniel Daley 625(10) *
All directors and executive officers as a group 4,145,791 87.5%
(seven persons)
- ----------------------
* less than 1%.
(1) As of October 2, 1998, there were 842,994 shares of Common Stock
outstanding giving effect to the 8 to 1 reverse split of the Company's
Common Stock effective September 1, 1998.
(2) Mr. Jenkins is Chief Executive Officer, President and a Director of the
Company. Mr. Jenkins' address is 321 Troy Circle, Knoxville,
Tennessee 37950.
2
(3) Mr. Jenkins is Chief Operating Officer and Director of the Company.
Includes (i) 168,512 shares of Common Stock issuable upon the
conversion of 42,128 shares of the Company's Series A Convertible
Preferred Stock at a conversion price of $.80 per share; and (ii)
subject to shareholder approval, 3,831,488 shares of Common Stock
issuable upon the conversion of 957,872 shares of the Company's Series
A Convertible Preferred Stock at a conversion price of $.80 per share.
Mr. Jenkins' address is 321 Troy Circle, Knoxville, Tennessee 37950.
(4) Mr. Williams is Chief Financial Officer, Secretary, Treasurer and
Director of the Company. Includes (i) 101,591 shares of Common Stock
issuable pursuant to a 9% Series A Subordinated Note; and (ii) 23,437
shares of Common Stock issuable upon the exercise of an option held by
Mr. Williams exercisable until March 2008 at an exercise price of $.08
per share. Mr. Williams' address is 321 Troy Circle, Knoxville,
Tennessee 37950.
(5) Mr. Zimmerman is a Director of the Company. Includes 625 shares of
common stock issuable upon the exercise of options exercisable until
January 2008 at an exercise price of $56 per share.
(6) Includes 8,750 shares of Common Stock issuable upon the exercise of an
option held by Mr. Doyle exercisable until June 2006 at an exercise
price of $56 per share. Mr. Doyle's address is 321 Troy Circle,
Knoxville, Tennessee 37950.
(7) Mr. Risley's address is 1050 Sevilla Avenue, Coral Gables, Florida
33134.
(8) Mr. Ripoll is a Director of the Company. Includes 625 shares of common
stock issuable upon the exercise of options exercisable until January
2008 at an exercise price per share equal to the closing bid price
of the Company's Common Stock on September 23, 1998.
(9) Mr. Cristiano is a Director of the Company. Includes 625 shares of
common stock issuable upon the exercise of options exercisable until
January 2008 at an exercise price of $56 per share.
(10) Mr. Daley is a Director of the Company. Includes 625 shares of common
stock issuable upon the exercise of options exercisable until January
2008 at an exercise price of $56 per share.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity securities
(collectively, "Reporting Persons") to file reports and changes in ownership of
such securities with the Securities and Exchange Commission and the Company.
Based solely upon a review of (i) Forms 3 and 4 and amendments thereto furnished
to the Company pursuant to Rule 16a-3(e), promulgated under the Exchange Act,
during the Company's fiscal year ended March 31, 1998 and (ii) Forms 5 and any
amendments thereto and/or written representations furnished to the Company by
any Reporting Persons stating that such person was not required to file a Form 5
during the Company's fiscal year ended March 31, 1998, it has been determined
that the following Reporting Persons were delinquent with respect to such
person's reporting obligations set forth in Section 16(a) of the Exchange Act by
failing to file Form 3 in a timely manner on the following dates: Edward C.
Williams (September 1997), Kevin Doyle (August 1996), Curtis Zimmerman
(February 1998), Daniel Daley (October 1998), Gabriel Ripoll (October 1998)
and Thomas Cristiano (October 1998). In addition, it has been determined that
Mr. Williams failed to file a Form 5 for the Company's final year ended March
31, 1998. Messrs. Williams, Doyle and Zimmerman have informed the Company that
all required Section 16(a) filings will be made on or before the date of the
Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
AND INFORMATION REGARDING DIRECTORS
The Board of Directors is presently comprised of seven individuals,
Messrs. J.D. Jenkins, Ron Jenkins, Edward C. Williams, and Curtis Zimmerman,
Daniel Daley, Gabriel Ripoll, Jr. and Thomas Cristiano. The same seven
individuals have been nominated to serve as Directors for the ensuing year and
until their successors shall have been duly elected and qualified. The persons
named in the accompanying proxy have advised management that unless authority is
withheld in the proxy, they intend to vote FOR the election of the individuals
listed in the table on the following page. Management does not contemplate that
any of the nominees named in the table will be unable, or will decline, to
serve; however, if any of the nominees are unable to serve or declines to serve,
the persons
3
named in the accompanying proxy may vote for another person, or persons, in
their discretion. The following table sets forth certain information with
respect to each nominee for election to the Board of Directors. A summary of the
background and experience of each nominee is set forth in the paragraphs
following the table.
The following table sets forth information concerning the directors:
Name Age Position with the Company and Year First Elected Director
- ---- --- ---------------------------------------------------------
J.D. Jenkins 36 Chairman of the Board, President, Chief Executive Officer and Director, 1998
Ron Jenkins 56 Chief Operating Officer, Executive Vice President and Director, 1998
Edward C. Williams 38 Chief Financial Officer, Treasurer, Secretary and Director, 1997
Curtis Zimmerman 40 Director, 1998
Gabriel Ripoll 57 Director, 1998
Thomas Cristiano 46 Director, 1998
Daniel Daley 37 Director, 1998
Biographical information concerning the directors is set forth below.
Mr. J.D. Jenkins has been President, Chief Executive Officer and
Director of the Company since July 1998. Since March 1998 Mr. Jenkins has also
been a director and President of SJI Group, Inc., a Delaware corporation,
located in Knoxville, Tennessee whose primary business is tobacco and tobacco
related product sales and marketing. Since April 1992, Mr. Jenkins has been
Chairman of that Board of SJI Wholesale, Inc. a subsidiary of SJI Group, Inc.
J.D. Jenkins is the son of Ron Jenkins.
