ASSET PURCHASE AGREEMENT
DATED AS OF AUGUST 1,
2008
BY AND
BETWEEN
ITEX
CORPORATION
AND
THE INTAGIO GROUP,
INC.
ASSET PURCHASE
AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this
“Agreement”), dated as of August 1, 2008, is by and
between ITEX Corporation, a Nevada corporation
(“ITEX”), and The Intagio Group, Inc., a Delaware
corporation (“Intagio”).
WHEREAS, ITEX wishes to purchase from Intagio,
and Intagio wishes to sell to ITEX, specified assets of Intagio
relating to Intagio’s barter exchange and related media
planning and placement business, all on the terms and subject to
the conditions set forth in this Agreement;
WHEREAS, the Board of Directors of Intagio has
adopted and approved this Agreement and the sale of assets as
described herein;
WHEREAS, the Board of Directors of ITEX has
adopted and approved this Agreement and the purchase of assets as
described herein; and
WHEREAS, the parties desire to enter into this
Agreement to set forth their mutual agreements concerning the above
matter;
NOW, THEREFORE, in consideration of the
foregoing premises and the representations, warranties, covenants
and agreements herein contained, and intending to be legally bound
hereby, the parties hereby agrees as follows:
ARTICLE
1
SALE AND TRANSFER OF ASSETS;
CLOSING
1.1. Sale of Assets . At the closing of the transactions
contemplated hereby (the “Closing”), and upon the terms
and subject to the conditions of this Agreement, Intagio shall
sell, convey, transfer, assign and deliver to ITEX, and ITEX will
purchase and acquire from Intagio, all right, title and interest of
Intagio in and to the following assets (the “Purchased
Assets”):
(a) The clients (the “Assigned
Clients”) listed on Exhibit A hereto,
(b) All contracts, insertion orders, and media
purchase agreements (the “Assigned Contracts”) between
Intagio and the Assigned Clients, including the Intagio contractual
rights and client relationships arising from such Assigned
Contracts (excluding those related to Intagio’s
“Perfect Escapes” business);
(c) All trade balances in effect as of the Closing,
both deficit and credit, associated with the Assigned Contracts
(which balances shall be transferred into the ITEX trading system
at the Closing);
(d) Historical transactional data from the Assigned
Contracts and associated accounts;
(e) Copies of the Assigned Contracts, if and only
to the extent to which Intagio is in physical possession of, and is
able to locate copies of, such Assigned Contracts; and
(f) All Cash Receivables (defined in Section 1.10)
as of the Closing Date that arose from the Assigned Contracts and
associated accounts.
(g) All contractual rights of Intagio to the
Advertising Credits listed on Exhibit B hereto;
The parties agree to the transfer and conveyance
of the Purchased Assets in intangible form as follows: Immediately
following execution of this Agreement by all parties, Intagio shall
transfer to ITEX, by electronic File Transfer Protocol (FTP) or
other reasonable means, account information for the Assigned
Accounts through July 31, 2008. Immediately following Closing,
Intagio shall transfer to ITEX, by overnight delivery service or
other reasonable means, account information for the Assigned
Accounts through month-end on July 31, 2008, along with transaction
history and related information associated with previously closed
commercial accounts for which there are transaction records within
the Intagio Trading Network.
The Purchased Assets shall be transferred or
otherwise conveyed to ITEX free and clear of all liabilities,
obligations, liens, security interests, encumbrances and
restrictions, excepting only the Assumed Liabilities in Section
1.3, the Assumed Office Lease in Section 1.5, and the Cash Media
Liabilities in Section 1.11.
1.2. Excluded Assets . Notwithstanding anything to the contrary
contained in this Agreement, no assets of Intagio other than the
assets specifically set forth in Section 1.1 shall be part of the
sale and purchase contemplated hereunder. By way of example and
without limiting the generality of the foregoing, ITEX shall not
acquire any rights whatsoever in or to any of the following assets,
which assets are specifically excluded from the Purchased Assets
and shall therefore remain the sole and exclusive property of
Intagio following the Closing:
(a) Any and all software or database programs
owned, licensed or operated by Intagio, including but not limited
to the TradeIt! software program and all of its
components;
(b) Any and all account management software owned,
licensed or operated by Intagio, and all software related to the
operation of the www.intagiotrading.com website; and
(c) Any and all assets or documents related to
Intagio’s “Perfect Escapes” business.
