SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of the last date
set forth on the signature page hereof between National Investment Managers
Inc., a Florida corporation (the "Company"), and the undersigned (the
"Subscriber").
W I T N E S S E T H:
WHEREAS, the Company is conducting a private offering (the
"Offering") for which Westminster Securities Corp. (the "Placement Agent") is
acting as placement agent, consisting of a minimum of 10,000 (the "Minimum
Offering") up to a maximum of 60,000 (the "Maximum Offering") shares (the
"Shares") of Series E Cumulative Convertible Preferred Stock ("Series E
Preferred Stock"), pursuant to Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act") and Rule 506 promulgated thereunder; and
WHEREAS, the Subscriber desires to purchase that number of Shares
set forth on the signature page hereof on the terms and conditions hereinafter
set forth; and
WHEREAS, for each Share of Series E Preferred Stock purchased, each
Subscriber will receive a warrant to purchase one hundred (100) shares of common
stock (the "Common Stock") of the Company (the "Warrants", and collectively with
the Series E Preferred Stock, the "Securities").
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
I. SUBSCRIPTION FOR SHARES AND REPRESENTATIONS BY SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth and in
the Confidential Offering Memorandum dated November 30, 2006 (such memorandum,
together with all amendments thereof and supplements and exhibits thereto, the
"Memorandum"), the Subscriber hereby irrevocably subscribes for and agrees to
purchase from the Company, and the Company agrees to sell to the Subscriber,
such number of Shares as is set forth on the signature page hereof, at a per
share price equal to $100.00 per Share. The purchase price is payable by wire
transfer, to be held in escrow until the Minimum Offering is achieved, to:
Receiving Bank: XXXXX
ABA # XXXXX
For the Credit: XXXXX
ABA # XXXXX
Address: XXXXX
Account Name: XXXXX
Account # XXXXX
Swift Code XXXXX
1.2 Offering Period; Maximum. The Securities will be offered for
sale until December 15, 2006, (the "Termination Date"), subject to the right of
the Company and the Placement Agent to extend the Termination Date for up to 45
additional days. The Offering is being conducted on a best-efforts basis.
1.3 Closings. The Company may hold an initial closing ("Initial
Closing") at any time after the receipt of accepted subscriptions for the
Minimum Offering prior to the Termination Date. After the Initial Closing,
subsequent closings with respect to additional Securities may take place at any
time prior to the Termination Date as determined by the Company, with respect to
subscriptions accepted prior to the Termination Date (each such closing,
together with the Initial Closing, being referred to as a "Closing"). The last
Closing of the Offering, occurring on or prior to the Termination Date, shall be
referred to as the "Final Closing". Any subscription documents or funds received
after the Final Closing will be returned, without interest or deduction.
1.4 The Subscriber recognizes that the purchase of the Securities
involves a high degree of risk including, but not limited to, the following: (a)
the Company has limited operating history and requires substantial funds in
addition to the proceeds of the Offering; (b) an investment in the Company is
highly speculative, and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Securities; (c) the
Subscriber may not be able to liquidate its investment; (d) transferability of
the Securities is extremely limited; (e) in the event of a disposition, the
Subscriber could sustain the loss of its entire investment; (f) the Company has
not paid any dividends since its inception and does not anticipate paying any
dividends; and (g) the Company may issue additional securities in the future
which have rights and preferences that are senior to those of the Series E
Preferred Stock. Without limiting the generality of the representations set
forth in Section 1.5 below, the Subscriber represents that the Subscriber has
carefully reviewed the section of the Memorandum captioned "Risk Factors."
1.5 The Subscriber represents that the Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D ("Regulation D")
promulgated under the Securities Act, as indicated by the Subscriber's responses
to the questions contained in Article VII hereof, and that the Subscriber is
able to bear the economic risk of an investment in the Securities.
1.6 The Subscriber hereby acknowledges and represents that (a) the
Subscriber has knowledge and experience in business and financial matters, prior
investment experience, including investment in securities that are non-listed,
unregistered and/or not traded on a national securities exchange nor on the
National Association of Securities Dealers, Inc. (the "NASD") automated
quotation system ("NASDAQ"), or the Subscriber has employed the services of a
"purchaser representative" (as defined in Rule 501 of Regulation D), attorney
and/or accountant to read all of the documents furnished or made available by
the Company both to the Subscriber and to all other prospective investors in the
Securities to evaluate the merits and risks of such an investment on the
Subscriber's behalf; (b) the Subscriber recognizes the highly speculative nature
of this investment; and (c) the Subscriber is able to bear the economic risk
that the Subscriber hereby assumes.
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1.7 The Subscriber hereby acknowledges receipt and careful review of
this Agreement, the Memorandum (which includes the Risk Factors), including the
Warrant and the Series E Certificate of Designation (as defined below) and all
other exhibits thereto, and any documents which may have been made available
upon request as reflected therein (collectively referred to as the "Offering
Materials") and hereby represents that the Subscriber has been furnished by the
Company during the course of the Offering with all information regarding the
Company, the terms and conditions of the Offering and any additional information
that the Subscriber has requested or desired to know, and has been afforded the
opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the Company and the
terms and conditions of the Offering.
1.8 (a) In making the decision to invest in the Securities the
Subscriber has relied solely upon the information provided by the Company in the
Offering Materials. To the extent necessary, the Subscriber has retained, at its
own expense, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and the
purchase of the Securities hereunder. The Subscriber disclaims reliance on any
statements made or information provided by any person or entity in the course of
Subscriber's consideration of an investment in the Securities other than the
Offering Materials.
(b) The Subscriber represents that (i) the Subscriber was
contacted regarding the sale of the Securities by the Company (or an authorized
agent or representative thereof) with whom the Subscriber had a prior
substantial pre-existing relationship and (ii) no Securities were offered or
sold to it by means of any form of general solicitation or general advertising,
and in connection therewith, the Subscriber did not (A) receive or review any
advertisement, article, notice or other communication published in a newspaper
or magazine or similar media or broadcast over television or radio, whether
closed circuit, or generally available; or (B) attend any seminar meeting or
industry investor conference whose attendees were invited by any general
solicitation or general advertising.
1.9 The Subscriber hereby represents that the Subscriber, either by
reason of the Subscriber's business or financial experience or the business or
financial experience of the Subscriber's professional advisors (who are
unaffiliated with and not compensated by the Company or any affiliate or selling
agent of the Company, directly or indirectly), has the capacity to protect the
Subscriber's own interests in connection with the transaction contemplated
hereby.
1.10 The Subscriber hereby acknowledges that the Offering has not
been reviewed by the United States Securities and Exchange Commission (the
"SEC") nor any state regulatory authority since the Offering is intended to be
exempt from the registration requirements of Section 5 of the Securities Act,
pursuant to Regulation D. The Subscriber understands that the Securities have
not been registered under the Securities Act or under any state securities or
"blue sky" laws and agrees not to sell, pledge, assign or otherwise transfer or
dispose of the Securities unless they are registered under the Securities Act
and under any applicable state securities or "blue sky" laws or unless an
exemption from such registration is available.
