EXHIBIT 10.10
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "AGREEMENT") is made as of June 7, 2004,
by and between Seven Ventures, Inc., a Nevada corporation ("VENTURES"), Equitex,
Inc. a Delaware corporation ("EQUITEX") and 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"), as
secured parties (Pandora and WHHY individually are each a "Secured Party" and
together are the "SECURED PARTIES").
Recitals
A. Under the terms of a Purchase Agreement dated March 8, 2004, Pandora
purchased a $3,000,000 face-amount promissory note, a copy of which is attached
hereto as Exhibit A, and WHHY purchased a $2,000,000 face-amount promissory
note, a copy of which is attached hereto as Exhibit B, in consideration for a
$5,000,000 loan by Secured Parties to Equitex (the "LOAN"), which Equitex loaned
on a secured basis to Chex Services, Inc., a Minnesota corporation and a then
wholly-owned subsidiary of Equitex ("Chex") for use in Chex's business. Both
promissory notes are referred to herein as the "NOTES".
B. In connection with the Loan, Equitex entered into an agreement
entitled "Equitex Security Agreement".
C. Under the terms of the Equitex Security Agreement, Equitex pledged
2,170,000 shares of the common stock of Chex to the Secured Parties as partial
security for the Loan.
D. Equitex and Chex entered into an Agreement and Plan of Merger with
Ventures, whereby Chex is to be merged with a wholly owned, newly formed,
subsidiary of Ventures, with Chex as the surviving corporation, and as a result,
upon the effective time of the Merger, Ventures shall become the record and
beneficial owner of all of the outstanding capital stock of Chex, being one
share of Chex common stock.
E. As a condition to obtaining the consent of the Secured Parties to
permit the Merger to be consummated, and to induce the Secured Parties to
deliver the 2,170,000 of Chex common stock to Ventures, and to release its
security interest therein, the parties hereto agree as follows:
AGREEMENT
NOW, THEREFORE, in consideration of the premises and 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
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 term "OBLIGATIONS" shall
mean the payment and other performance obligations under the Notes.
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ARTICLE 2.
SECURITY INTEREST
2.1 GRANT OF SECURITY INTEREST. To secure the timely payment and
performance in full of the Obligations, Ventures does hereby assign, grant and
pledge to Secured Parties, all of its estate, right, title and interest in and
to the Collateral. As to Ventures' equity interest (the "PLEDGED EQUITY
INTEREST") in Chex, the "COLLATERAL" includes Ventures' share of:
(a) all rights to receive income, gain, profit, dividends and other
distributions allocated or distributed to Ventures in respect of or in exchange
for all or any portion of such Pledged Equity Interest;
(b) all of Ventures' capital or ownership interest, including
capital accounts, in Chex, and all accounts, deposits or credits of any kind
with Chex;
(c) all of Ventures' voting rights in or rights to control or direct
the affairs of Chex;
(d) all of Ventures' rights, title and interest, as a member or
shareholder of Chex, in, to or under any and all of Chex's assets or properties;
(e) all other rights, title and interest in or to Chex derived from
the Pledged Equity Interest;
(f) all indebtedness or other obligations of Chex owed to Ventures;
(g) all claims of Ventures for damages arising out of, or for any
breach or default relating to, the Pledged Equity Interest;
(h) all rights of Ventures to terminate, amend, supplement, modify,
or cancel, the governing documents of Chex, 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 Ventures 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 Pledged Equity Interest shall be
delivered to and held by or on behalf of Secured Parties, or its designee
pursuant hereto, in the manner set forth in Section 4.6 (Delivery of Collateral;
Proxy).
2.3 FINANCING STATEMENTS.
(a) Ventures hereby authorizes Secured Parties 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 Secured Parties to
perfect or from time to time to publish notice of, or continue or renew the
security interests granted hereby (including, such financing statements,
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continuation statements, certificates, and other documents as may be necessary
or reasonably requested to perfect a security interest in any replacements or
proceeds of the Collateral), in each case in form and substance satisfactory to
Secured Parties.
