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EXHIBIT 99.4
VALUESTAR CORPORATION
REGISTRATION RIGHTS AGREEMENT
AND SHAREHOLDERS AGREEMENT AMENDMENT
THIS REGISTRATION RIGHTS AGREEMENT AND SHAREHOLDERS AGREEMENT AMENDMENT
(this "Agreement") is dated effective as of July 21, 1999, by and among
VALUESTAR CORPORATION, a Colorado corporation (the "Company"), SEACOAST CAPITAL
PARTNERS LIMITED PARTNERSHIP, a Delaware Limited Partnership ("Seacoast"),
PACIFIC MEZZANINE FUND, L.P. a California limited partnership ("Pacific"),
TANGENT GROWTH FUND, L.P., a California limited partnership ("Tangent"), Xxxxx
X. Xxxxxx ("Xxxxxx"), and Xxxxx X. Xxxxx ("Polis"), and the additional entities
or individuals set forth on Schedule 1 attached hereto and incorporated herein
by reference who have entered into the ValueStar Corporation Series A Preferred
Stock Purchase Agreement dated on even date herewith (the "Purchase Agreement")
(individually, each such individual or entity as well as Seacoast, Pacific,
Tangent, Xxxxxx and Polis a "Holder" and collectively, all such individuals and
entities, the "Holders").
RECITAL
A. On March 31, 1999, Seacoast, Pacific, Tangent, Xxxxxx, Polis and Xxx
Xxxxx ("Xxxxx") entered into a Shareholders Agreement (the "Shareholders
Agreement") which granted certain registration rights pursuant to Article VII
thereunder (the "Registration Agreement").
B. Seacoast, Pacific, Tangent, Polis and Xxxxxx desire to amend and
restate the Registration Agreement in consideration of the purchase by the
Holders of shares of the Company's Series A Convertible Preferred Stock pursuant
to the Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties contained in this Agreement, the parties hereto
hereby agree as follows:
1. DEFINITIONS.
a. "COMMISSION" means the Securities and Exchange Commission
or any other Federal agency at the time administering the Securities Act.
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b. "CAPITAL STOCK" means the Company's common stock and any
other capital stock of the Company authorized from time to time, and any other
shares, options, interests, participations, or other equivalents (however
designated) of or in the Company, whether voting or nonvoting, including,
without limitation, common stock, options, warrants, preferred stock, phantom
stock, stock appreciation rights, preferred stock, convertible notes or
debentures, stock purchase rights, and all agreements, instruments, documents,
and securities convertible, exercisable, or exchangeable, in whole or in part,
into any one or more of the foregoing.
c. "COMMON STOCK" means any and all (i) common stock of the
Corporation issued or issuable upon conversion of the Corporation's Series A
Convertible Preferred Stock, (ii) all common stock and Other Securities of the
Corporation issued or issuable pursuant to the Warrants issued under the Warrant
Purchase Agreement (collectively, (i) and (ii) the "Stock"); (iii) any common
stock of the Corporation issued as a dividend or other distribution with respect
to or in replacement of the Stock, and (iv) any common stock of the Corporation
issued in any combination or subdivision of the Stock. In determining the amount
of Common Stock held by any Person, the sum of (i), (ii), (iii) and (iv) shall
be used.
d. "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended or any similar Federal statue and the rules and regulations of the
Commission thereunder all as the same shall be in effect at the time.
e. "INDEBTEDNESS" means for any Person: (a) all indebtedness,
whether or not represented by bonds, debentures, notes, securities, or other
evidences of indebtedness, for the repayment of money borrowed, (b) all
indebtedness representing deferred payment of the purchase price of property or
assets, (c) all indebtedness under any lease which, in conformity with GAAP, is
required to be capitalized for balance sheet purposes and leases of property or
assets made as a part of any sale and lease-back transaction if required to be
capitalized, (d) all indebtedness under guaranties, endorsements, assumptions,
or other contractual obligations, including any letters of credit, or the
obligations in respect of, or to purchase or otherwise acquire, indebtedness of
others, (e) all indebtedness secured by any lien existing on property owned,
subject to such lien, whether or not the indebtedness secured thereby shall have
been assumed by the owner thereof, (f) trade accounts payable more than one
hundred twenty (120) days past due, (g) all amendments, renewals, extensions,
modifications and refundings of any indebtedness or obligations referred to in
clauses (a), (b), (c), (d), (e) or (f).
