-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QTtXjdRyQLe0ain6PKyxNk00iGw/Oc6NHFFLYzbffCqLy7Vq9/k2dj1oQjSTKAMi RjKyQOrdM2N0AhIU8Nh6CA== 0000950172-98-001387.txt : 19990101 0000950172-98-001387.hdr.sgml : 19990101 ACCESSION NUMBER: 0000950172-98-001387 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981231 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZITEL CORP CENTRAL INDEX KEY: 0000731647 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 942566313 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-12194 FILM NUMBER: 98779567 BUSINESS ADDRESS: STREET 1: 47211 BAYSIDE PARKWAY CITY: FREMONT STATE: CA ZIP: 94538-6517 BUSINESS PHONE: 5104409600 MAIL ADDRESS: STREET 1: 47211 BAYSIDE PARKWAY CITY: FREMONT STATE: CA ZIP: 94538 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report: December 31, 1998 Zitel Corporation - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) California 0-12194 94-256613 - ------------------------------------------------------------------------------ State of incorporation (Commission (IRS Employer of organization File Number) Identification No.) 47211 Bayside Parkway, Fremont, California 94538 - ------------------------------------------------------------------------------ (Address of principal executive offices) Zip Code Registrant's telephone number including ar(510) 440-9600 - ------------------------------------------------------------------------------ N/A - ------------------------------------------------------------------------------ (Former name or former address, if changed since last report) Item 5 - Other Events: On October 5, 1998, Zitel Corporation (the "Company"), Millennium Holding Corp., a Delaware corporation and a wholly-owned subsidiary of the Company ("Holdco"), Millennium Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Holdco, Zenith Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Holdco, and MatriDigm Corporation, a California corporation ("MatriDigm"), entered into an Agreement and Plan of Reorganization and Merger (the "Merger Agreement"). On December 16, 1998, the parties to the Merger Agreement mutually agreed to terminate the Merger Agreement. The termination and release agreement (the "Termination and Release Agreement") is attached hereto as Exhibit 2.1 and is incorporated by reference herein. The press release issued by the Company on December 21, 1998 is attached hereto as Exhibit 99.1 and is incorporated by reference herein. Item 7. - Financial Statements and Exhibits (c) The following exhibits are filed with this report: 2.1 Termination and Release Agreement. 99.1 Press Release. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ZITEL CORPORATION ------------------------------- (Registrant) Date: December 31, 1998 /s/ Jack H. King ------------------------------- ------------------------------- Jack H. King Chief Executive Officer EXHIBIT INDEX Exhibit No. Description 2.1* Termination and Release Agreement 99.1* Press Release - ------------------------------ *Filed herewith. EX-2 2 EXHIBIT 2.1 - TERMINATION AND RELEASE AGREEMENT EXHIBIT 2.1 TERMINATION AND RELEASE AGREEMENT This TERMINATION AND RELEASE AGREEMENT (this "Agreement"), dated as of December 16, 1998, by and among Zitel Corporation, a California corporation ("Parent"), Millennium Holding Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ("Holdco"), Zenith Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Holdco ("Zenith Acquisition"), Millennium Acquisition I Corp., a Delaware corporation and a wholly-owned subsidiary of Holdco ("Millennium Acquisition"), and MatriDigm Corporation, a California corporation (the "Company"). The foregoing parties hereto are collectively referred to herein as the "Parties." Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Merger Agreement. RECITALS WHEREAS, the parties hereto have entered into that certain Agreement and Plan of Reorganization and Merger, dated as of October 5, 1998 (the "Merger Agreement"), pursuant to which, and subject to the terms and conditions thereof, among other things, Zenith Acquisition would have merged with and into Parent (the "Zitel Merger"), with Parent remaining as the surviving corporation in the Zitel Merger, and Millennium Acquisition would have merged with and into MatriDigm (the "MatriDigm Merger"), with MatriDigm remaining as the surviving corporation in the MatriDigm Merger; and WHEREAS, the Parties have mutually determined that a Company Material Adverse Effect (as defined in the Merger Agreement) has occurred, and, as a result, the parties have mutually agreed to terminate the Merger Agreement in accordance with its terms; NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto agree as follows: TERMINATION AND RELEASE 1. Termination of the Merger Agreement. Subject to the terms of this Agreement, the Parties hereby agree to terminate the Merger Agreement and abandon the transactions specified therein pursuant to Section 7.1(a) of the Merger Agreement. 2. Effectiveness of Termination. The termination of the Merger Agreement as set forth above shall be effective upon execution of this Agreement by the Parties. 3. Fees and Expenses. All fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby shall be borne in accordance with the provisions of Section 8.1 of the Merger Agreement. 