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1.11 The Subscriber understands that the Securities have not been
registered under the Securities Act by reason of a claimed exemption under the
provisions of the Securities Act that depends, in part, upon the Subscriber's
investment intention. In this connection, the Subscriber hereby represents that
the Subscriber is purchasing the Securities for the Subscriber's own account for
investment and not with a view toward the resale or distribution to others. The
Subscriber, if an entity, further represents that it was not formed for the
purpose of purchasing the Securities.
1.12 The Subscriber understands that the Common Stock issuable upon
conversion of the Series E Preferred Stock (the "Conversion Shares") and upon
exercise of the Warrants (the "Warrant Shares" and collectively with the
Conversion Shares, the "Common Shares") is quoted on the OTC Bulletin Board and
that there is a limited market for the Common Stock. The Subscriber understands
that even if a public market develops for the Common Shares, Rule 144 ("Rule
144") promulgated under the Securities Act requires for non-affiliates, among
other conditions, a one-year holding period prior to the resale (in limited
amounts) of securities acquired in a non-public offering without having to
satisfy the registration requirements under the Securities Act. The Subscriber
understands and hereby acknowledges that the Company is under no obligation to
register any of the Securities or the Common Shares under the Securities Act or
any state securities or "blue sky" laws other than as set forth in Article V.
1.13 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Securities and the Common Shares
that such securities have not been registered under the Securities Act or any
state securities or "blue sky" laws and setting forth or referring to the
restrictions on transferability and sale thereof contained in this Agreement.
The Subscriber is aware that the Company will make a notation in its appropriate
records with respect to the restrictions on the transferability of such
Securities. The legend to be placed on each certificate shall be in form
substantially similar to the following:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
ANY STATE SECURITIES OR "BLUE SKY LAWS," AND MAY NOT BE OFFERED,
SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH
RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
1.14 It is agreed that the Company, at its sole discretion, reserves
the unrestricted right, without further documentation or agreement on the part
of the Subscriber, to reject or limit any subscription, to accept subscriptions
for fractional Shares and to close the Offering to the Subscriber at any time
and that the Company will issue stop transfer instructions to its transfer agent
with respect to such Securities.
1.15 The Subscriber hereby represents that the address of the
Subscriber furnished by Subscriber on the signature page hereof is the
Subscriber's principal residence if Subscriber is an individual or its principal
business address if it is a corporation or other entity.
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1.16 The Subscriber represents that the Subscriber has full power
and authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Securities. This Agreement constitutes the legal,
valid and binding obligation of the Subscriber, enforceable against the
Subscriber in accordance with its terms.
1.17 If the Subscriber is a corporation, partnership, limited
liability company, trust, employee benefit plan, individual retirement account,
▇▇▇▇▇ Plan, or other tax-exempt entity, it is authorized and qualified to invest
in the Company and the person signing this Agreement on behalf of such entity
has been duly authorized by such entity to do so.
1.18 The Subscriber acknowledges that if he or she is a Registered
Representative of an NASD member firm, he or she must give such firm the notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm in Section 7.4 below.
1.19 The Subscriber acknowledges that at such time, if ever, as the
Securities or the Common Shares are registered (as such term is defined in
Article V hereof), sales of the Securities and the Common Shares will be subject
to state securities laws.
1.20 The Subscriber agrees not to issue any public statement with
respect to the Subscriber's investment or proposed investment in the Company or
the terms of any agreement or covenant between them and the Company without the
Company's prior written consent, except such disclosures as may be required
under applicable law or under any applicable order, rule or regulation.
1.21 The Subscriber agrees to hold the Company and its directors,
officers, employees, affiliates, controlling persons and agents and their
respective heirs, representatives, successors and assigns harmless and to
indemnify them against all liabilities, costs and expenses incurred by them as a
result of (a) any sale or distribution of the Securities by the Subscriber in
violation of the Securities Act or any applicable state securities or "blue sky"
laws; or (b) any false representation or warranty or any breach or failure by
the Subscriber to comply with any covenant made by the Subscriber in this
Agreement (including the Confidential Investor Questionnaire contained in
Article VII herein) or any other document furnished by the Subscriber to any of
the foregoing in connection with this Agreement.
II. REPRESENTATIONS BY AND COVENANTS OF THE COMPANY
The Company hereby represents and warrants to the Subscriber that:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida and has full corporate power and authority to own and
use its properties and its assets and conduct its business as currently
conducted. Each of the Company's subsidiaries (the "Subsidiaries") is an entity
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duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with the requisite corporate power and
authority to own and use its properties and assets and to conduct its business
as currently conducted. Neither the Company, nor any of its Subsidiaries is in
violation of any of the provisions of their respective articles of
incorporation, by-laws or other organizational or charter documents, including,
but not limited to the Charter Documents (as defined below). Each of the Company
and its Subsidiaries is duly qualified to conduct business and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not result in a direct and/or indirect (i) material
adverse effect on the legality, validity or enforceability of any of the
Securities and/or this Agreement, (ii) material adverse effect on the results of
operations, assets, business or financial condition of the Company or its
Subsidiaries, or (iii) material adverse effect on the Company's ability to
perform in any material respect on a timely basis its obligations under this
Agreement, the Warrants, the Certificate of Designation of the Preferences,
Rights and Limitations of Series E Convertible Preferred Stock (the "Series E
Certificate of Designation") and the Memorandum.
2.2 Capitalization and Voting Rights. The authorized, issued and
outstanding capital stock of the Company is as set forth in Schedule 2.2 hereto
and all issued and outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable. Except as set forth in Schedule
2.2 hereto, (i) there are no outstanding securities of the Company or any of its
Subsidiaries which contain any preemptive, redemption or similar provisions, nor
is any holder of securities of the Company or any Subsidiary entitled to
preemptive or similar rights arising out of any agreement or understanding with
the Company or any Subsidiary by virtue of any of the Transaction Documents, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (ii) the Company does not have any
stock appreciation rights or "phantom stock" plans or agreements or any similar
plan or agreement; and (iii) there are no outstanding options, warrants,
agreements, convertible securities, preemptive rights or other rights to
subscribe for or to purchase or acquire, any shares of capital stock of the
Company or contracts, commitments, understandings, or arrangements by which the
Company or any Subsidiary is or may become bound to issue any shares of capital
stock of the Company, or securities or rights convertible or exchangeable into
shares of capital stock of the Company. Except as set forth in Schedule 2.2 and
as otherwise required by law, there are no restrictions upon the voting or
transfer of any of the shares of capital stock of the Company pursuant to the
Company's Charter Documents, Bylaws or other governing documents or any
agreement or other instruments to which the Company is a party or by which the
Company is bound.
