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--SCHEDULE 13D--
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ____)*
GRAND HAVANA ENTERPRISES, INC.
________________________________________________________________________________
(Name of Issuer)
Common Stock, par value $.01 share per share
________________________________________________________________________________
(Title of Class of Securities)
911379105
_______________________________________________________________
(CUSIP Number)
Lance Jon Kimmel, Esq., RICHMAN, LAWRENCE, MANN CHIZEVER & PHILLIPS
9601 Wilshire Blvd. - Penthouse, Beverly Hills, CA 90210, tel: (310)274-8300
________________________________________________________________________________
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
June 3, 1999
_______________________________________________________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
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SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. PAGE 2 OF 2 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Stanley Shuster
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
00
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 6,907,565
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 6,907,565
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
6,907,565
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
45.1%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
ITEM 1. SECURITY AND ISSUER
This Statement relates to the Common Stock, par value $.01 per share (the
"Common Stock"), of Grand Havana Enterprises, Inc., a Delaware corporation (the
"Issuer"). The principal executive offices of the Issuer are located at 1990
Westwood Boulevard, Los Angeles, California 90025.
ITEM 2. IDENTITY AND BACKGROUND
This Statement is being filed by Stanley Shuster (the "Reporting Person"),
Chairman of the Board, Chief Executive Officer, President and a principal
shareholder of the Issuer. The Reporting Person is a natural person and his
business address is 1990 Westwood Boulevard, Los Angeles, California 90025.
During the last five years, the Reporting Person has not been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors),
nor has he been a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, Federal or state securities laws
or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The source of the Reporting Person's consideration for his purchases of the
Issuer's Common Stock was a promissory note, secured by a pledge of the
purchased securities. The seller of the securities is the Reporting Person's
father, Harry Shuster.
ITEM 4. PURPOSE OF TRANSACTION
The Reporting Person acquired the securities of the Issuer for investment
purposes in connection with his recent appointment, on May 24, 1999, as Chairman
of the Board, President and Chief Executive Officer of the Issuer. As Chairman
of the Board, President, Chief Executive Officer, a director, and the single
largest stockholder of the Issuer, the Reporting Person intends to exercise
control over the affairs of the Issuer.
The Reporting Person will continue to evaluate his ownership and voting
position in the Issuer and may consider the following future courses of action:
(i) continuing to hold the Common Stock for investment; (ii) disposing of all or
a portion of the Common Stock in open market sales or in privately-negotiated
transactions; or (iii) acquiring additional shares of Common Stock in open
market or in privately-negotiated transactions. The Reporting Person has not yet
determined which of the courses of actions specified in
1
<PAGE>
this paragraph he may ultimately take, although the Reporting Person has no
present intent to dispose of any of the acquired securities of the Issuer.
Except as set forth herein, the Reporting Person has no present intent or
proposals that relate to or would result in: (i) the acquisition by any person
of additional securities of the Issuer, or the disposition of securities of the
Issuer; (ii) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries;
(iii) a sale or transfer of a material amount of assets of the Issuer or any of
its subsidiaries; (iv) any change in the present Board of Directors or
management of the Issuer, including any plans or proposals to change the number
or term of Directors or to fill any vacancies on the Board; (v) any material
change in the present capitalization or dividend policy of the Issuer; (vi) any
other material change in the Issuer's business or corporate structure; (vii)
changes in the Issuer's charter, bylaws or instruments corresponding thereto or
actions which may impede the acquisition of control of the Issuer by any person;
(viii) causing a class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(ix) a class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or
(x) any action similar to those enumerated above.
The Reporting Person reserves the right to determine in the future whether
to change the purpose or purposes described above or whether to adopt plans or
proposals of the type specified above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
On June 3, 1999, the Reporting Person purchased from his father, Harry
Shuster, 920,133 shares of the Issuer's Common Stock, at $.08 per share.
On June 11, 1999, the Reporting Person purchased from his father, Harry
Shuster, 2,514,368 shares of the Issuer's Common Stock, at $.08 per share.
On June 11, 1999, the Reporting Person purchased from his father, Harry
Shuster, an additional 2,315,375 shares of the Issuer's Common Stock, at $.08
per share, and also received warrants to purchase 1,157,689 shares of the
Issuer's Common Stock as part of the purchase price.
There were no other transactions in the Issuer's Common Stock by the
Reporting Person in the past 60 days.
2
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As of the close of business on June 20, 1999, the Reporting Person
beneficially owned 6,907,565 shares of the Issuer's Common Stock, or 45.1% of
the class outstanding. Included in this amount are the warrants to purchase
1,157,689 shares of the Issuer's Common Stock, which warrants are presently
exercisable but not in-the-money. The Reporting Person has the sole power to
vote or direct the vote, and the sole power to dispose of or direct the
disposition of, the shares of the Issuer's Common Stock which the Reporting
Person beneficially owns.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER
None
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 7.1 - Agreement for Purchase and Sale of Stock dated June 3, 1999
between Harry Shuster and Stanley Shuster, together with related Non-Recourse
Promissory Note and Stock Pledge Agreement.
Exhibit 7.2 - Agreement for Purchase and Sale of Stock dated June 11, 1999
between Harry Shuster and Stanley Shuster, together with related Non-Recourse
Promissory Note and Stock Pledge Agreement.
Exhibit 7.3 - Agreement dated June 11, 1999 between Harry Shuster and
Stanley Shuster, together with related Non-Recourse Promissory Note and Pledge
Agreement.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: July 9, 1999
/s/ Stanley Shuster
-------------------
Stanley Shuster
3
<PAGE>
EXHIBIT 7.1
AGREEMENT FOR PURCHASE AND SALE OF STOCK
THIS AGREEMENT FOR PURCHASE AND SALE OF STOCK ("Agreement") is made and
entered into this 3/rd/ day of June, 1999, by and between HARRY SHUSTER
("Seller") and STANLEY SHUSTER ("Buyer").
In consideration of the mutual promises contained herein, and for other
good and valuable consideration the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Seller does hereby sell, assign, convey and transfer to Buyer, and Buyer
does hereby purchase from Seller, 920,133 shares of common stock of
Grand Havana Enterprises, Inc., a Delaware corporation ("Shares").
2. Seller does hereby represent and warrant that he has good and marketable
title to the Shares and is hereby conveying them to Buyer free and clear
of any and all liens and encumbrances whatsoever.
3. The purchase price to be paid by Buyer to Seller for the Shares is
$73,610.64, which shall be payable pursuant to a Non-Recourse Promissory
Note executed by Buyer in favor of Seller concurrently herewith. The
payment of the purchase price shall be secured by the Shares pursuant to
the terms of a Stock Pledge Agreement to be executed by Buyer and Seller
concurrently herewith.
4. The parties hereto agree to execute any and all documents, including but
not limited to stock assignments separate from certificate, in order to
effectuate the terms and conditions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
/s/ Harry Shuster /s/ Stanley Shuster
- --------------------------- ------------------------------
HARRY SHUSTER STANLEY SHUSTER
<PAGE>
NON-RECOURSE PROMISSORY NOTE
$73,610.64 Los Angeles, California
June 3, 1999
FOR VALUE RECEIVED, the undersigned, Stanley Shuster, promises to pay to
the order of Harry Shuster the sum of Seventy-Three Thousand Six Hundred Ten
Dollars and Sixty-Four Cents ($73,610.64), together with interest from the date
hereof on the unpaid principal, as it exists from time to time, at the rate of
5 1/2% per annum.
Interest shall be paid annually and principal shall be paid on or before
ten (10) years from the date of this Non-Recourse Promissory Note.
Payment shall be paid in lawful money of the United States. The undersigned
shall have the right to prepay all or any portion due hereunder at any time and
from time to time without any penalty whatsoever. Each payment made hereunder
shall be credited first to interest then due and the remainder to principal.