4. Parent Release. Except for the obligations expressly set forth in this Agreement, Parent, with full understanding of the contents and legal effect of this Agreement, on behalf of its subsidiaries, shareholders, directors, officers, members, employees, agents, attorneys, insurers, and any of its predecessors, successors-in-interest, and assigns (collectively, the "Parent Parties") hereby irrevocably and unconditionally releases and discharges the Company and its subsidiaries, shareholders, directors, officers, members, employees, agents, attorneys, insurers, and any of its predecessors, successors-in-interest, and assigns (collectively, the "Company Parties") from any and all actions, causes of action, claims, obligations, fees, expenses, costs, attorneys' fees, damages, losses, liabilities and demands, of whatever character, including, without limiting the generality of the foregoing, actions arising from contract, tort, and bankruptcy, and any other claims of any nature or kind which are or could have been asserted with respect to, or in any way arise out of or are related to, the Merger Agreement, the transactions contemplated thereby, and the termination and abandonment thereof pursuant to this Agreement. 5. Company Release. Except for the obligations expressly set forth in this Agreement, the Company, with full understanding of the contents and legal effect of this Agreement, on behalf of itself and the other Company Parties hereby irrevocably and unconditionally releases and discharges the Parent Parties from any and all actions, causes of action, claims, obligations, fees, expenses, costs, attorneys' fees, damages, losses, liabilities and demands, of whatever character, including, without limiting the generality of the foregoing, actions arising from contract, tort, and bankruptcy, and any other claims of any nature or kind which are or could have been asserted with respect to, or in any way arise out of or are related to, the Merger Agreement, the transactions contemplated hereby, and the termination and abandonment thereof pursuant to this Agreement. 6. Section 1542 Waiver. It is further understood and agreed by the Parties that, except for the obligations expressly set forth in this Agreement, the foregoing releases extend to all claims, of every nature and kind whatsoever, known, suspected or unsuspected, past, present or future, and all rights under Section 1542 of the California Civil Code, arising in any way out of or which are related to the Merger Agreement, the transactions contemplated thereby, and the termination and abandonment thereof pursuant to this Agreement, and all such claims are hereby expressly waived by each of the Parent Parties and the Company Parties. Said section reads as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH, IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. The Parties hereby acknowledge that they may hereafter discover facts different from, or in addition to, those which they now believe to be true with respect to the released claims, and agree that this Agreement and the releases contained herein shall be and remain effective in all respects notwithstanding such different or additional facts or the discovery thereof. 7. Press Release; Nondisparagement. With respect to the termination of the Merger Agreement, the Parties agree that the press release attached hereto as Exhibit A shall be issued. Each of the Parties further agrees that it will not disparage any of the other Parties, or their respective directors, officers, shareholders, members, or employees, in any manner intended to be harmful to Parent or the Company or any of their respective affiliates, or their respective reputations, or the personal or business reputation of such directors, officers, shareholders, members or employees; provided, however, that each Party may respond accurately and fully to any question, inquiry or request for information as may be required by applicable law. 8. Entire Agreement. It is further understood and agreed that this Agreement constitutes the entire understanding between the Parties. All prior negotiations and understandings between the Parties, whether oral or written, have been merged herein. 9. No Promises, Representations, Warranties. It is further understood and acknowledged that none of the Parties has made any promise, representation or warranty whatsoever, express or implied, except as expressly set forth herein, to induce the other to execute this Agreement, and the Parties acknowledge that they have not executed this Agreement in reliance upon any such promise, representation, or warranty; except that, subsequent to the execution of this Agreement, the Parties hereto acknowledge that the Company may, at its sole option and discretion, determine to undertake a private placement financing substantially on the terms attached hereto as Exhibit B, and Parent, in the event that Parent is requested by the MatriDigm Executive Committee and approved by Parent's board of directors to participate in such financing, hereby agrees to invest an amount not in excess of $1,300,000 in accordance with the terms and subject to the conditions of such financing as set forth in Exhibit A and in the definitive agreements as may be mutually agreed upon pursuant thereto. 10. No Admissions. It is further understood and agreed that this Agreement represents the release of all claims, except as set forth in this Agreement, by each of the Parent Parties and the Company Parties. The execution of this Agreement shall not constitute or be construed as an admission of any liability whatsoever by any of the Parent Parties or the Company Parties. 