ims123006abi_ex99-1.txt
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated December 30, 2006 (this
"Agreement"), is by and among International Monetary Systems, Ltd., a
Wisconsin corporation ("Buyer"), IMS Holdings Inc., a New York corporation
("Newco"), Alliance Barter, Inc., a New York corporation ("ABI"), and
Xxxxxxx X. Xxxxxxx ("Shareholder").
WHEREAS, the Board of Directors of each of Buyer and ABI believe it
is in the best interest of each company and their respective shareholders
that Newco, a wholly-owned subsidiary of Buyer, and ABI combine into a
single company through the statutory merger of ABI with and into Newco
(the "Merger") and, in furtherance thereof, have approved the Merger; and
WHEREAS, pursuant to the Merger and subject to the terms and
conditions of this Agreement, among other things (i) all of the issued and
outstanding shares of common stock of ABI ("ABI Common Stock") shall be
converted into the right to receive shares of voting common stock, $0.0001
par value per share, of Buyer ("IMS Common Stock"), and (ii) all of the
issued and outstanding shares of common stock of Newco shall remain issued
and outstanding and owned by Buyer; and
WHEREAS, Buyer, Newco, ABI and Shareholder desire to make certain
representations, warranties, covenants and other agreements in connection
with the Merger;
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. On the "Effective Date," as defined in Section 1.2
below, and subject to the terms and conditions of this Agreement and
the applicable provisions of the New York Business Corporation Law
("New York Law"), ABI shall be merged with and into Newco, the separate
corporate existence of ABI shall cease, and Newco shall continue as
the surviving corporation and a wholly-owned subsidiary of Buyer.
Newco as the surviving corporation after the Merger is sometimes
referred to in this Agreement as the "Surviving Corporation."
1.2 Effective Date. Unless this Agreement is earlier terminated pursuant
to Article V, the parties hereto agree to use their respective best
efforts to consummate the Merger, effective as of January 31, 2007
(the "Effective Date"). The "Closing" shall be held at ABI's offices
located at 0000 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx, xx such date and
at such time as the parties shall agree upon in writing. The date
upon which the Closing actually takes place is herein referred to as
the "Closing Date." On the Closing Date, the parties shall cause a
Certificate of Merger to be filed with the Department of State of the
State of New York in accordance with the relevant provisions of New
York Law, to be effective as of the Effective Date.
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1.3 Effect of the Merger. The effect of the Merger shall be as provided
in the applicable provisions of New York Law. Without limiting the
generality of the foregoing, and subject thereto, on the Effective
Date all property, rights, privileges, powers and franchises of ABI
shall vest in the Surviving Corporation, and all debts, liabilities
and obligations of ABI shall become the debts, liabilities and
obligations of the Surviving Corporation.
1.4 Purchase Price and Payment. In connection with the Merger, Buyer
will pay Shareholder an amount equal to Two Million Five Hundred Thousand
and 00/100 Dollars ($2,500,000.00), payable on the Effective Date by
the delivery of three million three hundred thirty-three thousand
three hundred thirty-three (3,333,333) shares of IMS Common Stock (the
"Merger Shares"). The Merger Shares will be restricted securities
that are not registered under the Securities Act of 1933, as amended
(the "Securities Act"). On the Effective Date, (i) Shareholder shall
cause to be delivered to Buyer one or more stock certificates
representing all of the issued and outstanding shares of ABI Common
Stock, in proper form for transfer, and (ii) Buyer shall deliver to
Shareholder one or more stock certificates, at Shareholder's
discretion with respect to the number of stock certificates and the
number of Merger Shares represented by each stock certificate,
representing in the aggregate Shareholder's ownership of the Merger
Shares.
1.5 Xxxxxxx Money Deposit. Shareholder acknowledges that Fifty Thousand
and 00/100 Dollars ($50,000.00) has been deposited with Shareholder by
Buyer (the "Xxxxxxx Money"). The Xxxxxxx Money shall be returned to
Buyer upon consummation of the Merger. Upon termination of this
Agreement prior to consummation of the Merger, the Xxxxxxx Money shall
be retained by Shareholder in accordance with the terms of Section 5.2
below.
1.6 Guaranty of Value of the Merger Shares. Buyer hereby guarantees
that Shareholder will receive a minimum of Two Million Five Hundred
Thousand and 00/100 Dollars ($2,500,000.00), or seventy-five cents
($.75) per Merger Share (the "Guaranteed Price"), net after all
commissions and other expenses of sale, upon his sale of the Merger
Shares. This guaranty, and Buyer's obligations under this Agreement,
will be secured by (i) a first priority security interest in all of
the assets that vest in the Surviving Corporation on the Effective
Date as a result of the Merger, and (ii) the establishment and funding
of an escrow account in accordance with the terms set forth in
Section 1.8 below.
1.7 Security Agreement. At the Closing, Buyer and Shareholder will
enter into the Security Agreement attached hereto as Exhibit A, to be
effective as of the Effective Date.
1.8 Establishment of Escrow Account. As of the Effective Date, Buyer
shall have established an escrow account at The Bank of Castile, a New
York State chartered commercial bank (the "Escrow Account").
Commencing on the Effective Date and, subject to the terms and
conditions set forth in Section 1.10 below, on or before the 20th day
of each month thereafter for the following fifty-nine (59) months,
Buyer will deposit $40,000 per month into the Escrow Account. In
connection with the establishment of the Escrow Account, at the
Closing Buyer, Shareholder and The Bank of Castile (as escrow agent)
will enter into the Escrow Agreement attached hereto as Exhibit B, to
be effective as of the Effective Date.
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1.9 Redemption of the Merger Shares.
(a) Repurchase of All Merger Shares. If, as of January 31, 2012,
Shareholder has not received, from (i) sales of Merger Shares,
and/or (ii) retention of Merger Shares for investment pursuant to
Section 1.10(c) below, an aggregate amount equal to at least Two
Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00)
(net after all commissions and other expenses of sale), upon
written request from Shareholder, Buyer will repurchase all
remaining Merger Shares then held by Shareholder at the
Guaranteed Price (and Buyer will pay any and all commissions or
other expenses associated with such purchase and sale, if any).
The closing for the purchase and sale of Shareholder's remaining
Merger Shares contemplated by this Section 1.9(a) shall take
place within thirty (30) days following Buyer's receipt of
Shareholder's written request.
(b) Monthly Repurchases of Merger Shares. During each of the
first sixty (60) months from and after the Effective Date,
Shareholder may require Buyer to purchase from Shareholder up to
53,333 of the Merger Shares per month at the Guaranteed Price
(and Buyer will pay any and all commissions or other expenses
associated with such purchase and sale, if any). This right will
be cumulative so that, in the event it is not exercised during
any month, it will carry forward and be exercisable in any
subsequent month. For example, if Shareholder does not exercise
this right in two (2) separate months, in any subsequent month
Shareholder would have the right to require Buyer to purchase
159,999 of the Merger Shares at a price of $120,000.00 (and Buyer
will pay any and all commissions or other expenses associated
with such purchases and sales, if any). To exercise his rights
under this Section 1.9(b), Shareholder shall provide written
notice to Buyer indicating the number of Merger Shares to be sold
and the closing for the purchase and sale of such Merger Shares
shall take place within fifteen (15) days following Buyer's
receipt of Shareholder's written notice.
