EXHIBIT 10.9
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is entered into as of the
8th
day of March, 2004, by and among Equitex,
Inc., a Delaware corporation (the
"Company"), and Pandora Select Partners,
L.P., a British Virgin Islands limited
partnership ("Pandora" or a "Purchaser"),
and Whitebox Hedged High Yield
Partners, L.P., a British Virgin Islands
limited partnership ("Whitebox" or a
"Purchaser") (together, the
"Purchasers").
R E C I T A L S :
WHEREAS, in consideration of $5,000,000, the Company proposes to
issue
to the Purchasers, and the Purchasers,
severally and jointly, desire to purchase
promissory notes in the form attached as
Exhibit A (the "Notes") convertible at
each Purchaser's option into shares of the
Company's Common Stock, $0.02 par
value (the "Shares"), and warrants in the
form of Exhibit B (the "Warrants," and
individually, a "Warrant") to purchase an
aggregate of 800,000 Shares (subject
to certain adjustments).
NOW, THEREFORE, in consideration of the foregoing recitals and
the
mutual promises hereinafter set forth, the
parties hereto agree as follows:
SECTION 1.
AGREEMENT TO SELL AND PURCHASE.
1.1. Authorization of Transaction. On or prior to the closing
under
Section 2.1 of this Agreement (the
"Closing"), the Company shall have authorized
the sale and issuance to the Purchasers of
the Notes, Warrants and Shares
issuable upon conversion of the Notes or
exercise of the Warrants.
1.2. Sale and Purchase. Subject to the
terms and conditions hereof, at the
Closing, the Company hereby agrees to issue
and sell to Purchasers, and
Purchasers, severally and jointly, agree to
purchase from the Company, the Notes
and Warrants for an aggregate Purchase
Price of $5,000,000. The principal amount
of each Purchaser's Note shall be as
designated by the Purchasers prior to
Closing (as defined below), and the number
of Shares purchasable under a Warrant
shall be in the same proportion as the
principal balance of a Note bears to
$5,000,000.
SECTION 2.
CLOSING, DELIVERY AND PAYMENT
2.1. Closing. The Closing shall take place at 10:00 a.m. on the
date
hereof at the offices of the Purchaser's
legal counsel, Messerli & Kramer P.A.,
in Minneapolis, Minnesota, or at such other
time or place as the Company and the
Purchaser may mutually agree (the "Closing
Date"). At the Closing, subject to
the terms and conditions hereof, the
Company will issue, sell and deliver to
each Purchaser the Purchaser's Note and
Warrant, against payment of the
Purchaser's respective Purchase Price by
certified check or wire transfer of
immediately available funds. At that time,
the Company shall also execute and
deliver to the Purchasers the Registration
Rights Agreement in the form attached
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as Exhibit C (the "Registration Rights
Agreement") and the Security Agreement
covering certain of the Company assets (the
"Company Collateral") in the form
attached as Exhibit D (the "Company
Security Agreement"). The Company Collateral
will consist of a first priority interest
in all of the outstanding common stock
of Chex Services, Inc., a Minnesota
corporation and wholly-owned subsidiary of
the Company ("Chex"), a promissory note
issued by Chex in favor of the Company
in the principal amount of $5,000,000 (the
"Chex Note") and the Company's
interest in the Chex Note Security
Agreement dated as of this date. At that
time, the Company will also cause Chex to
execute and deliver to the Purchasers
a Guarantee of the Notes (the "Guarantee"),
and a Security Agreement pledging
all of Chex's assets to secure the
Guarantee (the "Chex Collateral") in the form
attached as Exhibit E (the "Chex Guarantee
Security Agreement").
SECTION 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and
warranties
to each Purchaser as of the date of the
Closing.
3.1. Organization, Good Standing and Qualification. The Company is
a
corporation duly organized, validly
existing and in good standing under the laws
of the State of Delaware. Each of the
Company and Chex has all requisite
corporate power and authority to own and
operate its respective properties and
assets and to carry on its business as
presently conducted and as presented
proposed to be conducted. The Company has
all requisite corporate power and
authority to execute and deliver this
Agreement, each Note, each Warrant, the
Registration Rights Agreement and the
Company Security Agreement (together, the
"Company Transaction Documents"); to pledge
the Company Collateral as security
for each Note; to issue and sell the Shares
upon conversion of each Note or
exercise of each Warrant (the "Conversion
Shares"); and to carry out the
provisions of the Company Transaction
Documents. Chex has all requisite
corporate power and authority to execute
and deliver the Chex Guarantee Security
Agreement, to pledge the Chex Collateral as
security for each Note and to carry
out the provisions of this Agreement and
the Chex Guarantee Security Agreement.
