DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, made this 6th day of August, 2001 between
Equitex, Inc., a Delaware corporation (the "Company") and Equitex 2000, Inc., a
Delaware corporation ("E2000")
WITNESSETH:
WHEREAS, on June 22, 2001, a special meeting of stockholders,
stockholders of the Company approved the distribution by they Company of all its
assets and liabilities to E2000 and the distribution by the Company of all the
outstanding shares of E2000 common stock to the stockholders of the Company on
the basis of one share of common stock of E2000 for each share of common stock
of the Company (the "Distribution");
WHEREAS, at the special meeting of stockholders, the Company's
stockholders approved a proposal to acquire all the outstanding capital stock of
Key Financial Systems and Nova Financial Systems, Inc. ("Key/Nova");
WHEREAS, E2000 a wholly-owned subsidiary of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and certain other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto covenant and
agree as follows:
ARTICLE 1
ACTIONS PRIOR TO DISTRIBUTION
1.1 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. Subject to the
conditions set forth in Article 3, on or before the Distribution Date, as
defined in Section 2.1, below, the Company shall take all necessary action to
sell, assign, transfer and distribute to E2000 all of its assets and E2000
agrees to assume, pay, perform or discharge in due course all of the Company's
liabilities as they exist immediately prior to the Distribution Date. In
exchange for the assumption of certain liabilities of the Company, E2000 will
receive 78,339 shares of the Company's common stock and a warrant exercisable
for five years to purchase up to 78,339 shares of the Company's common stock at
an exercise price of $5.76 per share.
1.2 ISSUANCE OF STOCK. Prior to the Distribution Date, the Company and
E2000 shall take all steps necessary so that the number of shares of E2000
common stock, $.01 par value per share (the "E2000 Common Stock"), outstanding
and held by the Company shall equal the number of shares of Equitex Common
Stock, $.02 par value per share ("Equitex Common Stock"), outstanding on the
Record Date, as defined in Section 2.1, below.
1.3 TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION. To the extent
that any transfers contemplated by this Article 1 shall not have been
consummated by the Distribution Date, the Company and E2000 shall cooperate to
effect such transfers as promptly following the Distribution
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Date as practicable. Nothing herein shall be deemed to require the transfer of
any assets or the assumption of any liabilities which by their terms or
operation of law cannot be transferred or assumed; provided, however, that the
Company and E2000 and their respective subsidiaries shall cooperate to obtain
any necessary consents or approvals for the transfer of all assets and
liabilities listed on Exhibit A attached hereto.
ARTICLE 2
THE DISTRIBUTION
2.1 RECORD DATE AND DISTRIBUTION DATE. The date for determining
stockholders of the Company who shall be entitled to receive the Distribution is
July 20, 2001 (the "Record Date"). Subject to the satisfaction or waiver of all
of the conditions set forth in Article 3, the date on which the Distribution
shall be made (the "Distribution Date") shall be August 3, 2001.
2.2 DISTRIBUTION AGENT. Prior to the Distribution Date, E2000 shall
enter into an agreement with a transfer agent registered pursuant to Section
17A(c) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
to distribute the shares of E2000 Common Stock to the Company's stockholders in
accordance with this Article 2 (the "Distribution Agent").
2.3 DELIVERY OF SHARE CERTIFICATE TO AGENT. On the Distribution Date,
the Company or E2000 shall deliver to the Distribution Agent share certificates
representing all of the shares of E2000 Common Stock to be distributed to the
Company's stockholders in connection with the Distribution to be held by the
Distribution Agent and distributed as provided in Section 2.4 below.
2.4 THE DISTRIBUTION. Subject to the terms and conditions of this
Agreement, E2000 shall instruct the Distribution Agent to distribute, upon
effectiveness of E2000's Registration Statement on Form 10, one share of E2000
Common Stock in respect of each share of Equitex Common Stock held by the
holders of record of Equitex Common Stock on the Record Date.
2.5 PRIVATE PLACEMENT PROCEEDS. The Company agrees to act as escrow
agent and to promptly transfer to E2000 all proceeds in excess of the $5,000,000
or net proceeds required to complete the Key/Nova transaction, from private
placements of the Company's securities, including the placement of the Company's
Series H 8% Convertible Preferred Stock and Series I 6% Convertible Preferred
Stock, which are received by the Company after the date hereof, and prior to
August 20, 2001.
ARTICLE 3
CONDITIONS TO THE DISTRIBUTION
3.1 CONDITIONS TO OBLIGATIONS. The obligations of the Company and E2000
to consummate the transactions contemplated hereby are subject to the
satisfaction or waiver of each of the following conditions:
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(a) the transactions contemplated hereby shall have shall been approved
the Company's stockholders;
(b) all transactions contemplated by Article 1 hereof shall have been
completed in all material respects;
(c) the Agreements and Plans of Reorganization between the Company and
Key/Nova shall have been approved by the respective stockholders of the
Company and Key/Nova (the "Key/Nova Merger");
(d) all conditions to the Key/Nova Merger, other than the transactions
contemplated by this Agreement, shall have been satisfied;
(e) all third-party consents and governmental approvals required in
connection with the transactions contemplated hereby shall have been
received, except where the failure to obtain such consents or approvals
would not have a material adverse effect on either (i) the ability of the
Company and E2000 to consummate the transactions contemplated by this
Agreement; or (ii) the business, assets, liabilities, financial condition
or results of operations of the Company or E2000 and their respective
subsidiaries, taken as a whole; and
(f) the transactions contemplated hereby shall be in compliance with
all applicable federal and state securities laws.