Mr. Ron Jenkins has been Executive Vice President, Chief Operating
Officer and Director of the Company since July 1998. Mr. Jenkins has been a
director of SJI Group, Inc. since March 1998. Mr. Jenkins was Vice President of
SJI Wholesale, Inc., between October 1996 and April 1998 and has been President
of SJI Wholesale, Inc., a Tennessee corporation, since April 1998. Between 1992
and 1997, Mr. Jenkins was employed as an executive officer of SJI, Inc. Ron
Jenkins is the father of J.D. Jenkins.
Mr. Edward C. Williams has been Chief Financial Officer since September
1997. He also served as Interim President from June 1998 to July 1998. He has
been a Director since November 1997. From December 1996 to September 1997, he
served as President and Chief Executive Officer of Williams Financial Group,
Inc., a financial and business consulting firm. Mr. Williams was Vice President
- - Finance of DenAmerica Corp. from April 1996 to July 1996, and he was Chief
Financial Officer of American Family Restaurants, Inc. from February 1993 to
March 1996, when American Family Restaurants, Inc. merged with DenWest
Restaurant Corp. Both of such corporations operated restaurants. From 1987 until
January 1993, Mr. Williams was employed by KPMG Peat Marwick, most recently as a
senior manager.
Mr. Curtis Zimmerman has been a Director of the Company since January
1998. Since 1987, Mr. Zimmerman has been a partner and principle of the
Zimmerman Agency, Inc., an advertising and marketing firm. Prior to that he was
a partner at Pringle Dixon & Pringle where he was employed since 1979.
Mr. Ripoll has been a director of the company since September 1998. Mr.
Ripoll has been principal officer and director of Tabaqueria de Filipinas, Inc.,
a cigar manufacturing company, since March 1993. Between February 1964, and
February 1993, Mr. Ripoll was employed in the Philippine branch of Compania
General de Tabacos de Filipinas S.A., a Spanish cigar manufacturing company as
General Manager of their cigar factory, La Flor de la Isabela.
Mr. Cristiano has been a director of the company since September 1998.
Mr. Cristiano has been the principal of Christom Imports & Exports, Inc., a
manufacturer and importer of handmade tobacco pipes and pipe and tobacco
accessories, since 1982.
4
Mr. Daley has been a director of the company since September 1998. Mr.
Daley has been President of S&D Party Enterprises, Inc., a retail party goods
supplier, since 1993. Mr. Daley has also served as President of Party City of
TN, Inc., a retail party goods supplier, since 1995.
The Company's Board of Directors has the following committees:
(a) The Audit Committee is comprised of Messrs. Zimmerman and Daley.
This committee was established to oversee the auditing procedures of the
Company, to receive and accept the reports of the Company's independent
certified public accountants, to oversee the Company's internal systems of
accounting and management controls and to make recommendations to the full Board
of Directors as to the selection and appointment of auditors for the Company.
(b) The Compensation Committee is comprised of Messrs. Ripoll,
Cristiano and Daley. This committee reviews and recommends to the Board of
Directors the appropriate compensation of directors and executive officers of
the Company.
The Board of Directors of the Company held 4 meetings during fiscal
1998.
EXECUTIVE COMPENSATION
DIRECTORS COMPENSATION
The Company's Directors do not currently receive fees for their
services as directors except as described under "Employment Contracts" below;
however, each director who is not an employee of the Company is paid for service
on the Board of Directors $500 for each meeting other than telephonic meetings.
The Company also reimburses each director for reasonable expenses in attending
meetings of the Board of Directors. Directors who are also employees of the
Company are not separately compensated for their services as directors.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information with respect
to the compensation paid to the Company's executive officers whose total annual
salary and bonus exceeded $100,000 for the last three fiscal years ending March
31, for services rendered in all capacities to the Company.
Summary Compensation Table
Annual Compensation
-------------------
Restricted Stock Options, SARs
Name and Principal Position Year Salary Bonus Awards (Dollars) (Number)
- --------------------------- ---- ------ ----- ---------------- -------------
Edward C. Williams - Chief 1998 $54,167 - - 23,437(1)
Financial Officer and Director
Kevin Doyle - President, Executive 1998 $150,000 - - -
Vice President and Director(2) 1997 $150,000 - - 8,750(3)
1996 $102,000 - - -
Thomas R. Dilk - Chief Financial 1998 $ 40,000 - - -
Officer(4) 1997 $80,000 - - -
1996 $33,000 - $46,667 12,500(5)
5
(1) The Options are exercisable at $.08 per share.
(2) Between April 1, 1997 and March 30, 1998, Mr. Doyle was President of the
Company. Effective July 28, 1998, Ron Jenkins replaced Mr. Doyle as
Executive Vice President of the Company. On such date, Ron Jenkins also was
elected as a director of the Company.
(3) The Options are exercisable at $56 per share.
(4) Mr. Dilk acted as Chief Financial Officer between October 1995 and
September 14, 1997.
(5) The Options are exercisable at $12.00 per share until November 2001.
EMPLOYMENT CONTRACTS
The Company has employment agreements with Mr. Edward C. Williams and Mr. Kevin
Doyle. The employment agreement with Mr. Williams, effective April 1, 1998,
provides for his employment as Chief Financial Officer of the Company until
March 31, 2001, subject to automatic renewal for successive one-year periods
unless either the Company or Mr. Williams has given prior notice of non-renewal.
The employment agreement further provides Mr. Williams with an annual base
salary of $100,000 per year plus performance bonuses and annual increases, if
any, as determined by the Company's Board of Directors. In connection with his
Employment Agreement, the Company agreed to grant Mr. Williams an option to
purchase 187,496 shares of its common stock at an exercise price of $0.01 per
share. The option is immediately exercisable and expires in March 2008. Under
his employment agreement, Mr. Williams is entitled to participate in or receive
benefits under all employee and executive benefit plans or arrangements and
perquisites of employment, including, but not limited to, health and disability
insurance coverage, life insurance, deferred compensation and pension benefits
and personal financial, investment, legal or tax advice, subject to the same
terms and conditions as apply to other senior officers of the Company. Mr.
