EXHIBIT 10.16
CHEX NOTE SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of March 8, 2004,
by and between Equitex, Inc., a Delaware corporation ("Equitex"), and Chex
Services, Inc., a Minnesota corporation and wholly-owned subsidiary of Equitex
("Chex").
RECITALS
A. Equitex and Pandora Select Partners, L.P., ("Pandora"), and Whitebox
Hedged High Yield Partners, L.P., ("WHHY"), have entered into a Purchase
Agreement dated as of this date, pursuant to which Pandora is purchasing a
$3,000,000, and WHHY is purchasing a $2,000,000, face amount promissory note
from Equitex in consideration of a $5,000,000 loan by Pandora and WHHY to
Equitex.
B. Equitex, concurrent with its borrowing of $5,000,000 from Pandora
and WHHY, is loaning $5,000,000 to Chex (the "Loan") under the terms of a
promissory note (the "Note") in the like principal amount dated as of the date
of this Agreement.
C. As a condition of making the Loan, Equitex is requiring Chex to
pledge all of Chex's assets, as more fully described on Exhibit A hereto
(together with the rights described herein, the "Collateral").
NOW, THEREFORE, in consideration of the agreements herein and in
reliance upon the representations and warranties set forth herein and therein,
the parties agree as follows:
ARTICLE 1.
DEFINED TERMS
1.1 Definitions. Unless otherwise defined herein or unless the context otherwise
requires, terms used in this Agreement, including its preamble and recitals,
have the meanings provided in the Uniform Commercial Code in effect in the State
of Minnesota (the "UCC"). In addition, the following terms when used in this
Agreement, including its preamble and recitals, shall have the following
meanings:
"Loan Documents" means the Note.
"Obligations" means the payment and other performance
obligations under the Note.
ARTICLE 2.
SECURITY INTEREST
2.1 Grant of Security Interest. To secure the timely payment and
performance in full of the Obligations, Chex does hereby assign, grant and
pledge to Equitex, all of the estate, right, title and interest of Chex in and
to the Collateral as more fully described on Exhibit A hereto, whether now owned
or later acquired or created, and including all proceeds of the Collateral,
whether cash or non-cash (the "Collateral"). As to any equity interest that Chex
may acquire (the "Pledged Equity Interests") in wholly or partially owned
subsidiaries (each a "Pledged Entity"), the Collateral includes Chex's share of:
(a) all rights to receive income, gain, profit, dividends and other
distributions allocated or distributed to Chex in respect of or in exchange for
all or any portion of such Pledged Equity Interests;
(b) all of Chex's capital or ownership interest, including capital
accounts, in each Pledged Entity, and all accounts, deposits or credits of any
kind with each Pledged Entity;
(c) all of Chex's voting rights in or rights to control or direct the
affairs of each Pledged Entity;
(d) all of Chex's rights, title and interest, as a member or
shareholder of each Pledged Entity, in, to or under any and all of each Pledged
Entity's assets or properties;
(e) all other rights, title and interest in or to each Pledged Entity
derived from the Pledged Equity Interests;
(f) all indebtedness or other obligations of each Pledged Equity owed
to Chex;
(g) all claims of Chex for damages arising out of, or for any breach or
default relating to, any of the Pledged Equity Interests;
(h) all rights of Chex to terminate, amend, supplement, modify, or
cancel, the governing documents of any Pledged Entity, to take all actions
thereunder and to compel performance and otherwise exercise all remedies
thereunder; and
(i) all securities, notes, certificates and other instruments
representing or evidencing any of the foregoing rights and interests or the
ownership thereof and any interest of Chex reflected in the books of any
financial intermediary pertaining to such rights and interests and all non-cash
dividends, cash, options, warrants, stock splits, reclassifications, rights,
instruments or other investment property and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such rights and interests.
2.2 Delivery of Certificates. All certificates, notes and other
instruments representing or evidencing any Pledged Equity Interests shall be
delivered to and held by or on behalf of Equitex, or its designee pursuant
hereto, in the manner set forth in Section 4.6 (Delivery of Pledged Equity
Interest; Proxy).
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2.3 Financing Statements.
(a) Chex hereby authorizes Equitex to file all financing statements,
continuation statements, assignments, certificates, and other documents and
instruments with respect to the Collateral pursuant to the UCC and otherwise as
may be necessary or reasonably requested by Equitex to perfect or from time to
time to publish notice of, or continue or renew the security interests granted
hereby (including, such financing statements, continuation statements,
certificates, and other documents as may be necessary or reasonably requested to
perfect a security interest in any additional property rights hereafter acquired
by Chex or in any replacements, products or proceeds thereof), in each case in
form and substance satisfactory to Equitex.