Each of the Company and Chex is duly
qualified and is authorized to do business
and is in good standing in each
jurisdiction in which the nature of its
activities and of its properties (both
owned and leased) makes such
qualification necessary, except for those
jurisdictions in which failure to be
so qualified would not have a materially
adverse effect on the Company or its
business, taken as a whole.
3.2. Capitalization. The Company is authorized to issue
2,000,000
shares of Preferred Stock, par value $1,000
per share, of which 408 shares of
Series D, 370 shares of Series G and 1,600
shares of Series I are issued and
outstanding, and 50,000,000 shares of
Common Stock, par value $0.02 per share,
of which 31,752,346 shares are issued and
29,390,278 shares are outstanding.
Except as set forth Schedule 3.2 or in the
Company's quarterly, annual and other
filings (the "SEC Reports") with the U.S.
Securities and Exchange Commission
(the "Commission"), the Company has no (i)
outstanding options, warrants or
other rights to acquire any capital stock,
or securities convertible or
exchangeable for capital stock or for
securities themselves convertible or
exchangeable for capital stock (together,
"Convertible Securities") or (ii)
agreement or commitment to sell or issue
any shares of capital stock or
Convertible Securities. All issued and
outstanding shares of the Company's
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capital stock (i) have been duly authorized
and validly issued, (ii) are fully
paid and nonassessable, (iii) are free from
any preemptive and cumulative voting
rights and (iv) were issued pursuant to an
effective registration statement
filed with the Commission and applicable
state securities authorities or
pursuant to valid exemptions under federal
and state securities laws. Except as
set forth on Schedule 3.2, there are no
outstanding rights of first refusal or
proxy or shareholder agreements of any kind
relating to any of the Company's
securities to which the Company or any of
its executive officers and directors
is a party or as to which the Company
otherwise has knowledge of. When issued in
compliance with the provisions of the Notes
or Warrants (and upon payment as
provided by each such Note or Warrant), the
Shares so issued will be validly
issued, fully paid and nonassessable, and
will be free of any liens or
encumbrances; provided, however, that the
Shares may be subject to restrictions
on transfer under state and/or federal
securities laws as set forth herein or as
otherwise required by such laws at the time
a transfer is proposed. Chex does
not have any outstanding Convertible
Securities or agreements or commitments to
sell or issue any shares of capital stock
or Convertible Securities.
3.3. Authorization; Binding Obligations. All corporate action on
the
part of the Company and Chex, and their
respective officers, directors and
shareholders necessary for the
authorization (in the case of the Company) of the
Company Transaction Documents, and (in the
case of Chex) the Guarantee and Chex
Guarantee Security Agreement (together, the
"Transaction Documents"), the
performance of all obligations of the
Company hereunder at the Closing, and the
performance of the respective obligations
of the Company and Chex under the
Transaction Documents, including the pledge
of the Company Collateral and the
Chex Collateral (together, the
"Collateral") as security for the Notes and
Guarantee, respectively, and the
authorization, sale, issuance and delivery of
the Shares upon conversion of each Note or
upon exercise of each Warrant has
been taken. The Transaction Documents, when
executed and delivered, will be
valid and binding obligations of the
Company and/or Chex, as applicable,
enforceable in accordance with their terms,
except (i) as limited by applicable
bankruptcy, insolvency, reorganization,
moratorium or other laws of general
application affecting enforcement of
creditors' rights, (ii) according to
general principles of equity that restrict
the availability of equitable
remedies and (iii) to the extent that the
enforceability of the indemnification
provisions of the Registration Rights
Agreement may be limited by applicable
laws. The sale of the Shares upon exercise
of each Warrant or upon conversion of
each Note is not and will not be subject to
any preemptive rights or rights of
first refusal.