If the undersigned shall default in any payment due hereunder, then, at the
option of the holder of this Non-Recourse Promissory Note, the entire amount of
outstanding principal and interest due shall immediately become due and payable.
If action be instituted on this Non-Recourse Promissory Note, the undersigned
promises to pay reasonable attorneys' fees and court costs.
This Non-Recourse Promissory Note is secured by the terms of a certain
Stock Pledge Agreement of even date herewith entered into between the
undersigned and the payee hereunder. This Non-Recourse Promissory Note is non-
recourse and the undersigned shall have no personal liability beyond that which
the holder of this Non-Recourse Promissory Note receives upon the sale of the
collateral under the aforesaid Stock Pledge Agreement.
/s/ Stanley Shuster
--------------------------------
STANLEY SHUSTER
<PAGE>
STOCK PLEDGE AGREEMENT
----------------------
THIS STOCK PLEDGE AGREEMENT ("Agreement") is made and entered into this
3/rd/ day of June, 1999, by and between STANLEY SHUSTER ("Debtor") and HARRY
SHUSTER ("Secured Party"), with reference to the following facts:
A. Debtor has executed and delivered to Secured Party a Non-Recourse
Promissory Note of even date herewith in the original principal amount of
$73,610.64 ("Note").
B. Debtor desires to enter into this Agreement to secure payment and
performance of his obligations under the Note.
NOW, THEREFORE, for valuable consideration, Debtor and Secured Party agree
as follows:
1. Definitions. For purposes of this Agreement, the following terms shall
-----------
have the following definitions:
1.1 "Collateral" means 920,133 shares of common stock of Grand Havana
Enterprises, Inc., a Delaware corporation, owned or held by Debtor, all cash,
additional securities and other property at any time and from time to time
receivable or otherwise distributed in respect of or in exchange for any of the
Collateral, and all proceeds of the foregoing.
1.2 "Event of Default" means any event of default specified in Section 5
herein.
1.3 "Obligations" means payment and performance of all obligations of
Debtor under the Note.
2. Grant of Security Interest. To secure the Obligations, Debtor hereby
--------------------------
grants and assigns to Secured Party a present and continuing security interest
in the Collateral.
3. Debtor's Covenants.
------------------
3.1 Further Assurances. The security interest granted by Debtor
------------------
hereunder, at all times, shall be perfected and prior to any other interests in
the Collateral. Debtor shall take all actions which may be reasonably necessary
or appropriate to maintain, preserve, protect and defend the Collateral and
Secured Party's security interest therein, including all such actions as may be
reasonably requested by Secured Party. Upon Secured Party's request, Debtor
shall execute and deliver to Secured Party such further documents and
agreements, in form and substance satisfactory to Secured Party, as Secured
Party may require to effectuate this Agreement or to evidence, perfect,
maintain, preserve or protect Secured Party's security interest in the
Collateral, including without limitation financing statements, continuation
financing statements, financing statement amendments, security agreements and
assignments.
1
<PAGE>
3.2 Deliveries. Debtor shall deliver to Secured Party the certificate
----------
and any other certificates evidencing the Collateral as soon as possible after
the execution of this Agreement and shall deliver, immediately upon receipt by
Debtor from any party of any securities that constitute Collateral, such
securities to the Secured Party, together with duly executed stock powers in
blank with a signature guarantee provided by a member of the New York Stock
Exchange or such other party satisfactory to Secured Party. In the event of any
non-cash distribution with respect to such Collateral (whether by way of stock
dividends, stock splits or recapitalization), the property so distributed shall
be delivered to the Secured Party to be held as additional Collateral under this
Agreement.
3.3 Negative Covenants. Without Secured Party's prior written consent,
------------------
Debtor shall not sell, transfer, assign, pledge, mortgage, encumber, hypothecate
or otherwise dispose of or abandon any or all of the Collateral.
3.4 Voting Rights. So long as there shall exist no Event of Default,
-------------
Debtor shall be entitled to exercise his rights to voting power with respect to
all Collateral pledged under this Agreement. Upon an Event of Default, Secured
Party acting alone may exercise voting rights with respect to the Collateral and
may cause the Collateral to be reissued in Secured Party's name to facilitate
the exercise of such voting rights.
4. Warranties and Representations. Debtor warrants and represents to
------------------------------
Secured Party that:
(a) Debtor has the full power and authority to enter into this
Agreement, to grant to Secured Party the security interest in the Collateral as
provided herein, and to perform all of his other obligations under this
Agreement; and
(b) Debtor is the sole owner of and has good and marketable title to
the Collateral, and the Collateral is free and clear and shall at all times
remain free and clear of all claims, demands, rights, liens, security interests
and encumbrances, other than the security interest granted to Secured Party
under this Agreement.
5. Event of Default.
----------------
The occurrence of any of the following events or conditions shall
constitute and is hereby defined to be an "Event of Default":
(a) Any failure to make any payment on the date that such payment is
due under the Note;
(b) The sale, lease, transfer, assignment, pledge, mortgage,
encumbrance, hypothecation or other disposal of or abandonment of any or all of
the Collateral without the prior written consent of Secured Party;
2
<PAGE>
(c) Any failure or neglect to perform or observe any of the other
terms, provisions, or covenants of this Agreement;
(d) Any warranty, representation or statement contained in this
Agreement or any other document or agreement executed or delivered in connection
with the Obligations that shall be or shall prove to have been materially false
when made or furnished;
(e) The filing by Debtor (or against Debtor in which Debtor
acquiesces or which is not dismissed within thirty (30) days after the filing
thereof) of any proceeding under the federal bankruptcy laws now or hereafter
existing or any other similar statute now or hereafter in effect; the entry of
an order for relief under such laws with respect to Debtor; or the appointment
of a receiver, trustee, custodian or conservator of all or any part of the
assets of Debtor;
(f) The insolvency of Debtor; or the execution by Debtor of an
assignment for the benefit of creditors; or the convening by Debtor of a meeting
of his creditors, or any class thereof, for purposes of effecting a moratorium
upon or extension or composition of his debts; or the failure of Debtor to pay
his debts as they mature; or if Debtor is generally not paying his debts as they
mature;
(g) The admission in writing by Debtor that he is unable to pay his
debts as they mature or that he is generally not paying his debts as they
mature; and
(h) The institution of any legal action or proceedings to enforce a
lien or security interest in any portion of the Collateral that is not dismissed
to the satisfaction of Secured Party within fifteen (15) days of such
institution.
6. Remedies Upon Default. Upon the occurrence of any Event of Default,
---------------------
Secured Party shall, in addition to all other rights and remedies provided
hereunder or any document or agreement referred to herein, have the following
rights and remedies:
6.1 Uniform Commercial Code. Secured Party shall have all of the rights
-----------------------
and remedies of a secured party under the California Uniform Commercial Code and
under all other applicable laws.
6.2 Acceleration. Secured Party may declare any or all of the
------------
Obligations to be immediately due and payable, to the extent that such
Obligations are not already due and payable by their terms.
