NATIONAL INVESTMENT MANAGERS INC.
SECURITIES PURCHASE AGREEMENT
MAY 30, 2006
TABLE OF CONTENTS
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1. Agreement to Sell and Purchase........................................1
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2. Fees and Warrant......................................................2
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3. Closing, Delivery and Payment.........................................2
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3.1 Closing....................................................2
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3.2 Delivery...................................................2
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4. Representations and Warranties of the Company.........................3
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4.1 Organization, Good Standing and Qualification..............3
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4.2 Subsidiaries...............................................4
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4.3 Capitalization; Voting Rights..............................4
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4.4 Authorization; Binding Obligations.........................5
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4.5 Liabilities................................................5
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4.6 Agreements; Action.........................................5
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4.7 Obligations to Related Parties.............................7
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4.8 Changes....................................................8
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4.9 Title to Properties and Assets; Liens, Etc.................9
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4.10 Intellectual Property......................................9
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4.11 Compliance with Other Instruments.........................10
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4.12 Litigation................................................10
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4.13 Tax Returns and Payments..................................11
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4.14 Employees.................................................11
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4.15 Registration Rights and Voting Rights.....................12
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4.16 Compliance with Laws; Permits.............................12
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4.17 Environmental and Safety Laws.............................12
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4.18 Valid Offering............................................13
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4.19 Full Disclosure...........................................13
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4.20 Insurance.................................................13
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4.21 SEC Reports...............................................13
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4.22 Listing...................................................14
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4.23 No Integrated Offering....................................14
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4.24 Stop Transfer.............................................14
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4.25 Dilution..................................................14
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4.26 Patriot Act...............................................12
5. Representations and Warranties of the Purchaser......................15
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5.1 No Shorting...............................................15
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5.2 Requisite Power and Authority.............................15
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5.3 Investment Representations................................16
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5.4 Purchaser Bears Economic Risk.............................16
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5.5 Acquisition for Own Account...............................16
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5.6 Purchaser Can Protect Its Interest........................16
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5.7 Accredited Investor.......................................16
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5.8 Legends...................................................16
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5.9 Limitation on Acquisition of Common Stock of the Company..14
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6. Covenants of the Company.............................................17
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6.1 Stop-Orders...............................................17
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6.2 Listing...................................................18
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6.3 Market Regulations........................................18
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6.4 Reporting Requirements....................................18
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6.5 Use of Funds..............................................18
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6.6 Access to Facilities......................................18
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6.7 Taxes.....................................................19
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6.8 Insurance.................................................19
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6.9 Intellectual Property.....................................20
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6.10 Properties................................................20
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6.11 Confidentiality...........................................20
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6.12 Required Approvals........................................20
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6.13 Reissuance of Securities..................................23
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6.14 Opinion...................................................23
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6.15 Margin Stock..............................................19
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6.16 Restricted Cash Disclosure................................19
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6.17 Financing Right of First Refusal..........................19
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7. Covenants of the Purchaser...........................................24
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7.1 Confidentiality...........................................24
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7.2 Non-Public Information....................................24
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7.3 Other.....................................................20
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7.4 No Shorting.................................................20
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7.5 Limitation on Acquisition of Common Stock of Company........20
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8. Covenants of the Company and Purchaser Regarding Indemnification.....25
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8.1 Company Indemnification...................................25
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8.2 Purchaser's Indemnification...............................25
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9. [OMITTED]...................................................
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10. Registration Rights..................................................27
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10.1 Registration Rights Granted...............................27
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10.2 Offering Restrictions.....................................27
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11. Miscellaneous........................................................27
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11.1 Governing Law.............................................27
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11.2 Survival..................................................29
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11.3 Successors................................................29
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11.4 Entire Agreement..........................................29
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11.5 Severability..............................................29
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11.6 Amendment and Waiver......................................29
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11.7 Delays or Omissions.......................................30
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11.8 Notices...................................................30
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11.9 Attorneys' Fees...........................................31
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11.10 Titles and Subtitles......................................31
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11.11 Facsimile Signatures; Counterparts........................31
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11.12 Broker's Fees.............................................31
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11.13 Construction..............................................31
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LIST OF EXHIBITS
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Form of Term Note......................................................Exhibit A
Form of Opinion........................................................Exhibit B
Form of EscrowAgreement................................................Exhibit C
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of May 30 2006, by and between NATIONAL INVESTMENT MANAGERS, INC., a
Florida corporation (the "Company"), and Laurus Master Fund, Ltd., a Cayman
Islands company (the "Purchaser").
RECITALS
WHEREAS, on March 9, 2005, the Company issued to the Purchaser a
Convertible Term Note in the aggregate principal amount of Three Million Dollars
($3,000,000) (as amended, modified or supplemented from time to time, the "March
Note"), which March Note is convertible into shares of the Company's common
stock, $0.001 par value per share (the "Common Stock") at an initial fixed
conversion price of $ 0.83 per share of Common Stock ("Fixed Conversion Price");
WHEREAS, on November 30, 2005, the Company issued to the Purchaser a
Secured Non-Convertible Term Note in the aggregate principal amount of Nine
Million Two Hundred Thousand Dollars ($9,200,000) (as amended, modified or
supplemented from time to time, the "November Note");;
WHEREAS, the Company has authorized the issuance to the Purchaser of (i)
an additional Secured Non-Convertible Term Note in the aggregate principal
amount of Seven Million Dollars ($7,000,000) (as amended, modified or
supplemented from time to time, the "Note") and (ii) in connection with the
Purchaser's purchase of the Note, a warrant in the form of Exhibit B hereto (as
amended, modified or supplemented from time to time, the "Warrant") to purchase
700,000 shares of the Company's Common Stock (the "Warrant Shares");
WHEREAS, Purchaser desires to purchase the Note and the Warrant on the
terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and the Warrant to
Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company, a Note in the aggregate principal amount of
$7,000,000. The Note and the Warrants purchased on the Closing Date shall be
known as the "Offering." A form of the Note is annexed hereto as Exhibit A. The
Note will mature on the Maturity Date (as defined in the Note). Collectively,
the Note and the Warrants and the Warrant Shares are referred to as the
"Securities."
2. Fees, Warrants, etc. On the Closing Date:
(a) The Company will issue and deliver the Warrants to the
Purchaser.
(b) Subject to the terms of Section 2(d) below, the Company shall
pay to Laurus Capital Management, LLC, the manager of the
Purchaser, a closing payment in an amount equal to three and
one-half percent (3.50%) of the aggregate principal amount of
the Note. The foregoing fee is referred to herein as the
"Closing Payment."
(c) The Company shall reimburse the Purchaser for its reasonable
expenses (including legal fees and expenses) incurred in
connection with the preparation and negotiation of this
Agreement and the Related Agreements (as hereinafter defined),
and expenses incurred in connection with the Purchaser's due
diligence review of the Company and its Subsidiaries (as
defined in Section 4.2) and all related matters. Amounts
required to be paid under this Section 2(c) will be paid on
the Closing Date and shall be $30,000 for such expenses
referred to in this Section 2(c).
(d) The Closing Payment and the expenses referred to in the
preceding clause (c) (net of deposits previously paid by the
Company) shall be paid at closing out of funds held pursuant
to an Escrow Agreement (as defined below) and a disbursement
letter (the "Disbursement Letter").
3. Closing, Delivery and Payment.
3.1 Closing. Subject to the terms and conditions herein, the closing of
the transactions contemplated hereby (the "Closing"), shall take place on the
date hereof, at such time or place as the Company and Purchaser may mutually
agree (such date is hereinafter referred to as the "Closing Date").
3.2 Delivery. Pursuant to the Escrow Agreement, at the Closing on the
Closing Date, the Company will deliver to the Purchaser, among other things, a
Note in the form attached as Exhibit A representing the aggregate principal
amount of $7,000,000 and the Warrants, and the Purchaser will deliver to the
Company, among other things, the amounts set forth in the Disbursement Letter by
certified funds or wire transfer (it being understood that $7,000,000 of the
proceeds of the Note shall be placed in the Restricted Account (as defined in
the Restricted Account Agreement referred to below)). The Company hereby
acknowledges and agrees that the Purchaser's obligation to purchase the Note
from the Company on the Closing Date shall be contingent upon the satisfaction
(or waiver by the Purchaser in its sole discretion) of the items and matters set
forth in the closing checklist provided by the Purchaser to the Company on or
prior to the Closing Date.
