STOCK PURCHASE AGREEMENT
For the Sale of the Capital Stock of
Downtown Theatre Ticket Agency, Inc.,
a subsidiary of
U. S. Transportation Systems, Inc.,
and related Entertainment
Subsidiaries and Divisions
Dated as of December 31, 1996
AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of December 31, 1996, by and between
U. S. TRANSPORTATION SYSTEMS, INC., a Nevada corporation ("USTS") and PACKAGING
PLUS SERVICES, INC. a Nevada corporation ("PKGP").
WITNESSETH:
WHEREAS, PKGP desires to purchase all of the issued and outstanding shares
of capital stock of Downtown Theatre Ticket Agency, Inc. (D/B/A "Advance
Entertainment"), and its related entertainment subsidiaries and divisions
("Entertainment"), as set forth in Schedule A hereto; and
WHEREAS, USTS is the sole shareholder of Entertainment and is willing to
sell all of the issued and outstanding shares of capital stock of Entertainment
to PKGP;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
1. SALE AND PURCHASE OF CAPITAL STOCK OF ENTERTAINMENT.
1.1 Sale of Stock and Delivery. USTS hereby agrees to sell, transfer and
deliver to PKGP, free of all debt, liens and encumbrances, and PKGP
agrees to purchase from USTS, on the date fixed in accordance with
Section 3 for the closing hereunder (the "Closing Date"), all of the
outstanding shares of the capital stock of Entertainment.
Certificates for the Entertainment capital stock, endorsed in blank,
shall be delivered by USTS to PKGP at the Closing.
1.2 Purchase Price. The purchase price to be paid by PKGP to USTS for
Entertainment shall be by delivery at the Closing of a stock
certificate of PKGP for 850,000 of its common shares, "restricted",
for a two year period (the "Shares").
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1.3 Repurchase of Shares of PKGP. PKGP will have a right to repurchase
the Shares as follows:
a) PKGP has a right to repurchase all or any part of the 850,000
Shares for $1.15 per share, during the first 6 months from the
Closing. If PKGP does not repurchase all of such shares during
the 6-month period, PKGP shall deliver an additional 50,000
shares to USTS, and the repurchase period shall be extended
for the 7th through 12th month;
b) PKGP has a right to repurchase all or any part of the 900,000
Shares or the remaining Shares not repurchased, at $1.20 per
share, during the 7th through 12th month. If PKGP does not
repurchase all of such shares during such period, PKGP shall
deliver an additional 50,000 shares to USTS, and the
repurchase period shall be extended for the 13th through 18th
month;
c) PKGP has a right to repurchase all or any part of the 950,000
Shares or the remaining Shares not repurchased, at $1.25 per
share, during the 13th through 18th month. If PKGP does not
repurchase all of the shares during such period, PKGP shall
deliver an additional 50,000 shares to USTS, and the
repurchase period shall be extended for the 19th through the
24th month; and
d) PKGP has a right to repurchase all or any part of the
1,000,000 Shares at $1.30 per share during the 19th through
24th month.
e) The right to repurchase Shares shall terminate at the end of
the 24th month.
1.4 Registration of Shares of PKGP. PKGP will agree to include or
"piggyback" any Shares of PKGP owned by USTS on its next
registration statement.
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1.5 Loan to PKGP. At the Closing, USTS will loan PKGP $100,000, to be
repaid with interest at 10% per annum, in eighteen (18) monthly
installments from the date of Closing, the first six (6) monthly
installments of which shall be interest only, and the last twelve
(12) monthly installments shall consist of equal payments of
principal and interest. The loan will be secured by 300,000
"restricted" common shares of PKGP, placed in an appropriate escrow
account with Xxxxxx & XxXxxx, XX. Failure to make any payment when
due after a 10 business day grace period shall require the release
of the Shares to USTS, but shall in no way effect PKGP's obligation
to repay the loan.
1.6 Adjustment of Purchase Price. PKGP and USTS will agree that the
purchase price for Entertainment will be adjusted after the first
year from the Closing if gross revenue generated by Entertainment
falls below 10% from gross revenues estimated for the 1997 of
$2,300,000. Accordingly, for every $100,000 less than $2,070,000 in
revenues, USTS will return 42,500 shares to PKGP.
