EXHIBIT 4.1
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XXXX NATIONAL CORPORATION
NOTE PURCHASE AGREEMENT
This note purchase agreement (this "Agreement") is made as of the
Closing Date (as defined below) by and between Xxxx National Corporation, a
California corporation (the "Company"), with its principal office at 000
Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000 and Seaside
Partners, L.P., a Delaware limited partnership with its principal offices
at c/o Seaside Advisors, L.L.C., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxxxx
00000 ("Purchaser").
RECITALS
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The Company is undertaking the placement and sale (the "Offering") of
up to $1,500,000 principal amount of 6% Convertible Subordinated Notes due
2000, convertible into shares of the Company's common stock, no par value
(the "Common Stock") at a conversion price (the "Conversion Price") as
described in said notes. The notes will be sold by the Company to
Purchaser pursuant to Regulation D under the Securities Act of 1933, as
amended (the "Act") (the "Regulation D Purchasers").
AGREEMENT
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In consideration of the mutual promises, representations, warranties
and conditions set forth in the Agreement, the Company and Purchaser agree
as follows:
1. PURCHASE AND SALE OF NOTE.
1.1 ISSUE OF NOTE.
(a) The Company has authorized the issuance and sale to
Purchaser, in reliance upon the Purchaser's representations and warranties
contained in Section 4 and subject to the terms and conditions set forth
herein, a 6% Convertible Subordinated Note in the principal amount of
$500,000 (the "Note"), convertible into up to 2,500,000 shares of Common
Stock (the "Conversion Shares") pursuant to the exchange of the Note.
(b) In reliance upon the representations and warranties
of the Company contained herein, and subject to the terms and conditions
set forth herein, Purchaser agrees to purchase the Note.
2. CLOSING DATE; DELIVERY.
2.1 CLOSING. The closing of the sale and purchase of the
Note under this Agreement (the "Closing") shall be held at 11:00 a.m.
(Eastern Standard Time) on a date mutually agreeable to the Company and
Purchaser, but in no event later than February 26, 1999 (the "Closing
Date"), at the offices of Xxxxxxxx Xxxxxxxxx Professional Corporation, 000
Xxxxxxx Xxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx 00000, or at such other place as
the Company decides.
2.2 DELIVERY. At the Closing, subject to the terms and
conditions hereof, the Company will deliver to Purchaser the Note
subscribed for by Purchaser, dated as of the Closing Date, against payment
of the purchase price therefor by wire transfer, unless other means of
payment shall have been agreed upon by the Purchaser and the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Subject to and except as disclosed by the Company in the Confidential
Private Offering Memorandum of its wholly-owned subsidiary, Ampersand
Medical Corporation (the "Offering Memorandum"), the Company represents and
warrants to Purchaser as of the date hereof as follows, and all such
representations and warranties shall be true and correct as of the Closing
Date as if then made and shall survive the Closing:
3.1 ORGANIZATION. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of
California. The Company has all requisite power and authority to own or
lease its properties and to conduct its businesses as now conducted. The
Company holds all licenses and permits required for the conduct of its
business as now conducted, which, if not obtained, would have a material
adverse effect on the business, financial condition or results of
operations of the Company taken as a whole. The Company is qualified as
foreign or domestic corporations and is in good standing in all states
where the conduct of its business or its ownership or leasing of property
requires such qualification, except where failure to so qualify would not
have a material adverse effect on the business, financial condition or
results of operations of the Company taken as a whole.
3.2 CAPITALIZATION. As of the date hereof, taking into
account the transaction contemplated hereby, the authorized capital stock
of the Company consists of 12,000,000 shares of Common Stock, all of which
are issued and outstanding, warrants for the purchase of an additional
3,175,850 shares of Common Stock, stock appreciation rights for an
additional 450,000 shares of Common Stock, and a subordinated note
convertible into up to 2,5000,000 shares of Common Stock as set forth in
the Note. All of the issued and outstanding shares of Common Stock have
been duly authorized, validly issued and are fully paid and non-assessable.