1.10 Release of Buyer's Obligations.
(a) Market Conditions. Commencing on the earlier of (1) the
effective date of registration of a minimum of two million
(2,000,000) of the Merger Shares, or (2) the first anniversary of
the Effective Date:
(i) If (A) shares of IMS Common Stock are trading on a
national securities exchange at a per share price in
excess of the Guaranteed Price for twenty (20)
consecutive trading days, (B) the average daily trading
volume for shares of IMS Common Stock is greater than
50,000 shares for such twenty (20) consecutive trading
day period, and (C) Shareholder is eligible to resell
the Merger Shares without restriction (under Rule 144,
any other applicable securities laws, or otherwise),
then Buyer shall have the right to give written notice
to Shareholder of such circumstances and to require that
Shareholder elect to either (1) sell 53,333 of the
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Merger Shares on the applicable national securities
exchange, (2) require Buyer to redeem 53,333 of the
Merger Shares at the Guaranteed Price (and Buyer will
pay any and all commissions or other expenses associated
with such purchase and sale, if any), or (3) retain
53,333 of the Merger Shares for investment. Upon
receipt of Buyer's written notice under this
Section 1.10(a)(i), Shareholder shall have fifteen (15)
days within which to notify Buyer in writing of his
election. If Shareholder fails to provide a response
within fifteen (15) days, Shareholder shall be deemed to
have elected to retain 53,333 of the Merger Shares for
investment.
(ii)If (A) shares of IMS Common Stock are trading on a
national securities exchange at a per share price of at
least $1.25 for a period of ninety (90) consecutive
days, (B) the average daily trading volume for shares of
IMS Common Stock is greater than 100,000 shares for such
ninety (90) day trading period, and (C) Shareholder is
eligible to resell the Merger Shares without restriction
(under Rule 144, any other applicable securities laws,
or otherwise), then Buyer may provide to Shareholder a
written opinion from a broker or market maker for IMS
Common Stock to the effect that such party believes it
can sell a particular number of the Merger Shares for at
least $1.00 per share and require that Shareholder elect
to (1) sell all or a portion of that number of Merger
Shares on the applicable national securities exchange
(and, in the event that Shareholder does not receive at
least $1.00 per share for such sales, net after all
commissions and other expenses of sale, Buyer shall pay
Shareholder the amount of any such shortfall), and/or
(2) retain the remainder of that number of Merger Shares
(after giving effect to any sales under subsection (1))
for investment, in which case Buyer shall be relieved of
all further obligations in respect of those Merger
Shares.
(b) Election to Sell Merger Shares. In the event that, in
response to a written notice from Buyer under subsection (a)
above, Shareholder elects to sell 53,333 (or more) of the Merger
Shares on the applicable national securities exchange, Buyer
shall be relieved of its obligation under Section 1.9(b) above to
repurchase such shares and its obligation under Section 1.8 above
to make the $40,000 escrow deposit for the month in which such
sale is consummated. Upon the sale of any Merger Shares,
Shareholder shall notify Buyer within fifteen (15) days of such
sale of the number of Merger Shares sold and the price received
for such Merger Shares. For purposes of Section 1.9(a) above and
Section 1.10(d) below, the net price received, less commissions
and other expenses of sale, shall be credited towards the total
purchase price received by Shareholder for the Merger Shares.
(c)Election to Retain Merger Shares. In the event that, in
response to a written notice from Buyer under subsection (a)
above, Shareholder elects to retain 53,333 (or more) of the
Merger Shares for investment, whether by providing notice to
Buyer or by failing to timely respond to Buyer's notice, Buyer
shall be relieved of its obligation under Section 1.9(b) above to
repurchase such shares and its obligation under Section 1.8 above
to make the $40,000 escrow deposit for the month in which such
election is effective. For purposes of Section 1.9(a) above and
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Section 1.10(d) below, any shares retained for investment under
this Section 1.10(c) shall be credited at the Guaranteed Price
towards the total purchase price received by Shareholder for the
Merger Shares.
(d) Prepayment of the Guaranteed Price. If, at any time after the
first anniversary of the Effective Date, Shareholder is deemed to
have received at least Two Million Five Hundred Thousand and
00/100 Dollars ($2,500,000.00) through any combination of the
following: (i) deposits by Buyer into the Escrow Account, (ii)
sales of Merger Shares, (iii) retention of Merger Shares for
investment as provided in subsection (c) above, and/or (iv)
redemption of Merger Shares by Buyer, then all of Buyer's
obligations under Sections 1.8 and 1.9 above shall be deemed
satisfied and Buyer shall have the right to give written notice
to Shareholder of such circumstances and to require that
Shareholder elect to (A) require Buyer to redeem all or any
portion of the Merger Shares then held by Shareholder at the
Guaranteed Price (and Buyer will pay any and all commissions or
other expenses associated with such purchase and sale, if any),
and/or (B) retain all remaining Merger Shares (after giving
effect to the redemption of any Merger Shares under
subsection (A)) for investment, following which Buyer shall be
relieved of all further obligations with respect to the remaining
Merger Shares.
1.11 Assignment of the Merger Shares. Notwithstanding any provision
to the contrary set forth in this Agreement, Buyer acknowledges and
agrees that Shareholder may transfer or assign up to five hundred
thousand (500,000) of the Merger Shares, and all of his rights under
this Agreement with respect thereto, to any transferee or assignee
upon written notice to Buyer, and Buyer further agrees that any such
transferee or assignee whom is a parent, grandparent, or lineal or
collateral descendant of Shareholder shall be entitled to all of the
rights granted to Shareholder under this Agreement with respect to
such Merger Shares, including without limitation the rights set forth
under Sections 1.8, 1.9 and 1.10 above.
ARTICLE II
REGISTRATION RIGHTS
2.1 Registration. Buyer will register a minimum of two million
(2,000,000) of the Merger Shares (the "Registrable Securities") within
six (6) months of the Effective Date, either as part of any other
registration that Buyer may consummate, or as a separate registration
specifically for the benefit of Shareholder.
(a) Requested Registration. As soon as practicable following
the written request of Shareholder, Buyer will effect a public
registration of the Registrable Securities (including without
limitation filing post-effective amendments, appropriate
qualifications under applicable blue sky or other state
securities laws, and appropriate compliance with the Securities
Act by filing a registration statement covering the Registrable
Securities; provided, however, that Buyer shall have the right to
defer such filing for no more than six (6) months if, in the good
faith judgment of Buyer's Board of Directors, such filing would
be seriously detrimental to Buyer. The registration statement
filed pursuant to the request of Shareholder may include other
securities of Buyer.
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(b) Buyer Registration.
(i) If Buyer shall determine to register any of its
securities either for its own account or the account of
a security holder or holders exercising their respective
demand registration rights, other than a registration
relating solely to employee benefit plans, or a
registration relating solely to a Rule 145 transaction,
or a registration on any registration form that does not
permit secondary sales, the Company will (A) promptly
give written notice to Shareholder, and (B) include in
such registration (and any related qualification under
blue sky laws or other compliance), all of the
Registrable Securities requested to be included in such
registration pursuant to a written request by
Shareholder within fifteen (15) days after the written
notice from Buyer described in clause (A) above is
given. Such written request may specify that all or a
part of Shareholder's Registrable Securities be included
in such registration.
(ii) If the registration for which Buyer gives notice is
for a registered public offering involving an underwriting,
Buyer shall so advise Shareholder as a part of the
written notice given pursuant to subsection (i) above.
