EXHIBIT 4.5
Zitel Corporation
3% Convertible Subordinated Debentures Due 1999 and
Common Stock Purchase Warrants
PLACEMENT AGENCY AGREEMENT
June 16, 1998
Xxxxxx Capital Group, Ltd.
As Placement Agent
00 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
This letter confirms the agreement (this "Agreement") of Zitel
Corporation, a California corporation (the "Company"), to retain Xxxxxx
Capital Group, Ltd., a California corporation (the "Placement Agent"), as the
Company's exclusive agent from May 8, 1998 through and including June 30,
1998 (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. $20,000,000.00
aggregate principal amount of the Company's 3% Convertible Subordinated
Debentures Due 1999 (the "Debentures"), convertible into shares of the
Company's common stock, no par value per share (the "Common Stock"), and up
to 300,000 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 shall be as set forth in the subscription
documents, including the convertible debenture purchase agreement,
convertible subordinated debenture, registration rights agreement, and common
stock purchase warrant, to be executed 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
Xxxxxx Capital Group, Ltd.
June 16, 1998
Page 2
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 July 7, 1998 without the written consent of the
Company and the Placement Agent and provided further that to the extent the
Subscription Documents contemplate a second closing, the terms of this
Agreement shall apply to such second closing (and herein reference to the
"Closing" shall be deemed to include each of the first and second such
closing unless the text specifically indicates otherwise).
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 D ("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.
Xxxxxx Capital Group, Ltd.
June 16, 1998
Page 3
(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 Xxxxxx 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 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 transactions
contemplated herein, the Company agrees to pay the Placement Agent, directly
from the escrowed funds at the Closing, a fee of 4.0% of the gross proceeds
from the sale of the Securities on the first $6,000,000.00 raised, 3.5% of
the gross proceeds from the sale of the Securities on amounts between
$6,000,001.00 and $20,000,000.00, and 3.0% of the gross proceeds from the
sale of the Securities on amounts in excess of $20,000,000.00 (the "Agency
Fee"). The parties hereto expressly agree that the gross proceeds from the
sale of the Securities at a second closing shall be subject to compensation
as provided in this Section 4 on a cumulative basis with the gross proceeds
of the first closing and the fee so paid in respect of the first and second
Closings shall collectively be referred to herein as the "Agency Fee". In
addition, the Company agrees to pay to the Placement Agent, directly from
Xxxxxx Capital Group, Ltd.
June 16, 1998
Page 4
the escrowed funds at the first Closing, an expense allowance of $19,500.00
and directly from the escrowed funds at the second Closing, an expense
allowance of $10,000.00, each 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 (collectively, 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 own 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 in an amount not to exceed $30,000.00.
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, 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 related to the Placement, 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
Xxxxxx Capital Group, Ltd.
June 16, 1998
Page 5
expense arising from 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 indemnified 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
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.
Xxxxxx Capital Group, Ltd.
June 16, 1998
Page 6
(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 "Xxxxxx 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 Xxxxxx Contacts, which list and names the Company agrees to hold
strictly confidential. 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
Paragraph 8(a) of this Agreement.
(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 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 in 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
Xxxxxx Capital Group, Ltd.
June 16, 1998
Page 7
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 July 7, 1998 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 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
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
Xxxxxx Capital Group, Ltd.
June 16, 1998
Page 8
with a copy to: Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
To the Placement Agent: Xxxxxx Capital Group, Ltd.
00 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to: Xxxxx Xxxx LLP
000 Xxxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X.00000
Attention: XxXxxx Xxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
(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.
(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.
Xxxxxx Capital Group, Ltd.
June 16, 1998
Page 9
(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.
[REMAINDER OF PAGE INTENTIALLY LEFT BLANK]
Xxxxxx Capital Group, Ltd.
June 16, 1998
Page 10
If the foregoing correctly sets forth the understandings between you as
Placement Agent and the Company, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement between us.
Very truly yours,
Zitel Corporation
By: _______________________________
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President, Finance and
Administration and CFO
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST WRITTEN ABOVE:
Xxxxxx Capital Group, Ltd.
By: ___________________________________
Name: Xxxxxxx X. Xxxxxx
Title: President
