STOCK PURCHASE AND SALE AGREEMENT
This Stock Purchase and Sale Agreement (this "Agreement"), dated as of
August 4, 2000, at Canton, Ohio, is by and among The Havana Group, Inc., a
Delaware corporation having a business and mailing address of 7835 Freedom
Avenue, North Canton, Ohio 44720 ("Buyer"), and John S. Parker, Priscilla H.
Parker, Jerald E. Christensen, and Linda L. Christensen, each having a business
and mailing address as set forth in Section 10.04 below (hereinafter
collectively referred to as "Sellers"). In any provision of this Agreement, any
promise, agreement, covenant, representation, and warranty made by Sellers shall
be construed as if the same had been made jointly and severally by each of the
four Sellers.
In consideration of the mutual promises contained herein, the benefits
to be derived by each party hereunder and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Buyer and Sellers
agree as follows:
ARTICLE 1.
Purchase and Sale
Section 1.01 Purchase and Sale. Sellers agree to sell and to convey, and
Buyer agrees to purchase and to pay for, the Stock (as defined in Section 1.02
below), subject to the terms and conditions of this Agreement.
Section 1.02 Interests Purchased. All of the following shall herein be
called the "Stock:"
All of the rights, title and interest of Sellers in and to any
ownership interest in Phillips & King International, Incorporated
(hereinafter "P&K"), a reorganized company pursuant to the Second
Amended Plan of Reorganization (the "Plan of Reorganization") confirmed
by an order of the United States Bankruptcy Court for the Central
District of California (the "Bankruptcy Court") entered on July 5, 2000
in Case No. BK. No. LA 99-14796-LF (EC) (the "Confirmation Order") to
which no appeal has been filed.
ARTICLE 2.
Purchase Price
Section 2.01 Purchase Price. The purchase price for the Stock shall be (a)
One Million Two Hundred Thousand Dollars ( $1,200,000) (the "Purchase Price"),
and (b) 300,000 unregistered shares of Buyer's common stock (the "Havana
Shares"), which are both subject to adjustment as provided in Section 2.02
below.
Section 2.02 Adjustments to Purchase Price. The Purchase Price and the
Havana Shares shall be payable and adjusted as follows and the resulting amount
shall be herein called the "Adjusted Purchase Price:"
(a) In the event that the combined assets of P&K at the Closing
(as defined in Section 7.01 below) should have a value less than Three
Million Five Hundred and Eighty-five Thousand Dollars ($3,585,000) as
valued in accordance with the same accounting principles and
assumptions used in the financial statements of P&K dated December 31,
1999, (Exhibit 2.02(a)), there will be a dollar for dollar reduction
in the Purchase Price. This reduction shall first be applied against:
(i) first, any cash payments at the Closing, (ii) second, any
promissory note(s) issued by Buyer to Sellers at the Closing, and
(iii) third, reductions from any future payments due under
Non-Competition Agreements with any of the Sellers.
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(b) Any other amount agreed upon in writing by Sellers and Buyer.
(c) Buyer will issue the Havana Shares to each of the Sellers in
proportion to their ownership of the Stock.
(d) The initial, unadjusted number of Havana Shares to be issued
to Sellers (i.e., 300,000) is based upon a presumed average trading
price of Buyer's publicly issued stock of $3.00 as of the Closing Date
(as defined in Section 7.01 below) resulting in an issuance of
$900,000 worth of stock ($3.00 x 300,000 = $900,000 worth of stock).
However, the total number of Havana Shares issued to Sellers shall be
adjusted upward or downward based upon the average trading price of
the listed common stock of Buyer as of the Closing Date as follows:
(i) If at the time of Closing, the average listed
closing stock price of Buyer's stock for the five trading days
immediately prior to Closing is less than $3.00 per share, the
number of Havana Shares to be issued to Sellers will be
increased proportionately in order to maintain the same
overall aggregate value of $900,000 as presumed above;
provided, however, that the number of Havana Shares issued to
Sellers pursuant to this Agreement will not exceed 450,000
shares, even if the average listed closing stock price of
Havana stock for the five trading days immediately prior to
Closing is less than $2.00 per share.
(ii) If at the time of Closing, the average listed
closing stock price of Buyer's stock for the five trading days
immediately prior to Closing exceeds $3.00 per share, the
number of Havana Shares to be issued to Sellers will be
decreased proportionately in order to maintain the same
relative value of $900,000 as presumed above; provided,
however, that the number of Havana Shares issued to Sellers
pursuant to this Agreement will not be less than 225,000
shares, even if the average listed closing stock price of
Buyer's stock for the five trading days immediately prior to
Closing is greater than $4.00 per share.
(iii) Therefore, expressed as a mathematical formula,
the number of Havana Shares to be issued to Sellers shall be
determined by a formula the numerator of which is 900,000 and
the denominator of which is the average listed closing stock
price of Buyer's stock for the five trading days immediately
prior to Closing, but the denominator shall not be less than 2
nor greater than 4 (900,000 / 2 <= x <= 4 = number of Havana
Shares; where x = the average listed closing stock price of
Buyer's stock).
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(e) As holder of the Havana Shares issued pursuant to this
Agreement, Sellers shall have "piggy-back rights" as set forth in the
form of Registration Rights Agreement attached hereto as Exhibit
2.02(e) which permits the registration of the Havana Shares in the
event Buyer should elect, in certain circumstances, to register any
other shares in the future.
(f) The parties agree that for purposes of the Closing, the
parties will use the financial information of P&K as of June 30, 2000,
to make adjustments to the purchase price as provided in Section 2.02
above. Subsequent to Closing, the parties agree that a calculation
will be made in the assets of P&K as of August 4, 2000, and to the
extent that such calculation reflects figures different than the June
30 figures, adjustments will be made accordingly to the Adjusted
Purchase Price. In the event that additional funds should be due the
Sellers, the funds will be added as appropriate to the consulting
agreements, promissory note or cash payments or any further
reductions. If any reductions are required, reductions will be made in
the same sequence of cash, promissory note and consulting payments.
Section 2.03 Payment of the Purchase Price. At Closing, the Adjusted
Purchase Price will be paid as follows:
(a) Cancellation of that certain promissory note in favor of
Buyer and on which Sellers are obligated in the principal amount of
$900,000, an exoneration of any guaranties therefor and a release of
any security given for the note or any guaranty therefrom. (Exhibit
2.03(a)).
(b) Payment of cash to Sellers in the amount of $100,000 in the
form of a bank cashier's check, wire transfer or other instrument
reasonably specified.
(c) Delivery of a promissory note to Sellers executed by Buyer in
the amount of $200,000 to carry interest at the rate of 7% per annum
with all amounts payable under such note to be due on or before the
first anniversary of the Closing Date. (Exhibit 2.03(c)).
(d) Within ten (10) days after the Closing, issuance of the
Havana Shares to Sellers in the amount as determined under the
provisions of Section 2.02(d).
ARTICLE 3.
Non-Competition Agreements
The parties agree that, at the Closing, Buyer will enter into a
non-competition and consulting agreement with both John S. Parker and Jerald E.
Christensen in accordance with the form Non-Competition and Consulting Agreement
attached to this Agreement as Exhibit 3.
ARTICLE 4.
Representations and Warranties
Section 4.01 Representations and Warranties of Sellers. Sellers represent
and warrant to Buyer that:
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(a) Corporate Organization and Qualification. P&K is a
corporation duly organized, validly existing and in good standing
under the laws of the State of California.
