SECURITY
AGREEMENT
This SECURITY AGREEMENT, dated as of August 1,
2008 (as the same may from time to time be amended, supplemented or
otherwise modified, this “ Security Agreement
”), by and between The Intagio Group, Inc., a Delaware
corporation (the “ Secured Party ”), and ITEX
Corporation, a Nevada corporation (the “ Debtor
”).
W I T N E S S E T H
:
WHEREAS, the Debtor and the Secured Party are
parties to the certain Asset Purchase Agreement, dated as of August
1, 2008 (the “ Purchase Agreement ”), which
provides for, among other things, the issuance to the Secured Party
of non-negotiable senior subordinated secured promissory note (the
“ Note ”) in the aggregate principal amount of
$687,500 (subject to adjustment as provided by the Purchase
Agreement); and
WHEREAS, it is a condition precedent to the
consummation of the transactions contemplated by the Purchase
Agreement that the Debtor execute and deliver this Security
Agreement to the Secured Party.
NOW, THEREFORE, the parties hereto hereby agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms . As used herein, capitalized terms defined in
this Agreement and not otherwise defined herein are used herein as
so defined.
“ Account Debtor ” shall mean
the Person who is obligated on a Receivable.
“ Accounts ” shall mean
“accounts” as such term is defined in
Section 9-102(2) of the UCC.
“ Chattel Paper ” shall mean
“chattel paper” as such term is defined in
Section 9-102(11) of the UCC.
“ Collateral ” shall have the
meaning assigned to it in Article II hereof.
“ Collateral Records ” shall
mean books, records, computer software, computer printouts,
customer lists, blueprints, technical specifications, manuals, and
similar items which relate to any Collateral other than such items
obtained under license or franchise security agreements which
prohibit assignment or disclosure of such items.
“ Contracts ” means all
contracts, undertakings, franchise agreements or other agreements
in or under which the Debtor now holds or hereafter acquires any
right, title or interest, including, without limitation, with
respect to an Account, any agreement relating to the terms of
payment or the terms of performance thereof.
“ Documents ” shall mean
“documents” as such term is defined in
Section 9-102(30) of the UCC.
“ Equipment ” shall mean
“equipment” as such term is defined in
Section 9-102(33) of the UCC, including, without limitation,
machinery, manufacturing equipment, data processing equipment,
computers, office equipment, furniture, appliances, and
tools.
“ Event of Default ” shall
have the meaning assigned to it in the Note.
“ Fixtures ” shall mean
“fixtures” as such term is defined in
Section 9-102(41) of the UCC.
“ General Intangibles ” shall
mean “general intangibles” as such term is defined in
Section 9-102(42) of the UCC, including, without limitation,
rights to the payment of money (other than Receivables),
trademarks, copyrights, patents, and contracts, licenses and
franchises (except in the case of licenses and franchises in
respect of which the Debtor is the licensee or franchisee if the
agreement in respect of such license or franchise prohibits by its
terms any assignment or grant of a security interest), limited and
general partnership interests and joint venture interests, federal
income tax refunds, trade names, distributions on certificated
securities (as defined in § 8-102(a)(4) of the UCC) and
uncertificated securities (as defined in § 8-102(a)(18)
of the UCC), computer programs and other computer software,
inventions, designs, trade secrets, goodwill, proprietary rights,
customer lists, supplier contracts, sale orders, correspondence,
advertising materials, payments due in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of
any property, reversionary interests in pension and profit-sharing
plans and reversionary, beneficial and residual interests in
trusts, credits with and other claims against any Person, together
with any collateral for any of the foregoing and the rights under
any security agreement granting a security interest in such
collateral.
“ Instruments ” shall mean
“instruments” as such term is defined in
Section 9-102(47) of the UCC.
“ Inventory ” shall mean
“inventory” as such term is defined in
§ 9-102(48) of the UCC, including without limitation, all
goods (whether such goods are in the possession of the Debtor or of
a bailee or other Person for sale, lease, storage, transit,
processing, use or otherwise and whether consisting of whole goods,
spare parts, components, supplies, materials or consigned or
returned or repossessed goods), including without limitation, all
such goods which are held for sale or lease or are to be furnished
(or which have been furnished) under any contract of service or
which are raw materials or work in progress or materials used or
consumed in the Debtor’s business.
“ Investment Property ” shall
mean “investment property” as such term is defined in
Section 9-102(49) of the UCC.
“ Lien ” shall mean any
mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), or preference, priority or
other security agreement of any kind or nature whatsoever,
including, without limitation, the filing of any financing
statement or similar instrument under the UCC or comparable law of
any jurisdiction, domestic or foreign.