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f. "OTHER SECURITIES" Any stock other than the Corporation's
common stock, other securities, property, or other property or rights that the
Holders become entitled to receive upon exercise of the Warrants.
g. "PERSON" means any individual, corporation, trust,
partnership, association, or other entity.
h. "PUBLIC OFFERING" A public offering of shares of any class
of Capital Stock by the Company issued to the general public pursuant to a
registration statement declared effective by the United States Securities and
Exchange Commission.
i. "REGISTRABLE SECURITIES" means the Common Stock.
j. "SECURITIES ACT" means the Securities Act of 1933, as
amended, or any similar Federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
k. "SENIOR OBLIGATIONS" means and includes any and all
Indebtedness and/or liabilities of the Company to each of Seacoast, Pacific and
Tangent (each a "Noteholder")of every kind, nature and description, direct or
indirect, secured or unsecured, joint, several, joint and several, absolute or
contingent, due or to become due, now existing or hereafter arising, under that
certain "Note Purchase Agreement" and any "Other Agreement" (as such agreements
are referenced under the Warrant Agreement) (regardless of how such Indebtedness
or liabilities arise or by what agreement or instrument they may be evidenced or
whether evidenced by any agreement or instrument) and all obligations of the
Company and any of its subsidiaries to each Noteholder to perform acts or
refrain from taking any action under any of the aforementioned documents,
together with all renewals, modifications, extensions, increases, substitutions
or replacements of any of such Indebtedness.
l. "SERIES A STOCK" means all issued and outstanding Series A
Convertible Preferred Stock of the Company and any common stock shares issuable
upon conversion thereof.
m. "SUBSIDIARY" Each Person of which or in which the Company
or its other Subsidiaries own directly or indirectly fifty-one percent (51%) or
more of (i) the combined voting power of all classes of stock having general
voting power under ordinary circumstances to elect a majority of the board of
directors or equivalent body of such Person, if it is a corporation
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or similar person; (ii) the capital interest or profits interest of such Person,
if it is a partnership, joint venture, or similar entity; or (iii) the
beneficial interest of such Person, if it is a trust, association, or other
unincorporated organization.
n. "WARRANT PURCHASE AGREEMENT" means that certain agreement
by and among the parties hereto and Xxx Xxxxx dated March 31, 1999. Any terms
not defined herein shall have the meaning set forth in the Warrant Purchase
Agreement.
o. "WARRANTS" means collectively the "A Warrant," the "B
Warrant" and the "C Warrant" referred to in Section 2.01 of the Warrant Purchase
Agreement and all Warrants issued upon the transfer or division of, or in
substitution for, such Warrants.
2. REGISTRATION RIGHTS.
a. REQUIRED REGISTRATION. At any time, Holders of a majority
of the Registrable Securities held by Seacoast, Pacific and Tangent may, upon
not more than two (2) occasions and not more often than once during any 180-day
period, make a written request to the Company requesting that the Company effect
the registration of Registrable Securities so long as such request is for an
aggregate offering price of not less than Five Million Dollars ($5,000,000).
After receipt of such a request, the Company will, as soon as practicable,
notify all Holders of such request and use its best efforts to effect the
registration of all Registrable Securities that the Company has been so
requested to register by any Holder for sale, all to the extent required to
permit the disposition (in accordance with the intended method or methods
thereof) of the Registrable Securities so registered.
Notwithstanding the foregoing, if the managing underwriter or
underwriters, if any, of such offering deliver a written opinion to each Holder
of such Registrable Securities that the success of the offering under this
Section 2.a. would be materially and adversely affected by the inclusion of any
securities requested to be included in such offering, then the amount of
securities to be offered for the accounts of any Persons will be reduced (i)
first according to the securities proposed for registration by any Persons other
than the Holders to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by such
managing underwriter or underwriters, and then (ii) by any Series A Stock held
by any Holder, and (iii) if such underwriter requires reduction of the
securities to be included in the offering in excess of all issued and
outstanding Series A Stock held by such participating Holders, pro rata among
all such Holders (according to the securities proposed for such registration
held by such Holders).