In such event, the right of Shareholder to have all or a
portion of the Registrable Securities registered
pursuant to this Section 2.1(b) shall be conditioned
upon his participation in such underwriting and the
inclusion of the Registrable Securities in the
underwriting to the extent provided herein. Shareholder
shall (together with Buyer and any other holders of
securities of Buyer with registration rights to
participate therein by distributing their securities
through such underwriting) enter into an underwriting
agreement in customary form with the underwriter
selected by Buyer. Notwithstanding any other provision
of this Section 2.1(b)(ii), if the underwriter advises
Buyer in writing that marketing factors require a
limitation on the number of shares to be underwritten,
the underwriter may limit the number of shares to be
included in the registration and underwriting. Buyer
shall so advise Shareholder, and the number of shares of
securities that are entitled to be included in the
registration and underwriting shall be allocated pro
rata among Shareholder, Buyer and any other holders of
securities of Buyer with registration rights to
participate in such underwriting. If Shareholder does
not agree to the terms of any such underwriting, he
shall be excluded therefrom by written notice from Buyer
or the underwriter. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
2.2 Expenses of Registration. All registration expenses incurred in
connection with any registration, qualification or compliance pursuant
to Section 2.1 above, including without limitation all registration,
filing and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for Buyer, and the reasonable fees and
disbursements of counsel for Shareholder, shall be borne by Buyer.
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2.3 Registration Procedures. In the case of each registration effected
by Buyer pursuant to this Article II, Buyer will keep Shareholder advised
in writing as to the initiation of each registration and as to the
completion thereof. At its expense, Buyer will:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until Shareholder has completed the
distribution described in the registration statement relating
thereto, whichever first occurs;
(b) Prepare and file such amendments and supplements to such
registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration
statement;
(c) Cause all such Registrable Securities registered pursuant to
Article II hereunder to be listed on each securities exchange, if
any, on which similar securities issued by Buyer are listed;
(d) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and
a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration; and
(e) Otherwise comply with all applicable rules and regulations of
the Securities and Exchange Commission.
In connection with any underwritten offering pursuant to a registration
statement filed pursuant to Section 2.1 hereof, Buyer will enter into an
underwriting agreement reasonably necessary to effect the offer and sale
of the Registrable Securities, provided such underwriting agreement
contains customary underwriting provisions.
2.4 Information from Shareholder. Shareholder shall furnish to Buyer such
information regarding Shareholder and the distribution proposed by
Shareholder as Buyer may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification
or compliance referred to in this Article II.
2.5 Indemnification.
(a) By Buyer. To the extent permitted by law, Buyer will
indemnify and hold harmless Shareholder, his heirs,
beneficiaries, legal representatives, successors and assigns,
from and against all expenses, claims, losses, damages and
liabilities (or actions, proceedings or settlements in respect
thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any
prospectus, offering circular or other document (including any
related registration statement, notification or the like)
incident to any such registration, qualification or compliance,
or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by Buyer
of the Securities Act or any rule or regulation thereunder
applicable to Buyer and relating to action or inaction required
of Buyer in connection with any such registration, qualification
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or compliance, and will reimburse Shareholder for any legal and
any other expenses reasonably incurred in connection with
investigating and defending or settling any such claim, loss,
damage, liability or action, provided that Buyer will not be
liable in any such case to the extent that any such claim, loss,
damage, liability, or expense arises out of or is based on any
untrue statement or omission based upon written information
furnished to Buyer by Shareholder and stated to be specifically
for use therein. Notwithstanding the foregoing, to the extent
that the provisions on indemnification and contribution contained
in the underwriting agreement entered into in connection with an
underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.
(b) By Shareholder. To the extent permitted by law, Shareholder
will indemnify and hold harmless Buyer, its officers, directors,
successors and assigns, from and against all expenses, claims,
losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on any
untrue statement of a material fact contained in any written
information furnished by Shareholder to Buyer, and will reimburse
Buyer for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such
claim, loss, damage, liability or action, provided that
Shareholder will be liable in any such case solely to the extent
that such claim, loss, damage, liability or action relates to the
reasonable reliance by Buyer or any other third party upon such
inaccurate information furnished by Shareholder.
2.6 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Securities and Exchange
Commission that may permit the sale of restricted securities of Buyer
to the public without registration, Buyer agrees to:
(a) Make and keep public information regarding Buyer available as
those terms are understood and defined in Rule 144 under the
Securities Act;
(b) File with the Securities and Exchange Commission in a timely
manner all reports and other documents required of Buyer under
the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); and
(c) So long as Shareholder owns any restricted securities, furnish
to Shareholder forthwith upon written request a written statement
by Buyer as to its compliance with the reporting requirements of
Rule 144 and of the Securities Act and the Exchange Act.
2.7 Transfer or Assignment of Registration Rights. The rights to cause
Buyer to register the Registrable Securities granted to Shareholder
under this Article II may be transferred or assigned by Shareholder to
any transferee or assignee of the Registrable Securities (as presently
constituted and subject to subsequent adjustments for stock splits,
stock dividends, reverse stock splits and the like); provided that
Buyer is given written notice at the time of or within a reasonable
time after said transfer or assignment, stating the name and address
of the transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or
assigned and, provided further, that the transferee or assignee of
such rights assumes the obligations of Shareholder under this Article
II.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties. Each of Buyer, Newco and ABI
hereby covenants, represents and warrants to the other parties hereto
that:
(a) Organization and Good Standing. It is a corporation duly
incorporated and organized, validly existing, in good standing
and is up to date in all of the filings and registrations
required under the laws of its jurisdiction of incorporation.
(b) No Violation. It is not a party to, bound by or subject to any
indenture, mortgage, lease, agreement, instrument, charter or
bylaw provision, statute, regulation, order, judgment, decree or
law which would be violated, breached by or under which any
default would occur as a result of the execution and delivery by
it of this Agreement or the performance by it of any of the terms
of this Agreement.
(c) Due Authorization; Valid and Binding. It has the full power,
legal capacity and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement.
This Agreement constitutes the legal, valid and binding
obligation of it, enforceable against it in accordance with its
terms, except as that enforceability may be (i) limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally, and (ii) subject to general principles of equity. It
has taken all actions necessary for the authorization, execution,
delivery and performance by it of this Agreement.
3.2 Representations and Warranties of ABI. ABI further covenants,
represents and warrants to Buyer that, save and except as has been
disclosed to Buyer:
(a) Power of ABI. All corporate action on the part of ABI and its
directors and shareholders necessary for the execution of this
Agreement and the performance of ABI's obligations under this
Agreement has been taken or will be taken prior to the Effective
Date. This Agreement has been duly executed and delivered by ABI
and this Agreement is a legal, valid and binding obligation of
ABI, enforceable against ABI in accordance with its terms.
(b) No Conflicts. To Shareholder's knowledge, ABI's execution,
delivery and performance in accordance with the respective terms
of this Agreement and other transaction documents to which ABI is
a party do not and will not (i) violate or conflict with any
governmental requirement, (ii) breach or constitute a default
under any agreement or instrument to which ABI is a party or
(iii) result in the creation or imposition of, or afford any
person the right to obtain, any lien upon the assets of the
Surviving Corporation. Furthermore, to Shareholder's knowledge,
the execution and performance by ABI will not result in any of
the following:
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(i) the acceleration or mandatory prepayment of any
indebtedness of ABI or afford any holder of any of that
indebtedness, or any beneficiary of those guaranties,
the right to require Buyer or the Surviving Corporation
to redeem, purchase, or otherwise acquire, reacquire or
repay any of that indebtedness, or to perform any of
those guaranties;
(ii) cause or result in the imposition of, or afford any
person the right to obtain, a lien upon any property or
assets of the Surviving Corporation, or upon any
revenues, income or profits of the Surviving
Corporation; or
(iii) result in the revocation, cancellation, suspension or
material modification of any governmental approval
possessed by ABI immediately prior to the Effective Date
and necessary for the ownership, lease or operation of
its properties or the carrying on of its business as now
conducted including any necessary governmental approval
under each applicable environmental law and industry
law.
(c) Reports; Notices. To Shareholder's knowledge, no reports or
notices to report, or filings with, any governmental authority
are required to be made by ABI for the execution, delivery or
performance by ABI of this Agreement, the enforcement against ABI
of its obligations thereunder, or the effectuation of the Merger
and the other transactions contemplated thereby.
