EXHIBIT 4.4
$25,000,000
ZITEL CORPORATION
5% Convertible Subordinated Debentures Due 1999
PLACEMENT AGENCY AGREEMENT
--------------------------
May 19, 1997
Xxxxxx Capital Group, Ltd.
As Placement Agent
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
This letter confirms our agreement (this "Agreement") to retain Xxxxxx
Capital Group, Ltd. as our exclusive agent (the "Placement Agent") through
May 26, 1997 (the "Engagement Period") to identify for Zitel Corporation (the
"Company") prospective purchasers (collectively, the "Purchasers") in a
private placement (the "Placement") of up to $25,000,000 aggregate principal
amount of 5% Convertible Subordinated Debentures Due 1999 (the "Debentures"),
convertible into shares of the Company's common stock, no par value per share
(the "Common Stock").
The Placement Agent will have no obligation to purchase any of the
Debentures offered by the Company in the Placement. During the Engagement
Period, the Placement Agent shall have the exclusive right to arrange for all
sales of securities by the Company, including the exclusive right to identify
buyers for the Debentures; provided, however, that the Company shall not be
prohibited from issuing securities in connection with acquisitions or
strategic alliances with potential corporate partners. The Engagement Period
shall be automatically extended for a reasonable period of time 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.
The Placement is intended to be exempt from the registration requirements
of the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
Section 4(2) and Regulation D ("Regulation D") of the rules and regulations
of
Exhibit 4.4 - Page 1
the Securities and Exchange Commission (the "Commission") promulgated under
the Securities Act (the "Rules and Regulations"). In order to effectuate the
Closing (as defined in Section 1 hereof), the Company, the Placement Agent
and LaSalle National Bank 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 and terms and conditions:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The representations and
warranties set forth in Section 2 of the Securities Purchase Agreements to be
entered into between the Company and each Purchaser (the "Securities Purchase
Agreements") are hereby incorporated by reference as of the date of
consummation of the sale of the Debentures (the "Closing").
2. COVENANTS OF THE COMPANY.
(a) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D under the Securities Act) 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
Debentures or the shares of Common Stock issuable upon conversion of the
Debentures (the "Underlying Common Shares") in a manner which would require
the registration under the Securities Act of the Debentures or the Underlying
Common Shares.
(b) Any press release to be issued by the Company in connection with
the Placement shall be subject to the prior review by the Placement Agent.
In addition, each press release to be issued by the Company in connection
with the Placement shall identify Xxxxxx Capital Group, Ltd. as the Placement
Agent.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLACEMENT AGENT.
(a) With respect to each offer or sale of the Debentures, neither the
Placement Agent nor any of its representatives has engaged or will engage in
any form of general solicitation or general advertising, including, but not
limited to, advertisements, articles, notices or other communication
published in any newspaper, magazine or similar
Exhibit 4.4 - Page 2
medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
(b) The Placement Agent covenants and agrees that it 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 Debentures would
not be exempt from the registration requirements of the Securities Act or the
registration or qualification requirements of any state or political
subdivision of the United States in which the Debentures are to be offered or
sold. The Placement Agent shall only offer the Debentures to persons for
which the Placement Agent has a reasonable belief that such persons are
"accredited investors" as such term is defined in Rule 501 under the
Securities Act.
4. COMPENSATION OF THE PLACEMENT AGENT. The Company shall pay the
Placement Agent, directly from the escrowed funds at the Closing, a fee of
4.5% of the gross proceeds from the Placement hereunder. The Company further
agrees to pay to the Placement Agent all of the Placement Agent's actual
out-of-pocket expenses incurred in connection with this transaction,
regardless of whether the sales contemplated hereby are consummated,
including, but not limited to, fees and disbursements of its counsel and
counsel to the Purchasers (which fees shall be paid at the sole discretion of
the Placement Agent), fees and disbursements of the escrow agent and any
co-management and due diligence fees, up to $80,000, directly from the
escrowed funds at Closing or, in the event there is no Closing, within five
business days after submission of invoices or receipts therefor by the
Placement Agent. The Company will pay all of its expenses incurred in
connection with these transactions.
