EXHIBIT 4.17.2
SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT
This Second Amendment to Note Purchase Agreement (this "Amendment"),
dated as of December 8, 1999, is by and among VALueStar, INC., a California
corporation (the "Company"), SEACOAST CAPITAL PARTNERS LIMITED PARTNERSHIP, a
Delaware limited partnership ("Seacoast"), and PACIFIC MEZZANINE FUND, L.P., a
California limited partnership, ("Pacific") and Tangent GROWTH FUND, L.P., a
California limited partnership ("Tangent" and, collectively with Seacoast and
Pacific, "Purchaser").
WHEREAS, the Company and Purchaser have entered into that certain Note
Purchase Agreement, dated as of March 31, 1999, as amended (the "Original
Agreement" and, as further amended hereby, the "Note Agreement"), in connection
with the issuance by the Company to Purchaser of a 8.0% Senior Subordinated Note
in the original principal amount of $2,450,000; and
WHEREAS, in connection with a Series B Preferred Stock financing of the
Company, the Company and certain investors in the Series B Preferred Stock have
requested that Purchaser make certain amendments to the Original Agreement, and
Purchaser is willing to do so upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. DEFINITIONS. All capitalized terms used but not otherwise defined in
this Amendment shall have the meanings ascribed to them in the Note Agreement.
Unless otherwise specified, all section references herein refer to sections of
the Original Agreement.
2. Amendments to SECTION 1.1. Section 1.1 is hereby amended and
restated to read as follows in its entirety:
"1.1 Description of Senior Note. The Company will authorize
the issuance and sale of its Senior Note which shall be dated as of the
Closing Date, shall be in the aggregate original principal amount of
Two Million Four Hundred Fifty Thousand and No/100 Dollars
($2,450,000), and shall bear interest at the fixed rate of 8% per annum
until March 31, 2000. On April 1, 2000 and each January 1, April 1,
July 1 and October 1 of each calendar year thereafter, the rate of
interest payable with respect to the Senior Note shall be increased by
1.0% until January 1, 2001, at which time and thereafter the rate of
interest payable with respect to the Senior Note shall be 12.0%. Any
Senior Obligations payable under Section 2.4 hereof shall bear interest
from the due date thereof at a rate of thirteen percent (13%) per
annum. Upon the occurrence of any Potential Default under Section
8.1(a) hereof or Event of Default and during the continuation thereof,
the unpaid principal amount, and the past due interest, if any, of the
Senior Note shall bear interest at the rate of thirteen percent (13%)
per annum. Interest on the Senior Note and on any other Senior
Obligations shall be computed on the basis of the actual number of days
elapsed over a three hundred-sixty (360) day year. Each Senior Note
shall be substantially in the form attached hereto as Exhibit A."
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3. AMENDMENT TO SECTION 6.12. Section 6.12 is hereby amended and
restated to read as follows in its entity:
"6.12 Insurance. The Company will maintain, with financially
sound, reputable and solvent companies, insurance policies acceptable
to Purchaser (a) insuring its assets against loss by fire, explosion,
theft and other risks and casualties as are customarily insured against
by companies engaged in the same or a similar business, (b) insuring it
against liability for personal injury and property damages relating to
its assets, such policies to be in such amounts and covering such risks
as are usually insured against by companies engaged in the same or a
similar business, and insuring such other matters as may from time to
time be reasonably requested by Purchaser and (c) insuring the life of
James Stein in the amount of $2,000,000. In the event that any benefits
are paid thereon, the Purchaser shall first receive, in reduction of
the Senior Obligations, an amount equal to the lesser of the Senior
Obligations or $2,000,000, and any other benefits paid thereon shall be
paid to the Company. All general liability policies shall be endorsed
in favor of each Purchaser as an additional insured, and all casualty
insurance policies shall name each Purchaser as loss payee, as the
interest may appear. The Company shall provide copies of all such
insurance policies to each Purchaser within ten (10) days following
each Purchaser's request for the same. The Company shall (i) pay, or
cause to be paid, all premiums for such insurance on or before such
premiums become due, (ii) furnish to each Purchaser satisfactory proof
of the timely making of such payments, (iii) deliver all renewal
policies to each Purchaser at least five (5) days before the date the
expiration date of each expiring policy, (iv) cause such policies to
require the insurer to give notice to each Purchaser of termination of
any such policy at least thirty (30) days before such termination is to
be effective, and (v) immediately deliver written notice to each
Purchaser of any casualty loss affecting the Collateral. If the Company
fails to provide and pay for any such insurance, any Purchaser may, at
its option, but shall not be required to, pay the same and charge the
Company therefor."