(d) Litigation. To Shareholder's knowledge, ABI is not aware of
any pending or threatened suit, action, arbitration, or legal,
administrative, or other proceeding, or governmental
investigation against or affecting any of its assets. To
Shareholder's knowledge, ABI is not in default with respect to
any order, writ, injunction, or decree of any federal, state,
local, or foreign court, department, agency, or instrumentality.
ABI is not presently engaged in any legal action to recover
monies due to, or damages sustained by, ABI.
(e) Financial Statements. Attached hereto as Schedule 3.2(e) are
the compilation financial statements for ABI as of and for the
period ended December 31, 2005 (the "Financial Statements").
Since the date of the Financial Statements, no unapproved
material change has occurred in the business, operations,
properties or assets, liabilities, condition (financial or other)
or results of operations of ABI that could reasonably be expected
to have a material adverse effect on its business or operations.
Buyer acknowledges and agrees that certain collection actions and
activities of ABI against former members of ABI's barter trade
exchange business ("Old Collection Matters") are not accounted
for in the Financial Statements and that such Old Collection
Matters will be assigned by ABI to Shareholder on or prior to the
Closing Date. Shareholder acknowledges and agrees that Buyer
shall have no obligation with respect to the Old Collection
Matters. On the Effective Date, (i) all assets of ABI necessary
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for the conduct by the Surviving Corporation of the barter trade
exchange business operated by ABI prior to the Effective Date,
including without limitation at least $500,000 in cash and cash
equivalents, all current accounts receivable and all member
account balances, shall vest in the Surviving Corporation, and
(ii) all debts, liabilities and obligations of ABI disclosed on
the Financial Statements or otherwise disclosed in writing to
Buyer, including without limitation any account balances and
corporate deficits, shall become the debts, liabilities and
obligations of the Surviving Corporation, and Shareholder shall
have no further obligation or liability with respect to such
debts, liabilities or obligations.
(f) Disclosure. To Shareholder's knowledge, and as of the date of
this Agreement, the information that has been furnished to Buyer
by or on behalf of ABI prior to the date of this Agreement does
not contain any untrue statement of a material fact or fails to
state a material fact necessary in order to make the statements
contained herein not materially misleading in light of the
circumstances under which those statements were made.
(g) Compliance with Laws. ABI, to Shareholder's knowledge:
(i) possesses all necessary certifications and licenses and
similar governmental approvals required for the conduct
of its business;
(ii) is in compliance in all material respects with the terms
and conditions of all governmental approvals necessary
for the ownership or lease and the operation of its
properties and the carrying on of its business as now
conducted;
(iii) has not received, nor has any employee received, any
notice from a governmental authority which asserts, or
raises the possibility of assertion of, any non-
compliance with any of those governmental requirements;
and
(iv) is unaware of any condition or state of facts which
would provide a valid basis for any such assertion.
(h) Assets. ABI, to Shareholder's knowledge, has good and
marketable title to all of the assets necessary for the conduct
of the barter trade exchange business operated by ABI prior to
the Effective Date and that will vest in the Surviving
Corporation on the Effective Date as a result of the Merger. All
of the assets which will vest in the Surviving Corporation on the
Effective Date as a result of the Merger are free and clear of
restrictions on or conditions to transfer or assignment, and of
liens, pledges, charges, encumbrances, equities, claims,
covenants, conditions, or restrictions.
(i) Liabilities of ABI. ABI warrants that ABI shall be free and
clear of any liabilities as of the Effective Date, except
positive and negative trade account balances as of the Effective
Date, disclosed employee benefit plans, tax reporting and payment
obligations related to periods from and after January 1, 2007,
and utility and similar bills incurred in the ordinary course of
business.
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(j) Client List. Schedule 3.2(j) sets forth a complete and
accurate list of all of ABI's member accounts, including member
balances, as of the date hereof. ABI will update Schedule 3.2(j)
at and as of the Effective Date.
(k) Other Material Contracts. Except as set forth on
Schedule 3.2(k), ABI is not a party to, nor is the property of
ABI bound by, any representative or agency agreement; any
agreement not entered into in the ordinary course of business;
any indenture or lease; or any other agreement which, upon
consummation of the Merger, will have a material adverse effect
on the Surviving Corporation.
ARTICLE IV
ADDITIONAL COVENANTS AND AGREEMENTS
4.1 Covenant Not to Compete. As part of the consideration for the
Merger Shares to be delivered to Shareholder, Shareholder agrees not to
engage in a barter trade exchange business competitive with the
Surviving Corporation for a period of three (3) years from and after
the Effective Date. Notwithstanding the foregoing, Buyer acknowledges
and agrees that this covenant not to compete shall terminate and be
deemed null and void and unenforceable against Shareholder in the
event that (i) Buyer or Newco is in breach or default of any
representation, warranty, covenant or agreement of Buyer or Newco set
forth in this Agreement and such breach or default remains uncured for
a period of twenty (20) days following written notice from Shareholder
of such breach or default, or (ii) Shareholder takes title to those
assets that vest in the Surviving Corporation on the Effective Date as
a result of the Merger, in accordance with the terms and conditions of
the Security Agreement. In the event that Shareholder takes back
title to those assets (including without limitation the then current
member account balances) that vest in the Surviving Corporation on the
Effective Date as a result of the Merger pursuant to the terms of the
Security Agreement, Buyer agrees that it will not solicit or compete
for the member accounts reacquired by Shareholder from the Surviving
Corporation for a period of three (3) years thereafter.
4.2 ABI Accounting Software. It is understood that the accounting
software utilized by ABI in the conduct of its business is provided by
a third party. ABI and Shareholder shall use their best efforts to
secure access to such software for Buyer so that all data related to
ABI's business may be converted and transferred into the TradeWorks
software currently being used by Buyer.
4.3 Seat on Buyer's Board of Directors. From and after the Effective
Date, and until such time as Shareholder has received (from sales of
Merger Shares and/or the retention of Merger Shares for investment
pursuant to Section 1.10(c) above) an aggregate amount equal to at
least Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000.00) (net after all commissions and other expenses of
sale), (i) Shareholder shall be entitled to a seat on Buyer's Board of
Directors, and (ii) Shareholder shall be entitled to invite an
additional representative to attend all meetings of Buyer's Board of
Directors in a non-voting observer capacity and to receive copies of
all information and materials provided to Buyer's directors.
Acceptance of a seat on Buyer's Board of Directors shall be at
Shareholder's discretion and, if Shareholder elects not to accept a
seat on Buyer's Board of Directors, Shareholder shall remain entitled
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to attend all meetings of Buyer's Board of Directors in a non-voting
observer capacity and to receive copies of all information and
materials provided to Buyer's directors.
4.4 No-Shop Clause. Shareholder hereby agrees not to pursue or entertain
any additional offers for all or substantially all of the assets or
the capital stock of ABI from any other source. This provision shall
expire on the earlier of (i) the termination of this Agreement,
(ii) the Effective Date, or (iii) January 31, 2007, unless the parties
agree in writing to an extension.
4.5 Lease of ABI Facility. At the Closing, Shareholder (in his capacity
as landlord of the premises located at 0000 Xxxxxxx Xxxxxx, Xxxxxxxxx,
Xxx Xxxx) and Buyer will enter into the Lease Agreement attached
hereto as Exhibit C, to be effective as of the Effective Date.
4.6 Tax Consequences. The parties hereto intend that the Merger shall
constitute a reorganization within the meaning of Section 368 of the
Internal Revenue Code. Notwithstanding the foregoing, neither Buyer
nor Shareholder makes any representation that the transaction will, in
fact, constitute a reorganization. If it does not, each party hereto
shall be responsible for all taxes, expenses, fees, penalties or other
costs associated with the reclassification of the transactions
contemplated by this Agreement.