“ Permitted Liens ” shall
mean any of the following (1) Liens for taxes, fees,
assessments or other governmental charges which are not yet due and
payable or which are being contested in good faith with a reserve
or other appropriate provision having been made therefor;
(2) statutory liens of landlords, carriers, warehousemen,
mechanics, materialmen and other similar liens imposed by law which
are incurred in the ordinary course of business; (3) Liens
incurred or deposits made in the ordinary course of business in
connection with workers’ compensation, unemployment insurance
and other types of social security; (4) easements,
reservations, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in
any material respect with the ordinary conduct of the business of
the Debtor; (5) Liens in favor of the Secured Party and the
Senior Secured Party (as hereinafter defined); (6) Liens
existing on the date hereof and set forth on Schedule A
hereto; (7) Liens (i) upon or in any Equipment acquired
or held by the Debtor to secure the purchase price of such
Equipment or indebtedness incurred solely for the purpose of
financing the acquisition of such Equipment or (ii) existing
on such Equipment at the time of its acquisition, provided that the
Lien is confined solely to the Equipment so acquired, improvements
thereon and the Proceeds of such Equipment; (8) Liens arising
from judgments, decrees or attachments; and (9) other Liens not
described above securing outstanding aggregate indebtedness of less
than $50,000.
“ Person ” shall mean and
include any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any
government or political subdivision or agency, department or
instrumentality thereof.
“ Proceeds ” shall mean
“proceeds” as such term is defined in
Section 9-102(64) of the UCC.
“ Receivables ” shall mean
all rights to payment for goods sold or leased or services
rendered, whether or not earned by performance and all rights in
respect of the Account Debtor, including, without limitation, all
such rights in which the Debtor has any right, title or interest by
reason of the purchase thereof by the Debtor, and including,
without limitation, all such rights constituting or evidenced by
any Account, Chattel Paper, Instrument, General Intangible, note,
contract, invoice, purchase order, draft, acceptance, book debt,
intercompany account, security agreement, or other evidence of
indebtedness or security, together with (1) any collateral
assigned, hypothecated or held to secure any of the foregoing and
the rights under any security agreement granting a security
interest in such collateral; (2) all goods, the sale of which
gave rise to any of the foregoing, including, without limitation,
all rights in any returned or repossessed goods and unpaid
seller’s rights; (3) all guarantees, endorsements and
indemnifications on, or of, any of the foregoing; and (4) all
powers of attorney for the execution of any evidence of
indebtedness or security or other writing in connection
therewith.
“ Receivables Records ” shall
mean (1) all original copies of all documents, instruments or
other writings evidencing the Receivables; (2) all books,
correspondence, credit or other files, records, ledger sheets or
cards, invoices, and other papers relating to Receivables,
including, without limitation, all tapes, cards, computer tapes,
computer discs, computer runs, record keeping systems and other
papers and documents relating to the Receivables, whether in the
possession or under the control of the Debtor or any computer
bureau or agent from time to time acting for the Debtor or
otherwise; (3) all evidences of the filing of financing
statements and the registration of other instruments in connection
therewith and amendments, supplements or other modifications
thereto, notices to other creditors or secured parties, and
certificates, acknowledgments, or other writings, including without
limitation lien search reports, from filing or other registration
officers; (4) all credit information, reports and memoranda
relating thereto, and (5) all other written or non-written
forms of information related in any way to the foregoing or any
Receivable.
“ Secured Obligations ” means
the indebtedness and obligations of the Debtor evidenced by the
Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which the Debtor is
responsible under this Agreement or the Note.
“ UCC ” shall mean the
Uniform Commercial Code as the same may, from time to time, be in
effect in the State of Nevada; provided, however, in the event that
any or all of the attachment, perfection or priority of the Secured
Party’s security interest in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other
than the state of incorporation of the Debtor, the term
“UCC” shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection or priority and for
purposes of definitions related to such provisions.
ARTICLE II
GRANT OF SECURITY
INTERESTS
As security for the prompt and complete payment
and performance in full of all the Secured Obligations, the Debtor
hereby assigns, conveys, mortgages, and pledges, hypothecates and
transfers to the Secured Party and hereby grants to the Secured
Party a security interest in and continuing lien on all of the
Debtor’s right, title and interest in, to and under the
following, whether now owned or existing or hereafter acquired or
arising, and wherever located (all of which being hereinafter
collectively called the “ Collateral
”):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Collateral Records;
(iv) Contracts
(v) all Documents;
(vi) all Equipment;
(vii) all Fixtures;
(viii) all General Intangibles;
(ix) all Instruments;
(x) all Inventory;
(xi) all Investment Property;
(xii) all Receivables;
(xiii) all Receivables Records;
(xiv) all other tangible and intangible personal
property; and
(xv) all accessions, attachments and additions to
any or all of the foregoing, all substitutions and replacements for
any or all of the foregoing and all Proceeds or products of any or
all of the foregoing.
The Secured
Party acknowledges the security interest of U.S. Bank, N.A. (the "
Senior Secured Party ") in the Collateral and agrees and
confirms that the security interest granted hereunder shall be
subordinate in priority to the security interest of the Senior
Secured Party in the Collateral.
ARTICLE III
RIGHTS OF THE SECURED PARTY;
COLLECTION OF ACCOUNTS.