4. AMENDMENT TO SECTION 7.8. Section 7.8 is hereby amended and restated
to read as follows in its entity:
"7.8 Capital Expenditures. The Company will not make any
Capital Expenditures if, as a result thereof, the Capital Expenditures
of the Company exceed $1,250,000 during fiscal year 2000 and $750,000
during any fiscal year thereafter (except that the Company may also
make Capital Expenditures in fiscal year 2000 in an additional amount
equal to any unutilized portion of the $150,000 of permitted Capital
Expenditures for the fiscal quarter ending June 30, 1999)."
5. Amendment to Section 7.9(a). Section 7.9(a) is hereby amended and
restated to read as follows in its entirety:
"(a) Minimum Net Worth. At all times during the periods set
forth below, the Company shall not permit the Parent's Net Worth to be
less than the amounts set forth below (with the amount set forth below
increased by the amount of any adjustment to Net Worth from the sale of
securities of the Company or the Parent) for the period corresponding
thereto:
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Period Amount
------ ------
October 1, 1999 - December 31, 1999 ($9,000,000)
January 1, 2000 - March 31, 2000 ($13,500,000)
April 1, 2000 - June 30, 2000 ($18,000,000)
July 1, 2000 and thereafter ($24,000,000)"
6. Amendment to Section 7.9(b). Section 7.9(b) is hereby amended and
restated to read as follows in its entirety:
"(b) Minimum EBITDA. The Company shall not permit the Parent's
EBITDA for any fiscal quarter (determined on a consolidated basis) to
be less than the amounts set forth during the periods specified below,
measured as of the last day of each fiscal quarter:
Period EBITDA for Each Fiscal Quarter
------ ------------------------------
October 1, 1999 - December 31, 1999 ($3,000,000)
January 1, 2000 - March 31, 2000 ($4,500,000)
April 1, 2000 - June 30, 2000 ($4,500,000)
July 1, 2000 - June 30, 2001 ($1,500,000)
Thereafter ($1,500,000)"
7. Amendment to Section 7.9(c). Section 7.9(c) is hereby amended and
restated to read as follows in its entirety:
"(c) Minimum Net Income. The Company shall not permit Parent's
Minimum Net Income for any fiscal quarter to be less than the amounts
set forth during the periods specified below, measured as of the last
day of each fiscal quarter:
Period Net Income Per Fiscal Quarter
--------- -----------------------------
October 1, 1999 - December 31, 1999 ($3,200,000)
January 1, 2000 - March 31, 2000 ($4,700,000)
April 1, 2000 - June 30, 2000 ($4,700,000)
July 1, 2000 - June 30, 2001 ($1,500,000)
July 1, 2001 - June 30, 2002 and thereafter ($1,500,000)"
8. Amendment to Section 7.9(e). Section 7.9(e) is hereby amended and
restated to read as follows in its entirety:
"(e) Operating Leases. The Company will not enter into any
lease (other than a capital lease for fixed assets) if, as a result
thereof, the liability of such Persons under all such leases to which
such Persons are a party would exceed $600,000 per annum."
9. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by Purchaser:
9.1 Purchaser shall have received (a) this Amendment, duly executed by
the Company, (b) the Second Amendment to Shareholder Agreement, dated of even
date herewith (the "Shareholder
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Amendment"), (c) a true, correct and complete copy of the resolutions of the
Company's Board of Directors authorizing the execution, delivery and performance
of this Amendment, certified by the Secretary of the Company and substantially
in the form of Exhibit A attached hereto; and (c) such additional documents,
instruments and information as Purchaser or its legal counsel may request.