Except as stated in the Offering Memorandum and in this Section 3.2, there
are no existing subscriptions, options, warrants, calls, commitments,
agreements, conversion or other rights of any character (contingent or
otherwise) to purchase or otherwise acquire from the Company at any time,
or upon the happening of any stated event, any shares of the capital stock
of the Company, respectively.
3.3 AUTHORITY. The Company has all requisite corporate power
and authority to enter this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company,
and upon its execution and delivery by the Company, such document will
constitute a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, and subject as to
enforceability to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditor's rights from
time to time in effect and subject to general equity principles.
3.4 ISSUANCE OF THE NOTE. The Note, when issued against
payment therefor pursuant to the terms of this Agreement, will be duly and
validly authorized and issued, fully paid and nonassessable.
3.5 NO CONFLICT WITH LAW OR DOCUMENTS. The execution,
delivery and consummation of this Agreement and the transactions
contemplated hereby will not: (a) conflict with any provisions of the
certificate of incorporation of the Company, as amended to date, or the
bylaws of the Company, as amended to date; or (b) result in any violation
of or default or loss of a benefit under, or permit the acceleration of any
obligation under (in each case, upon the giving of notice, the passage of
time, or both) any mortgage, indenture, lease, agreement or other
instrument, permit, franchise, license, judgement, order, decree, law,
ordinance, rule or regulation applicable to the Company or its properties.
3.6 CONSENTS, APPROVALS AND PRIVATE OFFERING. Except for any
filings required under federal and applicable state securities laws, all of
which shall have been made as of the Closing Date to the extent required as
of such time, no consent, approval, order or authorization of, or
registration, declaration or filing with, any federal, state, local or
foreign governmental authority is required to be made or obtained by the
Company in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby.
3.7 ABSENCE OF CERTAIN DEVELOPMENTS. Except as described in
the Offering Memorandum, since September 30, 1998, the Company has not:
(a) incurred or become subject to any material liabilities (absolute or
contingent) except current liabilities incurred, and liabilities under
contracts entered into, in the ordinary course of business, consistent with
past practices; (b) mortgaged, pledged or subjected to any lien, charge or
other encumbrance any of its assets, tangible or intangible; (c) sold,
assigned or transferred any of its assets or canceled any debts or
obligations except in the ordinary course of business, consistent with past
practices; (d) suffered any extraordinary losses, or waived any rights of
substantial value; (e) entered into any material transaction other than in
the ordinary course of business, consistent with past practices; or (f)
otherwise had any change in its condition, financial or otherwise, except
as shown on or reflected in the consolidated balance sheet as of September
30, 1998 that is included in the Company's 1998 Third Quarter Form 10-Q,
except for changes in the ordinary course of business, consistent with past
practices, none of which individually or in the aggregate has been
materially adverse.
3.8 LITIGATION. There are no actions, suits, proceedings or
investigations pending, or to the Company's knowledge, threatened against
or affecting the Company that in the aggregate could reasonably be
anticipated to result in any material adverse effect on the Company.
3.9 DISCLOSURE. The Offering Memorandum does not contain any
untrue statement of material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
3.10 YEAR 2000 COMPLIANCE. The Company has reviewed its
products, business and operations which could be adversely affected by the
risk that computer applications developed, marketed, sold and delivered or
used by the Company may be unable to recognize and properly perform date-
sensitive functions involving dates prior to and after December 31, 1999
(the "Year 2000 Problem"). The Company's products and services provided or
delivered to its customers and the Company's internal information and
business systems will be able to perform properly date-sensitive functions
for all dates before and after January 1, 2000. In addition, the Company
has surveyed those vendors, suppliers and other third parties
(collectively, the "Outside Parties") with which the Company does business
and whose failure to adequately address the Year 2000 Problem could have a
material adverse effect on the business, financial condition or results of
operations of the Company taken as a whole. Based upon the aforementioned
internal review and surveys of the Outside Parties, the Year 2000 Problem
has not resulted in, and is not reasonably expected to have, a material
adverse effect on the business, financial condition or results of
operations of the Company taken as a whole.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Purchaser represents, warrants and covenants with the Company
as follows:
4.1 LEGAL POWER. Purchaser has the requisite power and
authority to enter into this Agreement, to purchase the Note hereunder, and
to carry out and perform its obligations under the terms of this Agreement.