(b) Secured Parties will pay the cost of filing the same in all
public offices where filing is necessary or reasonably requested by Secured
Parties and will pay any and all recording, transfer or filing taxes that may
due in connection with any such filing. Ventures grants Secured Parties the
right, at any time and at Secured Parties' option to file any or all such
financing statements, continuation statements, and other documents pursuant to
the UCC and otherwise as Secured Parties reasonably may deem necessary or
desirable.
(c) Ventures 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
Secured Parties may reasonably determine are necessary or advisable to perfect
the security interests granted to Secured Parties. 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 Parties may reasonably determine is necessary, advisable
or prudent to ensure the perfection of the security interest in the Collateral
granted to Secured Parties herein.
2.4 DEBTOR REMAINS LIABLE.
(a) Anything herein contained to the contrary notwithstanding,
Ventures shall remain liable under its certificate 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 Secured Parties shall have no
obligations or liabilities under the Constituent 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 Ventures
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 Ventures under any of the Constituent Documents shall
occur, Secured Parties shall, at their option, be permitted (but shall not be
obligated) to remedy any such default by giving written notice of such intent to
Ventures and to the parties to such agreement. Any cure by Secured Parties of
Ventures' default under a Constituent Document shall not be construed as an
assumption by Secured Parties of any obligations, covenants or agreements of
Ventures under the Constituent Documents, and Secured Parties shall not incur
any liability to Ventures or any other Person as a result of any actions
undertaken by Secured Parties 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 Ventures under any of the Constituent Documents.
2.5 RETENTION OF CERTAIN RIGHTS. So long as Secured Parties have 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, Ventures reserves the right, subject to its obligations under Section
2.6, to exercise all voting rights with respect to the Pledged Equity Interest;
provided, that no vote shall be cast, right exercised or other action taken
which could materially impair the Collateral.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF DEBTOR
Ventures makes the following representations and warranties to and in
favor of Secured Parties as of the date hereof. All of these representations and
warranties shall survive the execution and delivery of this Agreement:
3.1 ORGANIZATION. Ventures:
(a) is a corporation duly incorporated and validly existing and in
good standing under the laws of the State of Nevada;
(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;
(c) has the corporate power to carry on its business as now being
conducted and as proposed to be conducted by it; and
(d) has the corporate power (A) to execute, deliver and perform this
Agreement, (B) to take all action as may be necessary to consummate the
transactions contemplated hereunder and (C) 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 Ventures is located at 7315 East Peakview Avenue,
Englewood, Colorado 80111.
3.3 TITLE AND LIENS. The Pledged Equity Interest owned by Ventures (a)
has been duly authorized and validly issued, (b) is fully paid and
non-assessable, and (c) represents, and will represent during the term of this
Agreement, all of the outstanding capital stock of Chex. Ventures has good,
valid, and marketable title to its Collateral, free from all liens and
encumbrances of any kind. As a result of this Agreement, Secured Parties will
have a first priority security interest in the Collateral.
3.4 UCC ARTICLE 8. The shares of Chex that constitute the Pledged
Equity Interest are securities governed by Article 8 of the UCC.
3.5 AUTHORIZATION; NO CONFLICT. Ventures has duly authorized, executed
and delivered this Agreement, and Ventures' 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 other legal requirements applicable to or binding on Ventures which
could reasonably be expected to have a material adverse effect upon the
Collateral or Secured Parties' 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 Ventures' property, under any agreement or instrument to which Ventures
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.
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3.6 ENFORCEABILITY. This Agreement is a legal, valid and binding
obligation of Ventures, enforceable against Ventures 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
Ventures covenants to and in favor of Secured Parties as follows:
4.1 COMPLIANCE WITH OBLIGATIONS. Ventures 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. Ventures shall, promptly upon
request, provide to Secured Parties all information and evidence they may
reasonably request concerning the Collateral to enable Secured Parties to
enforce the provisions of this Agreement.
4.3 DEFENSE OF COLLATERAL. Ventures shall defend its title to the
Collateral and the interests of Secured Parties in the Collateral pledged
hereunder against the claims and demands of all third parties whomsoever.