1.3. Assumption of Liabilities by ITEX
. Subject to the terms and
conditions set forth in this Agreement, upon the Closing, ITEX
shall assume and become liable for the following liabilities,
obligations and commitments (the “Assumed
Liabilities”):
(a) (i) Any and all liabilities arising out of any
of the Assigned Contracts, including but not limited to any and all
trade transaction liabilities associated with the Assigned Clients
(such as, for example, post-Closing transaction reversals made in
the regular course of business);
(ii) All cash credits that are due members and
that have a negative cash balance that were accrued in the regular
course within the Intagio Trading Network and that arose from the
Assigned Contracts and relationships in existence prior to the
Closing;
provided
however, that the
aggregate amount of 1) liabilities other than Cash Media
Liabilities, and 2) negative cash balances, assumed by ITEX under
this Section 1.3(a) shall not exceed $15,000; and
(b) All Cash Media Liabilities (defined in Section
1.11).
1.4. Excluded Liabilities . Other than the Assumed Liabilities described
in Section 1.3 (and subject to the limitations set forth in the
proviso to Section 1.3(b)), the Assumed Office Lease in Section
1.5, and the Cash Media Liabilities in Section 1.11, ITEX shall
assume no liabilities of Intagio of any kind under this Agreement.
For purposes of this section, “liability” shall be
defined as any liability or obligation of any Person of any kind,
character or description, whether known or unknown, absolute or
contingent, accrued or unaccrued, disputed or undisputed,
liquidated or unliquidated, secured or unsecured, joint or several,
due or to become due, vested or unvested, executory, determined,
determinable or otherwise and whether or not the same is required
to be accrued on the financial statements of any such Person.
Nothing in this Agreement shall alter the parties’ reciprocal
trading account relationship or the balance of the parties’
reciprocal trading account(s).
1.5. Assumption of Office Lease, etc.
As soon as practicable following the
Closing Date, subject to the terms of the First Amended Office
Service Agreement attached hereto as Exhibit G , ITEX shall
assume Intagio’s leasehold for office space located at One
Oakbrook Terrace, Suite 718, Oakbrook Terrace, Illinois, 60181 (the
“Illinois Office Space”). The parties shall negotiate
in good faith the terms of assignment of the existing lease and/or
establishment of a new sublease, with the intention of executing
such assignment and/or sublease on or before August 31, 2008
(subject to any additional time necessary in order for Intagio to
obtain any required landlord consents) (it being acknowledged by
ITEX that Intagio is making no representations or warranties as to
its ability to obtain any such consents and that Intagio shall have
no obligation to make any payments in order to obtain any such
consents). Effective August 1, 2008, the parties hereby amend their
Office Services Agreement dated August 17, 2007(the “Old
Office Services Agreement”) to be replaced at Closing by the
First Amended Office Service Agreement attached hereto as
Exhibit G . The First Amended Office Services Agreement (
Exhibit G ) shall control the parties’ joint use and
occupancy of the Illinois Office space beginning August 1, 2008,
and extending until terminated pursuant to its terms. If landlord
consent is not obtained, Intagio shall continue to pay all office
rent for the Illinois Office Space through the end of
Intagio’s leasehold, provided that ITEX makes timely payments
to Intagio pursuant to the terms of the First Amended Office
Service Agreement.
1.6. Purchase Price . ITEX shall pay to Intagio the following
consideration (the “Purchase Price”) for the Purchased
Assets:
(a) Two Hundred Eighteen Thousand Four Hundred
Twenty One and One Cent ($218,421.01), to be paid by ITEX to
Intagio at the Closing in the form of a certified bank check or by
wire transfer; plus
(b) A Subordinated Promissory Note in the form
attached hereto as Exhibit D , in the principal sum of Six
Hundred Eighty Seven Thousand Five Hundred United States Dollars
($687,500).
1.7. Allocation of Purchase Price
. [Omitted].
1.8. Settlement of Earnout Payment
Obligation .
