EXHIBIT D
VALUESTAR CORPORATION
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated effective
as of September 14, 2000 (the "Effective Date") by and among (i) the purchasers
of certain Series C Convertible Preferred Stock and warrants to purchase common
stock of the Company (defined below) listed on the signature pages hereto and
each other Person (defined below) who becomes a party to this Agreement
simultaneously with becoming a party pursuant to and in accordance with the
terms and conditions set forth in that certain Purchase Agreement (defined
below) on, or before, December 31, 2000 (each a "Holder" and, collectively, the
"Holders") and (ii) ValueStar Corporation, a Colorado corporation (the
"Company").
RECITALS
The Holders are parties to a Series C Preferred Stock and Warrant Purchase
Agreement dated for reference purposes as of even date herewith by and between
the Company and the Holders (the "Purchase Agreement") pursuant to which the
Company is obligated to enter into this Agreement. All capitalized terms not
defined herein shall have the meaning established in 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.
"COMMISSION" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"COMMON STOCK" means any and all (i) common stock of the Company issued or
issuable upon conversion of the Company's Series C Convertible Preferred Stock;
(ii) common stock of the Company issued or issuable upon exercise of the
Warrants (collectively, (i) and (ii) the "Stock"); (iii) common stock of the
Company issued as a dividend or other distribution with respect to or in
replacement of the Stock, and (iv) any common stock 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 and a Person shall be
deemed to "hold" all Common Stock then held by and/or issuable to such Person.
"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.
"PERSON" means any individual, corporation, trust, partnership,
association, or other entity.
"REGISTRABLE SHARES" means the Common Stock.
"REGISTRATION STATEMENT" means the registration statement and any
additional registration statements filed with the Commission as contemplated by
Section 2, including (in each case) any prospectus, amendments and supplements
to such registration statement or Prospectus, including pre- and post- effective
amendments, all exhibits thereto, and all material incorporated by reference in
such registration statement or statements.
"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.
"UNTRUE STATEMENT" shall include any untrue statement or alleged untrue
statement in the Registration Statement, or any omission or alleged omission to
state in the Registration Statement 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.
"WARRANTS" shall include those warrants issued to the Holders under the
Purchase Agreement and any warrants issued to finders of purchasers of the
Company's Series C Convertible Preferred Stock as contemplated under the
Purchase Agreement.
2.1 REGISTRATION PROCEDURES AND EXPENSES. The Company is obligated to do
the following:
The Company shall (subject to the Company's eligibility to use a Form S-3
Registration Statement which the Company believes it will be eligible to use),
(A) within 120 days following the Initial Closing , use its best efforts
to prepare and file with the Commission a Registration Statement on Form S-3
(provided that at such time the Company is eligible to use S-3 and, if not, use
its best efforts to prepare and file with the Commission a Registration
Statement on Form S-3 at such later date as the Company is so eligible) in order
to register with the Commission under the Securities Act a sale by the Holders
in accordance with the method or methods of distribution thereof as reasonably
specified by the Holders on a delayed or continuous basis pursuant to Rule 415
under the Securities Act all of the Registrable Shares (notwithstanding anything
to the contrary expressed or implied herein, if a registration statement on any
substitute form becomes available for registration of the Registrable Shares,
the Company may in its sole discretion instead prepare and file with the
Commission a registration statement on such substitute form at any time in order
to register the Registrable Shares under the Securities Act and such
registration statement will be a "Registration Statement" for the purposes of
this Agreement);
(B) use its reasonable efforts after such filing, subject to receipt of
necessary information from the Holders, to cause such Registration Statement to
become effective as soon as reasonably practicable thereafter;
(C) promptly notify each Holder, at any time when a prospectus relating to
such Registration Statement is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in or relating to such Registration Statement contains an Untrue Statement;
(D) promptly prepare and file with the Commission, and deliver to each
Holder, 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
Shares until termination of such obligation as provided in Section 2.6 below;
(E) furnish to each Purchaser such number of copies of prospectuses,
including preliminary prospectuses, in conformity with the requirements of the
Securities Act, in order to facilitate the public sale or other disposition of
all or any of the Registrable Shares by the Holders;
(F) file such documents as may be required of the Company for normal
securities law clearance for the resale of the Registrable Shares in any state
reasonably requested by the Holders provided, however, that the Company shall
not be required in connection with this paragraph (f) to (i) qualify as a
foreign corporation to do business under the laws of any jurisdiction in which
it shall not then be qualified or execute a general consent to service of
process in any jurisdiction or (ii) undertake any filing obligations in those
states where the Company does not currently meet such filing requirements;
(G) use its best efforts to cause all Registrable Shares to be listed on
each securities exchange, quotation system, market or over-the-counter bulletin
board, if any, on which equity securities by the Company are then listed or
traded;
(H) bear all expenses in connection with this Agreement, including,
without limitation, all registration and filing fees (including all expenses
incident to filing with the NASD), printing expenses, fees and disbursements of
counsel for company, expenses of any special audits incident to or required by
any such registration and expenses of complying with the securities or blue sky
laws of any jurisdiction, other than (i) fees and expenses, if any, of counsel
or other advisors to the Holders and (ii) brokers commissions, discounts or fees
and transfer taxes; and
(I) take all reasonable actions required to prevent the entry of any stop
order issued or threatened by the Commission or any state regulatory authority
with respect to any Registration Statement covering Registrable Shares, and take
all reasonable actions to remove it if entered.