11. Successors. The Parties further expressly agree that this Agreement shall be binding upon and shall inure to the benefit of their respective directors, officers, agents, employees, divisions, subsidiaries, affiliated companies, heirs, administrators, successors and assigns, as applicable. 12. Assignment of Claims. The Parties represent and warrant that they have not made any assignment of any claim or cause of action related in any way to this Agreement. 13. Attorneys' Fees. In the event of any dispute, litigation or other adversary proceeding that may arise with respect to the subject matter of this Agreement, the prevailing party will be entitled to receive from the other reasonable attorneys' fees, costs and expenses incurred in said proceeding. The "prevailing party" means the party determined by the court or arbitrator to have most nearly prevailed, even if such party did not prevail in all matters, and not necessarily the party in whose favor a judgment is rendered. 14. Modification. The Parties understand and agree that this Agreement may not be altered, amended, modified, or otherwise changed in any respect or particular whatsoever except in writing duly executed by each of the Parties or their authorized representatives. 15. Severability. The provisions of this Agreement shall be considered severable, such that if any provision or part thereof shall at any time be held under any law or ruling to be invalid, such provision or part shall remain in force to the extent allowed by law, and all other provisions shall remain in force and effect and shall be enforceable in accordance with their terms. 16. Choice of Law. This Agreement shall be governed by, and shall be construed in accordance with, the laws of the State of California, without giving effect to the principles of conflicts of laws thereof. 17. Captions. The section captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 18. Facsimile Signatures. Any signature page delivered by a fax machine or telecopy machine shall be binding to the same extent as an original signature page, with regard to any agreement subject to the terms hereof or any amendment thereto. Any Party who delivers such a signature page agrees to later deliver an original counterpart to any Party which requests it. 19. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed on its behalf as of the day and year first above written ZITEL CORPORATION By: /s/ Henry C. Harris -------------------------------------- Name: Henry C. Harris Title: Executive Vice President MILLENNIUM HOLDING CORP. By: /s/ Henry C. Harris -------------------------------------- Name: Henry C. Harris Title: Executive Vice President ZENITH ACQUISITION CORP. By: /s/ Henry C. Harris -------------------------------------- Name: Henry C. Harris Title: Executive Vice President MILLENNIUM ACQUISITION I CORP. By: /s/ Henry C. Harris ------------------------------------- Name: Henry C. Harris Title: Executive Vice President MATRIDIGM CORPORATION By: /s/ Robert J. Luth ------------------------------------- Name: Robert J. Luth Title: Chief Financial Officer EXHIBIT A PRESS RELEASE Refer to Exhibit 99.1 to this Current Report on Form 8-K. EXHIBIT B TERMS OF PRIVATE PLACEMENT FINANCING To be mutually agreed by the Parties in accordance with the disclosure appearing in the Press Release attached to the Agreement as Exhibit A. EX-99 3 EXHIBIT 99.1 - PRESS RELEASE EXHIBIT 99.1 FOR IMMEDIATE RELEASE ZITEL REPORTS ON STATUS OF COMBINATION WITH MATRIDIGM CORPORATION AND YEAR-END RESULTS FREMONT, CA, December 21, 1998 -- Zitel Corporation (Nasdaq: ZITL) today announced that it has re-structured the planned transaction to combine with MatriDigm Corporation. Instead of the planned merger, Zitel will convert $3,200,000 of notes receivable plus accrued interest into MatriDigm preferred stock. Zitel's resulting ownership in MatriDigm will increase to approximately 58%. As part of the revised plan, the merger agreement is being terminated. The modified transaction is expected to close in January 1999. Discussions to combine the companies have been suspended but may be re- instated at a later date. Zitel also reported results for the fourth fiscal quarter and year ended September 30, 1998. The Company announced revenue of $4,022,000 for the fourth quarter of fiscal 1998 versus revenue of $6,258,000 for the same quarter of the prior year. Prior year revenue included $3,154,000 in sales and services related to the storage business unit, which was disposed of in the third quarter of the current fiscal year, and $728,000 in royalty revenue which terminated in April 1998. Revenue from the Datametrics division increased 54% to $3,651,000 during the current quarter from $2,376,000 for the same quarter of the prior year. As a result of the delay in the materialization of the Y2K market and the disappointing revenue results, to date, by MatriDigm, the Company wrote off its investment, loans, notes, and bank guarantee of $10,616,000. In addition, the results included charges associated with the final wrap up of the storage business unit of approximately $1,670,000 and costs associated with the subordinated debentures of $1,058,000. The resulting net loss for the