EXHIBIT 4.5
Zitel Corporation
3% Convertible Debentures Due 2000 and
Common Stock Purchase Warrants
PLACEMENT AGENCY AGREEMENT
February 1, 1999
▇▇▇▇▇▇ Capital Group, Ltd.
As Placement Agent
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
This letter confirms the agreement (this "Agreement") of Zitel
Corporation, a California corporation (the "Company"), to retain ▇▇▇▇▇▇
Capital Group, Ltd., a California corporation (the "Placement Agent"), as the
Company's exclusive agent from February 1, 1999 through and including March
1, 1999 (the "Engagement Period") to identify for the Company prospective
purchasers (collectively, the "Purchasers" and each individually, a
"Purchaser") in a placement (the "Placement") of up to U.S. $5,000,000.00
aggregate principal amount of the Company's 3% Convertible Debentures Due
2000 (the "Debentures") convertible into shares of the Company's common
stock, no par value per share (the "Common Stock"), and up to 75,000 warrants
(the "Warrants") exercisable into shares of Common Stock. The Debentures and
Warrants are collectively referred to herein as the "Securities."
Terms of the Placement are set forth in the subscription documents,
including the convertible debenture purchase agreement, convertible
subordinated debenture, registration rights agreement, and common stock
purchase warrant, issued in connection with the Placement (collectively, the
"Subscription Documents").
The Placement Agent will act on a best efforts basis and will have no
obligation to purchase any of the Securities offered by the Company in the
Placement. During the Engagement Period, the Placement Agent shall have the
exclusive right to make all offers and to arrange for all sales of securities
by the Company, including without limitation the exclusive right to identify
buyers for the Securities. The Engagement Period shall be automatically
extended for a reasonable number of days if, during the Engagement Period,
sales relating to commitments from Purchasers are not consummated during the
Engagement Period due to delays in the preparation of final documentation;
provided, however, that in no event will the Engagement Period be
automatically extended beyond March 15, 1999 without the written consent of
the Company and the Placement Agent.
The Placement is intended to be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to Regulation ▇
▇▇▇▇▇▇ Capital Group, Ltd.
February 1, 1999
Page 2
("Regulation D") of the rules and regulations of the Securities and Exchange
Commission (the "SEC") promulgated under the Securities Act.
In order to effectuate the Closing (as defined in Section 1 hereof), the
Company, the Placement Agent and a bank reasonably acceptable to both parties
(the "Escrow Agent") shall enter into an escrow agreement (the "Escrow
Agreement").
The engagement described herein shall be in accordance with applicable
laws and pursuant to the following procedures, terms and conditions:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
representations and warranties of the Company made to the Purchasers as set
forth in the Subscription Documents are hereby incorporated by reference as
of the date of consummation of the sale of the Securities (the "Closing") and
all such representations and warranties are hereby deemed made by the Company
directly to the Placement Agent as though set forth in full herein.
2. COVENANTS OF THE COMPANY.
(a) The covenants of the Company made to the Purchasers as set
forth in the Subscription Documents are hereby incorporated by reference as
of the Closing and all such covenants are hereby deemed made by the Company
directly to the Placement Agent as though set forth in full herein.
(b) Neither the Company nor any affiliate of the Company (as
defined in Rule 501(b) of Regulation D) will sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined
in the Securities Act) which will be integrated with the sale of the
Securities or the shares of Common Stock issuable upon conversion of the
Debentures or exercise of the Warrants (the "Underlying Common Shares") in a
manner which would require the registration under the Securities Act of the
Securities or the Underlying Common Shares.
(c) Any and all filings and documents required to be filed in
connection with or as a result of the Placement pursuant to federal and state
securities laws are the responsibility of the Company and will be filed by
the Company.
(d) Any press release to be issued by the Company announcing or
referring to the Placement shall be subject to the prior review of the
Placement Agent, and each such press release shall, at the request of the
Placement Agent, identify ▇▇▇▇▇▇ Capital Group, Ltd. as the placement agent.
This Agreement shall not be filed publicly by the Company without the prior
written consent of the Placement Agent.
3. COVENANTS OF THE PLACEMENT AGENT. On the basis of, and in
reliance on, the representations, warranties and covenants of the Purchasers
set forth in the Subscription Documents, the Placement Agent hereby covenants
with the Company as follows:
(a) The Placement Agent will take no action, nor fail to take any
action, if such action or failure to take such action would have the effect
that the offer or sale of the
▇▇▇▇▇▇ Capital Group, Ltd.