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4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows (which representations and
warranties are supplemented by the Company's filings under the Securities
Exchange Act of 1934 made prior to the date of this Agreement (collectively, the
"Exchange Act Filings"), copies of which have been provided to the Purchaser):
4.1 Organization, Good Standing and Qualification. Each of the Company and
each of its Subsidiaries is a corporation, partnership or limited liability
company, as the case may be, duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of the Company
and each of its Subsidiaries has the corporate power and authority to own and
operate its properties and assets, to execute and deliver (i) this Agreement,
(ii) the Note and the Warrant to be issued in connection with this Agreement,
(iii) the Reaffirmation and Ratification Agreement and Amendment dated as of the
date hereof between the Company, certain Subsidiaries of the Company and the
Purchaser (as amended, modified or supplemented from time to time, the
"Reaffirmation Agreement"), pursuant to which the Company and certain
Subsidiaries of the Company reaffirm that their obligations under (A) the Master
Security Agreement dated as of March 10, 2005 between the Company, certain
Subsidiaries of the Company and the Purchaser (as amended, modified or
supplemented from time to time, the "Master Security Agreement"); (B) the
Subsidiary Guaranty dated as of March 10, 2005 made by certain Subsidiaries of
the Company (as amended, modified or supplemented from time to time, the
"Subsidiary Guaranty"), and (C) the Stock Pledge Agreement dated as of March 7,
2005 among the Company, certain Subsidiaries of the Company and the Purchaser
(as amended, modified or supplemented from time to time, the "Stock Pledge
Agreement"); (iv) the Amended and Restated Registration Rights Agreement
relating to the Registrable Securities (as defined therein) dated as of the date
hereof between the Company and the Purchaser (as amended, modified or
supplemented from time to time, the "Registration Rights Agreement"), (v) the
Funds Escrow Agreement dated as of the date hereof among the Company, the
Purchaser and the escrow agent referred to therein, substantially in the form of
Exhibit C hereto (as amended, modified or supplemented from time to time, the
"Escrow Agreement"), (vi) the Restricted Account Agreement dated as of the date
hereof among the Company, the Purchaser and North Fork Bank (as amended,
modified or supplemented from time to time, the "Restricted Account Agreement"),
(vii) the Restricted Account Side Letter related to the Restricted Account
Agreement dated as of the date hereof between the Company and the Purchaser (as
amended, modified or supplemented from time to time, the "Restricted Account
Side Letter") and (viii) all other agreements related to this Agreement and the
Note and referred to herein (the preceding clauses (ii) through (vii),
collectively, the "Related Agreements") (the preceding clause (iii), together
with each other security agreement, mortgage, cash collateral deposit letter,
pledge, and other similar agreements that are executed by the Company or any of
its Subsidiaries in favor of the Purchaser, collectively the "Security
Documents"), to issue and sell the Note, the Warrant and the Warrant Shares and
to carry out the provisions of this Agreement and the Related Agreements and to
carry on its business as presently conducted. Each of the Company and each of
its Subsidiaries is duly qualified and is authorized to do business and is in
good standing as a foreign corporation, partnership or limited liability
company, as the case may be, in all jurisdictions in which the nature or
location of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so has not, or could not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on the business, assets, liabilities,
condition (financial or otherwise), properties, operations or prospects of the
Company and its Subsidiaries, taken individually and as a whole (a "Material
Adverse Effect").
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4.2 Subsidiaries. Each direct and indirect Subsidiary of the Company, the
direct owner of such Subsidiary and its percentage ownership thereof, is set
forth on Schedule 4.2. For the purpose of this Agreement, (x) a "Subsidiary" of
any person or entity means (a) a corporation or other entity whose shares of
stock or other ownership interests having ordinary voting power (other than
stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other persons or entities performing similar functions for such
person or entity, are owned, directly or indirectly, by such person or entity or
(b) a corporation or other entity in which such person or entity owns, directly
or indirectly, more than 50% of the equity interests at such time and (y) a
"Credit Party" means the Company and each direct or indirect Subsidiary of the
Company to the extent party to the Reaffirmation Agreement and such other
security documentation required by the Purchaser to grant to the Purchaser a
first priority perfected security interest in substantially all of such
Subsidiary's assets to secure the Obligations (as defined in the Master Security
Agreement).
4.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, as of the date
hereof consists of 110,000,000 shares, of which 100,000,000
are shares of Common Stock, par value $0.001 per share and
10,000,000 are shares of Preferred Stock, par value $0.001 per
share. Of such shares of Preferred Stock, 4,000,000 shares are
designated Series A Cumulative Convertible Preferred Stock,
4,000,000 shares are designated Series B Cumulative
Convertible Preferred Stock, and 1,0000,000 shares are
designated Series C Cumulative Convertible Preferred Stock.
The authorized capital stock of each Subsidiary of the Company
is set forth on Schedule 4.2.
(b) Except as disclosed on Schedule 4.3, other than: (i) the
shares reserved for issuance under the Company's stock option
plans; and (ii) shares which may be granted pursuant to this
Agreement and the Related Agreements and securities previously
issued to the Purchaser, there are no outstanding options,
warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or stockholder agreements,
or arrangements or agreements of any kind for the purchase or
acquisition from the Company of any of its securities. Except
as disclosed on Schedule 4.3, neither the offer, issuance or
sale of the Note, or the Warrants, nor the issuance of the
Warrant Shares upon exercise of the Warrants, nor the
consummation of any transaction contemplated hereby will
result in a change in the price or number of any securities of
the Company outstanding, under anti-dilution or other similar
provisions contained in or affecting any such securities.
(c) All issued and outstanding shares of the Company's Common
Stock: (i) have been duly authorized and validly issued and
are fully paid and nonassessable; and (ii) were issued in
compliance with all applicable state and federal laws
concerning the issuance of securities.
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(d) The rights, preferences, privileges and restrictions of the
shares of the Common Stock are as stated in the Company's
Certificate of Incorporation (the "Charter"). The Warrant
Shares have been duly and validly reserved for issuance. When
issued and paid for in compliance with the provisions of this
Agreement and the Company's Charter, the Securities will be
validly issued, fully paid and nonassessable, and will be free
of any liens or encumbrances; provided, however, that the
Securities 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.
4.4 Authorization; Binding Obligations. All corporate, partnership or
limited liability company, as the case may be, action on the part of the Company
and each of its Subsidiaries (including the respective officers and directors)
necessary for the authorization of this Agreement and the Related Agreements,
the performance of all obligations of the Company and its Subsidiaries hereunder
and under the other Related Agreements at the Closing and, the authorization,
sale, issuance and delivery of the Note and the Warrants has been taken or will
be taken prior to the Closing. This Agreement and the Related Agreements, when
executed and delivered and to the extent it is a party thereto, will be valid
and binding obligations of each of the Company and each of its Subsidiaries,
enforceable against each such person in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights; and
(b) general principles of equity that restrict the availability of
equitable or legal remedies.
The sale of the Note is not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with. The
issuance of the Warrants and the subsequent exercise of the Warrant for Warrant
Shares are not and will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with.
4.5 Liabilities. Neither the Company nor any of its Subsidiaries has any
contingent liabilities, except current liabilities incurred in the ordinary
course of business and liabilities disclosed in any Exchange Act Filings.
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4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as
disclosed in any Exchange Act Filings:
(a) there are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or
decrees to which the Company or any of its Subsidiaries is a
party or by which it is bound which may involve: (i)
obligations (contingent or otherwise) of, or payments to, the
Company or any Subsidiary in excess of $50,000 (other than
obligations of, or payments to, the Company or any Subsidiary
arising from purchase or sale agreements entered into in the
ordinary course of business); or (ii) the transfer or license
of any patent, copyright, trade secret or other proprietary
right to or from the Company or any Subsidiary (other than
licenses arising from the purchase of "off the shelf" or other
standard products); or (iii) provisions restricting the
development, manufacture or distribution of the Company's or
any Subsidiary's products or services; or (iv) indemnification
by the Company or any Subsidiary with respect to infringements
of proprietary rights.