3.4. Financial Statements. The Company's unaudited consolidated
balance
sheet at, and the statements of operations
and cash flows for the nine months
ended, September 30, 2003 (the "Latest
Financial Statements" with September 30,
2003 being the "Latest Statement Date") and
the audited consolidated balance
sheets at, and the statements of
operations, cash flows and changes in
stockholders' equity of the Company for the
fiscal years ended, December 31,
2002 and 2001 (all of the foregoing
together, the "Financial Statements"), as
contained in the SEC Reports, fairly
present in all material respects the
consolidated financial position, results of
operations, cash flows and changes
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in stockholders' equity of the Company as
of the respective dates and for the
respective periods covered thereby in
accordance with generally accepted
accounting principles consistently
applied.
3.5. Liabilities. The Company has no material liabilities and, to
the
best of its knowledge, the Company knows of
no material contingent liabilities
not disclosed in the Latest Financial
Statements or SEC Reports, except current
liabilities incurred in the ordinary course
of business subsequent to the Latest
Statement Date that have not been, either
in any individual case or in the
aggregate, materially adverse.
3.6. Certain Agreements and Actions. Except as disclosed in the
SEC
Reports, the Company has not (i) declared
or paid any dividends, or authorized
or made any distribution upon or with
respect to any class or series of its
capital stock, (ii) since the Latest
Statement Date incurred any indebtedness
for money borrowed or any other material
liabilities out of the ordinary course
of business, (iii) made any loans or
advances to any person, other than ordinary
advances for travel or entertainment
expenses or (iv) sold, exchanged or
otherwise disposed of any of its assets or
rights, other than in the ordinary
course of business.
3.7. Obligations of or to Related Parties. Except as disclosed
on
Schedule 3.7 or in the SEC Reports, there
are no obligations of the Company to
officers, directors, shareholders,
employees or consultants of the Company, or
to any members of their immediate families
or other affiliates, other than (i)
for payment of salary for services rendered
since the commencement of the
Company's most recent payroll period, (ii)
reimbursement for expenses reasonably
incurred on behalf of the Company and (iii)
for other standard employee benefits
made generally available to all employees
(including stock option agreements
outstanding under any stock option plan
approved by the Board of Directors of
the Company). Except as disclosed on
Schedule 3.7 or in the SEC Reports, none of
the officers or directors, or, to the
Company's knowledge, any affiliate,
employee or consultant, of the Company, or,
to the Company's knowledge, any
members of their immediate families, are
indebted to the Company for any
material amount or have any direct or
indirect material ownership interest in
any firm, corporation or other entity with
which the Company is affiliated or
with which the Company has a business
relationship, or any firm, corporation or
other entity that competes with the
Company. Except as disclosed in the SEC
Reports, no officer or director, or, to the
Company's knowledge, any affiliate,
employee or consultant of the Company, or,
to the Company's knowledge, any
member of their immediate families or other
affiliates, is, directly or
indirectly, interested in or a party to any
material contract with the Company.
Except as disclosed on Schedule 3.7 or in
the SEC Reports, the Company is not a
guarantor or indemnitor of any indebtedness
of any other person, firm or
corporation.
3.8. Changes. Since the Latest Statement Date, and except as
disclosed
in the SEC Reports, there has not been, to
the Company's knowledge, any event or
condition of any character that, either
individually or cumulatively, has
materially and adversely affected the
business, assets, liabilities, financial
condition, operations or prospects of the
Company.
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3.9. Title to Properties and Assets; Liens. Except as set forth
on
Schedule 3.9 or in the SEC Reports, the
Company has good and marketable title to
its properties and assets, including the
properties and assets reflected in the
Latest Financial Statements, and good title
to its leasehold estates, in each
case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other
than (i) those resulting from taxes that
have not yet become delinquent, (ii)
minor liens and encumbrances that do not
materially detract from the value of
the property subject thereto or materially
impair the operations of the Company
and (iii) those that have otherwise arisen
in the ordinary course of business.
All facilities, machinery, equipment,
fixtures and other properties owned,
leased or used by the Company are in good
operating condition and repair and are
reasonably fit and usable for the purposes
for which they are being used,
reasonable wear and tear excepted.
