PURCHASE AGREEMENT
Exhibit
10.1
THIS
PURCHASE AGREEMENT
(the
“Agreement”)
is
entered into as of the 15th day of September, 2005, by and among Equitex,
Inc.,
a
Delaware corporation; Pandora
Select Partners, L.P.,
a
British Virgin Islands limited partnership (“Pandora”)
and
Whitebox
Hedged High Yield Partners, L.P.,
a
British Virgin Islands limited partnership (“WHHY”).
Pandora and WHHY are individually referred to herein as a “Purchaser”
and
together as the “Purchasers.”
R
E C I T A L S
:
WHEREAS,
in
consideration of a $900,000.00 loan by Pandora and a $600,000.00 loan by WHHY
(representing $1,500,000 in the aggregate), the Company proposes to issue to
Pandora and WHHY, respectively, and each such Purchaser desires to severally
(and not jointly) purchase, a corresponding secured convertible promissory
note
in the form attached as Exhibit A (each, a “Note”
and
together, the “Notes”)
and a
warrant in the form attached as Exhibit B (each, a “Warrant”
and
together, the “Warrants”)
to
purchase (subject to certain adjustments) shares of the Company’s common stock,
$0.01 par value (the “Common
Stock”).
NOW,
THEREFORE,
in
consideration of the foregoing recitals and the mutual promises hereinafter
set
forth, the parties hereto agree as follows:
SECTION
1. AGREEMENT
TO SELL AND PURCHASE
1.1. Authorization
of Transactions.
On or
prior to the closing of the transactions contemplated in this Agreement (the
“Closing”),
the
Company shall have authorized the sale and issuance to the Purchasers of the
Notes, Warrants and the shares of Common Stock issuable upon conversion of
the
Notes, payment on the Notes and exercise of the Warrants (collectively, the
“Shares”),
in
accordance with and subject to the terms of the Notes and Warrants, as
applicable.
1.2. Sale
and Purchase.
Subject
to the terms and conditions hereof, at the Closing, the Company hereby agrees
to
issue and sell to each Purchaser, and each Purchaser severally (and not jointly)
agrees to purchase from the Company, such Purchaser’s respective Note and
Warrant for an aggregate purchase price from all Purchasers of
$1,500,000.
SECTION
2. CLOSINGS,
DELIVERIES AND PAYMENTS
2.1. Closing.
The
Closing shall take place at 10:00 a.m. on the date hereof at the offices of
the
Purchasers’ legal counsel, Xxxxxxxx & Xxxxxx P.A., in Minneapolis,
Minnesota, or at such other time or place as the Company and the Purchasers
may
mutually agree (the “Closing
Date”).
At the
Closing, subject to the terms and conditions hereof, the Company will issue,
sell and deliver to each Purchaser its respective Note and Warrant, against
payment by each Purchaser of its allocable portion of the $1,500,000 aggregate
purchase price by certified check or wire transfer of immediately available
funds. At the Closing, the Company shall also execute and deliver to the
Purchasers the Registration Rights Agreement in the form attached as
Exhibit
C
(the
“Registration
Rights Agreement”),
the
Amended Security Agreement in the form attached as Exhibit
D
(the
“Security
Agreement”)
and the
Stock Pledge Agreement in the form attached as Exhibit
E
(the
“Stock
Pledge Agreement”).
At the
Closing, the Company shall also cause Xxxxx Xxxx to execute and deliver to
the
Purchasers a Guaranty in the form attached as Exhibit
F
(the
“Guaranty”).
SECTION
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby makes the following representations and warranties to each of
the
Purchasers as of the Closing Date.
3.1. Organization,
Good Standing and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company’s only subsidiaries are (i)
FastFunds Financial Corporation, a Nevada corporation and its operating
subsidiary, Chex Services, Inc., a Minnesota corporation, and Denairs
Corporation, a Delaware corporation; and (ii) Nova Financial Systems, Inc.,
a
Florida corporation (each, a “Subsidiary”
and
together, the “Subsidiaries”).
The
Company has all requisite corporate power and authority to own and operate
its
properties and assets, to execute and deliver this Agreement, the Notes, the
Warrants, the Registration Rights Agreement, the Security Agreement and the
Stock Pledge Agreement (together, the “Transaction
Documents”),
to
pledge certain of the Company’s assets as described in the Security Agreement
and the Stock Pledge Agreement as security for the Notes (the “Collateral”),
to
issue and sell the Shares upon conversion of the Notes, upon payment on the
Notes and upon exercise of the Warrants, to carry out the provisions of the
Transaction Documents, and to carry on its business as presently conducted
and
as presently proposed to be conducted. Each Subsidiary is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization and has the power and authority to own or lease
its properties and to conduct its business as now conducted. The Company and
each of its Subsidiaries is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its activities and of
its
properties (both owned and leased) makes such qualification necessary, except
for those jurisdictions in which failure to be so qualified would not have
a
material
adverse effect on the Company, or its business or properties, taken as a
whole.
3.2. Capitalization.
The
authorized capital stock of the Company consists of 2,000,000 shares of
Preferred Stock, par value $0.01 per share, of which, as of the Closing Date,
3,055 shares of Series K are issued and outstanding; and 50,000,000 shares
of
Common Stock, par value $0.01 per share, of which 7,230,443 shares are issued
and 7,220,704 are outstanding. As of the Closing Date, and except as disclosed
on Schedule 3.2 or in the Company's quarterly annual and current reports or
other filings (the foregoing reports and filings being collectively referred
to
herein as the “SEC
Reports”)
filed
with the Securities and Exchange Commission (the “Commission”),
the
Company has no outstanding options, warrants or other rights to acquire any
capital stock, or securities convertible or exchangeable for capital stock
or
for securities themselves convertible or exchangeable for capital stock
(together, “Convertible
Securities”).