February 1, 1999
Page 3
Securities would not be exempt from the registration requirements of the
Securities Act pursuant to Regulation D.
(b) No action is being taken or is contemplated by the Placement
Agent that would permit a public offering of the Securities in any
jurisdiction where, or in any other circumstance in which, action for those
purposes is required (other than in jurisdictions where such action has been
duly taken). The Placement Agent will comply with applicable laws and
regulations in any jurisdiction in which it may offer, sell or deliver the
Securities and will not, directly or indirectly, offer, sell or deliver the
Securities or distribute or publish any prospectus, circular, advertisement
or other offering material in relation to the Securities in or from any
country or jurisdiction except under circumstances that will result in
compliance with any applicable laws and regulations, and all offers, sales
and deliveries of the Securities by it will be made on the foregoing terms.
4. COMPENSATION OF THE PLACEMENT AGENT; EXPENSES. As compensation
for services rendered by the Placement Agent in connection with the
transaction contemplated herein, the Company agrees to pay the Placement
Agent, directly from the escrowed funds at the Closing, a fee of 3.5% of the
gross proceeds from the sale of the Securities (the "Agency Fee"). In
addition, the Company agrees to pay to the Placement Agent, directly from the
escrowed funds at the Closing, an expense allowance of $10,000.00 as
reimbursement for the Placement Agent's expenses, including without
limitation attorney fees and costs, travel-related expenses and estimated
telephone, facsimile and postage charges (the "Expense Reimbursement").
Costs incurred by the Placement Agent in excess of the Expense Reimbursement
shall be the Placement Agent's sole responsibility. The Company will pay all
of its expenses incurred in connection with the Placement and will also pay
the Escrow Agent's fee and the reasonable accountable attorney fees and costs
incurred by one investor.
5. CLOSING. The Closing may be held at such place or places as shall
be specified by the Placement Agent and reasonably agreed to by the Company.
Certificates evidencing the Securities in the names of the respective
Purchasers and in the respective denominations aggregating all of the
Securities sold at the Closing shall be delivered by the Company to the
Escrow Agent.
6. CONDITIONS TO CLOSING. The Company and the Placement Agent agree
that the issuance and sale of the Securities and all obligations of the
Placement Agent provided herein shall be subject to the receipt by the
Placement Agent of (i) a legal opinion of the Company's securities counsel,
indicating that the Placement Agent is entitled to rely thereon, in the form
required to be delivered to the Purchasers pursuant to the Subscription
Documents and (ii) an escrow agreement duly executed by the Company in a form
reasonably satisfactory to the Placement Agent.
7. INDEMNIFICATION.
(a) The Company will indemnify and hold harmless the Placement
Agent and each of its partners, directors, officers, associates, affiliates ,
subsidiaries, divisions, employees,
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February 1, 1999
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consultants, attorneys and agents, and each person, if any, controlling
either the Placement Agent or any of its affiliates within the meaning of
either Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), from and against any
and all losses, claims, damages, liabilities, costs or expenses (and any
legal or other expenses incurred by the Placement Agent in investigating or
defending the same or in giving testimony or furnishing documents in response
to a request of any government agency or to a subpoena) in any way relating
to or in any way arising out of (i) the activities of the Placement Agent
contemplated by this Agreement or in connection with the Placement, (ii) the
inaccuracy of any representation or warranty, or the breach of any covenant,
contained herein, or (iii) any offering documents or offering materials; and
will reimburse, as incurred, the Placement Agent and each such controlling or
other person for any legal or other expenses incurred by the Placement Agent
or such controlling or other person in connection with investigating,
defending or appearing as a third-party witness in connection with any such
loss, claim, damage, liability or action. Such indemnity shall not, however,
cover any such loss, claim, damage, liability, cost or a breach by the
Placement Agent of its obligations in Section 3 hereof (a "Non-Indemnity
Event") or the willful misconduct of any person seeking indemnification
hereunder.
(b) The Placement Agent will indemnify and hold harmless the
Company and each person, if any, controlling the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act,
to the same extent set forth in subsection (a) above, but only to the extent
that any loss, claim, damage, liability, cost or expense arises out of or is
based upon a Non-Indemnity Event.
