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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 21, 1998 (May 12, 1998)
VALUESTAR CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 0-22619 84-1202005
(State or other jurisdiction of (Commission (I.R.S. Empl. Ident. No.)
incorporation or organization) File Number)
1120A Ballena Blvd., Alameda, California 94501
(Address of principal executive offices) (Zip Code)
(510) 814-7070
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On May 15, 1998 ValueStar Corporation (the "Company") completed the private
offering and sale for cash of an aggregate of $525,000 of unsecured 6%
Convertible Subordinated Promissory Notes due June 30, 2001 ("Notes") to four
investors. The principal and interest amount of each Note may at the election of
the Note holder be converted, in whole or in part, into fully paid and
nonassessable shares of common stock, $.00025 par value, of the Company, at a
conversion price of $1.00 per share. The Notes may be called by the Company for
conversion if the closing bid price of the Company's common stock equals or
exceeds $2.00 per share for ten consecutive trading days and certain other
conditions are met.
The Note purchasers were granted warrants to purchase an aggregate of 262,500
common shares of the Company at an exercise price of $1.25 per share
("A-Warrants") and warrants to purchase an aggregate of 262,500 common shares of
the Company at an exercise price of $2.00 per share ("B-Warrants") until April
30, 2003 (collectively the "Warrants"). The A-Warrants are redeemable by the
Company at $.01 per share if the closing bid price of the Company's common stock
equals or exceeds $3.00 per share for twenty consecutive trading days and
certain other conditions are met. The B-Warrants are also redeemable by the
Company at $.01 per share if the closing bid price of the Company's common stock
equals or exceeds $4.50 per share for twenty consecutive trading days and
certain other conditions are met.
These securities were offered and sold without registration under the Securities
Act of 1933, as amended (the "Act"), in reliance upon the exemption provided by
Regulation D thereunder and an appropriate legend was placed on the Notes and
Warrants and will be placed on the shares issuable upon conversion of the Notes
or exercise of the Warrants unless registered under the Act prior to issuance.
The securities were sold by the Company without an underwriter. The Company has
agreed to file a registration statement on the common stock obtained on
conversion of the Notes and Warrants and to certain piggy-back registration
rights, subject to certain limitations.
Net proceeds from the sale of the Notes of approximately $520,000 are intended
to supplement working capital and provide funds to expand the Company's branded
rating and licensing services to one or more additional market territories.
There can be no assurance the Company can successfully expand its business to
new markets or that the proceeds will be sufficient for such purpose.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired. Not applicable.
(b) Pro forma financial information. Not applicable.
(c) Exhibits
4.11 Form of unsecured 6% Convertible Subordinated Promissory Notes
due June 30, 2001 (individual notes aggregating $525,000 were
granted to four investors and differ as to principal amount
and holder).
4.12 Form of Stock Purchase Warrant granted to 6% Convertible
Subordinated Promissory Note holders (on an aggregate of
262,500 common shares) exercisable at $1.25 per common share
until April 30, 2003 (each individual warrant differs as to
number of shares and holder).
4.13 Form of Stock Purchase Warrant granted to 6% Convertible
Subordinated Promissory Note holders (on an aggregate of
262,500 common shares) exercisable at $2.00 per common share
until April 30, 2003 (each individual warrant differs as to
number of shares and holder).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VALUESTAR CORPORATION
Date: May 21, 1998 By: /s/BENJAMIN A. PITTMAN
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Benjamin A. Pittman
Secretary and Controller
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VALUESTAR CORPORATION
EXHIBIT 4.11
NOTE SERIES 98N
NOTE #98N-__
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND IS A
"RESTRICTED SECURITY" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THIS
NOTE MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT
OR APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT
CERTAIN SUBSCRIPTION AGREEMENT THEREFOR DATED MAY 12, 1998 BETWEEN THE COMPANY
AND THE ORIGINAL HOLDER HEREOF.
(ALL AMOUNTS IN U.S. DOLLARS)
VALUESTAR CORPORATION
6% CONVERTIBLE SUBORDINATED PROMISSORY NOTE
Due June 30, 2001
Note Date: May 12, 1998 US $_______.00
Alameda, California
FOR VALUE RECEIVED, ValueStar Corporation, the undersigned Colorado
corporation (together with all successors, the "Company"), hereby promises to
pay to the order of
Payee: ________________________________________
or his, her or its successors or assigns
(collectively, "Noteholder") at
Address:
or at such other address or addresses as Noteholder may subsequently designate
in writing to the Company, the principal sum of ____________________
($_________.00), due and payable in one installment on June 30, 2001 ("Maturity
Date"), plus simple interest thereon at the rate of six percent (6.00%) per
annum, in lawful monies of the United States of America. Interest shall accrue
and be payable at the Maturity Date. If the Maturity Date should fall on a
weekend or national holiday, payment shall be due on the following business day.
This Note is one of a duly authorized issue of Notes of the Company designated
as its Series 98N 6% Convertible Subordinated Promissory Notes (herein called
the "Notes"), limited in aggregate principal amount to $525,000.
1. Any payment shall be deemed timely made if received by Noteholder
within fifteen (15) calendar days of the due date. Payments received shall be
imputed first to late or penalty charges, if any, then due, next to interest
payments then due, and next to the remaining unpaid principal balance.
An "Event of Default" occurs if (a) the Company does not make the
payment of interest or principal of this Note when the same becomes due and
payable and such default shall continue for a period of fifteen (15) calendar
days, (b) the Company fails to comply with any of its other material agreements
in this Note that do not
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otherwise have separate remedies or provisions and such failure continues for
the period and after the notice specified below, (c) pursuant to or within the
meaning of any Bankruptcy Law (as hereinafter defined), the Company: (i)
commences a voluntary case; (ii) consents to the entry of an order for relief
against it in an involuntary case; (iii) consents to the appointment of a
Custodian (as hereinafter defined) of it or for all or substantially all of its
property or (iv) makes a general assignment for the benefit of its creditors or
(v) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (A) is for relief against the Company in an involuntary
case; (B) appoints a Custodian of the Company or for all or substantially all of
its property or (C) orders the liquidation of the Company, and any order or
decree remains unstayed and in effect for a period of sixty (60) days. As used
herein, the term "Bankruptcy Law" means Title 11 of the United States Code or
any similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
A default above is not an Event of Default until the holders of at
least 25% in aggregate principal amount of the Notes then outstanding notify the
Company of such default and the Company does not cure it within sixty (60) days
after receipt of such notice, which must specify the default, demand that it be
remedied and state that it is a "Notice of Default." If an Event of Default
occurs and is continuing, the Noteholder hereof by notice to the Company (the
"Default Notice"), may declare the principal of and accrued interest on this
Note to be due and payable immediately; provided, however, that the holders of
at least 51% in aggregate principal amount of the Notes then outstanding, by
written notice to the Company given within 30 days after the Company's receipt
of the Default Notice, may rescind, void and annul such declaration and its
consequences.