Williams is entitled to receive a severance payment over a 12-month period of
(i) one and one-half times his current salary including bonus and benefit
payments ("Current Salary") if his employment agreement is terminated as a
result of a "constructive termination" in connection with a "change of control"
(as defined in the agreement generally to mean a merger, consolidation or
transfer of the Company's assets pursuant to which the surviving corporation or
the transferee does not agree to be bound by the terms of the agreement, or any
person becomes the holder of 50% or more of the voting power of the Company), or
(ii) one time his Current Salary as a result of election of either party not to
renew the agreement, or (iii) an amount equal to the greater of (a) the base
salary over the remaining term of the agreement or (b) his Current Salary if his
agreement is terminated as a result of a "termination without cause". In
addition, in the event Mr. Williams' agreement is terminated as a result of a
"termination without cause" or "constructive termination," any and all stock
options held by Mr. Williams will immediately become vested and exercisable.
The employment agreement with Mr. Doyle, effective April 1, 1998,
provides for his employment as Executive Vice President of the Company until
March 31, 2001, subject to automatic renewal for successive one-year periods
unless either the Company or Mr. Doyle has given prior notice of non-renewal.
The employment agreement further provides Mr. Doyle with an annual base salary
of $150,000 per year plus performance bonuses and annual increases, if any, as
determined by the Company's Board of Directors. The benefit and severance
provisions in Mr. Doyle's agreement are the same as those set forth above in Mr.
Williams' agreement, except that his severance amount in the event of a change
of control, as defined above, would be two times his Current Salary. In
addition, in the event Mr. Doyle's agreement is terminated as a result of a
"termination without cause" or "constructive termination," any and all stock
options held by Mr. Doyle will immediately become vested and exercisable
6
Pursuant to their employment agreements, Mr. Doyle and Mr. Williams
will be entitled to invoke the change of control provisions in their respective
employment agreements with the Company if Proposal 2 is approved and Mr. Doyle
or Mr. Williams resign from the Company. In the event either Mr. Williams or Mr.
Doyle resign pursuant to such change of control provisions, they will be
entitled to receive one and one half (1 - 1/2) and two (2) times their Current
Salary as such term is defined in their respective employment agreements.
1996 LONG TERM INCENTIVE PLAN
In May 1996, the Company adopted, by action of the Board of Directors
and shareholders, the 1996 Long- Term Incentive Plan (the "Plan") to enable the
Company to attract, retain and reward key employees of the Company and its
subsidiaries and affiliates. The Plan does not have an expiration date. The Plan
is authorized for 500,000 shares of Common Stock. If shares subject to an option
under the Plan cease to be subject to such option, or if shares awarded under
the Plan are forfeited, or otherwise terminate without a payment being made to
the participant in the form of stock, such shares will again be available for
future distribution under the Plan.
Awards under the Plan may be made to key employees, including officers
and consultants to the Company, its subsidiaries and affiliates. The Plan
imposes no limit on the number of officers and other key employees to whom
awards may be made; however, no person shall be entitled to receive in any
fiscal year awards which would entitle such person to acquire more than 3% of
the number of shares of common stock outstanding on the date of grant.
The Plan is administered by a committee of no less than two
disinterested directors appointed by the Board of Directors (the "Committee").
Any member or alternate member of the Committee shall not be eligible to receive
options or stock under the Plan (except as to the automatic grant of options to
directors) or under any plan of the Company or any of its affiliates. The
Committee has broad discretion in determining the persons to whom stock options
or other awards are to be granted, the terms and conditions of the award,
including the type of award, the exercise price and term and the restrictions
and forfeiture conditions. This committee is currently comprised of Messrs.
Ripoll, Cristiano & Daley.
The Committee has the authority to grant the following types of awards
under the Plan: incentive or non-qualified stock options; stock appreciation
rights; restricted stock; deferred stock; stock purchase rights and/or other
stock-based awards. The Plan is designed to provide the Committee with broad
discretion to grant incentive stock-based rights.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
In June 1996, the Company adopted, by action of the Board of Directors
and shareholders, the Non- Employee Directors Stock Option Plan (the
"Non-Employee Directors Plan") to attract, retain and reward independent
directors, who are not otherwise employed by the Company or any subsidiary, for
services to the Company and its subsidiaries. The Non-Employee Directors Plan is
authorized to grant stock options to purchase up to 100,000 shares of Common
Stock.
On the date that each non-employee director is elected to the Board,
such individual shall receive stock options to purchase 5,000 shares of Common
Stock, subject to adjustment. Initial option grants under the Non- Employee
Directors Plan vest upon grant with an exercise price per share equal to the
greater of the fair market value on the date of grant or the par value of the
Common Stock.
On April of each year, commencing April 1, 1997, each non-employee
director shall also receive stock options to purchase 2,500 shares of Common
Stock. These annual option grants vest 25% after each three-month period
following the grant with an exercise price per share equal to the greater of the
fair market value on the date of grant or the par value of the Common Stock.
These options have a term of ten (10) years and are exercisable as
7
to 625 shares on the first day of July, October, January and April immediately
following the date of grant. If there is a change in control of the Company, all
outstanding stock options granted under the Non-Employee Directors Plan shall be
made in the event of a merger, consolidation, recapitalization,
reclassification, stock split, warrants or rights issuance, stock dividend or
combination of shares. As of September 1998, the following eligible directors
have received stock options pursuant to the Non-Employee Directors Plan during
the last fiscal year: Messrs. Zimmerman, Ripoll, Cristiano and Daley.
The Non-Employee Directors Stock Option Plan is administered by a
committee of not less than two disinterested persons, who are appointed by the
Board of Directors.
Option Grants In Fiscal Year Ended March 31, 1998
The following table sets forth information concerning options granted
during the year ended March 31, 1998, pursuant to the Company's stock option
plans. No stock appreciation rights ("SARs") were granted.