(a) 2005 Agreement Not Modified or
Amended . The earnout
provisions set forth in the Agreement and Plan of Merger, dated as
of June 30, 2005, by and among ITEX, BXI Exchange, Inc., BXI
Acquisition Sub, Inc. and Intagio (the “2005
Agreement”) are not modified, amended or changed by this
Agreement and shall remain in full force and effect in accordance
with the terms thereof.
(b) Acceleration of 2007 Earnout
Payment Obligation. Pursuant to the
Agreement and Plan of Merger, dated as of July 25, 2007, by and
among ITEX and Intagio (the “2007 Agreement”), ITEX is
obligated to hereafter make earnout payments to Intagio. As a
material component of the consideration for this Agreement, One
Hundred Fifty Thousand United States Dollars ($150,000) of the cash
payment at Closing set forth in Section 1.6(a) shall be deemed to
be in full satisfaction of ITEX’s earnout payment obligation
to Intagio arising from the 2007 Agreement. Except for settlement
of ITEX’s earnout payment obligation under the 2007
Agreement, all other provisions of the 2007 Agreement shall remain
in force and effect in accordance with the terms
thereof.
(c) Adjustment of Security Deposit.
As a material component of the
consideration for this Agreement, Sixteen Thousand Nine Hundred
Fifty Three US Dollars and 33 Cents ($16,953.33) of the cash
payment at Closing set forth in Section 1.6 shall be deemed to be
reimbursement to Intagio of the amount previously paid by Intagio
to the landlord of the office space described in Section 1.5.
Whether or not the landlord consents to the assignment of the lease
for the Illinois Office Space, the $16,953.33 security deposit held
by the landlord shall thereafter be for the benefit of ITEX’s
ongoing tenancy of the office space and any subsequent
reimbursement of the security deposit by the landlord shall be the
property of ITEX. The parties shall enter into a First Amended
Office Service Agreement at Closing, with terms substantially
similar to those set forth in Exhibit G .
1.9. Closing . The Closing will take place on Friday, August
1, 2008 at the offices of TroyGould P.C., 1801 Century Park East,
Los Angeles, California 90067, unless another time, date or place
is agreed to in writing by ITEX and Intagio (the date on which the
Closing occurs being referred to as the “Closing
Date”). All actions taken at the Closing shall be deemed to
have been taken simultaneously at the time the last of any such
actions is taken or completed. Failure to consummate the purchase
and sale provided for in this Agreement on the date and time and at
the place determined pursuant to this Section 1.9 will not result
in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement.
1.10. Cash Receivables and Cash Credits
.
(a) “Cash Receivables” shall mean the
sum of all cash amounts that clients owe to Intagio, arising from
the Assigned Contracts, in the form of receivables arising from the
Assigned Contracts as listed on Exhibit A hereto.
(b) “Cash Credits” shall mean the sum
of all cash amounts that Intagio owes to clients, arising from the
Assigned Contracts, to the extent they have accrued in the regular
course prior to Closing and do not exceed $15,000 in
aggregate.
(c) Within ninety (90) days following the Closing
Date, ITEX shall have the right to deliver a written notice to
Intagio disagreeing with Intagio’s calculation of the Cash
Receivables and/or Cash Credits, and setting forth ITEX’s
revised calculation of the Cash Receivables or Cash Credits,
specifying in reasonable detail the reasons for such disagreement.