2. The Company may not prepay principal or any accrued interest amount
due under this Note in full or in part without the prior written agreement of
Noteholder or the holders of at least 51% in aggregate principal amount of Notes
where all such Notes are treated equally.
3. "Senior Indebtedness" means the principal of and premium, if any,
and interest on indebtedness of the Company or any subsidiary, whether
outstanding on the date of issuance of this Note or thereafter created, incurred
or assumed for money borrowed from (a) banks, insurance companies, financial
institutions or other persons which regularly engage in the business of lending
money, unless the instrument creating such indebtedness shall specifically
designate such indebtedness as not being senior in right of payment to the
Notes, or (b) such other persons as to which indebtedness the Board of Directors
of the Company shall designate as senior in right of payment to the Notes.
The Company agrees, and each Noteholder, by acceptance hereof likewise
agrees, expressly for the benefit of the present and future holders of Senior
Indebtedness, that, except as otherwise provided herein, upon (i) an event of
default under any Senior Indebtedness, or (ii) any dissolution, winding up or
liquidation of the Company, whether or not in bankruptcy, insolvency or
receivership proceeding, the Company shall not pay, and the Noteholder shall not
be entitled to receive, any amount in respect of the principal and interest of
this Note unless and until the Senior Indebtedness shall have been paid or
otherwise discharged. Upon (A) an event of default under any Senior
Indebtedness, or (B) any dissolution, winding up or liquidation of the Company,
any payment or distribution of assets of the Company, which the Noteholder would
be entitled to receive but for the provisions hereof, shall be paid by the
Custodian directly to the holders of Senior Indebtedness ratably according to
the aggregate amounts remaining unpaid on Senior Indebtedness after giving
effect to any concurrent payment or distribution to the holders of any Senior
Indebtedness. Subject to the payment in full of the Senior Indebtedness and
until this Note is paid in full, the Noteholder shall be subrogated to the
rights of the holders of the Senior Indebtedness (to the extent of payments or
distributions previously made to the holders of Senior Indebtedness pursuant
hereto) to receive payments or distributions of assets of the Company applicable
to the Senior Indebtedness.
In the event that any Event of Default shall occur and as a result this
Note is declared due and payable, and such declaration shall not have been
rescinded or annulled, the Company shall not make any payment on account of the
principal of or interest on this Note unless at least sixty (60) days shall have
elapsed after said declaration and unless all principal of and interest on
Senior Indebtedness due at the time of such payment (whether by acceleration of
the maturity thereof or otherwise) shall first be paid in full.
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Nothing contained in this Note is intended to impair, as between the
Company, its creditors (other than the holders of Senior Indebtedness) and the
Noteholder of this Note, the unconditional and absolute obligation of the
Company to pay the principal of and interest on this Note or affect the relative
rights of the holder of this Note and the other creditors of the Company, other
than the holders of Senior Indebtedness. Nothing in this Note shall prevent the
holder of this Note from exercising all remedies otherwise permitted by
applicable law upon default under this Note, subject to the rights, if any, of
the holders of Senior Indebtedness in respect to cash, property or securities of
the Company received upon the exercise of any such remedy.
4. Conversion, Mandatory Conversion and Registration
(a) The outstanding principal amount of this Note (or increments thereof
of at least $50,000 or the balance if less) and any accrued interest
may, at any time and from time to time, be converted at the option of
the Noteholder into fully paid, nonassessable shares of common stock
("Common Stock") of the Company, $.00025 par value per share (the
"Conversion Shares"), at the Conversion Price per share as hereinafter
defined, subject to restrictions and limitations set forth herein. The
Conversion Price shall be $1.00 per share of Common Stock.
(b) Conversion shall be effected by Noteholder's writing which
unequivocally expresses Noteholder's intent to effect the conversion
and states the amount of principal being converted (the Company shall
compute the proportionate accrued interest being converted) and tender
of such writing (in the form of Exhibit A or other similar form) and
this original Note to the Company. Conversion shall be deemed to occur
on the date such writing is presented to Company together with the
original Note. Upon such conversion duly made, the Company shall
execute a new Note of like tenor for the balance of the principal
amount of this Note not converted to common stock, and deliver such new
Note and Common Stock to Noteholder. The Company shall bear all
expenses and charges of issuing and delivering the Conversion Shares.
Not less than $50,000 of principal and interest owed under this Note
may be converted at any one time; provided, that if the aggregate of
principal and interest owed is less than that amount, then all amounts
owed under the Note must be converted at the same time.
(c) The conversion rate set forth in paragraph 4(a) will be subject to
adjustment if the Company is reorganized, merged, consolidated or party
to a plan of exchange with another corporation pursuant to which
shareholders of the Company receive any shares of stock or other
securities, or in case of any reclassification of Common Stock.
Noteholder shall be entitled, after the occurrence of any such event,
to receive on conversion thereof the kind and amount of shares of stock
or other securities, cash or other property receivable upon such event
by a holder of the number of shares of common stock into which the
principal balance of this Note at such time might have been converted
immediately prior to occurrence of the event. In addition, the
conversion rate set forth in paragraph 4(a) of this Note will be
appropriately adjusted if the Common Stock is split or combined.
(d) Upon conversion of this Note, the Company shall use its best efforts
to issue and deliver to Noteholder a certificate or certificates for
the number of Conversion Shares to which Noteholder shall be entitled
within ten (10) business days after Noteholder has fulfilled all
conditions required for conversion as set forth in this Note. The
Company understands that a delay in the issuance of Conversion Shares
could result in economic loss to Noteholder. As compensation to
Noteholder for such loss, and not as a penalty, Company agrees to pay
liquidated damages to Noteholder for late issuance of Conversion Shares
in the amount of one quarter percent (0.25%) of the requested
conversion amount per week, beginning on the twelfth (12th) business
day from receipt by the Company of a duly executed notice of conversion
of the Note, provided that the original Note to be converted has been
delivered to the Company within such time period, all in accordance
with this Note agreement and the requirements of the Company's transfer
agent. Said liquidated damages shall accrue each week through the date
the Conversion Shares are issued to the Noteholder, and shall be paid
to the Noteholder upon the earlier to occur of (i) issuance of said
Conversion Shares to Noteholder, or (ii) each monthly anniversary of
the receipt by Company of such Noteholder's notice of conversion.