(b) Since December 31, 2004, neither the Company nor any of its
Subsidiaries has: (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) incurred any
indebtedness for money borrowed or any other liabilities
(other than ordinary course obligations) individually in
excess of $50,000 or, in the case of indebtedness and/or
liabilities individually less than $50,000, in excess of
$100,000 in the aggregate; (iii) made any loans or advances to
any person not in excess, individually or in the aggregate, of
$100,000, other than ordinary course advances for travel
expenses; or (iv) sold, exchanged or otherwise disposed of any
of its assets or rights, other than the sale of its inventory
in the ordinary course of business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings,
instruments, contracts and proposed transactions involving the
same person or entity (including persons or entities the
Company or any Subsidiary has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of such subsections.
(d) The Company maintains disclosure controls and procedures
("Disclosure Controls") designed to ensure that information
required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods
specified in the rules and forms of the Securities and
Exchange Commission ("SEC").
(e) The Company makes and keeps books, records and accounts that,
in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the Company's assets. The
Company maintains internal control over financial reporting
("Financial Reporting Controls") designed by, or under the
supervision of, the Company's principal executive and
principal financial officers, and effected by the Company's
board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles ("GAAP"), including that:
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(i) transactions are executed in accordance with
management's general or specific authorization;
(ii) unauthorized acquisition, use or disposition of the
Company's assets that could have a material effect on
the financial statements are prevented or timely
detected;
(iii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with
GAAP, and that the Company's receipts and expenditures
are being made only in accordance with authorizations of
the Company's management and board of directors;
(iv) transactions are recorded as necessary to maintain
accountability for assets;
(v) the recorded accountability for assets is compared with
the existing assets at reasonable intervals, and
appropriate action is taken with respect to any
differences.
(f) There is no weakness in any of the Company's Disclosure
Controls or Financial Reporting Controls that is required to
be disclosed in any of the Exchange Act Filings, except as so
disclosed.
4.7 Obligations to Related Parties. Except as set forth on Schedule 4.7,
there are no obligations of the Company or any of its Subsidiaries to officers,
directors, stockholders or employees of the Company or any of its Subsidiaries
other than:
(a) for payment of salary for services rendered and for bonus
payments;
(b) reimbursement for reasonable expenses incurred on behalf of
the Company and its Subsidiaries;
(c) 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 and each Subsidiary of the
Company, as applicable); and
(d) obligations listed in the Company's consolidated financial
statements or disclosed in any of the Company's Exchange Act
Filings.
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Except as described above or set forth on Schedule 4.7, none of the officers,
directors or, to the best of the Company's knowledge, key employees or
stockholders of the Company or any Subsidiary or any members of their immediate
families, are indebted to the Company, or any Subsidiary individually or in the
aggregate, in excess of $50,000 or have any direct or indirect ownership
interest in any firm or corporation with which the Company or any Subsidiary is
affiliated or with which the Company or any Subsidiary has a business
relationship, or any firm or corporation which competes with the Company or any
Subsidiary, other than passive investments in publicly traded companies
(representing less than one percent (1%) of such company) which may compete with
the Company or any Subsidiary. Except as described above, no officer, director
or stockholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company or any
Subsidiary and no agreements, understandings or proposed transactions are
contemplated between the Company or any Subsidiary and any such person. Except
as set forth on Schedule 4.7, neither the Company nor any Subsidiary is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
4.8 Changes. Since December 31, 2004, except as disclosed in any Exchange
Act Filing or in any Schedule to this Agreement or to any of the Related
Agreements, there has not been:
(a) any change in the business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects
of the Company or any of its Subsidiaries, which individually
or in the aggregate has had, or could reasonably be expected
to have, individually or in the aggregate, a Material Adverse
Effect;
(b) any resignation or termination of any officer, key employee or
group of employees of the Company or any of its Subsidiaries;
(c) any material change, except in the ordinary course of
business, in the contingent obligations of the Company or any
of its Subsidiaries by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(d) any damage, destruction or loss, whether or not covered by
insurance, which has had, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse
Effect;
(e) any waiver by the Company or any of its Subsidiaries of a
valuable right or of a material debt owed to it;
(f) any direct or indirect loans made by the Company or any of its
Subsidiaries to any stockholder, employee, officer or director
of the Company or any of its Subsidiaries, other than advances
made in the ordinary course of business;
(g) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder
of the Company or any of its Subsidiaries;
(h) any declaration or payment of any dividend or other
distribution of the assets of the Company or any of its
Subsidiaries;
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(i) any labor organization activity related to the Company or any
of its Subsidiaries;
(j) any debt, obligation or liability incurred, assumed or
guaranteed by the Company or any of its Subsidiaries, except
those for immaterial amounts and for current liabilities
incurred in the ordinary course of business;
(k) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by
the Company or any of its Subsidiaries;
(l) any change in any material agreement to which the Company or
any of its Subsidiaries is a party or by which either the
Company or any of its Subsidiaries is bound which either
individually or in the aggregate has had, or could reasonably
be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(m) any other event or condition of any character that, either
individually or in the aggregate, has had, or could reasonably
be expected to have, individually or in the aggregate, a
Material Adverse Effect; or
(n) any arrangement or commitment by the Company or any of its
Subsidiaries to do any of the acts described in subsection (a)
through (m) above.
4.9 Title to Properties and Assets; Liens, Etc. Except as set forth on
Schedule 4.9, each of the Company and each of its Subsidiaries has good and
marketable title to its properties and assets, and good title to its leasehold
estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than:
(a) those resulting from taxes which have not yet become
delinquent;
(b) minor liens and encumbrances which do not materially detract
from the value of the property subject thereto or materially
impair the operations of the Company or any of its
Subsidiaries, so long as in each such case, such liens and
encumbrances have no effect on the lien priority of the
Purchaser in such property; and
(c) those that have otherwise arisen in the ordinary course of
business, so long as they have no effect on the lien priority
of the Purchaser therein.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in good operating
condition and repair, ordinary wear and tear excepted, and are reasonably fit
and usable for the purposes for which they are being used. Except as set forth
on Schedule 4.9, the Company and its Subsidiaries are in compliance with all
material terms of each lease to which it is a party or is otherwise bound.
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4.10 Intellectual Property
(a) Each of the Company and each of its Subsidiaries owns or
possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and
processes necessary for its business as now conducted and to
the Company's knowledge, as presently proposed to be conducted
(the "Intellectual Property"), without any known infringement
of the rights of others. There are no outstanding options,
licenses or agreements of any kind relating to the foregoing
proprietary rights, nor is the Company or any of its
Subsidiaries bound by or a party to any options, licenses or
agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information and other proprietary rights
and processes of any other person or entity other than such
licenses or agreements arising from the purchase of "off the
shelf" or standard products.
(b) Neither the Company nor any of its Subsidiaries has received
any communications alleging that the Company or any of its
Subsidiaries has violated any of the patents, trademarks,
service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity, nor is
the Company or any of its Subsidiaries aware of any basis
therefor.
(c) The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary
information of any of its employees made prior to their
employment by the Company or any of its Subsidiaries, except
for inventions, trade secrets or proprietary information that
have been rightfully assigned to the Company or any of its
Subsidiaries.
4.11 Compliance with Other Instruments. Neither the Company nor any of its
Subsidiaries is in violation or default of (x) any term of its Charter or
Bylaws, or (y) of any provision of any indebtedness, mortgage, indenture,
contract, agreement or instrument to which it is party or by which it is bound
or of any judgment, decree, order or writ, which violation or default, in the
case of this clause (y), has had, or could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. The
execution, delivery and performance of and compliance with this Agreement and
the Related Agreements to which it is a party, and the issuance and sale of the
Note by the Company and the other Securities by the Company each pursuant hereto
and thereto, 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 provision, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or any of its Subsidiaries or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.
10
4.12 Litigation. Except as set forth on Schedule 4.12 hereto, there is no
action, suit, proceeding or investigation pending or, to the Company's
knowledge, currently threatened against the Company or any of its Subsidiaries
that prevents the Company or any of its Subsidiaries from entering into this
Agreement or the other Related Agreements, or from consummating the transactions
contemplated hereby or thereby, or which has had, or could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect or any change in the current equity ownership of the Company or any of
its Subsidiaries, nor is the Company aware that there is any basis to assert any
of the foregoing. Neither the Company nor any of its Subsidiaries is a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company or any of its Subsidiaries currently
pending or which the Company or any of its Subsidiaries intends to initiate.