9.2 The Series B Preferred Stock Purchase Agreement shall have been
validly executed and entered into by each of the parties thereto and the Series
B Preferred Stock shall have been issued to the recipients thereof.
9.3 The representations and warranties contained herein and in the
Original Agreement and the Other Agreements shall be true and correct as of the
date hereof, as if made on the date hereof.
9.4 No Potential Default or Event of Default under the Note Agreement
shall have occurred and be continuing to the knowledge of the Company, unless
such Potential Default or Event of Default has been specifically waived in
writing by Purchaser.
10. RATIFICATIONS, REPRESENTATIONS AND WARRANTIES.
10.1 The terms and provisions set forth in this Amendment shall modify
and supersede all inconsistent terms and provisions set forth in the Original
Agreement and the Other Agreements, and, except as expressly modified and
superseded by this Amendment, the terms and provisions of the Original Agreement
and the Other Agreements are ratified and confirmed and shall continue in full
force and effect. The Company and Purchaser agree that the Original Agreement
and the Other Agreements, as amended hereby, shall continue to be legal, valid,
binding and enforceable in accordance with their respective terms.
10.2 The Company hereby represents and warrants to Purchaser that (a)
the execution, delivery and performance of this Amendment and any and all other
agreements executed and/or delivered in connection herewith have been authorized
by all requisite corporate action on the part of the Company and will not
violate the Articles of Incorporation or Bylaws of the Company or the terms of
any material agreement, contract or obligation by which the Company is bound (b)
the representations and warranties contained in the Original Agreement and the
Other Agreements, as amended hereby, are true and correct on and as of the date
hereof as though made on and as of such date; (c) to the knowledge of the
Company, no Potential Default or Event of Default under the Note Agreement has
occurred and is continuing, unless such Potential Default or Event of Default
has been specifically waived in writing by Purchaser; (d) to the knowledge of
the Company, the Company is in full compliance with all covenants and agreements
contained in the Note Agreement and the Other Agreements; and (e) the Company
has not amended its Articles of Incorporation or its Bylaws since March 31,
1999.
11. WAIVER. Subject to the terms and conditions set forth herein and in
reliance upon the representations and warranties of the Company set forth
herein:
11.1 Purchaser hereby waives any Event of Default arising under the
Note Agreement on or before the date of this Amendment solely by reason of the
Company's violation of Sections 7.1, 7.4 and 7.5 of the Note Agreement as a
result of the issuance by the Company and compliance with the terms and
provisions of those certain 10% Convertible Demand Promissory Notes dated
November 24, 1999 or November 29, 1999 in the aggregate principal amount of
$250,000.
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11.2 Purchaser hereby waives the notice required by Section 6.19 of the
Note Agreement in connection with (1) the special meeting of the Board of
Directors of the Company held on December 8, 1999 with respect to the
authorization of the issuance of the Series B Preferred Stock and the
transactions contemplated under that certain Series B Preferred Stock Purchase
Agreement and the documents executed and warrants to purchase the Company's
common stock (the "Series B Warrants") issued in connection therewith; and (2)
any special meeting of the Board of Directors of the Company with respect to the
approval of the resolutions attached hereto as Exhibit A.
11.3 Purchaser hereby waives any Change in Control arising solely by
reason of the Company's issuance of the Company's Series A Preferred Stock,
Series B Preferred Stock and Series B Warrants.
11.4 Purchaser hereby waives any Prepayment Fee arising solely by
reason of the Company's issuance of the Series B Preferred Stock and the Series
B Warrants.
Other than as set forth in this Section, nothing contained in this Amendment
shall be construed as a waiver by Purchaser of any covenant or provision of the
Note Agreement, the Other Agreements, this Amendment, or of any other contract
or instrument between the Company and Purchaser, and the failure of Purchaser at
any time or times hereafter to require strict performance by Company of any
provision thereof shall not waive, affect or diminish any right of Purchaser to
thereafter demand strict compliance therewith. Purchaser hereby reserves all
rights granted under the Note Purchase, the Other Agreements, this Amendment and
any other contract or instrument between the Company and Purchaser.