Nothing herein shall waive the Company's obligations to deliver
Conversion Shares or limit Noteholder's right to pursue actual damages
for the Company's unexcused failure to issue and deliver Conversion
Shares
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to Noteholder in accordance with the terms of this Note agreement. The
damage provisions of this paragraph shall not apply to any delay caused
by the Noteholder, his agents, successors, or assigns or resulting from
circumstances reasonably beyond the Company's control or if in the
Company's judgment the conversion would be contrary to law or violate
its corporate charter.
(e) The Company is entitled, at its option, at any time after the
closing bid price of the Company's Common Stock has equaled or exceeded
$2.00 per share (as may be adjusted consistent with the adjustments of
the Conversion Price in paragraph 4(c)) for ten (10) consecutive
trading days during which market sales occurred, upon written notice
("Notice of Mandatory Conversion") to the holder of this Note, to cause
the automatic conversion of all of the principal outstanding and all
interest accrued thereon under this Note through the date of the Notice
of Mandatory Conversion into fully paid and nonassessable shares of
Common Stock at the Conversion Price then in effect; provided, that in
the event the Notice is issued prior to May 15, 1999, the Conversion
Shares issuable must be duly registered under the Securities Act of
1933, as amended. The Company shall notify the Noteholder of Company's
intent to force conversion by giving written notice to the Noteholder
by facsimile or other electronic means, if possible, with original
notice to follow by two (2) day courier. Conversion pursuant to this
Section 4(d) shall be effective with respect to each noteholder on the
fifth (5th) day (the "Mandatory Conversion Effective Date") following
the confirmed receipt by the noteholder or any other person at the
Noteholder's designated address of the original notice referred to in
the preceding sentence. The Company may elect to force conversion of
any individual Notes and not all Notes in its sole discretion.
Upon the effective date of forced conversion, this Note shall be
deemed void and no longer shall constitute an obligation of Company or
evidence of an obligation, irrespective of when surrendered to Company.
This provision requires the Company to convert all principal and
interest owing under this Note outstanding at the time of forced
conversion. The Noteholder shall in such event be required to surrender
the original of this Note as promptly as possible to the Company, which
shall mark the Note "canceled" upon receipt and retain permanent
custody of it. Upon the Company's receipt of this Note, the Company
shall deliver to the Noteholder the Conversion Shares called for by
this provision. If the Conversion Shares are not registered, then the
shares shall contain the appropriate restrictive legend.
(f) As promptly as possible following the completion of the audited
statements for the fiscal year ended June 30, 1998 and the filing of
the Form 10-KSB (due September 30, 1998), the Company shall use its
best efforts to file a registration statement to include all of the
Conversion Shares. The Company's intention is to file with the SEC to
register the Conversion Shares pursuant to Form S-3, Form SB-2 or other
appropriate form and to use its best efforts to keep such registration
statement effective for a minimum period of nine months when, if and
after it becomes effective. The Conversion Shares registered under such
Registration Statement shall be registered at the Company's sole cost
and expense provided that the Noteholder enters into such agreements,
including indemnification provisions as outlined below, as the Company
may reasonably request. The Company will not be required to register
any Conversion Shares issued prior to an effective registration. Other
than provided in this paragraph and below, the Company shall have no
obligation to amend such registration or file a further registration on
the Conversion Shares.
(g) In addition if, at any time until June 30, 2001, the Company
proposes to prepare and file any registration statements covering its
Common Stock (in either case, other than in connection with a merger or
acquisition, pursuant to Form S-8 or any successor form, or pursuant to
any other form or type of registration in which the Conversion Shares
cannot be appropriately included) (collectively, the "Registration
Statements"), it will give written notice as provided herein at least
thirty (30) days prior to the filing of each such Registration
Statement to the Noteholder of its intention to do so, unless the
Conversion Shares have been previously registered and such registration
is still effective. If the Noteholder notifies the Company within
twenty (20) days after receipt of any such notice of its or their
desire to include the Conversion Shares in such proposed registration
statement, the Company shall afford the Noteholder the opportunity to
have any such Conversion Shares registered under such Registration
Statement at the
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Company's sole cost and expense provided that the Noteholder enters
into such agreements, including indemnification provisions as outlined
below as the Company or its underwriters may reasonably request.
Notwithstanding the provisions hereof, the Company shall have the
right at any time after it shall have given written notice pursuant
hereto (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such
proposed Registration Statement provided in this subsection (g), or to
withdraw the same after the filing but prior to the effective date
thereof.
Notwithstanding any other provision, if the underwriter managing
such registration notifies the Noteholder in writing that market or
economic conditions limit the amount of securities which may reasonably
be expected to be sold, the Noteholders of such Conversion Shares will
be allowed to register only those Conversion Shares permitted by such
underwriter pro rata based on the number of Conversion Shares held by
such Noteholders, respectively. No Conversion Shares excluded from the
underwriting by reason of the underwriter's marketing limitation shall
be included in such registration.
(h) Each Noteholder of Conversion Shares to be sold pursuant to any
Registration Statement under subsection (f) or (g) hereof (each, a
"Distributing Holder") shall severally, and not jointly, indemnify and
hold harmless the Company, its officers and directors, each underwriter
and each person, if any, who controls the Company and such underwriter,
against any loss, claim, damage, expense or liability, joint or
several, as incurred, to which any of them may become subject under the
Securities Act or any other statute or at common law, in so far as such
loss, claim, damage, expense or liability (or actions in respect
thereof) arises out of or is based upon any untrue statement or alleged
untrue statement of any material fact contained in any such
Registration Statement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading,
in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information
furnished to the Company by such Distributing Holder specifically for
use therein. Such Distributing Holder shall reimburse the Company, such
underwriter and each such officer, director or controlling person for
any legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any such liability, as
incurred. Notwithstanding the foregoing, such indemnity with respect to
such preliminary prospectus or such final prospectus shall not inure to
the benefit of the Company, its officers or directors, or such
underwriter (or such controlling person of the Company or the
underwriter) if the person asserting any such loss, claim, damage,
expense or liability purchased the securities that are the subject
thereof and did not receive a copy of the final prospectus (or the
final prospectus as then amended, revised or supplemented) at or prior
to the time such furnishing is required by the Securities Act in any
case where any such untrue statement or omission of a material fact
contained in the preliminary prospectus was corrected in the final
prospectus (or, if contained in the final prospectus, was subsequently
corrected by amendment, revision or supplement).
