FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT
September 20, 1999
This First Amendment to Note Purchase Agreement (this "Amendment"),
dated as of September 20, 1999, is by and among VALueStar, INC., a California
corporation (the "Company"), VALUESTAR CORPORATION, a Colorado corporation (the
"Corporation"), 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"). Seacoast, Pacific and Tangent are sometimes
individually ("Purchaser") or collectively referred to as the ("Purchasers").
RECITALS
A. On March 31, 1999, the Purchasers entered into various agreements
with the Company, Corporation and others including but not limited to a Note
Purchase Agreement (the "Note Purchase Agreement") and a Warrant Purchase
Agreement (the "Warrant Purchase Agreement") or collectively the Agreements.
B. The Purchasers desire to amend certain provisions and waive certain
rights from the provisions of the Agreements.
C. Capitalized terms not defined herein shall have the meanings
established in the underlying Agreements and are incorporated herein by
reference.
AGREEMENT
Note Purchase Agreement Amendments and Restatements
The following sections of the Note Purchase Agreement (7.8 and 7.9) are
hereby amended and restated in their entirety as follows:
7.8 Capital Expenditures. The Company will not make any
Capital Expenditures if, as a result thereof, the Capital Expenditures
of the Company exceed $300,000 for the fiscal quarter ending June
30,1999. For each fiscal year following 1999, the Company will not make
any Capital Expenditures if, as a result thereof, the Capital
Expenditures of the Company exceed $250,000 (except that the Company
may also make Capital Expenditures in fiscal year 2000 in an additional
amount equal to any unutilized portion of the $300,000 of permitted
Capital Expenditures for the fiscal quarter ending June 30, 1999).
7.9 Financial Covenants.
(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:
Period Amount
------ ------
April 1, 1999 - June 30, 1999 ($4,500,000)
July 1, 1999 - September 30, 1999 ($6,300,000)
October 1, 1999 - December 31, 1999 ($8,500,000)
January 1, 2000 - March 31, 2000 ($9,600,000)
April 1, 2000 - June 30, 2000 ($10,300,000)
July 1, 2000 and thereafter Net Worth Covenant Amount
(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:
EBITDA for
Period Each Fiscal Quarter
------- -------------------
April 1, 1999 - June 30, 1999 Waived
July 1, 1999 - September 30, 1999 ($2,200,000)
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October 1, 1999 - December 31, 1999 ($2,100,000)
January 1, 2000 - March 31, 2000 ($1,050,000)
April 1, 2000 - June 30, 2000 ($600,000)
July 1, 2000 - June 30, 2001 $150,000
Thereafter $300,000
(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:
Net Income
Period Per Fiscal Quarter
--------- ------------------
April 1, 1999 - June 30, 1999 Waived
July 1, 1999 - September 30, 1999 ($2,400,000)
October 1, 1999 - December 31, 1999 ($2,300,000)
January 1, 2000 - March 31, 2000 ($1,300,000)
April 1, 2000 - June 30, 2000 ($800,000)
July 1, 2000 - June 30, 2001 $-0-
July 1, 2001 - June 30, 2002 and thereafter $150,000
(d) Maximum Indebtedness. The Company shall not permit its
Indebtedness at any time to exceed $5,350,000, reduced by scheduled
payments of principal and without giving effect to any reborrowing,
other than reborrowing under a revolving line of credit as permitted
hereunder and increased by any Permitted Future Debt to the extent the
Company is permitted to incur such Permitted Future Debt hereunder.
(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 $450,000 per annum.
(end of restatement)
Other Amendments and Waivers
The definition of Net Worth Covenant Amount in Section 11.1 of the Note
Purchase Agreement is amended by inserting $(10,300,000) to replace
$(5,500,000).
The requirement for an independent accountant's certificate referred to
in Section 6.1 (a) (ii) of the Note Purcchase Agreement is waived for the fiscal
year ended June 30, 1999. The Purchasers have been previously provided with the
officer certificate provided by Section 6.2 (a) of the agreement. Purchasers are
also in receipt of the budget provided by Section 6.1 (d) and this amendment
confirms prior consents allowing late delivery and adoption of the budget for
fiscal 2000.
The Purchasers have been advised that the Board of Directors of the
Corporation has approved an increase in the authorized shares of common stock
from 20,000,000 to 50,000,000 and the directors have scheduled an annual meeting
of the shareholders to approve such amendment to the articles of incorporation.
Purchasers consent to the increase in authorized common stock.
The Board of Directors of the Corporation has also approved an increase
in the authorized shares available for grant pursuant to the 1997 stock option
plan from 500,000 shares to 1,250,000 shares, subject to shareholder approval at
the annual meeting. Purchasers hereby agree that the number of shares issuable
under the 1997 stock option plan, as amended, shall be Permitted Stock as
defined in Article I of the Warrant Purchase Agreement.
Purchasers hereby waive any notices required pursuant to the documents,
including but not limited to the notices required under Section 4.08 of the
Warrant Purchase Agreement, in connection with the transactions described in
this Amendment.
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The Company and Corporation hereby agree with the foregoing provisions
and agrees and acknowledges that the foregoing amendments, waivers and consents
(a) shall in no event be construed or be deemed to obligate Purchasers to agree
to any subsequent waiver or consent; (b) shall in no event be construed or be
deemed as a waiver of any of the other terms and conditions of the Agreements
described herein; and (c) shall in no event be construed or be deemed to (i)
impair, prejudice or otherwise adversely affect Purchaser's right at any time to
exercise any right, privilege, or remedy in connection with the Agreements, (ii)
amend or alter any provision of the Agreements, or (iii) constitute any course
of dealing or other basis or altering any obligation of the Company or
Corporation or any right, privilege or remedy of Purchasers under the
Agreements.
IN WITNESS WHEREOF, the Company, the Corporation and Purchasers have
caused this Amendment to be executed and delivered by their respective officers
thereunto duly authorized. This Amendment may be executed in multiple
counterparts and by facsimile signature.
COMPANY:
VALUESTAR, INC.
By: /s/ XXXXX X. XXXXXX
Name: Xxxxx X. Xxxxxx
Its: Chief Financial Officer
CORPORATION:
VALUESTAR CORPORATION
By: /s/ XXXXX X. XXXXXX
Name: Xxxxx X. Xxxxxx
Its: Secretary and Treasurer
PURCHASER:
SEACOAST CAPITAL PARTNERS LIMITED
PARTNERSHIP
By: Seacoast Capital Corporation,
its general partner
By: /s/ XXXXXXX X. XXXXXXX
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
PACIFIC MEZZANINE fund, L.P., a limited
partnership
By: Pacific Private Capital
its general partner
By: /s/ XXXXX XXXXXXXX
Name: Xxxxx Xxxxxxxx
Title: General Partner
TANGENT GROWTH FUND, L.P.
By: Tangent Fund Management LLC
its general partner
By: /s/ XXXX X. XXXXXX
Name: Xxxx X. Xxxxxx
Title: Vice President
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