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b. INCIDENTAL REGISTRATION. If the Company at any time
proposes to file on its behalf or on behalf of any of its security holders a
registration statement under the Securities Act on any form (other than a
registration statement on Form S-4 or S-8 or any successor form unless such
forms are being used in lieu of or as the functional equivalent of, registration
rights) for any class that is the same or similar to Registrable Securities, it
will give written notice setting forth the terms of the proposed offering and
such other information as the Holders may reasonably request to all holders of
Registrable Securities at least twenty (20) days before the initial filing with
the Commission of such registration statement, and offer to include in such
filing such Registrable Securities as any Holder may request. Each Holder of any
such Registrable Securities desiring to have Registrable Securities registered
under this Section 2.b. will advise the Company in writing within ten (10) days
after the date of receipt of such notice from the Company, setting forth the
amount of such Registrable Securities for which registration is requested. The
Company will thereupon include in such filing the number of Registrable
Securities for which registration is so requested, and will use its best efforts
to effect registration under the Securities Act of such Registrable Securities.
Notwithstanding the foregoing, if the managing underwriter or
underwriters, if any, of such offering deliver a written opinion to each Holder
of such Registrable Securities that the success of the offering would be
materially and adversely affected by the inclusion of the Registrable Securities
requested to be included, then the amount of securities to be offered for the
accounts of Holders will be reduced pro rata (according to the Registrable
Securities proposed for registration) to the extent necessary to reduce the
total amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters; provided, however,
that if securities are being offered for the account of other Persons as well as
the Company, then with respect to the Registrable Securities intended to be
offered to Holders, the proportion by which the amount of such class of
securities intended to be offered by Holders is reduced will not exceed the
proportion by which the amount of such class of securities intended to be
offered by such other Persons (other than the Company) is reduced.
c. FORM S-3 REGISTRATIONS. In addition to the registration
rights provided in Sections 2.a. and 2.b. above, if at any time the Company is
eligible to use Form S-3 (or any successor form) for registration of secondary
sales of Registrable Securities, any Holder of Registrable Securities may
request in writing that the Company register shares of Registrable Securities
on such form so long as such request is for an aggregate offering price of at
least One
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Million Dollars ($1,000,000). Upon receipt of such request, the Company will
promptly notify all holders of Registrable Securities in writing of the receipt
of such request and each such Holder may elect (by written notice sent to the
Company within fifteen (15) days of receipt of the Company's notice) to have its
Registrable Securities included in such registration pursuant to this Section
7.03. Thereupon, the Company will, as soon as practicable, use its best efforts
to effect the registration on Form S-3 of all Registrable Securities that the
Company has so been requested to register by such Holder for sale. The Company
will use its best efforts to qualify and maintain its qualification for
eligibility to use Form S-3 for such purposes.
d. RULE 144 AVAILABILITY. Notwithstanding the foregoing, the
Company will not be obligated to register any Registrable Securities as to which
counsel reasonably acceptable to the Holders renders an opinion in form and
substance satisfactory to the Holders to the effect that such Registrable
Securities are freely saleable without limitation as to volume under Rule 144
under the Securities Act.
