TERMINATION OF WARRANT AGREEMENT
EXHIBIT
4.1
This
Termination of Warrant Agreement is
dated
effective as of June 16, 2006, by and between Equitex, Inc., a Delaware
corporation (the “Company”),
and
Corporate Stock Transfer (the “Warrant
Agent”),
with
respect to that certain Warrant Agreement dated as of February 7, 2005
(the “Warrant
Agreement”).
A. On
February 8, 2005, the Company began a dividend distribution of an aggregate
of
3,046,038 Common Stock Class A Redeemable Warrants (the “Class
A Warrants”)
and
3,046,038 Common Stock Class B Redeemable Warrants (the “Class
B Warrants”)
to
purchase an equivalent number of shares of our common stock, respectively.
The
dividend distribution was made to the Company’s stockholders of record as of
February 7, 2005.
B. The
terms
of the Class A Warrants and Class B Warrants are governed by the Warrant
Agreement. Among other things, the Warrant Agreement states that neither the
Class A nor Class B Warrants are exercisable until the effectiveness of a
registration statement covering the issuance of common stock upon exercise
of
the Class A and Class B Warrants.
C. On
April
28, 2005, the Company filed with the SEC a Registration Statement on Form S-3
for the registration of the issuance of common stock upon exercise of the Class
A and Class B Warrants.
D. After
the
filing of the S-3 Registration Statement, the SEC Staff took the position that
the Company’s distribution of the Class A and Class B Warrants constituted a
simultaneous unregistered and non-exempt offer of the common stock purchasable
under such warrants, which simultaneous offer was a violation of Section 5
of
the Securities Act of 1933. As a result, the Company’s S-3 Registration
Statement was never declared effective.
E. On
August
30, 2005, the Company filed with the SEC a Registration Statement on Form S-4
for the registration of (i) the exchange of the Class A and Class B Warrants
for
two new classes of warrants denominated Common Stock Class C Redeemable Warrants
(the “Class
C Warrants”)
and
Common Stock Class D Redeemable Warrants (the “Class
D Warrants”),
and
(ii) the registration of issuance of common stock upon the exercise of the
Class
C and Class D Warrants. In connection with the exchange offer contemplated
by
the S-4 Registration Statement, the Company reached an agreement with the
Warrant Agent to enter into a new Warrant Agreement in August 2005 with terms
and conditions substantially identical to the existing Warrant Agreement (the
“New
Warrant Agreement”).
The
New Warrant Agreement has not, however, been executed and delivered by the
parties.
F. After
the
filing of the S-4 Registration Statement, the SEC Staff informed the Company
that it could not approve the effectiveness of the S-4 Registration Statement
because the exchange offer would not, in the opinion of the SEC Staff, cure
the
Company’s alleged violation of Section 5 of the Securities Act of 1933. The SEC
Staff subsequently informed the Company that, in the opinion of the SEC Staff,
the Warrant Agreement would have to be terminated and both the S-3 Registration
Statement and S-4 Registration Statement withdrawn.
G. As
a
result of the foregoing, the Company has determined that it will be unable
to
obtain the effectiveness of any registration statement relative to the common
stock that would be issuable under the Class A Warrants, Class B Warrants,
Class
C Warrants or Class D Warrants. This renders all of those warrants valueless
since, by their terms, they can never be exercised without such
registration.
H. The
Company has since filed registration statement withdrawal requests with the
SEC
on May 24, 2006. Furthermore, the Company has determined to terminate the
Warrant Agreement and the Warrant Agent has no objection to such
termination.
I. Pursuant
to Section 6.6 of the Warrant, the parties may terminate the Warrant Agreement
by mutual agreement, including for the purpose of curing defective provisions.
Because the SEC Staff has taken the position that the transactions contemplated
by the Warrant Agreement constitute a violation of Section 5 of the Securities
Act of 1933, the Company has determined that the entire Warrant Agreement
(together with the subject warrants) is defective.
J. The
parties have determined to enter into this Agreement to terminate the Warrant
Agreement and the warrants issued pursuant thereto.
AGREEMENT
Now,
Therefore,
in
consideration of the facts set forth in paragraphs A-K above, and for other
good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. The
parties hereby terminate the Warrant Agreement.
2. The
parties hereby disclaim and terminate the New Warrant Agreement, as defined
in
paragraph F above.
3. As
a
result of this Agreement and the terminations effected hereby, the Class A
Warrants, Class B Warrants, Class C Warrants and Class D Warrants are hereby
extinguished and terminated forevermore.
4. This
Agreement shall be governed by the laws of the State of Delaware without regard
to its conflict-of-law principles.
In
Witness Whereof,
this
Warrant Agreement has been duly executed by the parties hereto to be effective
as of the date first above written.
EQUITEX,
INC.:
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/S/
XXXXX XXXX
Xxxxx
Xxxx,
Chief
Executive Officer
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CORPORATE
STOCK TRANSFER:
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/S/
XXXXX XXXXXXXXX
Xxxxx
Xxxxxxxxx,
Secretary,
Manager of Operations
Department
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