Document:

fs12010a1ex10iii_ims.htm

EXHIBIT 10.3

SHARE-EXCHANGE AGREEMENT

This agreement entered into as of the 27th day of May 2005, but to be effective May 31, 2005, between International Monetary Systems, Ltd. (Buyer), a Wisconsin corporation, and Deborah Lombardi (Seller), a resident of Southington, Connecticut, is for the purchase of all outstanding shares of Barter Business Unlimited, Inc (BBU), a Connecticut corporation.

For consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows: 

 

ARTICLE I

PURCHASE AND SALE

1.1 Purchase Price.  Seller agrees to sell to Buyer and Buyer agrees to purchase all of the outstanding and issued shares of stock of BBU in exchange for $500,000.00 cash 2,050,000 shares of the $0.0001 par value common voting stock of Buyer, and a promissory note in the amount of $350,000.00.

1.2 Payment.  Upon the closing of this Agreement and the assignment of all of Seller's shares in BBU, Buyer will pay to seller $500,000.00, will execute a promissory note payable to seller in the amount of $350,000.00, in the form attached hereto as Exhibit A attached hereto and will issue to Seller 2,050,000 shares of the $0.0001 par value common voting stock of International Monetary Systems, Ltd.  These shares are being issued without registration under the Securities Act of 1933 and may not be sold in the public market except under SEC Rule 144, which requires a one-year holding period.  At the request of the Seller, up to 50,000 of such shares may be issued to key employees of  BBU.

1.3 Guaranty of Stock Value.  Buyer guarantees that Seller will receive a minimum of $700,000.00, net after all commissions, or Fifty Cents ($.50) cash per share net (the "Guaranteed Price"), on 1,400,000 of the shares (the "Guaranteed Shares") that Seller is accepting under this Agreement.  Buyer will not guarantee the price on the remaining 650,000 shares of stock being transferred to Seller. To secure this guaranty, Buyer agrees to the following:

(a) An escrow account shall be established at a financial institution mutually agreed upon by the parties pursuant to an escrow agreement being executed concurrently herewith in the form of Exhibit B attached hereto.  For 35 months following closing, Buyer shall deposit $20,000.00 per month into this account by the 20th day of each month with the first payment due by July 20, 2005, so that by June 30, 2008 the escrow account shall contain not less than $700,000.  The escrow agent shall be instructed to confirm such payments directly to the Seller.

(b) If Buyer fails to make the entire deposit of any of the escrow payments that are required by this agreement within ten days after the due date (on or before the 30th day of the month), Buyer agrees to pay seller damages in the amount of $200.00 per calendar day for each day after the 30th of the month through and including the day the full deposit is made. This provision shall apply to each deposit independently of any other deposits.

 

  

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(c) If Buyer fails to make the entire deposit of any of the escrow payments that are required by this agreement on or before the 15th day of the following month, or if Buyer shall violate any of the Covenants set forth in Article III of this Agreement, such failure or violation shall be a Default and Seller shall have the right to require Buyer to make all remaining cash escrow payments required under this Agreement and to require that Buyer immediately buy back all remaining Guaranteed Shares held by Seller at the Guaranteed Price within 10 business days of Seller's notice to Buyer of the exercise of this right.

1.4 Right to Redeem.  During the term of this agreement, Seller may require Buyer to buy back up to 40,000 of the Guaranteed Shares per month at the Guaranteed Price.  This right is 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 Seller does not exercise this right for two consecutive months, the following month Seller would have the right to require Buyer to purchase 120,000 Guaranteed Shares at a price of $60,000.00 Funds to effect such purchases shall be released from the escrow account.

1.5 Release of Buyer's Obligations - Market Conditions. In the event that at any time beginning one year after the effective date the Buyer's stock is trading in the public market above sixty cents ($.60) per share and average daily trading volume for the Buyer's stock for 20 consecutive trading days is greater than 50,000 shares, and if Seller is eligible to sell shares under Rule 144, Buyer shall have the right to give notice to Seller of such circumstance and to require that Seller elect either: (i) to sell 40,000 of the Guaranteed Shares into the market, (ii) to allow Buyer to redeem such 40,000 Guaranteed Shares at the Guaranteed Price, or  (iii) to retain such 40,000 Guaranteed Shares for investment, in which case Buyer shall be relieved of its obligations to make the $20,000 escrow deposit next falling due and to repurchase such 40,000 Guaranteed Shares.   Seller shall notify Buyer of its election hereunder within ten days following receipt of Buyer's notice. If Seller shall fail to give such notice, Seller shall be deemed to have elected to retain 40,000 Guaranteed Shares for investment pursuant to clause (iii) above.