Percent of
Number of Total Options
Shares Granted to
Underlying Employees in Exercise Price
Name Options Granted Fiscal Year Per Share Expiration Date
- ---- -----------------------------------------------------------------------------
Edward C. Williams 23,437 45.3 $.08(1) 3/08
(1) The options were originally granted to Mr. Williams pursuant to his
employment agreement with the Company at an exercise price of $.75 per
share. Subsequent to March 31, 1998, the Company agreed to reduce the
exercise price on the options to $0.01 per share. The exercise price of
the options was again adjusted to $.08 as a result of the Company's 8
to 1 reverse stock split effective September 1, 1998.
Aggregate Option Exercises in Fiscal Year Ended March 31, 1998 and Fiscal Year
End Option Value
The following table sets forth information as to options held by the
executive officers named in the Summary Compensation Table.
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options at Fiscal Options at Fiscal
Year End Year End
Shares
Acquired Value Exercisable/ Exercisable/
Name Upon Exercise Realized Unexercisable Unexercisable
- ---- -------------------------------------------------------------------------------
Edward C. Williams - - 23,437 28,886 (1)
Kevin Doyle - - 8,750 -
(1) Based upon the difference between $1.03, which was the closing
price of the Company's common stock as of March 31, 1998, and $0.08,
the exercise price.
8
The Company's officers named in the Summary Compensation Table did not
exercise options or warrants during the year ended March 31, 1998.
The Company did not engage in any option repricing during the fiscal
year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1997, Mr. Fred Berger, Mr. Tom Dilk, Mr. Eric Kamisher, Mr.
Luciano Nicasio and Mr. Carlos Torano, former directors of the Company, loaned
the Company $250,000. The loans were repaid in September 1997 from the proceeds
of the Finova Credit Facility together with interest in the amount of $5,000,
calculated at a rate of 8% per annum.
As of March 31, 1998, the Mr. Edward C. Williams, the Company's Chief
Financial Officer, loaned the Company a total of $70,000 in exchange for $70,000
of the Company's Series 9% Subordinated Notes bearing interest at a rate 9% per
annum and repayable in 60 days. In connection with the Series 9% Subordinated
Notes, the Company issued Mr. Williams 2,500 shares of Common Stock.
As of March 31, 1997, the Company loaned $58,314 to an officer and
various employees of the Company. Approximately $34,000 was collateralized by
stock and the remaining balance was unsecured.
The Company from time to time purchased and sold tobacco to entities
affiliated with Mr. Carlos Torano, a former member of the Board of Directors of
the Company. Purchases and sales were approximately $0 and $257,000 and
$1,032,000 and $154,000, respectively, for the years ended March 31, 1998 and
1997.
On July 28, 1998, the Company entered into an agreement (the
"Agreement") with Mr. Ron Jenkins ("Jenkins"). Pursuant to the terms of the
Agreement the Company and Jenkins agreed that: (i) Jenkins would facilitate the
consummation of an agreement between the Company and SJI Wholesale, Inc.
("SJI"), of which Jenkins is an officer ("SJI") whereby the Company would grant
SJI the exclusive right to market the Company's products in the United States
for which the Company would extend to SJI its normal distributor pricing which
is a 20% discount of its published wholesale price subject to adjustment; (ii)
Jenkins would attempt to arrange for SJI to purchase cigars manufactured by the
Company; (iii) Jenkins would purchase certain of the inventory of the Company
for $500,000 to be paid $10,000 per week to Finova Capital Corporation (the
Company's primary lender); (iv) Jenkins would wire $25,000 cash into the Company
to cover payroll; and (v) Jenkins would assist the Company in either
restructuring or repaying its debt obligations with Finova, which obligations
Jenkins would personally guarantee.
In consideration for the services to be preformed by Jenkins, the
Company agreed to issue (the "Issuance") Jenkins, or his assigns, an aggregate
of 1,000,000 shares of Series A Convertible Preferred Stock ("Preferred Shares")
of the Company. The holder of the Preferred Shares will be entitled to vote one
vote per share with the holders of the Common Stock on all matter submitted for
such a vote. Each Preferred Share is convertible (the "Conversion") into four
shares of common stock of the Company (on a post reverse stock split basis) at a
conversion price of $.80 per share for an aggregate of $800,000 which conversion
must be effected by the holder of thereof on or prior to 48 months from the date
of issuance (the "Conversion Period"). In the event such Conversion does not
occur within the Conversion Period, the holder must immediately return the
unconverted portion of the Preferred Shares to the Company. Preferred Shares
convertible into 19.99% of the outstanding Common Stock of the Company have
already been issued to Jenkins. The remaining Preferred Shares will be issued
upon the approval of a majority of the Company's shareholders. The Company also
appointed Jenkins Chief Operating Officer and Executive Vice President of the
Company and J.D. Jenkins as Chief Executive Officer and President of the
Company. The Company also agreed to accept the resignation of Kevin Doyle as
Vice President and Director.
9
PROPOSAL 2
TO APPROVE THE POSSIBLE ISSUANCE OF IN EXCESS OF 19.99% OF THE PRESENTLY ISSUED
AND OUTSTANDING COMMON STOCK UPON THE
CONVERSION OF THE SERIES A CONVERTIBLE PREFERRED STOCK
The Series A Convertible Preferred Stock
On July 28, 1998 (the "Initial Closing Date") the Company issued 42,128
shares and agreed to issue an additional 957,872 shares, subject to shareholder
approval, for an aggregate 1,000,000 shares of its Series A Convertible
Preferred Stock ("Series A Convertible Preferred Stock"), to Ron Jenkins, an
unaffiliated third party in a private transaction exempt from registration under
the Securities Act of 1933, as amended (the "Act") pursuant to Section 4(2) of
the Act. The designations, rights and preferences of the Preferred Stock are
described in part below and set forth in their entirety on Appendix A hereto.
Assuming the approval of this Proposal 2, and the conversion of all
1,000,000 shares of Series A Convertible Preferred Stock at a conversion price
of $.80 per share, the gross proceeds to the Company from the sale of such stock
will be $800,000. The Company will use such proceeds for general working capital
purposes.