2.3 Authorization; Enforceability. The Company has all corporate
right, power and authority to enter into, execute and deliver this Agreement and
each other agreement, document, instrument and certificate to be executed by the
Company in connection with the consummation of the transactions contemplated
hereby, including, but not limited to the Warrants and the Series E Certificate
of Designation (collectively, the "Transaction Documents") and to perform fully
its obligations hereunder and thereunder. All corporate action on the part of
the Company, its directors and stockholders necessary for the (a) authorization
execution, delivery and performance of this Agreement and the Transaction
Documents by the Company; and (b) authorization, sale, issuance and delivery of
the Securities and the Common Shares contemplated hereby and the performance of
the Company's obligations under this Agreement and the Transaction Documents has
been taken. This Agreement and the Transaction Documents have been duly executed
and delivered by the Company and each constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its respective terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy. The Securities and Common Shares, when issued and
fully paid for in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable. The issuance and sale of the Securities
and Common Shares contemplated hereby will not give rise to any preemptive
rights or rights of first refusal on behalf of any person.
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2.4 No Conflict; Governmental Consents.
(a) The execution and delivery by the Company of this
Agreement and the Transaction Documents and the consummation of the transactions
contemplated hereby will not (i) result in the violation of any material law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority to or by which the Company is bound, (ii)
conflict with or violate any provision of the Company's Articles of
Incorporation (the "Articles"), as amended, the Bylaws, or the Certificate of
Designation of Preferences, Rights and Limitations of Series B Cumulative
Convertible Preferred Stock (the "Series B COD") or the Certificate of
Designation of Preferences, Rights and Limitations of Series C Cumulative
Convertible Preferred Stock (the "Series C COD") or the Certificate of
Designation of Preferences, Rights and Limitations of Series D Cumulative
Convertible Preferred Stock (the "Series D COD" and collectively, with the
Articles, the Bylaws and the Series B COD, and the Series C COD, the "Charter
Documents") of the Company, and (iii) will not conflict with, or result in a
material breach or violation of, any of the terms or provisions of, or
constitute (with or without due notice or lapse of time or both) a default or
give to others any rights of termination, amendment, acceleration or
cancellation (with or without due notice, lapse of time or both) under any
agreement, credit facility, lease, loan agreement, mortgage, security agreement,
trust indenture or other agreement or instrument to which the Company is a party
or by which it is bound or to which any of its properties or assets is subject,
nor result in the creation or imposition of any lien upon any of the properties
or assets of the Company.
(b) No approval by the holders of Common Stock, or other
equity securities of the Company is required to be obtained by the Company in
connection with the authorization, execution and delivery of this Agreement or
the Transaction Documents or in connection with the authorization, issue and
sale of the Securities, except as has been previously obtained,
(c) No consent, approval, authorization or other order of any
governmental authority is required to be obtained by the Company in connection
with the authorization, execution and delivery of this Agreement or the
Transaction Documents or in connection with the authorization, issue and sale of
the Securities, except such filings as may be required to be made with the SEC,
NASD, NASDAQ and with any state or foreign blue sky or securities regulatory
authority.
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2.5 Consents of Third Parties. No vote, approval or consent of any
holder of capital stock of the Company or any other third parties is required or
necessary to be obtained by the Company in connection with the authorization,
execution and deliver of this Agreement or the Transaction Documents or in
connection with the consummation of the transactions contemplated by this
Agreement and/or the Transaction Documents, except as previously obtained.
2.6 Licenses. Except as otherwise set forth in the SEC Reports (as
defined below), the Company has sufficient licenses, permits and other
governmental authorizations currently required for the conduct of its business
or ownership of properties and is in all material respects in compliance
therewith.
2.7 Litigation. Except as set forth in the SEC Reports, the Company
knows of no pending or threatened legal or governmental proceedings against the
Company which could materially adversely affect the business, property,
financial condition or operations of the Company or which materially and
adversely questions the validity of this Agreement or any agreements related to
the transactions contemplated hereby or the right of the Company to enter into
any of such agreements, or to consummate the transactions contemplated hereby or
thereby. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality which could materially adversely affect the business, property,
financial condition or operations of the Company. There is no action, suit,
proceeding or investigation by the Company currently pending in any court or
before any arbitrator or that the Company intends to initiate.
2.8 Disclosure. The information set forth in the Offering Materials
as of the date hereof and as of the date of each Closing contains no untrue
statement of a material fact nor omits to state a material fact necessary in
order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading.
2.9 Investment Company. The Company is not an "investment company"
within the meaning of such term under the Investment Company Act of 1940, as
amended, and the rules and regulations of the SEC thereunder.
2.10 Brokers. Except for the Placement Agent, neither the Company
nor any of the Company's officers, directors, employees or stockholders has
employed or engaged any broker or finder in connection with the transactions
contemplated by this Agreement and no fee or other compensation is or will be
due and owing to any broker, finder, underwriter, placement agent or similar
person in connection with the transactions contemplated by this Agreement. The
Company is not party to any agreement, arrangement or understanding whereby any
person has an exclusive right to raise funds and/or place or purchase any debt
or equity securities for or on behalf of the Company.
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2.11 Intellectual Property; Employees.
(a) To the best of its knowledge, the Company 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
as presently proposed to be conducted, without any known infringement of the
rights of others. Except as disclosed in the Memorandum, there are no material
outstanding options, licenses or agreements of any kind relating to the
foregoing proprietary rights, nor is the Company bound by or a party to any
material 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. The Company has not received
any written communications alleging that the Company has violated or, by
conducting its business as presently proposed to be conducted, would violate any
of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity.
(b) Except as disclosed in the SEC Reports, the Company is not
aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with their duties to the Company or that would conflict with the
Company's business as presently conducted.
(c) Neither the execution nor delivery of this Agreement, nor
the carrying on of the Company's business by the employees of the Company, nor
the conduct of the Company's business as presently conducted, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated.
(d) To the Company's knowledge, no employee of the Company,
nor any consultant with whom the Company 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 because of the nature of the business conducted by
the Company; and to the Company's knowledge the continued employment by the
Company of its present employees, and the performance of the Company's contracts
with its independent contractors, will not result in any such violation. The
Company has not received any written notice alleging that any such violation has
occurred. Except as described in the Memorandum, no employee of the Company has
been granted the right to continued employment by the Company or to any
compensation following termination of employment with the Company except for any
of the same which would not have a material adverse effect on the business of
the Company. 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,
nor does the Company have a present intention to terminate the employment of any
officer, key employee or group of employees.
2.12 Title to Properties and Assets; Liens, Etc. Except as described
in the SEC Reports, the Company has good and marketable title to its properties
and assets, including the properties and assets reflected in the most recent
balance sheet included in the Company's financial statements, 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) liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company; and (c) those that have otherwise arisen in the
ordinary course of business. The Company is in compliance with all material
terms of each lease to which it is a party or is otherwise bound.