If ITEX fails to deliver such a written notice within 90 days
following the Closing, Intagio’s determination of the Cash
Receivables and Cash Credits shall be final and binding. If ITEX
delivers a written notice of disagreement pursuant to this
Subsection, ITEX and Intagio shall, during the 30-day period
following such delivery, use their good faith efforts to reach
agreement on the disputed items or amounts in order to determine
the amount of Cash Receivables and Cash Credits, which amount shall
not be more than the amount thereof shown in ITEX’s
calculations delivered pursuant to this Subsection nor less than
the amount set forth in the updated Exhibit A delivered at
Closing. If ITEX and Intagio are unable to reach such agreement
during such 30-day period, they shall promptly thereafter refer the
matter to a mutually acceptable accounting firm (the
“Determining Accountants”) to promptly review the
disputed items or amounts for the purpose of calculating the amount
of Cash Receivables and Cash Credits. In making such calculation,
the Determining Accountants shall consider only those items or
amounts in ITEX’s written notice as to which ITEX has
disagreed. The Determining Accountants shall deliver to ITEX and
Intagio, as promptly as practicable, a report setting forth such
calculation. Such report shall be final and binding upon ITEX and
Intagio. If a determination is made by the Determining Accountants
that the amount of Intagio’s calculation exceeded the actual
Cash Receivables at the Closing Date by more than $5,000, or if a
determination is made by the Determining Accountants that the
amount of Intagio’s calculation of Cash Credits at the
Closing Date was inaccurate by more than $5,000, then the Purchase
Price shall be adjusted by adjusting the Note in an amount equal to
the aggregate dollar amount of such inaccuracies and the costs,
fees and expenses of the Determining Accountants shall be borne by
Intagio. Otherwise, ITEX shall bear all such costs, fees and
expenses.
1.11. Cash Media Liabilities. Pursuant to some of the client contracts and
Assigned Contracts, Intagio is contractually obligated to purchase
advertising or media from third parties on behalf of clients on or
before dates set forth in the respective contracts (“Cash
Media Liabilities”), with dates of purchase falling after
Closing. ITEX shall be assigned, and hereby accepts sole
responsibility for, all Cash Media Liabilities as listed on
Exhibit C hereto.
1.12. Transition and Integration
(a) Monthly Statements . Intagio will prepare and mail the July 31,
2008 monthly statements on the standard Intagio statement forms and
mailed in Intagio envelopes to all Assigned Clients. Intagio shall
include a message, agreed on by both Intagio and ITEX on the
statement notifying its clients of this transaction. ITEX may
include inserts welcoming the Intagio Media clients to the ITEX
organization. ITEX must deliver 300 pre-printed letters to Intagio
no later than July 31. The insert must be pre-approved by
Intagio.
(b) 1099 Statements. ITEX shall be solely responsible for timely
distribution and filing of completed 1099B forms for all of the
Assigned Contracts for calendar year 2008 (relating to both
pre-Closing transactions and post-Closing transactions).
(c) Website License and Use . Intagio will provide ITEX with the content o
f www.intagio.com and grants ITEX a perpetual, exclusive,
transferable, world-wide license to reproduce, use and distribute
all Intagio proprietary content related to its media planning and
placement business ( including all website-related domain and
sub-domain names, URLs, software, assets, content, customer,
advertiser and member databases, trademarks, service marks, trade
names, copyrights, contract rights and all other intellectual
property and technology comprising the website
www.intagio.com , but excluding the Intagio service mark and
logo). Beginning no later than August 15, 2008, and continuing for
a period of not less than one year, Intagio will 1) forward all web
traffic, www.intagiomedia.com and
www.intagiotrading.com to ITEX’s web address at
www.itexmedia.com , 2) include an explanatory statement
agreed on by both Intagio and ITEX on the home page of
www.intagio.com directing Assigned Clients to the above ITEX
URL, and 3) forward all emails directed to media@intagio.com
to sales@itexmedia.com .
ARTICLE
2
REPRESENTATIONS AND
WARRANTIES OF INTAGIO
Except as set forth in the Exhibits attached
hereto, and in order to induce ITEX to enter into and perform this
Agreement, Intagio hereby represents and warrants to ITEX as
follows:
2.1. Organization and Good Standing
. Intagio is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware, and has the corporate power and authority to
own, operate and lease its properties and to carry on its business
as now conducted. Intagio is duly qualified to do business and is
in good standing in the State of California as a foreign
corporation.
2.2. Power, Authorization and Validity
.
(a) Power and Capacity . Intagio has the right, power, legal capacity
and authority to execute, deliver and perform its obligations under
this Agreement and all agreements to which Intagio is or will be a
party that are required to be executed pursuant to this Agreement
(the “Intagio Ancillary Agreements”), and to consummate
the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Intagio
Ancillary Agreements have been duly and validly approved and
authorized by Intagio’s Board of Directors as required by
Delaware law and Intagio’s Certificate of Incorporation and
Bylaws, each as amended to date.