(i) In connection with any public registration of this Company's
securities under subsection (g), the Holder (and any transferee of
Holder) agrees, upon the request of the Company or the underwriter(s)
managing such underwritten offering of the Company's securities, not to
sell, make any short sale of, loan, grant any option for the purchase
of, or otherwise dispose of this Warrant, any of the shares of Common
Stock issuable upon exercise of this Warrant or any other securities of
the Company heretofore or hereafter acquired by Holder (other than
those included in the registration) without the prior written consent
of the Company and such underwriter(s), as the case may be, for a
period of time not to exceed one hundred eighty (180) days from the
effective date of the registration. Upon request by the Company, Holder
(and any transferee of Holder) agrees to enter into any further
agreement in writing in a form reasonably satisfactory to the Company
and such underwriter(s). The Company may impose stop-transfer
instructions with respect to the securities subject to the foregoing
restrictions until the end of said 180-day period. Any shares issued
upon exercise of this Warrant shall bear an appropriate legend
referencing this lock-up provision.
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5. If this Note becomes worn, defaced or mutilated but is still
substantially intact and recognizable, the Company or its agent may issue a new
Note in lieu hereof upon its surrender. Where the Noteholder claims that the
Note has been lost, destroyed or wrongfully taken, the Company shall issue a new
Note of like tenor in place of the original Note if the Noteholder so requests
by written notice to the Company together with an affidavit of the Noteholder
setting forth the facts concerning such loss, destruction or wrongful taking and
such other information in such form with such proof or verification as the
Company may request. The Company in addition may require, at its sole
discretion, indemnification and/or an indemnity bond in such amount and issued
by such surety as the Company deems satisfactory.
6. If the indebtedness represented by this Note or any part thereof is
collected in bankruptcy, receivership or other judicial proceedings or if this
Note is placed in the hands of attorneys for collection after default, the
Company agrees to pay, in addition to the principal and interest payable
hereunder, reasonable attorneys' fees and costs incurred by the Noteholder.
7. Any notice, demand, consent or other communication hereunder shall
be in writing addressed to the Company at its principal office or, in the case
of Holder, at Holder's address appearing above, or to such other address as such
party shall have theretofore furnished by like notice, and either served
personally, sent by express, registered or certified first class mail, postage
prepaid, sent by facsimile transmission, or delivered by reputable commercial
courier. Such notice shall be deemed given (a) when so personally delivered, or
(b) if mailed as aforesaid, five (5) days after the same shall have been posted,
or (c) if sent by facsimile transmission, as soon as the sender receives written
or telephonic confirmation that the message has been received and such facsimile
is followed the same day by mailing by prepaid first class mail, or (d) if
delivered by commercial courier, upon receipt.
8. The Company hereby waives present, demand for performance, notice of
non-performance, protest, notice of protest and notice of dishonor. No delay on
the part of Noteholder in exercising any right hereunder shall operate as a
waiver of such right or any other right.
9. This Note shall be governed by and construed in accordance with the
laws of the State of California applicable to contracts between residents of
such state entered into and to be performed entirely within such state. Venue
for all purposes hereunder shall be Alameda County, California.
10. Each provision of this Note shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Note is held to be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of this Agreement.
11. Waiver and Amendment. Any provision of this Note may be amended,
waived or modified upon the approval of the Company and Noteholders representing
a majority of the outstanding principal amount of all then outstanding Notes.
12. Transfer of this Note or Securities Issuable on Conversion Hereof.
With respect to any offer, sale or other disposition of this Note or any
underlying securities, the Noteholder will give written notice to the Company
prior thereto, describing briefly the manner thereof, together with a written
opinion of such Noteholder's counsel, to the effect that such offer, sale or
other distribution may be effected without registration or qualification (under
any federal or state law then in effect, including Securities Act of 1933, as
amended (the "Act")). Furthermore, no such transfer shall be made unless the
transferee meets the same investor suitability standards set forth in the
Subscription Agreement under which this Note was acquired. Promptly upon
receiving such written notice and reasonably satisfactory opinion, if so
requested, the Company, as promptly as practicable, shall notify such Noteholder
that such Noteholder may sell or otherwise dispose of this Note or the
underlying securities, as the case may be, all in accordance with the terms of
the written notice delivered to the Company. If a determination has been made
pursuant to this Section 13 that the opinion of counsel for the Noteholder is
not reasonably satisfactory to the Company, the Company shall so notify the
Noteholder promptly after such determination has been made.
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Each Note or underlying securities thus transferred shall bear legends as to the
applicable restrictions on transferability in order to ensure compliance with
the Act, unless in the opinion of counsel for the Company such legend is not
required in order to ensure compliance with the Act. The Company may issue stop
transfer instructions to its transfer agent in connection with such
restrictions.
IN WITNESS WHEREOF, the undersigned Company has executed this Note and has
affixed hereto its corporate seal.
VALUESTAR CORPORATION
By /s/ JAMES A. BARNES
James A. Barnes, Treasurer
Authorized Officer
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VALUESTAR CORPORATION
EXHIBIT 4.12
Warrant #98A-__
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH HEREIN AND IN THAT CERTAIN SUBSCRIPTION
AGREEMENT THEREFOR DATED MAY 12, 1998 BETWEEN THE COMPANY AND THE ORIGINAL
HOLDER HEREOF.
VALUESTAR CORPORATION
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, VALUESTAR CORPORATION, a
Colorado corporation (the "Company"), hereby grants to _______________
("Holder") the right to purchase from the Company up to ____________________
(_________) shares of the Common Stock of the Company (the "Warrant Shares"),
subject to the following terms and conditions:
1. Series. This Warrant is one of a duly authorized series of warrants
of the Company (which are identical except for the variations necessary to
express the identification numbers, names of the holder, number of common shares
issuable upon exercise thereof and warrant issue dates) designated as its "1998
Series A Warrants" issued pursuant to and subject to that certain Subscription
Agreement of even date herewith.
2. Term. This Warrant may be exercised in whole or in part at any time
during the period from the date of issuance of this Warrant until 5:00 p.m.,
California time, on April 30, 2003 (the "Exercise Period").
3. Purchase Price. The purchase price for each Warrant Share
purchasable hereunder shall be One and 25/100 United States Dollars (U.S. $1.25)
(the "Warrant Exercise Price") subject to adjustment for stock splits,
combinations and the like.
4. Exercise of Warrant. The purchase rights represented by this Warrant
may be exercised by the Holder, in whole or in part, at any time and from time
to time before the end of the Exercise Period by surrender of this Warrant at
the principal office of the Company in Alameda, California (or such other office
or agency of the Company as may be designated by notice in writing to the Holder
at the address of the Holder appearing on the books of the Company), together
with the Notice of Exercise annexed hereto duly completed and executed on behalf
of the Holder accompanied by payment in full of the amount of the aggregate
Warrant Exercise Price in immediately available funds in United States Dollars.
Certificates for shares purchased hereunder shall be delivered to the Holder
within ten (10) business days after the date on which this Warrant shall have
been exercised as aforesaid, but Holder shall be deemed the record owner of such
Warrant Shares as of and from the close of business on the date on which this
Warrant shall be surrendered.