e. REGISTRATION PROCEDURES. In connection with any
registration of Registrable Securities under this Agreement, the Company will,
as soon as practicable:
(i) prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become and remain effective until the
earlier of such time as all Registrable Securities subject to such registration
statement have been disposed of or the expiration of one hundred eighty (180)
days;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all Registrable Securities covered by such registration
statement until the earlier of such time as all of such Registrable Securities
have been disposed of or the expiration of one hundred eighty (180) days;
(iii) furnish to each Holder such number of copies of
the registration statement and prospectus (including, without limitation, a
preliminary prospectus) in conformity with the requirements of the Securities
Act (in each case including all exhibits) and each amendment or supplement
thereto, together with such other documents as any Holder may reasonably
request;
(iv) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions
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within the United States and Puerto Rico as each Holder reasonably requests, and
do such other acts and things as may be reasonably required of it to enable such
holder to consummate the disposition in such jurisdiction of the securities
covered by such registration statement, except any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction;
(v) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
securities holders, as soon as practicable, an earnings statement covering the
period of at least twelve months beginning with the first month after the
effective date of such registration statement, which earnings statement will
satisfy the provisions of Section 11(a) of the Securities Act;
(vi) provide and cause to be maintained a transfer agent and
registrar for Registrable Securities covered by such registration statement from
and after a date not later than the effective date of such registration
statement;
(vii) if requested by the underwriters for any underwritten
offering or Registrable Securities on behalf of a Holder of Registrable
Securities pursuant to a registration requested under Section 2.a, the Company
will enter into an underwriting agreement with such underwriters for such
offering, such agreement to contain such representations and warranties by the
Company and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, provisions with respect to indemnities and contribution as
are reasonably satisfactory to such underwriters and the Holders; the Holders on
whose behalf Registrable Securities are to be distributed by such underwriters
will be parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters, will also be made to and for the benefit of
such Holders of Registrable Securities; and no Holder of Registrable Securities
will be required by the Company to make any representations or warranties to or
agreements with the Company or the underwriters other than reasonable and
customary representations, warranties, or agreements regarding such Holder, such
Holder's Registrable Securities, such Holder's intended method or methods of
disposition, and any other representation required by law;
(viii) furnish, at the written request of any Holder, on the
date that such Registrable Securities are delivered to the underwriters for sale
pursuant to such registration, or,
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if such Registrable Securities are not being sold through underwriters, on the
date that the registration statement with respect to such Registrable Securities
becomes effective, (i) an opinion in form and substance reasonably satisfactory
to such Holders, and addressing matters customarily addressed in underwritten
public offerings, of the counsel representing the Company for the purposes of
such registration (who will not be an employee of the Company and who will be
satisfactory to such Holders), addressed to the underwriters, if any, and to the
selling Holders; and (ii) a letter (the "comfort letter") in form and substance
reasonably satisfactory to such Holders, from the independent certified public
accountants of the Company, addressed to the underwriters, if any, and to the
selling Holders making such request (and, if such accountants refuse to deliver
the comfort letter to such Holders, then the comfort letter will be addressed to
the Company and accompanied by a letter from such accountants addressed to such
Holders stating that they may rely on the comfort letter addressed to the
Company); and
(ix) during the period when the registration statement is
required to be effective, notify each selling Holder of the happening of any
event as a result of which the prospectus included in the registration statement
contains an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading. It will be a condition precedent to the
obligation of the Company to take any action pursuant to this Agreement in
respect of the Registrable Securities that are to be registered at the request
of any Holder of Registrable Securities that such Holder furnish to the Company
such information regarding the Registrable Securities held by such Holder and
the intended method of disposition thereof as is legally required in connection
with the action taken by the Company. The managing underwriter or underwriters,
if any, for any offering of Registrable Securities to be registered pursuant to
Section 2.a. or 2.c. will be selected by the Holders of a majority of the
Registrable Securities being so registered.
f. ALLOCATION OF EXPENSES. Except as provided in the
following sentence, the Company will bear all expenses arising or incurred in
connection with any of the transactions contemplated by this Agreement,
including, without limitation, (a) all expenses incident to filing with the
National Association of Securities Dealers, Inc.; (b) registration fees; (c)
printing
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expenses; (d) accounting and legal fees and expenses; (e) expenses of any
special audits or comfort letters incident to or required by any such
registration or qualification; and (f) expenses of complying with the securities
or blue sky laws of any jurisdictions in connection with such registration or
qualification. Each Holder will severally bear the expense of its underwriting
fees, discounts, or commissions relating to its sale of Registrable Securities.
g. LISTING ON SECURITIES EXCHANGE. If the Company lists any
shares of Capital Stock on any securities exchange or on the National
Association of Securities Dealers, Inc. Automated Quotation System or similar
system, it will, at its expense, list thereon, maintain and, when necessary,
increase such listing of, all Registrable Securities.
h. HOLDBACK AGREEMENTS.