Rule 4310(b)(25)(H) of The Nasdaq Stock Market, Inc. Marketplace Rules
requires certain companies whose securities are traded on the Nasdaq SmallCap
Market (such as the Company) to obtain shareholder approval prior to issuing
common stock (or shares convertible into common stock) in a transaction other
than a public offering at a price less than the market value of the common stock
when the amount of common stock to be issued (or issuable upon conversion) is or
will be greater than 20% of the common stock or voting power of the company
outstanding prior to issuance. The initial issuance of 42,128 shares of Series A
Convertible Preferred Stock did not require shareholder approval pursuant to
Rule 4310(b)(25)(H) as the Company is not contractually obligated to issue any
shares of its Common Stock upon conversion of the Series A Convertible Preferred
Stock which would breach the Company's obligation under the rules or regulations
of the Nasdaq Stock Market, being a maximum of 19.99% of the then currently
issued and outstanding Common Stock. The Company, however, must obtain
shareholder approval of this Proposal 2 prior to the issuance of the remaining
957,872 shares of Series A Convertible Preferred Stock.
Assuming approval of this Proposal 2, the number of shares of Common
Stock into which the 1,000,000 shares of Series A Convertible Preferred Stock
are convertible will be 4,000,000 which will represent 82.6% of the outstanding
shares of Common Stock of the Company if such conversion is deemed to occur on
the date hereof.
Series A Convertible Preferred Stock Designations
The following is a summary description of the preferences, rights and
limitations of the Series A Convertible Preferred Stock as set forth in the
Articles of Amendment to the Articles of Incorporation of the Company as filed
with the Secretary of State of Florida on September 18, 1998, and attached
hereto as Appendix A.
10
Voting Rights and Preferences
The shares of Series A Convertible Preferred Stock are entitled to one
vote per share upon any matter submitted to the shareholders of the Company's
Common Stock for a vote. So long as at least one-third of the shares of Series A
Convertible Preferred Stock are outstanding, the affirmative vote of holders of
a majority of the then outstanding Series A Convertible Preferred Stock shall be
required for (a) the Company to authorize or issue any additional capital stock
that is of senior or equal rank to Series A Convertible Preferred Stock in
respect to the preferences as to distribution and payments upon the all
liquidation, dissolution and winding up of the Company or (b) any change to the
Articles of Amendment or the Company's Certificate of Incorporation which would
also amend, alter, change or repeal any of the powers, designations, preferences
and rights of the Series A Convertible Preferred Stock. The Company may not
authorize or make any amendments of the Company's Articles of Incorporation or
By-Laws or file any resolutions of the Board of Directors of the Company
containing any provisions, which would adversely effect or otherwise impair the
rights or relative holders of the priority of the holders of the Series A
Convertible Preferred Stock relative to the Common Stock or the holders of other
class of capital stock, without such consent. In the event of the merger or
consolidation of the Company with or into another corporation, the holders of
the Series A Convertible Preferred Stock shall maintain their relative powers,
designations and preferences.
Dividends
The holders of the Series A Convertible Preferred Stock are entitled to
receive, for each share of Common Stock into which the Series A Convertible
Preferred Stock is convertible in accordance with the terms hereof, dividends,
in cash or in kind, when and as declared by the Board of Directors of the
Company.
Liquidation Preference
The Series A Convertible Preferred Stock has a stated value of $.10 per
share (the "Face Value"). In the event that any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of the Series
A Convertible Preferred Stock shall be entitled to receive in cash out of the
assets of the Company, before any amount shall be paid to the holders of any of
the capital stock of the Company of any class junior in rank to the Series A
Convertible Preferred Stock in respect of the preferences as to distributions
and payments on the liquidation, dissolution and winding up of the Company an
amount per share equal to $.10.
Optional Conversion
Each share of the Series A Convertible Preferred Stock is convertible,
at the option of the holder, (the "Conversion") into four shares the Company's
Common Stock at a price of $.80, provided however, that such Conversion must be
effected by the holder on or prior to 48 months from September, 1998 (the
"Conversion Period"). In the event such Conversion does not occur within the
Conversion Period, the holder of the Series A Preferred Stock must immediately
return the unconverted shares of Series A Convertible Preferred Stock to the
Company.
THE BOARD OF DIRECTORS HAS APPROVED THE OFFERING AND RECOMMENDS A VOTE
FOR THE APPROVAL OF THE OFFERING. SUCH APPROVAL REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF THE COMMON STOCK REPRESENTED IN PERSON OR BY PROXY
AT THE MEETING.
11
PROPOSAL 3
PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
CARIBBEAN CIGAR COMPANY
On September 23, 1998, the Board of Directors adopted a resolution,
subject to shareholder approval, authorizing an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
$.001 par value Common Stock from 1,250,000 to 25,000,000. The resolution, in
its entirety, states:
"RESOLVED, subject to the approval of the shareholders of the
Corporation, the Board of Directors hereby approves the amendment to the
Articles of Incorporation of the Corporation to increase the authorized number
of share of common stock the Corporation is authorized to issue to from
1,250,000 to 25,000,000."
Giving effect to the 8 for 1 reverse split of the Company's Common
Stock on September 1, 1998, as of September 15, 1998, there were issued and
outstanding 842,994 shares of the Company's $.001 par value Common Stock. If the
increase in authorized shares is approved, there will be approximately
24,157,006 shares of Common Stock authorized but unissued shares available for
future utilization. The Company currently plans to issue approximately 1,000,000
shares of its Common Stock to the holders of the companies Series 9%
Subordinated Notes if the increase in authorized shares is approved. The Company
currently plans to reserve for issuance the following shares if the increase in
authorized shares is approved: 500,000 shares pursuant to the Plan, 100,000
shares pursuant to the Non-Employees Directors Plan and approximately 230,000
shares issuable upon the exercise of warrants. The Board of Directors believes
that the recommended increase in the number of authorized shares will give it
the flexibility to timely meet the equity capital requirements of the Company's
business in the future. Once authorized in the Certificate of Incorporation,
shares of Common Stock may be issued by the Board of Directors, in most cases,
without further authorization from the shareholders.