5. Fractional Interest. The Company shall not be required to issue any
fractional shares on the exercise of this Warrant.
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6. Redemption of Warrants. The Company may elect on one occasion, by
written notice as provided herein (the "Company Notice"), to redeem all
outstanding Warrants including this Warrant, in whole but not in part, on any
date (the "Redemption Date") fixed by the Company at a price of $.01 per
outstanding Warrant Share (the "Redemption Price") following such time as the
Closing Bid Price (as defined below) of the Company's Common Stock for the
twenty (20) consecutive Trading Days (as defined below) equals or exceeds two
hundred forty percent (240%) of the Warrant Exercise Price; provided, however,
that this Warrant may be exercised at any time prior to 5:00 p.m., California
time, on the business day immediately preceding the Redemption Date. No notice
shall be effective, unless otherwise agreed by Holder, unless the Warrant Shares
issuable are duly registered under the Securities Act of 1933, as amended.
Holder shall, in any event, cooperate with the Company to register such Warrant
Shares as the Company may reasonably request.
For purposes hereof, (i) the term "Trading Day" shall mean any day on
which securities are traded on the applicable securities exchange or in the
applicable securities market; and (ii) the term "Closing Bid Price" in respect
of a Trading Day shall mean the reported last closing bid price, on the
principal national securities exchange on which the Common Stock of the Company
is listed or admitted to trading or, if not listed or admitted to trading on any
national securities exchange, on the Nasdaq Stock Market or, if not admitted to
trading or quoted on the Nasdaq Stock Market, the closing bid price in the
over-the-counter market as furnished by any quotation medium or any member firm
of a national securities exchange or the Nasdaq Stock Market selected from time
to time by the Company for that purpose.
The Company shall provide at least 10 days written notice to the Holder
("Company Notice") prior to the Redemption Date specified in such written
notice.
7. Warrant Confers No Rights of Shareholder. Holder shall not have any
rights as a shareholder of the Company with regard to the Warrant Shares prior
to actual exercise resulting in the purchase of the Warrant Shares.
8. Investment Representation. Neither this Warrant nor the Warrant
Shares issuable upon the exercise of this Warrant have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any
applicable state securities laws. Holder acknowledges by acceptance of this
Warrant that (a) it has acquired this Warrant for investment and not with a view
toward distribution; (b) it has a pre-existing personal or business relationship
with the Company, or its executive officers, or by reason of its business or
financial experience it has the capacity to protect its own interests in
connection with the transaction; and (c) except as so notified to the Company in
writing, it is an accredited investor as that term is defined in Regulation D
promulgated under the Securities Act. Holder agrees that any Warrant Shares
issuable upon exercise of this Warrant will be acquired for investment and not
with a view toward distribution; and acknowledges that to the extent such
Warrant Shares will not be registered under the Securities Act and applicable
state securities laws, that such Warrant Shares may have to be held indefinitely
unless they are subsequently registered or qualified under the Securities Act
and applicable state securities laws; or, based on an opinion of counsel
reasonably satisfactory to the Company, an exemption from such registration and
qualification is available. Holder, by acceptance hereof, consents to the
placement of the following restrictive legends, or similar legends, on each
certificate to be issued to Holder by the Company in connection with the
issuance of such Warrant Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT
CERTAIN
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SUBSCRIPTION AGREEMENT THEREFOR DATED MAY 12, 1998 BETWEEN THE
CORPORATION AND THE ORIGINAL HOLDER HEREOF.
9. Reservation of Shares. The Company agrees at all times during the
Exercise Period to have authorized and reserved, for the exclusive purpose of
issuance and delivery upon exercise of this Warrant, a sufficient number of
shares of its Common Stock to provide for the exercise of the rights represented
hereby.
10. Adjustment for Re-Classification of Capital Stock. If the Company
at any time during the Exercise Period shall, by subdivision, combination or
re-classification of securities, change any of the securities to which purchase
rights under this Warrant exist under the same or different number of securities
of any class or classes, this Warrant shall thereafter entitle the Holder to
acquire such number and kind of securities as would have been issuable as a
result of such change with respect to the Warrant Shares immediately prior to
such subdivision, combination or re-classification. If shares of the Company's
common stock are subdivided into a greater number of shares of common stock, the
purchase price for the Warrant Shares upon exercise of this Warrant shall be
proportionately reduced and the Warrant Shares shall be proportionately
increased; and conversely, if shares of the Company's common stock are combined
into a smaller number of common stock shares, the price shall be proportionately
increased, and the Warrant Shares shall be proportionately decreased.
11. Public Offering Lock-Up. In connection with any public registration
of this Company's securities, the Holder (and any transferee of Holder) agrees,
upon the request of the Company or the underwriter(s) managing such underwritten
offering of the Company's securities, not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of this Warrant, any
of the shares of Common Stock issuable upon exercise of this Warrant or any
other securities of the Company heretofore or hereafter acquired by Holder
(other than those included in the registration) without the prior written
consent of the Company and such underwriter(s), as the case may be, for a period
of time not to exceed one hundred eighty (180) days from the effective date of
the registration. Upon request by the Company, Holder (and any transferee of
Holder) agrees to enter into any further agreement in writing in a form
reasonably satisfactory to the Company and such underwriter(s). The Company may
impose stop-transfer instructions with respect to the securities subject to the
foregoing restrictions until the end of said 180-day period. Any shares issued
upon exercise of this Warrant shall bear an appropriate legend referencing this
lock-up provision.
12. Registration Rights. (a) As promptly as possible following the completion of
the audited statements for the fiscal year ended June 30, 1998 and the filing of
the Form 10-KSB (due September 30, 1998), the Company shall use its best efforts
to file a registration statement to include all of the Warrant Shares if the
Warrant Shares can be registered within the same registration statement selected
by the Company for the Conversion Shares related to the Note to which this
Warrant relates. The Company's intention is to file with the SEC to register the
Warrant Shares pursuant to Form S-3, Form SB-2 or other appropriate form and to
use its best efforts to keep such registration statement effective for a minimum
period of nine months when, if and after it becomes effective. The Warrant
Shares registered under such Registration Statement shall be registered at the
Company's sole cost and expense provided that the Noteholder enters into such
agreements, including indemnification provisions as outlined below, as the
Company may reasonably request. The Company will not be required to register any
Warrant Shares issued prior to an effective registration. Other than provided in
this paragraph and below, the Company shall have no obligation to amend such
registration or file a further registration on the Warrant Shares.