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2.13 Obligations to Related Parties. Except as described in the SEC
Reports and the M&A agreement entered with ▇▇▇▇▇▇ Capital, which is owned by
▇▇▇▇▇▇▇ ▇▇▇▇, a shareholder of the Company, there are no obligations of the
Company to officers, directors, stockholders, or employees of the Company other
than (a) for payment of salary or other compensation for services rendered, (b)
reimbursement for reasonable expenses incurred on behalf of the Company and (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). Except as may be disclosed
in the Memorandum, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
2.14 Subsidiaries. The Company has no direct or indirect
Subsidiaries other than as specified in the SEC Reports. The Company owns,
directly or indirectly, all of the capital stock of each Subsidiary free and
clear of any and all liens, and all the issued and outstanding shares of capital
stock of each Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights.
2.15 SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and Securities
Exchange Act of 1934 (the "Exchange Act"), including pursuant to Section 13(a)
or 15(d) thereof, for the twelve months preceding the date hereof (or such
shorter period as the Company was required by law to file such reports) (the
foregoing materials being collectively referred to herein as the "SEC Reports"
and, together with the Schedules to this Agreement (if any), the "Disclosure
Materials") on a timely basis or has timely filed a valid extension of such time
of filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the SEC promulgated thereunder, and none of
the SEC Reports, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present
in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.
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2.16 Press Releases. The press releases disseminated by the Company
during the twelve months preceding the date of this Agreement taken as a whole
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading.
2.17 Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in a
material adverse effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables, accrued expenses and
other liabilities incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to generally accepted accounting principles or
required to be disclosed in filings made with the SEC, (iii) the Company has not
altered its method of accounting or the identity of its auditors, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company has not
issued any equity securities to any officer, director or affiliate, except
pursuant to existing Company stock option plans. The Company does not have
pending before the SEC any request for confidential treatment of information.
2.18 Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
2.19 Compliance. The Company is in compliance with all effective
requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended, and the rules and
regulations thereunder, that are applicable to it, except where such
noncompliance could not have or reasonably be expected to result in a material
adverse effect.
2.20 Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. The Company has no reason to believe
that it will not be able to renew its and the Subsidiaries' existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business on terms
consistent with market for the Company's and such Subsidiaries' respective lines
of business.
2.21 Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
11
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company's Form 10-KSB or
10-QSB, as the case may be, is being prepared. The Company's certifying officers
have evaluated the effectiveness of the Company's controls and procedures in
accordance with Item 307 of Regulation S-B under the Exchange Act for the
Company's most recently ended fiscal quarter or fiscal year-end (such date, the
"Evaluation Date"). The Company presented in its most recently filed Form 10-KSB
or Form 10-QSB the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company's internal controls (as such term is
defined in Item 308(c) of Regulation S-B under the Exchange Act) or, to the
Company's knowledge, in other factors that could significantly affect the
Company's internal controls.
2.22 Solvency. Based on the financial condition of the Company as of
the Initial Closing (and assuming that the Initial Closing shall have occurred),
(i) the Company's fair saleable value of its assets exceeds the amount that will
be required to be paid on or in respect of the Company's existing debts and
other liabilities (including known contingent liabilities) as they mature, (ii)
the Company's assets do not constitute unreasonably small capital to carry on
its business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
2.23 Certain Registration Matters. Assuming the accuracy of the
Subscribers' representations and warranties, no registration under the
Securities Act is required for the offer and sale of the Securities and/or the
issuance of the Common Shares by the Company to the Subscribers under the
Agreement. The Company is eligible to register the resale of its Common Shares
under Form SB-2 promulgated under the Securities Act.
2.24 Listing and Maintenance Requirements. Except as specified in
the SEC Reports, the Company has not, in the two years preceding the date
hereof, received notice from any trading market to the effect that the Company
is not in compliance with the listing or maintenance requirements thereof. The
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with the listing and maintenance
requirements for continued listing or quotation of the Common Stock on the
trading market on which the Common Stock is currently listed or quoted. The
issuance and sale of the Securities and/or the issuance of the Common Shares
under the Agreement does not contravene the rules and regulations of the trading
market on which the Common Stock is currently listed or quoted, and no approval
of the shareholders of the Company thereunder is required for the Company to
issue and deliver to the Subscribers the Securities and Common Shares
contemplated by this Agreement.
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2.25 No General Solicitation. None of the Company, its Subsidiaries,
any of their affiliates, and any person acting on their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Securities.
2.26 No Integrated Offering. None of the Company, its Subsidiaries,
any of their affiliates, and any person acting on 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 require registration of any of
the Securities under the Securities Act or cause this offering of the Securities
to be integrated with prior offerings by the Company for purposes of the
Securities Act or any applicable stockholder approval provisions, including
without limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated. None of the Company, its Subsidiaries, their affiliates and any
person acting on their behalf will take any action or steps referred to in the
preceding sentence that would require registration of any of the Securities
under the Securities Act or cause the offering of the Securities to be
integrated with other offerings.
2.27 Application of Takeover Protections. The Company has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
Charter Documents or the laws of its state of incorporation that is or could
become applicable to the Subscribers as a result of the Subscribers and the
Company fulfilling their obligations or exercising their rights under this
Agreement, including, without limitation, the Company's issuance of the
Securities and the Subscribers' ownership of the Securities.
2.28 Privacy. The Company agrees not to disclose the names,
addresses or any other information about the Subscribers, except as required by
law; provided, that the Company may use the name of the Subscriber in any
registration statement filed pursuant to Article V in which the Subscriber's
Securities are included.
2.29 No Additional Agreements. The Company does not have any
agreement or understanding with any Subscribers with respect to the transactions
contemplated by this Agreement other than as specified in this Agreement.
III. TERMS OF SUBSCRIPTION
3.1 All funds shall be submitted directly to the Company's account
identified in Section 1.1 hereof.
3.2 Certificates representing the Series E Preferred Stock purchased
by the Subscriber pursuant to this Agreement will be prepared for delivery to
the Subscriber within 10 business days following the Closing at which such
purchase takes place. The Subscriber hereby authorizes and directs the Company
to deliver the certificates representing the Series E Preferred Stock purchased
by the Subscriber pursuant to this Agreement directly to the Subscriber's
residential or business or brokerage house address indicated on the signature
page hereto.
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IV. CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS
4.1 The Subscriber's obligation to purchase the Securities at the
Closing at which such purchase is to be consummated is subject to the
fulfillment on or prior to such Closing of the following conditions, which
conditions may be waived at the option of each Subscriber to the extent
permitted by law:
(a) Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
date of such Closing shall have been performed or complied with in all material
respects.
(b) No Legal Order Pending. There shall not then be in effect
any legal or other order enjoining or restraining the transactions contemplated
by this Agreement.