6.3 Sale of Collateral. Secured Party may sell or dispose of the
------------------
Collateral at public or private sale, in one or more sales, as a unit or in
parcels, at wholesale or retail, and at such time and place and on such terms as
Secured Party may determine. Secured Party may be the purchaser of any or all of
the Collateral at any public or private sale. If, at any time when Secured Party
shall determine to exercise his right to sell all or any part of the Collateral
and such Collateral, or the part thereof to be sold, he has been advised by
legal counsel or himself determines that the
3
<PAGE>
Collateral is subject to the Securities Act of 1933 as amended or any state
securities laws, Secured Party in his sole and absolute discretion, is hereby
expressly authorized to sell such Collateral, or any part thereof, subject to
obtaining all required regulatory approvals, by private sale in such manner and
under such circumstances as Secured Party may deem necessary or advisable in
order that such sale may be effected legally without registration or
qualification under applicable securities laws (including without limitation
without any obligation to advertise). Without limiting the generality of the
foregoing, Secured Party, in his sole and absolute discretion, may approach and
negotiate with a restricted number of potential purchasers to effect such sale
or restrict such sale to a purchaser or purchaser who will represent and agree
that such purchaser or purchasers are purchasing for his or their own account,
for investment only, and not with a view to the distribution or sale of such
Collateral or any part thereof. Any such sale shall be deemed to be a sale made
in a commercially reasonable manner within the meaning of the Uniform Commercial
Code of the State of California and Debtor hereby consents and agrees that
Secured Party shall incur no responsibility or liability for selling all or any
part of the Collateral at a price which is not unreasonably low, notwithstanding
the possibility that a higher price might be realized if the sale were public.
Any public sale of any or all of the Collateral may be postponed from time to
time by public announcement at the time and place last scheduled for the sale.
6.4 Commercially Reasonable Sale. Without limiting the generality of
----------------------------
this Section 6, Secured Party shall conclusively be deemed to have made a
commercially reasonable disposition of any or all of the Collateral if Secured
Party holds a public or private sale of such Collateral at least (5) five days
after notice is given to Debtor of the date fixed for any public sale or the
date on or after which any private sale or other disposition of the Collateral
is to be made by Secured Party; with respect to any public sale, the sale is
held at least five (5) days after notice is published in a newspaper of general
circulation in the City of Los Angeles, California; and without respect to any
public disposition, the sale is held any time between the hours of 8 a.m. and 5
p.m. at any place designated by Secured Party or the sale is made by a licensed
securities broker or dealer through the placement of a "sell" order at the then
current market price. Without limiting the generality of this Section 6, it
shall conclusively be deemed to be commercially reasonable for Secured Party to
direct any prospective purchaser of any or all of the Collateral to Debtor to
ascertain all information concerning the status of Grand Havana Enterprises,
Inc. Secured Party's disposition of any or all of the Collateral in any manner
which differs from the procedures specified in this Section 6 shall not be
deemed to be commercially unreasonable.
6.5 Protection of Collateral. Secured Party may discharge claims,
------------------------
demands, liens, security interests, encumbrances and taxes affecting any or all
of the Collateral and take such other actions as Secured Party determines to be
necessary or appropriate to protect the Collateral and Secured Party's security
interest therein. Secured Party, without releasing Debtor or any other party
from any of the Obligations and without any obligation to do so, may perform any
of the Obligations in such manner and to such extent as Secured Party determines
to be necessary or appropriate to protect the Collateral and Secured Party's
security interest therein.
6.6 Proceeds. The proceeds of any sale or disposition of the Collateral
--------
by Secured Party shall be applied in the following order of priority:
4
<PAGE>
(a) First, to all liabilities, obligations, costs, and expenses,
including without limitation reasonable attorneys' fees and costs, incurred by
Secured Party in exercising any of his rights or remedies under this Agreement,
including without limitation the costs and expenses of retaking, holding, and
selling any or all of the Collateral and the costs and expenses of enforcing and
collecting upon any or all of the Collateral;
(b) Second, to the payment of the Obligations in such order and
amounts as Secured Party may determine in his sole and absolute discretion; and
(c) Third, the surplus, if any, shall be paid to Debtor or any other
party legally entitled thereto.
7. No Liability for Deficiency. Debtor shall not be liable for any
---------------------------
deficiency remaining on the Obligations after any disposition of any or all of
the Collateral. Secured Party's sole recourse against Debtor in the Event of
Default shall be against the Collateral.
8. Power of Attorney. Debtor irrevocably appoints Secured Party, with full
-----------------
power of substitution, as Debtor's attorney-in-fact, coupled with an interest,
with full power, in Secured Party's own name or in the name of Debtor:
(a) Upon the occurrence of any Event of Default, to endorse any
checks, drafts, money orders, notes, and other instruments or documents
representing Collateral proceeds or evidencing payment on account of any or all
of the Collateral;
(b) Upon the occurrence of any Event of Default, to pay or discharge
claims, demands, liens, security interests, encumbrances, or taxes affecting or
threatened against any or all of the Collateral;
(c) Upon the occurrence of any Event of Default, to receive payment
of all Collateral proceeds;
(d) To commence, prosecute or defend any suit, action or proceeding
relating to any or all of the Collateral;
(e) Upon the occurrence of any Event of Default, to sell, transfer,
pledge, make any agreement with respect to, or otherwise deal with any or all of
the Collateral as though Secured Party were the owner thereof for all purposes;
and
(f) To execute any financing statement, continuation financing
statement, financing statement amendment, security agreement, assignment,
notice, or other document which Secured Party, in his sole and absolute
discretion, determines to be necessary or appropriate in order to perfect or
maintain Secured Party's first-priority security interest in the Collateral.
5
<PAGE>
Debtor acknowledges that Secured Party shall have no obligation to exercise any
of the foregoing rights.
9. Waivers. Debtor hereby waives presentment, demand for payment, protest,
-------
notice of demand, dishonor, protest and nonpayment, and all other notices and
demands in connection with the delivery, acceptance, performance, default under,
and enforcement of the Obligations. Debtor waives the right to assert any
statute of limitations as a defense to the enforcement of any of the Obligations
to the fullest extent permitted by law.
10. Relationship of Parties. Nothing contained in this Agreement
-----------------------
constitutes or shall be construed as the formation of a partnership or joint
venture between Secured Party and Debtor or any other party; or the creation of
any confidential or fiduciary relationship of any kind between Secured Party and
Debtor or any other party. Secured Party shall not be deemed to be a partner,
joint venturer, trustee, or fiduciary with respect to Debtor or any other party
as a result of this Agreement or the transactions contemplated hereby.
11. Attorneys' Fees. Upon Secured Party's demand, Debtor shall reimburse
---------------
Secured Party for all costs and expenses, including without limitation,
reasonable attorney's fees and costs, which are incurred by Secured Party,
whether before or after Debtor's default under this Agreement, in connection
with any or all of the following: the exercise of any or all of Secured Party's
rights and remedies under this Agreement or the enforcement of any obligation of
any other party liable to Secured Party in connection with the Obligations,
whether or not any legal proceedings are instituted by Secured Party; the
protection, preservation, management, operation, or maintenance of any or all of
the Collateral; the sale or disposition of any or all of the Collateral; or the
defense of any suit, action or proceeding by Debtor or any other party relating
to the Obligations.
12. Notices. All notices, requests and other communications hereunder shall
-------
be in writing and shall be delivered by courier or other means of personal
service, or sent by telecopy or by overnight mail or by Federal Express
addressed to:
If to Secured Party:
Harry Shuster
1990 Westwood Boulevard, Penthouse
Los Angeles, California 90025
If to Debtor:
Stanley Shuster
1990 Westwood Boulevard, Penthouse
Los Angeles, California 90025
All notices, requests and other communications shall be deemed given on the date
of delivery, if given by personal service, or, if sent by overnight mail or air
courier, seventy-two (72) hours after
6
<PAGE>
delivery to the air courier to the address set forth above. Any party may change
their address for notices, requests and other communications by giving notice in
the manner specified above.
13. Interpretation. This Agreement shall be construed in accordance with
--------------
and governed by the laws of the State of California. The headings to sections of
this Agreement are for convenience only, and they do not in any way limit or
amplify any of the terms of this Agreement and shall not be used in interpreting
this Agreement.
14. Entire Agreement. This Agreement contains the entire agreement between
----------------
Secured Party and Debtor concerning the subject matter of this Agreement.
15. No Waiver by Secured Party. No waiver by Secured Party of any of his
--------------------------
rights or remedies in connection with the Obligations or of any of the terms or
conditions of this Agreement shall be effective unless such waiver is in writing
and signed by Secured Party.