As of
the Closing Date, and except as disclosed on Schedule 3.2 or in the SEC Reports,
the Company has no agreement or commitment to sell or issue any shares of
capital stock or Convertible Securities. All issued and outstanding shares
of
the Company’s capital stock (i) have been duly authorized and validly issued,
(ii) are fully paid and nonassessable, (iii) are free from any preemptive and
cumulative voting rights and (iv) were issued pursuant to valid exemptions
under
federal and state securities laws. As of the Closing Date, and except as
disclosed on Schedule 3.2 or in the SEC Reports, there are no outstanding rights
of first refusal or proxy or shareholder agreements of any kind relating to
any
of the Company’s securities to which the Company or any of its executive
officers and directors is a party or as to which the Company otherwise has
knowledge of. When issued in compliance with the provisions of the Notes and
the
Warrants (and upon payment as provided by the Warrants), the Shares will be
validly issued, fully paid and nonassessable, and will be free of any liens
or
encumbrances; provided,
however,
that the
Shares may be subject to restrictions on transfer under applicable state and
federal securities laws.
3.3. Authorization;
Binding Obligations. All
corporate action on the part of the Company, its officers, directors and
shareholders necessary for the authorization of the Transaction Documents,
the
performance of all obligations of the Company hereunder and thereunder at the
Closing, including the pledge of the Collateral as security for the Notes,
and
the authorization, sale, issuance and delivery of the Shares upon conversion
of
the Notes, upon payment on the Notes and upon exercise of the Warrants in
accordance with and subject to the terms of the Notes and Warrants, as
applicable, has been taken or will be taken prior to the Closing. The
Transaction Documents, when executed and delivered, will be valid and binding
obligations of the Company enforceable in accordance with their terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) to the
extent that the enforceability of the indemnification provisions of the
Registration Rights Agreement may be limited by applicable laws. The sale of
the
Shares upon exercise of the Warrants or upon conversion of the Notes or upon
payment on the Notes is not and will not be subject to any preemptive rights
or
rights of first refusal.
3.4. Financial
Statements.
The
Company's audited consolidated balance sheet at December 31, 2004, and the
audited consolidated statements of operations, cash flows and stockholders’
deficit of the Company for the years ended, December 31, 2004 and 2003, and
the
Company's unaudited consolidated balance sheet at June 30, 2005, and the
unaudited consolidated statements of operations and cash flows of the Company
for the six months ended June 30, 2005 and 2004 (all of the foregoing together,
the “Financial
Statements”),
as
filed with the Commission, fairly present in all material respects the
consolidated financial condition, operating results and cash flow of the Company
as of the respective dates and for the respective periods covered thereby.
The
Financial Statements, as filed with the Commission, have been prepared in
accordance with generally accepted accounting principles in the United States
("GAAP")
applied
on a consistent basis (except as may be indicated in the notes thereto) and
comply in all material respects with applicable accounting requirements and
the
rules and regulations of the Securities and Exchange Commission (the
"Commission")
as in
effect at the time of filing with the Commission. For purposes hereof,
"Latest
Statement Date"
means
June 30, 2005 and "Latest
Financial Statements"
means
the unaudited financial statements of the Company at and for the six months
ended June 30, 2005.
3.5. Liabilities.
Neither
the Company nor any Subsidiaries (i) has any material liabilities and (ii)
to
the best of its knowledge, has any material contingent liabilities, in each
case
not otherwise disclosed in the Latest Financial Statements or in the SEC
Reports, except (A) current liabilities incurred in the ordinary course of
business subsequent to the Latest Statement Date and (B) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under GAAP to be reflected in the Latest Financial Statements, which,
in both cases have not had, either in any individual case or in the aggregate,
a
material adverse effect on the Company, or its business or properties, taken
as
a whole.
3.6. Certain
Agreements and Actions. Except
as
disclosed in the SEC Reports, neither the Company nor any Subsidiary has (i)
declared or paid any dividends, or authorized or made any distribution upon
or
with respect to any class or series of its capital stock, (ii) since the Latest
Statement Date, incurred any indebtedness for money borrowed or any other
material liabilities out of the ordinary course of business, (iii) made any
loans or advances to any person, other than ordinary advances for travel or
entertainment expenses or (iv) sold, exchanged or otherwise disposed of any
of its assets or rights, other than in the ordinary course of
business.
3.7. Obligations
of or to Related Parties.
Except
as disclosed on Schedule 3.7 or in the SEC Reports, there are no obligations
of
the Company or any Subsidiary to officers, directors or key employees of the
Company or any Subsidiary or, to the Company's knowledge, to any members of
their immediate families or other affiliates, other than (i) for accrued
salaries, (ii) reimbursement for expenses reasonably incurred on behalf of
the
Company or any Subsidiary and (iii) for other employee benefits made generally
available to all employees (including stock option agreements outstanding under
any stock option plan approved by the Board of Directors of the Company). Except
as disclosed on Schedule 3.7 or in the SEC Reports, to the Company's knowledge,
none of the officers, directors or key employees of the Company or any
Subsidiary or, to the Company's knowledge, any members of their immediate
families or other affiliates, are indebted to the Company or any Subsidiary
or
have any direct or indirect ownership interest in any firm, corporation or
other
entity with which the Company or any Subsidiary is affiliated or with which
the
Company or any Subsidiary has a business relationship, or any firm, corporation
or other entity that competes with the Company or any Subsidiary, except that
such officers, directors, employees and members of their immediate families
may
own securities (with beneficial ownership not exceeding 2%) in publicly-traded
companies that compete with the Company or any Subsidiary. Except as disclosed
on Schedule 3.7 or in the SEC Reports, no officer, director or key employee
of
the Company or any Subsidiary, or, to the Company’s knowledge, any member of
their immediate families or other affiliates, is, directly or indirectly,
interested in or a party to any material contract with the Company or any
Subsidiary. Except as disclosed on Schedule 3.7 or in the SEC Reports, neither
the Company nor any Subsidiary is a guarantor or indemnitor of any indebtedness
of any other person, firm or corporation.