4.7 Conduct of Business Prior to the Effective Date. From and after
the date of this Agreement until the Effective Date, except as otherwise
contemplated by the terms of this Agreement, Shareholder will cause
ABI to conduct its business in the ordinary course, consistent with
past practices. In connection therewith, Buyer acknowledges that ABI
may distribute to Shareholder any and all cash revenue and trade
income received by ABI from and after the date of this Agreement
through the Effective Date. Notwithstanding any provision to the
contrary herein, Buyer and Shareholder acknowledge and agree that
Shareholder shall be solely responsible for any and all tax reporting
and payment obligations of ABI related to periods through and
including December 31, 2005, and Buyer shall be solely responsible for
any and all tax reporting and payment obligations of ABI related to
periods from and after January 1, 2007 through the Effective Date. In
connection with the foregoing, each of the parties hereto agrees to
cooperate with the other parties hereto and to provide reasonable
access to pertinent information and records to the extent needed by
any party to prepare any tax reports or returns or respond to any
inquires related thereto.
ARTICLE V
TERMINATION
5.1 Termination Events. This Agreement may be terminated and the Merger
contemplated by this Agreement may be abandoned (i) at any time upon
the mutual written agreement of Buyer and Shareholder, (ii) by Buyer
or by Shareholder at any time upon fifteen (15) days prior written
notice to the other, if the other party is in material breach or
default of any of its covenants, agreements or other obligations under
this Agreement and fails to cure such breach or default within the
fifteen (15) day period following such written notice, or (iii) by
Buyer or Shareholder upon written notice, if the Merger has not been
effectuated by January 31, 2007, for any reason other than a breach or
default by such party or its affiliate(s) of its respective covenants,
agreements or other obligations under this Agreement.
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5.2 Effect of Termination; Limitation of Liability. If this Agreement
is terminated pursuant to Section 5.1, all obligations of the parties
under this Agreement will terminate, except that (i) each party will
pay the costs and expenses incurred by it in connection with this
Agreement, and no party will be liable to any other party for any
costs, expenses or damages except as expressly provided below, and
(ii) each party will return all documents, work papers and other
material of the other parties relating to the transactions
contemplated hereby, whether so obtained before or after execution
hereof, to the party furnishing the same. In the event that the
Merger does not occur, neither party to this Agreement will be liable
for any incidental, consequential, exemplary, special or punitive
damages in connection with any claim for breach of this Agreement.
Notwithstanding any provision to the contrary set forth in this
Agreement, upon termination of this Agreement, the Xxxxxxx Money shall
be retained by Shareholder; provided, however, that the Xxxxxxx Money
shall be returned to Buyer in the event that Buyer terminates this
Agreement under Section 5.1(ii).
ARTICLE VI
INDEMNIFICATION
6.1 Survival. The representations and warranties of the parties
contained in this Agreement or in any certificate or other agreement
delivered hereunder will survive the Effective Date for a period of
eighteen (18) months.
6.2 Indemnification by ABI and Shareholder. Each of ABI and
Shareholder hereby covenants and agrees, jointly and severally, to defend,
indemnify and hold harmless Buyer and the Surviving Corporation, and
their respective directors, officers, shareholders, agents,
representatives, successors and assigns, from and against any and all
losses, costs, expenses, liabilities, claims, demands, judgments and
settlements, including without limitation reasonable attorney fees, to
the extent the same are not covered by insurance, which arise out of
the breach by ABI or Shareholder of any representation or warranty
made by ABI or Shareholder pursuant to this Agreement.
6.3 Indemnification by Buyer and the Surviving Corporation. Each of Buyer
and the Surviving Corporation hereby covenants and agrees, jointly and
severally, to defend, indemnify and hold harmless ABI and Shareholder,
and their respective directors, officers, shareholders, agents,
representatives, heirs, beneficiaries, successors and assigns, from
and against any and all losses, costs, expenses, liabilities, claims,
demands, judgments and settlements, including without limitation
reasonable attorney fees, to the extent the same are not covered by
insurance, which arise out of the breach by Buyer or the Surviving
Corporation of any representation or warranty made by Buyer or the
Surviving Corporation pursuant to this Agreement.
6.4 Exclusivity. The parties hereto acknowledge and agree that the
purpose of the representations and warranties in this Agreement is to
give the aggrieved party the right to be indemnified pursuant to this
Agreement. Accordingly, each of the parties hereto acknowledges and
agrees that, except for the equitable remedies that may be available
as a result of a breach or threatened breach of the terms and
conditions of Section 4.1, or any claim of or action for fraud, the
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indemnification rights of the parties under this Article VI represent
the sole and exclusive remedy that the parties hereto have with
respect to any misrepresentation or breach of any warranty under this
Agreement on the part of any party hereto.
6.5 Recovery of Indemnification Obligations. Buyer hereby acknowledges
and agrees that its sole recourse to recover for its rights to
indemnification under Section 6.2 above shall be limited to (i) the
return by Shareholder of Merger Shares issued to Shareholder, or
(ii) if Shareholder no longer holds a sufficient number of Merger
Shares to satisfy Buyer's indemnification claim, or otherwise at the
election of Shareholder, a cash payment equal to the amount of the
indemnified claim. In the event that Shareholder returns Merger
Shares to Buyer in accordance with the foregoing, the value of each
share returned shall be an amount equal to the average closing sales
price for shares of IMS Common Stock as reported on the applicable
securities exchange for the most recent fifteen (15) trading days
ending on the day immediately prior to the date upon which it is
determined that Shareholder is required to return Merger Shares to
Buyer.
ARTICLE VII
GENERAL PROVISIONS
7.1 Public Notices. The parties agree that all notices to third parties
and all other publicity concerning the Merger shall be jointly planned
and coordinated and no party shall act unilaterally in this regard
without the prior approval of the other parties hereto unless such
disclosure shall be required to meet timely disclosure obligations of
any party under applicable securities laws and stock exchange rules in
circumstances where prior consultation with the other party is not
practicable.
7.2 Expenses. All costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such expenses.
7.3 Notices. All payments and communications which may be or are
required to be given by either party shall, in the absence of a specific
provision to the contrary, be in writing and delivered or sent by
facsimile to the parties at their following respective addresses and
shall be deemed to have been received at the time of delivery or
facsimile transmission as the case may be. Either party may from time
to time change its address by providing written notice to the other
party.
For ABI or Shareholder: Xx. Xxxxxxx X. Xxxxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
For Buyer: International Monetary Systems, Ltd.
Attn: Xxxxxx X. Xxxxxx, President
00000 X. Xxxxxxxx Xxxxx
Xxx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
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7.4 Governing Law; Submission to Jurisdiction. This Agreement shall be
construed in accordance with the laws of the State of Wisconsin.
Venue for any disputes arising from this Agreement shall be placed
with the courts of the State of New York or the courts of the State of
Wisconsin. The parties hereto hereby irrevocably submits to the
jurisdiction of any state or Federal court located in the State of New
York or the State of Wisconsin and agree that process may be served
upon it by any means resulting in actual notice to it.
7.5 Assignment. Except as expressly permitted elsewhere in this
Agreement, neither this Agreement nor any rights or obligations
hereunder shall be assignable by any party hereto without the prior
written consent of all other parties hereto. Subject thereto, this
Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
7.6 Entire Agreement. This Agreement, together with all Exhibits and
Schedules attached hereto, represents the entire agreement among the
parties hereto with respect to the subject matter hereof, and
supersedes any prior agreements or understandings among the parties
with respect to the subject matter hereof, including without
limitation that certain Memorandum of Intent, dated November 17, 2006.