4.4 MAINTENANCE OF COLLATERAL. Ventures shall not (i) take any action
to terminate, modify or amend any Constituent Document of Chex which impairs the
Secured Parties' interest in the Collateral, except with the consent of Secured
Parties, (ii) fail to deliver to Secured Parties 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 Secured Parties' rights therein, or (iii) sell,
contract to sell, assign, transfer or dispose of any of the Collateral, except
with the consent of Secured Parties.
4.5 EVENTS OF DEFAULT. Ventures shall give to Secured Parties prompt
notice of any material default under any Constituent Document of Chex or
otherwise with respect to the Collateral of which Ventures has knowledge or has
received notice.
4.6 DELIVERY OF PLEDGED EQUITY INTEREST; PROXY. All certificates or
instruments representing or evidencing the Pledged Equity Interest shall be
delivered to and held by or on behalf of Secured Parties 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 Secured Parties.
Secured Parties shall have the right, at any time in their discretion and
without prior notice to Ventures, following the occurrence and during the
continuation of an Event of Default, to transfer to or to register in the name
of Secured Parties or any of its nominees any or all of the Pledged Equity
Interest and to exchange certificates or instruments representing or evidencing
Pledged Equity Interest for certificates or instruments of smaller or larger
denominations; provided, however, that once such Event of Default has been
cured, Secured Parties will promptly transfer to or register in the name or
cause its nominees to transfer to or register in the name of Ventures all such
Pledged Equity Interest. In furtherance of the foregoing, Ventures shall further
execute and deliver to Secured Parties as to Chex a proxy in the form attached
hereto as Exhibit C.
4.7 PRESERVATION OF VALUE; LIMITATION OF LIENS. Ventures shall not take
any action in connection with the Collateral which would dilute or impair in any
material respect the interests or rights of Secured Parties therein or
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with respect thereto, except as expressly permitted hereby. Ventures 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). Ventures 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. Ventures 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.
4.9 MAINTENANCE OF RECORDS. Ventures shall, at all times, keep accurate
and complete records of the Collateral. Ventures shall permit representatives of
Secured Parties, upon reasonable prior notice, at any time during normal
business hours of Ventures to inspect and make abstracts from Ventures' books
and records pertaining to the Collateral. Upon the occurrence and during the
continuation of any Event of Default, at Secured Parties' request, Ventures
shall promptly deliver copies of any and all such records to Secured Parties.
4.10 PAYMENT OF TAXES. Ventures 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 it hereunder and
shall retain copies of, and, upon request, permit Secured Parties to examine
receipts showing payment of any of the foregoing.
4.11 NAME; JURISDICTION OF ORGANIZATION. Ventures shall give Secured
Parties at least 30 days prior written notice before Ventures changes its name,
jurisdiction of organization or entity type and shall at the expense of Ventures
execute and deliver such instruments and documents as may be required by Secured
Parties or applicable legal requirements to maintain a first perfected security
interest in the Collateral.
4.12 PROCEEDS OF COLLATERAL. Ventures shall, at all times, keep pledged
to Secured Parties pursuant hereto all Collateral, and all dividends,
distributions, interest, principal and other proceeds received by Ventures with
respect thereto, and all other Collateral and other securities, instruments,
proceeds and rights from time to time received by or distributable to Ventures
in respect of the Collateral, and shall not permit Chex to issue any shares of
stock or other equity interests which shall not have been immediately duly
pledged to Secured Parties hereunder.
ARTICLE 5.