4.2 DUE EXECUTION. This Agreement has been duly authorized,
executed and delivered by the Purchaser and, upon due execution and
delivery by the Company, this Agreement will be a valid and binding
agreement of the Purchaser.
4.3 INVESTMENT REPRESENTATIONS.
(a) Purchaser is acquiring the Note for its own
account, not as nominee or agent, for investment and not with a view to or
for resale in connection with, any distribution or public offering thereof
within the meaning of the Act, except pursuant to an effective registration
statement under the Act.
(b) Purchaser understands that: (i) neither the Note
nor the Conversion Shares have been registered under the Act by reason of a
specific exemption therefrom, and may not be transferred or resold except
pursuant to an effective registration statement or exemption from
registration; (ii) each certificate representing the Conversion Shares will
be endorsed with the following legends:
A) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM AND UPON
DELIVERY TO THE ISSUER OF THESE SECURITIES AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS; and
B) Any legend required to be placed thereon by applicable
federal or state securities laws;
and (iii) the Company will instruct any transfer agent not to register the
transfer of any of the Conversion Shares unless the conditions specified in
the foregoing legends are satisfied.
(c) Purchaser has received and reviewed the Offering
Memorandum. In addition, Purchaser has been furnished with such materials
and has been given access to such information relating to the Company as it
or its qualified representative has requested and has been afforded the
opportunity to ask questions regarding the Company and the Note, all as
Purchaser has found necessary to make an informed investment decision.
(d) Purchaser is an "accredited investor" as such term
is defined in Rule 501 of Regulation D under the Act and was not formed for
the specific purpose of acquiring the Note.
(e) Purchaser is not a resident of Canada or any
territory thereof.
5. COVENANTS OF THE COMPANY.
5.1 INFORMATION. The Company shall deliver to the Purchaser
all annual, quarterly or other reports furnished to the public security
holders; provided that if the Company is not subject to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company will promptly furnish to the Purchaser: (i)
as soon as available, and in any event within 90 days after the end of each
fiscal year of the Company, a consolidated balance sheet of the Company and
its consolidated subsidiaries, if any, as of the end of such fiscal year
and the related consolidated statements of income, stockholders' equity and
cash flows for such fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, all prepared in accordance
with generally accepted accounting principles and reported on by
independent certified public accountants of recognized national standing;
and (ii) as soon as available, and in any event within 45 days after the
end of each of the first three fiscal quarters of each fiscal year of the
Company, a consolidated balance sheet of the Company and its consolidated
subsidiaries, if any, as of the end of such quarter and the related
consolidated statements of income and stockholders' equity (together with
any other quarterly financial statements being prepared by the Company at
such time), setting forth in each case in comparative form the figures for
the corresponding quarter and the corresponding portion of the Company's
previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation and consistency by the chief
financial officer or the chief accounting officer of the Company.
5.2 CONDUCTING THE OFFERING. The Company will conduct the
Offering under Regulation D of the Act, and the Company represents as
follows:
(a) SALES TO ACCREDITED INVESTORS. The Company will
only make offers and sales of notes through the Offering to Regulation D
Purchasers or potential Regulation D Purchasers it reasonably believes to
be "accredited investors" as that term is defined in Rule 501(a) of
Regulation D under the Act;
(b) REGULATION D COMPLIANCE. Offers and sales of notes
through the Offering will be made in compliance with Regulation D, and the
Company has not and shall not offer to sell notes through the Offering by
any form of general solicitation or general advertising that is prohibited
by Rule 502(c) of Regulation D under the Act.