(b) If, at any time during the Exercise Period, the Company proposes to
prepare and file any registration statements covering its Common Stock (in
either case, other than in connection with a merger or acquisition, pursuant to
Form S-8 or any successor form, or pursuant to any other form or type of
registration in which Registrable Securities (as defined below) cannot be
appropriately included) (collectively, the "Registration Statements"), it will
give written notice as provided herein at least thirty (30) days prior to the
filing of each such Registration Statement to the Holders of the Warrants and/or
Warrant Shares of its intention to do so. If the Holders of the Warrants and/or
Warrant Shares notify the Company within twenty (20) days after receipt of any
such notice of its or their desire to include the shares of Common Stock
issuable upon exercise of the Warrant or the Warrant Shares (collectively, the
"Registrable Securities") in such proposed registration statement, the Company
shall afford the Holders of the Warrant and/or Warrant Shares the opportunity to
have any such Registrable Securities registered
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under such registration statement at the Company's sole cost and expense
provided that the Holder enters into such agreements, including indemnification
provisions as outlined below as the Company or its underwriters may reasonably
request.
(c) Notwithstanding the provisions hereof, the Company shall have the
right at any time after it shall have given written notice pursuant hereto
(irrespective of whether a written request for inclusion of any such securities
shall have been made) to elect not to file any such proposed registration
statement, or to withdraw the same after the filing but prior to the effective
date thereof.
(d) Notwithstanding any other provision of this Section, if the
underwriter managing such registration notifies the Holders in writing that
market or economic conditions limit the amount of securities which may
reasonably be expected to be sold, the Holders of such Registrable Securities
will be allowed to register only those Registrable Securities permitted by such
underwriter pro rata based on the number of shares of Registrable Securities
held by such Holders, respectively. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration.
(e) Each Holder of Warrants and Warrant Shares to be sold pursuant to
any Registration Statement (each, a "Distributing Holder") shall severally, and
not jointly, indemnify and hold harmless the Company, its officers and
directors, each underwriter and each person, if any, who controls the Company
and such underwriter, against any loss, claim, damage, expense or liability,
joint or several, as incurred, to which any of them may become subject under the
Securities Act or any other statute or at common law, in so far as such loss,
claim, damage, expense or liability (or actions in respect thereof) arises out
of or is based upon any untrue statement or alleged untrue statement of any
material fact contained in any such Registration Statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Distributing Holder specifically for use therein. Such Distributing Holder shall
reimburse the Company, such underwriter and each such officer, director or
controlling person for any legal or other expenses reasonably incurred by any of
them in connection with investigating or defending any such liability, as
incurred. Notwithstanding the foregoing, such indemnity with respect to such
preliminary prospectus or such final prospectus shall not inure to the benefit
of the Company, its officers or directors, or such underwriter (or such
controlling person of the Company or the underwriter) if the person asserting
any such loss, claim, damage, expense or liability purchased the securities that
are the subject thereof and did not receive a copy of the final prospectus (or
the final prospectus as then amended, revised or supplemented) at or prior to
the time such furnishing is required by the Securities Act in any case where any
such untrue statement or omission of a material fact contained in the
preliminary prospectus was corrected in the final prospectus (or, if contained
in the final prospectus, was subsequently corrected by amendment, revision or
supplement).
13. Assignment. With respect to any offer, sale or other disposition of
this Warrant or any underlying securities, the Holder will give written notice
to the Company prior thereto, describing briefly the manner thereof, together
with a written opinion of such Holder's counsel, to the effect that such offer,
sale or other distribution may be effected without registration or qualification
(under any applicable federal or state law then in effect). Furthermore, no such
transfer shall be made unless the transferee meets the same investor suitability
standards set forth in Section 8 of this Warrant and corresponding Subscription
Agreement hereto. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as practicable,
shall notify such Holder that such Holder may sell or otherwise dispose of this
Warrant or the underlying securities, as the case may be, all in accordance with
the terms of the written notice delivered to the Company. If a determination has
been made pursuant to this Section 13 that the opinion of counsel for the Holder
is not reasonably satisfactory to the Company, the Company shall so notify the
Holder promptly after such determination has been made. Each Warrant thus
transferred shall bear the same legends appearing on this Warrant, and
underlying securities thus transferred shall bear the legends required by
Section 8. The Company may impose stop-transfer instructions in connection with
such restrictions. Subject to any restrictions on transfer described elsewhere
herein, the rights and
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obligations of the Company and the Holder of this Warrant shall be binding upon
and benefit the successors, assigns, heirs, administrators and transferees of
the parties hereto.
14. Notice. Any notice, demand, consent or other communication
hereunder shall be in writing addressed to the other party at its principal
office or, in respect of Holder, as its address as shown on the books of the
Company, or to such other address as such party shall have theretofore furnished
by like notice, and either served personally, sent by express, registered or
certified first class mail, postage prepaid, sent by facsimile transmission, or
delivered by reputable commercial courier. Such notice shall be deemed given (i)
when so personally delivered, or (ii) if mailed as aforesaid, five (5) days
after the same shall have been posted, or (iii) if sent by facsimile
transmission, as soon as sender receives written or telephonic confirmation that
the message has been received and such facsimile is followed the same day by
mailing by prepaid first class mail, or (iv) if delivered by commercial courier,
upon receipt.
15. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, applicable to contracts
between California residents entered into and to be performed entirely within
the State of California. Venue for all purposes hereunder shall be Alameda
County, California.
16. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
17. Descriptive Headings. The headings used herein are descriptive only
and for the convenience of identifying provisions, and are not determinative of
the meaning or effect of any such provisions.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
duly authorized officer as of this 12th day of May, 1998.
VALUESTAR CORPORATION
/s/ JAMES A. BARNES
James A. Barnes, Treasurer
Authorized Officer
5
VALUESTAR CORPORATION
EXHIBIT 4.13
Warrant #98B-__
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH HEREIN AND IN THAT CERTAIN SUBSCRIPTION
AGREEMENT THEREFOR DATED MAY 12, 1998 BETWEEN THE COMPANY AND THE ORIGINAL
HOLDER HEREOF.
VALUESTAR CORPORATION
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, VALUESTAR CORPORATION, a
Colorado corporation (the "Company"), hereby grants to _____________ ("Holder")
the right to purchase from the Company up to _______________ (_________) shares
of the Common Stock of the Company (the "Warrant Shares"), subject to the
following terms and conditions:
1. Series. This Warrant is one of a duly authorized series of warrants
of the Company (which are identical except for the variations necessary to
express the identification numbers, names of the holder, number of common shares
issuable upon exercise thereof and warrant issue dates) designated as its "1998
Series B Warrants" issued pursuant to and subject to that certain Subscription
Agreement of even date herewith.
2. Term. This Warrant may be exercised in whole or in part at any time
during the period from the date of issuance of this Warrant until 5:00 p.m.,
California time, on April 30, 2003 (the "Exercise Period").