16. Amendment. This Agreement may be modified only by a written agreement
---------
signed by Debtor and Secured Party.
17. Successors. This Agreement shall be binding upon and inure to the
----------
benefit of Debtor and Secured Party and their respective successors and assigns.
18. Counterparts. This Agreement may be executed in two (2) or more
------------
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
"Debtor"
/s/ Stanley Shuster
---------------------------------------
STANLEY SHUSTER
"Secured Party"
/s/ Harry Shuster
---------------------------------------
HARRY SHUSTER
7
<PAGE>
EXHIBIT 7.2
AGREEMENT FOR PURCHASE AND SALE OF STOCK
THIS AGREEMENT FOR PURCHASE AND SALE OF STOCK ("Agreement") is made and
entered into this 11/th/ day of June, 1999, by and between HARRY SHUSTER
("Seller") and STANLEY SHUSTER ("Buyer").
In consideration of the mutual promises contained herein, and for other
good and valuable consideration the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Seller does hereby sell, assign, convey and transfer to Buyer,
and Buyer does hereby purchase from Seller, 2,514,368 shares of
common stock of Grand Havana Enterprises, Inc., a Delaware
corporation ("Shares").
2. Seller does hereby represent and warrant that he has good and
marketable title to the Shares and is hereby conveying them to
Buyer free and clear of any and all liens and encumbrances
whatsoever.
3. The purchase price to be paid by Buyer to Seller for the Shares
is $201,149.44, which shall be payable pursuant to a Non-Recourse
Promissory Note executed by Buyer in favor of Seller concurrently
herewith. The payment of the purchase price shall be secured by
the Shares pursuant to the terms of a Stock Pledge Agreement to
be executed by Buyer and Seller concurrently herewith.
4. The parties hereto agree to execute any and all documents,
including but not limited to stock assignments separate from
certificate, in order to effectuate the terms and conditions of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
/s/ Harry Shuster /s/ Stanley Shuster
- ----------------------------- -----------------------------
HARRY SHUSTER STANLEY SHUSTER
<PAGE>
NON-RECOURSE PROMISSORY NOTE
$201,149.44 Los Angeles, California
June 11, 1999
FOR VALUE RECEIVED, the undersigned, Stanley Shuster, promises to pay
to the order of Harry Shuster the sum of Two Hundred One Thousand One Hundred
Forty-Nine Dollars and Forty-Four Cents ($201,149.44), together with interest
from the date hereof on the unpaid principal, as it exists from time to time, at
the rate of 5 1/2% per annum.
Interest shall be paid annually and principal shall be paid on or
before ten (10) years from the date of this Non-Recourse Promissory Note.
Payment shall be paid in lawful money of the United States. The
undersigned shall have the right to prepay all or any portion due hereunder at
any time and from time to time without any penalty whatsoever. Each payment
made hereunder shall be credited first to interest then due and the remainder to
principal.
If the undersigned shall default in any payment due hereunder, then,
at the option of the holder of this Non-Recourse Promissory Note, the entire
amount of outstanding principal and interest due shall immediately become due
and payable. If action be instituted on this Non-Recourse Promissory Note, the
undersigned promises to pay reasonable attorneys' fees and court costs.
This Non-Recourse Promissory Note is secured by the terms of a certain
Stock Pledge Agreement of even date herewith entered into between the
undersigned and the payee hereunder. This Non-Recourse Promissory Note is non-
recourse and the undersigned shall have no personal liability beyond that which
the holder of this Non-Recourse Promissory Note receives upon the sale of the
collateral under the aforesaid Stock Pledge Agreement.
/s/ Stanley Shuster
-------------------------------
STANLEY SHUSTER
<PAGE>
STOCK PLEDGE AGREEMENT
----------------------
THIS STOCK PLEDGE AGREEMENT ("Agreement") is made and entered into
this 11/th/ day of June, 1999, by and between STANLEY SHUSTER ("Debtor") and
HARRY SHUSTER ("Secured Party"), with reference to the following facts:
A. Debtor has executed and delivered to Secured Party a Non-
Recourse Promissory Note of even date herewith in the original principal amount
of $201,149.44 ("Note").
B. Debtor desires to enter into this Agreement to secure payment and
performance of his obligations under the Note.
NOW, THEREFORE, for valuable consideration, Debtor and Secured Party
agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following definitions:
1.1 "Collateral" means 2,514,368 shares of common stock of
Grand Havana Enterprises, Inc., a Delaware corporation, owned or held by Debtor,
all cash, additional securities and other property at any time and from time to
time receivable or otherwise distributed in respect of or in exchange for any of
the Collateral, and all proceeds of the foregoing.
1.2 "Event of Default" means any event of default specified in
Section 5 herein.
1.3 "Obligations" means payment and performance of all
obligations of Debtor under the Note.
2. Grant of Security Interest. To secure the Obligations, Debtor
--------------------------
hereby grants and assigns to Secured Party a present and continuing security
interest in the Collateral.
3. Debtor's Covenants.
------------------
3.1 Further Assurances. The security interest granted by Debtor
------------------
hereunder, at all times, shall be perfected and prior to any other interests in
the Collateral. Debtor shall take all actions which may be reasonably necessary
or appropriate to maintain, preserve, protect and defend the Collateral and
Secured Party's security interest therein, including all such actions as may be
reasonably requested by Secured Party. Upon Secured Party's request, Debtor
shall execute and deliver to Secured Party such further documents and
agreements, in form and substance satisfactory to Secured Party, as Secured
Party may require to effectuate this Agreement or to evidence, perfect,
maintain, preserve or protect Secured Party's security interest
1
<PAGE>
in the Collateral, including without limitation financing statements,
continuation financing statements, financing statement amendments, security
agreements and assignments.
3.2 Deliveries. Debtor shall deliver to Secured Party the
----------
certificate and any other certificates evidencing the Collateral as soon as
possible after the execution of this Agreement and shall deliver, immediately
upon receipt by Debtor from any party of any securities that constitute
Collateral, such securities to the Secured Party, together with duly executed
stock powers in blank with a signature guarantee provided by a member of the New
York Stock Exchange or such other party satisfactory to Secured Party. In the
event of any non-cash distribution with respect to such Collateral (whether by
way of stock dividends, stock splits or recapitalization), the property so
distributed shall be delivered to the Secured Party to be held as additional
Collateral under this Agreement.
3.3 Negative Covenants. Without Secured Party's prior written
------------------
consent, Debtor shall not sell, transfer, assign, pledge, mortgage, encumber,
hypothecate or otherwise dispose of or abandon any or all of the Collateral.
3.4 Voting Rights. So long as there shall exist no Event of
-------------
Default, Debtor shall be entitled to exercise his rights to voting power with
respect to all Collateral pledged under this Agreement. Upon an Event of
Default, Secured Party acting alone may exercise voting rights with respect to
the Collateral and may cause the Collateral to be reissued in Secured Party's
name to facilitate the exercise of such voting rights.
4. Warranties and Representations. Debtor warrants and represents
------------------------------
to Secured Party that:
(a) Debtor has the full power and authority to enter into
this Agreement, to grant to Secured Party the security interest in the
Collateral as provided herein, and to perform all of his other obligations under
this Agreement; and
(b) Debtor is the sole owner of and has good and marketable
title to the Collateral, and the Collateral is free and clear and shall at all
times remain free and clear of all claims, demands, rights, liens, security
interests and encumbrances, other than the security interest granted to Secured
Party under this Agreement.