(c) No Law Prohibiting or Restricting Such Sale. There shall
not be in effect any law, rule or regulation prohibiting or restricting such
sale or requiring any consent or approval of any person, which shall not have
been obtained, to issue the Securities (except as otherwise provided in this
Agreement).
(d) Adverse Changes. Since the date of execution of this
Agreement, no event or series of events shall have occurred that reasonably
could have or result in a material adverse effect.
(e) No Suspensions of Trading in Common Stock; Listing.
Trading in the Common Stock shall not have been suspended by the SEC or any
trading market (except for any suspensions of trading of not more than one
trading day solely to permit dissemination of material information regarding the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading on
a trading market.
(f) Series E Designation. The Certificate of Designation of
the Preferences, Rights and Limitations for the Series E Preferred, in the form
attached as Exhibit 5 to the Memorandum, shall have been accepted for filing by
the Secretary of State of Florida.
(g) Blue Sky. The Company shall have completed qualification
for the Securities and the Common Shares under applicable Blue Sky laws.
(j) Legal Opinion. Counsel to the Company shall issue a legal
opinion to the Subscribers in a form reasonably acceptable to the Subscribers.
V. REGISTRATION RIGHTS
5.1 Definitions. As used in this Agreement, the following terms
shall have the following meanings.
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(a) The term "Holder" shall mean any person owning or having
the right to acquire Registrable Securities or any permitted transferee of a
Holder.
(b) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act.
(c) The term "Registrable Securities" shall mean the
Conversion Shares issuable upon conversion of the Preferred Stock, the Common
Stock issued or issuable in payment of quarterly dividends on the Series E
Preferred Stock for a period of three (3) years from the Closing, the Warrant
Shares issuable upon exercise of the Warrants, and any securities issued or
issuable upon any stock split, dividend or other distribution, recapitalization
or similar event, or any conversion price adjustment with respect to the Series
E Preferred Stock; provided, however, that securities shall only be treated as
Registrable Securities if and only for so long as they (A) have not been
disposed of pursuant to a registration statement declared effective by the SEC;
(B) have not been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale; (C) are held by a Holder or a permitted transferee of
a Holder pursuant to Section 5.11 hereof; and (D) may not be disposed of under
Rule 144(k) under the Securities Act without restriction.
(d) The term "Selling Holder" shall mean any Holder whose
Registrable Securities are included in a registration statement under discussion
herein.
5.2 Mandatory Registration. The Company shall prepare, and, within
sixty (60) days following the Final Closing of this Offering (the "Filing
Date"), will file with the SEC a registration statement on Form S-3 (or, if Form
S-3 is not then available, on such form of registration statement as is then
available to effect a registration of the Registrable Securities) covering the
resale of the Registrable Securities. The Company will use its best efforts to
have such registration statement declared effective within 180 days of the Final
Closing of this Offering.
5.3 Intentionally Omitted.
5.4 Registration Procedures. Whenever required under this Article V
to include Registrable Securities in a Company registration statement, the
Company shall, as expeditiously as reasonably possible:
(a) Use best efforts to (i) cause such registration statement
to become effective, and (ii) cause such registration statement to remain
effective until the earliest to occur of (A) such date as the sellers of
Registrable Securities (the "Selling Holders") have completed the distribution
described in the registration statement or (B) for a period of three (3) years
from Closing. The Company will also use its best efforts to, during the period
that such registration statement is required to be maintained hereunder, file
15
such post-effective amendments and supplements thereto as may be required by the
Securities Act and the rules and regulations thereunder or otherwise to ensure
that the registration statement does not contain any untrue statement of
material fact or omit to state a fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances under
which they are made, not misleading; provided, however, that if applicable rules
under the Securities Act governing the obligation to file a post-effective
amendment permits, in lieu of filing a post-effective amendment that (i)
includes any prospectus required by Section 10(a)(3) of the Securities Act or
(ii) reflects facts or events representing a material or fundamental change in
the information set forth in the registration statement, the Company may
incorporate by reference information required to be included in (i) and (ii)
above to the extent such information is contained in periodic reports filed
pursuant to Section 13 or 15(d) of the Exchange Act in the registration
statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement, and the prospectus used in
connection with such registration statement, as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Make available for inspection upon reasonable notice
during the Company's regular business hours by each Selling Holder, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such Selling
Holder or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such Selling Holder, underwriter, attorney, accountant or agent in connection
with such registration statement (provided the Company shall not disclose any
material non-public information to any such Selling Holder, underwriter,
attorney, accountant or agent without their prior written consent).
(d) Furnish to the Selling Holders such numbers of copies of a
final prospectus, in conformity with the requirements of the Securities Act, and
such other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
(e) Use best efforts to register and qualify the securities
covered by such registration statement under such other federal or state
securities laws of such jurisdictions as shall be reasonably requested by the
Selling Holders; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act.
(f) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Selling
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(g) Notify each Selling Holder of Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act within one (1)
business day of the Company's receipt of notice, (i) when the registration
statement or any post-effective amendment and supplement thereto has become
effective; (ii) of the issuance by the SEC of any stop order or the initiation
of proceedings for that purpose (in which event the Company shall make every
effort to obtain the withdrawal of any order suspending effectiveness of the
16
registration statement at the earliest possible time or prevent the entry
thereof); (iii) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation of any proceeding for such purpose; and (iv)
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(h) Cause all such Registrable Securities registered hereunder
to be listed or quoted on each securities exchange or quotation service on which
similar securities issued by the Company are then listed or quoted or, if no
such similar securities are listed or quoted on a securities exchange or
quotation service, apply for qualification and use best efforts to qualify such
Registrable Securities for inclusion on an applicable securities exchange or
quotation service.
(i) Cause for the removal of the restrictive legend on any
certificates evidencing Registrable Securities: (i) following any sale of such
Registrable Securities pursuant to an effective registration statement, or (ii)
following any proposed sale of such Registrable Securities pursuant to Rule 144,
or (iii) if such Registrable Securities are eligible for legend removal under
Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). If all or any portion of
a Series E Preferred Stock certificate is converted or Warrant is exercised at a
time when such underlying Common Shares being converted or exercised may be sold
under Rule 144(k) or if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial interpretations thereof)
then such underlying Common Shares shall be issued free of all legends. The
Company agrees that following the effectiveness of a registration statement
hereunder or at such time as such legend is no longer required under this
Section 5.4(i) pursuant to an applicable exemption from registration, it will,
no later than three (3) business days following the delivery by Subscriber to
the Company's transfer agent of a certificate representing Registrable
Securities accompanied by appropriate stock power or other required
documentation, as applicable, issued with a restrictive legend, deliver or cause
to be delivered to such Subscriber a certificate representing such shares that
is free from all restrictive and other legends, in each case without charge to
the Investor other than customary transfer fees which may be charged by the
transfer agent or broker-dealer. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section 5.4(i). Without limiting
the Investor's other legal remedies, the Company shall immediately upon demand
reimburse the Subscriber for the cost and losses occasioned by any buy-in
resulting from the Company's failure to timely deliver unlegended share
certificates, provided Subscriber provides documentation confirming such buy-in
was initiated by Subscriber's broker, securities custodian, or other such
outside party, and not by Subscriber.
