THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
NATIONAL INVESTMENT ADVISERS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase up to 700,000 Shares of
Common Stock of National Investment Managers Inc.
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. _________________ Issue Date: May 30, 2006
National Investment Managers Inc., a corporation organized under the laws
of the State of Florida (the "Company"), hereby certifies that, for value
received, LAURUS MASTER FUND, LTD., or assigns (the "Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company (as defined
herein) from and after the Issue Date of this Warrant and at any time or from
time to time before 5:00 p.m., New York time, through the close of business May
__, 2011 (the "Expiration Date"), up to 700,000 fully paid and nonassessable
shares of Common Stock (as hereinafter defined), $0.001 par value per share, at
the applicable Exercise Price per share (as defined below). The number and
character of such shares of Common Stock and the applicable Exercise Price per
share are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include National Investment Advisors,
Inc. and any person or entity which shall succeed, or assume the
obligations of, National Investment Advisors, Inc. hereunder.
(b) The term "Common Stock" includes (i) the Company's Common Stock,
par value $0.001 per share; and (ii) any other securities into which or
for which any of the securities described in the preceding clause (i) may
be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of the Warrant at any time shall
be entitled to receive, or shall have received, on the exercise of the
Warrant, in lieu of or in addition to Common Stock, or which at any time
shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.
(d) The "Exercise Price" applicable under this Warrant shall be $0.01
per share.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the
date hereof through and including the Expiration Date, the Holder shall be
entitled to receive, upon exercise of this Warrant in whole or in part, by
delivery of an original or fax copy of an exercise notice in the form attached
hereto as Exhibit A (the "Exercise Notice"), shares of Common Stock of the
Company, subject to adjustment pursuant to Section 4.
1.2. Fair Market Value. For purposes hereof, the "Fair Market Value"
of a share of Common Stock as of a particular date (the "Determination Date")
shall mean:
(a) If the Company's Common Stock is traded on the American Stock
Exchange or another national exchange or is quoted on the National Market
or Capital Market of The Nasdaq Stock Market, Inc.("Nasdaq"), then the
closing or last sale price, respectively, reported for the last business
day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on the American
Stock Exchange or another national exchange or on the Nasdaq but is traded
on the NASD Over the Counter Bulletin Board, then the mean of the average
of the closing bid and asked prices reported for the last ten (10)
business days immediately preceding the Determination Date.
(c) Except as provided in clause (d) below, if the Company's Common
Stock is not publicly traded, then as the Holder and the Company agree or
in the absence of agreement by arbitration in accordance with the rules
then in effect of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all
amounts to be payable per share to holders of the Common Stock pursuant to
the charter in the event of such liquidation, dissolution or winding up,
plus all other amounts to be payable per share in respect of the Common
Stock in liquidation under the charter, assuming for the purposes of this
clause (d) that all of the shares of Common Stock then issuable upon
exercise of the Warrant are outstanding at the Determination Date.
1.3. Company Acknowledgment. The Company will, at the time of the
exercise of this Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
2
1.4. Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the holders of this Warrant
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
2. Procedure for Exercise.
2.1. Delivery of Stock Certificates, Etc., on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares in accordance herewith. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
2.2. Exercise.
(a) Payment may be made either (i) in cash or by certified or
official bank check payable to the order of the Company equal to the
applicable aggregate Exercise Price, (ii) by delivery of this Warrant, or
shares of Common Stock and/or Common Stock receivable upon exercise of
this Warrant in accordance with the formula set forth in subsection (b)
below, or (iii) by a combination of any of the foregoing methods, for the
number of Common Shares specified in such Exercise Notice (as such
exercise number shall be adjusted to reflect any adjustment in the total
number of shares of Common Stock issuable to the Holder per the terms of
this Warrant) and the Holder shall thereupon be entitled to receive the
number of duly authorized, validly issued, fully-paid and non-assessable
shares of Common Stock (or Other Securities) determined as provided
herein.