5. Event of Default.
----------------
The occurrence of any of the following events or conditions shall
constitute and is hereby defined to be an "Event of Default":
(a) Any failure to make any payment on the date that such
payment is due under the Note;
2
<PAGE>
(b) The sale, lease, transfer, assignment, pledge,
mortgage, encumbrance, hypothecation or other disposal of or abandonment of any
or all of the Collateral without the prior written consent of Secured Party;
(c) Any failure or neglect to perform or observe any of the
other terms, provisions, or covenants of this Agreement;
(d) Any warranty, representation or statement contained in
this Agreement or any other document or agreement executed or delivered in
connection with the Obligations that shall be or shall prove to have been
materially false when made or furnished;
(e) The filing by Debtor (or against Debtor in which Debtor
acquiesces or which is not dismissed within thirty (30) days after the filing
thereof) of any proceeding under the federal bankruptcy laws now or hereafter
existing or any other similar statute now or hereafter in effect; the entry of
an order for relief under such laws with respect to Debtor; or the appointment
of a receiver, trustee, custodian or conservator of all or any part of the
assets of Debtor;
(f) The insolvency of Debtor; or the execution by Debtor of
an assignment for the benefit of creditors; or the convening by Debtor of a
meeting of his creditors, or any class thereof, for purposes of effecting a
moratorium upon or extension or composition of his debts; or the failure of
Debtor to pay his debts as they mature; or if Debtor is generally not paying his
debts as they mature;
(g) The admission in writing by Debtor that he is unable to
pay his debts as they mature or that he is generally not paying his debts as
they mature; and
(h) The institution of any legal action or proceedings to
enforce a lien or security interest in any portion of the Collateral that is not
dismissed to the satisfaction of Secured Party within fifteen (15) days of such
institution.
6. Remedies Upon Default. Upon the occurrence of any Event of
---------------------
Default, Secured Party shall, in addition to all other rights and remedies
provided hereunder or any document or agreement referred to herein, have the
following rights and remedies:
6.1 Uniform Commercial Code. Secured Party shall have all of
-----------------------
the rights and remedies of a secured party under the California Uniform
Commercial Code and under all other applicable laws.
6.2 Acceleration. Secured Party may declare any or all of the
------------
Obligations to be immediately due and payable, to the extent that such
Obligations are not already due and payable by their terms.
6.3 Sale of Collateral. Secured Party may sell or dispose of
------------------
the Collateral at public or private sale, in one or more sales, as a unit or in
parcels, at wholesale or retail, and at
3
<PAGE>
such time and place and on such terms as Secured Party may determine. Secured
Party may be the purchaser of any or all of the Collateral at any public or
private sale. If, at any time when Secured Party shall determine to exercise his
right to sell all or any part of the Collateral and such Collateral, or the part
thereof to be sold, he has been advised by legal counsel or himself determines
that the Collateral is subject to the Securities Act of 1933 as amended or any
state securities laws, Secured Party in his sole and absolute discretion, is
hereby expressly authorized to sell such Collateral, or any part thereof,
subject to obtaining all required regulatory approvals, by private sale in such
manner and under such circumstances as Secured Party may deem necessary or
advisable in order that such sale may be effected legally without registration
or qualification under applicable securities laws (including without limitation
without any obligation to advertise). Without limiting the generality of the
foregoing, Secured Party, in his sole and absolute discretion, may approach and
negotiate with a restricted number of potential purchasers to effect such sale
or restrict such sale to a purchaser or purchaser who will represent and agree
that such purchaser or purchasers are purchasing for his or their own account,
for investment only, and not with a view to the distribution or sale of such
Collateral or any part thereof. Any such sale shall be deemed to be a sale made
in a commercially reasonable manner within the meaning of the Uniform Commercial
Code of the State of California and Debtor hereby consents and agrees that
Secured Party shall incur no responsibility or liability for selling all or any
part of the Collateral at a price which is not unreasonably low, notwithstanding
the possibility that a higher price might be realized if the sale were public.
Any public sale of any or all of the Collateral may be postponed from time to
time by public announcement at the time and place last scheduled for the sale.
6.4 Commercially Reasonable Sale. Without limiting the
----------------------------
generality of this Section 6, Secured Party shall conclusively be deemed to have
made a commercially reasonable disposition of any or all of the Collateral if
Secured Party holds a public or private sale of such Collateral at least (5)
five days after notice is given to Debtor of the date fixed for any public sale
or the date on or after which any private sale or other disposition of the
Collateral is to be made by Secured Party; with respect to any public sale, the
sale is held at least five (5) days after notice is published in a newspaper of
general circulation in the City of Los Angeles, California; and without respect
to any public disposition, the sale is held any time between the hours of 8 a.m.
and 5 p.m. at any place designated by Secured Party or the sale is made by a
licensed securities broker or dealer through the placement of a "sell" order at
the then current market price. Without limiting the generality of this Section
6, it shall conclusively be deemed to be commercially reasonable for Secured
Party to direct any prospective purchaser of any or all of the Collateral to
Debtor to ascertain all information concerning the status of Grand Havana
Enterprises, Inc. Secured Party's disposition of any or all of the Collateral
in any manner which differs from the procedures specified in this Section 6
shall not be deemed to be commercially unreasonable.
6.5 Protection of Collateral. Secured Party may discharge
------------------------
claims, demands, liens, security interests, encumbrances and taxes affecting any
or all of the Collateral and take such other actions as Secured Party determines
to be necessary or appropriate to protect the Collateral and Secured Party's
security interest therein. Secured Party, without releasing Debtor or any other
party from any of the Obligations and without any obligation to do so, may
perform
4
<PAGE>
any of the Obligations in such manner and to such extent as Secured Party
determines to be necessary or appropriate to protect the Collateral and Secured
Party's security interest therein.
6.6 Proceeds. The proceeds of any sale or disposition of the
--------
Collateral by Secured Party shall be applied in the following order of priority:
(a) First, to all liabilities, obligations, costs, and
expenses, including without limitation reasonable attorneys' fees and costs,
incurred by Secured Party in exercising any of his rights or remedies under this
Agreement, including without limitation the costs and expenses of retaking,
holding, and selling any or all of the Collateral and the costs and expenses of
enforcing and collecting upon any or all of the Collateral;
(b) Second, to the payment of the Obligations in such order
and amounts as Secured Party may determine in his sole and absolute discretion;
and
(c) Third, the surplus, if any, shall be paid to Debtor or
any other party legally entitled thereto.
7. No Liability for Deficiency. Debtor shall not be liable for any
---------------------------
deficiency remaining on the Obligations after any disposition of any or all of
the Collateral. Secured Party's sole recourse against Debtor in the Event of
Default shall be against the Collateral.
8. Power of Attorney. Debtor irrevocably appoints Secured Party,
------------------
with full power of substitution, as Debtor's attorney-in-fact, coupled with an
interest, with full power, in Secured Party's own name or in the name of Debtor:
(a) Upon the occurrence of any Event of Default, to endorse
any checks, drafts, money orders, notes, and other instruments or documents
representing Collateral proceeds or evidencing payment on account of any or all
of the Collateral;
(b) Upon the occurrence of any Event of Default, to pay or
discharge claims, demands, liens, security interests, encumbrances, or taxes
affecting or threatened against any or all of the Collateral;
(c) Upon the occurrence of any Event of Default, to receive
payment of all Collateral proceeds;
(d) To commence, prosecute or defend any suit, action or
proceeding relating to any or all of the Collateral;
(e) Upon the occurrence of any Event of Default, to sell,
transfer, pledge, make any agreement with respect to, or otherwise deal with any
or all of the Collateral as though Secured Party were the owner thereof for all
purposes; and
5
<PAGE>
(f) To execute any financing statement, continuation
financing statement, financing statement amendment, security agreement,
assignment, notice, or other document which Secured Party, in his sole and
absolute discretion, determines to be necessary or appropriate in order to
perfect or maintain Secured Party's first-priority security interest in the
Collateral.
Debtor acknowledges that Secured Party shall have no obligation to exercise any
of the foregoing rights.