3. Purchase Price. The purchase price for each Warrant Share
purchasable hereunder shall be Two United States Dollars (U.S. $2.00) (the
"Warrant Exercise Price") subject to adjustment for stock splits, combinations
and the like.
4. Exercise of Warrant. The purchase rights represented by this Warrant
may be exercised by the Holder, in whole or in part, at any time and from time
to time before the end of the Exercise Period by surrender of this Warrant at
the principal office of the Company in Alameda, California (or such other office
or agency of the Company as may be designated by notice in writing to the Holder
at the address of the Holder appearing on the books of the Company), together
with the Notice of Exercise annexed hereto duly completed and executed on behalf
of the Holder accompanied by payment in full of the amount of the aggregate
Warrant Exercise Price in immediately available funds in United States Dollars.
Certificates for shares purchased hereunder shall be delivered to the Holder
within ten (10) business days after the date on which this Warrant shall have
been exercised as aforesaid, but Holder shall be deemed the record owner of such
Warrant Shares as of and from the close of business on the date on which this
Warrant shall be surrendered.
5. Fractional Interest. The Company shall not be required to issue any
fractional shares on the exercise of this Warrant.
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6. Redemption of Warrants. The Company may elect on one occasion, by
written notice as provided herein (the "Company Notice"), to redeem all
outstanding Warrants including this Warrant, in whole but not in part, on any
date (the "Redemption Date") fixed by the Company at a price of $.01 per
outstanding Warrant Share (the "Redemption Price") following such time as the
Closing Bid Price (as defined below) of the Company's Common Stock for the
twenty (20) consecutive Trading Days (as defined below) equals or exceeds two
hundred twenty five percent (225%) of the Warrant Exercise Price; provided,
however, that this Warrant may be exercised at any time prior to 5:00 p.m.,
California time, on the business day immediately preceding the Redemption Date.
No notice shall be effective, unless otherwise agreed by Holder, unless the
Warrant Shares issuable are duly registered under the Securities Act of 1933, as
amended. Holder shall, in any event, cooperate with the Company to register such
Warrant Shares as the Company may reasonably request.
For purposes hereof, (i) the term "Trading Day" shall mean any day on
which securities are traded on the applicable securities exchange or in the
applicable securities market; and (ii) the term "Closing Bid Price" in respect
of a Trading Day shall mean the reported last closing bid price, on the
principal national securities exchange on which the Common Stock of the Company
is listed or admitted to trading or, if not listed or admitted to trading on any
national securities exchange, on the Nasdaq Stock Market or, if not admitted to
trading or quoted on the Nasdaq Stock Market, the closing bid price in the
over-the-counter market as furnished by any quotation medium or any member firm
of a national securities exchange or the Nasdaq Stock Market selected from time
to time by the Company for that purpose.
The Company shall provide at least 10 days written notice to the Holder
("Company Notice") prior to the Redemption Date specified in such written
notice.
7. Warrant Confers No Rights of Shareholder. Holder shall not have any
rights as a shareholder of the Company with regard to the Warrant Shares prior
to actual exercise resulting in the purchase of the Warrant Shares.
8. Investment Representation. Neither this Warrant nor the Warrant
Shares issuable upon the exercise of this Warrant have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any
applicable state securities laws. Holder acknowledges by acceptance of this
Warrant that (a) it has acquired this Warrant for investment and not with a view
toward distribution; (b) it has a pre-existing personal or business relationship
with the Company, or its executive officers, or by reason of its business or
financial experience it has the capacity to protect its own interests in
connection with the transaction; and (c) except as so notified to the Company in
writing, it is an accredited investor as that term is defined in Regulation D
promulgated under the Securities Act. Holder agrees that any Warrant Shares
issuable upon exercise of this Warrant will be acquired for investment and not
with a view toward distribution; and acknowledges that to the extent such
Warrant Shares will not be registered under the Securities Act and applicable
state securities laws, that such Warrant Shares may have to be held indefinitely
unless they are subsequently registered or qualified under the Securities Act
and applicable state securities laws; or, based on an opinion of counsel
reasonably satisfactory to the Company, an exemption from such registration and
qualification is available. Holder, by acceptance hereof, consents to the
placement of the following restrictive legends, or similar legends, on each
certificate to be issued to Holder by the Company in connection with the
issuance of such Warrant Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH IN THAT CERTAIN
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SUBSCRIPTION AGREEMENT THEREFOR DATED MAY 12, 1998 BETWEEN THE
CORPORATION AND THE ORIGINAL HOLDER HEREOF.
9. Reservation of Shares. The Company agrees at all times during the
Exercise Period to have authorized and reserved, for the exclusive purpose of
issuance and delivery upon exercise of this Warrant, a sufficient number of
shares of its Common Stock to provide for the exercise of the rights represented
hereby.
10. Adjustment for Re-Classification of Capital Stock. If the Company
at any time during the Exercise Period shall, by subdivision, combination or
re-classification of securities, change any of the securities to which purchase
rights under this Warrant exist under the same or different number of securities
of any class or classes, this Warrant shall thereafter entitle the Holder to
acquire such number and kind of securities as would have been issuable as a
result of such change with respect to the Warrant Shares immediately prior to
such subdivision, combination or re-classification. If shares of the Company's
common stock are subdivided into a greater number of shares of common stock, the
purchase price for the Warrant Shares upon exercise of this Warrant shall be
proportionately reduced and the Warrant Shares shall be proportionately
increased; and conversely, if shares of the Company's common stock are combined
into a smaller number of common stock shares, the price shall be proportionately
increased, and the Warrant Shares shall be proportionately decreased.
11. Public Offering Lock-Up. In connection with any public registration
of this Company's securities, the Holder (and any transferee of Holder) agrees,
upon the request of the Company or the underwriter(s) managing such underwritten
offering of the Company's securities, not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of this Warrant, any
of the shares of Common Stock issuable upon exercise of this Warrant or any
other securities of the Company heretofore or hereafter acquired by Holder
(other than those included in the registration) without the prior written
consent of the Company and such underwriter(s), as the case may be, for a period
of time not to exceed one hundred eighty (180) days from the effective date of
the registration. Upon request by the Company, Holder (and any transferee of
Holder) agrees to enter into any further agreement in writing in a form
reasonably satisfactory to the Company and such underwriter(s). The Company may
impose stop-transfer instructions with respect to the securities subject to the
foregoing restrictions until the end of said 180-day period. Any shares issued
upon exercise of this Warrant shall bear an appropriate legend referencing this
lock-up provision.