(b) Notwithstanding any provisions herein to the contrary, if the
Fair Market Value of one share of Common Stock is greater than the
Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, the Holder may elect to receive shares
equal to the value (as determined below) of this Warrant (or the portion
thereof being exercised) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Exercise Notice
in which event the Company shall issue to the Holder a number of shares of
Common Stock computed using the following formula:
3
X= Y(A-B)
------
A
Where X = the number of shares of Common Stock to be issued to
the Holder
Y = the number of shares of Common Stock purchasable
under this Warrant or, if only a portion of this
Warrant is being exercised, the portion of this
Warrant being exercised (at the date of such
calculation)
A = the Fair Market Value of one share of the
Company's Common Stock (at the date of such
calculation)
B = the Exercise Price per share (as adjusted to the date of such
calculation)
3. Effect of Reorganization, Etc.; Adjustment of Exercise Price.
3.1. Reorganization, Consolidation, Merger, Etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such Holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder pursuant to Section 3.1, or, if the Holder shall so
instruct the Company, to a bank or trust company specified by the Holder and
having its principal office in New York, NY as trustee for the Holder (the
"Trustee").
4
3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then the Company's
securities and property (including cash, where applicable) receivable by the
Holder will be delivered to the Holder or the Trustee as contemplated by Section
3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock or any preferred stock issued by
the Company (b) subdivide its outstanding shares of Common Stock, or (c) combine
its outstanding shares of the Common Stock into a smaller number of shares of
the Common Stock, then, in each such event, the Exercise Price shall,
simultaneously with the happening of such event, be adjusted by multiplying the
then Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event, and the product so obtained shall thereafter be
the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 4. The number of shares of Common Stock
that the Holder shall thereafter, on the exercise hereof as provided in Section
1, be entitled to receive shall be adjusted to a number determined by
multiplying the number of shares of Common Stock that would otherwise (but for
the provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Exercise Price that would otherwise (but for the
provisions of this Section 4) be in effect, and (b) the denominator is the
Exercise Price in effect on the date of such exercise (taking into account the
provisions of this Section 4). Notwithstanding the foregoing, in no event shall
the Exercise Price be less than the par value of the Common Stock.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of this Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder and any Warrant agent of the
Company (appointed pursuant to Section 11 hereof).
5
6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or in
part, provided that the Holder may not assign its rights hereunder to a
competitor of either the Company or a Subsidiary of the Company, or to any
person or entity affiliated with such competitor. On the surrender for exchange
of this Warrant, with the Transferor's endorsement in the form of Exhibit B
attached hereto (the "Transferor Endorsement Form") and together with evidence
reasonably satisfactory to the Company demonstrating compliance with applicable
securities laws, which shall include, without limitation, the provision of a
legal opinion from the Transferor's counsel (at the Transferor's expense) that
such transfer is exempt from the registration requirements of applicable
securities laws, the Company at its expense (but with payment by the Transferor
of any applicable transfer taxes) will issue and deliver to or on the order of
the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The Holder has been granted certain registration
rights by the Company. These registration rights are set forth in a Registration
Rights Agreement entered into by the Company and Holder dated as of the date
hereof, as the same may be amended, modified and/or supplemented from time to
time.
10. Maximum Exercise. Notwithstanding anything herein to the contrary, in
no event shall the Holder be entitled to exercise any portion of this Warrant in
excess of that portion of this Warrant upon exercise of which the sum of (1) the
number of shares of Common Stock beneficially owned by the Holder and its
Affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unexercised portion of the Warrant or the
unexercised or unconverted portion of any other security of the Holder subject
to a limitation on conversion analogous to the limitations contained herein) and
(2) the number of shares of Common Stock issuable upon the exercise of the
portion of this Warrant with respect to which the determination of this proviso
is being made, would result in beneficial ownership by the Holder and its
Affiliates of any amount greater than 4.99% of the then outstanding shares of
Common Stock (whether or not, at the time of such exercise, the Holder and its
Affiliates beneficially own more than 4.99% of the then outstanding shares of
Common Stock). As used herein, the term "Affiliate" means any person or entity
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a person or entity, as such terms
are used in and construed under Rule 144 under the Securities Act. For purposes
of the proviso to the second preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided
in clause (1) of such proviso. The limitations set forth herein (x) may be
waived by the Holder upon provision of no less than sixty-one (61) days prior
notice to the Company and (y) shall automatically become null and void following
notice to the Company upon the occurrence and during the continuance of an Event
of Default (as defined in the Note referred to in the Purchase Agreement dated
as of the date hereof among the Holder and the Company (as amended, modified,
restated and/or supplemented from time to time, the "Purchase Agreement")).