The newly authorized shares of Common Stock will have voting and other
rights identical to those of the currently authorized shares of Common Stock.
Holders of the Company's Common Stock have no preemptive rights with respect to
the issuance of additional shares of Common Stock.
In the event Proposal 2 and this Proposal 3 are approved by the
shareholders, Mr. Ron Jenkins would, upon conversion of the 1,000,000 shares of
Series A Convertible Preferred Stock, own 4,000,000 of the then outstanding
4,842,994 shares of Common Stock of the Company and thereby control 82.6% of the
voting power of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION. PROXIES RECEIVED BY THE
BOARD OF DIRECTORS WILL BE VOTED FOR THE PROPOSAL UNLESS SHAREHOLDERS SPECIFY A
CONTRARY CHOICE IN THEIR PROXY.
PROPOSAL 4
PROPOSAL TO RATIFY THE APPOINTMENT OF AHEARN, JASCO + CO., P.A.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, AS THE
COMPANY'S AUDITORS
The Board of Directors of the Company has selected Ahearn, Jasco + Co.,
P.A., independent certified public accountants, as independent auditors for the
Company for the fiscal year ended March 31, 1999 and determined that it would be
desirable to request that the Company's shareholders ratify such selections. One
or more representatives of Ahearn, Jasco + Co., P.A., are expected to be present
at the Annual Meeting, will have the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions from shareholders.
12
Although the Board of Directors of the Company is submitting the
appointment of Ahearn, Jasco + Co., P.A., for shareholder ratification it
reserves the right to change the selection of Ahearn, Jasco + Co., P.A., as
auditors, at any time during the fiscal year, if it deems such change to be in
the best interest of the Company, even after shareholder ratification.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
RATIFICATION OF AHEARN, JASCO + CO., P.A., AS INDEPENDENT AUDITORS FOR THE
COMPANY FOR THE FISCAL YEAR ENDING MARCH 31, 1999.
OTHER MATTERS
Management is not aware of any other matters to be presented for action
at the Meeting. However, if any other matter is properly presented, it is the
intention of the persons named in the enclosed form of proxy to vote in
accordance with their best judgment on such matter.
COST OF SOLICITATION
The Company will bear the costs of the solicitation of proxies from its
shareholders. In addition to the use of the mail, proxies may be solicited by
directors, officers and regular employees of the Company in person or by
telephone or other means of communication. The directors, officers and employees
of the Company will not be compensated additionally for the solicitation but may
be reimbursed for out-of-pocket expenses in connection with the solicitation.
Arrangements are also being made with brokerage houses and any other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of the Company, and the Company will reimburse the brokers,
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses.
SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be
presented by such shareholders at the 1999 Annual Meeting must be received by
the Company no later than May 1, 1999 in order to have them included in the
proxy statement and form of proxy relating to that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ J.D. Jenkins
----------------------------------
J.D. Jenkins, President
and Chief Executive Officer
__________________, 1998
13
CARIBBEAN CIGAR COMPANY
ANNUAL MEETING OF SHAREHOLDERS
_____________, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CARIBBEAN CIGAR COMPANY. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE CHOICES SPECIFIED BELOW.
The undersigned shareholder of Caribbean Cigar Company (the "Company")
hereby appoints J.D. Jenkins the true and lawful attorney, agent and proxy of
the undersigned with full power of substitution for and in the name of the
undersigned, to vote all of the shares of Common Stock of the Company which the
undersigned may be entitled to vote at the 1998 Annual Meeting of Shareholders
of the Company to be held at _______________, on ____________, __________, 1998
at __:00 a.m., and any and all adjournments thereof, with all of the powers
which the undersigned would possess if personally present, for the following
purposes:
FOR AGAINST ABSTAIN
--- ------- -------
1. Election of J.D. Jenkins, Ron Jenkins, Edward [ ] [ ] [ ]
C. Williams, Curtis Zimmerman, Gabreil
Ripoll, Jr., Daniel Daley and Thomas Cristiano to
the Board of Directors of the Company
2. To approve the possible issuance of in excess of [ ] [ ] [ ]
19.9% of the presently issued and outstanding
Common Stock upon the conversion of the
Series A Convertible Preferred Stock and on any
other matters incident to Proposal 1 contained
in the Proxy Statement accompanying this Proxy.
3. To amend the Company's Certificate of Incorporation [ ] [ ] [ ]
to increase the authorized shares of the Company's
Common Stock from 1,250,000 to 25,000,000
4. To approve Ahearn, Jasco + Company, P.A. [ ] [ ] [ ]
as the Company's independent certified public
accountants for the fiscal year ended March 31, 1999
THIS PROXY WILL BE VOTED FOR THE CHOICE SPECIFIED. IF NO CHOICE IS SPECIFIED,
THIS PROXY WILL BE VOTED FOR THAT PROPOSAL.
The undersigned hereby acknowledges receipt of the Notice of the 1998 Annual
Meeting and Proxy Statement dated_________________, 1998.
DATED:__________________ __________________________
(Signature)
__________________________
(Signature if jointly held)
14
__________________________
(Printed name(s))
Please sign exactly as name appears on the stock certificate(s). Joint owners
should each sign. Trustees and others acting in a representative capacity should
indicate the capacity in which they sign.
15
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
CARIBBEAN CIGAR COMPANY
Pursuant to Sections 607.1006, 607.0602 and 607.0502 of the Business
Corporation Act of the State of Florida, the undersigned Chief Financial Officer
of Caribbean Cigar Company, a corporation organized and existing under and by
virtue of the Business Corporation Act of the State of Florida ("Corporation"),
bearing document number P95000068903, does hereby certify that:
FIRST: The Articles of Incorporation of the Corporation
authorize 2,000,000 shares of preferred stock, par value $.001 per share, of
which no shares are issued and outstanding.
