SECURITY AGREEMENT
This
SECURITY AGREEMENT, dated as of August 1, 2007 (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”).
WITNESSETH:
WHEREAS,
the Debtor and the Secured Party are parties to the certain Asset Purchase
Agreement, dated as of July 25, 2007 (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 _____________________ (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.
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“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.
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“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;
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(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.
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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 fees and related expenses reasonably incurred in connection
therewith; and
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(ii) Furnish
to the Secured Party from time to time statements and schedules further
identifying and describing the Collateral and its location and such other
reports in connection with the Collateral as the Secured Party may reasonable
request, all in reasonable detail and in form reasonably satisfactory to the
Secured Party.
5.2 Covenants
Concerning Debtor’s Legal Status.
Without
providing at least 30 days’ prior written notice to the Secured Party, the
Debtor will not change its name, its place of business or, if more than one,
chief executive office, or its mailing address or organizational identification
number if it has one. If the Debtor does not have an organizational
identification number and later obtains one, the Debtor shall forthwith notify
the Secured Party of such organizational identification number. The Debtor
will
not change its type of organization, jurisdiction of organization or other
legal
structure.
5.3 Covenants
Concerning Collateral.
The
Collateral, to the extent not delivered to the Secured Party, will be kept
at
those locations listed on the Perfection Certificate and the Debtor will not
remove the Collateral from such locations, without providing at least thirty
days prior written notice to the Secured Party. Except as previously pledged
and
assigned to the Senior Secured Party, and except for the security interest
herein granted, the Debtor shall be the owner of or have other rights in the
Collateral free from any right or claim of any other Person, lien, security
interest or other encumbrance, and the Debtor shall defend the same against
all
claims and demands of all Persons at any time claiming the same or any interests
therein adverse to the Secured Party. The Debtor (i) shall not pledge, mortgage
or create, or suffer to exist any right of any Person in or claim by any Person
to the Collateral, or any security interest, lien or encumbrance in the
Collateral in favor of any Person, other than the Senior Secured Party and
the
Secured Party; (ii) will keep the Collateral in good order and repair and will
not use the same in violation of law or any policy of insurance thereon; (iii)
will permit the Secured Party, or its designee, to inspect the Collateral at
any
reasonable time, wherever located; (iv) will pay promptly when due all taxes,
assessments, governmental charges and levies upon the Collateral or incurred
in
connection with the use or operation of such Collateral or incurred in
connection with this Agreement; (v) will continue to operate its business in
compliance with all applicable provisions of the federal Fair Labor Standards
Act, as amended, and with all applicable provisions of federal, state and local
statutes and ordinances dealing with the control, shipment, storage or disposal
of hazardous materials or substances; and (vi) will not sell or otherwise
dispose, or offer to sell or otherwise dispose, of the Collateral or any
interest therein except for sales and leases of inventory in the ordinary course
of business.
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5.4 Maintain
Records.
The
Debtor will keep and maintain at its own cost and expense reasonably
satisfactory and complete records of the Collateral.
5.5 Other
Actions as to Any and All Collateral.
The
Debtor will, at the request and option of the Secured Party, take any and all
other actions the Secured Party may determine to be necessary or useful for
the
attachment and perfection of, and the ability of the Secured Party to enforce,
the Secured Party’s security interest in any and all of the Collateral,
including, without limitation, (i) executing, delivering and, where appropriate,
filing financing statements and amendments relating thereto under the Uniform
Commercial Code, to the extent, if any, that the Debtor’s signature thereon is
required therefor, (ii) causing the Secured Party’s name to be noted as secured
party on any certificate of title for a titled good if such notation is a
condition to attachment, perfection or priority of, or ability of the Secured
Party to enforce, the Secured Party’s security interest in such Collateral,
(iii) complying with any provision of any statute, regulation or treaty of
the
United States as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of the Secured
Party to enforce, the Secured Party’s security interest in such Collateral, (iv)
obtaining governmental and other third party waivers, consents and approvals
in
form and substance satisfactory to Secured Party, including, without limitation,
any consent of any licensor, lessor or other Person obligated on Collateral,
(v)
obtaining waivers from mortgagees and landlords in form and substance
satisfactory to the Secured Party and (vi) taking all actions under any earlier
versions of the Uniform Commercial Code or under any other law, as reasonably
determined by the Secured Party to be applicable in any relevant Uniform
Commercial Code or other jurisdiction, including any foreign
jurisdiction.
5.6 Right
of Inspection.
