SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
October 5, 1998
(Date of earliest event reported)
ZITEL CORPORATION
(Exact name of Registrant as specified in its charter)
California 0-12194 94-2566313
(State of (Commission File No.) (IRS Employer
incorporation or Identification No.)
organization)
47211 Bayside Parkway
Fremont, California
(Address of principal executive offices)
94538
(zip code)
(510) 440-9600
(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS.
On October 5, 1998, Zitel Corporation, a California corporation
(the "Company"), entered into an Agreement and Plan of Reorganization and
Merger, dated as of October 5, 1998 (the "Merger Agreement"), by and among
the Company, Millennium Holding Corp., a Delaware corporation and a wholly
owned subsidiary of the Company ("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 ("MatriDigm"), pursuant to which (i)
Zenith Acquisition will merge with and into the Company (the "Zitel
Merger"), with the Company remaining as the surviving corporation in the
Zitel Merger (the "Zitel Surviving Corporation"), and (ii) Millennium
Acquisition will merge with and into MatriDigm (the "MatriDigm Merger", and
together with the Zitel Merger, the "Mergers"), with MatriDigm remaining as
the surviving corporation in the MatriDigm Merger (the "MatriDigm Surviving
Corporation").
Upon the consummation of the transactions contemplated by the
Merger Agreement, (i) (a) each outstanding share of common stock, par value
$0.01 per share, of the Company (the "Company Common Stock") will be
converted into the right to receive one fully paid and nonassessable share
of common stock, par value $0.01 per share, of Holdco (the "Holdco Common
Stock"), and (b) each outstanding option to purchase Company Common Stock
under the Company's employee stock option plans will be assumed by Holdco,
and (ii) (a) each outstanding share of common stock, no par value, of
MatriDigm (the "MatriDigm Common Stock") (excluding any MatriDigm Common
Stock held directly or indirectly by the Company, each of which will be
converted into the right to receive one fully paid and nonassessable share
of common stock of the MatriDigm Surviving Corporation) will be converted
into the right to receive approximately .65 of a fully paid and
nonassessable share of Holdco Common Stock, and (b) each outstanding option
to purchase MatriDigm Common Stock under the MatriDigm's employee stock
option plans will be assumed by Holdco at the conversion rate of
approximately .65 of a fully paid and nonassessable share of Holdco Common
Stock.
Consummation of the Mergers remains subject to certain
conditions, including (a) the approval of the Zitel Merger, the MatriDigm
Merger, the Merger Agreement and the transactions contemplated thereby by
a majority of the outstanding shares of Zitel and MatriDigm, respectively.
It is also a condition to the Company's obligation to consummate the
transactions contemplated by the Merger Agreement that all outstanding
shares of preferred stock of MatriDigm, as well as all warrants to
purchase shares of common stock or preferred stock of MatriDigm, shall
have been converted into that number of shares of MatriDigm Common Stock
equal to the net number of shares of MatriDigm Common Stock into which
each such warrant or share of preferred stock would have been convertible
immediately prior to the effectiveness of the Millennium Merger. The
Company currently owns approximately 31.3% of the outstanding MatriDigm
Common Stock on an as converted basis. A copy of the Merger Agreement is
filed herewith as Exhibit 2.1 and incorporated by reference herein. The
description of the Merger Agreement set forth herein does not purport to
be complete and is qualified in its entirety by the provisions of the
Merger Agreement.
On October 5, 1998 and in connection with the execution
and delivery of the Merger Agreement, the Company entered into Shareholder
Agreements with certain specified shareholders of MatriDigm. Pursuant to
each of these Shareholder Agreements, the shareholder party thereto agreed
to vote for the Millennium Merger and related transactions, as well as to
convert shares of preferred stock of MatriDigm or warrants to purchase
capital stock of MatriDigm held by such shareholder to shares of common
stock of MatriDigm immediately prior to the effectiveness of the Millennium
Merger. A copy of the Form of Shareholder Agreement is filed herewith as
Exhibit 10.1 and incorporated by reference herein. The description of the
Form of Shareholder Agreement set forth herein does not purport to be
complete and is qualified in its entirety by the provisions of the
Shareholder Agreement filed as an exhibit hereto.