SECOND: That pursuant to the authority conferred upon the
Board of Directors by the Articles of Incorporation of the Corporation, the
Board of Directors on July 26, 1998, at a Special Meeting of the Board of
Directors, adopted resolutions creating a Series of Preferred Stock designated
as Series A Convertible Preferred Stock.
THIRD: The approval of the Shareholders of the Corporation was
not required pursuant to Sections 607.0602 and 607.0502.
FOURTH: That on September 16, 1998, pursuant to a unanimous
written consent of the Board of Directors, the Board of Directors resolved to
change its registered agent principal office address as set forth herein.
16
In furtherance of the foregoing, Articles I, III and IV of the
Corporation's Articles of Incorporation shall be deleted in their entirety and
replaced with the following:
ARTICLE I
NAME AND ADDRESS
----------------
The name of this Corporation shall be Caribbean Cigar Company. The
address of the principal office and the mailing address of this Corporation is
321 Troy Circle, P.O. Box 50368, Knoxville, Tennessee 37950.
ARTICLE III
CAPITAL STOCK
-------------
The maximum number of shares that this Corporation shall be authorized
to issue and have outstanding at any one time shall be 1,250,000 shares of
Common Stock, par value $.001 per share and 2,000,000 shares of Preferred Stock,
par value $.001 per share. Series of the Preferred Stock may be created and
issued from time to time, with such designations, preferences, conversion
rights, cumulative, relative, participating, optional or other rights, including
voting rights, qualifications, limitations or restrictions thereof as shall be
stated and expressed in the resolution or resolutions providing for the creation
and issuance of such series of Preferred Stock as adopted by the Board of
Directors pursuant to the authority in this paragraph given.
Series A Convertible Preferred Stock
The Board of Directors of the Corporation desires, pursuant to its
authority as aforesaid, to determine and fix the rights, preferences, privileges
and restrictions relating to a class of said Preferred Stock to be designated as
follows:
1. Designation and Amount. The shares of such series shall be
designated as the Series A Convertible Preferred Stock (the "Series A
Convertible Preferred Stock") and shall have a stated value of $.10 (the "Stated
Value") per share, and the number of shares constituting such series shall be
1,000,000.
17
2. Dividends. The holders of the Series A Convertible Preferred Stock
and the common stock of the Corporation, as one class, shall be entitled to
receive, for each share of Common Stock into which the Series A Convertible
Preferred Stock is convertible in accordance with the terms hereof, as the case
may be, dividends, in cash or in kind, when and as declared by the Board of
Directors of the Corporation, out of any assets of the Corporation available for
dividends pursuant to the laws of the State of Florida. As used in this
paragraph 2, "Common Stock" shall also include any capital stock of any class of
the Corporation hereafter authorized, which is entitled to unlimited dividend
rights.
3. Restrictions on Transfer. Each certificate for shares of Series A
Convertible Preferred Stock (and any Common Stock issuable upon the conversion
of the Series A Convertible Preferred Stock) shall bear the following legend
(and any additional legend required by applicable law or rule) on the face
thereof:
"The shares of preferred stock represented by this certificate have not
been, and the shares of common stock to be issued upon conversion
hereof, when issued, will not have been registered under the securities
act of 1933, as amended (the "securities act"), or qualified under
state securities laws and may not be sold, pledged or otherwise
transferred unless (a) covered by an effective registration statement
under the securities act and qualified under applicable state
securities laws, or (b) the Corporation has been furnished with an
opinion of counsel acceptable to the Corporation to the effect that no
registration and qualification is legally required for such transfer."
4. Limitations on Corporate Action. So long as at least one-third of
the shares of Series A Convertible Preferred Stock are outstanding, the
Corporation (except upon the affirmative vote of the holders of a majority of
the then outstanding shares of the Series A Convertible Preferred Stock) will
not:
(a) issue any equity security (or make any commitments to
issue any equity pursuant to any debt instrument, warrant, option or otherwise)
senior to the Series A Convertible Preferred Stock with respect to dividends or
liquidation rights; or
(b) amend or repeal any provision of, or add any provision to,
the certificate of incorporation (including, without limitation, increasing or
decreasing the authorized number of shares
18
of Series A Convertible Preferred Stock) or by-laws, in each case if such action
would adversely alter the relative voting powers, preferences, rights and
privileges of, or the qualifications, limitations and restrictions provided for
the benefit of, the Series A Convertible Preferred Stock, or otherwise adversely
alter the powers, preferences, rights and privileges of, or the qualifications,
limitations and restrictions provided for the benefit of, the Series A
Convertible Preferred Stock.
5. Preference. (a) In the event of any liquidation, dissolution, or
winding up of the affairs of the Corporation, whether voluntary or involuntary,
except as set forth in subparagraph (b) below, the holders of the Series A
Convertible Preferred Stock shall be entitled, before any assets of the
Corporation shall be distributed among or paid over to the holders of the Common
Stock, to be paid $.10 per share plus the amount of any dividend previously
declared with respect to the Series A Convertible Preferred Stock and remaining
unpaid. After payment to the holders of the Series A Convertible Preferred Stock
as set forth in the previous sentence and as provided in subparagraph (b) below,
any additional amount available for distribution to the shareholders of the
Corporation shall, subject to subparagraph (b) below, be shared by the holders
of the Series A Convertible Preferred Stock and the Common Stock on a
share-for-share basis (with each share of Series A Convertible Preferred Stock
being deemed to be equal to the number of shares of Common Stock (including
fractions of a share) into which such Series A Convertible Preferred Stock is
convertible immediately prior to the close of business on the business day fixed
for such distribution.
(b) If, upon such liquidation, dissolution or winding up, the
assets of the Corporation distributable as aforesaid among the holders of the
Series A Convertible Preferred Stock shall be insufficient to permit the payment
to such holders of at least the amounts provided in subparagraph (a) above, plus
the amount of any unpaid dividend, as aforesaid, the entire assets shall be
distributed pro rata among the holders of the Series A Convertible Preferred
Stock based upon their respective liquidation preferences as set forth in
subparagraph (a) above. The amounts distributable to the holders of Series A
Convertible Preferred Stock under subparagraph (a) above shall be adjusted
19
appropriately for subdivisions (by stock splits, stock dividends or otherwise),
combinations (by reverse stock splits or otherwise) or other recapitalizations
of the Series A Convertible Preferred Stock.
