EXHIBIT 99.1
ZITEL CORPORATION
SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
THIS SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is entered into as of September 3, 1999, by and among ZITEL
CORPORATION, a California corporation (the "Company") and each of those
persons and entities, severally and not jointly, whose names are set forth on
the Schedule of Purchasers attached hereto as Exhibit A (which persons and
entities are hereinafter collectively referred to as "Purchasers" and each
individually as a "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of Two Hundred Thousand (200,000) shares (the "Shares") of its
Series B Convertible Preferred Stock (the "Series B Preferred");
WHEREAS, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to Purchasers
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. The Company has authorized (a) the sale
and issuance to Purchasers of the 200,000 shares of Series B Preferred and
(b) the issuance of such shares of Common Stock to be issued upon conversion
of the Shares (the "Conversion Shares"). The Shares and the Conversion Shares
shall have the rights, preferences and privileges set forth in the
Certificate of Determination of Series B Convertible Preferred Stock of Zitel
Corporation, in the form attached hereto as Exhibit B (the "Certificate").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof,
at the Closing (as hereinafter defined) the Company hereby agrees to issue
and sell to each Purchaser, severally and not jointly, and each Purchaser
agrees to purchase from the Company, severally and not jointly, the number of
Shares set forth opposite such Purchaser's name on Exhibit A, at a purchase
price of ten dollars ($10.00) per share.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the Shares
under this Agreement (the "Closing") shall take place at August 6, on the
date hereof, at the offices of ▇▇▇▇▇▇ Godward LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or at such other time or place as the
Company and Purchasers may mutually agree (such date is hereinafter referred
to as the "Closing Date").
2.2 DELIVERY. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to each Purchaser a certificate representing
the number of Shares to be purchased at the Closing by such Purchaser,
against payment of the purchase price therefor by wire transfer to ▇▇▇▇▇
Fargo Bank to be held for the account of the Company as collateral for the
guarantee by the Company of the obligations of Matridigm Corporation under a
promissory note in the principal amount of three million dollars ($3,000,000)
or to be applied to the principal balance of such note.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser as of
the date of this Agreement as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California. The Company has all requisite corporate
power and authority to own and operate its properties and assets, to execute
and deliver this Agreement, and the Registration Rights Agreement in the form
attached hereto as Exhibit C (the "Registration Rights Agreement"), to issue
and sell the Shares and the Conversion Shares, and to carry out the
provisions of this Agreement, the Registration Rights Agreement and the
Certificate and to carry on its business as presently conducted and as
presently proposed to be conducted.
3.2 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of
the Company, consists of 40,000,000 shares of Common Stock, 23,416,572 shares
of which are issued and outstanding, 1,000,000 shares of Preferred Stock,
100,000 of which are designated Series A Preferred Stock, none of which are
issued and outstanding and 200,000 Shares of Series B Preferred, none of
which were issued and outstanding prior to the Closing. The rights,
preferences, privileges and restrictions of the Shares are as stated in the
Certificate The Conversion Shares have been duly and validly reserved for
issuance. When issued in compliance with the provisions of this Agreement and
the Certificate, the Shares and the Conversion Shares will be validly issued,
fully paid and nonassessable.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for
the authorization of this Agreement and the Registration Rights Agreement,
the performance of all obligations of the Company hereunder and thereunder at
the Closing and the authorization, sale, issuance and delivery of the Shares
pursuant hereto and the Conversion Shares pursuant to the Certificate has
3.4 been taken. The Agreement and the Registration Rights
Agreements, when executed and delivered, will be valid and binding
obligations of the Company enforceable in accordance with their terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights, (b) general principles of equity that restrict the
availability of equitable remedies, and (c) to the extent that the
enforceability of the indemnification provisions in Section 2.4 of the
Registration Rights Agreement may be limited by applicable laws. The sale of
the Shares and the subsequent conversion of the Shares into Conversion Shares
are not subject to any preemptive rights or rights of first refusal that have
not been properly waived or complied with.
