EXHIBIT 10.10
CONVERTIBLE SECURED PROMISSORY NOTE
$3,000,000
March 8, 2004
FOR VALUE RECEIVED, the undersigned, Equitex, Inc., a Delaware
corporation (the "Maker"), hereby promises
to pay to the order of Pandora Select
Partners, L.P., a British Virgin Islands
limited partnership or its assigns (the
"Payee"), at such place as the Payee may
designate in writing, the principal sum
of Three Million Dollars ($3,000,000),
under the terms set forth herein.
1. Aggregate Notes. This Note is one of an
aggregate of $5,000,000 of
Convertible Secured Promissory Notes (the
"Convertible Secured Notes")
originally issued by the Maker in favor of
Payee and an affiliate of Payee, and
purchased under the terms of a Purchase
Agreement (the "Purchase Agreement")
dated as of the date of this Note between
Maker, Payee and Payee's affiliate.
2. Interest. The unpaid principal balance
hereof from time to time outstanding
shall bear interest from the date hereof at
the rate of 7% per annum; provided,
that upon the occurrence of an event of
default, the unpaid principal and
interest hereof existing from time to time
following the event of default, and
up to the date such event of default is
cured with the consent of Payee, shall
bear interest at the increased rate of 10%
per annum, and the incremental
increase in interest due under such
circumstance shall be added to each
installment payment as provided in Section
3 below.
3. Payment. Subject to adjustment upon an
event of default as provided under
Section 9, the payments of principal and
interest hereunder are payable as
follows:
(a) Payments
in cash of interest only are payable in arrears
on April 8, May 8 and June 8, 2004; and
(b) Commencing on July 8, 2004, and on the 8th day of each of
the
following 41 months, Maker shall pay
amortized principal and interest on this
Note of $80,742.61 (the "Monthly Scheduled
Payment").
4. Optional Payment in Stock.
(a) In lieu of making a cash payment under subsection 3(b) above,
Maker
may pay the Monthly Scheduled Payment, or
any portion thereof, by the issuance
of shares of its common stock, par value
$0.02 per share (the "Common Stock"),
the per share value of which is computed as
provided in subsection 4(b) below.
At the time that Maker timely and fully
pays a Monthly Scheduled Payment, Maker
may in its discretion also pay by the
issuance of Common Stock at the same per
share value up to $60,000 of Note principal
(a "Discretionary Principal
Payment"). Notwithstanding the foregoing,
the number of shares of Common Stock
which may be issued to pay all or any
portion of a particular Monthly Scheduled
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Payment, when aggregated with any
corresponding Discretionary Principal Payment,
may not exceed the lesser of (i) 6% of the
aggregate number of traded shares of
Common Stock reported on the "Trading
System" for the one-month period (from the
last Monthly Scheduled Payment date to the
day before the Monthly Scheduled
Payment date for which payment is being
made) immediately preceding such Monthly
Scheduled Payment due, or (ii) a number of
shares of Common Stock which, when
added to the number of shares of Common
Stock owned of record together by Payee
and its affiliates, would cause Payee and
its affiliates together to own
beneficially or of record more than 4.99%
of the Maker's outstanding Common
Stock. The "Trading System" is the NASDAQ
System (or if the securities are not
then traded on the NASDAQ System, on the
OTC Bulletin Board as reported by
bigcharts.com, or if this service is
discontinued, such other reporting service
acceptable to Payee). In computing under
this subsection (a) the aggregate
number of traded shares during any time
period, the Maker shall exclude (i)
shares sold by or for the account or at the
direction of the Maker, officers or
directors of Maker or any members of their
immediate families or any affiliates
of Maker and (ii) shares determined solely
by Payee (for which Payee shall so
inform the Maker in writing) to represent
unlawful or potentially unlawful
sales. Maker may pay the Monthly Scheduled
Payment, or any portion thereof, or
any Discretionary Principal Payment by the
issuance of Common Stock only if, at
the time of such payment, Maker has in
effect a registration statement on Form
S-2 or S-3 with the SEC and applicable
state securities laws covering the
original issuance of shares by the Maker or
the resale of such shares by the
Payee. Further, Maker may not pay a Monthly
Scheduled Payment, or any portion
thereof, or any Discretionary Principal
Payment by the issuance of Common Stock
if, at the time of such payment, the per
share value of the Maker's Common Stock
(as computed in accordance with subsection
(b) below and adjusted as provided in
Section 5(b)) is less than $0.75 per
share.
(b) The per share value of the Common Stock as of a specified
Scheduled
Monthly Payment date for the purposes of
this Section 4 is 85% (rounded to the
nearest $.01) of the "Maker's Average Stock
Price" for the 20 trading days
immediately preceding the particular
Scheduled Monthly Payment date. The
"Maker's Average Stock Price" is the
average (rounded to the nearest $.01) of
the high closing bid prices of Maker's
Common Stock on the Trading System over
the indicated period.
(c) Payment by Common Stock shall be deemed to be made by Maker
by
giving written notice to the Payee of the
number of shares being issued in such
payment, and the Maker's calculation of the
per share market value under
subsection 4(b) above; provided that
certificates representing those shares are
delivered to Payee within 20 days of the
due date of the Scheduled Monthly
Payment.
5. Conversion.
(a) At any time while any portion of the principal or interest of
this
Note is outstanding (including during the
notice period prior to any optional
cash prepayment by the Maker), the Payee
may give the Maker written notice of
its intention to convert all or any portion
of the outstanding principal and/or
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accrued, but unpaid interest on this Note
into shares of the Maker's Common
Stock based on $1.35 per share (the
"Conversion Rate"). Upon receipt of the
Payee's notice, the Maker shall immediately
cause certificates representing
these shares to be delivered to Payee
within 20 days of, and Payment shall be
deemed to have been made on, the date of
such notice.
(b) The Conversion Rate shall be adjusted proportionally for
any
subsequent stock dividend or split, stock
combination or other similar
recapitalization, reclassification or
reorganization of or relating to Maker's
Common Stock. In case of any consolidation
or merger to which the Maker is a
party, other than a merger or consolidation
in which the Maker is the continuing
corporation, or in case of any sale or
conveyance to another corporation of the
property of the Maker as an entirety or
substantially as an entirety, or in the
case of any statutory exchange of
securities with another corporation (including
any exchange effected in connection with a
merger of a third corporation into
the Maker), then instead of receiving
shares of Maker's Common Stock, Payee
shall have the right thereafter to receive
the kind and amount of shares of
stock and other securities and property
which the Payee would have owned or have
been entitled to receive immediately after
such consolidation, merger, statutory
exchange, sale or conveyance had the same
portion of this Note been paid or
converted immediately prior to the
effective date of such consolidation, merger,
statutory exchange, sale or conveyance and,
in any such case, if necessary,
appropriate adjustment shall be made in the
application o