quarter was $14,691,000 or $0.74 per share versus a net loss of $7,046,000 or $0.46 per share for the same quarter of the prior year. Weighted average shares outstanding in the fourth quarter of fiscal 1998 were 19,923,000 compared to 15,439,000 for the fourth quarter of fiscal 1997. For the twelve months ended September 30, 1998, the Company reported revenue of $21,700,000 versus $17,966,000 for the prior year and a net loss of $43,205,000 or $2.48 per share for the current year versus a net loss of $17,501,000 or $1.15 per share for the prior year. Weighted average shares outstanding in fiscal 1998 were 17,433,000 compared to 15,222,000 for fiscal 1997. Subsequent to the end of the year, the remaining outstanding $4,585,000 of the $10,000,000 Subordinated Convertible Debentures converted to approximately 1,250,000 of common stock. "The decision to write off the balance of our investments in and advances to MatriDigm was both difficult and troubling because the size and amount of opportunities currently being negotiated by Zitel and MatriDigm today are larger and appear to be closer to completion than in the past," commented Jack H. King, President and CEO, "but without executed contracts to support the value, we reluctantly concluded that the most conservative course was to reserve the balance." "As to the re-structuring of the transaction with MatriDigm," continued Mr. King, "the resulting benefits to the shareholders are substantially better than the prior plan. With the change in ownership to 58%, MatriDigm's financial results will be consolidated with Zitel's financial statements for reporting purposes. In addition, most of the infrastructure and business items in the original definitive agreement are expected to be implemented." "Zitel has emerged from fiscal 1998 considerably battered and bruised but with an adequate balance sheet and two business units with strong prospects for the future," King concluded. "Once the costs of the terminated merger are behind us, the Company should be positioned to return to profitability." This press release contains projections and other forward-looking statements regarding future events or the future financial performance of the Company. These statements are only predictions and actual events or results may differ materially. Refer to the documents the Company files from time to time with the Securities and Exchange Commission. These documents contains and identify important factors that could cause the actual results to differ materially from those contained in the projections or forward-looking statements in this press release. Zitel Corporation is an Information Technology company specializing in systems optimization, modeling and search technology. The Company's Year 2000 services include consulting, project management, planning, analysis, code conversion, and testing. Zitel's headquarters are located at 47211 Bayside Parkway, Fremont, CA 94538. Telephone: (510) 440-9600 or (800) 622-5020. FAX: (510) 400-9696. http://www.zitel.com. For information on Year 2000 services, call (888) FIND-FIX. Visit Zitel's web site for information and instructions to receive press releases via e-mail. Consolidated Financial Summary follows. Zitel is a registered trademark of Zitel Corporation. All other product names and brand names are trademarks or registered trademarks of their respective holders.
Zitel Corporation CONSOLIDATED SUMMARY OF FINANCIAL STATEMENTS Consolidated Statements of Operations (In Thousands Except Per Share Data) Three Months Ended Twelve Months Ended 9/30/98* 9/30/97* 9/30/98 9/30/97 ------- ------- ------- ------- Net Sales $ 4,022 $ 5,530 $ 20,159 $ 12,626 Royalty Revenue - 728 1,541 5,340 Total Revenue 4,022 6,258 21,700 17,966 Cost of goods sold 1,915 3,058 12,155 9,301 Research & development expenses 851 2,598 6,419 7,504 Selling, general and administrative expenses 4,538 5,679 24,012 14,468 Loss on impairment of assets 105 - 2,061 - Loss from unconsolidated company 10,616 - 10,616 - Acquisition of in-process research & development expenses - - - 6,600 Operating loss (14,003) (5,077) (33,563) (19,907) Other expense 735 1,969 3,142 2,097 Loss before income taxes (14,738) (7,046) (36,705) (22,004) Provision (benefit) for income taxes (47) 0 6,500 (4,503) Net loss $ (14,691) $ (7,046) $ (43,205) $ (17,501) Net loss per share $ (.74) $ (.46) $ (2.48) $ (1.15) Number of shares used in per share calculation 19,923 15,439 17,433 15,222
Consolidated Balance Sheets (In Thousands) September 30, 1998 September 30, 1997 Assets Current Assets Cash and cash equivalents $ 6,589 $ 4,224 Short-term investments - 9,596 Accounts receivable 3,579 6,547 Inventories - 3,050 Deferred and refundable taxes 208 3,540 Other current assets 749 993 Total current assets 11,125 27,950 Fixed assets, net 1,311 3,700 Other assets, net 5,634 17,644 Total assets $ 18,070 $ 49,294 Liabilities and shareholders' equity Current liabilities Accounts payable $ 3,585 $ 4,768 Accrued liabilities 3,666 4,419 Total current liabilities 7,251 9,187 Convertible subordinated debenture 4,585 24,161 Total Liabilities 11,836 33,348 Shareholders' equity Common Stock 60,574 27,081 Accumulated deficit (54,340) (11,135) Total shareholders' equity 6,234 15,946 Total liabilities and shareholders' equity $ 18,070 $ 49,294 *Three months ended 9/30/97 and 9/30/98 are unaudited. -----END PRIVACY-ENHANCED MESSAGE-----