(b) Corporate Authority. P&K has all requisite power and
authority to carry on its business as presently conducted. The
consummation of the transactions contemplated by this Agreement will
not violate, or be in conflict with, any provision of P&K's articles
of incorporation, bylaws, or other governing documents, or any
agreement or instrument to which P&K is a party or by which P&K is
bound, or any judgment, decree, order, statute, rule or regulation
applicable to P&K.
(c) Transactions Authorized. Sellers own 100% of the outstanding
stock of P&K. The execution and delivery of this Agreement and the
transactions contemplated hereby will not (i) require any consent,
authorization or approval of, or exemption by, or filing under any
provision of any law, statute, rule or regulation to which Sellers are
subject, (ii) violate any judgment, order, writ or decree of any court
applicable to Sellers or P&K or (iii) conflict with, result in a
breach of, constitute a default under, or accelerate or permit the
acceleration of the performance required by, or require any consent,
authorization or approval under any agreement, contract, commitment,
lease or other instrument, document or undertaking to which Sellers or
P&K are a party or are bound. Sellers have obtained or will obtain
prior to the Closing the written waiver from Wells Fargo Bank waiving
the due on sale clause in P&K's loan and security documents entered
into between Wells Fargo Bank and P&K. (Exhibit 4.01(c)).
(d) Execution of Agreement. This Agreement has been duly executed
and delivered on behalf of Sellers and, at the Closing, all documents
and instruments which are executed and delivered by Sellers shall have
been duly executed and delivered. This Agreement does, and such
documents and instruments shall, constitute legal, valid and binding
obligations of Sellers enforceable in accordance with their terms,
except to the extent that enforceability may be limited by a Seller's
bankruptcy, insolvency, moratorium or other similar laws currently or
hereafter in effect relating to or affecting the enforcement of
creditors' rights generally and by general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law).
(e) Payment of Taxes. To the best of Sellers' knowledge, P&K has
paid in full all taxes and assessments that have been or may be
accrued, due or levied against P&K by any local, state, federal, or
other taxing authority, including without limitation, applicable
corporation taxes, franchise taxes, federal and state income taxes,
state and municipal sales and use taxes, stamp, excise and excess
profits taxes, federal unemployment and old age insurance taxes,
property taxes, capital stock taxes, ad valorem taxes, severance, and
all other taxes and assessments. To the best of Sellers' knowledge,
all tax returns and reports required by applicable law or governmental
regulations have been filed by P&K, and such returns and reports are
true, correct and complete in all material respects and present fairly
and accurately the information required to be shown therein. To the
best of Sellers' knowledge, there are no assessed tax deficiencies
proposed or threatened, and no audit of P&K by any federal, state or
local authority is in progress.
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(f) Information. Sellers have provided Buyer with written
information relating to P&K that is complete and accurate in all
material respects, including, without limitation, the current
financial statements of P&K. No representation or warranty of Sellers
contained in this Agreement contains or will contain any untrue
statement of material fact, or omits or will omit to state any
material fact necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading. All
contracts, permits and other documents and instruments furnished or
made available to Buyer by Sellers are or will be true, complete and
accurate originals or copies of originals and include all amendments,
supplements, waivers and modifications thereto. There is no fact,
development or threatened development known to Sellers that Sellers
have not disclosed to Buyer in this Agreement or the Exhibits hereto
that materially adversely affects or, so far as Sellers can now
foresee, may materially adversely affect, the Stock, or the condition
(financial or otherwise) of P&K.
(g) P&K's Encumbrances. In addition to the Plan of
Reorganization, Exhibit 4.01(g) hereto contains a description of all
indebtedness, borrowings, loan agreements, promissory notes, pledges,
mortgages, guaranties and similar liabilities (direct and indirect)
that are secured by or constitute an encumbrance on any assets of P&K
("P&K's Encumbrances") with the exception of those for taxes not yet
due, purchase money liens, and other immaterial liens.
(h) Title to Properties. Except for P&K's Encumbrances as
provided in the Plan of Reorganization, P&K has good and marketable
title to its assets and Sellers have good and marketable title to the
Stock free and clear of all liens, encumbrances, burdens and claims
other than federal and state securities law limitations and
restrictions associated with unregistered stock.
(i) Contracts. All material leases and contracts between P&K and
any third party are listed on Exhibit 4.01(i) (the "Leases" and
"Contracts"). All royalties, rentals and other payments due under the
Leases and the Contracts have been paid and accepted, and all
conditions necessary to keep the Leases and the Contracts in force and
effect have been fully performed in all material respects. The Leases
and the Contracts are in full force and effect, are valid and
subsisting, and cover the entire estates or rights that they purport
to cover. P&K has never been advised, directly or indirectly, by any
lessor under any Lease or by any other party of a default under any
Lease or Contract which claim of default has not been resolved by the
confirmation of the Plan of Reorganization, the Confirmation Order or
otherwise.
(j) Contract Obligations. P&K is not in default under any
contract or agreement and, except for P&K's Encumbrances, there are no
contracts or other agreements pertaining to the Stock that require any
further action on the part of P&K or require P&K to perform any
obligations thereunder except those listed in Exhibits 4.01(g) or
4.01(i) or those provided in the Plan of Reorganization. Without
limiting the foregoing, and except as provided for in the Plan of
Reorganization and in Exhibits 4.01(g) or 4.01(i), P&K is not a party
to any written or oral:
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(i) agreement, contract or commitment for the future
purchase of, or payment for, supplies or products, or for the
performance of services by another party;
(ii) agreement, contract or commitment to sell or supply
products or to perform services, involving in any one case $5,000
or more;
(iii) agreement, contract or commitment continuing over a
period of more than six months from the date hereof or exceeding
$5,000 in value;
(iv) representative, sales agency, dealer or distributor
agreement, contract or commitment;
(v) lease under which P&K is either lessor or lessee other
than with respect to the Leases;
(vi) note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit agreement, loan
agreement or other contract or commitment of the borrowing or
lending of money (including without limitation loans to or from
employees) or guarantee, pledge or undertaking of the
indebtedness of any other Person; or
(vii) any other material agreement, contract or commitment
not made in the ordinary course of business consistent with past
practice.
(k) State Licenses. All State licenses held by P&K are listed on
Exhibit 4.01(k) and all said licenses are fully paid and are valid.
(l) Broker's Fee. Sellers have incurred no liability, contingent
or otherwise, for brokers' or finders' fees relating to the
transactions contemplated by this Agreement for which Buyer shall have
any responsibility whatsoever.
(m) Legal Proceedings. Except as set forth on Exhibit 4.01(m),
the Bankruptcy Case or in connection with the Plan of Reorganization,
to the best of Sellers' knowledge, there is no suit, action or other
proceeding pending, instituted or threatened before any court or
governmental body, authority or agency and, to the best of Sellers'
knowledge, no cause of action exists, that relates to Sellers or P&K.
Sellers or P&K are not a party or subject to any injunction, judgment,
order, notice of appeal, of any court or governmental body, authority
or agency except as set forth on Exhibit 4.01(m) and in the Plan of
Reorganization.
(n) General Compliance. To the best of Sellers' knowledge, all
laws, rules, regulations, ordinances and orders of all local, state,
and federal governmental bodies, authorities and agencies having
jurisdiction over P&K have been complied with in all material
respects.