(c) If any action, proceeding or investigation is commenced by a
third party as to which the indemnified party hereunder proposes to demand
indemnification under this Agreement, it will notify the indemnifying party
with reasonable promptness. The indemnified party shall have the right to
retain counsel of its own choice (which choice shall be reasonably
satisfactory to the indemnifying party) to represent it and such counsel
shall, to the extent consistent with its professional responsibilities,
cooperate with the indemnifying party and any counsel designated by the
indemnifying party. The indemnifying party will not be liable under this
Agreement for any settlement of any claim against the indemnifying party made
without the indemnifying party's written consent, which consent shall not be
unreasonably withheld. Notwithstanding anything to the contrary contained in
the foregoing subsection (b) or the following subsection (d), the Placement
Agent shall not be obligated to pay, and will not pay, any amount in respect
of its obligation to indemnify or contribute greater than the Agency Fee (as
defined in Section 4 hereof).
(d) In order to provide for just and equitable contribution, if a
claim for indemnification pursuant to this Section 7 is made but it is found
in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case,
even though the express provisions hereof provided for indemnification in
such case, then the Company, on the one hand, and the Placement Agent, on the
other hand, shall contribute to the losses, claims, damages, liabilities or
costs to which the indemnified persons may be subject in accordance with the
relative benefits received from the Placement of the Securities by the
Company, on the one hand, and the Placement Agent, on the other hand, and
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February 1, 1999
Page 5
also the relative fault of the Company, on the one hand, and the Placement
Agent, on the other hand, in connection with the statements, acts or
omissions which resulted in such losses, claims, damages, liabilities or
costs, and the relevant equitable considerations shall also be considered.
No person found liable for a fraudulent misrepresentation shall be entitled
to contribution from any person who is not also found liable for such
fraudulent misrepresentation.
8. NON-CIRCUMVENTION; RIGHT OF FIRST REFUSAL.
(a) NON-CIRCUMVENTION. The Company hereby agrees that, for a
period of two years form the end of the Engagement Period, the Company will
not enter into any agreement, transaction or arrangement with any of the
institutions (including their agents, principals and affiliates and the
accounts and funds which they manage or advise) which the Placement Agent has
identified to the Company as prospective purchasers of the Securities in the
Placement (collectively, the "▇▇▇▇▇▇ Contacts"), regardless of whether a
transaction is consummated with such prospective purchasers, unless the
Company notifies the Placement Agent in writing of the agreement, transaction
or arrangement, and pays the Placement Agent the Agency Fee set forth in
Paragraph 4 hereof. Within five business days after the expiration of the
Engagement Period, the Placement Agent will provide the Company with a list
of the ▇▇▇▇▇▇ Contacts, which list and names the Company agrees to hold
strictly confidential. Notwithstanding the foregoing, the parties agree that
the prospective purchasers whose names appear on the list submitted to the
Company by the Placement Agent in a letter dated May 23, 1997 shall continue
to be subject to the provisions of Section 8(a) of the placement agency
agreement by and between the Company and the Placement Agent dated May 19,
1997, and shall not be subject to the two-year limitation referred to in the
first sentence of Section 8(a) of this Agreement; and, in addition, the
parties agree that the list of prospective purchasers whose names appear in a
letter to the Company from the Placement Agent dated June 19, 1998 shall be
deemed to have been delivered to the Company by the Placement Agent within
five business days after the expiration of the Engagement Period, as such
term is defined in this Agreement, and the Placement Agent shall not be
required to submit any additional lists of names in order to receive the
non-circumvention protections described in this Section 8(a).
(b) RIGHT OF FIRST REFUSAL. For a period of two hundred forty
(240) days from the Closing Date, if the Company desires to sell any equity
securities of the Company or any securities convertible into or exchangeable
or exercisable for any equity securities of the Company (other than in
connection with underwritten public offerings, acquisitions or strategic
alliances in which the Company issues securities to potential corporate
partners), then the Company shall offer the Placement Agent in writing the
exclusive right to identify buyers for such securities upon terms that are
reasonably acceptable to the Company and the Placement Agent. The Company
shall set forth all terms of the Subsequent Transaction in the written offer
to the Placement Agent and the Placement Agent will then have 10 business
days from the date of the offer to accept or reject it. If accepted, the
Placement Agent will have an additional 10 business days from acceptance to
obtain commitments from investors to purchase the securities, or the Company
will then be free to engage others to assist it in offering such securities
on identical terms. If the Company chooses to offer or sell securities in
the Subsequent Transaction on terms which differ in any way from those set
forth in the written offer to the Placement
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February 1, 1999
Page 6
Agent, then the Company must offer the Placement Agent in writing the right
to act as the Company's exclusive agent in the Subsequent Transaction on the
modified terms. The foregoing notwithstanding, in the event of a Change of
Control of the Company (as that term is defined in the Subscription
Documents), the right of first refusal set forth in this Section 8(b) shall
terminate.
