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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
July 21, 2000
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(Date of Report: Date of earliest event reported)
EZCONNECT, INC.
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(Exact name of registrant as specified in its charter)
NEVADA 0-27249 87-0284731
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(State or other jurisdiction (Commission File Number) (IRS Employer ID No.)
of incorporation)
6009 SOUTH REDWOOD ROAD, SALT LAKE CITY, UTAH 84123
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(Address of principal executive office)
Registrant's telephone number, including area code: (801) 270-9711
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Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
Effective July 21, 2000, EZConnect, Inc. ("EZConnect") entered into an
Agreement and Plan of Merger ("Merger Agreement") with Encore Wireless, Inc.,
a California corporation ("Encore"), wherein EZConnect has the right to
acquire Encore in a stock and cash transaction, subject to certain closing
conditions. The terms and conditions of the Merger Agreement are contained in
the Agreement and Plan of Merger, which has been included as an exhibit to
this report and is incorporated herein by this reference. The summary
contained herein is qualified in its entirety by the terms of the Merger
Agreement.
Encore, headquartered in Westlake Village, California, is a provider of
private label wireless Internet solutions to the marketplace.
Summary of Merger Agreement
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(a) EZConnect will purchase from Encore 316,456 shares (the "Encore Shares")
of Encore common stock, which constitutes 5% of the issued and outstanding
shares of capital stock of Encore after giving effect to the issuance of the
Encore Shares. The purchase price for the Encore Shares is $250,000.
(b) The purchase price for the Encore Shares will be paid by EZConnect as
follows: (i) $50,000 on execution of the Merger Agreement; and (ii) $200,000
as soon as Encore has completed an audit of its unaudited financial statements
(the "Audit"). If the Audit has not been completed by that date that is
thirty (30) days after the start of the audit, EZConnect will pay an
additional $50,000 deposit for the Encore Shares and the balance of $150,000
is payable when the audit is completed. If the Audit is not completed within
75 days from the start of the Audit, either Party may terminate the Merger
Agreement upon written notice to the other Party. In the event the total
assets minus the total liabilities of Encore ("the Encore Net Worth") shown on
the balance sheet included in the Audit is materially less than the Encore Net
Worth shown on the balance sheet included in the Encore unaudited financial
statements, EZConnect may, at its option, terminate the Agreement upon written
notice to Encore, or proceed with the transaction and reduce the payments to
be made to Encore at Closing by the amount of the shortfall in the Encore Net
Worth based on a specific formula. For purposes of triggering the adjustment
provisions, a reduction in the Encore Net Worth of 5% or more will be deemed
to be material.
(c) The initial $50,000 payment constitutes a deposit from EZConnect which
is non-refundable; provided, that the deposit will be refunded to EZConnect
if: (i) the Agreement is terminated by EZConnect due to a material reduction
in the Encore Net Worth; (ii) Sprint Spectrum LP should exercise its right of
first refusal to acquire Encore, (iii) this Agreement should be terminated by
EZConnect due to a material misrepresentation by Encore or a material breach
by Encore of its obligations under the Merger Agreement; or (iv) the
transaction is terminated by Encore in accordance with section 5.10 of the
Merger Agreement.
(d) On or before the Closing Date, Encore will take all actions as may be
required to convert its outstanding shares of preferred stock to Encore Common
Stock and to cause any outstanding options, warrants or similar rights
pertaining to any securities of Encore or its Subsidiaries to be converted
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into shares of Encore Common Stock (through exercise or otherwise) or
terminated. Subject to the terms and conditions of the Merger Agreement, each
share of Encore Common Stock issued and outstanding immediately prior to
Closing (excluding those held by EZConnect), shall cease to exist and be
converted into the right to receive the cash payment described below and that
number of shares of newly designated EZConnect Series A Preferred Stock (the
"EZConnect Preferred Stock") calculated by (i) dividing $6,000,000 by the
Trailing Trading Price, and (ii) dividing the quotient obtained in (i) by
6,020,000 (the number of shares of Encore Common Stock outstanding on the
Closing Date excluding any shares held by EZConnect) (the "Exchange Ratio").
The "Trailing Trading Price" will be the average of the Closing Price for
EZConnect common stock on each of the five consecutive trading days occurring
immediately prior to the date of execution of the Merger Agreement; provided,
that in no event shall the Trailing Trading Price be less than $2.40 or
greater than $3.00. The Trailing Trade Price is $2.40.
(e) The cash payment to which each share of Encore Common Stock outstanding
immediately prior to the Closing is entitled will be calculated by dividing
$250,000 by [6,020,000] (the number of Encore shares outstanding on the
Closing Date excluding any shares held by EZConnect).
(f) The shares of EZConnect Preferred Stock to be delivered to the principal
shareholders of Encore will be placed in escrow and will be released based on
certain performance criteria. One-half the shares placed in escrow will be
"earned-out" based on Encore achieving a minimum number of subscribers and
one-half of the shares placed in escrow shall be "earned-out" based on the
continued active involvement of Messrs. Turley and Hamilton with the growth
and development of Encore.