(o) Suitability of Personal Property. All equipment of P&K has
been maintained in a good and workmanlike manner in accordance with
normal industry standards. In all material respects, all personal
property and equipment is in a state of good repair, is in sound and
serviceable operating condition and is suitable for the purposes for
which such property was obtained or is being used.
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(p) Locations of Business. The following is the chief place of
business of P&K:
Phillips & King International, Inc.
18021 Courtney Court
City of Industry, CA 91748
(q) Financial Statements. Sellers have delivered to Buyer true
and complete copies of (i) the balance sheets of the P&K at December
31, 1999, the related statements of income and cash flows for the year
then ended (Exhibit 2.02(a)), and (ii) unaudited balance sheets of P&K
at March 31, 2000 and related statements of income and cash flows for
the interim period then ended (Exhibit 4.01(q)). The foregoing
financial statements have been prepared from the books and records of
P&K in accordance with GAAP consistently applied throughout the
periods involved except as may be noted therein. To the best of
Sellers' knowledge, such financial statements, including the related
notes, are true and correct in all material respects and fairly
present the financial position of P&K at the dates indicated and the
results of operations and cash flows of P&K for the periods then ended
in accordance with GAAP. References in this Agreement to the "Balance
Sheet" shall mean the balance sheet of P&K as of December 31, 1999
referred to above, and references in this Agreement to the "Balance
Sheet Date" shall be deemed to refer to December 31, 1999.
(r) Books and Records. To the best of Sellers' knowledge, all
books of account and other financial records of P&K (the "Books and
Records") are complete and correct in all material respects and have
been made available to Buyer for examination and audit. All of the
Books and Records have been prepared and maintained in accordance with
good business practices and, where applicable, in conformity with GAAP
(except as otherwise stated therein) and in compliance in all material
respects with applicable laws, regulations and other requirements. The
Corporate Record Book of P&K as a reorganized entity under Title 11 of
the United States Code, is current and contains a complete and
accurate description of the corporate activity of P&K.
(s) Experienced Investor. Sellers are experienced investors in
securities of a company such as Havana and can bear the economic risk
of a complete loss of their investment in the Havana Shares. Sellers
have such knowledge and experience in financial or business matters
relating to a company such as Havana, and are capable of evaluating
the merits and risks of the investment in the Havana Shares.
(t) Purchase for Own Account. Sellers are acquiring the Havana
Shares for their own account, not as nominee or agent, for investment
and, at this time, not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning
of the Securities Act of 1933, as amended (the "Securities Act").
Sellers do not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation
to any third person with respect to any of the Havana Shares.
<PAGE>
(u) No Registration. Sellers understand that the Havana Shares
have not been registered under the Securities Act, or any other state
securities law, by reason of a specific exemption therefrom.
Therefore, unless a subsequent disposition thereof is registered under
the Securities Act under the Registration Rights Agreement or
otherwise, or is exempt from such registration, Sellers may be
required to bear the economic risk of such investment indefinitely.
(v) No Public Offering. Sellers have not been offered the Havana
Shares by any form of advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by such media.
Section 4.02 Representations and Warranties of Buyer. Buyer represents and
warrants to each of the Sellers that:
(a) Corporate Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified to conduct business in the
State of Ohio.
(b) Corporate Authority. Buyer has all requisite power and
authority to carry on its business as presently conducted, to enter
into this Agreement, to purchase the Stock on the terms described in
this Agreement and to perform its other obligations under this
Agreement. The consummation of the transactions contemplated by this
Agreement will not violate, or be in conflict with, any provision of
Buyer's charter, bylaws or governing documents, or any agreement or
instrument to which Buyer is a party or by which Buyer is bound, or
any judgment, decree, order, statute, rule or regulation applicable to
Buyer.
(c) Transactions Authorized. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby
will have been duly and validly authorized by all requisite action,
corporate and otherwise on the part of Buyer.
(d) Execution of Agreement. This Agreement has been duly executed
and delivered on behalf of Buyer, and, at the Closing, all documents
and instruments required hereunder to be executed and delivered by
Buyer shall have been duly executed and delivered.
(e) Broker's Fees. Buyer has incurred no liability, contingent or
otherwise, for brokers' or finders' fees relating to the transactions
contemplated by this Agreement for which Sellers shall have any
responsibility whatsoever.
(f) SEC Filings. Buyer has delivered to Sellers complete and
accurate copies of Buyer's most recent annual report on Form 10-KSB
filed by Buyer under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the most recent annual report to stockholders
of Buyer, and Buyer's definitive proxy statement, together with all
quarterly reports on Form 10-QSB, current reports on Form 8-K and all
other communications to stockholders or reports filed by Buyer with
the Securities and Exchange Commission (the "SEC") since the date of
filing of the form 10-KSB. The financial statements included in such
reports have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
indicated and present fairly the consolidated financial position of
Buyer and its subsidiaries on, and the consolidated results of its
operations for the periods ended on, the dates indicated. Information
delivered to Sellers by Buyer pursuant to this Section 4.02 did not at
the time of filing (or if amended, supplemented or superseded by a
filing prior to the date hereof, on the date of that filing) contain
any untrue statement of a material fact or omit to state a material
fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
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(g) Rule 144. Buyer has: (i) made and kept public information
available, as those terms are understood and defined in the General
Instructions to Form S-3 and in SEC Rule 144; (ii) filed with the SEC
in a timely manner all reports and other documents required to be
filed by an issuer of securities registered under the Securities Act
(as defined below) or the Exchange Act; and (iii) has undertaken any
and all additional actions necessary or appropriate to maintain the
availability of the use of SEC Rule 144 and Rule 145.
(h) Absence of Material Changes. Since the date of the latest
financial statements included in Buyer's most recent report on Form
10-QSB, there has not been any material adverse change in the
business, assets, liabilities, consolidated earnings or financial
condition or prospects of Buyer, nor are there any known
circumstances, conditions, happenings, events or arrangements,
contractual or otherwise, that have occurred and that may reasonably
be anticipated to give rise hereafter to any such material adverse
change.
(i) Capitalization. Since the date of the Buyer's most recent
report on Form 10-QSB, there has not been any material change in the
Buyer's capitalization.
(j) Due Diligence; Information. Buyer has been solely responsible
for Buyer's own due diligence investigation of the Stock and Plan of
Reorganization and has evaluated the merits and risks of an investment
under this Agreement. Buyer has received all information as Buyer
considers necessary for evaluating the risks and merits of acquiring
the Stock and has had full opportunity to make further inquiries of,
and to receive answers from, Sellers and their representatives for
additional information.
(k) Experienced Investor. Buyer is an experienced investor in
securities of companies and can bear the economic risk of a complete
loss of its investment in the Stock. Buyer has such knowledge and
experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Stock.
(l) Purchase for Own Account. Buyer is acquiring the Stock for
its own account, not as nominee or agent, for investment and not with
a view to, or for resale in connection with, any distribution or
public offering thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act"). Buyer does not have any
contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to any third person with respect
to any of the Stock.
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(m) No Registration. Buyer understands that the Stock was issued
pursuant to the Plan as allowed by 11 U.S.C. ss. 1145 but that the
Stock has not been registered under the Securities Act, or any other
state securities law, by reason of a specific exemption therefrom.
Therefore, unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from such registration, Buyer may be
required to bear the economic risk of such investment indefinitely.