4.13 Tax Returns and Payments. Each of the Company and each of its
Subsidiaries has filed all tax returns (federal, state and local) due and
required to be filed by it. All taxes shown to be due and payable on such
returns, any assessments imposed, and all other taxes due and payable by the
Company or any of its Subsidiaries on or before the Closing, have been paid or
will be paid prior to the time they become delinquent. Except as set forth on
Schedule 4.13, neither the Company nor any of its Subsidiaries has been advised:
(a) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof; or
(b) of any deficiency in assessment or proposed judgment to its
federal, state or other taxes.
The Company has no knowledge of any liability for any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
4.14 Employees. Except as set forth on Schedule 4.14, neither the Company
nor any of its Subsidiaries has any collective bargaining agreements with any of
its employees. There is no labor union organizing activity pending or, to the
Company's knowledge, threatened with respect to the Company or any of its
Subsidiaries. Except as disclosed in the Exchange Act Filings or on Schedule
4.14, neither the Company nor any of its Subsidiaries is a party to or bound by
any currently effective employment contract, deferred compensation arrangement,
bonus plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation plan or agreement. To the Company's knowledge, no employee
of the Company or any of its Subsidiaries, nor any consultant with whom the
Company or any of its Subsidiaries has contracted, is in violation of any term
of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company or any of its Subsidiaries because of the nature of
the business to be conducted by the Company or any of its Subsidiaries; and to
the Company's knowledge the continued employment by the Company or any of its
Subsidiaries of its present employees, and the performance of the Company's and
its Subsidiaries' contracts with its independent contractors, will not result in
any such violation. Neither the Company nor any of its Subsidiaries is 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 any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries has received any notice alleging that
any such violation has occurred. Except for employees who have a current
effective employment agreement with the Company or any of its Subsidiaries, no
employee of the Company or any of its Subsidiaries has been granted the right to
continued employment by the Company or any of its Subsidiaries or to any
material compensation following termination of employment with the Company or
any of its Subsidiaries. Except as set forth on Schedule 4.14, the Company is
not aware that any officer, key employee or group of employees intends to
terminate his, her or their employment with the Company or any of its
Subsidiaries, nor does the Company or any of its Subsidiaries have a present
intention to terminate the employment of any officer, key employee or group of
employees.
11
4.15 Registration Rights and Voting Rights. Except as set forth on
Schedule 4.15 or on Schedule 7(b) to the Registration Rights Agreement, and
except as disclosed in Exchange Act Filings, neither the Company nor any of its
Subsidiaries is presently under any obligation, and neither the Company nor any
of its Subsidiaries has granted any rights, to register any of the Company's or
its Subsidiaries' presently outstanding securities or any of its securities that
may hereafter be issued. Except as set forth on Schedule 4.15 and except as
disclosed in Exchange Act Filings, to the Company's knowledge, no stockholder of
the Company or any of its Subsidiaries has entered into any agreement with
respect to the voting of equity securities of the Company or any of its
Subsidiaries.
4.16 Compliance with Laws; Permits. Neither the Company nor any of its
Subsidiaries is in violation of any applicable statute, rule, regulation, order
or restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties which has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. No governmental
orders, permissions, consents, approvals or authorizations are required to be
obtained and no registrations or declarations are required to be filed in
connection with the execution and delivery of this Agreement or any other
Related Agreement and the issuance of any of the Securities, except such as has
been duly and validly obtained or filed, or with respect to any filings that
must be made after the Closing, as will be filed in a timely manner. Each of the
Company and its Subsidiaries has all material franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.17 Environmental and Safety Laws. Neither the Company nor any of its
Subsidiaries is in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, which violation
has had, or could reasonably be expected to have, a Material Adverse Effect, and
to its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation. Except as set forth on
Schedule 4.17, no Hazardous Materials (as defined below) are used or have been
used, stored, or disposed of by the Company or any of its Subsidiaries or, to
the Company's actual knowledge, by any other person or entity on any property
owned, leased or used by the Company or any of its Subsidiaries, in any such
case in violation of applicable law. For the purposes of the preceding sentence,
"Hazardous Materials" shall mean:
(a) materials which are listed or otherwise defined as "hazardous"
or "toxic" under any applicable local, state, federal and/or
foreign laws and regulations that govern the existence and/or
remedy of contamination on property, the protection of the
environment from contamination, the control of hazardous
wastes, or other activities involving hazardous substances,
including building materials; or
12
(b) any petroleum products or nuclear materials.
4.18 Valid Offering. Assuming the accuracy of the representations and
warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
4.19 Full Disclosure. Each of the Company and each of its Subsidiaries has
provided the Purchaser with all information requested by the Purchaser in
connection with its decision to purchase the Note and the Warrants including all
information the Company and its Subsidiaries believe is reasonably necessary to
make such investment decision. Neither this Agreement, the Related Agreements,
the exhibits and schedules hereto and thereto nor any other document delivered
by the Company or any of its Subsidiaries to Purchaser or its attorneys or
agents in connection herewith or therewith or with the transactions contemplated
hereby or thereby, contain any untrue statement of a material fact nor omit to
state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances in which they are made, not
misleading. Any financial projections and other estimates provided to the
Purchaser by the Company or any of its Subsidiaries were based on the Company's
and its Subsidiaries' experience in the industry and on assumptions of fact and
opinion as to future events which the Company or any of its Subsidiaries, at the
date of the issuance of such projections or estimates, believed to be
reasonable, it being acknowledged that such projections and other estimates do
not in any way constitute a guarantee of future performance.
4.20 Insurance. Each of the Company and each of its Subsidiaries has
general commercial, product liability, fire and casualty insurance policies with
coverages which the Company believes are customary for companies similarly
situated to the Company and its Subsidiaries in the same or similar business.
4.21 SEC Reports. Except as set forth on Schedule 4.21, the Company has
filed all proxy statements, reports and other documents required to be filed by
it under the Securities Xxxxxxxx Xxx 0000, as amended (the "Exchange Act"). The
Company has furnished the Purchaser with copies of: (i) its Annual Report on
Form 10-KSB for its fiscal year ended December 31, 2005, and (ii) the Form 8-K
filings which it has made during the fiscal year 2005 to date (collectively, the
"SEC Reports"). Except as set forth on Schedule 4.21, each SEC Report was, at
the time of its filing, in substantial compliance with the requirements of its
respective form and none of the SEC Reports, nor the financial statements (and
the notes thereto) included in the SEC Reports, as of their respective filing
dates, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company also reaffirms the representation made by it in Section
6(a) of the Registration Rights Agreement.
13
4.22 Listing. The Company's Common Stock is listed for trading on the
National Association of Securities Dealers Over the Counter Bulletin Board
("NASD OTCBB") and satisfies all requirements for the continuation of such
trading. The Company has not received any notice that its Common Stock will not
be eligible to be traded on the NASD OTCBB or that its Common Stock does not
meet all requirements for such trading.
4.23 No Integrated Offering. Neither the Company, nor any of its
Subsidiaries or affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited any
offers to buy any security under circumstances that would cause the offering of
the Securities pursuant to this Agreement or any of the Related Agreements to be
integrated with prior offerings by the Company for purposes of the Securities
Act which would prevent the Company from selling the Securities pursuant to Rule
506 under the Securities Act, or any applicable exchange-related stockholder
approval provisions, nor will the Company or any of its affiliates or
Subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings.
4.24 Stop Transfer. The Securities are restricted securities as of the
date of this Agreement. Neither the Company nor any of its Subsidiaries will
issue any stop transfer order or other order impeding the sale and delivery of
any of the Securities at such time as the Securities are registered for public
sale or an exemption from registration is available, except as required by state
and federal securities laws.
4.25 Dilution.
The Company specifically acknowledges that its obligation to issue the
Warrant Shares is binding upon the Company and enforceable regardless of the
dilution such issuance may have on the ownership interests of other shareholders
of the Company.
