Contract
Exhibit
10.7
THIS
AMENDED SECURITY AGREEMENT
(this
“Agreement”)
is
made as of September 15, 2005, by and among Equitex, Inc., a Delaware
corporation (“Company”),
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 referred to herein individually as a "Secured
Party"
and
together as the "Secured
Parties."
RECITALS
A. The
Company, Pandora and WHHY
entered
into a Purchase Agreement dated March 8, 2004 (the “Original
Purchase Agreement”),
pursuant to which Pandora and WHHY each purchased a secured convertible
promissory note (each, an “Original
Note”
and
together, the “Original
Notes”)
and a
warrant to purchase shares of the Company's Common Stock ( each, an “Original
Warrant” and
together, the "Original
Warrants")
in
consideration of a collective $5,000,000 loan (the “Original
Loan”).
B. As
a
condition to making the Original Loan, the Company pledged to the Secured
Parties all of the Company's assets pursuant to the terms of a Security
Agreement dated March 8, 2004 (the “Original Security
Agreement”).
C. The
Company, Pandora and WHHY have entered into a second Purchase Agreement dated
as
of this date (the "Second
Purchase Agreement"),
pursuant to which Pandora and WHHY are each purchasing an additional secured
convertible promissory note (each, a "New
Note"
and
together, the "New
Notes")
and an
additional warrant to purchase the Company's Common Stock (each, a "New
Warrant"
and
together, the "New
Warrants")
in
consideration of a collective $1,500,000 new loan (the "New
Loan").
D. The
Secured Parties desire to enter into this Agreement to supercede and replace
the
Original Security Agreement.
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 Delaware (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
this Agreement, the Second Purchase Agreement, the Stock Pledge Agreement
of
this date among the Company and the Secured Parties (the “Stock
Pledge Agreement”),
the
Registration Rights Agreement of this date among the Company and the Secured
Parties (the "Registration
Rights Agreement"),
the
Notes and the Warrants.
A-1
“Notes”
means
the each of the Original Notes and the New Notes.
“Obligations”
means
the payment and other performance obligations under the Loan Documents, whether
now existing or hereafter created.
"Warrants"
means
each of the Original Warrants and the New Warrants.
ARTICLE
2.
SECURITY
INTEREST
2.1 GRANT
OF SECURITY INTEREST.
(a) To
secure
the timely payment and performance in full of the Obligations, the Company
does
hereby assign, grant and pledge to each Secured Party, all of the estate,
right,
title and interest of the Company 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”).
2.2 FINANCING
STATEMENTS.
(a) The
Company hereby authorizes each Secured Party 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 such Secured Party 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 the Company or in any replacements, products or proceeds
thereof), in each case in form and substance satisfactory to such Secured
Party.
(b) Each
Secured Party will pay its respective cost of filing the same in all public
offices where filing is necessary or reasonably requested by such Secured
Party
and will pay any and all recording, transfer or filing taxes that may due
in
connection with any such filing. The Company grants each Secured Party the
right, at any time and at such Secured Party’s option, to file any or all such
financing statements, continuation statements, and other documents pursuant
to
the UCC and otherwise as Secured Party reasonably may deem necessary or
desirable.
(c) The
Company 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 each Secured Party may
reasonably determine is necessary or advisable to perfect its respective
security interest granted to such Secured Party. 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 Secured Party may reasonably determine is necessary, advisable
or prudent to ensure the perfection of its security interest in the Collateral
granted to such Secured Party herein.
A-2
2.3 DEBTOR
REMAINS LIABLE.
(a) Anything
herein contained to the contrary notwithstanding, the Company shall remain
liable under any contracts, agreements and other documents included in the
Collateral, to perform all of the obligations undertaken by it thereunder,
all
in accordance with and pursuant to the terms and provisions thereof, and
Secured
Parties shall have no obligations or liabilities (jointly or severally) under
any such contracts, agreements and other documents by reason of or arising
out
of this Agreement, nor shall Secured Parties be required or obligated in
any
manner to perform or fulfill any obligations of the Company thereunder or
to
make any payment, or to make any inquiry as to the nature or sufficiency
of any
payment received by such Secured Party 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 such Secured Party or to which such Secured Party may be entitled
at
any time or times.
(b) If
any
default by the Company under any of the contracts, agreements or other documents
included in the Collateral shall occur, each Secured Party shall, at its
option,
be permitted (but shall not be obligated) to remedy any such default by giving
written notice of such intent to the Company and to the parties to such
contract, agreement or other document. Any cure by Secured Party of the
Company’s default under any such contract, agreement or other document shall not
be construed as an assumption by such Secured Party of any obligations,
covenants or agreements of the Company contained in such contract, agreement
or
other document, and Secured Party shall not incur any liability to the Company
or any other person as a result of any actions undertaken by such Secured
Party
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 the Company
under
any of such contracts, agreements or other documents.