(c) COMPLIANCE GENERALLY. The Company has and will
observe all securities laws and regulations applicable to it in any
jurisdiction in which it has or may offer, sell or deliver notes through
the Offering and it will not, directly or indirectly, offer, sell or
deliver notes through the Offering or distribute or publish any prospectus,
circular, advertisement or other offering material in relation to notes
through the Offering in or from any state in the United States or country
or jurisdiction except under circumstances that will result in compliance
with any applicable laws and regulations.
(d) BLUE SKY COMPLIANCE. The Company will comply with
the state securities or blue sky laws of each state in which notes are
offered through the Offering.
5.3 ADDITIONAL COVENANTS.
(a) The Company shall timely file all such documents
required to be filed by it pursuant to the Exchange Act in order to permit
sales under Rule 144 of the Act.
(b) During any period in which the Company is not
subject to Section 13 or 15(d) of the Exchange Act, the Company shall make
available information required to be provided by Rule 144(d)(4), upon
request.
(c) Upon the request of the Purchaser and the
certification of the Purchaser that it qualifies under Rule 144(k) of the
Act, the Company shall, without further requirement, remove all restrictive
legends from the Purchaser's securities, insofar as such restrictions
relate to the transfer of such securities under the Act.
(d) The Company shall, before June 30, 1999, effect a
merger with and into Ampersand Medical Corporation or amend its Articles of
Incorporation such that a sufficient number of shares of Common Stock are
available for the conversion of the Note.
(e) The Company shall, as soon as practicable, take all
actions necessary to return to "in good standing" status in the State of
California, including the filing of past due franchise tax returns and
payment of past due franchise taxes, if any.
6. CONDITIONS TO CLOSING.
6.1 CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The
Purchaser's obligation to purchase the Note at the Closing is subject to
the fulfillment, at or prior to such Closing, of all of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 3 shall be true and correct in all material respects on the Closing
Date with the same force and effect as if they had been made on and as of
said date; except as described in or contemplated by the Offering
Memorandum, the business, assets, financial condition and results of
operations of the Company shall not have been adversely affected in any
material way prior to the Closing Date; and the Company shall have
performed all obligations and conditions herein required to be performed by
it on or prior to the Closing Date.
(b) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to the Purchaser.
(c) QUALIFICATIONS, LEGAL INVESTMENT. All
authorizations, approvals or permits, if any, of any governmental authority
or regulatory body of the United States or of any state that are required
in connection with the lawful sale and issuance of the Note pursuant to
this Agreement shall have been duly obtained and shall be effective on and
as of the Closing Date. No stop order or other order enjoining the sale of
the Note shall have been issued and no proceedings for such purpose shall
be pending or, to the knowledge of the Company, threatened by the SEC, or
any commissioner of corporations or similar officer of any state having
jurisdiction over this transaction. At the time of the Closing, the sale
and issuance of the Note shall be legally permitted by all laws and
regulations to which the Purchaser and the Company are subject.
(d) COMPLIANCE CERTIFICATE. The Purchaser shall have
received a certificate dated as of the date of the Closing executed by the
President of the Company certifying that the conditions specified in this
Section 6 have been fulfilled.
(e) SECRETARY'S CERTIFICATE. The Purchaser shall have
received a certificate dated as of the date of Closing executed by the
Secretary of the Company attesting to the incumbency of the Company's
officers and the authenticity of the resolutions authorizing the
transactions contemplated by this Agreement and the organizational
documents of the Company.
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Note at the Closing is subject to the
fulfillment to the Company's satisfaction, on or prior to the Closing, of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by the Purchaser in Section 4 shall be
true and correct at the Closing Date with the same force and effect as if
they had been made on and as of the Closing Date.
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have
performed and complied with all agreements and conditions required to be
performed or complied with by it on or before the Closing Date, and
Purchaser shall have delivered payment to the Company in respect of its
purchase of Note.