(n) No Public Offering. Buyer has not been offered the Stock by
any form of advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast
over television or radio, or any seminar or meeting whose attendees
have been invited by such media.
(o) Consents. Buyer need make or obtain no consent, approval, or
authorization of, or declaration, filing or registration with, any
federal or state governmental or regulatory authority in connection
with the execution, delivery, and performance of this Agreement and
the consummation of the transactions contemplated hereby.
ARTICLE 5.
Covenants
Section 5.01 Covenants and Agreements of Sellers. Sellers covenant and
agree with Buyer that, until the Closing or, if earlier, the termination hereof:
(a) Continuing Management. Sellers shall cause P&K to operate and
conduct the business of P&K in substantially the same manner as P&K
has heretofore operated and shall cause P&K to refrain from
introducing any materially new method of management, operation or
accounting.
(b) New Agreements and Sales. Without the prior consent of Buyer
which shall not be unreasonably withheld, delayed or conditioned,
Sellers shall cause P&K to refrain from (i) entering into any new
material agreements or commitments with respect to P&K that extend
beyond the Closing, (ii) making any expenditures in excess of Five
Thousand Dollars ($5,000) or Twenty-Five Thousand Dollars ($25,000) in
the aggregate, (iii) modifying or terminating any of the material
agreements relating to P&K, or (iv) encumbering, selling or otherwise
disposing of any of P&K assets other than personal property that is
replaced by equivalent property or which is sold or otherwise disposed
of in the normal operation of P&K's business. Notwithstanding the
foregoing, P&K may issue dividends to Sellers that do not cause the
value of the assets of P&K to fall below the amount provided in
Section 2.02(a).
(c) Legal Proceedings. Sellers shall promptly notify Buyer of any
suit, action or other proceeding before any court or governmental
body, authority or agency and any cause of action of which Sellers
have knowledge that relates to P&K.
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(d) Confidential Data. Sellers shall exercise all due diligence
in safeguarding and maintaining the security of all confidential data
in the possession of Sellers relating to P&K. Sellers shall not
disclose such confidential data to any third party without Buyer's
prior written consent.
(e) General Compliance. Sellers shall comply in all material
respects with all laws, rules, regulations, ordinances and orders of
all local, state, and federal governmental bodies, authorities and
agencies having jurisdiction over the Stock.
(f) Access to Properties. At all times prior to the Closing,
Sellers shall use their best efforts to give Buyer and the employees
and agents of Buyer reasonable access to the premises of P&K.
(g) Consummation of Transaction. Sellers shall use all
commercially reasonable efforts to take or cause to be taken all such
actions as may be necessary or advisable to consummate and make
effective the sale of the Stock and the transactions contemplated by
this Agreement and to assure that as of the Closing Date Sellers will
not be under any material corporate, legal, or contractual restriction
that would prohibit or delay the timely consummation of such
transactions.
(h) Validity of Representations. To the extent the conditions
precedent to the obligations of Buyer are within the reasonable
control of Sellers, Sellers shall take all commercially reasonable
actions necessary or appropriate to cause such conditions to be
satisfied on or prior to the Closing Date.
(i) Inability to Perform Covenant. Sellers shall promptly notify
Buyer (i) if any representation or warranty of Sellers contained in
this Agreement is discovered to be or becomes untrue in any material
respect, or (ii) if Sellers fail to perform or comply with any
covenant or an agreement contained in this Agreement or it is
reasonably anticipated that Sellers will be unable to perform or
comply with any covenant or agreement contained in this Agreement.
(j) Release of Encumbrances. At the Closing, Sellers shall use
all commercially reasonable efforts to cause all P&K encumbrances to
be released other than the encumbrances in favor of Wells Fargo Bank,
security agreement in favor of unsecured creditors, liabilities listed
in Section 6.02(g), liens for taxes not yet due and payable, and other
immaterial encumbrances.
(k) Settlement of Legal Proceedings. On or before the Closing and
except as provided in the Plan of Reorganization, Sellers shall use
all reasonable efforts to cause the lawsuits, proceedings, demands,
actions and other claims relating to P&K, if any, to be settled. In
the alternative, Sellers shall use all reasonable efforts to secure
releases from the claimants of such claims, releasing the P&K, Sellers
and Buyer from any such claims.
(l) Advice of Changes. Sellers shall advise Buyer promptly in
writing of any fact that, if known as of the date hereof, would have
been required to be set forth or disclosed in or pursuant to this
Agreement, or which would result in the breach in any material respect
by Sellers of any of their representations, warranties, covenants or
agreements hereunder.
<PAGE>
(m) Update Schedules. Sellers shall promptly disclose to Buyer
any information contained in the representations and warranties of
Sellers or in the Exhibits to this Agreement which is no longer
complete or correct (including furnishing updated financial
statements); provided that no such disclosure, of itself, shall be
deemed to modify or amend Sellers' representations and warranties.
Section 5.02 Covenants and Agreements of Buyer. Buyer covenants and agrees
with each of the Sellers that:
(a) Consummation of Transaction. Buyer shall use all commercially
reasonable efforts to take or cause to be taken all such actions as
may be necessary or advisable to consummate and make effective the
purchase of the Stock and the transactions contemplated by this
Agreement and to assure that, as of the Closing Date, Buyer will not
be under any material corporate, legal or contractual restrictions
that would prohibit or delay the timely consummation of such
transactions.
(b) Issuance of Havana Shares. Within 10 calendar days after the
Closing Date, Buyer shall issue the Havana Shares to Sellers in the
aggregate amount determined according to Section 2.02(d) of this
Agreement. Each Seller shall receive twenty-five percent (25%) of the
aggregate number of Havana Shares issued to Sellers pursuant to this
Agreement. Upon issuance, Buyer may retain the Havana Shares and hold
them as collateral subject to the terms of the Havana Stock Pledge
Agreement. (Exhibit 6.02(l)).
(c) Validity of Representations. To the extent the conditions
precedent to the obligations of Buyer are within the reasonable
control of Buyer, Buyer shall take all commercially reasonable actions
necessary or appropriate to cause such conditions to be satisfied on
or prior to the Closing Date.
(d) Inability to Perform Covenant. Buyer shall promptly notify
Sellers (i) if any representation or warranty of Buyer contained in
this Agreement is discovered to be or becomes untrue in any material
respect, or (ii) if Buyer fails to perform or comply with any covenant
or agreement contained in this Agreement or it is reasonably
anticipated that Buyer will be unable to perform or comply with any
covenant or agreement contained in this Agreement.
(e) Performance of Plan of Reorganization. On or after the
Closing Date, Buyer shall perform or cause P&K to comply with and
perform the terms and obligations of the Plan of Reorganization and
Confirmation Order in a timely manner.
(f) Release of Guaranty. After Closing, buyer shall use all
reasonable efforts to cause the release and exoneration by Wells Fargo
Bank of any guaranty held by Wells Fargo Bank executed by John S.
Parker and/or Priscilla H. Parker and/or The Parker Family Trust dated
May 23, 1990 relating to any indebtedness owed by P&K to Wells Fargo
Bank.