Each party acknowledges and represents that this Agreement is entered
into after full investigation and that no party is relying upon any
statement or representation made by any other which is not embodied in
this Agreement. Each party acknowledges that it shall have no right
to rely upon any amendment, promise, modification, statement or
representation made or occurring subsequent to the execution of this
Agreement unless the same is in writing and executed by all parties
hereto.
7.7 Further Assurances. The parties shall with reasonable diligence do
all such things and provide all such reasonable assurances as may be
required to consummate the transactions contemplated hereby and each
party hereto shall provide such further documents or instruments
required by the other parties as may be reasonably necessary or
desirable to effect the purpose of this Agreement and carry out its
provisions.
7.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
7.9 Headings. The headings in this Agreement are for reference purposes
only and shall not be deemed a part of this Agreement.
[Remainder of page intentionally left blank. Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above.
INTERNATIONAL MONETARY SYSTEMS, LTD. ALLIANCE BARTER, INC.
By: /s/ Xxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxxx
---------------------------- ---------------------------
Xxxxxx X. Xxxxxx, President Xxxxxxx X. Xxxxxxx, President
/s/ Xxxxxxx X. Xxxxxxx
---------------------------
Xxxxxxx X. Xxxxxxx, Individually
IMS HOLDINGS INC.
By: INTERNATIONAL MONETARY SYSTEMS,LTD.,
its sole shareholder
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Xxxxxx X. Xxxxxx, President
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EXHIBIT A
Form of Security Agreement
THIS SECURITY AGREEMENT, dated as of January 31, 2007, is given
by INTERNATIONAL MONETARY SYSTEMS, LTD., a Wisconsin corporation with
its principal place of business located at 00000 X. Xxxxxxxx Xxxxx, Xxx
Xxxxxx, Xxxxxxxxx 00000 ("Debtor"), to XXXXXXX X. XXXXXXX, an
individual with a mailing address at 0000 Xxxxxxx Xxxxxx, Xxxxxxxxx,
Xxx Xxxx 00000 ("Creditor").
Debtor and Creditor are parties to a certain Agreement and Plan
of Merger, dated December 30, 2006 (the "Merger Agreement"), by and
among Debtor, IMS Holdings Inc., a New York corporation ("Newco"),
Alliance Barter, Inc., a New York corporation ("Alliance Barter"), and
Creditor, pursuant to which, among other things, (i) the parties agreed
to merge Alliance Barter with and into Newco (the "Merger"), and
(ii) Debtor agreed to transfer 3,333,333 shares of its voting common
stock, $0.0001 par value per share, to Creditor in satisfaction of the
$2,500,000.00 to be paid Creditor in connection with the Merger.
Pursuant to the terms and conditions of the Merger Agreement,
Debtor agreed to secure certain of its obligations thereunder by
granting to Creditor a security interest in all of the assets of
Alliance Barter that vest in Newco as a result of the Merger.
Unless otherwise expressly provided in this Security Agreement,
all capitalized terms in this Security Agreement shall have the
meanings given to them in the Merger Agreement and, unless otherwise
provided in this Security Agreement, all terms shall have the same
meanings as given to them in the Uniform Commercial Code of the State
of New York, as amended from time to time.
1. Security Interest. Debtor hereby grants a security
interest to Creditor in the "Collateral," as defined in Section 2
below, to secure the obligations of Debtor to Creditor under the Merger
Agreement, together with all costs of enforcement and collection
thereof, including any and all interest accrued thereon and all
reasonable attorneys' fees and disbursements incurred by Creditor in
connection therewith (hereinafter collectively called the
"Obligations").
2. Collateral. The Collateral of this Security Agreement
consists of all of the assets and property of Newco, including without
limitation all goods, tangible property, machinery, equipment,
furniture, fixtures, vehicles, parts, general accounts, specific
accounts, inventory, chattel paper, contract rights, documents,
instruments, choses in action, general intangibles, goodwill and
intellectual property, of any kind or nature in which Newco has an
interest now or in the future, and which are now existing or hereafter
created or acquired, together with any and all additions, replacements,
accessions and substitutions thereto or therefor, and any proceeds
thereof (hereinafter collectively called the "Collateral").
3. Debtor's Representations and Warranties. Debtor represents
and warrants and, so long as any of the Obligations remain outstanding,
shall continue to represent and warrant, that:
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(a) Debtor shall keep, and cause Newco to keep, the
Collateral free of all security interests, liens or other encumbrances
other than the security interest granted herein;
(b) Debtor is authorized to enter into this Security
Agreement and the transactions contemplated hereby; and
(c) This Security Agreement is effective to vest in
Creditor the security interest in the Collateral as set forth herein.
4. Covenants of Debtor. So long as any of the Obligations
remain unpaid, Debtor:
(a) Will keep, and cause Newco to keep, the Collateral
free from all security interests, liens or other encumbrances other
than the security interest granted herein;
(b) Will not, and will not permit Newco to, sell,
transfer, assign or otherwise dispose of any Collateral or any interest
therein, except in the ordinary course of business consistent with past
practices or to Debtor, upon prior written notice to Creditor, as part
of any permitted merger or consolidation of Newco with and into Debtor;
(c) Upon and during an Event of Default under this
Security Agreement, will deliver, or cause Newco to deliver, to
Creditor upon demand any documents of title, chattel paper, invoices,
shipping or delivery receipts, purchase orders, contracts or other
documents representing or concerning the Collateral or any part thereof
and any proceeds and any and all other schedules, documents and
statements which Creditor may from time to time reasonably request;
(d) On request of Creditor, will advise Creditor promptly
in writing, in sufficient detail, of any substantial change in the
Collateral and of the occurrence of any event which would have a
material effect on the value of the Collateral as a whole or on the
lien and security interest granted to Creditor herein;
(e) Will, upon Creditor's reasonable request, deliver, or
cause Newco to deliver, to Creditor such financing statements and will
execute and deliver such other papers and do all acts as in Creditor's
reasonable judgment may be necessary or appropriate to establish and
maintain a valid and perfected security interest in the Collateral,
and, on Debtor's failure to do so, Creditor may sign any such papers on
Debtor's behalf;
(f) Will promptly notify Creditor in writing of any
change in Debtor's or Newco's business address or state of organization
and of any changes in the locations or of the existence of additional
locations at which the Collateral or records concerning it are kept
and, if any such change in location requires a refiling of a financing
statement to perfect the security interest in any of the Collateral or
is to a place without the state in which the Collateral is located on
the date hereof, will not change such location or state of organization
without at least thirty (30) days prior written notice to Creditor;
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(g) Will keep, and cause Newco to keep, the Collateral in
good condition and repair, and will not allow it to be misused or
abused, wasted or allowed to deteriorate, except for the ordinary wear
and tear of its intended primary use, and will not use it in violation
of any provisions of this Security Agreement, any applicable statute,
regulation or ordinance, or of any policy insuring it;
(h) Will pay, or cause Newco to pay, promptly, when due,
all taxes and assessments upon the Collateral;
(i) Will, at all times, keep, or cause Newco to keep, the
Collateral fully insured with financially sound and reputable insurers
against such casualties and contingencies and of such types and in such
amounts as are reasonable and will deliver certificates and policies
evidencing the insurance coverage of the Collateral to Creditor upon
reasonable request; and Debtor hereby assigns to Creditor any and all
monies which may become due and payable under any policy insuring the
Collateral, directs any such insurance company to make payments
directly to Creditor and authorizes Creditor to apply such monies and
payment on account of the Obligations, whether or not due, and to remit
any surplus to Debtor; and
(j) Will notify creditor promptly of any change in
Debtor's or Newco's name or form of entity; provided, however, such
notification shall not occur more than thirty (30) days following the
effective date of any such change.