1.6 Release of Buyer's Obligations - Prepayment.  If at any time after the first anniversary of the effective date all of Buyer's obligations under Paragraph 1.3 above shall have been satisfied, either through the deposit of the full $700,000.00 into the escrow account or through partial release of Buyer's obligations as provided in Paragraph 1.5 above, and if Seller is eligible to sell shares under Rule 144,  then Buyer shall have the right to give notice of such circumstance and to require that Seller elect either: (i) to allow the Buyer to redeem all or any portion of the remaining Guaranteed Shares at the Guaranteed Price, or (ii) to retain all remaining Guaranteed Shares for investment, in which case Buyer shall be relieved of all further obligations of in respect of such remaining Guaranteed Shares. 

 

1.7 Release from Escrow. At such time as all of Buyer's obligations under Paragraphs 1.3 and 1.4 shall have been satisfied in full, any funds remaining in the escrow account shall be released and paid over to Buyer.

1.8 Default.  In the event of a Default hereunder, Buyer shall pay all of Seller's legal fees and other costs of collection.

 

  

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1.9 Covenant Not to Compete.  Concurrently herewith the parties are entering into a Covenant Not to Compete in the form of Exhibit C attached hereto.

1.10 Security and Pledge Agreement.  The Buyer's obligations under this Agreement, the Promissory Note and the Covenant Not to Compete are subject to the terms of a Security and Pledge Agreement between the parties in the form of Exhibit D attached hereto.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

2.1 Representations and Warranties.  Buyer and Seller hereby covenants, represents and warrants to the other 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) Due Authorization.  It has the necessary corporate authority and capacity to enter into this Agreement and the agreements and other instruments contemplated herein and to perform its obligations hereunder and thereunder.  The execution and delivery of this Agreement and the agreements and other instruments contemplated herein and the performance of the transactions contemplated hereunder and thereunder have been duly authorized by all necessary corporate action on its part.

(c) No Violation.  It is not a party to, bound by or subject to any indenture, mortgage, lease, agreement, instrument, charger 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.

(d) 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.

 

2.2 Representations and Warranties of Seller.  Seller further covenants, represents and warrants to Buyer that, save and except as has been disclosed to Buyer:

 

  

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(a) Power of Seller.  All corporate action on the part of Seller and its officers, directors and shareholders necessary for the authorization, execution, delivery and performance of this Agreement and the other transaction documents to which Seller is a party, the consummation of the transactions contemplated thereby, and the performance of all of execution, delivery and performance of this Agreement and the other transaction documents to which Seller is a party, the consummation of the transactions contemplated thereby, and the performance of all of Seller's obligations under this Agreement and the other transaction documents to which it is a party has been taken or will be taken prior to the closing date.  This Agreement has been, and the other transaction documents to which Seller is a party on the closing date will be, duly executed and delivered by Seller, and this Agreement is, and each of the other transaction documents to which seller is a party on the closing date will, be a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms.

(b) No Conflicts.  To its knowledge, Seller's execution, delivery and performance in accordance with the respective terms of this Agreement and other transaction documents to which Seller is a party do not and will not (i) violate or conflict with any governmental requirement, (ii) to its knowledge, breach or constitute a default under any agreement or instrument to which Seller is a party or (iii) result in the creation or imposition of, or afford any person the right to obtain, any lien upon the purchased assets.  Furthermore, to its knowledge, the execution and performance by Seller will not result in any of the following:

(i) the acceleration or mandatory prepayment of any indebtedness of Seller or afford any holder of any of that indebtedness, or any beneficiary of those guaranties, the right to require Seller or Buyer, or any subsidiary 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 Seller, or upon any revenues, income or profits of Seller; or

(iii) result in the revocation, cancellation, suspension or material modification of any governmental approval possessed by Seller at the closing date and necessary for the ownership or lease or the operation of its properties or the carrying on of their business as now conducted including any necessary governmental approval under each applicable environmental law and industry law 

(c) Reports, Notices.  To Seller's knowledge, no reports or notices to report, or filings with, any governmental authority are required to be made by Seller for the execution, delivery or performance by Seller of this Agreement, the enforcement against Seller of its obligations thereunder, or the effectuation of the acquisition and the othertransactions contemplated thereby.

(d) Litigation.  To Seller's knowledge, the Seller 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 its knowledge, Seller is not in default with respect to any order, writ, injunction, or decree or any federal, state, local, or foreign court, department, agency, or instrumentality.  Seller is not presently engaged in any legal action to recover monies due to, or damages sustained by, Seller.

 

  

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(e) Financial Statements.  To Seller's knowledge, since April 1, 2005, except for the distribution of assets specifically contemplated hereby, no material change has occurred in the business, operations, properties or assets, liabilities, condition (financial or other) or results of operations of BBU that could reasonably be expected to have a material adverse effect on its business or operations. It is understood and agreed that the following assets of BBU will be distributed to Seller prior to the closing and are not included in the sale:

(i) all cash on hand as of the closing date;

(ii) all automobiles;

(iii) the personal computer used by the Seller;

(iv) Personal effects of the Seller located in the Seller's office.