ARTICLE
3.
REPRESENTATIONS
AND WARRANTIES OF DEBTOR
The
Company makes the following representations and warranties to and in favor
of
each Secured Party as of the date hereof. All of these representations and
warranties shall survive the execution and delivery of this
Agreement:
3.1 ORGANIZATION.
The
Company:
(a) is
a
corporation duly incorporated and validly existing and in good standing under
the laws of the State of Delaware;
(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
A-3
(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 the Company is located
at
0000 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000.
3.3 TITLE
AND LIENS.
The
Company has good, valid, and marketable title to the Collateral, free from
all
liens and encumbrances of any kind, except for the security interests granted
pursuant to the Original Security Agreement.
As a
result of this Agreement, Secured Parties will, together, have a first priority
security interest in the Collateral, subordinate to no other secured
rights.
3.4 AUTHORIZATION;
NO CONFLICT.
The
Company has duly authorized, executed and delivered this Agreement, and the
Company’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 any legal requirements applicable to or binding on
the
Company which could reasonably be expected to have a material adverse effect
upon the Collateral or Secured Party’s respective 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 the Company’s
property, under any agreement or instrument to which the Company 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.
3.5 ENFORCEABILITY.
This
Agreement is a legal, valid and binding obligation of the Company, enforceable
against the Company 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
The
Company covenants to and in favor of each Secured Party as follows:
A-4
4.1 COMPLIANCE
WITH OBLIGATIONS.
The
Company 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.
The
Company shall, promptly upon request, provide to Secured Party all information
and evidence that it reasonably requests concerning the Collateral to enable
such Secured Party to enforce the provisions of this Agreement.
4.3 DEFENSE
OF COLLATERAL.
The
Company shall defend its title to the Collateral and the respective interest
of
each Secured Party in the Collateral pledged hereunder against the claims
and
demands of all third parties whomsoever.
4.4 MAINTENANCE
OF COLLATERAL.
The
Company shall not (i) fail to deliver to Secured Party a copy of each
demand or notice received or given by it relating to any contract or agreement
of the Company or to any other Collateral which could reasonably be expected
to
have a material adverse effect upon the Collateral or Secured Party’s respective
rights therein, or (ii) 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 each Secured Party, which consent will not be unreasonably
withheld.
4.5 PRESERVATION
OF VALUE; LIMITATION OF LIENS.
The
Company shall not take any action in connection with the Collateral which
would
impair in any material respect the respective interests or rights of each
Secured Party therein or with respect thereto, except as expressly permitted
hereby; provided,
however, that
nothing in this Agreement shall prevent the Company, prior to the exercise
by
Secured Party of any of its respective rights pursuant to the terms hereof,
from
undertaking the Company’s operations in the ordinary course of business. The
Company 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). The Company shall at its own cost
and
expense promptly take such action as may be necessary to discharge any such
liens.
4.6 NO
OTHER FILINGS.
The
Company 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.
4.7 MAINTENANCE
OF RECORDS.
The
Company shall, at all times, keep accurate and complete records of the
Collateral. The Company shall permit representatives of each Secured Party,
upon
reasonable prior notice, at any time during normal business hours of the
Company
to inspect and make abstracts from the Company’s books and records pertaining to
the Collateral. Upon the occurrence and during the continuation of any Event
of
Default, at Secured Party’s request, the Company shall promptly deliver copies
of any and all such records to such
Secured Party.
4.8 PAYMENT
OF TAXES.
The
Company 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 each Secured Party to examine receipts showing
payment of any of the foregoing.
A-5
4.9 NAME;
JURISDICTION OF ORGANIZATION.
The
Company shall give Secured Parties at least 30 days prior written notice
before
the Company changes its name, jurisdiction of organization or entity type
and
shall at the expense of the Company execute and deliver such instruments
and
documents as may be required by Secured Parties or applicable legal requirements
to maintain their perfected security interests in the Collateral.
4.10 PROCEEDS
OF COLLATERAL.
The
Company shall, at all times, keep pledged to each Secured Party pursuant
hereto
all Collateral and all dividends, distributions, interest, principal and
other
proceeds received by the Company with respect thereto, and all other Collateral
and other securities, instruments, proceeds and rights from time to time
received by or distributable to the Company 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
each Secured Party hereunder.
ARTICLE
5.
RIGHTS
AND REMEDIES
5.1 EVENT
OF DEFAULT DEFINED.