(b) Equitex will pay the cost of filing the same in all public offices
where filing is necessary or reasonably requested by Equitex and will pay any
and all recording, transfer or filing taxes that may due in connection with any
such filing. Chex grants Equitex the right, at any time and at Equitex's option,
to file any or all such financing statements, continuation statements, and other
documents pursuant to the UCC and otherwise as Equitex reasonably may deem
necessary or desirable.
(c) Chex hereby authorizes the filing of any financing statements or
continuation statements, and amendments to financing statements, or any similar
document in any jurisdictions and with any filing offices as Equitex may
reasonably determine are necessary or advisable to perfect the security
interests granted to Equitex. Such financing statements may describe the
Collateral in the same manner as described herein or may contain an indication
or description of collateral that describes such property in any other manner as
Equitex may reasonably determine is necessary, advisable or prudent to ensure
the perfection of the security interest in the Collateral granted to Equitex
herein.
2.4 Debtor RemainS Liable.
(a) Anything herein contained to the contrary notwithstanding, Chex
shall remain liable under its articles of incorporation, bylaws or other
constituent documents (together, the "Constituent Documents"), to perform all of
the obligations undertaken by it thereunder, all in accordance with and pursuant
to the terms and provisions thereof, and Equitex shall have no obligations or
liabilities under the Constituent Documents by reason of or arising out of this
Agreement, nor shall Equitex be required or obligated in any manner to perform
or fulfill any obligations of Chex thereunder or to make any payment, or to make
any inquiry as to the nature or sufficiency of any payment received by it, or
present or file any claim, or take any action to collect or enforce 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) If any default by Chex under any of the Constituent Documents shall
occur, Equitex shall, at its option, be permitted (but shall not be obligated)
to remedy any such default by giving written notice of such intent to Chex and
to the parties to such agreement. Any cure by Equitex of Chex's default under a
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Constituent Document shall not be construed as an assumption by Equitex of any
obligations, covenants or agreements of Chex under the Constituent Documents,
and Equitex shall not incur any liability to Chex or any other person as a
result of any actions undertaken by Equitex in curing or attempting to cure any
such default. This Agreement shall not be deemed to release or to affect in any
way the obligations of Chex under any of the Constituent Documents.
2.5 Retention of Certain Rights. So long as Equitex has not exercised
remedies with respect to the Collateral under and in accordance with this
Agreement, upon the occurrence and during the continuance of an Event of
Default, Chex reserves the right to exercise all voting rights with respect to
the Pledged Equity Interests; provided, that no vote shall be cast, right
exercised or other action taken which could materially impair the Collateral.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF DEBTOR
Chex makes the following representations and warranties to and in favor
of Equitex as of the date hereof. All of these representations and warranties
shall survive the execution and delivery of this Agreement:
3.1 ORGANIZATION. Chex:
(a) is a corporation duly incorporated and validly existing and in good
standing under the laws of the state of Minnesota;
(b) is duly qualified, authorized to do business as a foreign
corporation in each jurisdiction where the character of its properties or the
nature of its activities makes such qualification necessary; and
(c) has the corporate power (A) to enter into the Loan Documents and to
perform its obligations thereunder and to consummate the transactions
contemplated thereby, (B) to carry on its business as now being conducted and as
proposed to be conducted by it, (C) to execute, deliver and perform this
Agreement, (D) to take all action as may be necessary to consummate the
transactions contemplated hereunder, and (E) to grant the liens and security
interests provided for in this Agreement.
3.2 OFFICES, LOCATION OF COLLATERAL. The chief executive office or
chief place of business of Chex is located at 00000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx
000, Xxxxxxxxxx, Xxxxxxxxx 00000.
3.3 Title and Liens. The Pledged Equity Interests, if and when owned by
Chex will be duly authorized and validly issued, and fully paid and
non-assessable. Chex has good, valid, and marketable title to the Collateral,
free from all liens and encumbrances of any kind. As a result of this Agreement,
Equitex will have a first priority security interest in the Collateral.
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3.4 UCC Article 8. All membership interests or shares in any Pledged
Entity that constitute the Pledged Equity Interests will be securities governed
by Article 8 of the UCC.
3.5 Authorization; No Conflict. Chex has duly authorized, executed and
delivered this Agreement, and Chex's execution and delivery hereof and its
consummation of the transactions contemplated hereby and the compliance with the
terms thereof:
(a) does not or will not contravene the Constituent Documents of Chex
or any Pledged Entity or any other legal requirements applicable to or binding
on Chex which could reasonably be expected to have a material adverse effect
upon the Collateral or Equitex's rights therein;
(b) does not or will not contravene or result in any breach of or
constitute any default, or result in or require the creation of any lien upon
any of Chex's property, under any agreement or instrument to which Chex is a
party or by which it or any of its properties may be bound or affected; and
(c) does not or will not require the consent or approval of any third
party which has not already been obtained.