(f) Disclosure.  To the best of Seller's knowledge, and as of the date of this Agreement, the information that has been furnished to Buyer by or on behalf of Seller prior to the date of this Agreement in connection with the transactions contemplated hereby, taken together, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which those statements were made.

(g) Compliance with Laws.  Seller, to its knowledge:

(i) possesses all necessary certifications and licenses and similar governmental approvals required for the conduct of its business and

(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 and

(iii) Seller has not received, nor to the knowledge of Seller 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) To the knowledge of Seller, no condition or state of facts exists which would provide a valid basis for any such assertion.

(h) Assets.  Seller, to its knowledge, has good and marketable title to the purchased assets, other than assets to be distributed to the Seller as specifically contemplated hereby. All the purchased assets are free and clear of restrictions on or conditions to transfer or assignment, and of liens, pledges, charges, encumbrances, equities, claims Buyer, covenants, conditions, or restrictions.  All tangible personal property is in good operating condition and repair, ordinary wear and tear excepted. 

(i) Real Property.  No real property is part of this agreement.

(j) Customer List.  Exhibit E sets forth a complete and accurate list of all of Seller's member accounts, including member balances as of May 31, 2005.

 

  

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(k) Other Material Contracts.  Except as otherwise disclosed, Seller is not a party to, nor is the property of Seller bound by, any representative or agency agreement; any agreement not entered into in the ordinary course of business; and indenture or lease; or any agreement that is unusual in nature or duration that would materially affect the Buyer.

2.3 Buyer's Representations and Warranties.

(a) Capitalization.  As of May 1, 2005, Buyer's authorized capital stock consists of 280,000,000 shares of common stock, par value $0.0001 per share, of which 40,086,404 shares are outstanding and of which 2,286,000 are reserved for issuance under Buyer's Non-qualified Stock Option Plan; and 20,000,000 shares of preferred stock, par value $0.0001 per share. No shares of preferred stock are issued or outstanding.

ARTICLE III

COVENANTS

3.1 Restriction on Expansion of Buyer's Debt.  Buyer agrees that it will not incur indebtedness of more than $2,500,000.00 in addition to that reflected on its December 31, 2004 balance sheet, plus $810,000 of convertible debt acquired in private placements in March and May of 2005, without the express written consent and permission of Seller.  Such consent not to be unreasonably withheld.

3.2 Insider Transactions with Buyer.  The officers of Buyer agree that they will not enter into any transactions with Buyer or any of it customers or suppliers without full disclosure and consent of Deborah Lombardi. Such consent not to be unreasonably withheld.  A transaction for the purchase of the Buyer corporate building in New Berlin, WI upon all material terms disclosed to Seller has been contemplated and is excluded from this provision.

3.3 Subordination of Debt Owed to Management.  Buyer has previously borrowed funds from Donald Mardak and Danny Weibling, the CEO and CFO of Buyer, as evidence by [2] promissory notes, copies of which have been furnished to Seller.  Buyer and Donald Mardak and Danny Weibling agree that these promissory notes will not be accelerated while a balance of more than $200,000.00 is required to be placed in the escrow account. Payment on each of these notes may not exceed $6,000.00 per month plus interest, as outlined in the repayment schedules.  Any amounts advanced by management after the date of this Agreement are not subject to the terms of such subordination.

3.4 Waiver of Officer Severance Plans.  In the event of Default on this Agreement, Donald Mardak, Danny Weibling, John E. Strabley and Dale L. Mardak agree to waive all severance payments as provided for in their respective employment contracts.  Such waiver will cease to be effective upon Buyer's cure of any Default on this Agreement.

3.5 Non-Compete Agreements.  The Buyer and the Seller have entered into this Agreement in reliance upon Non-Competition Agreements between BBU and each of Sandy Sweig, Lisa Boudreau, Heather Lombardi, and Bettina Gray on the other hand. 

   

  

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3.6 Liabilities of BBU.  Seller warrants that BBU shall be free and clear of any liabilities on May 31, 2005, except positive and negative trade account balances incurred before the date of closing, disclosed employee benefit plans, regular periodic tax payments accrued but not yet due and payable and utility and similar bills incurred in the ordinary course of business. 

 

3.7 Income Taxes.  Seller shall cause final income tax returns for BBU for the periods prior to the closing date to be prepared and filed. Buyer hereby appoints Seller its authorized agent for the purpose of preparing and signing such returns. In the event that any taxes are due on the BBU final income tax returns, such amounts will be the responsibility of, and will be paid by, Seller.

3.8 Indemnifications.  Buyer and Seller agree to indemnify each other from and against any and all claims, demands, losses, costs, expenses, liabilities or damages suffered or incurred by either party by any misrepresentation or breach of this agreement by either party.