4.26 Patriot Act.
The Company certifies that, to the best of Company's knowledge, neither
the Company nor any of its Subsidiaries has been designated, and is not owned or
controlled, by a "suspected terrorist" as defined in Executive Order 13224. The
Company hereby acknowledges that the Purchaser seeks to comply with all
applicable laws concerning money laundering and related activities. In
furtherance of those efforts, the Company hereby represents, warrants and agrees
that: (i) none of the cash or property that the Company or any of its
Subsidiaries will pay or will contribute to the Purchaser has been or shall be
derived from, or related to, any activity that is deemed criminal under United
States law; and (ii) no contribution or payment by the Company or any of its
Subsidiaries to the Purchaser, to the extent that they are within the Company's
and/or its Subsidiaries' control shall cause the Purchaser to be in violation of
the United States Bank Secrecy Act, the United States International Money
Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001. The Company shall
promptly notify the Purchaser if any of these representations ceases to be true
and accurate regarding the Company or any of its Subsidiaries. The Company
agrees to provide the Purchaser any additional information regarding the Company
14
or any of its Subsidiaries that the Purchaser deems necessary or convenient to
ensure compliance with all applicable laws concerning money laundering and
similar activities. The Company understands and agrees that if at any time it is
discovered that any of the foregoing representations are incorrect, or if
otherwise required by applicable law or regulation related to money laundering
or similar activities, the Purchaser may undertake appropriate actions to ensure
compliance with applicable law or regulation, including but not limited to
segregation and/or redemption of the Purchaser's investment in the Company. The
Company further understands that the Purchaser may release confidential
information about the Company and its Subsidiaries and, if applicable, any
underlying beneficial owners, to proper authorities if the Purchaser, in its
sole discretion, determines that it is in the best interests of the Purchaser in
light of relevant rules and regulations under the laws set forth in subsection
(ii) above.
4.27 ERISA.
Based upon the Employee Retirement Income Security Act of 1974 ("ERISA"),
and the regulations and published interpretations thereunder: (i) neither the
Company nor any of its Subsidiaries has engaged in any Prohibited Transactions
(as defined in Section 406 of ERISA and Section 4975 of the Internal Revenue
Code of 1986, as amended (the "Code")); (ii) each of the Company and each
Subsidiary has met all applicable minimum finding requirements under Section 302
of ERISA in respect of its plans; (iii) neither the Company nor any of its
Subsidiaires has any knowledge of any event or occurrence which would cause the
pEnsion Benefit Guaranty Corporation to institute proceedings under Title IV of
ERISA to terminate any employee benefit plans(s); (iv) netiher the Company nor
any of its Subsidiaries has any fiduciary responsibility for investments with
respect to any plan existing for the benefit of persons other than the Company's
or such Subsidiary's employees; and (v) neither the Company nor any of its
Subsidiries has withdrawn, completely or partially, from any multi-employer
pension plan so as to incur liability under the Multiemployer Pension Plan
Amendments of 1980.
5. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):
5.1 No ShortingThe Purchaser or any of its affiliates and investment
partners has not, will not and will not cause any person or entity to directly
engage in "short sales" of the Company's Common Stock as long as the Note shall
be outstanding.
5.2 Requisite Power and Authority. The Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. All
corporate action on Purchaser's part required for the lawful execution and
delivery of this Agreement and the Related Agreements have been or will be
effectively taken prior to the Closing. Upon their execution and delivery, this
Agreement and the Related Agreements will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights; and
15
(b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
5.3 Investment Representations. Purchaser understands that the Securities
are being offered and sold pursuant to an exemption from registration contained
in the Securities Act based in part upon Purchaser's representations contained
in the Agreement, including, without limitation, that the Purchaser is an
"accredited investor" within the meaning of Regulation D under the Securities
Act of 1933, as amended (the "Securities Act"). The Purchaser confirms that it
has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect to
the Note and the Warrant to be purchased by it under this Agreement and the
Warrant Shares acquired by it upon the exercise of the Warrant, respectively.
The Purchaser further confirms that it has had an opportunity to ask questions
and receive answers from the Company regarding the Company's and its
Subsidiaries' business, management and financial affairs and the terms and
conditions of the Offering, the Note, the Warrant and the Securities and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Purchaser or to which the
Purchaser had access.
5.4 Purchaser Bears Economic Risk. The Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. The Purchaser must bear the economic risk
of this investment until the Securities are sold pursuant to: (i) an effective
registration statement under the Securities Act; or (ii) an exemption from
registration is available with respect to such sale.
5.5 Acquisition for Own Account. The Purchaser is acquiring the Securities
for the Purchaser's own account for investment only, and not as a nominee or
agent and not with a view towards or for resale in connection with their
distribution.
5.6 Purchaser Can Protect Its Interest. The Purchaser represents that by
reason of its, or of its management's, business and financial experience, the
Purchaser has the capacity to evaluate the merits and risks of its investment in
the Securities and to protect its own interests in connection with the
transactions contemplated in this Agreement and the Related Agreements. Further,
Purchaser is aware of no publication of any advertisement in connection with the
transactions contemplated in the Agreement or the Related Agreements.
5.7 Accredited Investor. Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
5.8 Legends.
(a) The Note shall bear substantially the following legend:
16
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER
SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO NATIONAL INVESTMENT MANAGERS,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) The Warrant shall bear the following legend:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE
COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO NATIONAL INVESTMENT MANAGERS, INC.. THAT
SUCH REGISTRATION IS NOT REQUIRED.
(c) The Warrant Shares, if not issued by DWAC system (as
hereinafter defined), shall bear a legend which shall be in
substantially the following form until such shares are covered
by an effective registration statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE
STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
NATIONAL INVESTMENT MANAGERS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
6. Covenants of the Company. The Company covenants and agrees with the
Purchaser as follows:
17
6.1 Stop-Orders. The Company will advise the Purchaser, promptly after it
receives notice of issuance by the Securities and Exchange Commission (the
"SEC"), any state securities commission or any other regulatory authority of any
stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
6.2 Listing. The Company shall promptly secure the listing of the Warrant
Shares on the NASD OTCBB (the "Principal Market") upon which shares of Common
Stock are listed (subject to official notice of issuance) and shall maintain
such listing so long as any other shares of Common Stock shall be so listed. The
Company will maintain the listing of its Common Stock on the Principal Market,
and will comply in all material respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable.
6.3 Market Regulations. The Company shall notify the SEC, NASD and
applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to the
Purchaser and promptly provide copies thereof to the Purchaser.
6.4 Reporting Requirements. The Company will timely file with the SEC all
reports required to be filed pursuant to the Exchange Act and refrain from
terminating its status as an issuer required by the Exchange Act to file reports
thereunder even if the Exchange Act or the rules or regulations thereunder would
permit such termination.
6.5 Use of Funds. The Company agrees that it will use the proceeds of the
sale of the Note and the Warrants for acquisitions approved by the Purchaser
and/or general working capital purposes only (it being understood that
$7,000,000 of the proceeds of the Note will be deposited in the Restricted
Account on the Closing Date and shall be subject to the terms and conditions of
the Restricted Account on the Closing Date and shall be subject to the terms and
conditions of the Restricted Account Agreement and the Restricted Account Side
Letter).
6.6 Access to Facilities. Each of the Company and each of its Subsidiaries
will permit any representatives designated by the Purchaser (or any successor of
the Purchaser), upon reasonable notice and during normal business hours, at such
person's expense and accompanied by a representative of the Company, to:
(a) visit and inspect any of the properties of the Company or any
of its Subsidiaries;
(b) examine the corporate and financial records of the Company or
any of its Subsidiaries (unless such examination is not
permitted by federal, state or local law or by contract) and
make copies thereof or extracts therefrom; and
(c) discuss the affairs, finances and accounts of the Company or
any of its Subsidiaries with the directors, officers and
independent accountants of the Company or any of its
Subsidiaries (so long as, in the case of such independent
accountants, a representative of the Company is present at any
such discussion).
18
Notwithstanding the foregoing, neither the Company nor any of its Subsidiaries
will provide any material, non-public information to the Purchaser unless the
Purchaser signs a confidentiality agreement in form and substance reasonably
satisfactory to the Company and the Purchaser and otherwise complies with
Regulation FD, under the federal securities laws.
6.7 Taxes. Each of the Company and each of its Subsidiaries will promptly
pay and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Company and its Subsidiaries;
provided, however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company and/or such Subsidiary shall have set
aside on its books adequate reserves with respect thereto, and provided,
further, that the Company and its Subsidiaries will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor.