(i) If any registration pursuant to Section 2.b is in
connection with an underwritten public offering, each Holder of Registrable
Securities agrees, if so required by the managing underwriter, not to effect any
public sale or distribution of Registrable Securities (other than as part of
such underwritten public offering) during the period beginning seven (7) days
prior to the effective date of such registration statement and ending on the one
hundred eightieth (180th) day after the effective date of such registration
statement; provided, however, that Xxx Xxxxx and each Person that is an officer,
director, or beneficial owner of five percent (5%) or more of the outstanding
shares of any class of Capital Stock enters into such an agreement.
(ii) The Company agrees not to effect any public sale or
distribution during the period seven (7) days (or such longer period as may be
prescribed by Regulation M) prior to the effective date of the registration
statement employed in any underwritten public offering and ending on the one
hundred eightieth (180th) day after any such registration statement contemplated
by Sections 2.a. or 2.c. has become effective, except as part of such
underwritten public offering pursuant to such registration statement and except
pursuant to securities registered on Forms S-4 or S-8 of the Commission or any
successor forms, and the Company agrees to use its best efforts to cause each
holder of its equity securities or any securities convertible into or
exchangeable or exercisable for any of such securities, in each case purchased
from the Company at any time after the date of this Agreement (other than in a
public offering), to agree not to effect any such public sale or distribution of
such securities during such period.
i. RULE 144. At all times following completion by the
Company of a Public Offering, the Company will take such action as any Holder
may reasonably request, all to the extent required from time to time to enable
such Holder to sell shares of Registrable Securities
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without registration pursuant to and in accordance with (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation adopted by the Commission. Upon the request of any
Holder of Registrable Securities, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
j. RULE 144A. The Company agrees that, upon the request of
any Holder or any prospective purchaser of Registrable Securities designated by
a Holder, the Company will promptly provide (but in any case within fifteen (15)
days of a request) to such Holder or potential purchaser, the following publicly
available information:
(i) a brief statement of the nature of the business of the
Company and any Subsidiaries and the products and services they offer;
(ii) the most recent consolidated balance sheets and profit
and losses and retained earnings statements, and similar financial statements of
the Company for such part of the two preceding fiscal years prior to such
request as the Company has been in operation (such financial information will be
audited, to the extent reasonably available); and
(iii) such other publicly available information about
the Company, any Subsidiaries, and their business, financial condition, and
results of operations as the requesting Holder or purchaser of such Warrants
requests in order to comply with Rule 144A, as amended, and the antifraud
provisions of the federal and state securities laws. The Company hereby
represents and warrants to any such requesting Holder and any prospective
purchaser of Warrants or Warrant Shares from such Holder that the information
provided by the Company pursuant to this Section 2.j. will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading.
k. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. Until (i) a
Qualified Liquidity Milestone, (ii) a Qualified Liquidation Event (as each is
defined in the Company's Certificate of Designation filed with the Colorado
Secretary of State) (iii) the repayment of any and all Senior Obligations owed
to such Noteholder and the sale in excess of 80% of such Noteholder's common
stock shares and Other Securities issued or issuable under the Warrants from and
after the date of this Agreement or until the provisions of Section 2.d. are
applicable, the Company will not, without the prior written consent of the
Holders of a majority of the outstanding Registrable Securities, enter into any
agreement with any holder or prospective holder of any securities of the Company
that would allow such holder or prospective holder (a)
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to include such securities in any registration filed under Section 2.a., unless
under the terms of such agreement, such holder or prospective holder may include
such securities in any such registration only to the extent that the inclusion
of its securities will not reduce the amount of the Registrable Securities of
the Holders that is included or (b) to make a demand registration that could
result in such registration statement being declared effective prior to the
effectiveness of the first registration statement effected under Section 2.a. or
within one hundred twenty (120) days of the effective date of any registration
effected pursuant to Section 2.a..