3.6 Enforceability. This Agreement is a legal, valid and binding
obligation of Equitex, enforceable against Chex in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors' rights or by the effect of general
equitable principles.
ARTICLE 4.
COVENANTS OF DEBTOR
Chex covenants to and in favor of Equitex as follows:
4.1 Compliance with Obligations. Chex shall perform and comply in all
material respects with all obligations and conditions on its part to be
performed with respect to the Collateral.
4.2 Information Concerning Collateral. Chex shall, promptly upon
request, provide to Equitex all information and evidence it may reasonably
request concerning the Collateral to enable Equitex to enforce the provisions of
this Agreement.
4.3 Defense of Collateral. Chex shall defend its title to the
Collateral and the interests of Equitex in the Collateral pledged hereunder
against the claims and demands of all third parties whomsoever.
4.4 Maintenance of Collateral. Chex shall not (i) take any action to
terminate, modify or amend any Constituent Document of any Pledged Entity which
impairs Equitex's interest in the Collateral, except with the consent of
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Equitex, (ii) fail to deliver to Equitex a copy of each demand or
notice received or given by it relating to any Constituent Document of Chex or
to any other Collateral which could reasonably be expected to have a material
adverse effect upon the Collateral or Equitex's rights therein, or (iii) sell,
contract to sell, assign, transfer or dispose of any of the Collateral, except
in the ordinary course of business, or with the consent of Equitex.
4.5 Events of Default. Chex shall give to Equitex prompt notice of any
material default under any Constituent Document of any Pledged Entity or
otherwise with respect to the Collateral, of which Chex has knowledge or has
received notice.
4.6 Delivery of PLEDGED EQUITY INTEREST; Proxy. All certificates or
instruments representing or evidencing the Pledged Equity Interests shall be
delivered to and held by or on behalf of Equitex pursuant hereto. All such
certificates or instruments shall be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance acceptable to Equitex. Equitex shall have
the right, at any time in its discretion and without prior notice to Chex,
following the occurrence and during the continuation of an Event of Default, to
transfer to or to register in the name of Equitex or any of its nominees any or
all of the Pledged Equity Interests and to exchange certificates or instruments
representing or evidencing Pledged Equity Interests for certificates or
instruments of smaller or larger denominations; provided, however, that once
such Event of Default has been cured, Equitex will promptly transfer to or
register in the name or cause its nominees to transfer to or register in the
name of Chex all such Pledged Equity Interests. In furtherance of the foregoing,
Chex shall further execute and deliver to Equitex as to each of the Pledged
Equity Interests a proxy in the form attached hereto as Exhibit B.
4.7 Preservation of Value; Limitation of Liens. Chex shall not take any
action in connection with the Collateral which would impair in any material
respect the interests or rights of Equitex therein or with respect thereto,
except as expressly permitted hereby; provided, however, that nothing in this
Agreement shall prevent Chex, prior to the exercise by Equitex of any rights
pursuant to the terms hereof, from undertaking Chex's operations in the ordinary
course of business. Chex shall not directly or indirectly create, incur, assume
or suffer to exist any liens on or with respect to all or any part of the
Collateral (other than the lien created by this Agreement). Chex shall at its
own cost and expense promptly take such action as may be necessary to discharge
any such liens.
4.8 No Other Filings. Chex shall not file or authorize to be filed in
any jurisdiction any financing statements under the UCC or any like statement
relating to the Collateral, except as contemplated by the Chex Guarantee
Security Agreement dated as of this date between Chex, Pandora and WHHY.
4.9 Maintenance of Records. Chex shall, at all times, keep accurate and
complete records of the Collateral. Chex shall permit representatives of
Equitex, upon reasonable prior notice, at any time during normal business hours
of Chex to inspect and make abstracts from Chex's books and records pertaining
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to the Collateral. Upon the occurrence and during the continuation of any Event
of Default, at Equitex' request, Chex shall promptly deliver copies of any and
all such records to Equitex.
4.10 Payment of Taxes. Chex shall pay or cause to be paid, before any
fine, penalty, interest or cost attaches thereto, all taxes, assessments and
other governmental or non-governmental charges or levies (other than those taxes
that it is contesting in good faith and by appropriate proceedings, and in
respect of which it has established adequate reserves for such taxes) now or
hereafter assessed or levied against the Collateral pledged by them hereunder
and shall retain copies of, and, upon request, permit Equitex to examine
receipts showing payment of any of the foregoing.
4.11 Name; Jurisdiction of Organization. Chex shall give Equitex at
least 30 days prior written notice before Chex changes its name, jurisdiction of
organization or entity type and shall at the expense of Chex execute and deliver
such instruments and documents as may be required by Equitex or applicable legal
requirements to maintain a first perfected security interest in the Collateral.