(c) QUALIFICATIONS, LEGAL INVESTMENT. All
authorizations, approvals or permits, if any, of any governmental authority
or regulatory body of the United States or of any state that are required
in connection with the lawful sale and issuance of the Note pursuant to
this Agreement shall have been duly obtained and shall be effective on and
as of the Closing Date. No stop order or other order enjoining the sale of
the Note shall have been issued and no proceedings for such purpose shall
be pending or threatened by the SEC or any commissioner of corporations or
similar officer of any state having jurisdiction over this transaction. At
the time of the Closing, the sale and issuance of the Note shall be legally
permitted by all laws and regulations to which Purchaser and the Company
are subject.
7. MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Illinois as applied to agreements
among Illinois residents, made and to be performed entirely within the
State of Illinois without regard to principles of conflict of laws.
7.2 INDEMNIFICATION. The Company agrees to indemnify the
Purchaser and each officer, director, employee, agent, partner, stockholder
and affiliate of the Purchaser (collectively, the "Indemnified Parties")
for, and hold each Indemnified Party harmless from and against: (i) any
and all damages, losses, claims and other liabilities of any and every
kind, including, without limitation, judgments and costs of settlement, and
(ii) any and all out-of-pocket costs and expenses of any and every kind,
including, without limitation, reasonable fees and disbursements of counsel
for such Indemnified Parties (all of which expenses periodically shall be
reimbursed as incurred), in each case, arising out of or suffered or
incurred in connection with any of the following: (a) any
misrepresentation or any breach of any warranty made by the Company herein
or in the Note, (b) any breach or non-fulfillment of any covenant or
agreement made by the Company herein or in the Note, and (c) any claim
relating to or arising out of a violation of applicable federal or state
securities laws by the Company in connection with the sale of the Note by
the Company.
7.3 SURVIVAL. All representations, warranties, covenants and
agreements contained in or made pursuant to this Agreement or contained in
any certificate delivered pursuant to this Agreement, shall remain
operative and in full force and effect, regardless of any investigation
made by or on behalf of any party hereto, and shall survive the transfer
and payment for the Note and the consummation of the transactions
contemplated hereby.
7.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators
of the parties.
7.5 ENTIRE AGREEMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof and no party
shall be liable or bound to any other party in any manner by any
representations, warranties, covenants or agreements except as specifically
set forth herein. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly
provided.
7.6 SEPARABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall to the extent
practicable, be modified so as to make it valid, legal and enforceable and
to retain as nearly as practicable the intent of the parties, and the
validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
7.7 AMENDMENT AND WAIVER. Except as otherwise provided, any
term of this Agreement may be amended, and the observance of any term of
this Agreement may be waived (either generally or in a particular instance,
either retroactively or prospectively, and either for a specified period of
time or indefinitely), with the written consent of the Company and
Purchaser. Any amendment or waiver effected in accordance with this
section shall be binding upon each future holder of any security purchased
under this Agreement (including securities into which such securities have
been converted) and the Company.
7.8 NOTICES. All required or permitted notices and other
communications shall be in writing and shall be deemed effectively given
upon personal delivery, on the first business day following mailing by
overnight courier, or on the fifth day following mailing by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Company and Purchaser at the respective addresses included herein.
7.9 FEES AND EXPENSES. The Company shall pay its own
expenses and legal fees incurred on its behalf with respect to this
Agreement and the transactions contemplated hereby and shall pay the
reasonable and documented legal fees and expenses of the Purchaser incurred
on its behalf with respect to this Agreement and the transactions
contemplated hereby.
7.10 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and
are not to be considered in construing this Agreement.
7.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
XXXX NATIONAL CORPORATION:
By: /s/ Xxxxx X. Xxxxxxxx
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Its: Chairman, CEO
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ATTEST:
By: /s/ Xxxxxxx X. Xxxxxx
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Its: President, CFO
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SEASIDE PARTNERS, L.P.
By: Seaside Advisors, L.L.C.,
its general partner
By: /s/ Xxxxxxx X. Xxxxxx
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Its:
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