<PAGE>
(g) Reports under the Exchange Act. With a view to making
available to Sellers the benefits of Rule 144, Rule 145 and any other
rule or regulation of the SEC that may at any time permit Sellers to
sell shares of Buyer's common stock to the public without
registration, Buyer shall: (i) make and keep public information
available, as those terms are understood and defined in the General
Instructions to Form S-3, or any successor or substitute form, and in
Rule 144; (ii) file with the SEC in a timely manner all reports and
other documents required to be filed by an issuer of securities
registered under the Securities Act or the Exchange Act; (iii) file
with the SEC reports that do not contain any untrue statements of
material fact or omit to state a material fact required to be stated
or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading; (iv) as long as Sellers own any shares of
Buyer's common stock, to furnish in writing upon such Seller's request
a written statement by Buyer that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, and furnish
to such Seller a copy of the most recent annual or quarterly report of
Buyer, and such other reports and documents so filed by Buyer as may
be reasonably requested in availing such Seller of any rule or
regulation of the SEC permitting the selling of any shares of Buyer's
common stock without registration; and (v) after a period of one year
undertake any additional actions reasonably necessary to use Rule 144
or other SEC Rules to dispose of the shares of common stock of Buyer
free of registration.
(h) Regulatory Filings. Buyer shall make any and all filings and
applications necessary to issue the shares of its common stock to
Sellers, including without limitation, the filing of notices or
applications with stock market regulatory agencies and the National
Association of Securities Dealers.
(i) Confidence. Buyer agrees that, unless and until all the
closing has been consummated, Buyer and its officers, directors, and
other representatives will hold in strict confidence, and will not use
to the detriment of Sellers or P&K all data and information about the
business of P&K obtained in connection with this transaction or
agreement, except as far as the data and information may be required
by law to be included in Buyer's proxy statement in connection with a
meeting of its shareholders, required by the Exchange Act, and the
general rules and regulations issued under the Exchange Act. If the
transactions contemplated by this Agreement are not consummated, Buyer
will return to Sellers and P&K all that data and information that
Sellers may reasonably request, including worksheets, test reports,
manuals, lists, memoranda and other documents prepared by or made
available to Buyer in connection with this transaction.
ARTICLE 6.
Conditions to Closing
Section 6.01 Conditions to Obligations of Sellers. The obligations of
Sellers to consummate the transaction contemplated by this Agreement are
subject, at the option of each of the Sellers, to the satisfaction or waiver of
the following conditions:
<PAGE>
(a) Validity of Representations. All representations and
warranties of Buyer contained in this Agreement shall be true in all
material respects at and as of the Closing as if such representations
and warranties were made at and as of the Closing, and Buyer shall
have performed and satisfied in all material respects all agreements
required by this Agreement to be performed and satisfied by Buyer at
or prior to the Closing.
(b) Buyer's Certificate. Sellers shall have received a
certificate from Buyer, dated as of the Closing Date, and reasonably
satisfactory in form and substance to Sellers and their counsel,
certifying as to the matters specified in Section 6.01(a) hereof. The
matters set forth in such certificate shall constitute representations
and warranties of Buyer hereunder. (Exhibit 6.01(b)).
(c) Actions or Proceedings. All corporate actions, proceedings,
instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all other
related legal matters shall be reasonably satisfactory to counsel for
Sellers, and such counsel shall have been furnished with such
certified copies of such corporate actions and proceedings and such
other instruments and documents as it shall have reasonably requested.
(d) Pending Legal Proceedings. There shall not be pending or
instituted, threatened or proposed, any action or proceeding by or
before any court or administrative agency or any other person
challenging or complaining of or seeking to collect damages or to
enjoin the transactions contemplated by this Agreement or its
consummation or to obtain other relief in connection with such
transactions.
(e) Consultant Agreements. Buyer will have signed and delivered
the Non-Competition and Consulting Agreements with John Parker and
Jerald Christensen (Exhibit 3).
(f) Registration Rights Agreement. Buyer shall have signed and
delivered the Registration Rights Agreement in the form attached as
Exhibit 2.02(e).
Section 6.02 Conditions to Obligations of Buyer. The obligations of Buyer
to consummate the transaction contemplated by this Agreement are subject, at the
option of Buyer, to the satisfaction or waiver of the following conditions:
(a) Validity of Representations. All representations and
warranties of Sellers contained in this Agreement shall be true in all
material respects at and as of the Closing as if such representations
and warranties were made at and as of the Closing, and Sellers shall
have performed and satisfied in all material respects all agreements,
covenants and conditions required by this Agreement to be performed
and satisfied by Sellers at or prior to the Closing.
(b) Sellers' Certificate. Buyer shall have received a certificate
from Sellers, dated as of the Closing Date, and reasonably
satisfactory in form and substance to Buyer and its counsel,
certifying as to the matters specified in Section 6.02(a) hereof. The
matters set forth in such certificate shall constitute representations
and warranties of Sellers hereunder.
<PAGE>
(c) Bankruptcy Court Approval. The Confirmation Order confirming
the Plan of Reorganization has become a final order and no timely
notice of appeal to the Confirmation Order has been filed as of the
date of Closing.
(d) Actions or Proceedings. All corporate actions, proceedings,
instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all other
related legal matters shall be reasonably satisfactory to counsel for
Buyer, and such counsel shall have been furnished with such certified
copies of such corporate actions and proceedings and such other
instruments and documents as it shall have reasonably requested.
(e) Pending Legal Proceedings. There shall not be pending or
instituted, threatened or proposed, any action or proceeding by or
before any court or administrative agency or any other person
challenging or complaining of or seeking to collect damages to enjoin
the transactions contemplated by this Agreement or its consummation or
to obtain other relief in connection with such transactions.
(f) Parker Trust Guarantee. The execution and delivery as of the
Closing Date of a guarantee in the form as set forth in Exhibit
6.02(f) by John S. Parker and Priscilla H. Parker, trustees of the
John S. Parker and Priscilla H. Parker Declaration of Trust (the
"Guarantor") agreeing to guarantee the indemnity obligations of
Sellers pursuant to Article 8 of this Agreement. The demand or
exercise by Buyer of its right to indemnification with respect to any
one indemnified claim, loss, damage, cost, expense, or liability shall
not affect Buyer's right to demand indemnification for subsequent
claims, losses, damages, costs, expenses or liabilities.
(g) Limitation on P&K Liabilities. As of the Closing Date, the
liabilities of P&K shall consist of and/or meet the following
requirements:
(i) Secured Note to Wells Fargo Bank as modified by the Plan
of Reorganization with a principal balance due not to exceed
$660,000.00 (Exhibit 6.02(g));
(ii) As provided in the Plan of Reorganization, a secured
Note in favor of unsecured creditors in a principal amount not to
exceed $501,500.00 with an interest rate of 7% per annum payable
in quarterly installments with the final payment due on or before
May 1, 2005 secured by a subordinated security interest in
certain P&K assets (Exhibit 6.02(g));
(iii) As provided in the Plan of Reorganization, notes in
favor of Cuba Libre including: (a) an unsecured Note for $400,000
in principal amount with interest at 7% per annum and payable in
quarterly installments with the balance due on or before May 1,
2005; (b) an unsecured Note in the amount of $125,000 in
principal amount without interest for the first two years and to
bear interest at 7% beginning on the third year to be paid in
quarterly installments with the balance due on or before May 1,
2005 (Exhibit 6.02(g));
<PAGE>
(iv) Post Petition and post confirmation trade debt
obligations shall not exceed $273,000 (Exhibit 6.02(g));
(v) The foregoing notwithstanding, any of the above amounts
may individually exceed the amounts specified above; provided
that the aggregate obligations of other P&K liabilities, and the
items listed in (i)-(iv) above, shall not exceed One Million Nine
Hundred Sixty Thousand Dollars ($1,960,000) ("Permissible P&K
Liabilities").