The
Secured Party shall at all times on a confidential basis have full and free
access during normal business hours to the Collateral and to all the books,
correspondence and records of the Debtor, and the Secured Party and its
representatives may examine the same, take extracts therefrom and make
photocopies thereof, and the Debtor agrees to render the Secured Party, at
the
Debtor’s cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. The Secured Party and its
representatives shall (i) at all times also have the right to enter into and
upon any premises where any of the Inventory or Equipment is located for the
purpose of inspecting the same or observing its use, and (ii) after an Event
of
Default has occurred, to repossess any or all of the Collateral.
5.7 Payment
of Obligations.
The
Debtor will pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon the Collateral, as well as all claims of any
kind
(including, without limitation, claims for labor, materials, supplies and
services) against or with respect to the Collateral, except that no such charge
need be paid if (i) the validity thereof is being contested in good faith by
appropriate proceedings, (ii) the Debtor has promptly notified the Secured
Party
of the existence of such proceedings and such proceedings do not involve, in
the
good faith and reasonable opinion of the Secured Party, any material danger
for
the sale, forfeiture or loss of any material portion of the Collateral or any
material interest therein and (iii) such charge is adequately reserved against
on the Debtor’s books in accordance with generally accepted accounting
principles.
-8-
5.8 Negative
Pledge.
Without
the consent of the Secured Party, the Debtor will not create, incur or permit
to
exist, will defend the Collateral against, and will take such other action
as is
necessary to remove, any Lien or claim on or to the Collateral, other than
the
Liens created hereby and other than Permitted Liens.
5.9 Limitations
on Dispositions of Collateral.
Without
the express prior written consent of the Secured Party (which consent the
Secured Party may withhold or delay in its complete and sole discretion), the
Debtor will not sell, transfer, lease or otherwise dispose of any of the
Collateral, or attempt, offer or contract to do so, except for sales Inventory
in the ordinary course of its business and except for, so long as no Event
of
Default shall have occurred and be continuing, the disposition in the ordinary
course of business of items of Equipment which have become worn out or
obsolete.
5.10 Expenses
Incurred by Secured Party.
In the
Secured Party’s discretion, if the Debtor fails to do so, the Secured Party may
discharge taxes and other encumbrances at any time levied or placed on any
of
the Collateral, maintain any of the Collateral, make repairs thereto and pay
any
necessary filing fees or insurance premiums. The Debtor agrees to reimburse
the
Secured Party on demand for all expenditures so made. The Secured Party shall
have no obligation to the Debtor to make any such expenditures, nor shall the
making thereof be construed as the waiver or cure of any Default or Event of
Default.
5.11 Secured
Party’s Obligations and Duties.
Anything herein to the contrary notwithstanding, the Debtor shall remain
obligated and liable under each contract or agreement comprised in the
Collateral to be observed or performed by the Debtor thereunder. The Secured
Party shall not have any obligation or liability under any such contract or
agreement by reason of or arising out of this Agreement or the receipt by the
Secured Party of any payment relating to any of the Collateral, nor shall the
Secured Party be obligated in any manner to perform any of the obligations
of
the Debtor under or pursuant to any such contract or agreement, to make inquiry
as to the nature or sufficiency of any payment received by the Secured Party
in
respect of the Collateral or as to the sufficiency of any performance by any
party under any such contract or agreement, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any
amounts which may have been assigned to the Secured Party or to which the
Secured Party may be entitled at any time or times. The Secured Party’s sole
duty with respect to the custody, safe keeping and physical preservation of
the
Collateral in its possession, under Section 9-207 of the Uniform Commercial
Code
of the State or otherwise, shall be to deal with such Collateral in the same
manner as the Secured Party deals with similar property for its own
account.
ARTICLE
VI
POWER
OF
ATTORNEY
6.1 Following
the occurrence and continuance of an Event of Default, Debtor hereby irrevocably
constitutes and appoints the Secured Party and any officer or agent thereof,
with full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of the Debtor and
in
the name of the Debtor or in its own name, from time to time in the Secured
Party’s reasonable discretion, for the purpose of enforcing the Secured Party’s
rights under Article VII below, to take any and all appropriate action by any
technologically available means, which may include, without limitation, any
form
of electronic data transmission, and to execute in any appropriate manner,
which
may include, without limitation, using any symbol that the Secured Party may
adopt to signify the Debtor’s intent to authenticate, any and all documents and
instruments which may be reasonably necessary or desirable to enforce Secured
Party’s rights under Article VII below.
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The
Debtor hereby ratifies all that said attorneys shall lawfully do or cause to
be
done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
ARTICLE
VII
REMEDIES;
RIGHTS UPON DEFAULT
7.1 Rights
and Remedies Generally.