ARTICLE IV

GENERAL PROVISIONS

4.1 Public Notices.  The parties agree that all notices to third parties and all other publicity concerning the purchase of BBU shall be jointly planned and coordinated and no party shall act unilaterally in this regard without the prior approval of the other 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.

4.2 Lease of BBU Facility.  At the closing of this Agreement, Buyer agrees to assume and pay all continuing obligations under the existing lease agreement between BBU and its landlord and to indemnify Seller and hold her harmless from and against any liability in respect thereof.

4.3 Expenses.  All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such expenses.

4.4 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 the Seller:	Deborah Lombardi, President
	 	212 Westwood Road
	 	Southington, CT 06489
	 	Facsimile: N.A.
	 	 
	For the Buyer: 	International Monetary Systems, Ltd.
	 	Attn: Donald F. Mardak, President
	 	16901 W. Glendale Dr
	 	New Berlin, WI 53151
	 	Facsimile: (262) 780-3655

 

  

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4.5 Governing Law; Submission to Jurisdiction.  This agreement shall be construed in accordance with the laws of the State of Connecticut.  Venue for any disputes arising from this Agreement shall be placed exclusively with the courts of the State of Connecticut.  Buyer hereby irrevocably submits to the jurisdiction of any state or Federal court located in the State of Connecticut and agrees that process may be served upon it by any means resulting in actual notice to it.

4.6 Assignment. Neither this Agreement nor any rights or obligations hereunder shall be assignable by Buyer without the prior written consent of the Seller. Subject thereto, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing herein shall prohibit Buyer from selling any or all of the assets acquired herein, either independently, or as part of a sale of Buyers other assets or a merger or acquisition of Buyer after closing.

4.7 Entire Agreement.  This Agreement and the attached exhibit represent the entire agreement between the parties and any persons who have in the past or who are now representing either of the parties.  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 both parties.

4.8 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 party as may be reasonably necessary or desirable to effect the purpose of this Agreement and carry out its provisions.  

 

4.9 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.

4.10 Headings.  The headings in this Agreement are for reference purposes only and shall not be deemed a part of this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.      

 

	International Monetary Systems, Ltd. 	 	 	Barter Business Unlimited, Inc.	 
	 	 	 	 	 
	
/s/ Donald F. Mardak 

	 	 	
/s/ Deborah Lombardi

	 
	
Donald F. Mardak, President

	 	 	
Deborah Lombardi, President

	 
	 	 	 	 	 

 

  

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The undersigned hereby consent and agree to the provisions of Paragraphs 3.3, 3.4 and 3.5 of the foregoing Agreement>

 

 

	 	 	 
	
By: 

	/s/ Donald F. Mardak	 
	 	Donald F. Mardak, individually	 
	 	 	 

	 	 	 
	
By: 

	/s/ Danny W. Weibling	 
	 	Danny W. Weibling, individually	 
	 	 	 

	 	 	 
	
By: 

	/s/ John E. Strabley	 
	 	John E. Strabley, individually	 
	 	 	 
	 	 	 

	
By: 

	/s/ Dale L. Mardak	 
	 	Dale L. Mardak, individually	 
	 	 	 

 

 

9fs12010a1ex10iiib_ims.htm

 

	 $350,000	 May 31, 2005

 

PROMISSORY NOTE

 

FOR VALUE RECEIVED, the undersigned INTERNATINAL MONETARY SYSTEMS, LTD., a Wisconsin corporation ("Maker"), promises to pay to the order of DEBORAH LOMBARDI (the "Payee") or any subsequent assignee or holder hereof (the Payee or any subsequent assignee or holder hereof sometimes being hereinafter referred to as the "Holder) the principal sum of the principal sum of Three Hundred Fifty Thousand Dollars ($350,000), together with all costs and expenses, including reasonable attorneys' fees, incurred in collecting or attempting to collect the indebtedness evidenced by this Note or in any litigation or controversy arising from or connected with this Note, whether or not legal proceedings are commenced. All amounts owing under this Note shall be payable in legal tender of the United States of America. The indebtedness evidenced hereby shall not bear interest unless and until there shall have occurred an Event of Default, as hereinafter defined, following which the remaining unpaid balance hereof shall bear interest at the rate of ten percent (10%) per annum until such time as such Event of Default shall have been cured or the entire unpaid balance hereof paid in full.

 

The principal amount hereof shall be payable in thirty six (36) equal monthly installments of Nine Thousand Seven Hundred and Twenty Two and 22/100 Dollars ($9,222.22) each, payable commencing July 1, 2005 and continuing on the first day of each month thereafter through and including June 1, 2008, at which time the entire remaining unpaid principal amount hereof shall be due and payable.