2.2 INDEMNIFICATION.
(A) The Company agrees to indemnify and hold harmless each Holder, such
Holder's directors, officers, partners, agents, each underwriter of Registered
Shares, and each Person who controls any of the foregoing (within the meaning of
Section 15 of the Securities Act) (each an "Indemnified Party") from and against
any losses, claims, damages or liabilities to which such Indemnified Party may
become subject (under the Securities Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any Untrue Statement in the Registration
Statement, or arise out of any failure by the Company to fulfill any undertaking
included in the Registration Statement or arise under the Securities Act or any
other statute or at common law and the Company will reimburse such Indemnified
Party for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability arises out of, or is
based upon, an Untrue Statement made in such Registration Statement in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Indemnified Party specifically for use in preparation of the
Registration Statement or the failure of such Holder to comply with the
covenants and agreements contained in Section 2.3 hereof respecting the sale of
the Registrable Shares or any Untrue Statement in any prospectus that is
corrected in any subsequent prospectus that was delivered to the Holder prior to
the pertinent sale or sales by the Holder.
(B) Each Holder, severally and not jointly, agrees to indemnify and hold
harmless the Company (and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, each officer of the Company who
signs the Registration Statement and each director of the Company) from and
against any losses, claims, damages or liabilities to which the Company (or any
such officer, director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any failure to comply with the covenants and agreements contained in
Section 2.3 hereof respecting sale of the Registrable Shares, or any Untrue
Statement contained in the Registration Statement if, but only if, such Untrue
Statement was made in reliance upon and in conformity with written information
furnished by or on behalf of such Holder specifically for use in preparation of
the Registration Statement and such Holder will reimburse the Company (or such
officer, director or controlling person), as the case may be, for any legal or
other expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim; provided that in no event shall any
indemnity by a Holder under this Section 2.2 exceed the net proceeds received by
such Holder from the sale of the Registrable Shares covered by such Registration
Statement.
(C) Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 2.2, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel for all indemnified parties. No
indemnifying party in the defense of any such claim or litigation shall, except
with the consent of each indemnified party, consent to entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect of such claim or litigation, and no indemnified
party shall consent to entry of any judgment or settle such claim or litigation
without the prior written consent of the indemnifying party.
(D) If the indemnification provided for in this Section 2.2 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. Notwithstanding anything to the
contrary contained herein, any contribution by a Holder hereunder shall not
exceed the net proceeds received by such Holder from the sale of the Shares
covered by the Registration Statement.
2.3 TRANSFER OF SHARES AFTER REGISTRATION; NOTICE.
The Holder hereby covenants with the Company not to make any sale of the
Registrable Shares after registration without effectively causing the prospectus
delivery requirement under the Securities Act to be satisfied. The Holder
acknowledges that there may be times when the Company must suspend the use of
the prospectus forming a part of the Registration Statement until such time as
an amendment to the Registration Statement has been filed by the Company and
declared effective by the Commission, or until such time as the Company has
filed an appropriate report with the Commission pursuant to the Exchange Act.
The Holder hereby covenants that it will not sell any Registrable Shares
pursuant to said prospectus during the period commencing at the time at which
the Company gives the Holder notice of the suspension of the use of said
prospectus and ending at the time the Company gives the Holder notice that the
Holder may thereafter effect sales pursuant to said prospectus; provided,
however, that no such postponement shall be permitted for more than 120 days
during any 12 month period. The foregoing provisions of this Section 2.3 shall
in no manner diminish or otherwise impair the Company's obligations under
Section 2.1
2.4 REPORTING REQUIREMENTS.
(A) The Company agrees to use its best efforts to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(ii) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(iii) so long as any of the Holders own at least 250,000 shares of
Registrable Shares (appropriately adjusted for stock splits and
combinations), to furnish to the Holders forthwith upon written request
until the termination of the Company's obligations under Sections 2.1
through 2.4 (1) a written statement by the Company as to whether it
complies with the reporting requirements of said Rule 144, the Securities
Act and the Exchange Act, or whether it qualifies as a registrant whose
securities may be resold pursuant to Commission Form S-3, (2) a copy of
the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (3) such other
information as may be reasonably requested in availing the Holders of any
rule or regulation of the Commission that would permit the selling of the
Registrable Shares without registration.