3.5 SEC REPORTS. The Company has made available to the Purchasers
copies of its Annual Report on Form 10K under the Securities Exchange Act of
1934, as amended (the "Act") for the year ended September 30, 1998, and the
other reports filed by the Company under the Act since September 30, 1998
(collectively, the "SEC Filings"). The SEC Filings, as of the respective
dates of filing, complied as to form with the requirements of the Act and the
Rules and Regulations thereunder.
3.6 LITIGATION. There is no action, suit, proceeding or
investigation pending or to the Company's knowledge currently threatened
against the Company that questions the validity of this Agreement, or the
Related Agreements or the right of the Company to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby,
or which might result, either individually or in the aggregate, in any
material adverse change in the assets, condition, affairs or prospects of the
Company, financially or otherwise, or any change in the current equity
ownership of the Company, nor is the Company aware that there is any basis
for any of the foregoing.
3.7 OFFERING VALID. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4.2 hereof, the offer, sale
and issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"). Neither the Company nor any agent on its behalf has
solicited or will solicit any offers to sell or has offered to sell or will
offer to sell all or any part of the Shares to any person or persons other
than the Purchasers.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company as
follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver
this Agreement and the Registration Rights Agreement and to carry out their
provisions. All action on Purchaser's part required for the lawful execution
and delivery of this Agreement and the Related Agreements have been taken.
Upon their execution and delivery, this Agreement and the Related Agreements
will be valid and binding obligations of Purchaser, enforceable in accordance
with their terms,
except (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights, (b) general principles of equity that restrict the
availability of equitable remedies, and (c) to the extent that the
enforceability of the indemnification provisions of Section 2.4 of the
Registration Rights Agreement may be limited by applicable laws.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the
Securities Act. Purchaser also understands that the Shares are being offered
and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon Purchaser's representations contained in
the Agreement. Purchaser hereby represents and warrants as follows:
(A) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk
of this investment indefinitely unless the Shares (or the Conversion Shares)
are registered pursuant to the Securities Act, or an exemption from
registration is available. Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will
be available and that, even if available, such exemption may not allow
Purchaser to transfer all or any portion of the Shares or the Conversion
Shares under the circumstances, in the amounts or at the times Purchaser
might propose.
(B) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution, provided Purchaser may
resell the Conversion Shares in a transaction which is registered under the
Securities Act or which is exempt from the registration requirements of the
Securities Act.
(C) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents
that by reason of its, or of its management's, business or financial
experience, Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement, and the
Related Agreements. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the
Agreement.
(D) ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities
Act.
(E) COMPANY INFORMATION. Purchaser has received and read the
SEC Filings and has had an opportunity to discuss the Company's business,
management and financial affairs with directors, officers and management of
the Company and has had the opportunity to review the Company's operations
and facilities. Purchaser has also had the opportunity to ask questions of
and receive answers from, the Company and its management regarding the terms
and conditions of this investment.
(F) RULE 144. Purchaser acknowledges and agrees that the
Shares, and, if issued, the Conversion Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an
exemption from such registration is available. Purchaser has been advised or
is aware of the provisions of Rule 144 promulgated under the Securities Act
as in effect from time to time, which permits limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things: the availability of certain
current public information about the Company, the resale occurring following
the required holding period under Rule 144 and the number of shares being
sold during any three-month period not exceeding specified limitations.
(G) RESIDENCE. The office of the Purchaser in which its
investment decision was made is located at the address or addresses of the
Purchaser set forth on Exhibit A.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING.
Purchasers' obligations to purchase the Shares at the Closing are subject to
the satisfaction, at or prior to the Closing Date, of the following
conditions:
(A) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct as of the Closing Date with the
same force and effect as if they had been made as of the Closing Date, and
the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.
(B) RELEASE OF GUARANTEES. ▇▇▇▇▇ Fargo Bank shall have released
the guarantees of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇. ▇. ▇▇▇▇▇▇, and the estate of ▇. ▇.