(c) Written notices of such liquidation, dissolution or
winding up, stating a payment date and the place where said payments shall be
made, shall be given not less than twenty (20) days prior to the payment date
stated therein.
(d) The sale or transfer by the Corporation of all or
substantially all of its assets, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of the
provisions of this paragraph 5, unless the holders of a majority of the shares
of Series A Convertible Preferred Stock shall, prior to the effective date of
such sale or transfer, consent in writing or by vote at a meeting to such
transaction.
6. Voting Rights. The holders of the Series A Convertible Preferred
Stock shall be entitled to one (1) vote per share of Series A Convertible
Preferred Stock to vote:
(a) with the holders of the shares of common stock of the
Corporation upon any matter submitted to such shareholders of the Corporation
for a vote; and
(b) on any matter as required by law.
7. Conversion. (a) Each share of Series A Convertible Preferred Stock
shall be convertible, at the option of the holder, (the "Conversion") into four
(4) shares of common stock of the Company at a conversion price of $.80 per
share; provided however, that such Conversion must be effected by the holder on
or prior to 48 months from the date hereof (the "Conversion Period"). In the
event such Conversion does not occur within the Conversion Period, the holder of
the shares of Series A Convertible Preferred Stock must immediately return the
unconverted shares of Series Convertible A Preferred Stock to the Company. The
foregoing notwithstanding, the holder of the Series A Convertible Preferred
Stock may not convert the shares of Series A Preferred Stock into a number of
shares of Common Stock that would exceed 19.99% of the outstanding Common Stock
on the date of such conversion unless the Company has obtained the approval of
its shareholders, pursuant to
20
NASDAQ Marketplace Rule 4310 (b)(25)(H) to issue a number of shares of Common
Stock in excess of 20% of its outstanding shares of Common Stock on the date of
such conversion.
(b) All shares of Common Stock acquired by conversion of
Series A Convertible Preferred Stock ("Conversion Shares"), upon issuance, will
be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof, provided that
the Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the holder of the Series A Convertible Preferred
Stock which is being converted;
(c) So long as any shares of Series A Convertible Preferred
Stock are outstanding, the Corporation will use its best efforts to have at all
times authorized, and reserved (free from pre-emptive rights) for the purpose of
issue or transfer upon exercise of the rights evidenced by the Series A
Convertible Preferred Stock, a sufficient number of shares of its Common Stock
to provide therefor;
(d) No fractional shares of Common Stock shall be issued upon
conversion of the Series A Convertible Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to the then effective current market price of
such fractional shares as determined in good faith by the Board of Directors of
the Corporation.
7. Consolidation, Merger, Exchange, etc. In case the Corporation shall
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the Common Shares are exchanged for or changed into
other stock or securities, money and/or any other property, then in any such
case the Series A Convertible Preferred Stock shall at the same time be
similarly exchanged or changed into preferred shares of the surviving entity
providing the holders of such preferred shares with (to the extent possible) the
same relative rights and preferences as the Series A Convertible Preferred
Stock.
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8. Stock Dividends; Stock Splits, Etc. If, prior to the date on which
all shares of Series A Convertible Preferred Stock are converted, the
Corporation shall (i) pay a dividend in shares of Common Stock, (ii) subdivide
its outstanding Common Stock, or (iii) combine its outstanding Common Stock into
a smaller number of shares of Common Shares, the Conversion Price in effect on
the opening of business on the record date for determining shareholders entitled
to participate in such transaction shall thereupon be adjusted, or, if
necessary, the right to convert shall be amended, such that the number of shares
of Common Stock receivable upon conversion of the shares of Series A Convertible
Preferred Stock immediately prior thereto shall be adjusted so that the holders
of the Series A Convertible Preferred Stock shall be entitled to receive, upon
the conversion of such shares of Series A Convertible Preferred Stock, the kind
and number of shares of Common Stock or other securities of the Corporation
which it would have owned or would have been entitled to receive after the
happening of any of the events described above had the Series A Convertible
Preferred Stock been converted immediately prior to the happening of such event
or any record date with respect thereto. Any adjustment made pursuant to this
subparagraph 8 shall become effective immediately after the effective date of
such event and such adjustment shall be retroactive to the record date, if any,
for such event.
ARTICLE IV
REGISTERED OFFICE AND AGENT
---------------------------
The Registered Agent and the street address of the Registered Office of
this Corporation in the State of Florida shall be:
South Florida Registered Agents, Inc.
200 East Las Olas Blvd., Suite 1900
Fort Lauderdale, Florida 33301
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IN WITNESS WHEREOF, the undersigned, being the Chief Financial
Officer of this Corporation, has executed these Articles of Amendment as of
September 17, 1998.
CARIBBEAN CIGAR COMPANY,
a Florida Corporation
By:________________________________________
Edward Williams, Chief Financial Officer
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CERTIFICATE DESIGNATING REGISTERED AGENT
AND OFFICE FOR SERVICE OF PROCESS
Caribbean Cigar Company, a corporation existing under the laws of the
State of Florida with its principal office and mailing address at 321 Troy
Circle, P.O. Box 50368, Knoxville, Tennessee 37950, has named South Florida
Registered Agents, Inc. whose address is 200 East Las Olas Blvd., Suite 1900,
Fort Lauderdale, Florida 33301 as its agent to accept service of process within
the State of Florida.
ACCEPTANCE:
-----------
Having been named to accept service of process for the above named
Corporation, at the place designated in this Certificate, I hereby accept the
appointment as Registered Agent, and agree to comply with all applicable
provisions of law. In addition, I hereby am familiar with and accept the duties
and responsibilities as Registered Agent for said Corporation.
SOUTH FLORIDA REGISTERED AGENTS, INC.
(a Florida Corporation)
By:__________________________________
Beverly F. Bryan, President
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