2. OTHER DELIVERIES AND ASSURANCES.
2.1 Other Deliveries. At the Closing, in addition to the delivery of the
stock certificates for Entertainment, in accordance with Section 1.1
hereof, USTS shall deliver to PKGP the following:
2.1.1 Corporate Books. The minute books, certificates of
incorporation, by-laws, stock transfer books and corporate
seals of Entertainment and any of its subsidiaries.
2.1.2 Resignations. The resignations of all of the present officers
and directors of Entertainment and any of its subsidiaries, to
be effective upon completion of the Closing.
2.2 Assurances. Each party hereto shall take such other action from time
to time as the other party may reasonably request in order to
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more effectively carry out the sale and the deliveries provided for
in this Agreement.
3. CLOSING.
Subject to the terms and conditions of this Agreement, the closing of the
transactions provided for herein (the "Closing") shall take place at the offices
of USTS, 00 Xxxx Xxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx on January 8, 1997, at 10:30
a.m.; or at such prior date and time as may be mutually agreed upon by USTS and
PKGP.
4. USTS'S REPRESENTATIONS AND WARRANTIES.
USTS hereby represents and warrants to PKGP as follows:
4.1 Organization and Good Standing. USTS, and Entertainment and its
subsidiaries, are corporations duly organized, validly existing and
in good standing under the laws of the states of their
incorporation. USTS and Entertainment have authority to own, operate
and lease their properties and to carry on their businesses as now
being conducted. Copies of the charter and By-Laws, and all
amendments thereto, of Entertainment and its subsidiaries have been
delivered to PKGP and are complete and correct as of the date
hereof. Entertainment is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the
character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the
failure so to qualify or to be in good standing would not have a
materially adverse effect on the business, operations, assets or
financial condition of Entertainment.
4.2 Capitalization. Entertainment has the authorized, issued and
outstanding capital stock set forth in Schedule A. All of such
issued and outstanding shares are validly issued, fully paid and
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nonassessable. Entertainment does not have authorized, issued or
outstanding any other shares of capital stock or any subscription or
other rights to the issuance or receipt of shares of its stock.
4.3 Authorization. USTS has all requisite corporate power and authority
to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement by USTS and
the consummation by USTS of the transactions contemplated hereby
have been duly authorized by USTS's Board of Directors and no other
corporate action or proceeding on the part of USTS is necessary for
the execution or delivery of this Agreement by USTS or for the
consummation by USTS of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by USTS and (assuming
this Agreement has been duly executed and delivered by PKGP) is a
legally valid and binding obligation of USTS, enforceable against
USTS in accordance with its terms.
4.4 Non Conflict: No Consents or Approvals Required. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby by USTS will, with or without
notice or passage of time, or both, (i) violate any provision of the
Certificate or Incorporation or By-Laws or USTS or the charter
documents or by-laws of Entertainment, (ii) violate any law, rule,
regulation, ordinance, order, writ, injunction, judgment or decree
applicable to USTS or Entertainment or by which Entertainment's
properties or assets are bound or affected, or (iii) conflict with
or result in any breach of or constitute a default under the terms,
conditions or provisions of any note, bond, mortgage, indenture,
permit, license, franchise agreement, lease or other contract,
instrument or obligation to which USTS or Entertainment is a party
or by which USTS or Entertainment or any of their respective
properties or assets is bound or affected, except, in the case of
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clauses (ii) and (iii) above, for any such violation, conflict,
breach or default which individually or in the aggregate will not
have a material adverse effect on the business, operations, assets
or financial condition of Entertainment.
4.5 Litigation. To the best knowledge of USTS, there is no action,
proceeding or investigation pending or threatened against or
involving Entertainment, which, if determined adversely, would
materially and adversely affect the financial condition, business or
operations of Entertainment, nor is there any judgment, decree,
injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding
against Entertainment having, or which, insofar as can be foreseen,
in the future would be likely to have, any such effect.
4.6 Contracts. To the best knowledge of USTS, Entertainment is not in
material default under any contract made or obligation owed by
Entertainment, which contract or obligation, individually or in the
aggregate, is material to Entertainment.
4.7 Trademarks and Trade Names. Set forth in Schedule B hereto is a list
of the trademarks and trade names owned by Entertainment.
Entertainment owns, or is licensed or otherwise has the full right
to use, all trademarks, trade names, copyrights, technology,
know-how and processes currently used and conducted which are
material to the financial condition, results of operations or
business of Entertainment. To the best knowledge of USTS, no claim
has been asserted by any person with respect to the use of any such
trademark, trade name, copyright, technology, know-how or process or
challenging or questioning the validity or effectiveness of any such
license.
