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.