 

The Note may be prepaid at any time, in whole or in part, without prepayment penalty or premium.

 

The following shall constitute Events of Default hereunder (1) in the event Maker shall fail to pay any installment of principal or interest within ten (10) days following the due date hereof and within a further ten (10) days following the giving of notice by the Payee that such payment is overdue, or (ii) if there shall have occurred an Event of Default under, and as defined in, the Security and Pledge Agreement, dated as of the date hereof, between the Maker and the Payee.

 

Upon the occurrence of any Event of Default, the entire indebtedness evidenced by this Note shall, at the option of and without notice or demand by the Holder, become at once due and payable. Maker shall then pay to the Holder, in addition to any and all other sums and charges due, the entire principal of and interest accrued on this Note.

 

Any failure by the Holder to exercise any right under this, or any delay in such exercise, shall not constitute a waiver of the right to exercise such right at a later time so long as such Event of

 

  

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Default shall remain uncured, and shall not constitute a waiver of the right to exercise such right if any other Event of Default shall occur. The acceptance by the Holder of payment of any sum payable under this Note after the due date of such payment shall not be a waiver of Holder's right to require prompt payment when due of all other sums payable under this Note.

 

If any one or more of the provisions of this Note shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part, or in any respect, or if any one or more of the provisions of this Note shall operate, or would prospectively operate, to invalidate this Note, then such provision or provisions only shall be deemed to be null and void and of no force or effect and shall not affect any other provision of this Note, and the remaining provisions of this Note shall remain operative and in full force and effect, shall be valid, legal and enforceable, and shall in no way be affected: prejudiced or disturbed thereby.

 

This Note may not be modified or terminated orally, but only by a written instrument signed by the party against whom enforcement of any such modification or termination is sought. Time is and shall be of the essence in the performance of all obligations under this Note.

 

This promissory note and the transactions related thereto have been executed and delivered in the state of Connecticut. As part of the consideration for new value this day received, all parties hereby consents to the jurisdiction of any state or Federal court located within the state of Connecticut and waive personal service of any and all process and consent to the fullest extent permitted by applicable law. Without limiting the generality of the foregoing, the Maker specifically waives any defense or objection based upon lack of jurisdiction, improper venue or forum non conveniens.

 

As used in this Note, words of any gender shall be deemed to apply equally to any other gender, the plural shall include the singular and the singular shall include the plural (as the context shall require), and the word "person" shall refer to individuals, entities, authorities and other natural and juridical persons of every type.

 

MAKER HEREBY ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION AND, TO THE EXTENT ALLOWED UNDER CONNECTICUT GENERAL STATUTE SECTION 52-278(a) TO 52­278(n), INCLUSIVE, OR ANY OTHER APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH OWNER OR ITS SUCCESSORS MAY DESIRE TO USE. MAKER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE ENFORCEMENT OF ANY OF HOLDER'S RIGHTS AND REMEDIES, INCLUDING WITHOUT LIMITATION, TORT CLAIMS.

 

Maker hereby waives demand, presentment, protest, and notice of dishonor.

  

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	 	INTERNATINAL MONETARY SYSTEMS, LTD.	 
	 	 	 	 
	
 

	
By: 

	/s/ Donald F. Mardak	 
	 	 	Donald F. Mardak, President	 
	 	 	 	 
	 	 	 	 

 

  

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Draft 3/w1)5

 

ESCROW AGREEMENT

 

ESCROW AGREEMENT, made and entered into as of the 31st day of March, 2005, collectively by and among DEBORAH LOMBARDI ("Lombardi"), INTERNATIONAL MONETARY SYSTEMS, LTD ("INMS") and WEBSTER BANK, a Connecticut banking corporation, solely as Escrow Agent (the "Escrow Agent").

 

RECITALS

 

Concurrently herewith, Lombardi and INMS are entering into a Share-Exchange Agreement, dated as of the date here (the "Share-Exchange Agreement"); and.

 

The Share-Exchange Agreement provides for the payment of certain sums into escrow.

 

This Agreement is intended to govern the terms under which such sums shall be held and disbursed by the Escrow Agent.

 

AGREEMENT

 

In consideration of the premises and the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged the parties do hereby agree as follows:

 

            1.            Designation of Escrow Agent.  The Escrow Agent is hereby appointed escrow agent to hold and dispose of the Escrowed Property (as hereinafter defined), in accordance with the terms and conditions set forth in this Agreement, and the Escrow Agent accepts such designation and agrees to hold and dispose of the Escrowed Funds in accordance with the provisions of this Agreement.

 

  

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            2.          Delivery of Escrowed Funds. From time to time, INMS will make certain payments to the Escrow Agent as provided in the Share-Exchange Agreement. Such Funds as delivered are herein collectively referred to as the "Escrowed Funds".