9. Waivers. Debtor hereby waives presentment, demand for payment,
-------
protest, notice of demand, dishonor, protest and nonpayment, and all other
notices and demands in connection with the delivery, acceptance, performance,
default under, and enforcement of the Obligations. Debtor waives the right to
assert any statute of limitations as a defense to the enforcement of any of the
Obligations to the fullest extent permitted by law.
10. Relationship of Parties. Nothing contained in this Agreement
-----------------------
constitutes or shall be construed as the formation of a partnership or joint
venture between Secured Party and Debtor or any other party; or the creation of
any confidential or fiduciary relationship of any kind between Secured Party and
Debtor or any other party. Secured Party shall not be deemed to be a partner,
joint venturer, trustee, or fiduciary with respect to Debtor or any other party
as a result of this Agreement or the transactions contemplated hereby.
11. Attorneys' Fees. Upon Secured Party's demand, Debtor shall
---------------
reimburse Secured Party for all costs and expenses, including without
limitation, reasonable attorney's fees and costs, which are incurred by Secured
Party, whether before or after Debtor's default under this Agreement, in
connection with any or all of the following: the exercise of any or all of
Secured Party's rights and remedies under this Agreement or the enforcement of
any obligation of any other party liable to Secured Party in connection with the
Obligations, whether or not any legal proceedings are instituted by Secured
Party; the protection, preservation, management, operation, or maintenance of
any or all of the Collateral; the sale or disposition of any or all of the
Collateral; or the defense of any suit, action or proceeding by Debtor or any
other party relating to the Obligations.
12. Notices. All notices, requests and other communications
-------
hereunder shall be in writing and shall be delivered by courier or other means
of personal service, or sent by telecopy or by overnight mail or by Federal
Express addressed to:
If to Secured Party:
Harry Shuster
1990 Westwood Boulevard, Penthouse
Los Angeles, California 90025
6
<PAGE>
If to Debtor:
Stanley Shuster
1990 Westwood Boulevard, Penthouse
Los Angeles, California 90025
All notices, requests and other communications shall be deemed given on the date
of delivery, if given by personal service, or, if sent by overnight mail or air
courier, seventy-two (72) hours after delivery to the air courier to the address
set forth above. Any party may change their address for notices, requests and
other communications by giving notice in the manner specified above.
13. Interpretation. This Agreement shall be construed in accordance
--------------
with and governed by the laws of the State of California. The headings to
sections of this Agreement are for convenience only, and they do not in any way
limit or amplify any of the terms of this Agreement and shall not be used in
interpreting this Agreement.
14. Entire Agreement. This Agreement contains the entire agreement
----------------
between Secured Party and Debtor concerning the subject matter of this
Agreement.
15. No Waiver by Secured Party. No waiver by Secured Party of any of
--------------------------
his rights or remedies in connection with the Obligations or of any of the terms
or conditions of this Agreement shall be effective unless such waiver is in
writing and signed by Secured Party.
16. Amendment. This Agreement may be modified only by a written
---------
agreement signed by Debtor and Secured Party.
17. Successors. This Agreement shall be binding upon and inure to
----------
the benefit of Debtor and Secured Party and their respective successors and
assigns.
18. Counterparts. This Agreement may be executed in two (2) or more
------------
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
"Debtor"
/s/ Stanley Shuster
-------------------
STANLEY SHUSTER
"Secured Party"
/s/ Harry Shuster
-----------------
HARRY SHUSTER
7
<PAGE>
EXHIBIT 7.3
AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 11/th/ day of
June, 1999, by and between HARRY SHUSTER ("Seller") and STANLEY SHUSTER
("Buyer").
In consideration of the mutual promises contained herein, and for other
good and valuable consideration the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Seller does hereby sell, assign, convey and transfer to Buyer, and Buyer
does hereby purchase from Seller, (i) 2,315,375 shares of common stock
of Grand Havana Enterprises, Inc., a Delaware corporation ("Shares") and
(ii) stock purchase warrants ("Warrants") to purchase 1,157,689 shares
of such common stock.
2. Seller does hereby represent and warrant that he has good and marketable
title to the Shares and the Warrants and is hereby conveying them to
Buyer free and clear of any and all liens and encumbrances whatsoever;
except that (i) the Shares and Warrants are subject to a right of
rescission ("Right of Rescission") of certain claimants ("Claimants")
pursuant to that certain Settlement and Release Agreement dated as of
June 4, 1999 ("Settlement Agreement"), and (ii) pursuant to the terms of
the Settlement Agreement, the Shares and the Warrants will be held in
escrow ("Escrow") by the law firm of Richman, Lawrence, Mann, Chizever &
Phillips until the conditions of such escrow are satisfied.
3. The purchase price to be paid by Buyer to Seller for the Shares and the
Warrants is $185,230.00, which shall be payable pursuant to a Non-
Recourse Promissory Note ("Note") executed by Buyer in favor of Seller
concurrently herewith. The payment of the purchase price shall be
secured by the Shares and the Warrants pursuant to the terms of a Pledge
Agreement to be executed by Buyer and Seller concurrently herewith.
4. The parties hereto agree and acknowledge that if the Claimants exercise
the Right of Rescission pursuant to the Settlement Agreement, (i) the
sale and purchase of the Shares and the Warrants hereunder shall be
rescinded, (ii) the Shares and Warrants shall be transferred from Escrow
to the Claimants,(iii) the Note and the Pledge Agreement shall be
canceled, (iv) Seller shall not be entitled to any payments under the
Note and any payments received by Seller thereunder shall be refunded
promptly to Buyer, (v) Buyer shall have no further rights in and to the
Shares or the
<PAGE>
Warrants, and (vi) Buyer shall have no right to receive any other
securities in lieu of the Shares and the Warrants.
5. The parties hereto agree to execute any and all documents, including but
not limited to stock assignments separate from certificate, in order to
effectuate the terms and conditions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
/s/ Harry Shuster /s/ Stanley Shuster
- ---------------------------- ----------------------------------
HARRY SHUSTER STANLEY SHUSTER
<PAGE>
NON-RECOURSE PROMISSORY NOTE
$185,230.00 Los Angeles, California
June 11, 1999
FOR VALUE RECEIVED, the undersigned, Stanley Shuster, promises to pay to
the order of Harry Shuster the sum of One Hundred Eighty-Five Thousand Two
Hundred Thirty Dollars ($185,230.00), together with interest from the date
hereof on the unpaid principal, as it exists from time to time, at the rate of
5 1/2% per annum.
Interest shall be paid annually and principal shall be paid on or before
ten (10) years from the date of this Non-Recourse Promissory Note.
Payment shall be paid in lawful money of the United States. The undersigned
shall have the right to prepay all or any portion due hereunder at any time and
from time to time without any penalty whatsoever. Each payment made hereunder
shall be credited first to interest then due and the remainder to principal.
If the undersigned shall default in any payment due hereunder, then, at the
option of the holder of this Non-Recourse Promissory Note, the entire amount of
outstanding principal and interest due shall immediately become due and payable.
If action be instituted on this Non-Recourse Promissory Note, the undersigned
promises to pay reasonable attorneys' fees and court costs.
This Non-Recourse Promissory Note is secured by the terms of a certain
Pledge Agreement of even date herewith entered into between the undersigned and
the payee hereunder. This Non-Recourse Promissory Note is non-recourse and the
undersigned shall have no personal liability beyond that which the holder of
this Non-Recourse Promissory Note receives upon the sale of the collateral under
the aforesaid Pledge Agreement.
/s/ Stanley Shuster
--------------------------------
STANLEY SHUSTER
<PAGE>
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT ("Agreement") is made and entered into this 11/th/
day of June, 1999, by and between STANLEY SHUSTER ("Debtor") and HARRY SHUSTER
("Secured Party"), with reference to the following facts:
A. Debtor has executed and delivered to Secured Party a Non-Recourse
Promissory Note of even date herewith in the original principal amount of
$185,230.00 ("Note").