(h) Asset Valuation. Unless waived by Buyer, the combined assets
of P&K at Closing shall have a value of at least Three Million Dollars
($3,000,000). The useable inventory of P&K at Closing shall have a
value of not less than $1.9 million. Accounts receivable at Closing
shall not be less than 950,000.
(i) Non-Competition Agreement. John Parker and Jerald Christensen
will have signed and delivered Non-Competition and Consulting
Agreements with Buyer (Exhibit 3).
(j) Wells Fargo Bank Consent. Sellers shall provide to Buyer a
written confirmation from Wells Fargo to P&K to waive any "due on
sale" provisions in Wells Fargo's loans to P&K and that Wells Fargo
Bank consents to the transfer of the Stock to Buyer as provided in
this Agreement. (Exhibit 4.01(a)).
(k) Resignation. At Closing, Buyer will receive the resignation
of all then current directors and officers of P&K and termination
agreements of any written employment contracts of P&K employees.
(l) Havana Stock Pledge Agreement. Sellers shall have executed
and delivered the Havana Stock Pledge Agreement in the form set forth
in Exhibit 6.02(l) pledging the Havana Shares to secure the
obligations of Sellers pursuant to Section 8 of this Agreement.
Section 6.03. Conditions to Obligations of Sellers and Buyer. The
obligations of each of the Sellers and Buyer to consummate the transactions
contemplated by this Agreement are subject, at the option of each party, to the
satisfaction or waiver by all parties of the following conditions:
(a) Prohibition of Transactions. No state or federal statute,
rule, regulation or action shall exist or shall have been adopted or
taken, and no judicial or administrative decision shall have been
entered (whether on a preliminary or final basis), that would
prohibit, restrict or delay the consummation of the transactions
contemplated by this Agreement or make illegal the payments due
hereunder.
ARTICLE 7.
Closing
Section 7.01 Date of Closing. Subject to the conditions stated in this
Agreement, the consummation of the transactions contemplated hereby (the
"Closing") shall be held on August 4, 2000, or at such other time and date as
Buyer and Sellers may agree upon in writing. The date the Closing actually
occurs is herein called the "Closing Date."
<PAGE>
Section 7.02 Place of Closing. The Closing shall be held at the offices of
Gibson, Dunn & Crutcher LLP, located at 4 Park Plaza, Suite 1800, Irvine,
California 92614 or at such other place as Buyer and Sellers may agree upon in
writing.
Section 7.03 Closing Obligations. At the Closing the following events shall
occur, each being a condition precedent to the others and each being deemed to
have occurred simultaneously with the others:
(a) Stock Certificates. Delivery of the original Stock
certificates in P&K duly endorsed with power of attorney, without
legends or restrictions prohibiting the transfer contemplated herein.
(b) Settlement Statement. Sellers and Buyer shall execute and
deliver a settlement statement prepared by Buyer and agreed to by
Sellers that shall set forth the Adjusted Purchase Price, showing each
adjustment and the calculation of such adjustments used to determine
such amount.
(c) Delivery of Funds. Subject to the terms and conditions of
this Agreement, at the Closing, Buyer shall deliver to Sellers: (i)
the cancelled promissory note described in Section 2.03(a); and (ii)
the aggregate amount due under Section 2.03, plus the promissory notes
subject to any adjustment pursuant to Section 2.02. Certificates for
300,000 unregistered Havana Shares, or other number of Havana Shares
pursuant to the adjustment as provided in Section 2.02(d), shall be
delivered within ten (10) days after Closing, provided, however, that
delivery may occur pursuant to the terms of the Havana Stock Pledge
Agreement entered into between the parties concurrently herewith.
(Exhibit 6.02(l)).
(d) Files. Sellers have made or shall deliver or make available
to Buyer all corporate files and records relating to P&K, including,
without limitation, the original corporate record book and all
information.
(e) Sellers' Certificate. Sellers shall execute, acknowledge and
deliver to Buyer the certificates dated as of the Closing as required
by the terms of Section 6.02.
(f) Buyer's Certificate. Buyer shall execute, acknowledge and
deliver to Sellers the certificates dated as of Closing as required by
the terms of Section 6.01.
ARTICLE 8.
Obligations after Closing
Section 8.01 Sales Taxes and Recording Fees. Sellers shall pay all sales
taxes and conveyance fees occasioned by the sale of the Stock.
Section 8.02. Rights, Duties, and Obligations. Subsequent to the Closing:
<PAGE>
(a) Claims Accruing before Closing Date. Sellers shall defend,
indemnify and save and hold harmless Buyer against all claims, costs,
expenses and liabilities with respect to P&K that accrue or relate to
times prior to the Closing Date which arise from the liabilities of
P&K exceeding the amount of Permissible P&K Liabilities as provided in
Section 6.02(g) of this Agreement.
(b) Claims from Breach of Sellers' Warranties. Sellers shall
defend, indemnify and save and hold harmless Buyer against all claims,
losses, damages, costs, expenses and liabilities that result from or
relate or are attributable to any representation or warranty of
Sellers contained herein being untrue or any warranty, agreement or
covenant of Sellers contained herein being breached.
(c) Claims Attacking the Plan of Reorganization. Sellers shall
defend, indemnify and save and hold harmless Buyer against any claim,
loss, liability, damage or cost suffered by Buyer as a result of any
claim or action asserted in the Bankruptcy Court or other Court by or
on behalf of any pre-petition creditor of P&K seeking, as a result of
this Agreement, to rescind the Plan of Reorganization or Confirmation
Order, or to convert the case to a proceeding under Chapter 7 of the
United States Bankruptcy Code; provided, however, that Sellers shall
have no obligation to indemnify or defend Buyer and Buyer shall have
no rights against Seller if an action, motion or proceeding is brought
by any creditor or any other party in the Bankruptcy Court or other
Court as a result of P&K's failure after the Closing Date to perform
in a timely manner all of the terms and obligations of the Plan of
Reorganization and/or Confirmation Order.
(d) Limitation. In any event, Sellers shall not have an
obligation to indemnify and defend Buyer under Section 8.02(a) and (b)
above (or pursuant to any other provision herein) unless and then only
to the extent any claim(s) giving rise to indemnification exceed
$25,000 in the aggregate. Under any and all circumstances, the
aggregate amount for which Sellers shall be liable hereunder shall not
exceed $1,000,000.
(e) Sellers' Right to Defend. Buyer will promptly notify Sellers
of the existence of any claim, demand or other matter to which
Sellers' indemnification obligations would apply and will give them a
reasonable opportunity to defend the same at their own expense and
with counsel of their own selection; provided that Buyer will at all
times also have the right to participate fully in the defense at its
own expense. If Sellers, within a reasonable time after this notice,
fail to defend, Buyer will have the right, but not the obligation to
undertake the defense of, and to compromise or settle (exercising
reasonable business judgment), the claim or other mater on behalf, for
the account, and at the risk, of Sellers. If the claim is one that
cannot by its nature be defended solely by Sellers (including any
federal or state tax proceeding), Buyer will make available all
information and assistance that Sellers may reasonably request.