Any
failure to materially comply with any covenant, agreement, term or provision
contained in this Agreement, the Stock Pledge Agreement, the Second Purchase
Agreement or the Registration Rights Agreement (provided such failure continues
through twenty days after the Secured party gives to the Company written
notice
thereof) or any event of default under any of the Notes (including events
of
non-compliance with this Agreement, as described in the Notes) shall constitute
an “Event
of Default”
hereunder.
Without
limiting the foregoing, it is intended that any event of default under the
New
Notes will constitute an event of default under each of the Original
Notes.
5.2 REMEDIES
UPON EVENT OF DEFAULT.
(a) During
any period during which an Event of Default shall have occurred and be
continuing, each Secured Party may (but shall be under no obligation to),
directly or by using agent or broker:
(i) proceed
to protect and enforce the respective rights vested in it by this Agreement
and
under the UCC;
(ii) cause
all
moneys and other property pledged as security to Secured Party to be paid
and/or
delivered directly to such Secured Party, and demand, xxx for, collect and
receive any such moneys and property;
(iii) cause
any
action at law or suit in equity or other proceeding to be instituted and
prosecuted to collect or enforce any Obligations of the Company 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;
A-6
(iv) foreclose
or enforce any other agreement or other instrument by or under or pursuant
to
which the Obligations of the Company are issued or secured;
(v) 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 such Secured Party 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 Secured Party may be a purchaser
or
lessee on its own behalf at any such sale and that Secured Party 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 The
Company’s rights therein. Secured Party 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 Secured Party sells any of the Collateral upon credit, after reasonable
inquiry as to the credit worthiness of the purchaser, The Company will be
credited only with payments actually made by the purchaser, received by Secured
Party and applied to the indebtedness of the purchaser. In the event the
purchaser fails to pay for the Collateral, Secured Party may resell the
Collateral and the Company shall be credited with the proceeds of the
sale;
(vi) incur
expenses, including reasonable attorneys’ fees, consultants’ fees, and other
costs appropriate to the exercise of any of its rights or powers under this
Agreement;
(vii) perform
any obligation of the Company hereunder and make payments, purchase, contest
or
compromise any encumbrance, charge, or lien, and pay taxes and
expenses;
(viii) 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;
(ix) secure
the appointment of a receiver of any or all of the Collateral;
(x) exercise
any other or additional rights or remedies granted to such Secured Party
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, or under
any
other applicable law and take any other action which Secured Party deems
necessary or desirable to protect or realize upon its respective security
interest in the Collateral or any part thereof; and/or
A-7
(xi) appoint
a
third party (who may be an employee, officer or other representative of Secured
Party) to do any of the foregoing, or take any other action permitted hereunder,
on behalf of such Secured Party.
(b) If,
pursuant to any law, prior notice of any action described in Section 5.2(a)
is
required to be given to the Company, the Company 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 Secured Party
either in the Company’s name or in Secured Party’s name, as each such Secured
Party may deem necessary.
(d) All
rights of marshalling of assets of the Company, including any such right
with
respect to the Collateral, are hereby waived by the Company.
(e) Secured
Party 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. The Company hereby waives
any
claims against Secured Party 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 Secured Party 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, the Company
hereby irrevocably constitutes and appoints each Secured Party as its true
and
lawful attorneys-in-fact to enforce all rights of the Company 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 the Company or, at
the
option of such Secured Party, in the name of such Secured Party, with the
same
force and effect as the Company could do if this Agreement had not been made.
If
Secured Party shall so elect after the occurrence and during the continuation
of
an Event of Default hereunder, Secured Party shall have the right at all
times
to settle, compromise, adjust, or liquidate all claims or disputes directly
with
the Company or any obligor of the Company upon such terms and conditions
as each
Secured Party may determine in its sole discretion, and to charge all costs
and
expenses thereof (including reasonable attorneys’ fees and charges) to the
Company’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
each Secured Party 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 rate permitted by law) from the date on which such costs
or
expenses are invoiced to and become payable by the Company, to the date of
payment thereof, shall constitute part of the Obligations secured by this
Agreement and shall be paid by the Company to each such Secured Party within
10
days after written demand.
A-8
5.5 NO
IMPAIRMENT OF REMEDIES.