12. TERMINATION OF PLEDGE AND SECURITY AGREEMENTS. Upon payment in full
of the Note, each Pledge and Security Agreement shall terminate and the
securities covered thereby shall be returned and delivered to each of Stein,
Barnes and Polls, as applicable.
13. MISCELLANEOUS.
13.1 Survival of Representations and Warranties. All representations
and warranties made in this Amendment, the Original Agreement or any Other
Agreement, including, without limitation, any document furnished in connection
with this Amendment, shall survive the execution and delivery of this Amendment
and the Other Agreements, and no investigation by Purchaser or any closing shall
affect the representations and warranties or the right of Purchaser to rely upon
them.
13.2 Reference to Original Agreement. Each of the Original Agreement
and the Other Agreements, and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Original Agreement, as amended hereby, are
hereby amended so that any reference in the Original Agreement and such Other
Agreements to the Original Agreement shall mean a reference to the Original
Agreement as amended hereby.
13.3 Expenses of Purchaser. As provided in the Original Agreement, the
Company agrees to pay on demand all costs and expenses incurred by Purchaser in
connection with the preparation, negotiation and execution of this Amendment and
any other agreements executed pursuant hereto, including, without limitation,
the reasonable costs and fees of Purchaser's legal counsel.
13.4 Severability. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this
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Amendment and the effect thereof shall be confined to the provision so held to
be invalid or unenforceable.
13.5 Successors and Assigns. This Amendment will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns.
13.6 Headings. The headings of the sections and subsections of this
Amendment are inserted for convenience only and do not constitute a part of this
Amendment.
13.7 Counterparts. This Amendment may be executed in any number of
counterparts, which shall collectively constitute one agreement.
13.8 Law Governing. THIS AMENDMENT SHALL BE DEEMED TO HAVE BEEN
SUBSTANTIALLY NEGOTIATED AND MADE IN THE STATE OF CALIFORNIA AND SHALL BE
INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS
OF THE UNITED STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN,
WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE
THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER
JURISDICTION.
13.9 Waiver; Modification. NO PROVISION OF THIS AMENDMENT MAY BE
WAIVED, CHANGED OR MODIFIED, OR THE DISCHARGE THEREOF ACKNOWLEDGED, ORALLY, BUT
ONLY BY AN AGREEMENT IN WRITING SIGNED BY THE PARTY AGAINST WHOM THE ENFORCEMENT
OF ANY WAIVER, CHANGE, MODIFICATION OR DISCHARGE IS SOUGHT.
13.10 Final Agreement. THE ORIGINAL AGREEMENT, AS AMENDED HEREBY, AND
THE OTHER AGREEMENTS REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT
TO THE SUBJECT MATTER HEREOF AND THEREOF ON THE DATE THIS AMENDMENT IS EXECUTED.
THE ORIGINAL AGREEMENT, AS AMENDED HEREBY, AND THE OTHER AGREEMENTS MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the Company and Purchaser have caused this
Amendment to be executed and delivered as of the date first written.
THE COMPANY:
VALUESTAR, INC.
By: /s/ JIM STEIN
-------------
Name: JIM STEIN
-------------
Title: PRESIDENT & CEO
PURCHASER:
SEACOAST CAPITAL PARTNERS LIMITED PARTNERSHIP
By: Seacoast Capital Corporation,
its general partner
By: /s/ JEFFREY J. HOLLAND
----------------------
Name: JEFFREY J. HOLLAND
----------------------
Title: Vice President
----------------------
PACIFIC MEZZANINE fund, L.P.
By: Pacific Private Capital
its general partner
By: /s/ ANDREW B. DUMKE
----------------------
Name: ANDREW B. DUMKE
----------------------
Title: General Partner
----------------------
TANGENT GROWTH FUND, L.P.
By: Tangent Fund Management LLC
its general partner
By: /s/ MARK P. GILLES
----------------------
Name: MARK P. GILLES
----------------------
Title: Vice President
----------------------
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