(g) Prior to the Closing Date, EZConnect will establish and authorize the
issuance of a series of EZConnect Preferred Stock. The EZConnect Preferred
Stock shall have rights, privileges and preferences substantially identical to
those set forth in Exhibit "A" to the Merger Agreement, which has been
included as an exhibit to this report.
(h) EZConnect has formed a subsidiary ("Merger Sub"), so that at the
Effective Time (as defined in Section 1.03(b)of the Merger Agreement) and
subject to and upon the terms and conditions of the Merger Agreement, Merger
Sub shall be merged with and into Encore and the separate corporate existence
of Merger Sub shall cease. Encore will continue as the surviving corporation
and shall be a wholly-owned subsidiary of EZConnect.
(i) The closing of the Merger (the "Closing") shall take place (i) at the
offices of EZConnect, 6009 South Redwood Road, Salt Lake City, Utah 84123, at
10:00 A.M. local time, on the earlier of October 15, 2000 and the second
business day following the date on which the last to be satisfied or waived of
the conditions set forth in the Merger Agreement (other than those conditions
that by their nature are to be satisfied at the Closing) shall be satisfied or
waived in accordance with the Merger Agreement or (ii) at such other place,
time and/or date as EZConnect and Encore shall agree (the date of the Closing,
the "Closing Date").
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(j) The officers of Encore immediately prior to the Closing Date shall
continue to serve in their respective offices of Encore, until their
successors are elected or appointed and qualified or until their resignation
or removal; and
(k) The directors of Merger Sub immediately prior to the Effective Time shall
be the directors of Encore from and after the Closing Date, until their
successors are elected or appointed and qualified or until their resignation
or removal.
(l) Concurrently with the execution of the Merger Agreement, Encore and
EZConnect entered into written agreements with Tod Turley and Kevin Hamilton,
the executive officers and principal shareholders of Encore, to vote all their
shares of Encore Common Stock in favor of the Merger Agreement.
(m) As soon as practicable, EZConnect will, to the extent required, prepare
and file with the SEC, an information statement and related material (the
"Information Statement") regarding the Merger Agreement. In addition, as part
of its Information Statement, EZConnect will take such steps as may be
necessary to elect Kevin Hamilton as a director of EZConnect. In the event
that Mr. Hamilton is unable or unwilling to serve as a member of the Board of
Directors of EZConnect, Tod Turley shall be elected to the Board of Directors
of EZConnect as Mr. Hamilton's replacement.
(n) Prior to the Closing Date, Encore must have not less than four private
label joint marketing and agency agreements similar to its agreement with Big
Planet, Inc.
(o) Concurrently with the execution of the Merger Agreement, EZConnect entered
into employment agreements with Messrs. Turley and Hamilton in substantially
the same form as those attached to the Merger Agreement as Exhibits "C-1" and
"C-2", included as exhibits to this report.
(p) Prior to the Closing Date, Encore must obtain the written consent of
certain of its vendors to revise Encore's trade credit arrangements.
(q) The Merger Agreement may be terminated prior to Closing by (i) mutual
written consent of each of EZConnect and Encore; (ii) by either party, if the
Closing shall not have occurred on or before October 15, 2000 (the
"Termination Date"); provided, however, that the right to terminate the Merger
Agreement will not be available to any party whose failure to fulfill any
obligation under the Merger Agreement has been the cause of, or resulted in,
the failure of the Closing to occur on or before the Termination Date.
(r) Other key conditions to Closing are as follows: (i) the daily trading
volume of EZConnect Common Stock as reported on the OTC Bulletin Board must be
a minimum of 10,000 shares on at least fifteen of the thirty trading days
immediately preceding the Closing Date and the average Closing Price for
EZConnect Common Stock during the thirty trading days prior to the Closing
Date shall be not less than $3.00 per share; and (ii) EZConnect must have
working capital in the minimum amount of $300,000 for use in connection with
the execution of Encore's business plan (including the payment of additional
security to obtain more favorable payment terms from Encore's vendors), or
shall have received binding commitments from third parties to provide funding
to EZConnect for such purposes within thirty (30) days from the Closing Date
in an amount not less than the difference between $300,000 and the amount of
EZConnect's working capital on the Closing Date.
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(s) Exhibits. The following exhibits are included as part of this report:
SEC
Exhibit Reference
Number Number Title of Document Location
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20.01 20 Agreement and Plan of Merger, between
EZConnect, Inc., and EZConnect Merger Co,
and Encore Wireless, Inc., dated July 8, 2000 This Filing
20.02 20 Exhibit A Form of Designation of Rights,
Privileges and Preferences of EZConnect
Preferred Stock This Filing
20.03 20 Exhibit B Form of Investor Representation
Letter This Filing
20.04 20 Exhibit C-1 Employment Agreement - Kevin
Hamilton This Filing
20.05 20 Exhibit C-2 Employment Agreement - Tod Turley This Filing
20.06 20 Voting Agreement, among EZConnect, Inc, EZ
Merger Co., Encore Wireless, Inc., Kevin
Hamilton, and Tod M. Turley, dated July 8,
2000 This Filing
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunder duly authorized.
EZCONNECT, INC.
Date: June 26, 2000 /S/ J. Greg Spencer, President