(a) Notwithstanding anything contained in this
Security Agreement to the contrary, the Debtor expressly agrees
that it shall remain liable under each of its Contracts and each of
its licenses to observe and perform all the conditions and
obligations to be observed and performed by it thereunder and that
it shall perform all of its duties and obligations thereunder, all
in accordance with and pursuant to the terms and provisions of each
such Contract or license. The Secured Party shall not have any
obligation or liability under any Contract or license by reason of
or arising out of this Security Agreement or the granting to the
Secured Party of a lien therein or the receipt by the Secured Party
of any payment relating to any contract or license pursuant hereto,
nor shall the Secured Party be required or obligated in any manner
to perform or fulfill any of the obligations of the Debtor under or
pursuant to any Contract or license, or to make any payment, or to
make any inquiry as to the nature or the sufficiency of any payment
received by it or the sufficiency of any performance by any party
under any Contract or license, or to present or file any claim, or
to take any action to collect or enforce any performance or the
payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
(b) The Secured Party authorizes the Debtor, upon
the occurrence and continuance of an Event of Default, to collect
its Accounts, provided that such collection is performed in a
prudent and businesslike manner, and the Secured Party may, upon
the occurrence and during the continuation of any Event of Default
and without notice, limit or terminate said authority at any time.
Upon the occurrence and during the continuance of any Event of
Default, at the request of the Secured Party, the Debtor shall
deliver to the Secured Party all original and other documents
evidencing and relating to the performance of labor or service
which created such Accounts, including, without limitation, all
original orders, invoices and shipping receipts.
(c) The Secured Party may at any time, upon the
occurrence and during the continuance of any Event of Default,
after notifying the Debtor of its intention to do so, notify
Account Debtors of the Debtor, parties to the Contracts of the
Debtor, obligors in respect of Instruments of the Debtor and
obligors in respect of Chattel Paper of the Debtor that the
Accounts and the right, title and interest of the Debtor in and
under such Contracts, Instruments and Chattel Paper have been
assigned to the Secured Party and that payments shall be made
directly to the Secured Party. Upon the request of the Secured
Party, the Debtor shall so notify such Account Debtors, parties to
such Contracts, obligors in respect of such Instruments and
obligors in respect of such Chattel Paper. Upon the occurrence and
during the continuance of any Event of Default, the Secured Party
may, in its name or in the name of others, communicate with such
Account Debtors, parties to such Contracts, obligors in respect of
such Instruments and obligors in respect of such Chattel Paper to
verify with such parties, to the Secured Party’s
satisfaction, the existence, amount and terms of any such Accounts,
Contracts, Instruments or Chattel Paper.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES
The Debtor has delivered to the Secured Party a
certificate signed by the Debtor and entitled “Perfection
Certificate” (the “Perfection Certificate”)
attached as Annex A. The Debtor represents and warrants to the
Secured Party as follows: (a) the Debtor’s exact legal name
is that indicated on the Perfection Certificate and on the
signature page hereof, (b) the Debtor is an organization of the
type, and is organized in the jurisdiction set forth in the
Perfection Certificate, (c) the Perfection Certificate accurately
sets forth the Debtor’s organizational identification number
or accurately states that the Debtor has none, (d) the Perfection
Certificate accurately sets forth the Debtor’s place of
business or, if more than one, its chief executive office, as well
as the Debtor’s mailing address, if different, (e) all other
information set forth on the Perfection Certificate pertaining to
the Debtor is accurate and complete, and (f) that there has been no
change in any information provided in the Perfection Certificate
since the date on which it was executed by the Debtor.
ARTICLE V
COVENANTS
The Debtor covenants and agrees with the Secured
Party that from and after the date of this Security
Agreement:
5.1 Further Assurances . The Debtor will from time to time at the
expense of the Debtor, promptly execute, deliver, file and record
all further instruments, endorsements and other documents, and take
such further action as the Secured Party may deem reasonably
desirable in obtaining the full benefits of this Security Agreement
and of the rights, remedies and powers herein granted, including,
without limitation, the following:
(i) The filing of any financing statements, in a
form reasonably acceptable to the Secured Party under the UCC or
applicable law, rule or regulation in effect in any jurisdiction
with respect to the Liens and security interests granted hereby.
The Debtor also hereby authorizes the Secured Party to file any
such financing statements, including without limitation
continuation statements, and amendments thereto, in all
jurisdictions and with all filing offices as the Secured Party may
determine, in its reasonable discretion are necessary or advisable
to perfect the security interests granted to the Secured Party in
connection herewith without the signature of the Debtor to the
extent permitted by applicable law. Such financing statements may
describe the Collateral in the same manner as described in this
Security Agreement or may contain an indication or description of
Collateral that describes such property in any other manner as the
Secured Party may determine, in its reasonable discretion, is
necessary, advisable or prudent to ensure the perfection of the
security interests in the Collateral granted to the Secured Party
in connection herewith, including, without limitation, describing
such property as “all assets” or “all personal
property.” A photocopy or other reproduction of this Security
Agreement shall be sufficient as a financing statement and may
filed in lieu of the original to the extent permitted by applicable
law. The Debtor will pay or reimburse the Secured Party for all
filing f