3.8. Changes.
Since
the Latest Statement Date, and except as disclosed in the SEC Reports, there
has
not been, to the Company’s knowledge, any event or condition of any character
that, either individually or cumulatively, has materially and adversely affected
the business, assets, liabilities, financial condition, operations or prospects
of the Company.
3.9. Title
to Properties and Assets; Liens. Except
as
set forth on Schedule 3.9 or in the SEC Reports, the Company and each Subsidiary
has good and marketable title to its properties and assets, including the
properties and assets reflected in the Latest Financial Statements, in each
case
subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than
(i) those resulting from taxes that have not yet become delinquent,
(ii) liens and encumbrances that do not materially detract from the value
of the property subject thereto or materially impair the operations of the
Company or any Subsidiary and (iii) those that have otherwise arisen in the
ordinary course of business. With respect to the property and assets it leases,
the Company or any Subsidiary is in compliance with such leases in all material
respects and, to the Company's knowledge, holds a valid leasehold interest
free
of any liens, claims or encumbrances. All facilities, machinery, equipment,
fixtures and other properties owned, leased or used by the Company or any
Subsidiary are in good operating condition and repair and are reasonably fit
and
usable for the purposes for which they are being used, reasonable wear and
tear
excepted.
3.10. Patents
and Trademarks.
Schedule
3.10 contains a listing of all U.S. and foreign patents and patent applications,
and U.S. and foreign trademarks and service marks and applications therefor,
owned by, assigned to or licensed to the Company and each Subsidiary not
otherwise set forth in the SEC Reports. Except as set forth on Schedule 3.10
or
in the SEC Reports, the Company or any Subsidiary owns or has a valid right
to
use all patents, trademarks, service marks, trade names, copyrights, trade
secrets, information and other proprietary rights and processes necessary for
its business as now conducted and as proposed to be conducted, without any
known
infringement of the rights of others. The Company is not aware that any of
its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere
with
their duties to the Company or that would conflict with the Company’s business
as now conducted or proposed to be conducted. None of the execution or delivery
of, or the performance of the transactions contemplated by, the Transaction
Documents, the pledge of the Collateral by the Company to secure the Notes,
the
carrying on of the Company’s business by the employees of the Company nor the
conduct of the Company’s business as currently conducted or proposed to be
conducted will conflict with or result in a breach of the terms, conditions
or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any employee is now obligated. The Company does not
believe it is or will be necessary to utilize any inventions, trade secrets
or
proprietary information of any of its employees made prior to their employment
by the Company, except for inventions, trade secrets or proprietary information
that have been exclusively assigned to the Company.
3.11. Compliance
with Other Instruments.
Except
as disclosed on Schedule 3.11 or in the SEC Reports, neither the Company nor
any
Subsidiary is in violation or default of any term of its Articles or Certificate
of Incorporation, as applicable, or Bylaws (in each case, as amended or
restated), or in any material respect of any mortgage, indenture, contract,
agreement, instrument or contract to which it is party or by which it is bound
or of any judgment, decree, order, writ or, to its knowledge, any statute,
rule
or regulation applicable to the Company or any Subsidiary that would materially
and adversely affect the business, assets, liabilities, financial condition,
operations or prospects of the Company. The execution and delivery of, and
the
performance of and compliance with the transactions contemplated by, the
Transaction Documents, and the issuance and sale of the Shares upon conversion
of the Notes or upon exercise of the Warrants in accordance with the terms
thereof, respectively, will not, with or without the passage of time or giving
of notice, result in any such material violation, or be in conflict with or
constitute a default under any such term, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or any Subsidiary or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization
or
approval applicable to the Company or any Subsidiary, the business or operations
of the Company or any Subsidiary or any of the assets or properties of the
Company or any Subsidiary, except for such results that would not materially
and
adversely affect the business, assets, liabilities, financial condition,
operations or prospects of the Company.
3.12. Litigation.
Except
as disclosed in the SEC Reports, there is no action, suit, proceeding or
investigation pending or, to the Company’s knowledge, currently threatened
against the Company that questions the validity of this Agreement or the other
Transaction Documents or the right of the Company to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby.
Except as disclosed in the SEC Reports, there is no action, suit, proceeding
or
investigation or, to the Company’s knowledge, currently threatened against the
Company or any Subsidiary that might result, either individually or in the
aggregate, in any material adverse change in the assets, condition, affairs
or
prospects of the Company, financial or otherwise, or any change in the current
equity ownership of the Company. The foregoing includes, without limitation,
actions pending or threatened involving the prior employment of any of the
employees of the Company or any Subsidiary, their use in connection with the
business of the Company or any Subsidiary of any information or techniques
allegedly proprietary to any of their former employers or their obligations
under any agreements with prior employers. Neither the Company nor any
Subsidiary is a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality.