4.12 Proceeds of Collateral. Chex shall, at all times, keep pledged to
Equitex pursuant hereto all Collateral and all dividends, distributions,
interest, principal and other proceeds received by Chex with respect thereto,
and all other Collateral and other securities, instruments, proceeds and rights
from time to time received by or distributable to Chex in respect of any
Collateral, and shall not permit any issuer of such Collateral to issue any
shares of stock or other equity interests which shall not have been immediately
duly pledged to Equitex hereunder.
ARTICLE 5.
RIGHTS AND REMEDIES
5.1 Event of Default Defined. Any event of default under the Note shall
constitute an "Event of Default" hereunder.
5.2 Remedies Upon Event of Default.
(a) During any period during which an Event of Default shall have
occurred and be continuing, Equitex may (but shall be under no obligation to),
directly or by using agent or broker:
(i) in connection with any acceleration and foreclosure, vote or
exercise, any and all of Chex's rights or powers incident to its ownership of
any of the Pledged Equity Interests, including any rights or powers to manage or
control a Pledged Entity;
(ii) proceed to protect and enforce the rights vested in it by this
Agreement and under the UCC;
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(iii) cause all moneys and other property pledged as security to be
paid and/or delivered directly to it, and demand, xxx for, collect and receive
any such moneys and property;
(iv) cause any action at law or suit in equity or other proceeding
to be instituted and prosecuted to collect or enforce any Obligations of Chex or
rights included in the Collateral, or for specific enforcement of any covenant
or agreement contained herein, or in aid of the exercise of any power therein or
herein granted, or for any foreclosure hereunder and sale under a judgment or
decree in any judicial proceeding, or to enforce any other legal or equitable
right vested in it by this Agreement or by law;
(v) foreclose or enforce any other agreement or other instrument by
or under or pursuant to which the Obligations of Chex are issued or secured;
(vi) subject to Section 5.2(b), sell, lease or otherwise dispose of
any or all of the Collateral, in one or more transactions, at such prices as
Equitex may deem best, and for cash or on credit or for future delivery, without
assumption of any credit risk, at any broker's board or at public or private
sale, without demand of performance or notice of intention to sell, lease or
otherwise dispose of, or of time or place of disposition (except such notice as
is required by applicable statute and cannot be waived), it being agreed that
Equitex may be a purchaser or lessee on its own behalf at any such sale and that
Equitex or anyone else who may be the purchaser, lessee or recipient for value
of any or all of the Collateral so disposed of shall, upon such disposition,
acquire all of Chex's rights therein. Equitex may adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for the same, and such sale may, without further notice or
publication, be made at any time or place to which the same may be so adjourned.
If Equitex sells any of the Collateral upon credit, after reasonable inquiry as
to the credit worthiness of the purchaser, Chex will be credited only with
payments actually made by the purchaser, received by Equitex and applied to the
indebtedness of the purchaser. In the event the purchaser fails to pay for the
Collateral, Equitex may resell the Collateral and Chex shall be credited with
the proceeds of the sale;
(vii) incur expenses, including reasonable attorneys' fees, consultants' fees,
and other costs appropriate to the exercise of any right or power under this
Agreement;
(viii) perform any obligation of Chex hereunder and make payments,
purchase, contest or compromise any encumbrance, charge, or lien, and pay taxes
and expenses;
(ix) make any reasonable compromise or settlement deemed desirable
with respect to any or all of the Collateral and extend the time of payment,
arrange for payment installments, or otherwise modify the terms of, any or all
of the Collateral;
(x) secure the appointment of a receiver of any or all of the
Collateral;
(xi) exercise any other or additional rights or remedies granted to
Equitex under any other provision of this Agreement or exercisable by a secured
party under the UCC, whether or not the UCC applies to the affected Collateral,
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or under any other applicable law and take any other action which Equitex deems
necessary or desirable to protect or realize upon its security interests in the
Collateral or any part thereof; and/or
(xii) appoint a third party (who may be an employee, officer or
other representative of Equitex) to do any of the foregoing, or take any other
action permitted hereunder, on behalf of Equitex.
(b) If, pursuant to any law, prior notice of any action described in
Section 5.2(a) is required to be given to Chex, Chex hereby acknowledges that
the minimum time required by such law, or if no minimum is specified, ten days,
shall be deemed a reasonable notice period.
(c) Any action or proceeding to enforce this Agreement may be taken by
Equitex either in Chex's name or in Equitex's name, as Equitex may deem
necessary.
(d) All rights of marshaling of assets of Chex, including any such
right with respect to the Collateral, are hereby waived by Chex.