▇▇▇▇▇▇ and ACS BRC Holdings, Inc. of obligations of Matridigm Corporation,
each in the aggregate principal amount of one million dollars ($1,000,000)
upon receipt of the purchase price of the Shares.
(C) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement and the
Related Agreements (except for such as may be properly obtained subsequent to
the Closing).
(D) FILING OF CERTIFICATE. The Certificate shall have been
filed with the Secretary of State of the State of California and shall
continue to be in full force and effect as of the Closing Date.
(E) CORPORATE DOCUMENTS. The Company shall have delivered to
Purchasers or their counsel, copies of all corporate documents of the Company
as Purchasers shall reasonably request.
(F) RESERVATION OF CONVERSION SHARES. The Conversion Shares
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
(G) COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchasers a Compliance Certificate, executed by the President of the
Company, dated the Closing Date, to the effect that the conditions specified
in subsections (a), (c), (d) and (f) of this Section 5.1 have been satisfied.
(H) REGISTRATION RIGHTS AGREEMENT. A Registration Rights
Agreement substantially in the form attached hereto as Exhibit C shall have
been executed and delivered by the parties thereto.
(I) LEGAL OPINION. The Purchasers shall have received from
legal counsel to the Company an opinion addressed to them, dated as of the
Closing Date, in substantially the form attached hereto as Exhibit D.
(J) Certificates representing the Shares shall have been
delivered to the Purchasers.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at each Closing is subject to the
satisfaction, on or prior to such Closing, of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties in Section 4 made by those Purchasers acquiring Shares hereof
shall be true and correct at the date of the Closing, with the same force and
effect as if they had been made on and as of said date.
(B) PERFORMANCE OF OBLIGATIONS. Such Purchasers shall have
performed and complied with all agreements and conditions herein required to
be performed or complied with by such Purchasers on or before the Closing.
(C) FILING OF CERTIFICATE. The Certificate shall have been
filed with the Secretary of State of the State of California.
(D) REGISTRATION RIGHTS AGREEMENT. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit C shall have been
executed and delivered by the Purchasers.
(E) MATRIDIGM GUARANTEE. ▇▇▇▇▇ Fargo Bank shall have agreed to
hold the purchase price of the Shares for the account of the Company as
collateral for the guarantee by the Company of obligations of Matridigm
Corporation in the principal amount of $3,000,000 or to apply the collateral
to the principal of the obligation of Matridigm in the principal amount of
$3,000,000.
(F) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement and the
Related Agreements (except for such as may be properly obtained subsequent to
the Closing).
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in
California.
6.2 SURVIVAL. The representations and warranties made herein shall
terminate at the Closing.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 ENTIRE AGREEMENT. This Agreement and the Registration Rights
Agreements constitute the full and entire understanding and agreement between
the parties with regard to the subjects hereof and no party shall be liable
or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.
6.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
6.6 AMENDMENT AND WAIVER.
(A) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least seventy-five percent
(75%) of the issued and outstanding Shares (treated as if converted and
including any Conversion Shares into which the Shares have been converted
that have not been sold to the public).
(B) The obligations of the Company and the rights of the
holders of the Shares and the Conversion Shares under this Agreement may be
waived only with the written consent of the holders of at least a
seventy-five percent (75%) of the issued and outstanding Shares (treated as
if converted and including any Conversion Shares into which the Shares have
been converted that have not been sold to the public).
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the
Registration Rights Agreement or the Certificate, shall impair any such
right, power or remedy, nor shall it be construed to be a waiver of any such
breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring.
6.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified,
(b) when sent by confirmed telex or facsimile if sent during normal business
hours of the recipient, if not, then on the next business day, (c) five (5)
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on Exhibit A attached hereto or at such
other address as the Company or Purchaser may designate by ten (10) days
advance written notice to the other parties hereto.
6.9 EXPENSES. The Company shall reimburse the reasonable fees of and
expenses of one special counsel for the Purchasers, not to exceed $25,000,
and shall reimburse such special counsel for reasonable expenses incurred in
connection with the negotiation, execution, delivery and performance of this
Agreement.
