RIGHT OF FIRST NEGOTIATION AGREEMENT
THIS RIGHT OF FIRST NEGOTIATION AGREEMENT (this "AGREEMENT") by and between
First Data Corporation, a Delaware corporation ("FDC"), and ValueStar
Corporation, a Colorado corporation ("VALUESTAR"), is made this 21st day of
June, 2001.
WHEREAS, ValueStar through its wholly owned subsidiary, ValueStar, Inc., a
California corporation ("SUBSIDIARY"), provides a merchant rating service, a
merchant benefits service and a cardholder benefits service (collectively, the
"VALUESTAR SYSTEM");
WHEREAS, FDC, through its indirect wholly-owned subsidiary First Data
Merchant Services Corporation, a Florida corporation ("FDMS"), is in the
business of providing certain payment processing services for credit and debit
card transactions for merchants;
WHEREAS, pursuant to a Strategic Development, Marketing And Services
Agreement dated September 29, 2000 by and between FDMS and ValueStar, FDMS is in
the process of enhancing a system proprietary to FDMS that will allow FDMS to
match credit card numbers registered with ValueStar with transactions at
merchants registered with ValueStar which are paid for with registered credit
card numbers (the "FDMS SYSTEM");
WHEREAS, FDMS has previously made an investment in ValueStar by purchasing
a portion of its Series CC Convertible Preferred Stock; and
WHEREAS, ValueStar recognizes FDC as a strategic investor important to the
marketing and operation of the ValueStar System;
WHEREAS, as of the date hereof, FDC has agreed to enter into the Bridge
Loan and Common Stock Purchase Agreement ("BRIDGE LOAN AGREEMENT") dated as of
April 24, 2001 with ValueStar pursuant to which FDC has invested as of the date
hereof $1,000,000 in exchange for a note (the "Note") and 5,000,000 shares of
Common Stock of ValueStar; and
WHEREAS, FDC and ValueStar have discussed FDC making an additional
investment of $1,000,000 for Senior Convertible Notes and Warrants as described
in the Note (it being understood that FDC is under no obligation to make such
additional investment); and
WHEREAS, in order to induce FDC to enter into the Bridge Loan Agreement and
in further consideration of the relationship between ValueStar and FDMS, the
parties have entered into this Agreement.
NOW, THEREFORE, in consideration of the foregoing, FDC and ValueStar hereby
agree as follows:
1. RIGHT OF FIRST NEGOTIATION.
(a) For so long as FDC or its Affiliates beneficially own, directly or
indirectly, in the aggregate, not less than 2,386,686 shares of ValueStar common
stock (determined on an as converted basis for convertible securities, and
assuming the exercise of all warrants), appropriately adjusted for stock splits,
combinations reclassifications and the like on or after the date hereof, or hold
not less than $500,000 aggregate principal amount of debt securities of
ValueStar (the "RESTRICTED PERIOD"), if ValueStar or the Board of Directors of
ValueStar (i) receives a bona fide offer or proposal in writing from a Specified
Company (as defined below) for the acquisition of ValueStar, the Subsidiary or
the ValueStar System by means of (A) a merger, consolidation or other business
combination pursuant to which the stockholders of ValueStar immediately prior to
the effective date of such transaction have beneficial ownership of less than
fifty percent (50%) of the total combined voting power for election of directors
of the surviving or continuing entity immediately following such transaction, or
(B) the sale of the ValueStar System, the Subsidiary or all or substantially all
of the assets of ValueStar or the Subsidiary, or (ii) votes to initiate (X) a
sale to any Specified Company of securities representing twenty-five percent
(25%) or more of the total voting power of all securities of ValueStar, or (y) a
sale of the ValueStar System, the Subsidiary or all or substantially all of
ValueStar's or the Subsidiary's assets to a Specified Company or (z) any other
transaction or series of transactions in which control of ValueStar, the
Subsidiary or the ValueStar System is effectively transferred, directly or
indirectly, to a Specified Company (each, an "ACQUISITION PROPOSAL"), then prior
to accepting or engaging in subsequent discussions with the person making the
Acquisition Proposal or its representatives regarding such Acquisition Proposal,
ValueStar shall provide to FDC written notice within 24 hours (the "NOTICE") of
the receipt of such Acquisition Proposal of the identity of the party making the
Acquisition Proposal and the proposed terms of such Acquisition Proposal.