12. Registration Rights. (a) As promptly as possible following the completion of
the audited statements for the fiscal year ended June 30, 1998 and the filing of
the Form 10-KSB (due September 30, 1998), the Company shall use its best efforts
to file a registration statement to include all of the Warrant Shares if the
Warrant Shares can be registered within the same registration statement selected
by the Company for the Conversion Shares related to the Note to which this
Warrant relates. The Company's intention is to file with the SEC to register the
Warrant Shares pursuant to Form S-3, Form SB-2 or other appropriate form and to
use its best efforts to keep such registration statement effective for a minimum
period of nine months when, if and after it becomes effective. The Warrant
Shares registered under such Registration Statement shall be registered at the
Company's sole cost and expense provided that the Noteholder enters into such
agreements, including indemnification provisions as outlined below, as the
Company may reasonably request. The Company will not be required to register any
Warrant Shares issued prior to an effective registration. Other than provided in
this paragraph and below, the Company shall have no obligation to amend such
registration or file a further registration on the Warrant Shares.
(b) If, at any time during the Exercise Period, the Company proposes to
prepare and file any registration statements covering its Common Stock (in
either case, other than in connection with a merger or acquisition, pursuant to
Form S-8 or any successor form, or pursuant to any other form or type of
registration in which Registrable Securities (as defined below) cannot be
appropriately included) (collectively, the "Registration Statements"), it will
give written notice as provided herein at least thirty (30) days prior to the
filing of each such Registration Statement to the Holders of the Warrants and/or
Warrant Shares of its intention to do so. If the Holders of the Warrants and/or
Warrant Shares notify the Company within twenty (20) days after receipt of any
such notice of its or their desire to include the shares of Common Stock
issuable upon exercise of the Warrant or the Warrant Shares (collectively, the
"Registrable Securities") in such proposed registration statement, the Company
shall afford the Holders of the Warrant and/or Warrant Shares the opportunity to
have any such Registrable Securities registered
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under such registration statement at the Company's sole cost and expense
provided that the Holder enters into such agreements, including indemnification
provisions as outlined below as the Company or its underwriters may reasonably
request.
(c) Notwithstanding the provisions hereof, the Company shall have the
right at any time after it shall have given written notice pursuant hereto
(irrespective of whether a written request for inclusion of any such securities
shall have been made) to elect not to file any such proposed registration
statement, or to withdraw the same after the filing but prior to the effective
date thereof.
(d) Notwithstanding any other provision of this Section, if the
underwriter managing such registration notifies the Holders in writing that
market or economic conditions limit the amount of securities which may
reasonably be expected to be sold, the Holders of such Registrable Securities
will be allowed to register only those Registrable Securities permitted by such
underwriter pro rata based on the number of shares of Registrable Securities
held by such Holders, respectively. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration.
(e) Each Holder of Warrants and Warrant Shares to be sold pursuant to
any Registration Statement (each, a "Distributing Holder") shall severally, and
not jointly, indemnify and hold harmless the Company, its officers and
directors, each underwriter and each person, if any, who controls the Company
and such underwriter, against any loss, claim, damage, expense or liability,
joint or several, as incurred, to which any of them may become subject under the
Securities Act or any other statute or at common law, in so far as such loss,
claim, damage, expense or liability (or actions in respect thereof) arises out
of or is based upon any untrue statement or alleged untrue statement of any
material fact contained in any such Registration Statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Distributing Holder specifically for use therein. Such Distributing Holder shall
reimburse the Company, such underwriter and each such officer, director or
controlling person for any legal or other expenses reasonably incurred by any of
them in connection with investigating or defending any such liability, as
incurred. Notwithstanding the foregoing, such indemnity with respect to such
preliminary prospectus or such final prospectus shall not inure to the benefit
of the Company, its officers or directors, or such underwriter (or such
controlling person of the Company or the underwriter) if the person asserting
any such loss, claim, damage, expense or liability purchased the securities that
are the subject thereof and did not receive a copy of the final prospectus (or
the final prospectus as then amended, revised or supplemented) at or prior to
the time such furnishing is required by the Securities Act in any case where any
such untrue statement or omission of a material fact contained in the
preliminary prospectus was corrected in the final prospectus (or, if contained
in the final prospectus, was subsequently corrected by amendment, revision or
supplement).
13. Assignment. With respect to any offer, sale or other disposition of
this Warrant or any underlying securities, the Holder will give written notice
to the Company prior thereto, describing briefly the manner thereof, together
with a written opinion of such Holder's counsel, to the effect that such offer,
sale or other distribution may be effected without registration or qualification
(under any applicable federal or state law then in effect). Furthermore, no such
transfer shall be made unless the transferee meets the same investor suitability
standards set forth in Section 8 of this Warrant and corresponding Subscription
Agreement hereto. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as practicable,
shall notify such Holder that such Holder may sell or otherwise dispose of this
Warrant or the underlying securities, as the case may be, all in accordance with
the terms of the written notice delivered to the Company. If a determination has
been made pursuant to this Section 13 that the opinion of counsel for the Holder
is not reasonably satisfactory to the Company, the Company shall so notify the
Holder promptly after such determination has been made. Each Warrant thus
transferred shall bear the same legends appearing on this Warrant, and
underlying securities thus transferred shall bear the legends required by
Section 8. The Company may impose stop-transfer instructions in connection with
such restrictions. Subject to any restrictions on transfer described elsewhere
herein, the rights and
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obligations of the Company and the Holder of this Warrant shall be binding upon
and benefit the successors, assigns, heirs, administrators and transferees of
the parties hereto.
14. Notice. Any notice, demand, consent or other communication
hereunder shall be in writing addressed to the other party at its principal
office or, in respect of Holder, as its address as shown on the books of the
Company, or to such other address as such party shall have theretofore furnished
by like notice, and either served personally, sent by express, registered or
certified first class mail, postage prepaid, sent by facsimile transmission, or
delivered by reputable commercial courier. Such notice shall be deemed given (i)
when so personally delivered, or (ii) if mailed as aforesaid, five (5) days
after the same shall have been posted, or (iii) if sent by facsimile
transmission, as soon as sender receives written or telephonic confirmation that
the message has been received and such facsimile is followed the same day by
mailing by prepaid first class mail, or (iv) if delivered by commercial courier,
upon receipt.
15. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, applicable to contracts
between California residents entered into and to be performed entirely within
the State of California. Venue for all purposes hereunder shall be Alameda
County, California.
16. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
17. Descriptive Headings. The headings used herein are descriptive only
and for the convenience of identifying provisions, and are not determinative of
the meaning or effect of any such provisions.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
duly authorized officer as of this 12th day of May, 1998.
VALUESTAR CORPORATION
/s/ JAMES A. BARNES
James A. Barnes, Treasurer
Authorized Officer
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