3.13. Tax
Returns and Payments.
Except
as set forth on Schedule 3.13, the Company and each Subsidiary has timely filed
all tax returns (federal, state and local) required to be filed by it. All
taxes
shown to be due and payable on such returns, any assessments imposed, and,
to
the Company’s knowledge, all other taxes due and payable by the Company or any
Subsidiary on or before the Closing have been paid or will be paid prior to
the
time they become delinquent. Except as set forth on Schedule 3.13, the Company
has not been advised (i) that any of the tax returns of the Company or any
Subsidiary have been or are being audited as of the date hereof or (ii) of
any deficiency in assessment or proposed judgment to its federal, state or
other
taxes. The Company has no knowledge of any liability of any tax to be imposed
upon the properties or assets of the Company or any Subsidiary as of the date
of
this Agreement that is not adequately provided for.
3.14. Employees.
Neither
the Company nor any Subsidiary has collective bargaining agreements with any
of
its employees. There is no labor union organizing activity pending or, to the
Company's knowledge, threatened with respect to the Company or any Subsidiary.
Except as set forth on Schedule 3.14 or in the SEC Reports, no employee has
any
agreement or contract, written or verbal, regarding his employment. Except
as
disclosed on Schedule 3.14 or in the SEC Reports, neither the Company nor any
Subsidiary is a party to or bound by any currently effective employment
contract, deferred compensation arrangement, bonus plan, incentive plan, profit
sharing or defined benefit plan, retirement agreement or other employee
compensation plan or agreement. To the Company’s actual knowledge, no employee
of the Company, nor any consultant with whom the Company has contracted, is
in
violation of any material term of any employment contract, proprietary
information agreement or any other agreement relating to the right of any such
individual to be employed by, or to contract with, the Company because of the
nature of the business to be conducted by the Company; and, to the Company’s
knowledge, the continued employment by the Company of its present employees,
and
the performance of the Company’s contracts with its independent contractors,
will not result in any such violation. The Company has not received any written
or oral notice alleging that any such violation has occurred. Except as
disclosed on Schedule 3.14 or in the SEC Reports, no employee of the Company
or
any Subsidiary has been granted the right to continued employment by the Company
or to any material compensation following termination of employment with the
Company. The Company is not aware that any officer or key employee, or that
any
group of key employees, intends to terminate their employment with the Company
or any Subsidiary, nor does the Company or any Subsidiary have a present
intention to terminate the employment of any officer, key employee or group
of
key employees.
3.15. Registration
Rights.
Except
(i) for registration rights granted pursuant to that certain Registration Rights
Agreement dated March 8, 2004 (the “March
2004 Registration Rights Agreement”),
(ii)
as disclosed on Schedule 3.15, or (iii) as set forth in the SEC Reports, or
(iv)
required pursuant to the Registration Rights Agreement, the Company is presently
not under any obligation, and has not granted any rights, to register (as
defined in the Registration Rights Agreement) any of the Company’s presently
outstanding securities or any of its securities that may hereafter be
issued.
3.16. Compliance
with Laws; Permits.
Except
as disclosed in the SEC Reports, neither the Company nor any Subsidiary is
in
violation of any applicable statute, rule, regulation, order or restriction
of
any domestic or foreign government or any instrumentality or agency thereof
in
respect of the conduct of its business or the ownership of its properties that
would materially and adversely affect the business, assets, liabilities,
financial condition, operations or prospects of the Company. No governmental
orders, permissions, consents, approvals or authorizations are required to
be
obtained and no registrations or declarations are required to be filed in
connection with the execution and delivery of, and the performance of the
transactions contemplated by, the Transaction Documents, the pledge of the
Collateral to secure the Notes or the issuance of the Shares upon conversion
of
the Notes upon payment of the Notes or upon exercise of the Warrants, except
such as has been duly and validly obtained or filed, or with respect to any
filings that must be made after the Closing, as will be filed in a timely
manner. Each of the Company and the Subsidiaries has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business
as
now being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects or financial condition of the Company
and the Company believes it can obtain any similar authority for the conduct
of
its business as now conducted or planned to be conducted.
3.17. Environmental
and Safety Laws.
Neither
the Company nor any Subsidiary is in violation of any applicable statute, law
or
regulation relating to the environment or occupational health and safety, where
such violation would have a material adverse effect on the Company, and to
the
Company’s knowledge, no material expenditures are or will be required in order
to comply with any such existing statute, law or regulation. Without limiting
the foregoing:
| (i) |
with
respect to any real
property owned, leased or otherwise utilized by the Company or any
Subsidiary (“Real
Property”),
neither the Company nor any Subsidiary is or has in the past been
in
violation of any Hazardous Substance Law which violation could reasonably
be expected to result in a material liability to the Company or its
properties and assets;
|
| (ii) |
neither
the Company, any Subsidiary nor, to the knowledge of the Company,
any
third party has used, released, generated, manufactured, produced
or
stored, in, on, under, or about any Real Property, or transported
thereto
or therefrom, any Hazardous Substances that could reasonably be expected
to result in a material liability to the Company under any Hazardous
Substance Law;
|
| (iii) |
to
the knowledge of the Company, there are no underground tanks, whether
operative or temporarily or permanently closed, located on any Real
Property that could reasonably be expected to result in a material
liability to the Company under any Hazardous Substance
Law;
|
| (iv) |
there
are no Hazardous Substances used, stored or present at, or on, or
to the
knowledge of the Company that could reasonably be expected to migrate
onto
any Real Property, except in compliance with Hazardous Substance
Laws;
and
|
| (v) |
to
the knowledge of the Company, there neither is nor has been any condition,
circumstance,
action, activity or event that could reasonably be expected to be
a
material violation by the Company or any Subsidiary of any Hazardous
Substance Law, or to result in liability to the Company or any Subsidiary
under any Hazardous Substance Law.