6.10 ATTORNEYS' FEES. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party
in such dispute shall be entitled to recover from the losing party all fees,
costs and expenses of enforcing any right of such prevailing party under or
with respect to this Agreement, including without limitation, such reasonable
fees and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.11 TITLES AND SUBTITLES. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
6.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.13 BROKER'S FEES. Each party hereto represents and warrants that
no agent, broker, investment banker, person or firm acting on behalf of or
under the authority of such party hereto is or will be entitled to any
broker's or finder's fee or any other commission directly or indirectly in
connection with the transactions contemplated herein. Each party hereto
further agrees to indemnify each other party for any claims, losses or
expenses incurred by such other party as a result of the representation in
this Section 6.13 being untrue.
6.14 CONFIDENTIALITY. Each party hereto agrees that, except with the
prior written consent of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has
been or shall become privy by reason of this Agreement or the Related
Agreements, discussions or negotiations relating to this Agreement or the
Related Agreements, the performance of its obligations hereunder or the
ownership of the Shares purchased hereunder.
6.15 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
6.16 SHAREHOLDER APPROVAL. In that conversions of the Shares are
suspended under the provisions of Section E.1 of the Certificate of
Determination of the Shares, the Company agrees to forthwith call a special
meeting of its shareholders to approve the issuance of additional Shares of
Common Stock upon conversion of the Shares, and to use its best efforts to
obtain such approval.
IN WITNESS WHEREOF, the parties hereto have executed the SERIES B
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASER:
ZITEL CORPORATION EC CHIEF, INC.
By: s/ ▇▇▇ ▇. ▇▇▇▇▇ By: s/_______________________________
President
Title: CHIEF FINANCIAL OFFICER
ACS BRC HOLDINGS, INC.
By: S/_______________________________
Title: PRESIDENT
ZITEL CORPORATION
SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
PAGE
1. AGREEMENT TO SELL AND PURCHASE........................................1
1.1 Authorization of Shares......................................1
1.2 Sale and Purchase............................................1
2. CLOSING, DELIVERY AND PAYMENT.........................................2
2.1 Closing......................................................2
2.2 Delivery.....................................................2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................2
3.1 Organization, Good Standing and Qualification................2
3.2 Capitalization; Voting Rights................................2
3.3 Authorization; Binding Obligations...........................2
3.4 SEC Reports..................................................3
3.5 Litigation...................................................3
3.6 Offering Valid...............................................3
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS......................3
4.1 Requisite Power and Authority................................3
4.2 Investment Representations...................................4
5. CONDITIONS TO CLOSING.................................................5
5.1 Conditions to Purchasers' Obligations at the Closing.........5
5.2 Conditions to Obligations of the Company.....................6
6. MISCELLANEOUS.........................................................7
6.1 Governing Law................................................7
6.2 Survival.....................................................7
6.3 Successors and Assigns.......................................7
6.4 Entire Agreement.............................................7
6.5 Severability.................................................7
6.6 Amendment and Waiver.........................................7
6.7 Delays or Omissions..........................................7
6.8 Notices......................................................7
6.9 Expenses.....................................................8
i.
TABLE OF CONTENTS
(CONTINUED)
PAGE
6.10 Attorneys' Fees..............................................8
6.11 Titles and Subtitles.........................................8
6.12 Counterparts.................................................8
6.13 Broker's Fees................................................8
6.14 Confidentiality..............................................8
6.15 Pronouns.....................................................9
6.16 Shareholder Approval.........................................9
ii.
LIST OF EXHIBITS
Schedule of Purchasers Exhibit A
Certificate of Determination Exhibit B
Registration Rights Agreement Exhibit C
Form of Legal Opinion Exhibit D
iii.
EXHIBIT A
SCHEDULE OF PURCHASERS
AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
EC Chief, Inc. 100,000 $1,000,000
c/o EFO Holdings, Ltd.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ACS BRC Holding, Inc. 100,000 $1,000,000
TOTAL: 200,000 $2,000,000
------- ----------
------- ----------