If an
Event of Default shall occur and be continuing, then and in every such case,
the
Secured Party shall have all the rights and remedies of a secured party under
the UCC, shall have all rights now or hereafter existing under all other
applicable laws, and, subject to any mandatory requirements of applicable law
then in effect, shall have all the rights set forth in this Security Agreement
or the Note and all the rights set forth with respect to the Collateral or
this
Security Agreement in any other security agreement between the
parties.
7.2 Assembly
of Collateral.
If an
Event of Default shall occur and be continuing, upon five (5) days’ notice to
the Debtor, the Debtor shall, at its own expense, assemble the Collateral (or
from time to time any portion thereof) and make it available to the Secured
Party at any place or places designated by the Secured Party which is reasonably
convenient to both parties.
7.3 Disposition
of Collateral.
The
Secured Party will give the Debtor reasonable notice of the time and place
of
any public sale of the Collateral or any part thereof or the time after which
any private sale or any other intended disposition thereof is to be made. The
Debtor agrees that the requirements of reasonable notice to it shall be met
if
such notice is mailed, postage prepaid to its address specified in
Section 7.3 of the Purchase Agreement (or such other address that the
Debtor may provide to the Secured Party in writing) at least ten (10) days
before the time of any public sale or after which any private sale may be made.
The Proceeds of any sale, disposition or other realization upon all or any
part
of the Collateral shall be distributed by the Secured Party in the following
order of priorities: First, to the Secured Party in an amount sufficient to
pay
in full the reasonable costs of the Secured Party in connection with such sale,
disposition or other realization, including all fees, costs, expenses,
liabilities and advances reasonably incurred or made by the Secured Party in
connection therewith, including, without limitation, reasonable attorneys’ fees;
Second, to the Secured Party in an amount equal to the then unpaid Secured
Obligations; and Finally, upon payment in full of the Secured Obligations,
to
the Debtor or its representatives, in accordance with the UCC or as a court
of
competent jurisdiction may direct.
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7.4 Recourse.
The
Debtor shall remain liable for any deficiency if the proceeds of any sale or
other disposition of the Collateral are insufficient to satisfy the Secured
Obligations. The Debtor shall also be liable for all expenses of the Secured
Party reasonably incurred in connection with collecting such deficiency,
including, without limitation, the reasonable fees and disbursements of
attorneys employed by the Secured Party to collect such deficiency.
7.5 Expenses;
Attorneys’ Fees.
The
Debtor shall reimburse the Secured Party for all its reasonable expenses in
connection with the exercise of its rights under this Article VII, including,
without limitation, all reasonable attorneys’ fees and legal expenses incurred
by the Secured Party. Expenses of retaking, holding, preparing for sale, selling
or the like shall include the reasonable attorneys’ fees and legal expenses of
the Secured Party. All such expenses shall be secured hereby.
7.6 Limitation
on Duties Regarding Preservation of Collateral.
The
Secured Party’s sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of
the UCC or otherwise, shall be to deal with it in the same manner as the Secured
Party deals with similar property for its own account.
(a) The
Secured Party shall have no obligation to take any steps to preserve rights
against prior parties to any Collateral.
(b) Neither
the Secured Party nor any of its directors, officers, employees or agents shall
be liable for failure to demand, collect or realize upon all or any part of
the
Collateral or for any delay in doing so or shall be under any obligation to
sell
or otherwise dispose of any Collateral upon the request of the Debtor or
otherwise.
ARTICLE
VIII
MISCELLANEOUS
8.1 Limitation
on the Secured Party’s Duty in Respect of Collateral.
The
Secured Party shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it takes such action
as
the Debtor requests in writing, but failure of the Secured Party to comply
with
any such request shall not in itself be deemed a failure to act reasonably,
and
no failure of the Secured Party to do any act not so requested shall be deemed
a
failure to act reasonably.
8.2 Reinstatement.
This
Security Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against the Debtor for liquidation
or reorganization, should the Debtor become insolvent or make an assignment
for
the benefit of creditors or should a receiver or trustee be appointed for all
or
any significant part of the Debtor’s property and assets, and shall continue to
be effective or be reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored
or
returned by any obligee of the Secured Obligations, whether as a “voidable
preference,” “fraudulent conveyance,” or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
-11-
8.3 Governing
Law; Waiver of Jury Trial.
(i) This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Washington without regard to the principles of conflicts of law
thereof.
(ii) Each
of
the parties hereto consents to the jurisdiction of any state or federal court
located within the county of San Francisco in the State of California, and
irrevocably agrees that all actions or proceedings relating to this Agreement
or
the transactions contemplated hereby shall be litigated in one of such courts,
and each of the parties waives any objection that it may have based on improper
venue or forum
non conveniens
to the
conduct of any such action or proceeding in any such court and waives personal
service of any and all process upon it, and consents to all such service of
process made in the manner set forth in Section 8.4. Nothing contained in this
Section 8.3(ii) shall affect the right of any party to serve legal process
on
any other party in any other manner permitted by law.
