EXHIBIT 4.42
BRIDGE LOAN AND COMMON STOCK PURCHASE AGREEMENT
THIS BRIDGE LOAN AND COMMON STOCK PURCHASE AGREEMENT (the "Agreement")
is dated for reference purposes only as of April 24, 2001 by and between
VALUESTAR CORPORATION, a Colorado corporation (the "Corporation"), and those
investors set forth on Schedule 1 attached hereto (individually, a "Purchaser"
and collectively, the "Purchasers").
R E C I T A L S:
A. The Corporation, through its subsidiary, Valuestar, Inc., a
California corporation, is in the business of rating and certifying customer
satisfaction of commercial businesses.
B. The Purchasers are interested in investing capital in the
Corporation and the Corporation desires to obtain capital from the Purchasers on
the terms and conditions hereinafter set forth.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the above recitals and the mutual
agreements, covenants, representations and warranties contained below in this
Agreement, the parties agree:
I. DEFINITIONS.
"Agreement" means, and the words "herein", "hereof", "hereunder" and words of
similar import refer to, this instrument and any amendments hereto.
"Act" means the Small Business Investment Act of 1958, as amended and in effect
from time to time, and the regulations promulgated thereunder.
"Affiliate" means any Person directly or indirectly controlling, controlled by,
or under common control with, the Person in question. A Person shall be deemed
to control a corporation if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract, or
otherwise.
"Code" means the Internal Revenue Code of 1986, as amended and in effect from
time to time, and the regulations promulgated thereunder.
"Controlled Group" means any group of organizations within the meaning of
Section 414(b), (c), (m) or (o) of the Code of which the Corporation is a
member.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
similar Federal statute that replaces said Exchange Act and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at the
time.
"GAAP" means generally accepted accounting principles, applied on a consistent
basis, as set forth in Opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants and/or in statements of the
Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question.
"Intellectual Property" means all patents, patent rights, patent applications,
licenses, inventions, trade secrets, knowhow, proprietary techniques (including
processes and substances), trademarks, service marks, trade names and
copyrights.
"Lien" means any lien, mortgage, security interest, tax lien, pledge,
encumbrance, financing statement, or conditional sale or title retention
agreement, or any other interest in property designed to secure the repayment of
indebtedness or any other obligation, whether arising by agreement, operation of
law, or otherwise.
"Material Adverse Effect" means (a) a material adverse effect upon the business,
operations, properties, assets or condition (financial or otherwise) of the
Corporation or, as the case may be, Corporation and the Subsidiary taken as a
whole or (b) the impairment of the ability of any party other than any Purchaser
to perform its obligations under this Agreement or any of the Other Agreements
to which it is a party.
"Party" or "parties" means the Corporation and/or any Purchaser.
"Person" means any individual, sole proprietorship, corporation, business trust,
unincorporated organization, association, company, partnership, joint venture,
governmental authority (whether a national, federal, state, county, municipality
or otherwise, and shall include without limitation any instrumentality,
division, agency, body or department thereof), or other entity.
"Promissory Note" or "Bridge Loan Note" means the convertible promissory note,
the form of which attached hereto as Exhibit A.
"Securities Act" means the Securities Act of 1933, as amended, or any similar
Federal statute which replaces such Securities Act and the rules and regulations
of the SEC thereunder, all as the same shall be in effect at the time.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means Valuestar, Inc., a California corporation.
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II. ISSUANCE OF PROMISSORY NOTES AND STOCK.
2.1 ISSUANCE OF NOTES. The Corporation agrees to issue to each
Purchaser meeting the suitability standards set forth in Article IV, the
Promissory Notes described herein and, subject to the terms and conditions set
forth herein, each such Purchaser agrees to lend to Corporation in exchange for
such Promissory Note the principal amount set forth on Schedule I set forth
opposite Purchaser's name (the "Purchase Price"). In addition, Corporation shall
issue to each Purchaser Five (5) shares of Corporation's common stock for each
One Dollar ($1.00) of Promissory Note principal investment. The maximum
principal offering of the Promissory Notes is $3,500,000 and the maximum number
of common shares of Corporation to be issued in connection therewith is
17,500,000.