|
For
purposes hereof, “Hazardous
Substances”
means
(statutory acronyms and abbreviations having the meaning given them in the
definition below of “Hazardous
Substances Laws”)
substances defined as “hazardous substances,” “pollutants” or “contaminants” in
Section 101 of the CERCLA; those substances defined as “hazardous waste,”
“hazardous materials” or “regulated substances” by the RCRA; those substances
designated as a “hazardous substance” pursuant to Section 311 of the CWA;
those substances defined as “hazardous materials” in Section 103 of the
HMTA; those substances regulated as a hazardous chemical substance or mixture
or
as an imminently hazardous chemical substance or mixture pursuant to
Sections 6 or 7 of the TSCA; those substances defined as “contaminants” by
Section 1401 of the SDWA, if present in excess of permissible levels; those
substances regulated by the Oil Pollution Act; those substances defined as
a
pesticide pursuant to Section 2(u) of the FIFRA; those substances defined
as a source, special nuclear or by-product material by Section 11 of the
AEA; those substances defined as “residual radioactive material” by
Section 101 of the UMTRCA; those substances defined as “toxic materials” or
“harmful physical agents” pursuant to Section 6 of the OSHA; those
substances defined as hazardous wastes in 40 C.F.R. Part 261.3; those
substances defined as hazardous waste constituents in 40 C.F.R.
Part 260.10, specifically including Appendix VII and VIII of Subpart D of
40 C.F.R. Part 261; those substances designated as hazardous substances in
40 C.F.R. Parts 116.4 and 302.4; those substances defined as hazardous
substances or hazardous materials in 49 C.F.R. Part 171.8; those substances
regulated as hazardous materials, hazardous substances, or toxic substances
in
40 C.F.R. Part 1910; any chemical, material, toxin, pollutant, or waste
regulated by or in any other Hazardous Substances Laws; and in the regulations
adopted and publications promulgated pursuant to said laws, whether or not
such
regulations or publications are specifically referenced herein.
“Hazardous
Substances Law”
means
any of:
|
(i)
|
the
Comprehensive Environmental Response, Compensation, and Liability
Act of
1980, as amended (42 U.S.C. Section 9601 et
seq.)
(“CERCLA”);
|
|
(ii)
|
the
Federal Water Pollution Control Act (33 U.S.C. Section 1251
et
seq.)
(“Clean
Water Act”
or
“CWA”);
|
|
(iii)
|
the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901
et
seq.)
(“RCRA”);
|
|
(iv)
|
the
Atomic Energy Act of 1954 (42 U.S.C. Section 2011 et
seq.)
(“AEA”);
|
|
(v)
|
the
Clean Air Act (42 U.S.C. Section 7401 et
seq.)
(“CAA”);
|
|
(vi)
|
the
Emergency Planning and Community Right to Know Act (42 U.S.C.
Section 11001 et
seq.)
(“EPCRA”);
|
|
(vii)
|
the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 136 et
seq.)
(“FIFRA”);
|
|
(viii)
|
the
Oil Pollution Act of 1990 (33 U.S.C.A. Section 2701 et
seq.);
|
|
(ix)
|
the
Safe Drinking Water Act (42 U.S.C. Sections 300f et
seq.)
(“SDWA”);
|
|
(x)
|
the
Surface Mining Control and Reclamation Act of 1974 (30 U.S.C.
Sections 1201 et
seq.)
(“SMCRA”);
|
|
(xi)
|
the
Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.)
(“TSCA”);
|
|
(xii)
|
the
Hazardous Materials Transportation Act (49 U.S.C. Section 5101
et
seq.)
(“HMTA”);
|
|
(xiii)
|
the
Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C.
Section 7901 et seq.) (“UMTRCA”);
|
|
(xiv)
|
the
Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.)
(“OSHA”);
and
|
|
(xv)
|
all
other federal, state and local governmental rules which govern Hazardous
Substances, and the regulations adopted and publications promulgated
pursuant to all such foregoing
laws.
|
3.18. Offering
Valid.
Assuming
the accuracy of the representations and warranties of the Purchasers contained
in Section 4, the offer, sale and issuance of the Notes and the Warrants (and
the Shares issuable upon conversion of the Notes, upon payment on the Notes
or
upon exercise of the Warrants) will be exempt from the registration requirements
of the Securities Act of 1933, as amended (the “Securities
Act”),
and
will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements
of
the State of Minnesota.
3.19. Full
Disclosure.
None of
this Agreement, the Notes, the Warrants, the Registration Rights Agreement,
the
Security Agreement or the Stock Pledge Agreement contains any untrue statement
of a material fact nor, to the Company’s knowledge and belief, omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.
3.20. Insurance.
The
Company has fire and casualty insurance policies with coverage customary for
companies similarly situated to the Company.
3.21. Investment
Company Act.
The
Company is not, and will not use the proceeds from the Notes in a manner so
as
to become, an “investment company,” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as
amended.
3.22. Security
Interest in Collateral.
The
Company owns the Collateral free and clear of all claims, liens or encumbrances
of any kind, except for the security interests granted in such Collateral
pursuant to that certain Security Agreement dated March 8, 2004 (the
“Original
Security Agreement”).