l. RIGHT TO DELAY A DEMAND REGISTRATION. If, at the time of
any request to register Registrable Securities hereunder, the Company is
preparing a registration statement for a Public Offering (other than a
registration effected solely to implement an employee benefit plan or a
transaction to which Rule 145 of the Commission is applicable) and such
registration statement in fact is filed and becomes effective within ninety (90)
days after the request, then the Company may at its option delay such request
for a period not more than in excess of one hundred twenty (120) days from the
effective date of such offering or the date of commencement of such other
activity, as the case may be. Such right to delay shall be exercised by the
Company not more than once in any twelve (12) month period. Nothing in this
Section 2.l. shall preclude a Holder of Registrable Securities from enjoying
registration rights which it might otherwise possess under this this Agreement.
m. INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. Each
Holder of any Registrable Securities shall, by acceptance thereof, indemnify and
hold harmless each other holder of any Registrable Securities, the Company, its
directors and officers, each above-described underwriter who contracts with the
Company or its agents and each other Person, if any, who controls the Company or
such underwriter, against any liability, joint or several, to which any such
other Holder, the Company, underwriter or any such director or officer of any
such Person may become subject under the Securities Act or any other statute or
at common law, if such liability (or actions in respect hereof) arises out of or
is based upon (i) the disposition by such Holder of such Registrable Securities
in violation of the provisions of this Agreement, (ii) any alleged untrue
statement of any material fact contained in any registration statement under
which securities were registered under the Securities Act at the request of such
Holder, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or (iii) any alleged omission to state therein
a material fact required to be stated therein or necessary to make statement(s)
therein not misleading. Notwithstanding any other provision of this Section, the
indemnification rights set
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forth in this Section shall be given in the case of clause (ii) or (iii) only if
such alleged untrue statement or alleged omission supplement thereto was made
(1) in reliance upon and in conformity with information furnished to the Company
by such Holder expressly stated for use therein, and (2) not based on the
authority of an expert as to whom the holder had no reasonable ground to
believe, and did not believe, that (A) the statements made on the authority of
such expert were untrue or (B) there was an omission to state a material fact.
Such Holder shall reimburse the Company, such underwriter or such director,
officer, other Person or other Holder for any reasonable legal fees incurred in
investigating or defending any such liability; provided, however, that no Holder
of Registrable Securities shall be required to indemnify any Person against any
liability arising from any untrue or misleading statement or omission contained
in any prospectus or for any liability which arises out of the failure of any
Person to deliver a prospectus as required by the Securities Act; and provided
further, that the obligations of such Holder of Registrable Securities for the
indemnity hereunder shall be limited to an amount equal to the net proceeds
received by such Holder of Registrable Securities upon disposition thereof and
shall not extend to any settlement of claims related thereto without the express
written consent of such Holder of Registrable Securities, which consent shall
not be unreasonably withheld.
3. WAIVER OF CERTAIN SHAREHOLDER AGREEMENT RIGHTS.
a. PREEMPTIVE RIGHTS. In consideration of each of Seacoast's,
Pacific's and Tangent's purchase of the Company's Series A Stock under the
Purchase Agreement, each of Seacoast, Pacific and Tangent hereby waive all of
their rights set forth under Article II of the Shareholder Agreement with
respect to the Company's sale of the Series A Stock pursuant to the Purchase
Agreement and the rights accorded thereunder and this Agreement (and any other
Capital Stock issued hereafter in connection with the Series A Stock)..
b. DILUTION FEE. Each of Seacoast, Pacific and Tangent hereby
agree that the "Dilution Fee" set forth in Article III of the Shareholder
Agreement shall not apply with respect to any cash dividend or cash distribution
made by the Company on any shares of the Company's Series A Stock (or any other
Capital Stock issued hereafter in connection with the Series A Stock).
c. DRAG ALONG RIGHTS. Each of Seacoast, Pacific and Tangent
hereby agree that for purposes of the drag along rights set forth in Article IV
of the Shareholders Agreement, the issued and outstanding shares of Series A
Stock (or any other Capital Stock issued hereafter in connection with the Series
A Stock) shall not be used in either the numerator or denominator of any
percentage calculation to determine the percentage ownership in the Company of
the number of
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issued and outstanding voting stock shares of the Company held by either Barnes,
Polis, Xxxxx or their affiliates. For purposes of the definition of
"Shareholder" under the Shareholder Agreement, each of Seacoast, Pacific and
Tangent agree that Shareholder shall collectively include for each of Xxxxxx and
Polis those affiliated entities identified on the signature of the Shareholder
Agreement as being affiliated with each such individual.