4.8 Tax Matters. Entertainment has filed, or on behalf of Entertainment
there has been filed, all United States federal income tax returns,
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declarations and information returns, state and local income and
franchise tax returns, declarations and information returns which
are required to be filed including, but not limited to, Federal, New
York State and Illinois Unemployment Taxes and New York City
Occupancy Tax. All taxes as shown on said returns and all
assessments received have been paid to the extent that such taxes
have become due. All income and franchise tax returns filed on
behalf of Entertainment by USTS, with respect to periods ending on
or prior to the Closing Date, shall be filed based on normal and
consistent tax accounting practices and in accordance with
applicable law.
4.9 Lists of Certain Items. The following lists, setting forth summary
descriptions, as of the date hereof, shall be true as of the Closing
Date.
(i) Insurance Policies. Schedule C. USTS shall deliver
simultaneously with the execution of this Agreement a summary
description of all present policies of insurance with respect
to Entertainment and covering its properties, buildings,
equipment, furniture, fixtures or operations, all of which are
presently in force;
(ii) Real Property. Schedule D. All real property owned of record
or beneficially or leased by Entertainment;
(iii) Automobiles and Trucks. Schedule E. All automobiles and trucks
owned or leased by Entertainment;
(iv) Leases. Schedule F. Each presently existing lease of personal
property to which Entertainment is a party;
(v) Sales Contracts and Customer Purchase Orders. Schedule G.
Schedule G lists each sales contract and
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customer purchase order for the delivery of products or
performance of services by Entertainment, which would result
in the right to receive revenues of at least $1,000 and a list
of specific contracts or commitments each involving purchases
of inventories or supplies in excess of $1,000;
(vi) Banks. Schedule H. The name of each bank in which
Entertainment has an account or safe deposit box, and the
names of all persons authorized to draw thereon or have access
thereto;
(vii) Loan and Credit Agreement, etc. Schedule I. All mortgages,
pledges, deeds of trust, loan or credit agreements, notes and
similar instruments to which Entertainment is a party, and all
amendments or modifications of any thereof.
(viii)Apportionment of Expenses. All rents, bond payments, payroll
and other expenses relating to Entertainment will be prorated
between USTS and PKGP as of the date of the Closing.
4.10 Brokers. USTS represents that it has not incurred any obligation to
pay a finder's fee or similar acquisition services compensation in
connection with the proposed acquisition, or if it has or does, it
will pay such obligation.
4.11 Financial Matters. USTS represents that Entertainment will be debt
free at the Closing; USTS will retain accounts payable and accounts
receivable of Entertainment in effect as of the Closing, but will
deliver to PKGP all of the inventory associated with Entertainment.
4.12 Transfer of Shares. USTS will transfer title to the capital stock of
Entertainment to PKGP on the Closing Date, free and clear of all
debt, liens, pledges, encumbrances, voting trusts and voting
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agreements. There is no existing option, warrant or other agreement
(other than this Agreement) to which USTS or Entertainment is a
party requiring, and there are no convertible or exchangeable
securities of USTS or Entertainment, which upon conversion or
exchange would require, the issuance or sale of any shares of the
capital stock of Entertainment.
5. PKGP's REPRESENTATIONS AND WARRANTIES.
PKGP hereby represents and warrants to USTS as follows:
5.1 Membership on PKGP's Board of Directors. USTS will receive one board
seat on PKGP's Board of Directors as long as USTS holds at least
200,000 of the Shares. As long as USTS has one board seat, the Board
shall not exceed five members.
5.2 Consent of Designated Director. As long as USTS holds at least
200,000 of the Shares, PKGP will not take any action without the
consent of USTS' designated director, which would affect USTS'
Shares and not similarly and proportionally affect the shares held
by PKGP's President, Xxxxxxx X. Xxxxxxxx, or his assigns or any
related party.
5.3 Organization and Good Standing. PKGP is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Nevada, with full corporate power and authority to
carry on its business as it is now being conducted and as proposed
to be conducted. Copies of PKGP'S Certificate of Incorporation, By-
Laws, and all amendments thereto, in effect prior to the date
hereof, have been delivered to USTS and are complete and correct as
of the date hereof.