3.10. Patents and Trademarks. Except as set forth on Schedule 3.10
or
in the SEC Reports, the Company owns or
licenses all patents, trademarks,
service marks, trade names, copyrights,
trade secrets, information and other
proprietary rights and processes necessary
for its business as now conducted and
as proposed to be conducted, without any
known infringement of the rights of
others. The Company is not aware that any
of its employees is obligated under
any contract (including licenses, covenants
or commitments of any nature) or
other agreement, or subject to any
judgment, decree or order of any court or
administrative agency, that would interfere
with their duties to the Company or
that would conflict with the Company's
business as proposed to be conducted.
Neither the execution, delivery or
performance of the Transaction Documents, the
pledge of the Collateral by the Company and
Chex to secure the Notes and the
Guarantee, respectively, the carrying on of
the Company's and Chex's business by
the respective employees of the Company and
Chex, nor the conduct of the
Company's and Chex's business as currently
conducted or proposed, will conflict
with or result in a breach of the terms,
conditions or provisions of, or
constitute a default under, any contract,
covenant or instrument under which any
employee of the Company or Chex now
obligated. The Company does not believe it
is or will be necessary to utilize any
inventions, trade secrets or proprietary
information of any of its or Chex's
employees made prior to their employment by
the Company or Chex, except for inventions,
trade secrets or proprietary
information that have been assigned to the
Company or Chex.
3.11. Compliance with Other Instruments. Except as disclosed in the
SEC
Reports, the Company is not in material
violation or default of any term of its
Articles or Bylaws, or of any provision of
any mortgage, indenture, contract,
agreement, instrument or contract to which
it is party or by which it is bound
or of any judgment, decree, order, writ or,
to its knowledge, any statute, rule
or regulation applicable to the Company,
that, in any such case, would
materially and adversely affect the
business, assets, liabilities, financial
condition, operations or prospects of the
Company. The execution, delivery, and
performance of and compliance with the
Transaction Documents, and the issuance
and sale of the Shares upon conversion of
each Note or exercise of each Warrant,
will not, with or without the passage of
time or giving of notice, result in any
such material violation, or be in conflict
with or constitute a default under
any such term, or result in the creation of
any mortgage, pledge, lien,
encumbrance or charge upon any of the
properties or assets of the Company or the
suspension, revocation, impairment,
forfeiture or nonrenewal of any permit,
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license, authorization or approval
applicable to the Company, its business or
operations or any of its assets or
properties that, in any such case, would
materially and adversely affect the
business, assets, liabilities, financial
condition, operations or prospects of the
Company.
3.12. Litigation. Except as disclosed in the SEC Reports, there is
no
action, suit, proceeding or investigation
pending or, to the Company's
knowledge, currently threatened against the
Company that questions the validity
of this Agreement or the other agreements
contemplated hereby, or the right of
the Company to enter into any of such
agreements, or to consummate the
transactions contemplated hereby or
thereby. Except as disclosed in the SEC
Reports, there is no action, suit,
proceeding or investigation or, to the
Company's knowledge, currently threatened
against the Company that might result,
either individually or in the aggregate, in
any material adverse change in the
assets, condition, affairs or prospects of
the Company, financial or otherwise,
or any change in the current equity
ownership of the Company, nor is the Company
aware that there is any basis for the
foregoing. The foregoing includes, without
limitation, actions pending or threatened
(or any basis therefor known to the
Company) involving asbestos and other
environmental-related claims and the prior
employment of any of the employees of the
Company, their use in connection with
the Company's business of any information
or techniques allegedly proprietary to
any of their former employers or their
obligations under any agreements with
prior employers. Except as disclosed in the
SEC Reports, the Company is not a
party or subject to the provisions of any
order, writ, injunction, judgment or
decree of any court or government agency or
instrumentality.
3.13. Tax Returns and Payments. The Company has timely filed all
tax
returns (federal, state and local) required
to be filed by it. All taxes shown
to be due and payable on such returns, any
assessments imposed, and, to the
Company's knowledge, all other taxes due
and payable by the Company on or before
the Closing have been paid or will be paid
prior to the time they become
delinquent. The Company has not been
advised (i) that any of its returns,
federal, state or other, have been or are
being audited as of the date hereof or
(ii) of any deficiency in assessment or
proposed judgment to its federal, state
or other taxes. The Company has no
knowledge of any liability of any tax to be
imposed upon the properties or assets of
the Company as of the date of this
Agreement that is not adequately provided
for.
3.14. Employees. The Company has no collective bargaining
agreements
with any of its employees. There is no
labor union organizing activity