(b) If the Board of Directors of ValueStar determines in its reasonable
good faith judgment that ValueStar should pursue negotiations with the Specified
Company regarding its Acquisition Proposal, then before entering into such
negotiations, FDC shall have a period of ten (10) business days following its
receipt of the Notice ("NEGOTIATION PERIOD") in which to present to ValueStar a
counter-offer (a "COUNTER OFFER"). During such ten (10) business day period,
FDC, at its sole option, shall have the opportunity in such Counter Offer either
to match such Acquisition Proposal and be entitled to effect an acquisition of
ValueStar, the Subsidiary or the ValueStar System or to provide its own
acquisition offer for consideration by ValueStar's Board of Directors. In any
event, during such ten (10) business day period FDC shall have the exclusive
right to engage in negotiations with ValueStar with respect to such Counter
Offer.
(c) In the event that the Board of Directors of ValueStar determines in
its reasonable good faith judgment that a Counter Offer from FDC is financially
equivalent or superior to such Acquisition Proposal, ValueStar shall not enter
into a definitive agreement with respect to the Acquisition Proposal with the
Specified Company rather than the Counter Offer; PROVIDED that, ValueStar shall
be permitted to enter into such
definitive agreement if it shall have been determined by a final judgment or
decree (not subject to further appeal) of any court of competent jurisdiction
that rejection of the Acquisition Proposal would constitute a violation by the
Board of Directors of ValueStar of its fiduciary duties; PROVIDED, HOWEVER, that
in the event ValueStar does enter into such definitive agreement pursuant to the
foregoing proviso, FDC shall be entitled to at any time or from time to time
thereafter, at its sole discretion and election, to cause ValueStar to
repurchase all equity securities or debt obligations of ValueStar beneficially
owned by FDC and its Affiliates at a redemption price equal to (A) in the case
of equity securities, the common equivalent price implied by the Acquisition
Proposal or (B) in the case of debt securities or obligations, the total face
amount of such indebtedness.
(d) If FDC does not deliver a Counter Offer within the ten (10) business
day period prescribed above in this SECTION 1(b), then ValueStar shall be free,
subject in any event to the other provisions of this SECTION 1, for a period of
one hundred twenty (120) calendar days following the expiration of the
Negotiation Period, to negotiate and to accept the Acquisition Proposal on the
terms and conditions set forth in the Notice or on such other terms and
conditions no more favorable to the Specified Company than those specified in
the Notice. Any proposed acquisition of ValueStar or sale of its assets pursuant
to an Acquisition Proposal after the end of such 120-day period or any change in
the terms of such Acquisition Proposal that is more favorable to the Specified
Company shall require a new Notice, and shall give rise anew to the rights of
FDC provided in this SECTION 1.
(e) If the terms of any Acquisition Proposal include stock or other
securities ("STOCK") as consideration, FDC shall be deemed to have matched the
terms of such Acquisition Proposal, and, all other terms being materially
equivalent taken as a whole, thereby deemed as having proposed an offer more
favorable than the Acquisition Proposal, if it agrees to substitute for such
Stock component of the Acquisition Proposal either cash or shares of Common
Stock of FDC having a "fair market value" equivalent to the fair market value of
the Stock component of the subject Acquisition Proposal. "Fair market value"
shall mean, with respect to the Stock of any Specified Company (i) that is
traded on a nationally recognized exchange, the average of the closing bid or
sale price (whichever is applicable) of such Stock on the five (5) trading days
preceding the date prior to the Counter Offer; (ii) which is actively traded
over-the-counter, the average of the closing bid or sale prices (whichever is
applicable) on the five (5) trading days preceding the date prior to the Counter
Offer; and (iii) if such Stock is not publicly traded, the value assigned to
such Stock by a nationally recognized investment advisor designated by the
mutual agreement of ValueStar and FDC. The fair market value of any other
non-cash consideration shall be determined in the same manner as for such
non-publicly traded stock.
(f) Unless ValueStar shall have complied fully with all of the procedures
and requirements of SECTION 1, then any Acquisition Proposal that ValueStar may
accept, and any transaction it may purport to effect pursuant thereto, shall be
void ab initio.