Upon
consummation of the transactions as contemplated hereby, the Purchasers will,
together, have a first priority security interest in the
Collateral.
3.23. Foreign
Corrupt Practices; Xxxxxxxx-Xxxxx.
(a) Neither
the Company, nor to the knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly, used any
corrupt funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or
to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or made
by
any person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any material respect any provision of
the
Foreign Corrupt Practices Act of 1977, as amended.
(b) The
Company is in compliance in all material respects with all provisions of the
Xxxxxxxx-Xxxxx Act of 2002 (and related rules of the Commission) that are
applicable to it as of the Closing Date.
3.24. Brokers
or Finders.
Except
as set forth in Schedule 3.24, the Company has not incurred nor will incur,
directly or indirectly, any liability for any brokerage or finders’ fees or
agent’s commissions or any similar charges (whether payable in cash, in equity
securities or by a combination thereof) in connection with this Agreement or
any
transaction contemplated hereby.
3.25. Reporting
Status. Except
as
set forth in Schedule 3.25, the Company has filed on a timely basis all SEC
Reports required to be filed by it under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange
Act")
for the
twelve months preceding the date hereof or such shorter period as the Company
has been required by law to file such SEC Reports or has timely filed a valid
extension of such time of filing and has filed any such SEC Reports prior to
the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they were made, not misleading.
3.26 NASDAQ
Compliance.
The
Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
Act, and is quoted on the NASDAQ SmallCap Market (the “NASDAQ”).
The
Company has taken no action designed to, or likely to have the effect of, and
the transactions contemplated by this Agreement will not have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
de-listing of the Common Stock from the NASDAQ. Except as disclosed in the
SEC
Reports, the Company has not received any notification that the Commission,
the
NASD, the NASDAQ or any other self-regulatory organizational body is
contemplating terminating such registration or listing. Without limiting the
foregoing, the Transaction Documents and the transactions contemplated by them
require no stockholder approval under the rules or interpretations of the
NASDAQ.
3.27.
No Manipulation of Stock.
Neither
the Company, nor any of its directors, officers or controlling persons, has
taken or will, in violation of applicable law, take, any action designed to
or
that might reasonably be expected to cause or result in, or which has
constituted, stabilization or manipulation of the price of the Common Stock
to
facilitate the sale or resale of the securities issued or issuable in connection
with the transactions contemplated hereunder.
SECTION
4. REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER
Each
Purchaser hereby severally, but not jointly, represents and warrants to the
Company as of the Closing Date and agrees, as follows:
4.1. Authorization.
Such
Purchaser has full power and authority to enter into this Agreement and each
of
the Transaction Documents, and each such agreement, when executed and delivered
by such Purchaser, will constitute the valid and binding obligation of the
Purchaser enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of
general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) to the
extent that the enforceability of the indemnification provisions of the
Registration Rights Agreement may be limited by applicable laws.
4.2. Investment
Representations.
Such
Purchaser understands that neither the offer nor the sale of the Purchaser’s
Note, the Warrant or the Shares has been registered under the Securities Act.
The Purchaser also understands that the Purchaser’s Note and Warrant are being
offered and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon the Purchaser’s representations contained in
the Agreement. The Purchaser hereby represents and warrants as
follows:
(a) Purchaser
Bears Economic Risk. The
Purchaser has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company so
that
it is capable of evaluating the merits and risks of its investment in the
Company and has the capacity to protect its own interests. The Purchaser must
bear the economic risk of this investment indefinitely unless the Purchaser’s
respective Note or Warrant (or the Shares) are registered pursuant to the
Securities Act, or an exemption from registration is available. Except as
contemplated by the Registration Rights Agreement, the Purchaser has no present
intention of selling or otherwise transferring its respective Note, the Warrant
or the Shares, or any interest therein. The Purchaser also understands that
there is no assurance that any exemption from registration under the Securities
Act will be available and that, even if available, such exemption may not allow
the Purchaser to transfer all or any portion of the Purchaser’s respective Note,
the Warrant or the Shares under the circumstances, in the amounts or at the
times the Purchaser might propose.
(b) Acquisition
for Own Account.
Except
as contemplated by the Registration Rights Agreement, the Purchaser is acquiring
its respective Note, the Warrant and the Shares for its own account for
investment only, and not with a view towards their public
distribution.
(c) Purchaser
Can Protect Its Interest.
The
Purchaser represents that by reason of its, or of its management’s, business or
financial experience, the Purchaser has the capacity to protect its own
interests in connection with the transactions contemplated in this Agreement,
the Note, the Warrant and the Registration Rights Agreement. Further, the
Purchaser is aware of no publication of any advertisement in connection with
the
transactions contemplated in the Agreement.
(d) Accredited
Investor.
The
Purchaser represents that it is an accredited investor within the meaning of
Rule 501 of Regulation D of the Securities Act.
(e) Residence.
The
Purchaser represents that it is organized under the laws of the British Virgin
Islands and that its principal office is located in the State of
Minnesota.
(f) Rule
144.
The
Purchaser acknowledges and agrees that its respective Note and Warrant, and,
if
issued, its Shares, must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration
is
available. The Purchaser has been advised or is aware of the provisions of
Rule 144 promulgated under the Securities Act, which permits limited resale
of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things: the availability of certain
current public information about the Company, the resale occurring not less
than
one year after a party has purchased and paid for the security to be sold,
the
sale being through an unsolicited “broker’s transaction” or in transactions
directly with a market maker (as such term is defined under the Exchange Act)
and the number of shares being sold during any three-month period not exceeding
specified limitations.