(e) Equitex shall incur no liability as a result of the sale of any or
all of the Collateral at any private sale pursuant to Section 5.2(a) conducted
in a commercially reasonable manner. Chex hereby waives any claims against
Equitex arising by reason of the fact that the price at which any or all of the
Collateral may have been sold at such a private sale was less than the price
that might have obtained at a public sale or was less than the aggregate amount
of the Obligations, even if Equitex accepts the first offer received and does
not offer the Collateral to more than one offeree.
5.3 AttorneyS-in-Fact. Upon the occurrence and during the continuation
of an Event of Default, Chex hereby irrevocably constitutes and appoints Equitex
as its true and lawful attorneys-in-fact to enforce all rights of Chex with
respect to the Collateral, including the right to give appropriate receipts,
releases and satisfactions for and on behalf of and in the name of Chex or, at
the option of Equitex, in the name of Equitex, with the same force and effect as
Chex could do if this Agreement had not been made. If Equitex shall so elect
after the occurrence and during the continuation of an Event of Default
hereunder, Equitex shall have the right at all times to settle, compromise,
adjust, or liquidate all claims or disputes directly with Chex or any obligor of
Chex upon such terms and conditions as Equitex may determine in its sole
discretion, and to charge all costs and expenses thereof (including reasonable
attorneys' fees and charges) to Chex's account and to add them to the
Obligations whereupon such costs and expenses shall be and become part of the
Obligations. This power of attorney is a power coupled with an interest and
shall be irrevocable.
5.4 Expenses; Interest. All costs and expenses (including reasonable
attorneys' fees and expenses) incurred by Equitex in connection with exercising
any actions taken under Article 5, together with interest thereon (to the extent
permitted by law) computed at a rate of 10% per annum (or if less, the maximum
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rate permitted by law) from the date on which such costs or expenses are
invoiced to and become payable by Chex, to the date of payment thereof, shall
constitute part of the Obligations secured by this Agreement and shall be paid
by Chex to Equitex within ten (10) days after written demand.
5.5 No Impairment of Remedies. If under applicable law, Equitex
proceeds by either judicial foreclosure or by non-judicial sale or enforcement,
Equitex may, at its sole option, determine which of its remedies or rights to
pursue without affecting any of its rights and remedies under this Agreement.
If, by exercising any right and remedy, Equitex forfeits any of its other rights
or remedies, including any right to enter a deficiency judgment against Chex or
any third party (whether because of any applicable law pertaining to "election
of remedies" or the like), Chex nevertheless hereby consents to such action by
Equitex. To the extent permitted by applicable law, Equitex also waives any
claim based upon such action, even if such action by Equitex results in a full
or partial loss of any rights of subrogation, indemnification or reimbursement
which Chex might otherwise have had but for such action by Equitex or the terms
herein. Any election of remedies which results in the denial or impairment of
the right of Equitex to seek a deficiency judgment against any third party shall
not, to the extent permitted by applicable law, impair Chex's obligations
hereunder. If Equitex bids at any foreclosure or trustee's sale or at any
private sale permitted by law or this Agreement, Equitex may bid all or less
than the amount of the Obligations. To the extent permitted by applicable law,
the amount of the successful bid at any such sale, whether Equitex or any other
party is the successful bidder, shall be conclusively deemed to be the fair
market value of the Collateral and the difference between such bid amount and
the remaining balance of the Obligations shall be conclusively deemed to be the
amount of the Obligations.
ARTICLE 6.
CERTAIN WAIVERS
6.1 Modification of Obligations. Chex's liability hereunder shall not
be reduced, limited, impaired, discharged or terminated if Equitex at any time
with Chex's consent (or, to the extent permissible by the terms of the Loan
Documents and law, without notice to or demand of Chex):
(a) renews, extends, accelerates, increases the rate of interest on, or
otherwise changes the time, place, manner or terms, or otherwise modifies any of
the Obligations (including any payment terms);
(b) extends or waives the time for Chex's performance of, or compliance
with, any term, covenant or agreement on their part to be performed or observed
under the Loan Documents, or waives such performance or compliance or consent to
a failure of, or departure from, such performance or compliance;
(c) settles, compromises, releases or discharges, or accepts or refuses
any offer of performance with respect to, or substitutions for, any of the
Obligations or any agreement relating thereto and/or subordinate the payment of
the same to the payment of any other obligations;
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(d) requests and accepts other guaranties of any of the Obligations and
takes and holds security for the payment hereof or any of the Obligations;
(e) releases, surrenders, exchanges, substitutes, compromises, settles,
rescinds, waives, alters, subordinates or modifies, with or without
consideration, any security for payment of any of the Obligations, any other
guaranties of any of the Obligations, or any other obligation of any third party
with respect to any of the Obligations;
(f) to the extent permitted by law, enforces and applies any security,
if any, now or hereafter held by or for the benefit of Equitex in respect hereof
or any of the Obligations and directs the order or manner of sale thereof, or
exercises any other right or remedy that Equitex may have against any such
security, in each case as Equitex in its discretion may determine, including
foreclosure on any collateral pursuant to one or more judicial or nonjudicial
sales, whether or not every aspect of any such sale is commercially reasonable;
or
(g) exercises any other rights available to it under any of the Loan
Documents, at law or in equity.