 

            3.           Terms of the Escrow. The Escrowed Funds shall be held and released as set forth below:

 

              (a)       Payment Instructions. The Escrow Agent shall pay over to Lombardi all or such portion of the Escrowed Funds as may be directed from time to time in writing by INMS. The Escrow agent shall pay over to INMS all or such portion of, the Escrowed Funds as may be directed from time to time in writing by Lombardi.

 

              (b)       Default. Lombardi may at any time deliver to the Escrow Agent a notice (a "Default Notice") stating that there has occurred a default under the Share-Exchange Agreement and demanding payment to her of all Escrowed Funds. Such Default Notice shall specify in reasonable detail the circumstances and events constituting such default. Following receipt of such notice, the Escrow Agent shall furnish a copy thereof to INMS. INMS shall have a period of thirty (30) days during which INMS may give notice (an "Objecting Notice") to the Escrow Agent and Lombardi stating that a Default has not occurred. Such Objecting Notice shall refute in reasonable detail the statements made in the Default Notice. Both any Default Notice and any Objecting Notice shall be given in good faith and subject to the penalties hereinafter described. In the event Lombardi shall have given a Default Notice and INMS shall not have given an Objecting Notice within such thirty (30) day period, the Escrow Agent shall pay over all Escrowed funds to Lombardi and the Escrow. Agent shall have no further duties hereunder. In the event INMS shall have given an Objecting Notice, then the Escrow Agent shall continue to hold all Escrowed Funds until either (i) one or both of the parties shall have given written directions to pay over Escrowed Funds to the other, or (ii) the Escrow Agent shall have been directed to make disposition of the Escrowed Funds by a court of competent jurisdiction.

 

              (c)        Satisfaction. INMS may at any time deliver to the Escrow Agent a notice (a "Satisfaction Notice") stating that all of its financial obligations under the Share-Exchange Agreement have been satisfied and demanding payment to it of all remaining Escrowed Funds. Such Satisfaction Notice shall specify in reasonable detail the circumstances and events constituting such satisfaction. Following receipt of such notice, the Escrow Agent shall furnish a copy thereof to Lombardi. Lombardi shall have a period of thirty (30) days during which Lombardi may give notice (an "Objecting Notice") to the Escrow Agent and INMS stating that a satisfaction has not occurred. Such Objecting Notice shall refute in reasonable detail the statements made in the Satisfaction Notice. Both any Satisfaction Notice and any Objecting Notice shall be given in good faith and subject to the penalties hereinafter described. In the event INMS shall have given a Satisfaction Notice and Lombardi shall not have given an Objecting Notice within such thirty (30) day period, the Escrow Agent shall pay over all Escrowed funds to INMS and the Escrow Agent shall have no further duties hereunder. In the event Lombardi shall have given an Objecting Notice, then the Escrow Agent shall continue to hold all Escrowed Funds until either (i) One or both of the parties shall have given written directions to pay over Escrowed Funds to the other, or (ii) the Escrow Agent shall have been directed to make disposition of the Escrowed Funds by a court of competent jurisdiction.

 

  

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             4.          Deposit of Funds. The parties acknowledge that, unless otherwise specifically provided herein, the Escrowed Funds will be held in an interest-bearing account and all interest accrued thereunder shall be paid over to INMS.

 

             5.          Concerning the Escrow Agent. The obligations of the Escrow Agent under this Agreement are subject to the following terms and conditions:

            

                          (a)        The Escrow Agent is not a party to and is not bound by any agreement other than as expressly set forth in this agreement;

 

                          (b)        The Escrow Agent shall not have any responsibility for the genuineness or validity of any notice, evidence of other documents or items delivered to it:, and the Escrow Agent shall be entitled to rely upon and shall be protected in acting upon any written notice, waiver, consent, receipt, or other evidence or paper or document which the Escrow Agent believes to be genuine and to be signed by a proper person; and

 

                          (c)     The terms of this Section 4 shall survive any termination of this agreement.

 

                          (d)     As compensation for acting as escrow agent pursuant to this agreement, the Escrow Agent shall be paid its out-of-pocket disbursements in connection with this Agreement.

 

  

6

  

 

       (e)     The Escrow Agent shall only be obligated to perform those duties specifically set forth in this Agreement.

 

       (f)     The Escrow Agent shall not be obligated to take any legal or other action under this Agreement which might, in its sole judgment, involve expense or liability unless it shall have been furnished with indemnity acceptable to it.

 

       (g)         The Escrow Agent may rely on and shall be protected in acting or refraining from acting upon any written notice, instruction, instrument, statement, request or document furnished to it pursuant to this Agreement and believed by the Escrow Agent to be genuine and to have been signed or presented by the proper person, and Escrow Agent shall have no responsibility for determining the accuracy thereof.

 

       (h)      The Escrow Agent may consult with counsel satisfactory to it and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by Escrow Agent under this Agreement in good faith and in accordance with the advice or opinion of such counsel.