B. Debtor desires to enter into this Agreement to secure payment and
performance of his obligations under the Note.
NOW, THEREFORE, for valuable consideration, Debtor and Secured Party agree
as follows:
1. Definitions. For purposes of this Agreement, the following terms shall
-----------
have the following definitions:
1.1 "Collateral" means 2,315,375 shares of common stock of Grand Havana
Enterprises, Inc., a Delaware corporation, owned or held by Debtor, (b) warrants
to purchase 1,157,689 shares of common stock of Grand Havana Enterprises, Inc.,
(c) all cash, additional securities and other property at any time and from time
to time receivable or otherwise distributed in respect of or in exchange for any
of the Collateral, and (d) all proceeds of the foregoing.
1.2 "Event of Default" means any event of default specified in Section 5
herein.
1.3 "Obligations" means payment and performance of all obligations of
Debtor under the Note.
2. Grant of Security Interest. To secure the Obligations, Debtor hereby
--------------------------
grants and assigns to Secured Party a present and continuing security interest
in the Collateral.
3. Debtor's Covenants.
------------------
3.1 Further Assurances. The security interest granted by Debtor
------------------
hereunder, at all times, shall be perfected and prior to any other interests in
the Collateral. Debtor shall take all actions which may be reasonably necessary
or appropriate to maintain, preserve, protect and defend the Collateral and
Secured Party's security interest therein, including all such actions as may be
reasonably requested by Secured Party. Upon Secured Party's request, Debtor
shall execute and deliver to Secured Party such further documents and
agreements, in form and substance satisfactory to Secured Party, as Secured
Party may require to effectuate this
1
<PAGE>
Agreement or to evidence, perfect,maintain, preserve or protect Secured Party's
security interest in the Collateral, including without limitation financing
statements, continuation financing statements, financing statement amendments,
security agreements and assignments.
3.2 Deliveries. Debtor shall deliver to Secured Party the certificate
----------
and any other certificates evidencing the Collateral as soon as possible after
the execution of this Agreement and shall deliver, immediately upon receipt by
Debtor from any party of any securities that constitute Collateral, such
securities to the Secured Party, together with duly executed stock powers in
blank with a signature guarantee provided by a member of the New York Stock
Exchange or such other party satisfactory to Secured Party. In the event of any
non-cash distribution with respect to such Collateral (whether by way of stock
dividends, stock splits or recapitalization), the property so distributed shall
be delivered to the Secured Party to be held as additional Collateral under this
Agreement.
3.3 Negative Covenants. Without Secured Party's prior written consent,
------------------
Debtor shall not sell, transfer, assign, pledge, mortgage, encumber, hypothecate
or otherwise dispose of or abandon any or all of the Collateral.
3.4 Voting Rights. So long as there shall exist no Event of Default,
-------------
Debtor shall be entitled to exercise his rights to voting power with respect to
all Collateral pledged under this Agreement. Upon an Event of Default, Secured
Party acting alone may exercise voting rights with respect to the Collateral and
may cause the Collateral to be reissued in Secured Party's name to facilitate
the exercise of such voting rights.
4. Warranties and Representations. Debtor warrants and represents to
------------------------------
Secured Party that:
(a) Debtor has the full power and authority to enter into this
Agreement, to grant to Secured Party the security interest in the Collateral as
provided herein, and to perform all of his other obligations under this
Agreement; and
(b) Debtor is the sole owner of and has good and marketable title to
the Collateral, and the Collateral is free and clear and shall at all times
remain free and clear of all claims, demands, rights, liens, security interests
and encumbrances, other than the security interest granted to Secured Party
under this Agreement; provided, however, that the Collateral is subject to
certain persons' right of rescission ("Right of Rescission") pursuant to that
certain Settlement and Release Agreement dated as of June 4, 1999 ("Settlement
Agreement"). Secured Party acknowledges the foregoing and takes his interest in
the Collateral subject to such right of rescission. Secured Party further
acknowledges that, pursuant to the Settlement Agreement, the Collateral shall be
held in escrow by the law firm of Richman, Lawrence, Mann, Chizever & Phillips,
until such right has lapsed, been waived or has otherwise expired.
2
<PAGE>
5. Event of Default.
----------------
The occurrence of any of the following events or conditions shall
constitute and is hereby defined to be an "Event of Default":
(a) Any failure to make any payment on the date that such payment is
due under the Note;
(b) The sale, lease, transfer, assignment, pledge, mortgage,
encumbrance, hypothecation or other disposal of or abandonment of any or all of
the Collateral without the prior written consent of Secured Party;
(c) Any failure or neglect to perform or observe any of the other
terms, provisions, or covenants of this Agreement;
(d) Any warranty, representation or statement contained in this
Agreement or any other document or agreement executed or delivered in connection
with the Obligations that shall be or shall prove to have been materially false
when made or furnished;
(e) The filing by Debtor (or against Debtor in which Debtor
acquiesces or which is not dismissed within thirty (30) days after the filing
thereof) of any proceeding under the federal bankruptcy laws now or hereafter
existing or any other similar statute now or hereafter in effect; the entry of
an order for relief under such laws with respect to Debtor; or the appointment
of a receiver, trustee, custodian or conservator of all or any part of the
assets of Debtor;
(f) The insolvency of Debtor; or the execution by Debtor of an
assignment for the benefit of creditors; or the convening by Debtor of a meeting
of his creditors, or any class thereof, for purposes of effecting a moratorium
upon or extension or composition of his debts; or the failure of Debtor to pay
his debts as they mature; or if Debtor is generally not paying his debts as they
mature;
(g) The admission in writing by Debtor that he is unable to pay his
debts as they mature or that he is generally not paying his debts as they
mature; and
(h) The institution of any legal action or proceedings to enforce a
lien or security interest in any portion of the Collateral that is not dismissed
to the satisfaction of Secured Party within fifteen (15) days of such
institution.
6. Remedies Upon Default. Upon the occurrence of any Event of Default,
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Secured Party shall, in addition to all other rights and remedies provided
hereunder or any document or agreement referred to herein, have the following
rights and remedies:
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6.1 Uniform Commercial Code. Secured Party shall have all of the rights
-----------------------
and remedies of a secured party under the California Uniform Commercial Code and
under all other applicable laws.
6.2 Acceleration. Secured Party may declare any or all of the
------------
Obligations to be immediately due and payable, to the extent that such
Obligations are not already due and payable by their terms.
6.3 Sale of Collateral. Subject to the Right of Rescission pursuant to
------------------
the Settlement Agreement, Secured Party may sell or dispose of the Collateral at
public or private sale, in one or more sales, as a unit or in parcels, at
wholesale or retail, and at such time and place and on such terms as Secured
Party may determine. Secured Party may be the purchaser of any or all of the
Collateral at any public or private sale. If, at any time when Secured Party
shall determine to exercise his right to sell all or any part of the Collateral
and such Collateral, or the part thereof to be sold, he has been advised by
legal counsel or himself determines that the Collateral is subject to the
Securities Act of 1933 as amended or any state securities laws, Secured Party in
his sole and absolute discretion, is hereby expressly authorized to sell such
Collateral, or any part thereof, subject to obtaining all required regulatory
approvals, by private sale in such manner and under such circumstances as
Secured Party may deem necessary or advisable in order that such sale may be
effected legally without registration or qualification under applicable
securities laws (including without limitation without any obligation to
advertise). Without limiting the generality of the foregoing, Secured Party, in
his sole and absolute discretion, may approach and negotiate with a restricted
number of potential purchasers to effect such sale or restrict such sale to a
purchaser or purchaser who will represent and agree that such purchaser or
purchasers are purchasing for his or their own account, for investment only, and
not with a view to the distribution or sale of such Collateral or any part
thereof. Any such sale shall be deemed to be a sale made in a commercially
reasonable manner within the meaning of the Uniform Commercial Code of the State
of California and Debtor hereby consents and agrees that Secured Party shall
incur no responsibility or liability for selling all or any part of the
Collateral at a price which is not unreasonably low, notwithstanding the
possibility that a higher price might be realized if the sale were public. Any
public sale of any or all of the Collateral may be postponed from time to time
by public announcement at the time and place last scheduled for the sale.