(b) No Filings . No filing, authorization or approval,
governmental or otherwise, is necessary to enable Intagio to enter
into, and to perform its obligations under, this Agreement and the
Intagio Ancillary Agreements.
2.3. Authorization; Enforceability
. All corporate action on the part
of Intagio necessary for the authorization, execution, delivery and
performance of this Agreement and the Intagio Ancillary Agreements,
the consummation of the sale of the Purchased Assets, and the
performance of Intagio’s obligations hereunder and thereunder
has been taken. Each of this Agreement and the Intagio Ancillary
Agreements has been duly executed and delivered by Intagio and each
is, or when executed by Intagio will be, valid and binding
obligations of Intagio enforceable against Intagio in accordance
with their respective terms, except as to the effect, if any, of
(a) applicable bankruptcy and other similar laws affecting the
rights of creditors generally, and (b) rules of law governing
specific performance, injunctive relief and other equitable
remedies.
2.4. No Violation of Existing Agreements; Third Party
Consents and Approvals .
The execution and delivery of this Agreement and any Intagio
Ancillary Agreement by Intagio, and the consummation of the
transactions contemplated hereby or thereby, will not conflict
with, or (with or without notice or lapse of time, or both) result
in a default, termination, breach, impairment or violation of, or
the creation in any party of the right to accelerate, terminate,
modify or cancel (a) any provision of the Certificate of
Incorporation or Bylaws of Intagio, as currently in effect, (b) in
any material respect, any material agreement, lease, note or other
restriction, encumbrance, obligation or liability to which Intagio
is a party or by which Intagio is bound or to which Intagio’s
assets are subject, (c) in any material respect, any provision of
any material law or any material federal, state, local or foreign
judgment, writ, decree, order, statute, rule or regulation
applicable to Intagio or its assets or properties, or (d) any
permit used in or necessary for the conduct of Intagio’s
business. The consummation by Intagio of the sale of the Purchased
Assets will not require the consent, approval or authorization of,
or declaration, filing or registration with, any third
party.
2.5. No Brokers . Intagio has not incurred, and will not incur,
directly or indirectly, as a result of any action taken by or on
behalf of Intagio, any liability for brokerage or finders’
fees or agents’ commissions or any similar charges in
connection with the sale of the Purchased Assets, this Agreement or
any transactions contemplated hereby.
2.6. Accuracy of Exhibits A, B and C
. To the knowledge of Intagio, the
trade balances, Cash Receivables, Advertising Credits and Cash
Media Liabilities for the Assigned Contracts set forth on
Exhibits A, B and C are materially accurate as of the date
stated on such Exhibits.
2.7. Employee Matters . During the period from April 1, 2008 through
the date hereof, Intagio has not increased the salary or altered
the compensation plan of any Named Employee.
2.8. Litigation . To the knowledge of Intagio, (i) there is no
action or proceeding pending or threatened by the Assigned Clients
or the Named Employees against Intagio before any court,
administrative agency or arbitral tribunal, and (ii) there are no
material outstanding or unsatisfied judgments, orders, decrees or
stipulations to which Intagio is a party with the Assigned Clients
or the Named Employees. Intagio affirms that no material disputes
have been settled or resolved by litigation or arbitration since
July 31, 2005 with the Assigned Clients or the Named
Employees.
2.9. Labor and Employment Matters
. To the knowledge of Intagio, there
are no material pending claims, actions, suits, investigations or
proceedings alleging any violation of applicable laws, rules or
regulations relating to employment of the Named Employees by
Intagio. Intagio has provided ITEX with the current base
compensation amounts of each of the Named Employees. The Named
Employees are employed on an “at-will” basis, and, to
the knowledge of Intagio, are eligible to work and are lawfully
employed in the United States.
2.10. Contracts . Other than the applicable Assigned Contracts,
any predecessor trade exchange client agreement, and agreements
related to Intagio’s “Perfect Escapes” business,
there are no agreements, contracts, commitments, leases,
arrangements or other documents by which any of the Assigned
Contracts or Advertising Credits are bound or affected to which
Intagio is a party or bound in connection with the Purchased
Assets. Except as set forth in Exhibit B, to the knowledge of
Intagio, there does not exist under any contract by which any of
the Assigned Contracts or