If,
under
applicable law, Secured Party proceeds by either judicial foreclosure or
by
non-judicial sale or enforcement, such Secured Party 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, Secured Party forfeits any of its other rights or remedies, including
any right to enter a deficiency judgment against the Company or any third
party
(whether because of any applicable law pertaining to “election of remedies” or
the like), the Company nevertheless hereby consents to such action by Secured
Party. To the extent permitted by applicable law, The Company also waives
any
claim based upon such action, even if such action by Secured Party results
in a
full or partial loss of any rights of subrogation, indemnification or
reimbursement which The Company might otherwise have had but for such action
by
Secured Party or the terms herein. Any election of remedies which results
in the
denial or impairment of the right of Secured Party to seek a deficiency judgment
against any third party shall not, to the extent permitted by applicable
law,
impair the Company’s obligations hereunder. If Secured Party bids at any
foreclosure or trustee’s sale or at any private sale permitted by law or this
Agreement, Secured Party 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 Secured Party 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.
The
Company’s liability hereunder shall not be reduced, limited, impaired,
discharged or terminated if Secured Parties at any time with the Company’s
consent (or, to the extent permissible by the terms of the Loan Documents
and
law, without notice to or demand of the Company):
(a) renew,
extend, accelerate, increase the rate of interest on, or otherwise change
the
time, place, manner or terms, or otherwise modifies any of the Obligations
(including any payment terms);
(b) extend
or
waive the time for the Company’s performance of, or compliance with, any term,
covenant or agreement on their part to be performed or observed under the
Loan
Documents, or waive such performance or compliance or consent to a failure
of,
or departure from, such performance or compliance;
(c) settle,
compromise, release or discharge, or accept or refuse 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;
A-9
(d) request
and accept other guaranties of any of the Obligations and take and hold security
for the payment hereof or any of the Obligations;
(e) release,
surrender, exchange, substitute, compromise, settle, rescind, waive, alter,
subordinate or modify, 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, enforce and apply any security, if any, now or
hereafter held by or for the benefit of each Secured Party in respect hereof
or
any of the Obligations and direct the order or manner of sale thereof, or
exercise any other right or remedy that each Secured Party may have against
any
such security, in each case as each Secured Party 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) exercise
any other rights available to them under any of the Loan Documents, at law
or in
equity.
6.2 SECURITY
INTERESTS ABSOLUTE.
All
rights of Secured Parties and the security interests hereunder, and all
obligations of the Company 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 of the Loan Documents, 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 of the other Loan Documents 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 of the other Loan Documents 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 the Company to Secured Party
other than the Obligations, even though Secured Party might have elected
to
apply such payment to any part or all of the Obligations;
(d) Secured
Party’s consent to the change, reorganization or termination of the corporate
structure or existence of the Company and to any corresponding restructuring
of
any of the Obligations;
A-10
(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 the Company as an obligor
in respect of any of the Obligations;
(f) any
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 the Company may allege or assert
against Secured Party in respect of the Obligations.
6.3 CERTAIN
WAIVERS.
Except
as provided in Section 7.16, the Company 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 Secured Parties protect, secure, perfect or insure any
security interest or lien, or any property subject thereto, or exhaust any
right
or take any action against the Company 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.
The
Company 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 the Company on account of any such subrogation rights prior to such
time
shall be held in trust for Secured Parties and shall immediately be paid
to
Secured Parties and credited and applied against the Obligations. Any time
after
this Agreement has terminated and if the Company has made payment to Secured
Parties 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 the
Company’s request, Secured Parties will execute and deliver to the Company
appropriate documents (without recourse and without representation or warranty)
necessary to evidence the transfer by subrogation to the Company of an interest
in the Obligations resulting from such payment by the Company.
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:
(a)
if
to the
Company, at:
Equitex,
Inc.
0000
Xxxxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxx 00000
Attention: Xxxxx
Xxxx, President
Facsimile:
(000) 000-0000
Email:
xxxxx@xxxxxxx.xxx
A-11
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
(b)
if
to
Secured Parties, in care of:
Whitebox
Advisors, LLC
0000
Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxxx,
XX 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,
XX 00000
Attention:
Xxxxxxx X. Xxxxxxx, Esq.
Facsimile:
(000) 000-0000
All
notices or other communications required or permitted to be given hereunder
shall be in writing and shall be considered given (a) when made if
personally delivered by hand (with written confirmation of receipt), (b) on
the date received if sent by national overnight delivery service (receipt
requested) or (c) when receipt is acknowledged by the receiving party if
delivered by facsimile or electronic email. 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 Secured Party in exercising any of its rights or powers
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such rights or powers, 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 Secured Party of any breach or default under
the
Agreement or any waiver on the part of Secured Party 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 Secured Party 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 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 each Secured Party may be taken concurrently
or successively and in one or several consolidated or independent judicial
actions or lawfully taken nonjudicial proceedings, or both.
A-12
7.3 ENTIRE
AGREEMENT; SUPERSEDES ORIGINAL SECURITY 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.