6.2 Security InterestS Absolute. All rights of Equitex and the security
interests hereunder, and all obligations of Chex hereunder, shall be absolute
and unconditional irrespective of:
(a) any failure or omission to assert or enforce or agreement or
election not to assert or enforce, or the stay or enjoining, by order of court,
by operation of law or otherwise, of the exercise or enforcement of, any claim
or demand or any right, power or remedy (whether arising under any Loan
Document, at law, in equity or otherwise) with respect to any of the Obligations
or any agreement relating thereto, or with respect to any other guaranty of or
security for the payment of any of the Obligations;
(b) any rescission, waiver, amendment or modification of, or any
consent to departure from, any of the terms or provisions (including provisions
relating to events of default) hereof, in any other Loan Document or any
agreement or instrument executed pursuant thereto, or of any other guaranty or
security for any of the Obligations, in each case, whether or not in accordance
with the terms hereof or any other Loan Document or any agreement relating to
such other guaranty or security;
(c) the application of payments received from any source (other than payments
received from the proceeds of any security for any of the Obligations, except to
the extent such security also serves as collateral for indebtedness other than
the Obligations) to the payment of indebtedness of Chex to Equitex other than
the Obligations, even though Equitex might have elected to apply such payment to
any part or all of the Obligations;
(d) Equitex's consent to the change, reorganization or termination of
the corporate structure or existence of Chex or any Pledged Entity and to any
corresponding restructuring of any of the Obligations;
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(e) any other act or thing or omission, or delay to do any other act or
thing, which may or might in any manner or to any extent vary the risk of Chex
as an obligor in respect of any of the Obligations;
(f) any of the Obligations, or any agreement relating thereto, at any
time being found to be illegal, invalid or unenforceable in any respect; and
(g) any defenses, set offs or counterclaims which Chex may allege or
assert against Equitex in respect of any of the Obligations.
6.3 Certain Waivers. Except as provided in Section 7.16, Chex hereby
waives any and all defenses afforded to a surety, including promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations and this Agreement and any requirement that Equitex protect, secure,
perfect or insure any security interest or lien, or any property subject
thereto, or exhaust any right or take any action against Chex or any other third
party or entity or any collateral securing any of the Obligations, as the case
may be.
6.4 Postponement of Subrogation. Chex agrees that it will not exercise
any rights which it may acquire by way of rights of subrogation under this
Agreement, by any payment made hereunder or otherwise, while this Agreement is
in effect, unless such action is required to stay or prevent the running of any
applicable statute of limitations. Any amount paid to Chex on account of any
such subrogation rights prior to such time shall be held in trust for Equitex
and shall immediately be paid to Equitex and credited and applied against the
Obligations. Any time after this Agreement has terminated and if Chex has made
payment to Equitex of all of the Obligations, or if an action is required to
stay or prevent the running of any applicable statute of limitations, then, at
Chex's request, Equitex will execute and deliver to Chex appropriate documents
(without recourse and without representation or warranty) necessary to evidence
the transfer by subrogation to Chex of an interest in the Obligations resulting
from such payment by Chex.
ARTICLE 7.
MISCELLANEOUS
7.1 Notices. Any communications, including notices and instructions,
between the parties hereto or notices provided herein to be given may be given
to the following addresses:
If to Equitex, in care of:
Equitex, Inc.
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxx, President, and Xxxx Xxxxx, Treasurer
Facsimile: (000) 000-0000 (Xxxx) and (000) 000-0000 (Anwar)
E-mail: xxxxx@xxxxxxx.xxx and xxxxxx@xxxxxx.xxx
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If to Chex, in care of:
Chex Services, Inc.
00000 Xxxxxxx Xxxxxxxxx/
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Xxxxx, Assistant Secretary
Facsimile: (000) 000-0000
E-mail: xxxxxx@xxxxxx.xxx
With a copy in each case to:
Felhaber, Larson, Xxxxxx & Xxxx, P.A.
c/o Xxxxx X. Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Facsimile: (000 000-0000
E-mail: xxxxxxxxx@xxxxxxxx.xxx
All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be considered as properly given (a) on
the date received in person, (b) on the date received by overnight delivery
service (including Federal Express, UPS, ETA, Xxxxx, DHL, AirBorne and other
similar overnight delivery services), (c) on the fourth business day following
the date mailed by first class United States mail, postage prepaid, registered
or certified with return receipt requested, (d) on the next business day after
being transmitted by telecopy or by other electronic means (including electronic
mail). Any party shall have the right to change its address for notice hereunder
to any other location within the continental United States by giving of notice
to the other parties in the manner set forth hereinabove.