(iii) Each
party acknowledges and agrees that any controversy which may arise under this
Agreement is likely to involve complicated and difficult issues, and therefore
each such party hereby irrevocably and unconditionally waives any right such
party may have to a trial by jury in respect of any litigation directly or
indirectly arising out of or relating to this Agreement or the transactions
contemplated by this Agreement. Each party certifies and acknowledges that
(i)
no representative, agent or attorney of any other party has represented,
expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce the foregoing waiver, (ii) each such party
understands and has considered the implications of this waiver, (iii) each
such
party makes this waiver voluntarily, and (iv) each such party has been induced
to enter into this agreement by, among other things, the waivers and
certifications in this Section 8.3(iii).
8.4 Notices.
Except
as otherwise expressly provided herein, all notices, requests and demands to
or
upon the respective parties hereto to be effective shall be in made in
accordance with all of the provisions of Section 7.3 of the Purchase
Agreement.
8.5 Successors
and Assigns.
This
Security Agreement shall be binding upon and inure to the benefit of the Debtor,
the Secured Party, all future holders of the Secured Obligations and their
respective successors and assigns, except that the Debtor may not assign or
transfer any of its rights or obligations under this Security Agreement without
the prior written consent of the Secured Party, which consent the Secured Party
may withhold or delay in its sole and complete discretion.
8.6 Waivers
and Amendments.
None of
the terms or provisions of this Security Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed
by
the party against whom enforcement is sought. In the case of any waiver, the
Debtor and the Secured Party shall be restored to their former position and
rights hereunder and under the outstanding Secured Obligations, and any Event
of
Default waived shall be deemed to be cured and not continuing, but no such
waiver shall extend to any subsequent or other Event of Default, or impair
any
right consequent thereon.
-12-
8.7 No
Waiver; Remedies Cumulative.
No
failure or delay on the part of the Secured Party in exercising any right,
power
or privilege hereunder and no course of dealing between the Debtor and the
Secured Party shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Secured Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Secured Party would otherwise have on any future occasion. The rights and
remedies herein expressly provided are cumulative and may be exercised singly
or
concurrently and as often and in such order as the Secured Party deems expedient
and are not exclusive of any rights or remedies which the Secured Party would
otherwise have whether by security agreement or now or hereafter existing under
applicable law. No notice to or demand on the Debtor in any case shall entitle
the Debtor to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Secured Party to
any
other or future action in any circumstances without notice or
demand.
8.8 Termination;
Release.
When
the Secured Obligations have been indefeasibly paid and performed in full this
Security Agreement shall terminate, and the Secured Party, at the request and
sole expense of the Debtor, will execute and deliver to the Debtor the proper
instruments (including UCC termination statements) acknowledging the termination
of this Security Agreement, and will duly assign, transfer and deliver to the
Debtor, without recourse, representation or warranty of any kind whatsoever,
such of the Collateral as may be in the possession of the Secured Party and
has
not theretofore been disposed of, applied or released.
8.9 Headings
Descriptive.
The
headings of the several Sections and subsections of this Security Agreement
are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
8.10 Severability.
In case
any provision in or obligation under this Security Agreement or the Secured
Obligations shall be invalid, illegal or unenforceable in any jurisdiction,
the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall
not in any way be affected or impaired thereby.
8.11 EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER DOCUMENT.
[THIS
SPACE INTENTIONALLY LEFT BLANK]
-13-
IN
WITNESS WHEREOF, the Debtor and the Secured Party have caused this Security
Agreement to be duly executed and delivered as of the date first above
written.
|
THE
DEBTOR
ITEX
CORPORATION
|
||
| |
|
|
| By: | ||
|
Name:
Xxxxxx Xxxxx
Title:
Chief Executive Officer
|
||
|
Address:
0000
- 000xx
Xxx XX, Xxxxx 000
Xxxxxxxx,
XX 00000-0000
|
||
|
SECURED
PARTY
THE
INTAGIO GROUP, INC.
|
||
| |
|
|
| By: | Xxxx Xxxx | |
|
Title:
President
|
||
-14-
ANNEX
A
PERFECTION
CERTIFICATE
(UCC
Financing Statements)
The
undersigned, the President of ITEX Corporation, a Nevada corporation (the
“Debtor”), hereby certifies, with reference to a certain Security Agreement
dated July 25, 2007 (the “Security Agreement”) (terms defined in such Security
Agreement having the same meanings herein as specified therein), between the
Debtor and The Intagio Group, Inc., a Delaware corporation (the “Secured
Party”),
to
the Secured Party as follows:
1. Name.
The
exact legal name of the Debtor as that name appears on its Restated Articles
of
Incorporation filed with the Nevada Secretary of State is as follows: ITEX
Corporation.