4.3. Transfer
Restrictions. The
Purchaser acknowledges and agrees that its respective Note and Warrant and,
if
issued, its Shares, are subject to restrictions on transfer and will bear
restrictive legends.
SECTION
5. CONDITIONS FOR CLOSING
5.1. Conditions
for the Company to Satisfy.
The
several obligations
of each Purchaser to purchase its respective Note and Warrant as contemplated
by
this Agreement is subject to satisfaction of the following contingencies at
or
prior to the Closing:
(a) The
Company shall have executed and delivered to the Purchasers at Closing the
Transaction Documents.
(b) The
Company shall have paid Whitebox Advisors a $45,000 cash origination fee, plus
all reasonable out-of-pocket expenses for due diligence, related to the
transactions contemplated hereby.
(c) Xxxxxx
Xxxxxxx Xxxxxx & Brand, LLP, legal counsel to the Company, shall have
delivered an opinion to the Purchasers with respect to the following matters
(which opinion may contain customary exclusions and limitations that are
reasonably acceptable to counsel for the Purchasers):
|
The
Company is a corporation duly incorporated, validly existing and
in good
standing under the laws of the State of Delaware. The Company has
all
corporate power and authority necessary to own its properties and
to
conduct its business as, to our knowledge, it is presently
conducted.
|
|
(ii)
|
The
Company has the requisite corporate power and authority to execute,
deliver and perform its obligations under the Transaction
Documents.
|
|
(iii)
|
The
Transaction Documents have been duly authorized by all necessary
corporate
action on the part of the Company.
|
|
(iv)
|
The
authorized capital stock of the Company consists of 50,000,000 shares
of
Common Stock, par value $0.01 per share, and 2,000,000 shares of
Preferred
Stock, par value $0.01 per share. To our knowledge, except as described
in
the Purchase Agreement (including the schedules and exhibits thereto),
there are no other presently outstanding preemptive rights to purchase
from the Company any of the authorized but unissued stock of the
Company.
|
|
(v)
|
Each
of the Transaction Documents, when executed and delivered by the
Company,
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their
terms.
|
|
(vi)
|
When
issued in compliance with the provisions of the Notes and Warrants
(and
upon payment as provided by the Warrants), the Shares will be validly
issued, fully paid and nonassessable, and will be free of any liens
or
encumbrances; provided, however, that the Shares may be subject to
restrictions on transfer under applicable state and federal securities
laws.
|
|
(vii)
|
The
execution and delivery of the Transaction Documents by the Company
will
not result in (i) a violation of the Company's Certificate of
Incorporation or Bylaws (in each case, as amended or restated) or
(ii) to
our knowledge, a violation or default under any agreement known by
us to
which the Company is a party or by which any of its properties or
assets
are bound.
|
|
(viii)
|
To
our knowledge, except as disclosed in the SEC Reports, there is no
other
action, suit, proceeding or investigation pending or currently threatened
against the Company that questions the validity of the Purchase Agreement
or the other Transaction Documents, or the right of the Company to
enter
into any of such agreements, or to consummate the transactions
contemplated thereby. To our knowledge, except as disclosed in the
SEC
Reports, neither the Company nor any Subsidiary is a party or subject
to
the provisions of any order, writ, injunction, judgment or decree
of any
court or government agency or instrumentality.
|
|
(ix)
|
Upon
consummation of the transactions contemplated by the Transaction
Documents, including delivery of the Security Agreement, and filing
of a
UCC Financing Statement covering the Collateral, a security interest
in
the Collateral will attach in favor of the
Purchasers.
|
SECTION
6. OTHER AGREEMENTS
The
Company covenants and agrees to the following (as to which the failure to comply
shall constitute an event of default under (i) the Notes, the Security Agreement
and the Stock Pledge Agreement, and (ii) the notes issued pursuant to that
certain Purchase Agreement dated March 8, 2004 between the Company and the
Investors).
6.1 Reporting
Requirements. The
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by
the
Company after the date hereof pursuant to the Exchange Act.
6.2 Internal
Accounting Controls.
The
Company shall maintain a system of internal accounting controls sufficient
to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared
with
the existing assets at reasonable intervals and appropriate action is taken
with
respect to any differences. The Company shall maintain disclosure controls
and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) that
are
designed to ensure that material information relating to the Company, including
its subsidiaries, is made known to the certifying officers by others within
those entities, particularly during the period in which the Company's Form
10-KSB (or 10-K) or Form 10-QSB (or 10-Q), as the case may be, is being
prepared.
6.3. Inspection.
The
Company shall permit any person designated by the Purchasers to visit and
inspect any of the properties of the Company, to examine the books and records
of the Company and make copies thereof and to discuss the affairs of the Company
with its officers, employees and independent accountants at such reasonable
times and intervals as the Purchasers may request; provided, however, that
each
of the Purchasers and each such person designated by the Purchasers shall have
executed a confidentiality agreement reasonably acceptable to the
Company.