2.2 Issuance and Payment.The closing of the sale and purchase of the
Promissory Notes pursuant to this Agreement and the issuance of common stock in
connection therewith will take place at the principal offices of the Corporation
on or before April 30, 2001, or such other time and place as the parties may
mutually agree (the "Closing"). At the Closing, upon the Corporation's receipt
of each Purchaser's Purchase Price, by check (when funds clear to the
Corporation), by wire transfer of immediately available funds, cancellation of
any indebtedness or obligation owed by the Corporation to Purchaser the
Corporation shall deliver to the respective Purchaser his, hers or its
Promissory Note and shares of Common Stock.
2.3 Conversion Rights. a In the event Corporation or Subsidiary raises
additional capital through a Senior Secured Promissory Note on, or prior to
April 30, 2002, all of the principal and accrued but unpaid interest on the
Promissory Note then outstanding shall be automatically converted into Senior
Secured Convertible Notes in such amounts and under such terms and conditions as
if Holder had invested the principal and accrued interest of this Note pursuant
to the terms and conditions of the offering for Senior Secured Convertible
Notes, subject to the occurrence of the following:
2.3.1 The Notes may be automatically converted upon a
subsequent debt financing in accordance with the terms of the Notes.
b. In the event that Company does offer Senior Convertible Notes and
receives offers to purchase more than $20,000,000 of these Senior Convertible
Notes, Holder shall have the full amount of principal and accrued but unpaid
interest of the Promissory Notes converted without a pro-rata reduction.
c. In the event any conversion of any portion of the principal and
accrued interest pursuant to the terms of Promissory Notes is required, the
Corporation's obligation to pay such principal and interest shall terminate and
Purchaser shall be required to deliver the original Promissory Note before the
Corporation shall have any obligation to deliver the securities contemplated
upon conversion. The Purchaser shall execute the necessary documentation for the
Senior Convertible Notes and Warrants as such other purchasers of such
securities so execute.
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d. Any interpretation or determination of the conversion features of
the Promissory Notes including if a conversion is required and any
interpretation or determination of matters related to the subsequent Senior
Convertible Notes and Warrants, shall be made in good faith by the Board of
Directors of the Corporation.
III. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.
Except as set forth on any Schedules attached hereto and incorporated
herein by reference, the Corporation hereby represents and warrants to each
Purchaser as of the date hereof as follows:
3.1. Corporate Existence and Authority.
(a) The Corporation (i) is a corporation duly organized,
validly existing, and in good standing under the laws of Colorado; (ii) has all
requisite corporate power and authority to own its assets and carry on its
business as now conducted; and (iii) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a Material Adverse Effect.
The Corporation has the corporate power and authority to execute, deliver, and
perform its obligations under this Agreement and all Other Agreements to which
it is, or in connection with the transactions contemplated hereby, may become, a
party.
(b) The Subsidiary (i) is a corporation duly organized,
validly existing, and in good standing under the laws of California; (ii) has
all requisite corporate power and authority to own its assets and carry on its
business as now conducted; and (iii) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a Material Adverse Effect.
3.2 Financial Statements and Reports. The Corporation has timely filed
all required forms, reports, statements and documents with the SEC, all of which
have complied in all material respects with all applicable requirements of the
Exchange Act and the Securities Act, as the case may be. The Corporation has
delivered or made available to each Purchaser true and complete copies of (i)
the Corporation's Annual Report on Form 10-KSB for the fiscal year ended June
30, 2000, (ii) its proxy statement relating to the Corporation's annual
stockholders meeting held November 30, 2000, (iii) all other forms, reports,
statements and documents filed by the Corporation with the SEC pursuant to the
Exchange Act since June 30, 2000, and (iv) all reports, statements and other
information provided by the Corporation to its stockholders since January 1,
2000 (collectively, the "SEC Reports"). As of their respective dates, the SEC
Reports did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Each of the consolidated financial statements of the
Corporation included or incorporated by reference in the SEC Reports (including
any such SEC Report filed after the date of this Agreement until the Initial
Closing) were prepared in accordance with GAAP applied on a consistent basis
(except as otherwise stated in such financial statements or, in the case of
audited statements, the related report thereon of independent certified public
accounts), and present fairly the financial position and results of operations,
cash flows and of changes in stockholders' equity of the Corporation and its
consolidated subsidiaries as of the dates and for the periods indicated,
subject, in
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the case of unaudited interim financial statements, to normal year-end audit
adjustments, and except that the unaudited interim financial statements do not
contain all of the disclosures required by GAAP. Since June 30, 2000 there has
been no change in any of the significant accounting (including tax accounting)
policies, practices, or procedures of the Corporation or any of its consolidated
subsidiaries. The Corporation is and has been subject to the reporting
requirements of the Exchange Act and has timely filed with the SEC all periodic
reports required to be filed by it pursuant thereto and all reports required to
be filed under Sections 13, 14 or 15(d) of the Exchange Act since June 30, 2000.