RIGHTS AND REMEDIES
5.1 EVENT OF DEFAULT DEFINED. Any material default of Ventures under
the terms of this Agreement, or any event of default by Equitex under either of
the Notes 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, Secured Parties 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 Ventures' rights or powers incident to its ownership of
Chex, including any rights or powers to manage or control Chex;
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(ii) proceed to protect and enforce the rights vested in it by
this Agreement and under the UCC;
(iii) cause all moneys and other property pledged as security to
be paid and/or delivered directly to it, and demand, sue 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
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 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
Secured Parties 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 Parties may be purchasers on their own behalf at any such
sale and that Secured Parties or anyone else who may be the purchaser or
recipient for value of any or all of the Collateral so disposed of shall, upon
such disposition, acquire all of the Ventures' rights therein. Secured Parties
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 Parties, after reasonable inquiry
as to the credit worthiness of the purchaser, sell any of the Collateral upon
credit, Equitex will be credited only with payments actually made by the
purchaser, received by Secured Parties and applied to the indebtedness of the
purchaser. In the event the purchaser fails to pay for the Collateral, Secured
Parties may resell the Collateral and Equitex 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 Ventures 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 Secured Parties 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 Parties deems necessary or desirable to protect or realize upon their
security interests in the Collateral or any part thereof; and/or
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(xii) appoint a third party (who may be an employee, officer or
other representative of Secured Parties) to do any of the foregoing, or take any
other action permitted hereunder, on behalf of Secured Parties.
(b) If, pursuant to any law, prior notice of any action described in
Section 5.2(a) is required to be given to Ventures or Equitex, Ventures and
Equitex hereby acknowledge that the minimum time required by such law, or if no
minimum is specified, 10 days shall be deemed a reasonable notice period.
(c) Any action or proceeding to enforce this Agreement may be taken
by Secured Parties either in Ventures' name or in Secured Parties' names, as
Secured Parties may deem necessary.
(d) Secured Parties 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. Ventures and Equitex hereby waive
any claims against Secured Parties 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 Parties accept the
first offer received and do 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, Ventures hereby irrevocably constitutes and appoints
Secured Parties as its true and lawful attorneys-in-fact to enforce all rights
of Ventures 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 Ventures or, at the option of Secured Parties, in the name of Secured
Parties, with the same force and effect as Ventures could do if this Agreement
had not been made. 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 Secured Parties 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, Ventures or Equitex, to the date of
payment thereof, shall constitute part of the Obligations secured by this
Agreement, and shall be paid by Equitex or Ventures, who will be jointly liable
therefore, to Secured Parties within 10 days after written demand.
5.5 NO IMPAIRMENT OF REMEDIES. If under applicable law, Secured Parties
proceed by either judicial foreclosure or by non-judicial sale or enforcement,
Secured Parties may, at their sole option, determine which of their remedies or
rights to pursue without affecting any of its rights and remedies under this
Agreement. If, by exercising any right and remedy, Secured Parties forfeit any
of their other rights or remedies, including any right to enter a deficiency
judgment against Equitex or any third party (whether because of any applicable
law pertaining to "election of remedies" or the like), Ventures and Equitex
nevertheless hereby consent to such action by Secured Parties. To the extent
permitted by applicable law, Ventures and Equitex also waive any claim based
upon such action, even if such action by Secured Parties results in a full or
partial loss of any rights of subrogation, indemnification or reimbursement
which Ventures or Equitex might otherwise have had but for such action by
Secured Parties or the terms herein. Any election of remedies which results in
the denial or impairment of the right of Secured Parties to seek a deficiency
judgment against any third party shall not, to the extent permitted by
applicable law, impair Ventures' or Equitex's obligations hereunder. If Secured
Parties bid at any foreclosure or trustee's sale or at any private sale
permitted by law or this Agreement, Secured Parties may bid all or less than the
amount of the Obligations. To the extent permitted by applicable law, the amount
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of the successful bid at any such sale, whether Secured Parties 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 liability of Ventures or Equitex
hereunder shall not be reduced, limited, impaired, discharged or terminated, if
Secured Parties at any time with Equitex's or Venture's consent (or, to the
extent permissible by the terms of the Notes and law, without notice to or
demand of Ventures or Equitex):
(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 Equitex's performance of, or
compliance with, any term, covenant or agreement on its part to be performed or
observed under the Notes or any agreement to which Equitex and either or both of
the Secured Parties are a party (an "Equitex Agreement"), 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;
(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 Secured Parties 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 Secured Parties may have
against any such security, in each case as Secured Parties in their 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 the Notes or
any Equitex Agreement at law or in equity.