17
5.5 Furnish Information. It shall be a condition precedent to the
obligation of the Company to take any action pursuant to this Article V with
respect to the Registrable Securities of any Selling Holder that such Selling
Holder shall furnish to the Company such information regarding the Selling
Holder, the Registrable Securities held by the Selling Holder, and the intended
method of disposition of such securities as shall be reasonably required by the
Company to effect the registration of such Selling Holder's Registrable
Securities.
5.6 Registration Expenses. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to registrations pursuant to Section V
for each Selling Holder, including, without limitation, in making filings with
the SEC, the NASD or NASDR, and in connection with applicable "blue sky" laws,
but excluding underwriting discounts and commissions relating to Registrable
Securities and excluding any professional fees or costs of accounting, financial
or legal advisors to any of the Holders.
5.7 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 5.3 to include any of the Holders'
Registrable Securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters), provided, however,
that if the total amount of securities, including Registrable Securities,
requested by stockholders to be included in such offering exceeds the amount of
securities that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering, provided, however,
that any reduction in the securities to be included in such registration
statement pursuant to the foregoing shall be apportioned among all of the
securities proposed to be included in such registration statement, including,
but not limited to, all other Registrable Securities (based upon the number of
Registrable Securities requested to be registered by each such Holder) on a pro
rata basis, but not including securities to be sold by the Company.
5.8 Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Article.
5.9 Indemnification. In the event that any Registrable Securities
are included in a registration statement under this Article V:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Selling Holder, any underwriter (as defined in the
Securities Act) for such Selling Holder and each person, if any, who controls
such Selling Holder or underwriter within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, or the
Exchange Act, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
18
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission to state therein a material
fact required to be stated therein, or necessary to make the statements therein
not misleading, or (iii) any violation by the Company of the Securities Act, the
Exchange Act, or any rule or regulation promulgated under the Securities Act, or
the Exchange Act, and the Company will pay to each such Selling Holder,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 5.9(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Selling Holder, underwriter or controlling
person.
(b) To the extent permitted by law, each Selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers, each person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter, any other Selling Holder selling securities
in such registration statement and any controlling person of any such
underwriter or other Selling Holder, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Securities Act, or the Exchange Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Selling Holder expressly for use in
connection with such registration; and each such Selling Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this Section 5.9(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that any Selling Holder's liability pursuant to this Section
5.9 shall be limited to the amount of the net proceeds received by such Selling
Holder from the sale of the Registrable Securities sold by it, and further
provided that the indemnity agreement contained in this Section 5.9(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Selling
Holder, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this
Section 5.9 of notice of the commencement of any action (including any
governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under this Section 5.9,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly notified, to assume the defense thereof with counsel selected by
the indemnifying party and approved by the indemnified party (whose approval
shall not be unreasonably withheld); provided, however, that an indemnified
party (together with all other indemnified parties which may be represented
without conflict by one counsel) shall have the right to retain one separate
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
5.9, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 5.9.
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(d) If the indemnification provided for in this Section 5.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in an underwriting
agreement entered into in connection with an underwritten public offering are in
conflict with the foregoing provisions, the provisions in such underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 5.9 shall survive the completion of the Offering.
5.10 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3 (or other applicable form), the Company agrees to:
(a) file with the SEC all reports and other documents required
of the Company under the Securities Act and the Exchange Act;
(b) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (ii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form; and
20
(c) cause the Company's legal counsel to issue such legal
opinions, at the Company's expense, as may be reasonably requested by the Holder
in connection with any sales or proposed sales of Registrable Securities
pursuant to Rule 144 or other similar rule or regulation that may be in effect
at such time.
5.11 Permitted Transferees. The rights to cause the Company to
register Registrable Securities granted to the Holders by the Company under this
Article V may be assigned in full by a Holder in connection with a transfer by
such Holder of its Registrable Securities if: (a) such Holder gives prior
written notice to the Company; (b) such transferee agrees to comply with the
terms and provisions of this Agreement; (c) such transfer is otherwise in
compliance with this Agreement; and (d) such transfer is otherwise effected in
accordance with applicable securities laws.
5.12 Termination of Registration Rights The obligation of the
Company to include a Holder's Registrable Securities in any registration
pursuant to this Section V shall terminate if all shares of Registrable
Securities held by such Holder can immediately be sold under Rule 144(k).
VI. COVENANTS OF THE COMPANY
6.1 Integration. The Company shall not, and shall ensure that no
affiliate of the Company shall, sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Subscribers, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any trading market in a manner that would require stockholder
approval of the sale of the securities to the Subscribers.
6.2 Listing of Securities. The Company agrees, (i) if the Company
applies to have the Common Stock traded on any other trading market, it will
include in such application the Registrable Securities, and will take such other
action as is necessary or desirable to cause the Registrable Securities to be
listed on such other trading market as promptly as possible, and (ii) it will
take all action reasonably necessary to continue the listing and trading of its
Common Stock on a trading market and will comply in all material respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the trading market.
6.3 Reservation of Shares. The Company shall at all times while the
Securities are outstanding maintain a reserve from its duly authorized shares of
Common Stock of a number of shares of Common Stock sufficient to allow for the
issuance of all Conversion Shares, Warrant Shares, and shares of Common Stock
issuable in payment of dividends on the Series E Preferred Stock.
21
6.4 Conversion and Exercise Procedures. The conversion procedures
described in and the form of Notice of Conversion included in the Certificate of
Designation of Preferences, Rights and Limitations of the Series E 12%
Cumulative Convertible Preferred Stock (the "Certificate of Designation") set
forth the totality of the procedures required by the Subscribers in order to
convert the Shares. The exercise procedures described in and the form of Form of
Subscription included in the Warrant set forth the totality of the procedures
required by the Subscribers in order to exercise the warrants. The Company shall
honor conversions of Shares and exercises of Warrants and shall deliver Common
Stock in accordance with the terms, conditions and time periods set forth in
this Agreement and the Certificate of Designation or Warrant (as applicable).
6.5 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) this
Agreement, whenever any Subscriber exercises a right, election, demand or option
under this Agreement and the Company does not timely perform its related
obligations within the periods therein provided, then such Subscriber may
rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.