6.4 Commercially Reasonable Sale. Without limiting the generality of
----------------------------
this Section 6, Secured Party shall conclusively be deemed to have made a
commercially reasonable disposition of any or all of the Collateral if Secured
Party holds a public or private sale of such Collateral at least (5) five days
after notice is given to Debtor of the date fixed for any public sale or the
date on or after which any private sale or other disposition of the Collateral
is to be made by Secured Party; with respect to any public sale, the sale is
held at least five (5) days after notice is published in a newspaper of general
circulation in the City of Los Angeles, California; and without respect to any
public disposition, the sale is held any time between the hours of 8 a.m. and 5
p.m. at any place designated by Secured Party or the sale is made by a licensed
securities broker or dealer through the placement of a "sell" order at the then
current market
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price. Without limiting the generality of this Section 6, it shall conclusively
be deemed to be commercially reasonable for Secured Party to direct any
prospective purchaser of any or all of the Collateral to Debtor to ascertain all
information concerning the status of Grand Havana Enterprises, Inc. Secured
Party's disposition of any or all of the Collateral in any manner which differs
from the procedures specified in this Section 6 shall not be deemed to be
commercially unreasonable.
6.5 Protection of Collateral. Secured Party may discharge claims,
------------------------
demands, liens, security interests, encumbrances and taxes affecting any or all
of the Collateral and take such other actions as Secured Party determines to be
necessary or appropriate to protect the Collateral and Secured Party's security
interest therein. Secured Party, without releasing Debtor or any other party
from any of the Obligations and without any obligation to do so, may perform any
of the Obligations in such manner and to such extent as Secured Party determines
to be necessary or appropriate to protect the Collateral and Secured Party's
security interest therein.
6.6 Proceeds. The proceeds of any sale or disposition of the
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Collateral by Secured Party shall be applied in the following order of priority:
(a) First, to all liabilities, obligations, costs, and expenses,
including without limitation reasonable attorneys' fees and costs, incurred by
Secured Party in exercising any of his rights or remedies under this Agreement,
including without limitation the costs and expenses of retaking, holding, and
selling any or all of the Collateral and the costs and expenses of enforcing and
collecting upon any or all of the Collateral;
(b) Second, to the payment of the Obligations in such order and
amounts as Secured Party may determine in his sole and absolute discretion; and
(c) Third, the surplus, if any, shall be paid to Debtor or any
other party legally entitled thereto.
7. No Liability for Deficiency. Debtor shall not be liable for any
---------------------------
deficiency remaining on the Obligations after any disposition of any or all of
the Collateral. Secured Party's sole recourse against Debtor in the Event of
Default shall be against the Collateral.
8. Power of Attorney. Debtor irrevocably appoints Secured Party, with full
-----------------
power of substitution, as Debtor's attorney-in-fact, coupled with an interest,
with full power, in Secured Party's own name or in the name of Debtor:
(a) Upon the occurrence of any Event of Default, to endorse any
checks, drafts, money orders, notes, and other instruments or documents
representing Collateral proceeds or evidencing payment on account of any or all
of the Collateral;
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(b) Upon the occurrence of any Event of Default, to pay or discharge
claims, demands, liens, security interests, encumbrances, or taxes affecting or
threatened against any or all of the Collateral;
(c) Upon the occurrence of any Event of Default, to receive payment
of all Collateral proceeds;
(d) To commence, prosecute or defend any suit, action or proceeding
relating to any or all of the Collateral;
(e) Upon the occurrence of any Event of Default, to sell, transfer,
pledge, make any agreement with respect to, or otherwise deal with any or all of
the Collateral as though Secured Party were the owner thereof for all purposes;
and
(f) To execute any financing statement, continuation financing
statement, financing statement amendment, security agreement, assignment,
notice, or other document which Secured Party, in his sole and absolute
discretion, determines to be necessary or appropriate in order to perfect or
maintain Secured Party's first-priority security interest in the Collateral.
Debtor acknowledges that Secured Party shall have no obligation to exercise any
of the foregoing rights.
9. Waivers. Debtor hereby waives presentment, demand for payment, protest,
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notice of demand, dishonor, protest and nonpayment, and all other notices and
demands in connection with the delivery, acceptance, performance, default under,
and enforcement of the Obligations. Debtor waives the right to assert any
statute of limitations as a defense to the enforcement of any of the Obligations
to the fullest extent permitted by law.
10. Relationship of Parties. Nothing contained in this Agreement
-----------------------
constitutes or shall be construed as the formation of a partnership or joint
venture between Secured Party and Debtor or any other party; or the creation of
any confidential or fiduciary relationship of any kind between Secured Party and
Debtor or any other party. Secured Party shall not be deemed to be a partner,
joint venturer, trustee, or fiduciary with respect to Debtor or any other party
as a result of this Agreement or the transactions contemplated hereby.
11. Attorneys' Fees. Upon Secured Party's demand, Debtor shall reimburse
---------------
Secured Party for all costs and expenses, including without limitation,
reasonable attorney's fees and costs, which are incurred by Secured Party,
whether before or after Debtor's default under this Agreement, in connection
with any or all of the following: the exercise of any or all of Secured Party's
rights and remedies under this Agreement or the enforcement of any obligation of
any other party liable to Secured Party in connection with the Obligations,
whether or not any legal proceedings are instituted by Secured Party; the
protection, preservation, management, operation, or maintenance of any or all of
the
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Collateral; the sale or disposition of any or all of the Collateral; or the
defense of any suit, action or proceeding by Debtor or any other party relating
to the Obligations.
12. Notices. All notices, requests and other communications hereunder shall
-------
be in writing and shall be delivered by courier or other means of personal
service, or sent by telecopy or by overnight mail or by Federal Express
addressed to:
If to Secured Party:
Harry Shuster
1990 Westwood Boulevard, Penthouse
Los Angeles, California 90025
If to Debtor:
Stanley Shuster
1990 Westwood Boulevard, Penthouse
Los Angeles, California 90025
All notices, requests and other communications shall be deemed given on the date
of delivery, if given by personal service, or, if sent by overnight mail or air
courier, seventy-two (72) hours after delivery to the air courier to the address
set forth above. Any party may change their address for notices, requests and
other communications by giving notice in the manner specified above.
13. Interpretation. This Agreement shall be construed in accordance with
--------------
and governed by the laws of the State of California. The headings to sections of
this Agreement are for convenience only, and they do not in any way limit or
amplify any of the terms of this Agreement and shall not be used in interpreting
this Agreement.
14. Entire Agreement. This Agreement contains the entire agreement between
----------------
Secured Party and Debtor concerning the subject matter of this Agreement.
15. No Waiver by Secured Party. No waiver by Secured Party of any of his
--------------------------
rights or remedies in connection with the Obligations or of any of the terms or
conditions of this Agreement shall be effective unless such waiver is in writing
and signed by Secured Party.
16. Amendment. This Agreement may be modified only by a written agreement
---------
signed by Debtor and Secured Party.
17. Successors. This Agreement shall be binding upon and inure to the
----------
benefit of Debtor and Secured Party and their respective successors and assigns.
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18. Counterparts. This Agreement may be executed in two (2) or more
------------
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
"Debtor"
/s/ Stanley Shuster
-----------------------------------
STANLEY SHUSTER
"Secured Party"
/s/ Harry Shuster
-----------------------------------
HARRY SHUSTER
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