ARTICLE 4
NO REPRESENTATIONS OR WARRANTIES
4.1 NO REPRESENTATIONS OR WARRANTIES. Except as expressly set forth
herein or any other agreement between the parties, the Company and E2000
understand and agree that neither party is, in this Agreement or any other
agreement or document effecting the Distribution, representing or warranting to
the Company or E2000 in any way as to the assets or liabilities being
transferred or assumed pursuant to Article 1, it being agreed and understood
that E2000 shall take all of the assets "as is, where is."
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ARTICLE 5
INDEMNIFICATION
5.1 INDEMNIFICATION. E2000 shall (i) indemnify, defend and hold the
Company harmless from and against any of the liabilities assumed pursuant to
Section 1.1, and (ii) prosecute or assume the defense of and indemnify and hold
the Company harmless against all claims, costs, liabilities, and attorney's fees
arising out of or related to the matters captioned THEOHAROUS, ET AL. V. XXXXX
XXXX, EQUITEX, INC., XXXXXXX X. XXXXXXX AND METROMEDIA INTERNATIONAL GROUP,
INC., Civil Action Xx. 0-00- XX-0000 (X.X. Xxxxxxxx Court for the Northern
District of Georgia); XXXXXX XXXXXXXX, ET AL. V. XXXXX XXXX, EQUITEX, INC.,
XXXXXXX X. XXXXXXX AND METROMEDIA INTERNATIONAL GROUP, INC., Civil Action No.
1-98-CV-2366 (U.S. District Court for the Northern District of Georgia); and
EQUITEX, INC. AND XXXXX XXXX X. XXXXXXXX X. XXXXX, Case Xx. 00 XX 0000 (Xxxxxxxx
Xxxxx, Xxxxxxxx Xxxxxx, Xxxxxxxx).
ARTICLE 6
ACCESS TO INFORMATION
6.1 ACCESS TO INFORMATION. From and after the Distribution Date, each
of the Company and E2000 shall provide to the other and the other's
representatives, reasonable access and duplicating rights during normal business
hours to all records, books, contracts, instruments, computer data and other
data and information (collectively, "Information"), within the possession or
control of such party relating to the other party's pre-Distribution business,
assets or liabilities or relating to or arising in connection with the
relationship between the parties on or prior to the Distribution Date, insofar
as such access is reasonably required for a reasonable purpose and to the extent
that such information is not or may not be protected from disclosure pursuant to
the attorney- client, the work product doctrine or other applicable privileges.
Without limiting the foregoing, Information may be requested under this Section
6.1 for audit, accounting, claims, litigation and tax purposes, as well as for
purposes of fulfilling disclosure and reporting obligations.
6.2 RETENTION OF RECORDS. Except as otherwise agreed in writing, or as
otherwise provided in other agreements between the parties, each of the Company
and E2000 shall retain all Information in such party's possession or under its
control, relating directly and predominately to the pre-Distribution business,
assets or liabilities of the other party until such Information is at least six
years old or until such later date as may be required by law.
ARTICLE 7
MISCELLANEOUS
7.1 TERMINATION. This Agreement and the transactions contemplated
hereby shall terminate if the conditions to closing have not been satisfied on
or before October 1, 2001 or by mutual consent of the Company and E2000.
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7.2 ENTIRE AGREEMENT. This Agreement and the exhibits hereto contain
the complete agreement among the parties with respect to the transactions
contemplated hereby and supersede all prior agreements and understandings among
the parties with respect to such transactions. Section and other headings are
for reference purposes only and shall not affect the interpretation or
construction of this Agreement. The parties hereto have not made any
representation or warranty except as expressly set forth in this Agreement or in
any certificate or schedule delivered pursuant hereto. The obligations of any
party under any agreement executed pursuant to this Agreement shall not be
affected by this Section.
7.3 SURVIVAL OF AGREEMENTS. All covenants and agreements of the Company
and E2000 contained in this Agreement shall survive the Distribution Date.
7.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
7.5 SUCCESSORS; ASSIGNMENT. This Agreement and the rights, interests,
and obligations hereunder shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, by operation of law or otherwise, by any of the parties hereto without
the prior written consent of the other.
7.6 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Delaware.
7.7 WAIVER AND OTHER ACTION. This Agreement may be amended, modified,
or supplemented only by a written instrument executed by the parties against
which enforcement of the amendment, modification or supplement is sought.
7.8 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance; and in lieu of
such illegal, invalid, or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
7.9 MUTUAL CONTRIBUTION. The parties to this Agreement and their
counsel have mutually contributed to its drafting. Consequently, no provision of
this Agreement shall be construed against any party on the ground that such
party drafted the provision or caused it to be drafted or the provision contains
a covenant of such party.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Equitex, Inc.
By:/s/ Xxxxx Xxxx
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Name: Xxxxx Xxxx
Title: President
Equitex 2000, Inc.
By:/s/ Xxxxx Xxxx
-------------------------
Name: Xxxxx Xxxx
Title: President
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