EXHIBIT 4.40
"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH
THE DISTRIBUTION HEREOF. THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER OR
EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES LAWS."
STOCK PURCHASE WARRANT
RIGHT TO PURCHASE _________ SHARES OF COMMON STOCK
THIS CERTIFIES THAT __________ and all registered and permitted assigns
("Holder") is entitled to purchase, on or before March 5, 2006, up to
______________________________ shares of the common stock ("Common Stock" or
"Shares") of VALUESTAR CORPORATION (the "Corporation" or "Company") upon
exercise of this Warrant along with presentation of the full purchase price as
provided herein. The purchase price of the Common Stock upon exercise (the
"Warrant Shares") is equal to Seventy Five Cents ($0.75) per share (the
"Exercise Price").
1. Exercise.
(a) This Warrant may be exercised one or more times, in whole or minimum
increments of 50,000 shares (or the balance of the Warrant), on any business day
on or before the expiration date listed above by presentation and surrender
hereof to the Corporation at its principal office of a written exercise request
and the payment of the Exercise Price in lawful money of the United States of
America in the form of a wire transfer or certified or official bank check for
the Warrant Shares specified in the exercise request. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant,
execute and deliver a new Warrant evidencing the rights of the Holder hereof to
purchase the balance of the Warrant Shares purchasable hereunder. Upon receipt
by the Corporation of an exercise request and representations, together with
proper payment of the Exercise Price, at such office, the Holder shall be deemed
to be the holder of record of the Warrant Shares, notwithstanding that the stock
transfer books of the Corporation shall then be closed or that certificates
representing such Warrant Shares shall not then be actually delivered to the
Holder. The Corporation shall pay any and all transfer agent fees, documentary
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of the Warrant Shares.
(b) At any time during the period from issuance to expiration of this Warrant
(the "Exercise Period"), the Holder may, at its option, exchange this Warrant,
(in minimum blocks of 100,000 shares being exchanged unless waived by the
Company), (a "Warrant Exchange"), into the number of Warrant Shares determined
in accordance with this Section (1)(b), by surrendering this Warrant at the
principal office of the Company, accompanied by a written notice stating such
Holder's intent to effect such exchange, the number of Warrant Shares to be
exchanged and the date on which the Holder requests that such Warrant Exchange
occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the
date the Notice of Exchange is received by the Company or such later date as may
be specified in the Notice of Exchange (the "Exchange Date"). Certificates for
the shares issuable upon such Warrant Exchange and, if applicable, a new Warrant
of like tenor evidencing the balance of the shares remaining subject to this
Warrant, shall be issued as of the Exchange Date and delivered to the Holder
within ten (10) days following the Exchange Date. In connection with any Warrant
Exchange, this Warrant shall represent the right to subscribe for and acquire
the number of Warrant Shares (rounded to the next highest integer) equal to (i)
the number of Warrant Shares specified by the Holder in its Notice of Exchange
(the "Total Number") less (ii) the number of Warrant Shares equal to the
quotient obtained by dividing (A) the product of the Total Number and the
existing Exercise Price by (B) the current market value of a share of Common
Stock. Current market value shall be the average closing sales price for the 5
trading day period prior to the Exchange Date.
2. Adjustment of Exercise Price and Number of Shares Deliverable Upon Exercise
of Warrant.
The Exercise Price and the number of Shares purchasable upon the exercise of
this Warrant are subject to adjustment from time to time upon the occurrence of
the events enumerated in this paragraph.
(a) In case the Corporation shall at any time after the date of this Warrant:
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(i) Pay a dividend of its shares of its Common Stock or make a
distribution in shares of its Common Stock with respect to its
outstanding Common Stock;
(ii) Subdivide its outstanding shares of Common Stock;
(iii) Combine its outstanding shares of Common Stock; or
(iv) Issue any other shares of capital stock by reclassification of
its shares of Common Stock;
the number of Warrant Shares in effect at the time of the record date of such
dividend, subdivision, combination, or reclassification shall be proportionately
adjusted so that Holder shall be entitled to receive the aggregate number and
kind of shares which, if this Warrant had been exercised prior to such event,
Holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination, or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
If shares of the Corporation's Common Stock are subdivided into a greater number
of shares of Common Stock, the Exercise 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
Corporation's Common Stock are combined into a smaller number of Common Stock
shares, the Exercise Price shall be proportionately increased, and the Warrant
Shares shall be proportionately decreased.