7.2 Delay and Waiver; Remedies Cumulative. No failure or delay by
Equitex in exercising any right or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. Any waiver, permit, consent or approval of any kind or character
on the part of Equitex of any breach or default under the Agreement or any
waiver on the part of Equitex of any provision or condition of this Agreement
must be in writing and shall be effective only to the extent in such writing
specifically set forth. No right, power or remedy herein conferred upon or
reserved to Equitex hereunder is intended to be exclusive of any other right,
power or remedy, and every such right, power and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right, power and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
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otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy. Resort to any or all security now or hereafter held
by Equitex, may be taken concurrently or successively and in one or several
consolidated or independent judicial actions or lawfully taken nonjudicial
proceedings, or both.
7.3 Entire Agreement. This Agreement and any agreement, document or
instrument referred to herein integrate all the terms and conditions mentioned
herein or incidental hereto and supersede all oral negotiations and prior
writings in respect of the subject matter hereof.
7.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota, exclusive of its conflict of
laws rules.
7.5 Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
7.6 Headings. Paragraph headings have been inserted in this Agreement
as a matter of convenience for reference only and it is agreed that such
paragraph headings are not a part of this Agreement and shall not be used in the
interpretation of any provision of this Agreement.
7.7 Waiver of Jury Trial. CHEX HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY COURSE OR CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN), OR ACTIONS OF SECURED PARTIES. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR SECURED PARTIES TO MAKE THE LOAN.
7.8 Consent to Jurisdiction. Each party hereto agrees that any legal
action or proceeding with respect to or arising out of this Agreement may be
brought in or removed to the federal or state courts located in Hennepin County,
Minnesota, as Equitex may elect. By execution and delivery of this Agreement,
each party hereto accepts, for themselves and in respect of their property,
generally and unconditionally, the jurisdiction of the aforesaid courts. Each of
the parties hereto irrevocably consents to the service of process out of any of
the aforementioned courts in any manner permitted by law. Nothing herein shall
affect the right of Equitex to bring legal action or proceedings in any other
competent jurisdiction. Each party hereto hereby waives any right to stay or
dismiss any action or proceeding under or in connection with this Agreement
brought before the foregoing courts on the basis of forum non-conveniens.
7.9 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
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7.10 Counterparts. This Agreement may be executed in one or more
duplicate counterparts and when signed by all of the parties listed below, shall
constitute a single binding agreement. Delivery of an executed signature page of
this Agreement by facsimile transmission shall be as effective as delivery of a
manually executed counterpart thereof.
7.11 Benefit of Agreement. Nothing in this Agreement, express or
implied, shall give or be construed to give, any person other than the parties
hereto and their respective permitted successors, transferees and assigns any
legal or equitable right, remedy or claim under this Agreement, or under any
covenants and provisions of this Agreement, each such covenant and provision
being for the sole benefit of the parties hereto and their respective permitted
successors, transferees and assigns.
7.12 Amendments and Waivers. No amendment, modification, termination or
waiver of any provision of this Agreement or consent to any departure therefrom
shall be effective unless the same shall be in writing and signed by each of the
parties hereto. Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given.
7.13 Survival of Agreements. The provisions regarding the payment of
expenses and indemnification obligations shall survive and remain in full force
and effect regardless of the termination of this Agreement pursuant to Section
7.14.
7.14 Release and Satisfaction. Upon the indefeasible payment (whether
in cash and/or other consideration which is satisfactory to Equitex in its sole
discretion) and performance in full of the Obligations, (i) this Agreement and
the security interests created hereby shall terminate and Equitex will return
the Collateral, including all documentation evidencing or affecting the
Collateral, and (ii) upon written request of Chex, Equitex shall execute and
deliver to Chex, at Chex's expense and without representation or warranty by or
recourse to Equitex, releases and satisfactions of all financing statements,
mortgages, notices of assignment and other registrations of security.
7.15 Reinstatement. This Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time any payment
pursuant to this Agreement is rescinded or must otherwise be restored or
returned upon the insolvency, bankruptcy, reorganization, liquidation of Chex or
upon the dissolution of, or appointment of any intervenor or conservator of, or
trustee or similar official for, Chex or any substantial part of Chex's assets,
or otherwise, all as though such payments had not been made.