 

       (i)         The Escrow Agent shall not be liable to any person or party for any action taken or omitted to be taken by it or any of its officers, directors or employees under this Agreement, except in the case of Escrow Agent's gross negligence, bad faith or willful misconduct.

 

       (j)         The parties hereto shall, jointly and severally, indemnify the Escrow Agent and hold it harmless from and against any and all claims, losses, costs, liabilities, damages, suits, demands, judgments or expenses (including, but not limited to, reasonable attorneys' fees) claimed against or incurred by the Escrow Agent arising out of or related, directly or indirectly to, this Agreement and its duties under this Agreement including, without limitation, the withholding or deduction or the failure to withhold or deduct such taxes, assessments and charges, and any liability for failure to obtain proper certifications or to properly report to governmental authorities, to which the Escrow Agent may be or become subject in connection with the perforrnance of its duties as Escrow Agent. The provisions of this Section shall survive termination of this Agreement for any mason,

 

       (k)        Escrow Agent may at any time resign as Escrow Agent by giving thirty (30) days prior written notice of such resignation to the Buyer and Seller, Prior to the effective date of the resignation as specified in such notice, the Buyer and Seller shall issue to the Escrow Agent written directions authorizing delivery of the Escrowed Property to a successor escrow agent selected by them. If the Buyer and Seller shall fail to name a successor escrow agent within twenty (20) days after the notice of resignation from the Escrow Agent, the Escrow Agent may apply to a court of competent jurisdiction for the appointment of a successor escrow agent.

 

  

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            6.            Disputes. In the event that any dispute arises with respect to this Agreement or in the event that any claim is made with respect to the Escrowed Property, then the Escrow Agent, upon receipt of written notice of such dispute, is authorized. and directed to retain in its possession without liability to any person or party., all of the Escrowed Property until such dispute shall have been settled either by the mutual agreement of the parties involved or by a final, unappealable order, decree or judgment of a court of competent jurisdiction. The Escrow Agent may, but shall be Under no duty to, institute or defend any legal proceeding which relates to this Agreement.

 

            7.            Submission to Jurisdiction. Each of the parties hereby submits to the jurisdiction of the courts of the State of Connecticut and of any federal court located in the State of Connecticut in connection with any actions or proceeding brought against them by the Escrow Agent arising out of or in relating to this Agreement. In any such action or proceeding, each of the parties hereby absolutely and irrevocably waives personal service of any summons, complaint, declaration or other process and agrees that service thereof may be made by certified or registered first class mail directed to such party at the address set forth in this Agreement or by any other means effecting actual notice.

 

            8.            Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if sent by registered or certified mail, postage prepaid, or by nationally recognized overnight delivery service, addressed and delivered:

 

            To Lombardi:

 

                              Deborah Lombardi

                          212 Westwood Road 

                          Southington, CT 06489

 

            To INMS:

 

International Monetary Systems, Ltd. 

16901 W. Glendale Drive

New Berlin, WI 53151

Attention: Donald F. Mardak, President

 

    To the Escrow Agent: 

                             

                                        Webster Bank

	                                        ______________________	 
	                                        ______________________	 

 

Any notices required to be given to any party to this agreement shall be given contemporaneously to all of the parties to this agreement.

 

 

  

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       9.           Governing Law. This Agreement shall be governed by and interpreted in

accordance with the substantive laws of the state of Connecticut and shall be binding on the successors and assigns of the parties hereto.

 

       10.         Attorney's Fees. In the event of any dispute between INMS and Lombardi regarding disposition of the Escrowed Funds, if the court shall determine that either of such parties has given a Default Notice, a Satisfaction Notice or an Objecting Notice in bad faith, the court may award to the other party, in addition to such other relief as it may find appropriate, all of such party's legal fees and expenses.

 

             IN WITNESS WHEREOF, the parties and the Escrow Agent have caused this agreement to be executed as of the date set forth in the first paragraph.

 

	 	/s/ Deboran Lambardi	 
	 	Deboran Lambardi, Individually	 
	 	 	 
	 	
INTERNATIONAL MONETARY SYSTEMS, LTD.

	 
	 	 	 
	
 

	
By: 

	/s/ Donald Mardak	 
	 	 	Donald Mardak, President	 

 

  

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Covenant Not To Compete

 

                 This Agreement, dated as of the 31st day of May, 2005, is entered into between INTERNATIONAL MONETARY SYSTEMS, LTD. a Wisconsin corporation ("IMS"), and DEBORAH LOMBARDI, a resident of Connecticut ("Lombardi").

 

                 For consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows:

 

	
1.  

	
IMS shall pay to Lombardi the sum of $100,000 in monthly payments of $2,777.78 for a period of 36 months, commencing July 1, 2005 and continuing on the first day of each month thereafter through June 1, 2008

 

	
2.  