3.3 Authorization of Promissory Notes. The issuance and sale of the
Promissory Notes and the issuance of the common stock have been duly authorized
and the Promissory Notes and common stock, when issued as set forth herein, will
be fully paid and non-assessable, with no personal liability attached to the
ownership thereof, and free of restrictions on transfer other than under
applicable state and federal securities laws.
3.4 Brokers. Except as described in Schedule 3.4, neither the
Corporation, the Subsidiary nor any of its shareholders has dealt with any
broker, finder, commission agent or other Person in connection with the
transactions referenced in or contemplated by this Agreement, nor is the
Corporation or any of its shareholders under any obligation to pay any broker's
fee or commission in connection with such transactions.
3.5 Capitalization. The capital structure of the Corporation are as set
forth on Schedule 3.5.
IV. REPRESENTATIONS AND WARRANTIES OF PURCHASERS.
As of the Closing, each Purchaser represents and warrants to the
Corporation as to itself that:
4.1 Investment. The Purchaser is acquiring the Promissory Note and
Common Stock for investment purposes only for its own account, and not with a
view to, or for resale in connection with, any distribution thereof, and it has
no present intention of selling or distributing any such securities. Purchaser
understands that the Promissory Note (and any securities issued upon conversion)
and the Common Stock have not been registered under the Securities Act by reason
of a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the investment
as expressed herein. All such securities are hereinafter collectively referred
to as the "Securities".
4.2 Rule 144. The Purchaser acknowledges that because the Securities
have not been registered under the Securities Act, the Securities must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. It is aware of the provisions of
Rule 144 promulgated under the Securities Act, which permits limited resale of
shares purchased in a private placement under certain circumstances.
4.3 Access to Data. The Purchaser has had an opportunity to discuss the
Corporation's business, management and financial affairs with its management and
to obtain any additional information necessary or appropriate for deciding
whether or not to purchase the Securities. The
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Purchase has had the opportunity to review and discuss the current financial
condition of the Corporation with management and has been provided such
schedules of capitalization and indebtedness as requested by Purchaser. The
Purchaser understands the Corporation intends to use the proceeds of the
Promissory Notes primarily to pay existing obligations of the Corporation and
will be required to obtain additional funds to continue operations into future
periods.
4.4 Knowledge And Experience. Purchaser has such knowledge and
experience in financial and business matters, including investments in other
companies that are in a financial condition substantially similar to the
Corporation's financial condition immediately prior to the Closing, that it is
capable of evaluating the merits and risks of the investment in the Securities,
and it is able to bear the economic risk of such investment. Further, the
individual executing this Agreement has such knowledge and experience in
financial and business matters that he or she is capable of utilizing the
information made available to him or her in connection with the offering of the
Securities, of evaluating the merits and risks of an investment in the
Securities and of making an informed investment decision with respect to the
Securities.
4.5 Requisite Power. The Purchaser has all requisite power and
authority necessary to enter into and to carry out the provisions of this
Agreement and the transactions contemplated hereby.
4.6 Duly Authorized. All action on the part of the Purchaser necessary
for the purchase of its Promissory Note and the performance of the Purchaser's
obligations hereunder has been taken or will be taken prior to the Closing. This
Agreement is a legal, valid and binding obligation of the Purchaser enforceable
in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws and equitable
principles relating to or affecting the enforcement of creditors' rights in
general and by general principles of equity.