d. FIRST REFUSAL; AND CO-SALE RIGHTS. In addition to any
other equity excluded from the provisions of Article VI of the Shareholders
Agreement, each of Seacoast ,Pacific and Tangent hereby agree that the Series A
Stock (and any other Capital Stock issued hereafter in connection with the
Series A Stock) held by Xxxxxx and Polis or their affiliates shall not be
subject to the first refusal or co-sale rights set forth in Article VI of the
Shareholder Agreement.
e. VOTING AGREEMENT. Each of Seacoast, Pacific and Tangent
hereby agree that Xxxxxx' and Polis' voting obligations under Article VIII of
the Shareholders Agreement with respect to the Capital Stock now owned or later
acquired by them shall expire with respect to any shares of Series A Stock (and
any other Capital Stock issued hereafter in connection with the Series A Stock)
at such time that Xxxxxx or Polis, as the case may be, are no longer the
beneficial owners with respect to such shares of Capital Stock, whether or not
they continue to own other shares of Series A Stock
4. MISCELLANEOUS.
a. HEADINGS. The headings in this Agreement are for
convenience and reference only and are not part of the substance of this
Agreement.
b. SEVERABILITY. The parties to this Agreement expressly
agree that it is not their intention to violate any public policy, statutory or
common law rules, regulations, or decisions of any governmental or regulatory
body. If any provision of this Agreement is judicially or administratively
interpreted or construed as being in violation of any such policy, rule,
regulation, or decision, the provision, section, sentence, word, clause, or
combination thereof causing such violation will be inoperative (and in lieu
thereof there will be inserted such provision, sentence, word, clause, or
combination thereof as may be valid and consistent with the intent of the
parties under this Agreement) and the remainder of this Agreement, as amended,
will remain binding upon the parties to this Agreement, unless the inoperative
provision would cause enforcement of the remainder of this Agreement to be
inequitable under the circumstances.
c. NOTICES. Whenever it is provided herein that any notice,
demand, request,consent, approval, declaration, or other communication be given
to or served upon any of the parties by another, such notice, demand, request,
consent, approval, declaration, or other communication will
14
be in writing and will be deemed to have been validly served, given, or
delivered (and "the date of such notice" or words of similar effect will mean
the date) five (5) days after deposit in the United States mails, certified
mail, return receipt requested, with proper postage prepaid, or upon receipt
thereof (whether by non-certified mail, telecopy, telegram, express delivery, or
otherwise), whichever is earlier, and addressed to the party to be notified as
follows:
If to Seacoast, at Seacoast Capital Partners Limited Partnership
Xxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Fax: (000) 000-0000
Seacoast Capital Partners Limited Partnership
c/o Seacoast Capital Corporation
00 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Fax: (000) 000-0000
If to Pacific, at Pacific Mezzanine Fund, L.P.
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Fax: (000) 000-0000
If to Tangent, at Tangent Growth Fund, L.P.
0 Xxxxx Xxxxxx
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Fax: (000) 000-0000
with courtesy copies to: Xxxxxx Xxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
If to the Company, at ValueStar Corporation
000 00xx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
FAX: (000) 000-0000
Attention: Xxx Xxxxx
with courtesy copies to: Bay Venture Counsel, LLP
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000
00
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
If to Xxxxxx: Xxxxx X. Xxxxxx
0000 Xxxxxx Xxxx Xxxxx
Xxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
If to Polis: Xxxxx X. Xxxxx
000 Xxxxxxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxx 00000
Fax: (000) 000-0000
If to any other Holder: As set forth on Schedule 1.
or to such other address as each party may designate for itself by like notice.