6.8 Insurance. Each of the Company and its Subsidiaries will keep its
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in similar business similarly situated
as the Company and its Subsidiaries; and the Company and its Subsidiaries will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner which the Company reasonably believes is customary for companies in
similar business similarly situated as the Company and its Subsidiaries and to
the extent available on commercially reasonable terms. The Company, and each of
its Subsidiaries will jointly and severally bear the full risk of loss from any
loss of any nature whatsoever with respect to the assets pledged to the
Purchaser as security for its obligations hereunder and under the Related
Agreements. At the Company's and each of its Subsidiaries' joint and several
cost and expense in amounts and with carriers reasonably acceptable to
Purchaser, the Company and each of its Subsidiaries shall (i) keep all its
insurable properties and properties in which it has an interest insured against
the hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to the Company's or the
respective Subsidiary's including business interruption insurance; (ii) maintain
a bond in such amounts as is customary in the case of companies engaged in
businesses similar to the Company's or the respective Subsidiary's insuring
against larceny, embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with others at any time
have access to the assets or funds of the Company or any of its Subsidiaries
either directly or through governmental authority to draw upon such funds or to
direct generally the disposition of such assets; (iii) maintain public and
product liability insurance against claims for personal injury, death or
property damage suffered by others; (iv) maintain all such worker's compensation
19
or similar insurance as may be required under the laws of any state or
jurisdiction in which the Company or the respective Subsidiary is engaged in
business; and (v) furnish Purchaser with (x) copies of all policies and evidence
of the maintenance of such policies at least thirty (30) days before any
expiration date, (y) excepting the Company's workers' compensation policy,
endorsements to such policies naming Purchaser as "co-insured" or "additional
insured" and appropriate loss payable endorsements in form and substance
satisfactory to Purchaser, naming Purchaser as loss payee, and (z) evidence that
as to Purchaser the insurance coverage shall not be impaired or invalidated by
any act or neglect of the Company or any Subsidiary and the insurer will provide
Purchaser with at least thirty (30) days notice prior to cancellation. The
Company and each Subsidiary shall instruct the insurance carriers that in the
event of any loss thereunder, the carriers shall make payment for such loss to
the Company and/or the Subsidiary and Purchaser jointly. In the event that as of
the date of receipt of each loss recovery upon any such insurance, the Purchaser
has not declared an event of default with respect to this Agreement or any of
the Related Agreements, then the Company and/or such Subsidiary shall be
permitted to direct the application of such loss recovery proceeds toward
investment in property, plant and equipment that would comprise "Collateral"
secured by Purchaser's security interest granted by the Company pursuant to the
Master Security Agreement and reaffirmed by the Company pursuant to the
Reaffirmation Agreement, any Related Agreement and/or such other security
agreement as shall be required by the Purchaser, with any surplus funds to be
applied toward payment of the obligations of the Company to Purchaser. In the
event that Purchaser has properly declared an event of default with respect to
this Agreement or any of the Related Agreements and such event of default is
continuing, then all loss recoveries received by Purchaser upon any such
insurance thereafter may be applied to the obligations of the Company hereunder
and under the Related Agreements, in such order as the Purchaser may determine.
Any surplus (following satisfaction of all Company obligations to Purchaser)
shall be paid by Purchaser to the Company or applied as may be otherwise
required by law. Any deficiency thereon shall be paid by the Company or the
Subsidiary, as applicable, to Purchaser, on demand.
6.9 Intellectual Property. Each of the Company and each of its
Subsidiaries shall maintain in full force and effect its existence, rights and
franchises and all licenses and other rights to use Intellectual Property owned
or possessed by it and reasonably deemed to be necessary to the conduct of its
business.
6.10 Properties. Each of the Company and each of its Subsidiaries will
keep its properties in good repair, working order and condition, reasonable wear
and tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions and improvements thereto; and each of the
Company and each of its Subsidiaries will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
6.11 Confidentiality. The Company agrees that it will not, and will not
permit any Subsidiary to, disclose, and will not include in any public
announcement, the name of the Purchaser, unless expressly agreed to by the
Purchaser or unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement. Notwithstanding the
foregoing, the Company may disclose Purchaser's identity and the terms of this
Agreement to its current and prospective debt and equity financing sources.
6.12 Required Approvals(I) For so long as twenty-five percent (25%) of
the principal amount of the Note is outstanding, the Company,
without the prior written consent of the Purchaser, shall not, and
shall not permit any of its Subsidiaries to:
20
(a) Subject to Section [6.13] hereof, (i) directly or indirectly
declare or pay any dividends, other than dividends paid in
stock or dividends paid to the Company or any of its
wholly-owned Subsidiaries (ii) issue any preferred stock that
is manditorily redeemable prior to the one year anniversary of
Maturity Date (as defined in the Note) or (iii) redeem any of
its preferred stock or other equity interests;
(b) liquidate, dissolve or effect a material reorganization (it
being understood that in no event shall the Company dissolve,
liquidate or merge with any other person or entity (unless the
Company is the surviving entity);
(c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument
which by its terms would (under any circumstances) restrict
the Company's or any of its Subsidiaries right to perform the
provisions of this Agreement, any Related Agreement or any of
the agreements contemplated hereby or thereby;
(d) materially alter or change the scope of the business of the
Company and its Subsidiaries taken as a whole (it being
acknowledged by the Purchaser that the Company and its
Subsidiaries intend to use the proceeds of the Note to effect
acquisitions approved by the Purchaser, as noted in Section
6.5 hereof);
(e) (i) create, incur, assume or suffer to exist any indebtedness
(exclusive of trade debt and debt incurred to finance the
purchase of equipment (not in excess of five percent (5%) of
the fair market value of the Company's and its Subsidiaries'
assets) whether secured or unsecured other than (x) the
Company's indebtedness to the Purchaser, (y) indebtedness set
forth on Schedule 6.12(e) attached hereto and made a part
hereof and any refinancings or replacements thereof on terms
no less favorable to the Purchaser than the indebtedness being
refinanced or replacednad (z) any debt incurred in connection
with the purchase of assets in the ordinary course of
business, or any refinancings or replacements thereof on terms
no less favorable to the Purchaser than the indebtedness being
refinanced or replaced, so long as any lien relating thereto
shall only encumber the fixed assets so purchased and no other
assets of the Company or any of its Subsidiares; (ii) cancel
any debt owing to it in excess of $50,000 in the aggregate
during any 12 month period; (iii) assume, guarantee, endorse
or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except
the endorsement of negotiable instruments by the Company or
any Credit Party for deposit or collection or similar
transactions in the ordinary course of business or guarantees
of indebtedness otherwise permitted to be outstanding pursuant
to this clause (e); and
21
(f) Purchase or hold beneficially any Stock or other securities or
evidences of indebtedness of, make or permit to exist any
loans or advances to, or make any investment or acquire any
interest whatsoever in, any other Person, including any
partnership or joint venture, except (x) travel advances, (y)
loans to its and its Subsidiaries' officers and employees not
exceeding at any one time an aggregate of $10,000, and (z)
Stock of, or loans or advances to, any Credit Parties (as used
herein, "Stock" means all certificated and uncertificated
shares, options, warrants, membership interests, general or
limited partnership interests, participation or other
equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or
equivalent entity whether voting or nonvoting, including
common stock, preferred stock or any other "equity security
(as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the SEC under the Securities
Exchange Act of 1934);
(g) Enter into any transaction with any employee, director or
Affiliate, except in the ordinary course on arms-length terms
(as used herein, (x) "Affiliate" means, with respect ot any
Person, (a) any other Person (other than a Subsidiary) that,
directly or indirectly, is in control of , is controlled by,
or is under common control with such Person or (b) any other
Person who is a director or officer (i) of such Person, (ii)
of any Subsidiary of such Person or (iii) of any Person
described in clause (a) above. For the purposes of this
definition, control of a Person shall mean the power (direct
or indirect) to direct or cause the direction of the
management and policities of such Person whether by contract
or otherswise and (y) "Person" means any individual, sole
proprietorship, partnership, limited liability partnership,
joint venture, trust, unincorporated organization,
association, corporation, limited liability company,
institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise,
including any instrumentality, division, agency, body or
department thereof), and shall include such Person's
successors and assigns); or
(h) sell, lease, transfer or otherwise dispose of any of its
properties or assets, or any of the properties or assets of
its Subsidiaries, except for (1) sales, leases, transfer or
dispositions by any Credit Party to any other Credit Party,
(2) the sale of Inventory (as defined in the Master Security
Agreement) in the ordinary course of business and (3) the
disposition or transfer in the ordinary course of business
during any fiscal year of obsolete and worn-out Equipment (as
defined in the Master Security Agrement) and only to the
extent that (x) the proceeds of any such disposition are used
to acquire replacement Equipment which is subject to the
Purchaser's first priority security interest or are used to
repay the Purchaser or to pay general corporate expenses, or
(y) following the occurrence of an Event of Default (as
defined in the Note) which continues to exist, the proceeds of
which are remitted to the Purchaser to be held as cash
collateral for the Obligations (as defined in the Master
Security Agreement);
22
(II) The Company, without the prior written consent of the
Purchaser, shall not, and shall not permit any of its
Subsidiaries to, create or acquire any Subsidiary after the
date hereof unless (i) such Subsidiary is a wholly-owned
Subsidiary of the Company and (ii) such Subsidiary becomes
party to the Master Security Agreement, the Stock Pledge
Agreement and the Subsidiary Guaranty (either by executing a
counterpart thereof or an assumption or joinder agreement in
respect thereof) and, to the extent required by the Purchaser,
satisfies each condition of this Agreement and the Related
Agreements as if such Subsidiary were a Subsidiary on the
Closing Date;
(III) The Company shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of the
Purchaser, amend,modify or in any way alter the terms of any
of the Subordinated Debt Documentation As set forth on
Schedule 6.12 (f).