(f) Havana Stock Pledge Agreement. Sellers' obligations under
this Section 8 shall be secured by a security interest against the
Havana Shares pursuant to the terms of the Havana Stock Pledge
Agreement executed by each of the Sellers. (Exhibit 6.02(l)).
Provided, however, that, unless a claim for indemnity is then pending,
the security interest granted in the Havana Stock Pledge Agreement
shall automatically expire on the first anniversary of the Closing
Date of this Agreement.
<PAGE>
(g) Claims from Breach of Buyer's Warranties. Buyer shall defend,
indemnify and save and hold harmless Sellers against all claims,
losses, damages, costs, expenses, and liabilities that result from or
relate or are attributable to any representation or warranty of Buyer
contained herein being untrue or any warranty, agreement or covenant
of Buyer contained herein being breached.
Section 8.03 Survival.
(a) Performance of Plan of Reorganization. Buyer's covenant to
perform the Plan of Reorganization as set forth in Section 5.02(e) of
this Agreement shall survive the Closing until the Plan of
Reorganization is fully and completely performed and the Notes to
creditors and Cuba Libre are paid in full.
(b) Other Covenants and Representations. Except as provided in
subsection (a) above, for a period of four (4) years following the
Closing Date, the representations, warranties, covenants, agreements
and indemnities included or provided in this Agreement, or in any
Exhibit, document, certificate or other instrument delivered pursuant
hereto, shall survive the Closing in accordance with the provisions
hereof.
(c) Limitations on Claims. Any claim for indemnification under
Section 7 above must be made with the survival period set forth in
Section 8.03(a) and (b) above or shall be forever waived.
Section 8.04 Access to Information. Upon Sellers' request, Buyer shall
provide Sellers access during reasonable business hours to all files and records
delivered to Buyer pursuant to Section 7.03(d) of this Agreement; provided,
however, that Sellers shall request access to such files only when necessary to
obtain needed information for pending legal proceedings involving Sellers or
other legitimate business purpose including without limitation matters relating
to state and federal tax issues, and provided further that Sellers shall
disclose information obtained from such files to third parties only upon the
prior written consent of Buyer, which consent will not be unreasonably withheld.
Section 8.05 Non-competition. Commencing on the Closing Date and for a
period of five years following the Closing Date, Sellers will not jointly or
severally, directly or indirectly, unless acting in accordance with Buyer's
written consent, own, manage, operate, finance or participate in the ownership,
management, operation or financing of or permit their names to be used by or in
connection with any business or enterprise engaged in the business of the sale
or distribution of tobacco products or other products related thereto, either
through catalog, wholesale distribution or internet distribution or any other
means of sale anywhere within North America ("Competing Business"). Sellers
acknowledge that this territory is the same territory currently serviced by P&K,
that this restriction is essential and, but for this provision, this Agreement
would not be entered into. Sellers acknowledge that the provisions of this
Section are reasonable and necessary to protect the interests of Buyer, and are
a material inducement to Buyer to enter into this transaction. Any violation of
this Section will result in an irreparable injury to Buyer and damages at law
would not be reasonable or adequate compensation to Buyer for violation of this
<PAGE>
Section and that, in addition to any other available remedies, Buyer shall be
entitled to have the provisions of this Section specifically enforced by
preliminary and permanent injunctive relief without the necessity of proving
actual damages or posting a bond or other security and to an equitable
accounting of all earnings, profits and other benefits arising out of any
violation of this Section. In the event that the provisions of this Section
shall ever be deemed to exceed the time, geographic, product or other
limitations permitted by applicable law, then the provisions shall be deemed
reformed to the maximum extent permitted by applicable law. Any action filed
pursuant to this paragraph shall be commenced in the Court of Common Pleas,
Stark County, Ohio and the Sellers irrevocably consent to the jurisdiction of
such court. Notwithstanding the foregoing, Sellers may own an interest in Buyer
and may own up to 5% of publicly held companies involved in a Competing
Business. In accordance with the terms of the Non-Competition and Consulting
Agreements entered into in connection with this Agreement, certain of the
Sellers may seek and accept employment or consulting work with a Competing
Business. In the event that an employment position with a Competing Business
involves business activities similar to the type of business and channels of
distribution then currently employed by P&K or Havana, Buyer may in its
discretion approve or disapprove such employment. In the event Seller requests
permission to engage in other activities with a Competing Business, then Buyer's
consent shall not be unreasonably withheld, delayed or conditioned. In the event
of a material breach by Buyer under this Agreement, the Employment Agreement(s),
the Non-Competition and Consulting Agreement, the $200,000 Promissory Note in
favor of Sellers (if issued), the Registration Rights Agreement or the Havana
Stock Pledge Agreement, then the effected Seller or Sellers shall be deemed
automatically released from the obligations set forth in this Section 8.05, but
shall retain their rights to seek damages for breach of contract or any other
remedy.
Section 8.06 Retention of and Access to Records; Cooperation. For a period
of not less than five years after the Closing Date, Buyer shall preserve and
retain the corporate, accounting, legal, auditing and other books and records of
P&K (including but not limited to, any governmental or non-governmental actions,
suits, proceedings or investigations arising out of the conduct of P&K and
operations of P&K prior to the Closing Date); provided, however, that such
five-year period shall be extended in the event that any action, suit,
proceedings or investigation has been commenced or is pending or threatened at
the termination of such five-year period and such extension shall continue until
any such action, suit, proceeding or investigation has been settled through
judgment or otherwise or is no longer pending or threatened. Notwithstanding the
foregoing, Buyer may discard or destroy any of such books and records prior to
the end of such five-year period or period of extension, if applicable, if it
has given Sellers 60 days' prior written notice of its intent to do so and none
of the Sellers has obtained possession of such books and records, at his or her
expense, within such 60-day period.
Section 8.07 Accounts Receivable Payment. In the event that either Buyer or
Sellers at any time receives any funds from any third party that are properly
payable to another party hereto, the party receiving such funds shall promptly
remit such funds to the party entitled to such funds.
<PAGE>
ARTICLE 9.
Termination of Agreement
Section 9.01 Termination. This Agreement and the transactions contemplated
hereby may be terminated in any of the following instances:
(a) By either Buyer or any of Sellers, if applicable, if any
condition set forth in Section 7.03 in favor of the terminating party
shall not be satisfied at the Closing.
(b) By Buyer if any condition set forth in Sections 6.02, or
6.03, shall not be satisfied on or before the Closing Date.
(c) By any of Sellers if any condition set forth in Sections 6.01
or 6.03 shall not be satisfied on or before the Closing Date.
(d) By the mutual written agreement of Buyer and Sellers.
(e) Without any further action of Sellers and Buyer if the
Closing has not occurred, for any reason, on or before December 31,
2000.
Section 9.02 Effect of Termination. If this Agreement is terminated
pursuant to Section 9.01, this Agreement shall become void and have no effect;
and, with the exception of the right to recover damages for any breach of this
Agreement, neither party shall have any further rights or duties hereunder.
However, no party then in breach of any of its obligations hereunder shall have
the right to terminate. If either party should be in breach of its obligations
hereunder, the aggrieved party may, without waiving any other remedy, seek
specific performance of this Agreement.
ARTICLE 10.
Miscellaneous
Section 10.01 Exhibits. The Exhibits referred to in this Agreement have
been separately approved by Sellers and the duly authorized officers of Buyer.