6
11. Warrant Agent. The Company may, by written notice to the each Holder
of the Warrant, appoint an agent for the purpose of issuing Common Stock (or
Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
12. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
13. Notices, Etc. All notices and other communications from the Company to
the Holder shall be mailed by first class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company in writing by
such Holder or, until any such Holder furnishes to the Company an address, then
to, and at the address of, the last Holder who has so furnished an address to
the Company.
14. GRANT OF IRREVOCABLE PROXY.
For good and valuable consideration, receipt of which is hereby
acknowledged, Laurus Master Fund, Ltd., hereby appoints the Company (the "Proxy
Holder"), with a mailing address at 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000, with
full power of substitution, as proxy, to vote all shares of Common Stock of the
Company, now or in the future owned by Laurus Master Fund, Ltd., but solely to
the extent issuable upon exercise of this Warrant (the "Shares").
This proxy is irrevocable and coupled with an interest. Upon the
sale or other transfer of the Shares, in whole or in part, or the assignment of
this Warrant, this proxy shall automatically terminate (x) with respect to such
sold or transferred Shares at the time of such sale and/or transfer, and (y)
with respect to all Shares in the case of an assignment of this Warrant, at the
time of such assignment, in each case, without any further action required by
any person.
Laurus Master Fund, Ltd. shall use its best efforts to forward to
Proxy Holder within two (2) business days following Laurus Master Fund, Ltd.'s
receipt thereof, at the address for Proxy Holder set forth above, copies of all
materials received by Laurus Master Fund, Ltd. relating, in each case, to the
solicitation of the vote of shareholders of the Company.
This proxy shall remain in effect with respect to the Shares of the
Company during the period commencing on the date hereof and continuing until the
payment in full of all obligations and liabilities owing by the Company to
Laurus Master Fund, Ltd. (as the same may be amended, restated, extended or
modified from time to time).
7
15. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS. ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS
WARRANT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL
COURTS LOCATED IN THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY
CHOOSE TO WAIVE THIS PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW
YORK. The individuals executing this Warrant on behalf of the Company agree to
submit to the jurisdiction of such courts and waive trial by jury. The
prevailing party shall be entitled to recover from the other party its
reasonable attorneys' fees and costs. In the event that any provision of this
Warrant is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Warrant. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision hereof. The Company
acknowledges that legal counsel participated in the preparation of this Warrant
and, therefore, stipulates that the rule of construction that ambiguities are to
be resolved against the drafting party shall not be applied in the
interpretation of this Warrant to favor any party against the other party.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS]
8
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
NATIONAL INVESTMENT MANAGERS INC.
WITNESS:
By: ____________________________
Name: ____________________________
____________________________ Title:____________________________
9
EXHIBIT A
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)
TO: National Investment Managers Inc.
Attention: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):
______ ________ shares of the Common Stock covered by such Warrant; or
______ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
______ $__________ in lawful money of the United States; and/or
______ the cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ shares of Common Stock (using a
Fair Market Value of $_______ per share for purposes of this
calculation); and/or
______ the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section 2.2,
to exercise this Warrant with respect to the maximum number of
shares of Common Stock purchasable pursuant to the cashless exercise
procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be issued
in the name of, and delivered to ______________________________________________
whose address is_______________________________________________________________.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:___________________________ ____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
Address:____________________________________
____________________________________
Warrant A-1
EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To Be Signed Only On Transfer Of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of National Investment Managers Inc. into which the
within Warrant relates specified under the headings "Percentage Transferred" and
"Number Transferred," respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the books
of National Investment Managers Inc. with full power of substitution in the
premises.
Percentage Number
Transferees Address Transferred Transferred
----------- ------- ----------- -----------
__________________________ ___________________ ________________ ___________
__________________________ ___________________ ________________ ___________
__________________________ ___________________ ________________ ___________
__________________________ ___________________ ________________ ___________
Dated:____________________ ____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
Address:____________________________________
____________________________________
SIGNED IN THE PRESENCE OF:
____________________________________________
(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
_________________________
(Name)
Warrant B-1