9. SURVIVAL. The respective indemnities of the Company and the
Placement Agent and the representations, warranties and agreements of the
Company set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of the Placement Agent,
the Company or any person referred to in Section 7 hereof, and shall be
binding upon any successors and assigns of the Company and shall survive any
termination of this Agreement and/or issuance of the Securities. Any
successor or assign of the Placement Agent and/or its designees, the Company
or any such person or any legal representative of such person shall be
entitled to the benefit of the respective indemnities, agreements, warranties
and representations contained herein.
10. TERMINATION. Either party may terminate this Agreement by giving
notice as hereinafter specified at any time after March 15, 1999 if the
Closing has not occurred by such date. In the event of termination pursuant
to this Section 10, the Company shall remain obligated to pay the Expense
Reimbursement as set forth in Section 4 hereof. Subject to the foregoing
sentence, any termination pursuant to this Section 10 shall be without
liability of either party to the other party except as provided in the
immediately preceding sentence.
11. General Provisions.
(a) PARTIES. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the Placement Agent, the Company, the controlling
and other persons referred to in Section 7 hereof, and their respective
successors, legal representatives, heirs, designees and assigns, and no other
person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained.
(b) AMENDMENT. No amendment or modification hereto, or waiver of
the terms hereof, shall be valid unless in a writing executed by each of the
parties hereto or by the party or parties to be bound.
(c) NOTICES. All notices, requests and other communications under
this Agreement shall be in writing and shall be deemed to have been delivered
48 hours after having been mailed in a general or branch post office and
enclosed in a registered or certified postpaid envelope; 24 hours after
having been sent by overnight courier; when delivered to a telegraph company
or when scanned graphically or otherwise by telegraphic communications
equipment of the sending party and accompanied by a substantially
contemporaneous telephone call; and, in each case, addressed to the
respective parties at the addresses stated below or to such other
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February 1, 1999
Page 7
changed addresses as the parties may have fixed by notice; provided, however,
that any notice of change of address shall be effective only upon receipt.
To the Company: Zitel Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ Godward LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
To the Placement Agent: ▇▇▇▇▇▇ Capital Group, Ltd.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇.
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(d) SEVERABILITY. If any provision of this Agreement, other than
Section 4, Section 7 and Section 8, is found to be unenforceable, invalid or
illegal, and cannot be modified to the satisfaction of the Placement Agent,
such provision shall be deemed deleted from this Agreement and the remainder
of this Agreement shall not be affected or impaired thereby.
(e) ATTORNEYS' FEES. If any action, including, without
limitation, arbitration, should arise among the parties hereto to enforce or
interpret the provisions of this Agreement, the prevailing party in such
action shall be reimbursed for all reasonable expenses incurred in connection
with such action, including reasonable attorneys' fees and costs.
(f) INTEGRATION. This Agreement expresses the entire agreement
and understanding of the parties hereto with respect to the matters set forth
herein and supersedes all prior written and oral agreements and
understandings among the parties hereto with respect to the matters set forth
herein.
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February 1, 1999
Page 8
(g) GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of California without regard to its
principles of conflicts of laws.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but all of which
shall together constitute one and the same agreement. Facsimile signatures
are considered to be originals and shall have the same effect.
(i) FURTHER ASSURANCES. The parties agree to execute any and all
such further agreements, instruments or documents, and to take any and all
such further action, as may be necessary or desirable to carry into effect
the purpose and intent of this Agreement.
(j) HEADINGS. The headings in this Agreement are for convenience
of reference only and are in no way intended to describe, interpret, define,
modify, add to, or limit the scope, extent or intent of, this Agreement or
any provision hereof.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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February 1, 1999
Page 9
If the foregoing correctly sets forth the understandings among the
Placement Agent and the Company, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among us.
Very truly yours,
ZITEL CORPORATION
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President Finance &
Administration
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST WRITTEN ABOVE:
▇▇▇▇▇▇ CAPITAL GROUP, LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President