	
For a period of 36 months from the date of this Agreement, Lombardi will not engage in or otherwise affiliate with any barter or trade exchange located within a 50 mile radius of any IMS or Continental Trade Exchange, Ltd. office or with any other business operation directly or indirectly related to, or in competition with, the business operations of IMS. Lombardi also agrees that she will not influence nor attempt to influence any IMS customer or client to move to any competitor of IMS.

 

	
3.  

	
In the event of a breach of this agreement, all costs, including attorney fees, incurred in enforcing this agreement shall be borne by the losing party.

 

	
4.  

	
In the event that either (i) any installment of the payments required hereunder shall remain unpaid for a period of ten (10) days following the due date thereof, and Lombardi shall have given notice of such failure to IMS, and in the event IMS shall fail to make such payment within ten (10) days following the giving of such notice, or (ii) if there shall have occurred an Event of Default under, and as defined in, the Security and Pledge Agreement, dated as of the date hereof, between the Maker and the Payee, then in either such event the entire remaining balance of the payments provided for herein shall become immediately due and payable and shall bear interest at the rate of twelve percent (12%) per annum from the date of such default until paid in full.

 

	
5.  

	
This agreement and the transactions related thereto have been executed and delivered in the state of Connecticut. As part of the consideration for new value this day received, all parties hereby consent to the jurisdiction of any state or Federal court located within the state of Connecticut and waive personal service of any and all process and consent to the fullest extent permitted by applicable law. Without limiting the generality of the foregoing, the parties specifically waive any defense or objection based upon lack of jurisdiction, improper venue or forum non conveniens.

 

  

10

  

 

                 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.

                

                 INTERNATIONAL MONETARY SYSTEMS, LID.

 

	             By 	
/s/ Donald F. Mardak

	 	 	
/s/ Deboran Lombardi

	 
	 	

Donald F. Mardak, President

	 	 	
Deboran Lombardi

	 

 

  

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SECURITY AND PLEDGE AGREEMENT

 

Security Agreement made as of this 3lst day of May, 2005 by and between DEBORAH LOMBARDI (the "Secured Party"), INTERNATIONAL MONETARY SYSTEMS, LTD, a Wisconsin corporation ("DIMS") and BARTER BUSINESS UNLIMITED, INC., a Connecticut corporation ("BBU"). INMS and BBU are hereinafter collectively called the "Debtors".

 

RECITALS

 

BBU has extended credit to INMS pursuant to: (i) the guaranteed price provisions of a Share-Exchange Agreement between the parties, dated as of the date hereof (the "Share-Exchange Agreement"), (ii) a certain Promissory Note of INMS dated the date hereof in the original principal amount of $350,000 (the "Promissory Note"), and (iii) a certain Covenant Not to Complete between the parties, dated as of the date hereof (the "Non-Competition Agreement"). BBU unconditionally guaranties all obligations of INMS under each of such agreements. All obligations of INMS under the Share-Exchange Agreement, the Promissory Note and the Non-Competition Agreement and all obligations of BBU under such guaranty are sometimes herein collectively referred to as the "Secured Obligations".

 

Pursuant to the Share-Exchange Agreement, the INMS is acquiring from the Secured Party all of the outstanding capital stock of BBU.

 

The parties desire to provide for the grant to the Secured Party of a security interest in certain assets of the Debtors in order to secure the Secured Obligations.

 

AGREEMENT

 

In consideration of the foregoing and the mutual covenants herein contained, the parties do hereby agree as follows:

 

1.             Guarantee. BBU hereby unconditionally guarantees to the Secured Party the full and prompt payment of all obligations of INMS to the Secured Party under the Share-Exchange Agreement, the Promissory Note and the Non-Competition Agreement.

 

2.              Security Interest. As collateral security for the full and prompt payment of the Secured Obligations, the Debtors hereby grant to the Secured Party first a lien and security interests in and to all of the property of the Debtors listed on Schedule A attached hereto (all of which property is hereinafter collectively referred to as the "Collateral").

 

  

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In witness whereof, the undersigned have caused this instrument to be duly executed as of the day and year first above written.

 

	 	
DEBTOR:

	 
	 	
INTERNATIONAL MONETARY SYSTEMS, LTD

	 
	 	 	 
	
 

	
By: 

	/s/ Donald Mardak	 
	 	 	Donald Mardak, President	 
	 	 	 
	 	
BARTER BUSINESS UNLIMITED, INC.

	 
	 	 	 
	 	By: 	 	 
	 	 	Donald Mardak, President	 
	 	 	 	 
	 	SECURED PARTY:	 
	 	 	 	 
	 	By:	/s/ Deboran Lombardi	 
	 	 	Deboran Lombardi	 
	    	 	 

 

 

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