(g) In the event (i) ValueStar raises additional capital through a
convertible
debt financing on or prior to April 30, 2002 pursuant to which the Note is
mandatorily converted pursuant to Section 2(a) of the Note into a Senior
Convertible Note (as defined in the Note) ("QUALIFIED DEBT FINANCING"); (ii)
ValueStar offers to issue not less than $1,000,000 aggregate principal amount of
Senior Convertible Notes to FDC or its Affiliates in connection with such
Qualified Debt Financing; and (iii) FDC and its Affiliates do not invest at
least $1,000,000 in connection with such Qualified Debt Financing, then the
Restricted Period shall be deemed to be terminated effective as of the closing
of the Qualified Debt Financing.
2. SPECIFIED COMPANY. For purposes of this Agreement,
"SPECIFIED COMPANY" shall mean any of the companies identified on EXHIBIT A
attached hereto, and any of such companies' respective Affiliates.
"AFFILIATE" shall mean for any person, any other person which directly or
indirectly controls, is controlled by or is under common control with such
person.
3. RELATIONSHIP OF THE PARTIES. The parties are acting as independent
contractors and not as partners or in the capacity of any type of joint venture.
4. ENTIRE AGREEMENT. This Agreement and the exhibits hereto constitute the
entire agreement between the parties with respect to the right of first
negotiation and there are no representations, warranties, covenants or
obligations except as set forth herein or therein. This Agreement supersedes all
prior or contemporaneous agreements, understandings, negotiations and
discussions, written or oral, of the parties hereto, with respect to the matters
set forth in this Agreement. Nothing in this Agreement is intended or shall be
construed to confer upon or to give any person other than the parties hereto any
rights or remedies under or by reason of this Agreement.
5. ASSIGNMENT. Neither party shall assign any interest in this Agreement
without the prior written consent of an authorized executive officer of the
other, provided that FDC may assign this Agreement to an Affiliate without
ValueStar's prior consent.
6. GOVERNING LAW. Except to the extent Colorado law is mandatorily applicable
to the terms of this Agreement, the rights and obligations of the parties under
this Agreement shall be governed by law of the State of New York without regard
to that state's choice of law provisions.
7. WAIVER. Any failure of either party to enforce, at any time or for any
period of time, any of the provisions of this Agreement shall not be construed
as a waiver of the right of that party to enforce such provisions unless said
waiver is in writing, and signed by an authorized executive officer.
8. REPRESENTATIONS OF VALUESTAR. ValueStar has full power and authority to
execute, deliver and perform this Agreement, the Bridge Loan Agreement and the
Note, and the execution, delivery and performance of each of this Agreement, the
Bridge Loan
Agreement and the Note by ValueStar have been duly authorized, executed and
delivered by ValueStar and each of this Agreement, the Bridge Loan Agreement and
the Note is the legal, valid and binding obligation of ValueStar enforceable in
accordance with their respective terms.
9. NOTICES. Any notice required or permitted to be given under this Agreement
shall be sent in writing, by prepaid, certified, return receipt requested,
first-class air mail to the respective party at the address below, or to such
other address as each party may hereafter specify in writing to the other.
If to ValueStar: Chief Executive Officer
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with a copy to: ▇▇. ▇▇▇ ▇▇▇▇▇▇
Bay Venture Counsel
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If to FDC: General Counsel
First Data Corporation
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: General Counsel
First Data Merchant Services Corporation
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices shall be deemed to have been given upon receipt.
11. SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall be
considered severable and if for any reason any provision or provisions herein
are determined to be invalid or contrary to any existing or future law, such
invalidity shall not impair the operation of this Agreement or affect those
portions of this Agreement, which are valid.
12. ENUMERATIONS AND HEADINGS. The enumerations and headings contained in this
Agreement are for convenience of reference only and are not intended to have any
substantive significance in interpreting this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound, the undersigned
parties have duly executed this Agreement as of the date first set forth above.
FIRST DATA CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
VALUESTAR CORPORATION
By: /s/ ▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
EXHIBIT A
American Express
Concord EFS
Electronic Data Systems
NOVA Corp.
Total System Services
Viad
Equifax/Certegy
Global Payments
Vital Processing
National Processing
Alliance Data Systems