2. Other
Identifying Factors.
(a) The
following is a mailing address for the Debtor: 0000 - 000xx
Xxx XX,
Xxxxx 000, Xxxxxxxx, XX 00000-0000.
| (b) |
If
different from its indicated mailing address, the Debtor’s place of
business or, if more than one, its chief executive office is located
at
the following address:
|
|
Address
|
County
|
State
|
|
Not
applicable
|
| (c) |
The
following is the type of organization of the Debtor:
Corporation
|
| (d) |
The
following is the jurisdiction of the Debtor’s organization:
Nevada
|
| (e) |
The
following is the Debtor’s state issued organizational identification
number: C6527-1985
|
3. Other
Names.
(a) The
following is a list of all other names (including trade names or similar
appellations) used by the Debtor, or any other business or organization to
which
the Debtor became the successor by merger, consolidation, acquisition, change
in
form, nature or jurisdiction of organization or otherwise, now or at any time
during the past five years:
ITEX
Payment Systems
(b) Attached
hereto as Schedule
3
is the
information required in Section 2 for any other business or organization to
which the Debtor became the successor by merger, consolidation, acquisition
of
assets, change in form, nature or jurisdiction of organization or otherwise,
now
or at any time during the past five years: None
4. Other
Current Locations.
(a) The
following are all other locations in the United States of America in which
the
Debtor maintains any books or records relating to any of the Collateral
consisting of accounts, instruments, chattel paper, general intangibles or
mobile goods:
|
Address
|
County
|
State
|
|
None
|
(b) The
following are all other places of business of the Debtor in the United States
of
America:
|
Address
|
County
|
State
|
|
None
|
(c) The
following are all other locations in the United States of America where any
of
the Collateral consisting of inventory or equipment is located:
|
Address
|
County
|
State
|
|
None
|
(d) The
following are the names and addresses of all Persons or entities other than
the
Debtor, such as lessees, consignees, warehousemen or purchasers of chattel
paper, which have possession or are intended to have possession of any of the
Collateral consisting of instruments, chattel paper, inventory or
equipment:
|
Name
|
Xxxxxxx
Xxxxxxx
|
Xxxxxx
|
Xxxxx
|
|
Xxxx
|
0. Prior
Locations.
(a) Set
forth
below is the information required by Section 4 (a) or (b) with respect to each
location or place of business previously maintained by the Debtor at any time
during the past five years in a state in which the Debtor has previously
maintained a location or place of business at any time during the past four
months:
|
Address
|
County
|
State
|
|
Not
applicable
|
(b) Set
forth
below is the information required by Section 4(c) or (d) with respect to each
other location at which, or other Person or entity with which, any of the
Collateral consisting of inventory or equipment has been previously held at
any
time during the past twelve months:
|
Name
|
Mailing
Address
|
County
|
State
|
|
Not
applicable
|
6. Fixtures.
Attached
hereto as Schedule
6 is
the
information required by UCC Section 9-502(b) or Section 9-402(5) of each state
in which any of the Collateral consisting of fixtures are or are to be located
and the name and address of each real estate recording office where a mortgage
on the real estate on which such fixtures are or are to be located would be
recorded.
7. Unusual
Transactions.
Except
for those purchases, acquisitions and other transactions described on
Schedule
3
or on
Schedule
7
attached
hereto, all of the Collateral has been originated by the Debtor in the ordinary
course of the Debtor’s business or consists of goods which have been acquired by
the Debtor in the ordinary course from a Person in the business of selling
goods
of that kind.
8. UCC
Filings. A
duly
authorized financing statement, in a form acceptable to the Secured Party and
containing the indication of the Collateral set forth on Schedule
8(A)
has
been, or will be as of the Closing Date, duly filed in the central Uniform
Commercial Code filing office in the jurisdiction identified in Section 2(d)
and
in each real estate recording office referred to on Schedule
6
hereto.
IN
WITNESS WHEREOF, I have hereunto signed this Certificate on August 1,
2007.
Schedule
3 - Other Names
None
Schedule
6 - Fixtures
None
Schedule
7 - Unusual Transactions
None
Schedule
8(A) - Collateral Description
Debtor:
ITEX
Corporation
Secured
Party: The
Intagio Group, Inc.
The
collateral covered by this Financing Statement is 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.