This
Agreement supersedes and replaces the Original Security Agreement.
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.
THE
COMPANY
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 OF CONDUCT, COURSE
OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF SECURED PARTIES.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH SECURED PARTY 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 Secured Party 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 each Secured Party 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.
A-13
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 each Secured Party in its sole discretion) and performance
in
full of the Obligations, (i) this Agreement and the security interests
created hereby shall terminate and Secured Parties will return the Collateral,
including all documentation evidencing or affecting the Collateral, and
(ii) upon written request of the Company, Secured Parties shall execute and
deliver to the Company, at the Company’s expense and without representation or
warranty by or recourse to Secured Parties, 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 the Company or upon the dissolution of, or
appointment of any intervenor or conservator of, or trustee or similar official
for, the Company or any substantial
part of the Company’s assets, or otherwise, all as though such payments had not
been made.
7.16 LIMITATION
ON DUTY OF SECURED PARTY WITH RESPECT TO THE COLLATERAL.
The
powers conferred on each Secured Party hereunder are solely to protect its
respective interests in the Collateral and shall not impose any duty on such
Secured Party or any of its designated agents to exercise any such powers.
Except for the safe custody of any Collateral in their possession and the
accounting for monies actually received by them hereunder, Secured Parties
shall
have no duty with respect to any Collateral and no implied duties or obligations
shall be read into this Agreement against Secured Parties. Each Secured Party
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment that is substantially equivalent to that which such Secured Party
accords its own respective property, it being expressly agreed, to the maximum
extent permitted by applicable law, that each Secured Party 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,
each Secured Party may do so and all expenses reasonably incurred in connection
therewith shall be part of the Obligations.
A-14
7.17 COLLECTION
AGENT.
The
following shall relate to the enforcement of this Agreement:
(a) The
Secured Parties hereby appoint Whitebox Advisors, LLC as the initial collection
agent and attorney-in-fact for the Secured Parties under this Agreement (in
such
capacity, the “Collection
Agent”)
to
serve from the date hereof until the termination hereof, or until the Collection
Agent’s successor is duly appointed by agreement among the Secured Parties and
their successors in interest and the Secured Parties and their successors
in
interest notify the Company in writing of the newly appointed successor
Collection Agent. Each Secured Party hereby authorizes the Collection Agent
to
act as exclusive agent of and for all Secured Parties for purposes of taking
any
action to enforce rights and foreclose and dispose of any Collateral under
this
Agreement and the Stock Pledge Agreement (together, the “Security
Agreements”).
Each
Secured Party agrees that it shall not take any action against the Company
to
enforce rights under the Security Agreements and foreclose and dispose of
any
Collateral, except through and as directed by the Collection Agent.
(b) Each
Secured Party hereby irrevocably authorizes the Collection Agent to take
such
action and to exercise such powers hereunder as provided herein or as requested
in writing by any of the Secured Parties. The Collection Agent may rely upon
advice of counsel concerning legal matters, advice of certified public
accountants with respect to accounting matters and advice of other experts
as to
any other xxxxxx which it reasonably believes to be genuine or to have been
presented by an appropriate person under the circumstances. The Collection
Agent
may execute any of its duties hereunder by or through agents or employees
and
shall be entitled to request and act in reliance upon the advice of counsel
concerning all matters pertaining to its duties hereunder and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance therewith. The Collection Agent may take any and all actions that
the
Collection Agent deems necessary or appropriate, in its reasonable discretion,
in exercising its powers hereunder, including, but not limited to, initiating
any action in the name of the Secured Parties against the Company, foreclosing
on the Collateral or exercising any other rights available to the Collection
Agent on behalf of the Secured Parties at law or in equity.
(c) The
Company may rely on all orders and directions of the Collection Agent appointed
under subsection (a) above as acting on behalf, and with the authority, of
the
Secured Parties, or any of them, without liability to any Secured Party or
its
successors in interest.
[Signature
Page Follows]
A-15
IN
WITNESS WHEREOF,
the
parties hereto have executed this Amended Security Agreement as of the date
first written above.
| The Company: | Secured Parties: | ||
| Equitex, Inc. | Pandora Select Partners, L.P. | ||
| By | /s/ Xxxxx Xxxx | By | /s/ Xxxxxxxx Xxxx |
|
Xxxxx Xxxx, President |
|
||
| Its | Managing Director | ||
|
|
|||
| Whitebox Hedged High Yield Partners, L.P. | |||
| By | Xxxxxxxx Xxxx | ||
|
|
|||
| Its | Managing Director | ||
|
|
|||
A-16