5. Default. Any of the following events or conditions shall
constitute an "Event of Default" hereunder:
(a) Default by Debtor in the prompt performance of any of
the material terms, obligations, covenants or provisions contained or
referred to in this Security Agreement, the Merger Agreement or that
certain Lease Agreement, entered into as of the 31st day of January,
2007, by and between Creditor and Debtor, for the premises located at
0000 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx;
(b) Institution of any voluntary proceedings by or
involuntary proceedings against Debtor or Newco are commenced under any
provision of any federal or state laws relating to bankruptcy or
insolvency, or institution of any formal or written proceeding for the
dissolution or liquidation of, or winding up of the affairs of, Debtor
or Newco; and
(c) Sale, assignment, transfer or delivery of all or
substantially all of the assets of Newco and/or Debtor, merger or
consolidation of Newco and/or Debtor with or into another entity such
that Newco and/or Debtor is not the surviving entity, or cessation by
Newco and/or Debtor as a going business concern; provided, however,
that the merger or consolidation of Newco with and into Debtor at any
time after October 1, 2007 shall not constitute an Event of Default
hereunder.
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6. Creditor's Remedies on Default.
(a) On the occurrence of an Event of Default under this
Security Agreement, Creditor may, at any time, without further notice
to Debtor, declare any or all of the obligations secured by this
Security Agreement immediately due and payable and Creditor's rights
and remedies with respect to the Collateral shall be those of a secured
party under the Uniform Commercial Code and under any other applicable
law, as the same may from time to time be in effect, in addition to
those rights granted herein and in any other agreement now or hereafter
in effect between Debtor and Creditor.
(b) Without in any way requiring notice to be given in
the following manner, Debtor agrees that any notice by Creditor of any
sale, disposition or other intended action hereunder or in connection
herewith, whether required by the Uniform Commercial Code or otherwise,
shall constitute reasonable notice to Debtor if such notice is mailed
by regular or certified mail, postage prepaid, at least five (5) days
prior to such action, to Debtor's address as set forth above and to any
other address which Debtor has specified in writing to Creditor as the
address at which notices hereunder shall be given to Debtor.
(c) While any Event of Default hereunder shall be
continuing, on Creditor's written notice to Debtor, Debtor will
assemble the Collateral, at its sole cost and expense, and make it
available to Creditor at such place, to be designated in said notice,
as is reasonably convenient to both parties.
(d) Debtor agrees to pay all reasonable costs and
expenses incurred by Creditor following an Event of Default in (i)
enforcing this Security Agreement and its rights hereunder in realizing
upon any Collateral, and (ii) enforcing and collecting any of the
Obligations, including without limitation reasonable attorneys' fees if
Creditor retains counsel for any such purpose.
(e) No act, delay, omission or course of dealing between
Debtor and Creditor will be a waiver of any of Creditor's rights or
remedies under this Security Agreement and no single or partial
exercise of any right or remedy hereunder shall preclude any other or
further exercise thereof or the exercise of any other right or remedy.
A waiver by Creditor of any rights or remedies under the terms of this
Security Agreement or with respect to any obligation secured by this
Security Agreement on any occasion will not be a bar to the exercise of
any right or remedy on any subsequent occasion.
7. Other Rights of Creditor. Debtor hereby authorizes
Creditor, at Creditor's sole expense, to file such financing statement
or statements, security agreements or assignments and to perform all
other acts which Creditor reasonably deems necessary in order to
perfect and continue the security interest granted to Creditor herein.
To the extent permitted by law, Creditor may file such documents
without Debtor's signature. Upon payment in full of all amounts due
and owing under the Promissory Note, Creditor shall, at Creditor's sole
expense, terminate any financing statement, security agreement or
assignment filed hereunder.
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8. Successors and Assigns. All rights and remedies of
Creditor shall inure to the benefit of his heirs, beneficiaries, legal
representatives, successors and assigns.
9. Notice. All notices given pursuant to this Security
Agreement shall be in writing and shall be delivered by hand or sent by
registered or certified mail, return receipt requested, postage
prepaid, addressed to the party for whom it is intended at its address
as first set forth above or to such other address as may be designated
by written notice hereunder.
10. Severability. If any term, provision, covenant or
restriction of this Security Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable in any jurisdiction,
then said term, provision, covenant or restriction shall be interpreted
as closely as possible to the original term, provision, covenant or
restriction so as to be valid and enforceable and consistent with the
intent and purpose of said term, provision, covenant or restriction,
and the remaining terms, provisions, covenants and restrictions of this
Security Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
11. Governing Law. This Security Agreement and the
transactions evidenced by it shall be interpreted, construed, applied
and enforced in accordance with the laws of the State of New York, as
they may from time to time be in effect.
12. Entire Agreement. This Security Agreement constitutes the
entire understanding between the parties with respect to the subject
matter hereof and no modification, rescission, release, amendment or
waiver (except as indicated herein) of any provision of this Security
Agreement shall be made except by a written agreement subscribed by
Debtor and by Creditor or their respective agents or legal
representatives.
13. Counterparts. This Security Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but
all of which, when taken together, shall constitute one and the same
instrument.
IN WITNESS WHEREOF, Debtor has caused this Security Agreement to
be executed by its duly authorized representative as of the day and
year first above written.
INTERNATIONAL MONETARY SYSTEMS, LTD.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Xxxxxx X. Xxxxxx, President
ACKNOWLEDGED AND AGREED:
IMS HOLDINGS INC.
By: INTERNATIONAL MONETARY SYSTEMS,LTD.,
its sole shareholder
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Xxxxxx X. Xxxxxx, President
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EXHIBIT B
Form of Escrow Agreement
THIS ESCROW AGREEMENT, dated as of the 31st day of January, 2007
(this "Agreement"), is by and among INTERNATIONAL MONETARY SYSTEMS,
LTD., a Wisconsin corporation with its principal place of business
located at 00000 X. Xxxxxxxx Xxxxx, Xxx Xxxxxx, Xxxxxxxxx 53151("IMS"),
XXXXXXX X. XXXXXXX, an individual with a mailing address at 0000
Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 ("Xxxxxxx"), and THE BANK OF
CASTILE, a commercial bank organized under the laws of the State of New
York with a mailing address at 00 Xxxxx Xxxx Xxxxxx, Xxxxxxx, Xxx Xxxx
00000, as escrow agent ("Escrow Agent").
WHEREAS, IMS, IMS Holdings Inc., a New York corporation
("Newco"), Alliance Barter, Inc., a New York corporation ("Alliance
Barter"), and Xxxxxxx entered into a certain Agreement and Plan of
Merger, dated December __, 2006 (the "Merger Agreement"), pursuant to
which, among other things, the parties thereto agreed that (i) Alliance
Barter would be merged with and into Newco (the "Merger"), and (ii) IMS
would pay Xxxxxxx $2,500,000.00, payable by the delivery of 3,333,333
shares of voting common stock, $0.0001 par value per share, of IMS (the
"Merger Shares"), all as set forth in the Merger Agreement; and
WHEREAS, pursuant to the terms and conditions of the Merger
Agreement, IMS has guaranteed that Xxxxxxx will receive a minimum of
$2,500,000.00, net after all commissions and other expenses of sale, on
his sale (or retention, pursuant to the terms of the Merger Agreement)
of the Merger Shares; and
WHEREAS, pursuant to the terms and conditions of Section 1.8 of
the Merger Agreement, IMS has agreed to deposit certain sums of money
into escrow with Escrow Agent, to be released from escrow and delivered
to IMS and/or Xxxxxxx in accordance with the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and
the covenants and agreements set forth herein and in the Merger
Agreement, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Commencing on January 31, 2007 and continuing for each of
the following fifty-nine (59) months, subject to the terms of the
Merger Agreement, IMS will deposit with Escrow Agent Forty Thousand and
00/100 Dollars ($40,000.00) per month in immediately available funds
(such funds, together with any and all interest and earnings accrued
thereon, the "Escrow Funds"). Escrow Agent will invest the Escrow
Funds pursuant to written instructions from IMS and Xxxxxxx, and agrees
to hold the Escrow Funds in escrow upon the terms and conditions set
forth in this Agreement.