2.5 TERMINATION OF OBLIGATIONS.
The obligations of the Company pursuant to Sections 2.1 through 2.4 hereof
shall cease and terminate upon the earlier to occur of (i) such time as all of
the Registrable Shares have been resold or (ii) such time as all of the
Registrable Shares may be sold during any 3 month period pursuant to Rule 144,
including Rule 144 (k) or (iii) upon the third anniversary date of the Effective
Date of this Agreement.
2.6 ASSIGNABILITY OF REGISTRATION RIGHTS.
The Registration rights set forth in this Section 2 are assignable only to
assignees acquiring no less than 250,000 or more Registrable Shares
(appropriately adjusted for stock splits and combinations). Notwithstanding
anything to the contrary herein, in no event shall a Holder assign any rights
herein after 30 days following the Effective Date and prior to the effectiveness
of the Registration Statement. Provided further that the Company shall not be
obligated to file any post-effective amendment to the Registration Statement
solely for the purpose of adding such assignee(s) to the Registration Statement
more than once during any consecutive six month period.
3. 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 any Registrable Shares
(other than those included in the registration) without the prior written
consent of the Company and, if applicable, such underwriter(s), as the case may
be, for a period of time not to exceed 30 days before and one hundred eighty
(180) days after the effective date of the registration; provided, however, that
Jim Stein 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 of the Company enters into such an agreement. 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. All Registrable Shares shall bear an appropriate legend
referencing this lock-up provision.
4. MISCELLANEOUS.
(A) CONSENT TO AMENDMENTS. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended and/or the provisions hereof
waived, only with the written consent of the Company and of Holders holding
fifty percent (50%) or more of the Registrable Shares at the time held by all
Holders. Notwithstanding the foregoing, no amendment or waiver may affect any
Holder in any manner differently from any other Holder without the written
consent of such first mentioned Holder. No course of dealing between the Company
and any Holder or any delay in exercising any rights hereunder or under the
Company's Certificate of Incorporation will operate as a waiver of any rights of
any such Holder.
(B) SUCCESSORS AND ASSIGNS. 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.
(C) 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.
(d) 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.
(E) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(F) NOTICES. All notices, demands, consents or other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been given (i) when personally delivered, (ii) three (3) business days following
mailing thereof, if sent by first class certified mail, return receipt
requested, or (iii) the next business day following transmission or mailing, if
sent by facsimile (receipt confirmed and followed up by one of the other
delivery methods discussed herein as well), Express Mail, Federal Express or
similar service, addressed as follows:
IF TO ANY HOLDER: To the applicable addresses set forth in the
Purchase Agreement
IF TO THE COMPANY: Valuestar Corporation
Attn: Jim Stein
360 - 22nd Street, Suite 210
Oakland, CA 94612
Fax No.: (510) 808-1400
WITH A COPY TO: Bay Venture Counsel, LLP
1999 Harrison Street, Suite 1300
Oakland, CA 94612
Attn: Donald C. Reinke, Esq.
Fax No.: (510) 834-7440
Any party may change its address for purposes hereof by notice given in
accordance with this Section 3.f to each of the other parties hereto.
(A) GOVERNING LAW. The validity, meaning and effect of this Agreement, and
all amendments and supplements hereto and all waivers and consents hereunder,
shall be determined in accordance with the laws of California, applicable to
contracts made and to be performed entirely within the State of California. Each
of the parties hereby submits to personal jurisdiction in the County of Alameda,
State of California solely for purposes of this Agreement and waives any
objection as to venue in the County of Alameda, State of California.
(B) SCHEDULES AND EXHIBITS. All schedules and exhibits are an integral
part of this Agreement.
(C) LITIGATION COSTS. Subject to Section 2.2, if any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of a dispute, breach, default, or misrepresentation in
connection with any of the provisions of this Agreement, the successful or
prevailing party or parties 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, if and only to the extent that
the applicable arbitrator or court shall so direct and such direction is final
and not subject to appeal or review.
(D) INTEGRATION. This instrument constitutes the entire agreement of the
parties hereto respecting the registration of the Registrable Shares by the
Holders and correctly sets forth the rights, duties, and obligations of each
party hereto to the others in relation thereto as of its date. Any prior
agreements, promises, negotiations or representations concerning its subject
matter which are not expressly set forth in this Agreement.
CORPORATION:
VALUESTAR CORPORATION
By:
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Name: James Stein
Its: President and Chief Executive
Officer
<PAGE>
SIGNATURE PAGES TO THE REGISTRATION RIGHTS AGREEMENT
PURCHASER:
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By:
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(Signature)
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(Print Name and Title)
ADDRESS:
TELEPHONE AND FAX NUMBERS:
Tel:
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Fax:
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Email Contact:
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AGGREGATE INVESTMENT AMOUNT
$
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