THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS.
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED
EXCEPT AS PROVIDED HEREIN AND (1) PURSUANT TO A REGISTRATION
STATEMENT WITH RESPECT TO SUCH NOTE WHICH IS EFFECTIVE UNDER THE
ACT OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS RELATING TO THE
DISPOSITION OF SECURITIES, PROVIDED THAT
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ITEX
CORPORATION
TO SUCH EFFECT IS PROVIDED TO
ITEX CORPORATION
IN CONNECTION THEREWITH.
SENIOR SUBORDINATED SECURED PROMISSORY
NOTE
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$_______________
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Bellevue, Washington
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August 1, 2007
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This
Senior Subordinated Secured Promissory Note (this
“
Note ”)
is being delivered pursuant to that certain Asset Purchase
Agreement (the
"Purchase Agreement" ),
dated
as of July 25, 2007, by and between ITEX Corporation, a Nevada
corporation (“
Maker ”)
and The Intagio Group, Inc., a Delaware corporation (“
Intagio ”).
This Note is being issued as a non-negotiable senior subordinated
secured obligation of Maker and ranks senior to all of
Maker’s other obligations, whether now existing or
hereinafter incurred or created, except that this Note is
subordinated to the Bank Debt (as defined in Section 2 hereof)
as set forth herein. The payment of all amounts due under this
Note, including interest accrued thereon, is secured pursuant to
the terms of that certain Security Agreement, dated as of the date
hereof, by and between Maker and Intagio (the
“Security Agreement” ).
Capitalized terms not otherwise defined herein shall have the
meaning given such terms in the Purchase Agreement.
1.
Principal and Interest .
Maker hereby promises to pay to Intagio, together with its
successors and authorized assigns (
“Payee” ),
in immediately available funds, the principal sum of _____________,
together with interest accrued on the unpaid principal of this Note
at the rate of 8.0% per annum, commencing on the date hereof.
Interest shall be computed based on the basis of a 365 day year for
the actual number of days elapsed. Principal and interest on this
Note shall be payable in 24 equal monthly installments of $52,500
(or such lesser amount as is then outstanding under this Note),
payable on the last day of each calendar month commencing on August
31, 2007 (each such date is herein referred to as a “
Payment Date ”).
Any remaining unpaid amount of principal or interest shall be due
and payable in full on August 31, 2010. All or any portion of the
principal amount outstanding under this Note may be prepaid by
Maker at any time without premium or penalty. Each such principal
prepayment shall be accompanied by the interest accrued and
outstanding with respect to such principal amount. Each such
principal prepayment shall be applied to installments of principal
payments in the inverse order of their maturity. As of and during
the continuance of an Event of Default (as defined in section 6),
interest on any principal or interest then outstanding shall accrue
at a rate per annum equal to 14%.
2.
Subordination .
(a)
Agreement to Subordinate .
Maker, for itself and its successors, and Payee, by its acceptance
of this Note, agrees that the payment of the principal of and
interest on, and any other amounts due in respect of, this Note is
subordinated in right of payment, to the extent and in the manner
stated in this Section 2, to the prior payment in full of the Bank
Debt. “
Bank Debt ”
means all amounts due and owing by Maker to U.S. Bank National
Association (the “
Bank ”),
pursuant to that certain Term Note (the
“Term Note” )
and Term Loan Agreement dated as of June 27, 2005 between Maker and
the Bank (the
“Term Loan Agreement” ).
(b)
No Payment on Note if Bank Debt is in Default
.
Notwithstanding anything in this Note to the contrary, no payment
on account of principal of, interest on or other amounts due in
respect of this Note, shall be made by or on behalf of Maker if, at
the time of such payment, or immediately after giving effect
thereto, there shall exist under the Bank Debt any default in the
payment of all or any portion of principal of or interest thereon,
which default shall have resulted in the full amount of the Bank
Debt being declared due and payable and which default shall not
have been cured or waived. The Maker shall notify Payee in writing
promptly following the occurrence of the foregoing. In the event
that, notwithstanding the provisions of this Section 2(b), payments
are made by or on behalf of Maker in contravention of the
provisions of this Section 2(b), such payments shall be held by
Payee in trust for the benefit of, and shall be paid over to and
delivered to, the Bank, for application to the payment of the Bank
Debt remaining unpaid to the extent necessary to pay the Bank Debt
in full in accordance with the terms of the Bank Debt, after giving
effect to any concurrent payment or distribution to the
Bank.
(c)
Reliance by the Bank on Subordination Provisions
.
Payee, by its acceptance hereof, acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an
inducement and a consideration for the Bank to continue to hold the
Bank Debt, and the Bank shall be deemed conclusively to have relied
on such subordination provisions in continuing to hold the Bank
Debt. In furtherance hereof, it is expressly understood by all
parties to this Note that the Bank is a third-party beneficiary to
Section 2 of this Note and shall be fully entitled to enforce its
provisions.
(d)
Subordination Rights Not Impaired by Acts or Omissions of Maker
or the Bank .
No right of the Bank to enforce subordination as provided herein
shall at any time in any way be prejudiced or impaired by any act
or failure to act on the part of Maker or by any act or failure to
act, in good faith, by the Bank, or by any noncompliance by Maker
with the terms of this Note, regardless of any knowledge thereof
which the Bank may have or be otherwise charged with.
(e)
Obligation of Maker Unconditional .
Nothing contained in this Section 2 or elsewhere in this Note is
intended to or shall impair, as between Maker and Payee, the
obligation of Maker, which is absolute and unconditional, to pay to
Payee the principal of and interest on this Note as and when the
same shall become due and payable in accordance with its terms, or
is intended to or shall affect the relative rights of Payee and
creditors of Maker other than the Bank, nor shall anything herein
prevent Payee from exercising all remedies otherwise permitted by
applicable law upon an Event of Default, subject to the rights, if
any, under this Section 2, of the Bank in respect of cash received
upon the exercise of any such remedy.
3.
Right of Offset .
Maker shall have the right to withhold and set-off against any
amount due or payable hereunder the amount of any claim for
indemnification or payment of Losses to which Maker may be entitled
under Section 6.2 of the Purchase Agreement, as provided in Section
6.3 thereof. The
withholding of all or any portion of the principal or interest due
or payable under this Note pursuant to the terms of Article 6 of
the Purchase Agreement shall not be deemed an Event of Default
under this Note and shall not be the basis for any claim of
acceleration hereunder.
4.
Conduct of Business of Maker .
Except as contemplated by the Merger Agreement, during the period
from the date hereof to the date on which all amounts due under
this Note have been satisfied in full, Maker agrees as
follows:
(a)
Maker will (i) preserve its existence, rights and franchises; (ii)
not make any material change in the nature or manner of its
business activities; (iii) not liquidate, dissolve, acquire another
entity or merge or consolidate with or into another entity or
change its form of organization; (iv) not amend its organizational
documents in any manner that may conflict with any terms or
condition of this Note, the Security Agreement or the Purchase
Agreement; and (iv) not sell, lease transfer or otherwise dispose
of all or substantially all of its assets.
(b)
Maker will not create, incur, assume or have outstanding any
indebtedness for borrowed money (including capitalized leases)
except (i) any indebtedness owing to the Bank and its affiliates,
(ii) any indebtedness owing to Payee, and (iii) any other
indebtedness outstanding on the date hereof, and shown on the
Maker’s financial statements delivered to Payee prior to the
date hereof, provided that such other indebtedness will not be
increased.
(c)
Maker will not create, incur, assume or permit to exist any
mort
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