All of such Exhibits are hereby incorporated in this Agreement by reference and
constitute a part of this Agreement. Each party to this Agreement and its
counsel has received a complete set of Exhibits prior to and as of the execution
of this Agreement.
Section 10.02 Expenses. Except as otherwise specifically provided in this
Agreement, all fees, costs and expenses incurred by Buyer or Sellers in
negotiating this Agreement or in consummating the transactions contemplated by
this Agreement shall be paid by the party incurring the same, including, without
limitation, legal and accounting fees, costs and expenses.
Section 10.03 Publicity. All notices to third parties and all other
publicity concerning the transactions contemplated by this Agreement shall be
jointly planned and coordinated by and among Buyer and Sellers. Except as may be
required by law, including without limitation the rules and regulations of the
Securities and Exchange Commission, no party shall act unilaterally in this
regard without the prior written approval of Buyer, John S. Parker and Jerald E.
Christensen, and each of them, such approval not to be unreasonably withheld.
<PAGE>
Section 10.04 Notices. All notices and communications required or permitted
under this Agreement shall be in writing and any communication or delivery
hereunder shall be deemed to have been duly made if actually delivered, or if
mailed by registered or certified mail, postage prepaid, addressed as follows:
If to Buyer:
The Havana Group, Inc.
Attn: Mr. William Miller
7835 Freedom Avenue, NW
N. Canton, Ohio 44720
With a courtesy copy to:
Scott P. Sandrock, Esq.
Black, McCuskey, Souers, & Arbaugh
1000 United Bank Plaza
220 Market Avenue South
Canton, Ohio 44702-2116
[email protected]
Facsimile: (330) 456-5756
If to Sellers:
John S. and Priscilla H. Parker
5208 Rideout Waite
Whittier, California 90601
and
Jerald E. and Linda L. Christensen
1300 N. Glen View Drive
Fullerton, California 92835
With a courtesy copy to:
Craig H. Millet, Esq.
Gibson, Dunn & Crutcher LLP
Jamboree Center
4 Park Plaza, Suite 1800
Irvine, California 92614
[email protected]
Facsimile: (949) 475-4651
Any party may, by written notice so delivered to the other parties, change
the address to which delivery shall thereafter be made.
<PAGE>
Section 10.05 Knowledge and Representations. All references in this
Agreement to a party having knowledge of particular facts or circumstances shall
include only such facts or circumstances actually known (either through first
hand knowledge or through such facts or circumstances having been reported to
them) by such party's officers, directors, or employees of such party directly
and immediately involved in the transactions which are the subject matter of
this Agreement.
Section 10.06 Amendment. This Agreement may not be altered or amended, or
any rights hereunder waived, except by an instrument in writing executed by the
party or parties to be charged with such amendment or waiver. No waiver of any
term, provision or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
Section 10.07 Assignment. Neither Buyer nor Sellers may assign its or their
rights or delegate its or their duties or obligations under the terms of this
Agreement without the prior written consent of the other party; provided,
however, that Buyer may assign all or any portion of its rights and delegate all
or any portion of its duties and obligations under this Agreement to any
affiliate of Buyer. If Buyer makes such an assignment, Buyer shall remain liable
for the performance of all of Buyer's duties and obligations under this
Agreement.
Section 10.08 Generality of Provisions. The specificity of any
representation, warranty, covenant, agreement or indemnity included or provided
in this Agreement, or in any Exhibit, document, certificate or other instrument
delivered pursuant hereto, shall in no way limit the generality of any
representation, warranty, covenant, agreement or indemnity included or provided
in this Agreement, or in any Exhibit, document, certificate or other instrument
delivered pursuant hereto.
Section 10.09 Headings. The headings of the Articles and Sections of this
Agreement are for guidance and convenience of reference only and shall not limit
or otherwise affect any of the terms or provisions of this Agreement.
Section 10.10 Counterparts. This Agreement may be executed by Buyer and
Sellers in any number of counterparts, each of which shall be deemed an original
instrument but all of which together shall constitute but one and the same
instrument.
Section 10.11 References. References made in this Agreement, including use
of a pronoun, shall be deemed to include where applicable, masculine, feminine,
singular or plural, individuals, partnerships or corporations. As used in this
Agreement, "party" shall mean any natural person, corporation, partnership,
trust, estate or other entity. As used in this Agreement, "affiliate" of a party
shall mean any partnership, joint venture, corporation or other entity in which
such party has an interest or which controls, is controlled by or is under
common control with such party.
Section 10.12 Governing Law. Except as otherwise provided herein, this
Agreement and the transaction contemplated hereby shall be construed in
accordance with, and governed by, the laws of the State of Ohio; and Sellers and
Buyer consent to venue and jurisdiction in the Stark County, Ohio, Court of
Common Pleas and in the United States District Court for the Northern District
of Ohio in any action commenced relating to this Agreement or the transactions
contemplated hereby. The Non-Competition and Consulting Agreement will be
governed by the laws of the State of Ohio. The $200,000 Promissory Note (if
<PAGE>
issued) to be provided to Sellers, the Registration Rights Agreement, and the
Employment Agreements shall be governed by the laws of the State of California
(to the extent not otherwise governed by applicable federal law), and, in any
dispute with respect to the foregoing agreements, Sellers and Buyer consent to
venue and jurisdiction in the Superior Court of the State of California for the
County of Orange and in the United States District Court for the Central
District of California in any action relating to the above agreements.
Section 10.13 Entire Agreement. This Agreement (including those agreements
and other matters attached as Exhibits hereto) constitutes the entire
understanding among the parties with respect to the subject matter hereof
superseding all negotiations, prior discussions and prior agreements and
understandings relating to such subject matter.
Section 10.14 Parties in Interest. This Agreement shall be binding upon,
and shall inure to the benefit of the parties hereto and, except as otherwise
prohibited, their respective successors and assigns, and nothing contained in
this Agreement express or implied, is intended to confer upon any other person
or entity any benefits, rights or remedies.
IN WITNESS WHEREOF, Sellers and Buyer have executed this Agreement as of
the date first above mentioned. SELLERS:
/s/ John s. Parker
John S. Parker
/s/ Priscilla H. Parker
Priscilla H. Parker
/s/ Jerald E. Christensen
Jerald E. Christensen
/s/ Linda L. Christensen
Linda L. Christensen
BUYER:
The Havana Group, Inc.
By: /s/ William Miller
William Miller, Its President
<PAGE>
EXHIBITS
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2.02(a) Phillips & King Financial Statements, December 31, 1999
2.02(e) Registration Rights Agreement
2.03(a) $900,000 Promissory Note in favor of Buyer
2.03(c) $200,000 Promissory Note in favor of Sellers
3.00 Parker / Christensen Consulting Agreements
4.01(c) Wells Fargo Bank consent
4.01(i) Leases and Contracts
4.01(g) P&K's Encumbrances
4.01(k) P&K's State Licenses
4.01(m) Legal Proceedings
4.01(q) P&K Financial Statements, March 31, 2000
6.01(b) Buyer's Certificate
6.02(b) Sellers' Certificate
6.02(f) Parker Trust Guarantee
6.02(g) Wells Fargo Bank Note, Creditors' Note and Security Agreement, Cuba Libre Notes,
List of Post Petition and Post Confirmation Trade Debt Obligations
6.02(l) Havana Stock Pledge Agreement
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