On October 5, 1998 and in connection with the execution and
delivery of the Merger Agreement, the Company entered into Lock-Up
Agreements with certain specified shareholders of MatriDigm. Pursuant to
each of these Lock-Up Agreements, during the period commencing on October
5, 1998 and ending (A) if the Mergers are consummated prior to January 29,
1999, on the second trading day following the public announcement of the
consolidated results of operations of the Company and MatriDigm for the
fiscal quarter ended March 31, 1999, and (B) if the Mergers are
consummated after January 29, 1999, on the second trading day following
the public announcement of the consolidated results of operations of the
Company and MatriDigm for the fiscal quarter ended June 30, 1999, certain
shareholders of MatriDigm have agreed not to (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, grant any
option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Holdco Common Stock or any
securities convertible into or exercisable or exchangeable for Holdco
Common Stock (including, without limitation, shares of Holdco Common Stock
or securities convertible into or exercisable or exchangeable for Holdco
Common Stock which may be deemed to be beneficially owned by the
undersigned in accordance with the rules and regulations of the Securities
and Exchange Commission), or (2) enter into any swap or other arrangement
that transfers all or a portion of the economic consequences associated
with the ownership of any Holdco Common Stock (regardless of whether any
of the transactions described in this or the immediately preceding
paragraph is to be settled by the delivery of Holdco Common Stock, or such
other securities, in cash or otherwise), without the prior written consent
of Holdco; provided, that (a) during such period such shareholders may
make gifts of shares of Holdco Common Stock or securities convertible into
Holdco Common Stock upon the condition that the donees agree to be bound
by the foregoing restriction in the same manner as it applies to such
shareholders, and (b) with respect to securities convertible into or
exercisable or exchangeable for Holdco Common Stock, such shareholders may
distribute such securities to their partners or members, as the case may
be, so long as the recipients of such securities agree to be bound by the
foregoing restriction in the same manner as it applies to the shareholder
in question. A copy of the Form of Lock-Up Agreement is filed herewith as
Exhibit 10.2 and incorporated by reference herein. The description of the
Form of Lock-Up Agreement set forth herein does not purport to be complete
and is qualified in its entirety by the provisions of the Lock-Up
Agreement filed as an exhibit hereto.
Selected Summary Financial Data, in addition to the foregoing
specified exhibits filed herewith, for the period ended June 30, 1998 is
filed herewith as Exhibit 27.1.
The transactions are expected to close either before the end of
this year or early in the first quarter of 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
2.1 Agreement and Plan of Reorganization and Merger, dated as of
October 5, 1998, by and among Zitel Corporation, Millennium
Holding Corp., Zenith Acquisition Corp., Millennium Acquisition
I Corp., and MatriDigm Corporation.
10.1 Form of Shareholder Agreement, dated as of October 5, 1998, by
and between, in each case, Zitel Corporation and a certain
specified shareholder of MatriDigm Corporation.
10.2 Form of Lock-Up Letter, dated as of October 5, 1998, addressed,
in each case, to Millennium Holding Corp. from a certain
specified shareholder of MatriDigm Corporation.
27.1 Selected Summary Financial Data for the period ended June 30, 1998.
99.1 Joint Press Release of Zitel Corporation and MatriDigm
Corporation, dated October 5, 1998.
SIGNATURE
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, thereto duly authorized.
ZITEL CORPORATION
By: /s/ Jack H. King
---------------------------
Name: Jack H. King
Title: Chief Executive Officer
Date: October 5, 1998
EXHIBIT INDEX
Exhibit Description Page
2.1 Agreement and Plan of Reorganization and Merger, 6
dated as of October 5, 1998, by and among Zitel
Corporation, Millennium Holding Corp., Zenith
Acquisition Corp., Millennium Acquisition I Corp.,
and MatriDigm Corporation.
10.1 Form of Shareholder Agreement, dated as of October 83
5, 1998, by and between, in each case, Zitel
Corporation and a certain specified shareholder of
MatriDigm Corporation.
10.2 Form of Lock-Up Letter, dated as of October 5, 97
1998, addressed, in each case, to Millennium
Holding Corp. from a certain specified shareholder
of MatriDigm Corporation.
27.1 Selected Summary Financial Data for the period 98
ended June 30, 1998.
99.1 Joint Press Release of Zitel Corporation and
MatriDigm Corporation, dated October 5, 1998. 99