5.4 Authorization. PKGP has all requisite corporate power and authority
to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement by PKGP
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and the consummation by PKGP of the transactions contemplated hereby
have been duly authorized by PKGP's Board of Directors and no other
corporate action or proceeding on the part of PKGP is necessary for
the execution or delivery of this Agreement by PKGP or for the
consummation by PKGP of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by PKGP and (assuming
this Agreement has been duly executed and delivered by USTS) is a
legally valid and binding obligation of PKGP enforceable against
PKGP in accordance with its terms.
5.5 Brokers. PKGP represents that it has not incurred any obligation to
pay a finder's fee or similar acquisition services compensation in
connection with the proposed acquisition, or if it has or does, it
will pay such obligation.
6. TAX LIABILITIES.
6.1 USTS agrees that it shall be responsible for and shall pay (a) the
federal income tax liabilities of Entertainment for all taxable
periods ending with and prior to the Closing Date and (b) the state
and local income and franchise tax liabilities of Entertainment for
all taxable periods ending with and prior to the Closing Date.
6.2 USTS's liability for federal, state and local income and franchise
taxes for Entertainment for periods prior to the Closing Date shall
survive the Closing for a period coterminous with the applicable
statute of limitations.
7. LITIGATION. CLAIMS AND LIABILITIES.
7.1 Liability Claims. USTS has no knowledge of any material liability
claim against Entertainment.
7.2 USTS's Obligations. USTS hereby agrees to indemnify, hold harmless
and defend PKGP and its shareholders, directors, officers and
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employees from all such obligations and liabilities incurred by
Entertainment or arising from Entertainment business prior to the
Closing, including the payment of all expenses and attorneys' fees
arising therefrom.
8. SURVIVAL OF REPRESENTATIONS AND COVENANTS.
The representations, warranties and covenants of USTS and PKGP in this
Agreement shall survive the Closing for a period of four years, except that
subsections 1.4, 5.1 and 5.2 shall survive the Closing without limitation.
9. BEST EFFORTS TO OBTAIN SATISFACTION OF CONDITIONS AND TRANSITION.
USTS agrees to use its best efforts to perform and fulfill all conditions
required to be performed by it under this Agreement, and PKGP agrees to use its
best efforts to perform and fulfill all conditions required to be performed by
it under this Agreement. Based upon the information presently available to PKGP
and its impressions gained in discussions with USTS, it is the intention of PKGP
to retain most of the present management personnel and other employees of
Entertainment and USTS shall use its best efforts to assure management and
employee continuity and a smooth transition of the businesses of Entertainment
to PKGP, with the exception of any persons who may be named in a separate
statement between the parties hereto.
10. PUBLIC ANNOUNCEMENTS.
Prior to the Closing and for one week thereafter, neither USTS nor PKGP
shall make any public announcement regarding any aspects of this Agreement, or
any of the transactions contemplated hereby, without first advising and
obtaining the consent of the other party.
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11. WAIVER.
The parties may mutually agree to waive any and all of the conditions or
requirements herein contained or defer them until after the Closing.
12. AMENDMENTS.
PKGP and USTS, by mutual consent of their respective duly authorized
officers, may amend or modify this Agreement, in such manner as may be agreed
upon, by a written instrument, executed by both PKGP and USTS.
13. SECTION AND PARAGRAPH HEADINGS.
The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14. NOTICES.
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered or mailed
first claims postage prepaid:
(a) To USTS. If to USTS, to Xxxxxxx Xxxxxxxxx, Chairman, U.S.
Transportation Systems, Inc., 00 Xxxx Xxxx Xxxxxx, Xxxxxxxx, Xxx
Xxxx 00000.
(b) To PKGP. If to PKGP, to Xxxxxxx X. Xxxxxxxx, President and CEO,
Packaging Plus Services, Inc., 00 Xxxxx Xxxxxxxx Xxxxx, Xxxxxxxxx,
Xxx Xxxx 00000.
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15. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
16. ENTIRE AGREMENT.
This Agreement contains the entire agreement between the parties hereto
with respect to the transactions contemplated herein.
17. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the principles of conflicts of
laws thereunder.
IN WITNESS WHEREOF, the undersigned parties hereto have duly executed this
Agreement as of the date first above written.
December 31, 1996
PACKAGING PLUS SERVICES, INC.
By /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxxx,
President and CEO
U.S. TRANSPORTATIONS SYSTEM, INC.
By /s/ Xxxxxxx Xxxxxxxxx
-------------------------------
Xxxxxxx Xxxxxxxxx
Chairman
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