5. CLOSING. The Closing may be held at such place or places as shall be
specified by the Placement Agent. Debentures in the names of the respective
Purchasers and in the respective denominations aggregating the full number of
Debentures sold at the Closing shall be delivered by the Company to the
Escrow Agent as contemplated by the Securities Purchase Agreements.
6. CONDITION TO CLOSING. The Company and the Placement Agent agree that
the issuance and sale of the Debentures and all obligations of the Placement
Agent provided herein shall be subject to the receipt by the Placement Agent
of a legal opinion of Xxxxxx Godward Xxxxxx Xxxxxxxxx & Xxxxx, counsel to the
Exhibit 4.4 - Page 3
Company, indicating that the Placement Agent is entitled to rely thereon, in
the form required to be delivered pursuant to Section 7 the Securities
Purchase Agreements.
7. INDEMNIFICATION.
(a) The Company will indemnify and hold harmless the Placement Agent
and each of its partners, directors, officers, associates, affiliates,
subsidiaries, 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
other materials including the 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 expense to the extent that it
arises out of or is based upon (i) a breach by the Placement Agent of its
obligations in Section 3 hereof (a "Non-Indemnity Event") or (ii) 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 letter
Exhibit 4.4 - Page 4
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 letter agreement for any settlement of any
claim against the indemnifying party made without the indemnifying party's
written consent, which shall not be unreasonably withheld. Notwithstanding
anything to the contrary contained in the foregoing paragraph (b) or the
following paragraph (d), the Placement Agent shall not be obligated to pay
any amount in respect of its obligation to indemnify or contribute greater
than the Placement Fee.
(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 Debentures and the
securities underlying the Debentures 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.
(a) NON-CIRCUMVENTION. The Company hereby agrees that, whether or
not this Agreement is terminated and/or whether or not the Placement is
consummated, the Company will not enter into any agreement, transaction, or
arrangement, including pursuant to Section 4(e) of the Securities Purchase
Agreements, with any prospective purchaser (including their agents,
Exhibit 4.4 - Page 5
principals and affiliates, the accounts and funds which they manage or
advise, and regardless of whether a transaction is consummated with such
purchaser) who has (i) been identified to the Company as a prospective
purchaser by the Placement Agent or (ii) otherwise communicated with the
Company regarding the Placement, unless such agreement, transaction or
arrangement is effected through or with the written consent of the Placement
Agent. The Placement Agent shall, within five business days after the
Closing, provide the Company with a list of the names of the parties to whom
clause (i) of the preceding sentence applies, which list and names the
Company agrees to hold strictly confidential; if there is no Closing, then
such list shall be provided within five business days of the expiration of
the Engagement Period.
(b) RIGHT OF FIRST REFUSAL. For a period of 240 calendar days from the
Closing Date, if the Company desires to sell any equity securities of the
Company or 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), subject to the Securities
Purchase Agreements, the Company will offer the Placement Agent in writing
the exclusive right to find buyers for such securities upon terms that are
reasonably acceptable to the Company and the Placement Agent. 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 firm commitments from buyers to
purchase the securities, or the Company will be free to engage others to
assist it in offering such securities.
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 survive any termination
of this Agreement and/or issuance of the Debentures, and any successor or
assign of the Placement Agent and/or its designee(s), 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.
Exhibit 4.4 - Page 6
10. TERMINATION. Reserved.
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 Placement
Agent: Xxxxxx Capital Group, Ltd.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Stroock & Stroock & Xxxxx LLP
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Exhibit 4.4 - Page 7
To the Company: Zitel Corporation
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxxxx Godward Xxxxxx Xxxxxxxxx & Xxxxx
Five Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(d) SEVERABILITY. If any provision herein is found to be unenforceable,
invalid or illegal, 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.
(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 agreements, arrangements 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 New York without regard to the
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 hereto 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.
Exhibit 4.4 - Page 8
(j) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not affect the meanings herein.
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:
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Financial Officer
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST WRITTEN ABOVE:
XXXXXX CAPITAL GROUP, LTD.
By:
-------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
Exhibit 4.4 - Page 9