7.16 Limitation on Duty of Secured Parties with Respect to the
Collateral. The powers conferred on Equitex hereunder are solely to protect its
interest in the Collateral and shall not impose any duty on Equitex or any of
its designated agents to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for monies actually
received by it hereunder, Equitex shall have no duty with respect to any
Collateral and no implied duties or obligations shall be read into this
Agreement against Equitex. Equitex shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the
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Collateral is accorded treatment that is substantially equivalent to that which
Equitex accords its own property, it being expressly agreed, to the maximum
extent permitted by applicable law, that Equitex shall have no responsibility
for (a) taking any necessary steps to preserve rights against any parties with
respect to any Collateral or (b) taking any action to protect against any
diminution in value of the Collateral, but, in each case, Equitex may do so and
all expenses reasonably incurred in connection therewith shall be part of the
Obligations.
IN WITNESS WHEREOF, the undersigned have hereunto affixed their
signatures.
Chex: Secured Party:
Chex Services, Inc. Equitex, Inc.
By /s/ Xxxxx Xxxxxxxx By /s/ Xxxxx Xxxx
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Its President Its President
--------------------------------- -------------------------------
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EXHIBIT A
DESCRIPTION OF CHEX COLLATERAL
Inventory: All inventory of Chex Services, Inc., a Minnesota
corporation (the "Company"), as that term is defined in the Uniform Commercial
Code, whether now owned or hereafter acquired or in which the Company obtains
rights, whether consisting of whole goods, spare parts or components, supplies
or materials whether acquired, held or furnished for sale, for lease or under
contracts or for manufacture or processing, and wherever located;
Equipment: All equipment of the Company, whether now owned or hereafter
acquired, including all present and future machinery, vehicles, furniture,
fixtures, office and recordkeeping equipment, parts, tools, supplies and all
other goods (except inventory) used or bought for use by the Company for any
business or enterprise and including specifically (without limitation) all
accessions thereto, all substitutions and replacements thereof, and all like or
similar property now owned or hereafter acquired by the Company, and all of
which is owned by the Company;
Deposit Accounts and Other Cash: All deposits and deposit accounts with
any bank, savings and loan association, credit union or like organization, and
all funds and amounts therein, and whether or not held in trust, or in custody
or safekeeping, or otherwise restricted or designated for a particular purpose,
and all other cash or marketable securities on hand, whether held in-vault or
otherwise;
Receivables: Each and every right of the Company to the payment of
money, whether such right to payment now exists or hereafter arises, whether
such right to payment arises out of a sale, lease or other disposition of goods
or other property, out of a rendering of services, or of a loan, out of the
overpayment of taxes or other liabilities, or any other transaction or event,
whether such right to payment is created, generated or earned by the Company or
by some other person who subsequently transfers his, her or its interest to the
Company, whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be evidenced, together with
all other rights and interests (including all liens and other security
interests) which the Company may at any time have by law or agreement against
any account debtor or other person obligated to make such payment or against any
property of such account debtor or other persons including, but not limited to,
all present and future accounts, contract rights, chattel paper, bonds, notes
and other debt instruments, and rights to payment in the nature of general
intangibles;
General Intangibles: All general intangibles of the Company whether now
owned or hereafter acquired, including (without limitation) all present and
future patents, patent applications, copyrights, trademarks, trade names, trade
secrets, customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use the Company's name, the
Company's internet domain names and address and the goodwill of the Company's
business.
Securities: All securities and other equity interests owned by the
Company, whether now owned or hereafter acquired, including shares of capital
stock of any wholly owned or partially owned subsidiary of the Company.
The Collateral shall include (i) all substitutes and replacements for
and proceeds of any and all of the foregoing property, and in the case of all
tangible Collateral, all accessions, accessories, attachments, parts, equipment
and repairs now or hereafter attached or affixed to or use in connection with
any such goods and (ii) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods.
EXHIBIT B
IRREVOCABLE PROXY
The undersigned hereby appoints __________________________________
("Secured Party"), as Proxy with full power of substitution, and hereby
authorizes Secured Party to represent and vote (or to execute a consent in lieu
of voting) all _________ shares of ___________ Stock, _____ par value, of
_________________________, a ____________ corporation, as represented by
Certificate No. _____ (for ______ shares), together with any other shares or
securities issued pursuant to a stock split or dividend, reorganization or other
event affecting or relating to any of the foregoing shares, owned by the
undersigned on the date of exercise hereof during the continuance of an Event of
Default under, and as defined in, that certain Security Agreement dated as of
March 8, 2004 by and among Equitex, Inc. and Chex Services, Inc., at any meeting
or at any other time chosen by Secured Party in its sole discretion.
Date: , 20 Chex Services, Inc.
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By
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Its
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