4.7 Accredited Investor. Purchaser is an "accredited investor" as that
term is defined in Regulation D promulgated by the Securities and Exchange
Commission. The term "Accredited Investor" under Regulation D refers to:
(i) A person or entity who is a director or executive officer
of the Corporation;
(ii) Any bank as defined in Section 3(a)(2) of the Securities
Act, or any savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to Section 15 of
the Exchange Act; insurance corporation as defined in Section 2(13) of the
Securities Act; investment corporation registered under the Investment
Corporation Act of 1940; or a business development corporation as defined in
Section 2(a)(48) of that Act; Small Business Investment Corporation licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance corporation, or
registered investment adviser, or if the employee benefit
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plan has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decision made solely by persons that are accredited investors;
(iii) Any private business development corporation as defined
in Section 202(a)(22) of the Investment Advisers Act of 1940;
(iv) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the Promissory
Notes offered, with total assets in excess of $5,000,000;
(v) Any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his purchase exceeds
$1,000,000;
(vi) Any natural person who had an individual income in excess
of $200,000 during each of the previous two years or joint income with that
person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year;
(vii) Any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the Promissory Notes offered,
whose purchase is directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment; or
(viii) Any entity in which all of the equity owners are
accredited investors.
As used in this Section 4.7, the term "net worth" means the
excess of total assets over total liabilities. For the purpose of determining a
person's net worth, the principal residence owned by an individual should be
valued at fair market value, including the cost of improvements, net of current
encumbrances. As used in this Section 4.7, "income" means actual economic
income, which may differ from adjusted gross income for income tax purposes.
Accordingly, the undersigned should consider whether it should add any or all of
the following items to its adjusted gross income for income tax purposes in
order to reflect more accurately its actual economic income: Any amounts
attributable to tax-exempt income received, losses claimed as a limited partner
in any limited partnership, deductions claimed for depletion, contributions to
an XXX or Xxxxx retirement plan, and alimony payments.
4.8 Resident. Purchaser has its, his or her principal residence or
principal executive offices in the state indicated on Schedule 1.
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V. RESTRICTIONS ON TRANSFER OF SECURITIES.
The Promissory Notes and any future Securities into which they may
convert are not transferable except upon the conditions specified in this
Article V, which conditions are intended to ensure compliance with the
provisions of the Securities Act and state securities laws in respect of the
transfer of any of such securities. Each instrument representing the Securities
shall be stamped or otherwise imprinted with legends substantially in the
following form until such time as the conditions set forth in such legends have
been met:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED
UNDER ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, OR THE HOLDER
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THE SECURITIES
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT AND THE QUALIFICATION REQUIREMENTS UNDER STATE LAW."
The Corporation shall be entitled to enter stop transfer notices on its
stock books with respect to the Promissory Notes or Securities until the
conditions as set forth in the legend above with respect to the transfer of such
securities have been met.
VI. MISCELLANEOUS.
6.1 Remedies. Any Person having any rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages by reason of any breach of any provision of this Agreement, and to
exercise all other rights granted by law, which rights may be exercised
cumulatively and not alternatively.
6.2 Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
6.3 Severability. Each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement 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.
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6.4 Counterparts. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts when taken together shall constitute one and
the same Agreement.
6.5 Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
6.6 Notices. Except as otherwise expressly provided herein, all
communications provided for hereunder shall be in writing and delivered or
mailed by the United States mails, certified mail, return receipt requested, (a)
if to Purchaser, addressed to each Purchaser at the address specified on
Schedule I hereto or to such other address as such Purchaser may in writing
designate, or (b) if to the Corporation, addressed to the Corporation at the
address set forth below or to such other address as the Corporation may in
writing designate. Notices shall be deemed to have been validly served, given or
delivered (and "the date" of such notice or words of similar effect shall mean
the date) five (5) days after deposit in the United States mails, certified
mail, return receipt requested, with proper postage prepaid, or upon actual
receipt thereof (whether by noncertified mail, telecopy, telegram, facsimile,
express delivery or otherwise), whichever is earlier.