6.6 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
6.7 Right of First Refusal. Until the shares of Series E Preferred
Stock are no longer outstanding, except in connection with the issuance of
securities associated with (i) the issuance to employees under the Company's
stock incentive or option plan; (ii) issued for consideration other than cash
pursuant to a merger, consolidation, acquisition, or similar business
combination approved by the Company's Board of Directors; (iii) issued pursuant
to any equipment loan or leasing arrangement, real property leasing arrangement
or debt financing from a bank or similar financial institution approved by the
Board of Directors; (iv) warrants issued in connection with a secured finance
loan or (v) securities upon the exercise of or conversion of or in payment of
dividends on any securities issued hereunder, convertible securities, options or
warrants issued and outstanding as of the Closing, provided that such securities
have not been amended since the Closing to increase the number of such
securities or to decrease the exercise or conversion price of any such
securities. ("Excepted Issuances"), the holders of the Series E Preferred Stock,
22
to the extent that the holders of the Company's Series D Preferred Stock have
not exercised their right of first refusal, shall have a pro-rata right to
participate in subsequent issuances by the Company of debt, equity or other
securities (the "Right of First Refusal"). The Company shall give holders of
Series E Preferred Stock not less than ten (10) business days prior written
notice of any proposed sale by the Company of its Common Stock or other
securities or debt obligations. The holders of the Series E Preferred Stock who
exercise their rights pursuant to this Right of First Refusal shall have the
right during the ten (10) business days following receipt of the notice to
purchase such offered equity, debt or other securities in accordance with the
terms and conditions set forth in the notice of sale in the same proportion to
each other and to the holders of the Series D Preferred Stock as their
percentage of the Series D Preferred Stock and Series E Preferred Stock, in the
aggregate, outstanding at that time. In the event such terms and conditions are
modified during the notice period, the Company shall give holders of Series E
Preferred Stock prompt notice of such modification and shall have the right
during the ten (10) business days following the notice of modification to
exercise such right. If a holder of Series D Preferred Stock or Series E
Preferred Stock elects to not participate in such financing, then the remaining
holders shall have the right to participate in that holder's allocation on a pro
rata basis. An election by a holder not to exercise its Right of First Refusal
with respect to a security issuance shall not effect such holder's Right of
First Refusal with respect to any other security issuance.
6.8 Intentionally Omitted.
6.9 Access. The holders of the Series E Preferred Stock will be
granted access to the Company facilities and personnel during normal working
hours and with reasonable advance written notice, provided, however, that the
Company covenants and agrees not to provide any such holder with material
non-public information unless prior thereto such holder shall have executed a
written agreement regarding the confidentiality and use of such information.
Upon filing its quarterly and annual reports with the Securities and Exchange
Commission, the Company shall deliver such reports to the holders of the Series
E Preferred Stock upon their request.
6.10 Key Man Life Insurance. The Company shall obtain and maintain
at all times that any shares of Series E Preferred Stock remain outstanding, key
man life insurance policies on the senior executives and key employees
identified by and in such amounts as reasonably requested by a majority of the
holders of Series E Preferred Stock.
6.11 Dividends. Until such time as there are no shares of Series E
Preferred Stock outstanding, the Company shall pay all dividends on the Series E
Preferred Stock, in cash or in Common Stock as determined by the Company and
shall pay any and all other dividends due and payable on any series of preferred
stock issued prior to the Series E Preferred Stock having preference over the
Series E Preferred Stock so that any payment of dividends on the Series E
Preferred Stock shall not violate the provisions of any other series of
preferred stock outstanding as of the Initial Closing.
6.12 Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Subscriber, its affiliates and their respective officers, directors, employees,
agents and controlling persons (collectively, the "Indemnified Parties") from
and against, any and all loss, liability, damage or deficiency suffered or
incurred by any Indemnified Party by reason of any misrepresentation or breach
23
of warranty by the Company or nonfulfillment of any covenant or agreement to be
performed or complied with by the Company under this Agreement, the Transaction
Documents; and will promptly reimburse the Indemnified Parties for all expenses
(including reasonable fees and expenses of legal counsel) as incurred in
connection with the investigation of, preparation for or defense of any pending
or threatened claim related to or arising in any manner out of any of the
foregoing, or any action or proceeding arising therefrom (collectively,
"Proceedings"), whether or not such Indemnified Party is a formal party to any
such Proceeding.
(b) If for any reason (other than a final non-appealable
judgment finding any Indemnified Party liable for losses, claims, damages,
liabilities or expenses for its gross negligence or willful misconduct) the
foregoing indemnity is unavailable to an Indemnified Party or insufficient to
hold an Indemnified Party harmless, then the Company shall contribute to the
amount paid or payable by an Indemnified Party as a result of such loss, claim,
damage, liability or expense in such proportion as is appropriate to reflect not
only the relative benefits received by the Company on the one hand and the
Advisor on the other, but also the relative fault by the Company and the
Indemnified Party, as well as any relevant equitable considerations.
VII. MISCELLANEOUS
7.1 Any notice or other communication given hereunder shall be
deemed sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefor,
addressed as follows:
if to the Company, to it at:
National Investment Managers Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CFO
With a copy to (which shall not constitute notice):
Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
if to the Subscriber, to the Subscriber's address indicated on the
signature page of this Agreement.
Notices shall be deemed to have been given or delivered on the date of receipt.
7.2 Except as otherwise provided herein, this Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
24
7.3 Subject to the provisions of Section 5.11, this Agreement shall
be binding upon and inure to the benefit of the parties hereto and to their
respective heirs, legal representatives, successors and assigns. This Agreement
sets forth the entire agreement and understanding between the parties as to the
subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
7.4 Upon the execution and delivery of this Agreement by the
Subscriber, this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Securities as herein provided, subject, however,
to the right hereby reserved by the Company to enter into the same agreements
with other subscribers and to reject any subscription, in whole or in part,
provided the Company returns to Subscriber any funds paid by Subscriber with
respect to such rejected subscription or portion thereof, without interest or
deduction.
7.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED
BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO SUCH STATE'S PRINCIPLES OF CONFLICTS
OF LAW. IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR
RESOLVING DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE COURTS
STATE OF NEW YORK IN AND FOR THE COUNTY OF NEW YORK OR THE FEDERAL COURTS FOR
SUCH STATE AND COUNTY, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY
IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.
7.6 In order to discourage frivolous claims the parties agree that
unless a claimant in any proceeding arising out of this Agreement succeeds in
establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other parties
to the action), then the other party shall be entitled to recover from such
claimant all of its/their reasonable legal costs and expenses relating to such
proceeding and/or incurred in preparation therefor.
7.7 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.
7.8 It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
25
7.9 The Company agrees to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
7.10 This Agreement may be executed in two or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
7.11 Nothing in this Agreement shall create or be deemed to create
any rights in any person or entity not a party to this Agreement, except for the
holders of Registrable Securities.