(b) Except in the circumstances covered by Section 2(a) above, in case the
Corporation shall fix a record date for the issuance of rights, options, or
warrants or make a distribution of shares of Common Stock to all (but not less
than all) holders of its outstanding Common Stock entitling them to subscribe
for or purchase shares of Common Stock (or securities convertible into shares of
Common Stock) at a price per share (or having a conversion price per share, if a
security convertible into Common Stock) less than the market price of the shares
(based on the closing bid price on the record date on NASDAQ or a listed
securities exchange of the Corporation's Common Stock, or if no such quote is
available, the shareholders equity on the date of the last financial statement
divided by the total number of shares outstanding) (the "Market Price"), the
Exercise Price to be in effect after such record date shall be determined by
multiplying the then current Exercise Price in effect immediately prior to such
record date by a fraction, of which the numerator shall be the number of
fully-diluted shares of Common Stock outstanding on such record date plus the
number of shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock so to be offered (or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Market Price and of which the denominator shall be the number of
fully-diluted shares of Common Stock outstanding on such record date plus the
number of additional shares of Common Stock to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible). Such adjustment shall be made successively whenever such
a record date is fixed; and in the event that such rights or warrants are not so
issued, the Exercise Price shall again be adjusted to be the Exercise Price
which would then be in effect if such record date had not been fixed.
3. 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 any state securities laws. The Holder acknowledges by
acceptance of this Warrant that as of the date of this Warrant and at the time
of exercise (a) he has acquired this Warrant or the Warrant Shares, as the case
may be, for investment and not with a view to distribution; and either (b) he
has a pre-existing personal or business relationship with the Corporation, or
its executive officers, or by reason of his business or financial experience he
has the capacity to protect his own interests in connection with the
transaction; and (c) he is an accredited investor as that term is defined in
Regulation D promulgated under the Securities Act. The Holder agrees that any
Warrant Shares issuable upon exercise of this Warrant will be acquired for
investment and not with a view to distribution and such Warrant Shares will not
be registered under the Securities Act and applicable state securities laws and
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 Corporation, an exemption from such registration and qualification is
available. The Holder, by acceptance hereof, consents to the placement of the
following restrictive legends, or substantially similar legends, on each
certificate to be issued to the Holder by the Corporation in connection with the
issuance of such Warrant Shares: "THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH THE
DISTRIBUTION HEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
PLEDGED, SOLD,
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OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE
SECURITIES LAWS."
4. 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 unrestricted
securities acquired in the open market and 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 (the "Lock-Up Period"). 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 (the "Lock-Up Legend").
5. Loss, Theft, Destruction or Mutilation of Warrant
Upon receipt by the Corporation of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of any Warrant or stock certificate, and
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and upon reimbursement to the Corporation of all reasonable
expenses incidental thereto, and upon surrender and cancellation of such Warrant
or stock certificate, if mutilated, the Corporation will make and deliver a new
Warrant or stock certificate of like tenor and dated as of such cancellation, in
lieu of this Warrant or stock certificate.
6. 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 Corporation
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 3 of this Warrant. Promptly upon receiving such
written notice and reasonably satisfactory opinion, if so requested, the
Corporation, 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 Corporation. If a determination has been made pursuant
to this Section 6 that the opinion of counsel for the Holder is not reasonably
satisfactory to the Corporation, the Corporation 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 3. The Corporation
may issue stop transfer instructions to its transfer agent in connection with
such restrictions. Warrants and underlying securities issued upon transfers
after the expiration date of the Lock-Up Period shall be issued without the
Lock-Up Legend.
7. Reservation of Shares.
The Company hereby agrees that at all times there shall be reserved for issuance
and delivery upon exercise or exchange of this Warrant all shares of its Common
Stock or other shares of capital stock of the Company from time to time issuable
upon exercise or exchange of this Warrant. All such shares shall be duly
authorized and, when issued upon the exercise or exchange of the Warrant in
accordance with the terms hereof, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale (other than as provided in the
Company's articles of incorporation and any restrictions on sale set forth
herein or pursuant to applicable federal and state securities laws) and free and
clear of all preemptive rights.
The 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.
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8. Registration Rights.
The Company intends to register the Warrant Shares in connection with that
certain registration statement discussed and proposed in the Registration Rights
Agreement dated as of September 14, 2000, as amended on January 4, 2001, between
the Company and Series C and Series CC Preferred stock purchasers.
9. Arbitration.
In the event that a dispute arises between the Corporation and the holder of
this Warrant as to any matter relating to this Warrant, the matter shall be
settled by arbitration in Alameda County, California in accordance with the
Rules of the American Arbitration Association and the award rendered by such
arbitrator(s) shall not be subject to appeal and may be entered in any federal
or state court located in Alameda County having jurisdiction thereof, and
actions or proceedings shall be brought in no other forum or venue.
10. 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.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by
its duly authorized officers and the corporate seal hereunto affixed as of this
5th day of March, 2001.
VALUESTAR CORPORATION ACCEPTANCE BY HOLDER
/s/ JAMES STEIN
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James Stein, CEO
/s/ JAMES A. BARNES
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James A. Barnes, Secretary