SENIOR SUBORDINATED SECURED PROMISSORY NOTE

Exhibit 10.1

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 THE COMPANY TO SUCH EFFECT  IS PROVIDED TO THE COMPANY IN CONNECTION THEREWITH.

SENIOR SUBORDINATED SECURED PROMISSORY NOTE

          This Senior Subordinated Secured Promissory Note (this “ Note ”) is one of a series of notes (collectively, the “ Merger Notes ”) that is being delivered pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement” ),dated as of June 30, 2005, by and among ITEX Corporation, a Nevada corporation (“ Maker ”), BXI Exchange, Inc., BXI Acquisition Sub, Inc., and The Intagio Group, Inc. (the “ Stockholders’ Representative ”).  The Merger Notes are being issued as non-negotiable senior subordinated secured obligations of Maker and rank senior to all of Maker’s other obligations, whether now existing or hereinafter incurred or created, except that the Merger Notes are subordinated to the Bank Debt (as defined in Section 2 hereof) as set forth herein.  This Note ranks pari passu with the other Merger Notes in all respects.  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 June 30, 2005, by and between Maker and the Stockholders’ Representative (the “Security Agreement” ).  Capitalized terms not otherwise defined herein shall have the meaning given such terms in the Merger Agreement.

          1.           Principal and Interest . Maker hereby promises to pay to ______________, together with his 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 6.0% 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 36 equal monthly installments of $_____________ payable on the last day of each calendar month commencing on July 31, 2005 (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 June 30, 2008.  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 the Stockholders’ Representative 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.

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          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 8.2 (a)(ii) of the Merger Agreement, as provided in Section 8.2 (b)(i) 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 8 of the Merger 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 the Merger Notes 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 the Merger Notes, the Security Agreement or the Merger 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 the holders of the Merger Notes (the “Holders” ), and (iii) any other indebtedness outstanding on the date hereof, and shown on the Maker’s financial statements delivered to the Holders 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 mortgage, pledge, encumbrance or other lien or levy upon or security interest in any of the Maker’s property now owned or hereafter acquired, excep