2. Following the initial monthly deposit of Escrow Funds to be
made on January 31, 2007, each monthly deposit of Escrow Funds shall be
due on or before the 20th day of the month. If IMS fails to deliver to
Escrow Agent the entire amount of any monthly deposit due under the
Merger Agreement within ten (10) days after the date due (i.e., on or
before the 30th day of the applicable month), IMS will pay Xxxxxxx
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damages in the amount of $100 per calendar day for each day thereafter
through and including the day the full deposit is made. This provision
shall apply to each deposit independently of any other deposits.
3. The Escrow Agent shall release the Escrow Funds from escrow
and distribute the same to IMS and/or Xxxxxxx, as applicable, as
follows:
(a) In the event that Escrow Agent receives a joint
written notice from IMS and Xxxxxxx, then the Escrow Funds, or such
applicable portion of the Escrow Funds, shall be delivered to IMS
and/or Xxxxxxx pursuant to the instructions set forth in such written
notice.
(b) In the event that Escrow Agent receives a written
notice from Xxxxxxx at any time (a copy of which is also provided to
IMS) indicating that IMS is in breach or default of its obligations
under the Merger Agreement and requesting the delivery of all or a
portion of the Escrow Funds, then, unless Escrow Agent receives a
written notice from IMS disputing Xxxxxxx'x request within fifteen
(15) days following its receipt of Xxxxxxx'x written notice, Escrow
Agent shall deliver to Xxxxxxx the Escrow Funds, or such applicable
portion of the Escrow Funds, as requested in Xxxxxxx'x written notice.
(c) In the event that Escrow Agent receives a written
notice from IMS at any time (a copy of which is also provided to
Xxxxxxx) indicating that IMS has satisfied all of its obligations under
the Merger Agreement and requesting that any and all remaining Escrow
Funds be delivered to IMS, then, unless Escrow Agent receives a written
notice from Xxxxxxx disputing IMS's request within fifteen (15) days
following its receipt of IMS's written notice, Escrow Agent shall
deliver to IMS the Escrow Funds.
4. In the event that Escrow Agent receives a written notice of
dispute from either IMS or Xxxxxxx in accordance with the terms of
Section 3(b) or Section 3(c) above, then (i) that amount of the Escrow
Funds equal to any undisputed portion as set forth in such notice may
be released and delivered, and (ii) all remaining Escrow Funds shall
continue to be held in escrow until Escrow Agent receives a joint
written notice from IMS and Xxxxxxx regarding the disbursement of the
disputed portion of the Escrow Funds. Escrow Agent shall, as soon as
reasonably practicable following its receipt of such joint written
notice, pay the Escrow Funds to IMS and/or Xxxxxxx, as applicable, in
accordance with the instructions set forth in such joint written
notice.
5. In the event that Escrow Agent (i) receives a written
notice of dispute from either IMS or Xxxxxxx in accordance with the
terms of Section 3(b) or Section 3(c) above, or (ii) is otherwise in
doubt as to the action it should take hereunder, Escrow Agent shall be
entitled to retain the Escrow Funds until Escrow Agent shall have
received either (a) a final, non-appealable order directing delivery of
the Escrow Funds from a court with jurisdiction over the parties, or
(b) a written agreement executed by IMS and Xxxxxxx directing delivery
of the Escrow Funds, in which event Escrow Agent shall disperse the
Escrow Funds in accordance with such order or agreement. Any court
order shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to Escrow Agent to the effect that the
order is final and non-appealable. Escrow Agent shall be entitled to,
and shall, act on such court and legal opinion without further
questions.
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6. Escrow Agent shall have the power, authority and discretion
expressly conferred upon it by this Agreement, and shall not be
required to perform any act or do any thing not within such power,
authority and discretion, except upon the joint written instructions of
IMS and Xxxxxxx. Escrow Agent may rely upon, and shall be protected in
acting or refraining from acting upon, any written notice, instruction
or request furnished to Escrow Agent hereunder and believed in good
faith by Escrow Agent to be genuine and to have been signed or
presented by the proper party or parties. Escrow Agent may
conclusively presume that each of the undersigned has full power and
authority to instruct Escrow Agent on behalf of the respective party
for which each of the undersigned has signed. Escrow Agent shall not
be liable for any action taken by it in good faith without gross
negligence and believed by it to be authorized or within the power,
authority or discretion conferred upon it by this Agreement, and shall
be protected in acting or refraining from acting in reliance upon an
opinion of counsel or upon any certificate, request, instruction or
other document believed by it to be genuine and to have been signed and
presented by the proper party or parties.
7. For and in consideration of its services hereunder, Escrow
Agent shall receive an annual fee in an amount equal to Five Hundred
and 00/100 Dollars ($500.00) and shall be entitled to receive
reimbursement for any reasonable costs and expenses it incurs in
connection with the performance of its duties hereunder. All fees,
costs and expenses due and payable to Escrow Agent under this Agreement
shall be borne by IMS and shall be paid within thirty (30) days
following Escrow Agent's written request therefor. Escrow Agent shall
be jointly and severally indemnified by IMS and Xxxxxxx against any
loss, liability or expense incurred by Escrow Agent without gross
negligence or bad faith on the part of Escrow Agent arising out of or
in connection with its services hereunder, including the costs and
expenses of defending itself against any claim of liability arising out
of or in connection with its services hereunder. The provisions of
Section 6 above and this Section 7 shall survive the termination of
this Agreement and the resignation or removal of Escrow Agent.
8. This Agreement shall terminate on the date upon which the
Escrow Funds shall have been completely distributed pursuant to the
terms and conditions contained herein.
9. All notices required to be given pursuant to the terms and
conditions of this Agreement shall be in writing and shall be deemed to
have been received (i) at the time of personal delivery, (ii) if sent
by facsimile, when receipt thereof is acknowledged by a confirmation
copy of the same, (iii) the next business day following the date on
which the same has been delivered prepaid to a nationally recognized
courier service, or (iv) three (3) business days following deposit in
the mail as registered or certified, postage prepaid. All such notices
shall be addressed to the parties at their respective addresses set
forth above.
10. This Agreement may not be amended, modified, supplemented
or otherwise altered, except by a writing signed by each of the parties
hereto.
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11. This Agreement constitutes the entire agreement among the
parties hereto with respect to the escrow of the Escrow Funds, and
supersedes all prior understandings and agreements with respect
thereto. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
This Agreement expressly sets forth all of the duties of Escrow Agent
with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Agreement against Escrow
Agent. Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto except this Agreement.
12. This Agreement and all matters relating to its validity,
interpretation, performance and enforcement shall be governed by,
construed, interpreted and enforced in accordance with the laws of the
State of New York.
13. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed and
delivered this Escrow Agreement as of the date first above written.
INTERNATIONAL MONETARY SYSTEMS, LTD.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Xxxxxx X. Xxxxxx, President
/s/ Xxxxxxx X. Xxxxxxx
---------------------------
Xxxxxxx X. Xxxxxxx
THE BANK OF CASTILE
Escrow Agent
By:
---------------------------
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EXHIBIT C
Form of Lease Agreement
To be provided.
C-1