If to Purchasers: To the Addresses set forth on Schedule 1
With a Copy to: _____________________________________
_____________________________________
_____________________________________
If to the Corporation: Valuestar Corporation
Attn: Xxxxx Xxxxx
000 - 00xx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
FAX: (000) 000-0000
With a Copy to: Bay Venture Counsel, LLP
ttn: Xxxxxx X. Xxxxxx, Esq.
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
xxxxxx, XX 00000
AX: (000) 000-0000
6.7 Governing Law. The validity, meaning and effect of this Agreement
shall be determined in accordance with the laws of California applicable to
contracts made and to be performed entirely in California as if by and between
California residents.
6.8 Schedules and Exhibits. All schedules and exhibits are an integral
part of this Agreement.
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6.9 Litigation Costs. If any legal action, arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
therein shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled.
6.10 Final Agreement. This Agreement and the exhibits and schedules
attached hereto constitute the only agreement of the parties concerning the
matters herein, and supersedes, merges and renders void all prior written/oral,
and/or contemporaneous agreements and understandings related thereto.
6.11 Confidentiality. Each Purchaser agrees to keep confidential any
information delivered by the Corporation or Subsidiary to such Purchaser under
this Agreement that the Corporation or Subsidiary clearly indicates in writing
to be confidential information; provided, however, that nothing in this Section
6.11 will prevent such Purchaser from disclosing such information (a) to any
Affiliate of such Purchaser or any actual or potential purchaser, participant,
assignee, or transferee of such Purchaser's rights or obligations hereunder that
agrees to be bound by the terms of this Section 6.11, (b) upon order of any
court or administrative agency, (c) upon the request or demand of any regulatory
agency or authority having jurisdiction over such Purchaser, (d) that is in the
public domain, (e) that has been obtained from any Person that is not a party to
this Agreement or an Affiliate of any such party without breach by such Person
of a confidentiality obligation known to such Purchaser, (f) if necessary and
only to the extent necessary for the exercise of any remedy under this
Agreement, (g) to the certified public accountants for such Purchaser or (h)
that has been independently developed by such Purchaser without use or reference
to any confidential information of the Corporation or Subsidiary and such
independent development can be shown by documentary evidence. The Corporation
agrees that such Purchaser will be presumed to have met its obligations under
this Section 6.11 to the extent that it exercises the same degree of care with
respect to information provided by the Corporation or Subsidiary as it exercises
with respect to its own information of similar character.
6.12 Public Disclosure. Except as may be required to comply with
applicable law, no Purchaser shall make or cause to be made any press release or
similar public announcement.
6.13 Consent to Amendments. Except as otherwise expressly provided
herein, the provisions of this Agreement and any exhibit attached hereto may be
amended and the Corporation may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if it has obtained
the written consent of Purchasers holding at least sixty-six and two-thirds
percent (66-2/3%) or more of the outstanding principal amount of Promissory
Notes. No course of dealing between the Corporation and any Purchaser or any
delay in exercising any rights hereunder or under the Corporation's Articles of
Incorporation will operate as a waiver of any rights of any such Purchaser.
Notwithstanding the foregoing, this Section 6.13 shall not be amended without
the consent of all Purchasers holding Promissory Notes.
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IN WITNESS WHEREOF, the Corporation and each Purchaser identified on
Schedule 1 have caused this Agreement to be executed and delivered by their
respective officers thereunto duly authorized.
CORPORATION:
VALUESTAR CORPORATION
By: /s/ XXXXX XXXXX
---------------
Name: Xxxxx Xxxxx
Its: President and Chief Executive Officer
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Signature Pages to the Promissory Note and Stock Purchase Agreement
PURCHASER:
______________________________________________
By: __________________________________________
(Signature)
______________________________________________
(Print Name and Title)
ADDRESS:
______________________________________________
______________________________________________
______________________________________________
______________________________________________
TELEPHONE AND FAX NUMBERS:
Tel: _________________________________________
Fax: _________________________________________
Email Contact: _______________________________
AGGREGATE INVESTMENT AMOUNT
$_____________________________________________
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