7.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Subscribers and the Company will be entitled to specific performance under this
Agreement. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
7.13 Independent Nature of Subscribers' Obligations and Rights. The
obligations of each Subscriber under this Agreement are several and not joint
with the obligations of any other Subscriber, and no Subscriber shall be
responsible in any way for the performance of the obligations of any other
Subscriber under this Agreement. The decision of each Subscriber to purchase
Securities pursuant to this Agreement has been made by such Subscriber
independently of any other Subscriber. Nothing contained herein, and no action
taken by any Subscriber pursuant thereto, shall be deemed to constitute the
Subscribers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Subscribers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated herein. Each Subscriber acknowledges that no other Subscriber has
acted as agent for such Subscriber in connection with making its investment
hereunder and that no Subscriber will be acting as agent of such Subscriber in
connection with monitoring its investment in the Securities or enforcing its
rights under this Agreement. Each Subscriber shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Subscriber to
be joined as an additional party in any proceeding for such purpose. The Company
acknowledges that each of the Subscribers has been provided with this same
Agreement for the purpose of closing a transaction with multiple Subscribers and
not because it was required or requested to do so by any Subscriber.
VIII. CONFIDENTIAL INVESTOR QUESTIONNAIRE
8.1 The Subscriber represents and warrants that he, she or it comes
within one category marked below, and that for any category marked, he, she or
it has truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish
any additional information which the Company deems necessary in order to verify
the answers set forth below.
26
Category A ___ The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or joint net
worth with his or her spouse, presently exceeds $1,000,000.
Explanation. In calculating net worth you may include equity
in personal property and real estate, including your
principal residence, cash, short-term investments, stock and
securities. Equity in personal property and real estate
should be based on the fair market value of such property
less debt secured by such property.
Category B ___ The undersigned is an individual (not a partnership,
corporation, etc.) who had an income in excess of $200,000
in each of the two most recent years, or joint income with
his or her spouse in excess of $300,000 in each of those
years (in each case including foreign income, tax exempt
income and full amount of capital gains and losses but
excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable
expectation of reaching the same income level in the current
year.
Category C ___ The undersigned is a director or executive officer of the
Company which is issuing and selling the Securities.
Category D ___ The undersigned is a bank; a savings and loan association;
insurance company; registered investment company; registered
business development company; licensed small business
investment company ("SBIC"); or employee benefit plan within
the meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a bank,
savings and loan association, insurance company or
registered investment advisor, or (b) the plan has total
assets in excess of $5,000,000 or (c) is a self directed
plan with investment decisions made solely by persons that
are accredited investors. (describe entity)
____________________________________________________________
____________________________________________________________
Category E ___ The undersigned is a private business development company as
defined in section 202(a)(22) of the Investment Advisors Act
of 1940. (describe entity)
____________________________________________________________
____________________________________________________________
Category F ___ The undersigned is either a corporation, partnership,
Massachusetts business trust, or non-profit organization
within the meaning of Section 501(c)(3) of the Internal
Revenue Code, in each case not formed for the specific
purpose of acquiring the Securities and with total assets in
excess of $5,000,000. (describe entity)
____________________________________________________________
____________________________________________________________
27
Category G ___ The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Securities, where the purchase is directed by a
"sophisticated investor" as defined in Regulation
506(b)(2)(ii) under the Act.
Category H ___ The undersigned is an entity (other than a trust) in which
all of the equity owners are "accredited investors" within
one or more of the above categories. If relying upon this
Category alone, each equity owner must complete a separate
copy of this Agreement. (describe entity)
____________________________________________________________
____________________________________________________________
Category I ___ The undersigned is not within any of the categories above
and is therefore not an accredited investor.
The undersigned agrees that the undersigned will notify the
Company at any time on or prior to the Closing in the event
that the representations and warranties in this Agreement
shall cease to be true, accurate and complete.
8.2 SUITABILITY (please answer each question)
(a) For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
(b) For an individual Subscriber, please describe any college or graduate
degrees held by you:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
(c) For all Subscribers, please list types of prior investments:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
28
(d) For all Subscribers, please state whether you have participated in
other private placements before:
YES |_| NO |_|
(e) If your answer to question (d) above was "YES", please indicate
frequency of such prior participation in private placements of:
Public or Private
Companies with no,
Public Private or insignificant,
Companies Companies assets and operations
Frequently ________________ ________________ ________________
Occasionally ________________ ________________ ________________
Never ________________ ________________ ________________
(f) For individual Subscribers, do you expect your current level of income
to significantly decrease in the foreseeable future:
YES |_| NO |_|
(g) For trust, corporate, partnership and other institutional Subscribers,
do you expect your total assets to significantly decrease in the foreseeable
future:
YES |_| NO |_|
(h) For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you:
YES |_| NO |_|
(i) For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?
YES |_| NO |_|
(j) For all Subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
YES |_| NO |_|
8.3 MANNER IN WHICH TITLE IS TO BE HELD. (circle one)
(a) Individual Ownership
(b) CommSharey Property
(c) Joint Tenant with Right of Survivorship
(both parties must sign)
(d) Partnership*
(e) Tenants in Common
(f) Company*
(g) Trust*
(h) Other*
29
*If Securities are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.
8.4 NASD AFFILIATION.
Are you affiliated or associated with an NASD member firm (please check one):
Yes |_| No |_|
If Yes, please describe:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
*If Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
__________________________________
Name of NASD Member Firm
By: ______________________________
Authorized Officer
Date: ____________________________
8.5 The undersigned is informed of the significance to the Company
of the foregoing representations and answers contained in the Confidential
Investor Questionnaire contained in this Article VII and such answers have been
provided under the assumption that the Company will rely on them.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
30
NUMBER OF SHARES _________ X $100.00 = $_________ (the "Purchase Price")
____________________________________ ____________________________________
Signature Signature (if purchasing jointly)
____________________________________ ____________________________________
Name Typed or Printed Name Typed or Printed
____________________________________ ____________________________________
Title (if Subscriber is an Entity) Title (if Subscriber is an Entity)
____________________________________ ____________________________________
Entity Name (if applicable) Entity Name (if applicable)
____________________________________ ____________________________________
____________________________________ ____________________________________
Address Address
____________________________________ ____________________________________
City, State and Zip Code City, State and Zip Code
____________________________________ ____________________________________
Telephone-Business Telephone-Business
____________________________________ ____________________________________
Telephone-Residence Telephone-Residence
____________________________________ ____________________________________
Facsimile-Business Facsimile-Business
____________________________________ ____________________________________
Facsimile-Residence Facsimile-Residence
____________________________________ ____________________________________
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued: ____________________________________
Dated: ____________, 2006
This Subscription Agreement is agreed to and accepted as of ___________,
2006.
NATIONAL INVESTMENT MANAGERS INC.
By:______________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Chief Executive Officer
31
CERTIFICATE OF SIGNATORY
(To be completed if Securities are
being subscribed for by an entity)
I, ____________________________, am the ____________________________ of
__________________________________________ (the "Entity").
I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Subscription Agreement and to purchase and hold the
shares of Series E Preferred Stock, and certify further that the Subscription
Agreement has been duly and validly executed on behalf of the Entity and
constitutes a legal and binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this ________ day of _________________,
200_
____________________________________
(Signature)
32