Notice to any other Holder will be delivered as set forth above to the address
shown on the stock transfer books of the Company unless such Holder has advised
the Company in writing of a different address to which notices are to be sent
under this Agreement. Failure or delay in delivering the courtesy copies of any
notice, demand, request, consent, approval, declaration, or other communication
to the persons designated above to receive copies of the actual notice will in
no way adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration, or other communication. No notice, demand,
request, consent, approval, declaration, or other communication will be deemed
to have been given or received unless and until it sets forth all items of
information required to be set forth therein pursuant to the terms of this
Agreement.
d. SUCCESSORS. This Agreement will be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns.
e. REMEDIES. The failure of any party to enforce any right or
remedy under this agreement, or to enforce any such right or remedy promptly,
will not constitute a waiver thereof, nor give rise to any estoppel against such
party, nor excuse any other party from its obligations under this Agreement. Any
waiver of any such right or remedy by any party must be in writing and signed by
the party against which such waiver is sought to be enforced.
f. FEES. Any and all fees, costs, and expenses, of whatever
kind and nature, including attorneys' fees and expenses, incurred by the Holders
in connection with the defense or prosecution of any actions or proceedings
arising out of or in connection with this Agreement will, to the extent provided
in this Agreement, be borne and paid by the Company within ten (10) days of
demand by the Holders.
16
g. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, which will individually and collectively constitute one
agreement.
h. CHOICE OF LAW. THIS AGREEMENT HAS BEEN EXECUTED, DELIVERED,
AND ACCEPTED BY THE PARTIES AND WILL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF
CALIFORNIA AND WILL 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.
i. NOMINEES FOR BENEFICIAL OWNERS. In the event that any
Registrable Securities are held by a nominee for the beneficial owner of such
Registrable Securities, the beneficial owner of Registrable Securities may, at
its election, be treated as the Holder of such Registrable Securities for
purposes of any request or other action by any Holder or Holders of Registrable
Securities pursuant to this Agreement or any determination of any number or
percentage of shares of Registrable Securities held by any Holder or Holders of
Registrable Securities contemplated by this Agreement. If the beneficial owner
of any Registrable Securities so elects, the Company may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of such
Registrable Securities. In no event will a Holder be required to exercise the
Warrant as a condition to the registration of such Warrant or Registrable
Securities thereunder.
j. NO FUTURE WAIVER. The Company hereby agrees and
acknowledges that the foregoing waivers and consents (a) shall in no event be
construed or be deemed to obligate either Seacoast, Pacific or Tangent 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 Shareholder
Agreement; and (c) shall in no event be construed or be deemed to (i) impair,
prejudice or otherwise
17
adversely affect Seacoast's, Pacific's or Tangent's right at any time
to exercise any right, privilege, or remedy in connection with the Shareholder
Agreement, (ii) amend or alter any provision of the Shareholder Agreement, or
(iii) constitute any course of dealing or other basis or altering any obligation
of the Company or any right, privilege or remedy of Seacoast, Pacific or Tangent
under the Shareholder Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
18
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
COMPANY:
VALUESTAR CORPORATION
By:
-------------------------------------
Name: Xxxxx Xxxxx
Its: President and Chief Executive
Officer
----------------------------------------
Xxxxx X. Xxxxxx, individually, as
President of Sunrise Capital, Inc. and
General Partner of Xxxxxxx Investments,
and as General Partner of Xxxxxxx
Investments Limited Partnership
----------------------------------------
Xxxxx X. Xxxxx, individually, as
President of Davric Corporation and
Trustee of the Xxxxx X. Xxxxx Family
Trust
19
SEACOAST CAPITAL PARTNERS LIMITED
PARTNERSHIP
By: Seacoast Capital Corporation,
its general partner
By:
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
Its: Vice President
PACIFIC MEZZANINE FUND, L.P.
By: Pacific Private Capital
its general partner
By:
-------------------------------
Name: Xxxxx Xxxxxxxx
Its: General Partner
TANGENT GROWTH FUND, L.P.
By: Tangent Fund Management, LLC
its general partner
By:
-------------------------------
Name: Xxxx X. Xxxxxx
Its: Vice President
20
SCHEDULE 1
---------------------------------------
Name of Investor
---------------------------------------
Authorized Signature
---------------------------------------
Print Name and Title of Signatory
ADDRESS
---------------------------------------
---------------------------------------
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