6.4. Indebtedness.
The
Company will not incur, create, issue, assume or suffer to exist any
Indebtedness that ranks equal or senior in right of payment of the Notes without
the prior written consent of the Purchasers. For purposes hereof, “Indebtedness”
means
with respect to any person at the time of any determination, without
duplication, all obligations, contingent or otherwise, which in accordance
with
GAAP should be classified upon such person's balance sheet as liabilities,
but
in any event including: (a) obligations for borrowed money, (b) obligations
evidenced by bonds, debentures, notes or other similar instruments, (c)
obligations upon which interest charges are customarily paid or accrued, (d)
obligations under conditional sale or other title retention agreements relating
to property purchased by such person, (e) obligations for the deferred purchase
price of property or services, (f) obligations secured by any lien on property
owned or acquired subject thereto, whether or not the obligation secured thereby
has been assumed and whether or not the obligation secured is the obligation
of
the owner or another party, (g) capitalized lease obligations and contingent
obligations; (i) net liabilities under any interest rate swap, collar or other
interest rate hedging agreement, and (j) all obligations of any partnership
or
joint venture in which the Company is or may become personally liable.
SECTION
7. MISCELLANEOUS
7.1. Governing
Law.
This
Agreement shall be governed by the laws of the State of Minnesota as such laws
are applied to agreements between Minnesota residents entered into and performed
entirely in Minnesota.
7.2. Survival.
The
representations, warranties, covenants and agreements made herein shall survive
any investigation made by the parties and the closing of the transactions
contemplated hereby. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall
be
deemed to be representations and warranties by the Company hereunder solely
as
of the date of such certificate or instrument.
7.3. Successors
and Assigns.
Except
as otherwise expressly provided herein, the provisions hereof shall inure to
the
benefit of, and be binding upon, the successors, assigns, heirs, executors
and
administrators of the parties hereto and shall inure to the benefit of and
be
enforceable by each person who shall be a holder of the Notes, the Warrants
or
the Shares from time to time.
7.4. Entire
Agreement.
The
Transaction Documents and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to
any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
7.5. Severability.
In case
any provision of the Agreement shall be invalid, illegal or unenforceable,
the
validity, legality and enforceability of the remaining provisions shall not
in
any way be affected or impaired thereby.
7.6. Amendment
and Waiver.
This
Agreement may be amended or modified, and any provision hereunder may be waived,
only upon the written consent of the Company and Purchasers.
7.7. Notices.
All
notices, requests, consents, and other communications hereunder shall be in
writing and shall be deemed effectively given and received (a) when made if
delivered in person (with written confirmation of receipt) or (b) on the date
received if sent by national overnight courier service or (c) when receipt
is
acknowledged by the receiving party if delivered by facsimile or electronic
email, addressed as follows:
|
(a)
|
if
to the Company, at
Equitex,
Inc.
0000
Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxx Xxxx, President
Facsimile:
(000) 000-0000
Email:
xxxxx@xxxxxxx.xxx
with
a copy to:
Xxxxxx
Xxxxxxx Xxxxxx & Brand, LLP
3300
Xxxxx Fargo Center, 00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx,
Xxxxxxxxx 00000
Attention:
Xxxxxxx X. Xxxxx, Esq.
Facsimile:
(000) 000-0000
Email:
xxxx.xxxxx@xxxxxx.xxx
|
|
(b)
|
if
to the Purchasers, in care of:
Whitebox
Advisors, LLC
0000
Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxxx,
Xxxxxxxxx 00000
Attention:
Xxxxxxxx Xxxx, Chief Financial Officer
Facsimile:
(000) 000-0000
Email:
xxxxx@xxxxxxxxxxxxxxxx.xxx
with
a copy to:
Xxxxxxxx
& Xxxxxx P.A.
000
Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
Xxxxxxxxx 00000
Attention:
Xxxxxxx X. Xxxxxxx, Esq.
Facsimile:
(000) 000-0000
Email:
xxxxxxxx@xxxxxxxx.xxx
|
7.8. Indemnification
by the Company.
The
Company agrees to indemnify and hold the Purchasers, their affiliates and the
directors, officers, managers, employees and agents of each of the foregoing
(each, a "Purchaser
Party")
harmless against any and all claims, losses, liabilities, obligations, damages,
judgments, costs or expenses (including reasonable legal fees and costs) that
any such Purchaser Party may suffer, sustain or become subject to as a result
of, or in connection with, or in any way related to or by reason of (a) any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any of the Transaction Documents;
or (b) the execution, delivery or performance of any of the Transaction
Documents or any transaction contemplated by any of the Transaction
Documents.
7.9. Expenses.
At
Closing, the Company shall pay the Purchaser’s counsel, Xxxxxxxx & Xxxxxx
P.A., an amount not to exceed $20,000 for its actual legal fees and expenses
in
representing the Purchasers in connection with the transactions contemplated
hereby. In addition, the Company agrees to pay or reimburse the Purchasers
for
their reasonable legal fees and expenses that they may incur after the date
hereof in connection with the granting of any waiver with respect to, the
modification of any of the terms or provisions of or the enforcement of any
of
the Transaction Documents.
7.10. Titles
and Subtitles.
The
titles of the sections and subsections of the Agreement are for convenience
of
reference only and are not to be considered in construing this
Agreement.
7.11. Counterparts.
This
Agreement may be delivered via facsimile or other means of electronic
communication, and may be executed in counterparts, each of which shall be
an
original, but all of which together shall constitute one
instrument.
[signature
page follows]
IN
WITNESS WHEREOF,
the
parties hereto have executed this Purchase Agreement as of the date first above
written.
| Equitex, Inc. |
Pandora
Select Partners, L.P. and
Whitebox
Hedged High Yield Partners, L.P.,
|
||
| /s/ Xxxxx Xxxx | /s/ Xxxxxxxx Xxxx | ||
|
By: Xxxxx
Xxxx
Its: President
|
By: Xxxxxxxx
Xxxx
Their: Managing
Director
|