(IV) The Company shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of the
Purchaser, grant or permit any of its Subsidiaries to grant to
any Person any Collateral (as defined in the Security
Documents, as applicable), of such company or any collateral
of any of its Subsidiaries as security for any obligation
arising under the Subordinated Debt Documentation; and
(V) Neither the Company nor any of its Subsidiaries shall, without
the prior written consent of the Purchaser, make any payments
in respect of the indebtedness evidenced by the Subordinated
Debt Documentation, other than as expressly permitted by the
terms thereof.
6.13 Reissuance of Securities. The Company agrees to reissue certificates
representing the Securities without the legends set forth in Section 5.8 above
at such time as:
(a) the holder thereof is permitted to dispose of such Securities
pursuant to Rule 144(k) under the Securities Act; or
(b) upon resale subject to an effective registration statement
after such Securities are registered under the Securities Act.
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the selling Purchaser and broker, if
any.
6.14 Opinion. On the Closing Date, the Company will deliver to the
Purchaser an opinion acceptable to the Purchaser from the Company's external
legal counsel. The Company will provide, at the Company's expense, such other
legal opinions in the future as are deemed reasonably necessary by the Purchaser
(and acceptable to the Purchaser) in connection with the conversion of the Note
and exercise of the Warrant.
23
6.15 Margin Stock. The Company will not permit any of the proceeds of the
Noteor the Warrant to be used directly or indirectly to "purchase"
or "carry" "margin stock" or to repay indebtedness incurred to
"purchase" or "carry" "margin stock" within the respective meanings
of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time
hereafter in effect.
6.16 Restricted Cash Disclosure. The Company agrees that, in connection
with its filing of its Current Report on Form 8-K with the SEC
concerning the transactions contemplated by this Agreement and the
Related Agreements (such report, the "Laurus Transaction 8-K"), in a
timely manner after the date hereof, it will disclose in such Laurus
Transaction 8-K the amount of the proceeds of the Note issued to the
Purchaser that has been placed in a restricted cash account and is
subject to the terms and conditions of this Agreement and the
Related Agreements. Furthermore, the Company agrees to disclosed in
all public filings required by the SEC (where appropriate) following
the filing of the Laurus Transaction 8-K, the existence of this
restricted cash referred to in the immediately preceding sentence,
together with the amount thereof.
6.17 Financing Limitations. The Company will not, and will not permit its
Subsidiaries to, agree, directly or indirectly, to any restriction
with any person or entity which limits the ability of the Company or
any of its Subsidiaries to incur any additional indebtedness from
the Purchaser and/or sell or issue any equity interests of the
Company or any of its Subsidiaries to the Purchaser.
6.18 Authorization and Reservation of Shares. The Company shall at all
times have authorized and reserved a sufficient number of shares of
Common Stock to provide for the exercise of the Warrants.
7. Covenants of the Purchaser. The Purchaser covenants and agrees with the
Company as follows:
7.1 Confidentiality. The Purchaser agrees that it will not disclose, and
will not include in any public announcement, the name of the Company, unless
expressly agreed to by the Company or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.
7.2 Non-Public Information. The Purchaser agrees not to effect any sales
in the shares of the Company's Common Stock while in possession of material,
non-public information regarding the Company if such sales would violate
applicable securities law.
24
7.3 Other. The Purchaser agrees that it will not, while any principal
amount of the Note remains outstanding, become a customer with
respect to the products offered by the Company or any of its
Subsidiaries.
7.4 No Shorting. Neither the Purchaser nor any of its affiliates and
investment partners will, or will cause any person or entity to, directly engage
in "short sales" of the Company's Common Stock as long as the Note shall be
outstanding.
7.5 Limitation on Acquisition of Common Stock of the Company. Notwithstanding
anything to the contrary contained herein, in any Related Agreement or any
document, instrument or agreement entered into in connection with any other
transactions between the Purchaser and the Company, the Purchaser may not
acquire stock in the Company (including, without limitation, pursuant to a
contract to purchase, by exercising an option or warrant, by converting any
other security or instrument, by acquiring or exercising any other right to
acquire, shares of stock or other security convertible into shares of stock in
the Company, or otherwise, and such contracts, options, warrants, conversion or
other rights shall not be enforceable or exercisable) to the extent such stock
acquisition would cause any interest (including any original issue discount)
payable by the Company to Laurus not to qualify as "portfolio interest" within
the meaning of Section 881(c)(2) of the Code, by reason of Section 881(c)(3) of
the Code, taking into account the constructive ownership rules under Section
871(h)(3)(C) of the Code.
8. Covenants of the Company and Purchaser Regarding Indemnification.
8.1 Company Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend the Purchaser, each of the Purchaser's officers,
directors, agents, affiliates, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser which results, arises out of or is based upon: (i) any
misrepresentation by the Company or any of its Subsidiaries or breach of any
warranty by the Company or any of its Subsidiaries in this Agreement, any other
Related Agreement or in any exhibits or schedules attached hereto or thereto; or
(ii) any breach or default in performance by Company or any of its Subsidiaries
of any covenant or undertaking to be performed by Company or any of its
Subsidiaries hereunder, under any other Related Agreement or any other agreement
entered into by the Company and/or any of its Subsidiaries and Purchaser
relating hereto or thereto.
8.2 Purchaser's Indemnification. Purchaser agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company's officers,
directors, agents, affiliates, control persons and principal shareholders, at
all times against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Company which results, arises out of or is based upon: (i) any
misrepresentation by Purchaser or breach of any warranty by Purchaser in this
Agreement or in any exhibits or schedules attached hereto or any Related
Agreement; or (ii) any breach or default in performance by Purchaser of any
covenant or undertaking to be performed by Purchaser hereunder, or any other
agreement entered into by the Company and Purchaser relating hereto.
25
9. Exercise of Warrant.
9.1 Mechanics of Exercise.
(a) Provided the Purchaser has notified the Company of the Purchaser's
intention to sell the Warrant Shares and the Warrant Shares are included in an
effective registration statement or are otherwise exempt from registration when
sold: (i) upon the exercise of the Warrant or part thereof, the Company shall,
at its own cost and expense, take all necessary action (including the issuance
of an opinion of counsel reasonably acceptable to the Purchaser following a
request by the Purchaser) to assure that the Company's transfer agent shall
issue shares of the Company's Common Stock in the name of the Purchaser (or its
nominee) or such other persons as designated by the Purchaser in accordance with
Section 9.1(b) hereof and in such denominations to be specified representing the
number of Warrant Shares issuable upon such exercise; and (ii) the Company
warrants that no instructions other than these instructions have been or will be
given to the transfer agent of the Company's Common Stock and that after the
Effectiveness Date (as defined in the Registration Rights Agreement) the Warrant
Shares issued will be freely transferable subject to the prospectus delivery
requirements of the Securities Act and the provisions of this Agreement, and
will not contain a legend restricting the resale or transferability of the
Warrant Shares.