6.2 SECURITY INTERESTS ABSOLUTE. All rights of Secured Parties and the
security interests hereunder, and all obligations of Ventures and Equitex
hereunder, shall be absolute and unconditional irrespective of:
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(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 the Notes or any
Equitex Agreement, 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 the Notes or any Equitex Agreement 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 Equitex Agreement 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 Ventures or
Equitex to Secured Parties other than the Obligations, even though Secured
Parties might have elected to apply such payment to any part or all of the
Obligations;
(d) Secured Parties' consent to the change, reorganization or
termination of the corporate structure or existence of Chex or Equitex and to
any corresponding restructuring of any of the Obligations;
(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
Equitex 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 Equitex may allege
or assert against Secured Parties in respect of any of the Obligations.
6.3 CERTAIN WAIVERS. Except as provided in Section 7.16, Ventures and
Equitex hereby waive 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
Equitex 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. Ventures and Equitex agree that they
will not exercise any rights which either 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
Ventures or Equitex 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.
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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 Secured Parties, in care of:
Whitebox Advisors, LLC
3033 Excelsior Boulevard, Suite 300
Minneapolis, Minnesota 55416
Attention: Jonathan D. Wood, Chief Financial Officer
Facsimile: (612) 253-6151
E-mail: jwood@whitebox-advisors.com
With a copy to:
Messerli & Kramer P.A.
150 South Fifth Street, Suite 1800
Minneapolis, Minnesota 55402
Attention: Jeffrey C. Robbins, Esq.
Facsimile: (612) 672-3777
If to Ventures or Equitex, in care of:
Seven Ventures, Inc.
7315 East Peakview Avenue
Englewood, Colorado 80111
Attention: Henry Fong, President,
And Ijaz Anwar, Treasurer
Facsimile: (561) 624-0886,
And (952) 417-1996
E-mail: hfong@equitex.net,
And ianwar@chexss.com
With a copy to:
Maslon, Edelman, Borman & Brand P.A.
Attention: William M. Mower, Esq.
3300 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402-4140
Facsimile: (612) 672-8358
E-mail: bill.mower@maslon.com
And:
Felhaber Larson Fenlon & Vogt, P.A.
Attention: Roger H. Frommelt, Esq.
220 South Sixth Street
Suite 2200
Minneapolis, MN 55402
Facsimile: (612) 332-4608
E-mail: rfrommelt@felhaber.com
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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, Emery, 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
Secured Parties 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 Secured Parties of any breach or default under the
Agreement or any waiver on the part of Secured Parties 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 Parties 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 Secured Parties, 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. VENTURES AND EQUITEX HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS EITHER 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
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PROVISION IS A MATERIAL INDUCEMENT FOR SECURED PARTIES TO CONSENT TO THE
SUBSTITUTION OF COLLATERAL AS SET FORTH IN THE RECITALS.
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 Parties 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 Secured Parties 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.
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 Secured Parties 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 Ventures, Secured
Parties shall execute and deliver to Ventures, at Ventures' 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
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returned upon the insolvency, bankruptcy, reorganization, liquidation of
Ventures or Equitex, or upon the dissolution of, or appointment of any
intervenor or conservator of, or trustee or similar official for, Ventures or
Equitex, or any substantial part of Ventures' or Equitex'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 Secured Parties hereunder are solely to
protect their interest in the Collateral and shall not impose any duty on
Secured Parties or any of their 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, 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. Secured Parties shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in their possession if the Collateral is accorded treatment that
is substantially equivalent to that which Secured Parties accord their own
property, it being expressly agreed, to the maximum extent permitted by
applicable law, that Secured Parties 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, Secured Parties 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.
Ventures: Secured Parties:
Seven Ventures, Inc. Pandora Select Partners, L.P.
By /s/ Henry Fong By /s/ Andrew Redleaf
----------------------------- ---------------------------------------
Its President Its Managing Partner
---------------------------- -------------------------------
Equitex, Inc. Whitebox Hedged High Yield Partners, L.P.
By /s/ Henry Fong By /s/ Andrew Redleaf
----------------------------- ---------------------------------------
Its President Its Managing Partner
---------------------------- -------------------------------
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