(b) The Purchaser will give notice of its decision to exercise its right
to exercise the Warrant or part thereof by telecopying or otherwise delivering
an executed and completed notice of the number of shares to be exercised to the
Company (the "Form of Subscription"). The Purchaser will not be required to
surrender the Warrant until the Purchaser receives a credit to the account of
the Purchaser's prime broker through the DWAC system (as defined below),
representing all the Warrant Shares issuable under the Warrant. Each date on
which a Form of Subscription is telecopied or delivered to the Company in
accordance with the provisions hereof shall be deemed an "Exercise Date."
Pursuant to the terms of the Form of Subscription, the Company will issue
instructions to the transfer agent accompanied by an opinion of counsel within
two (2) business days of the date of the delivery to the Company of the Form of
Subscription and shall cause the transfer agent to transmit the certificates
representing the Warrant Shares set forth in the applicable Form of Subscription
to the Holder by crediting the account of the Purchaser's prime broker with the
Depository Trust Company ("DTC") through its Deposit Withdrawal Agent Commission
("DWAC") system within three (3) business days after receipt by the Company of
the Form of Subscription (the "Delivery Date").
(c) The Company understands that a delay in the delivery of the Warrant
Shares in the form required pursuant to Section 9 hereof beyond the Delivery
Date could result in economic loss to the Purchaser. In the event that the
Company fails to direct its transfer agent to deliver the Warrant Shares to the
Purchaser via the DWAC system within the time frame set forth in Section 9.1(b)
above and the Warrant Shares are not delivered to the Purchaser by the Delivery
Date, as compensation to the Purchaser for such loss, the Company agrees to pay
late payments to the Purchaser for late issuance of the Warrant Shares in the
form required pursuant to Section 9 hereof upon exercise of the Warrant in the
amount equal to the Purchaser's actual damages from such delayed delivery.
Notwithstanding the foregoing, the Company will not owe the Purchaser any late
payments if the delay in the delivery of the Warrant Shares beyond the Delivery
26
Date is solely out of the control of the Company and the Company is actively
trying to cure the cause of the delay. The Company shall pay any payments
incurred under this Section in immediately available funds upon demand and, in
the case of actual damages, accompanied by reasonable documentation of the
amount of such damages. Such documentation shall show the number of shares of
Common Stock the Purchaser is forced to purchase (in an open market transaction)
which the Purchaser anticipated receiving upon such exercise, and shall be
calculated as the amount by which (A) the Purchaser's total purchase price
(including customary brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (B) the aggregate exercise price of the Warrant, for
which such Form of Subscription was not timely honored.
10. Registration Rights.
10.1 Registration Rights Granted. The Company hereby grants registration
rights to the Purchaser pursuant to a Registration Rights Agreement dated as of
even date herewith between the Company and the Purchaser.
10.2 Offering RestrictionsExcept as previously disclosed in the SEC
Reports or in the Exchange Act Filings, or stock or stock options granted to
employees or directors of the Company (these exceptions hereinafter referred to
as the "Excepted Issuances"), neither the Company nor any of its Subsidiaries
will, prior to the full exercise by Purchaser of the Warrants, (x) enter into
any equity line of credit agreement or similar agreement or (y) issue, or enter
into any agreement to issue, any securities with a continuously
variable/floating conversion feature which are or could be (by conversion or
registration) free-trading securities (i.e. common stock subject to a
registration statement).
11. Miscellaneous.
11.1 Governing Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS AGREEMENT AND THE RELATED AGREEMENTS SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED
IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS.
27
(b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW
YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND,
AND THE PURCHASER, ON THE OTHER HAND, PERTAINING TO THIS
AGREEMENT OR ANY OF THE RELATED AGREEMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE
OTHER RELATED AGREEMENTS; PROVIDED, THAT THE PURCHASER AND THE
COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY
HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF
NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE THE PURCHASER FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE
OBLIGATIONS, TO REALIZE ON THE COLLATERAL (AS DEFINED IN THE
MASTER SECURITY AGREEMENT) OR ANY OTHER SECURITY FOR THE
OBLIGATIONS (AS DEFINED IN THE MASTER SECURITY AGREEMENT), OR
TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
PURCHASER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED
IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION
WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY
AT THE ADDRESS SET FORTH IN SECTION 11.9 AND THAT SERVICE SO
MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE
COMPANY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
(c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE
BETWEEN THE PURCHASER AND/OR THE COMPANY ARISING OUT OF,
CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT,
ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO
OR THERETO.
28
11.2 Survival11.3 . The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby to the extent provided
therein. All statements as to factual matters contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument. All indemnities set forth herein shall survive
the execution, delivery and termination of this Agreement and the Note and the
making and repayment of the obligations arising hereunder, under the Note and
under the other Related Agreements.
11.4 Successors. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each person who shall be a holder
of the Securities from time to time, other than the holders of Common Stock
which has been sold by the Purchaser pursuant to Rule 144 or an effective
registration statement. Purchaser may not assign its rights hereunder to a
competitor of the Company or any Subsidiary of the Company or to any person or
entity affiliated with such a competitor.
11.5 Entire Agreement; Maximum Interest. This Agreement, the Related
Agreements, the exhibits and schedules hereto and thereto and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and no
party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein. . Nothing contained in this Agreement, any Related
Agreement or in any document referred to herein or delivered in connection
herewith shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum rate permitted by applicable
law. In the event that the rate of interest or dividends required to be paid or
other charges hereunder exceed the maximum rate permitted by such law, any
payments in excess of such maximum shall be credited against amounts owed by the
Company to the Purchaser and thus refunded to the Company.
11.6 SeverabilityWherever possible each provision of this Agreement and
the Related Agreements shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement or any
Related Agreement shall be prohibited by or invalid or illegal under applicable
law such provision shall be ineffective to the extent of such prohibition or
invalidity or illegality, without invalidating the remainder of such provision
or the remaining provisions thereof which shall not in any way be affected or
impaired thereby.
11.7 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and the Purchaser.
29
(b) The obligations of the Company and the rights of the Purchaser
under this Agreement may be waived only with the written
consent of the Purchaser.
(c) The obligations of the Purchaser and the rights of the Company
under this Agreement may be waived only with the written
consent of the Company.
11.8 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement or the Related
Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative.
11.9 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next
business day;
(c) three (3) business days after having been sent by registered
or certified mail, return receipt requested, postage prepaid;
or
(d) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written
verification of receipt.
All communications shall be sent as follows:
If to the Company, to: National Investment Managers, Inc.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000 Attention: Chief
Financial Officer
Facsimile: 000 000 0000
with a copy to:
Xxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxx, Esq.
Facsimile: 000-000-0000
30
If to the Purchaser, to: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
X.X. Xxx 000 XX
Xxxxxx Xxxxx, Xxxxxx Xxxx
South Church Street
Grand Cayman, Cayman Islands
Facsimile: 000-000-0000
with a copy to:
Xxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxx 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
11.10 Attorneys' Fees. In the event that any suit or action is instituted
to enforce any provision in this Agreement or any Related Agreement, the
prevailing party in such dispute shall be entitled to recover from the losing
party all fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Agreement and/or such Related Agreement,
including, without limitation, such reasonable fees and expenses of attorneys
and accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
11.11 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
11.12 Facsimile Signatures; Counterparts. This Agreement may be executed
by facsimile signatures and in any number of counterparts, each of which shall
be an original, but all of which together shall constitute one instrument.
11.13 Broker's Fees. Except as set forth on Schedule 11.12 hereof, each
party hereto represents and warrants that no agent, broker, investment banker,
person or firm acting on behalf of or under the authority of such party hereto
is or will be entitled to any broker's or finder's fee or any other commission
directly or indirectly in connection with the transactions contemplated herein.
Each party hereto further agrees to indemnify each other party for any claims,
losses or expenses incurred by such other party as a result of the
representation in this Section 11.12 being untrue.
11.14 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the Related Agreements
and, therefore, stipulates that the rule of construction that ambiguities are to
be resolved against the drafting party shall not be applied in the
interpretation of this Agreement or any Related Agreement to favor any party
against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
31
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
NATIONAL INVESTMENT MANAGERS, INC. LAURUS MASTER FUND, LTD.
By: By:
---------------------------- -----------------------------
Name: Name:
---------------------------- -----------------------------
Title: Title:
---------------------------- -----------------------------
32
EXHIBIT A
FORM OF NOTE
A-1
EXHIBIT B
FORM OF OPINION
X-0
XXXXXXX X
XXXX XX XXXXXX XXXXXXXXX
X-0
