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EXHIBIT 20.08
AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER
This Amendment No. 2 to Agreement and Plan of Merger is made and entered into
the 18th day of September 2000, among EZCONNECT, INC., a Nevada corporation
("EZConnect"); EZCONNECT MERGER CO., a Nevada corporation ("Merger Sub"); and
ENCORE WIRELESS, INC., a California corporation ("Encore"). EZConnect, Merger
Sub and Encore are sometimes referred to herein individually as a "Party" and
together as the "Parties."
PREMISES
WHEREAS, the Parties entered into that certain Agreement and Plan of Merger
dated July 8, 2000, as amended by Amendment No. 1 thereto dated August 9, 2000
(collectively, the "Agreement");
WHEREAS, the sale to EZConnect of 316,456 shares of Encore common stock has
been completed as provided in Section 1.01(a) of the Agreement, EZConnect has
paid the purchase price for such shares through cash payments and the
cancellation of promissory notes in the aggregate amount of $250,000, and
Encore has issued and delivered the stock certificate for such shares; and
WHEREAS, the Parties desire to further amend the Agreement in the manner set
forth herein;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree that the Agreement shall be amended as follows:
1. Any capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Agreement. Unless otherwise provided to the contrary,
all references to numbered articles and sections shall be deemed to refer to
the corresponding articles and sections of the Agreement.
2. Section 1.01 is amended by inserting the following new section as 1.01(e)
immediately following section 1.01(d):
(e) Concurrently with the execution of this Amendment EZConnect shall
purchase an additional 126,582 shares of Encore common stock for a purchase
price of $100,000, or $0.79 per share. The certificate representing the
Encore shares so purchased shall be delivered against payment for the shares.
3. Section 1.03(a) is amended by deleting such section in its entirety and
substituting the following therefore:
(a) The closing of the Merger (the "Closing") shall take place (i) at the
offices of EZConnect at 2749 East Parleys Way, Suite 300, Salt Lake City, Utah
84109 at 5:00 P.M. local time, on October 17, 2000, or (ii) at such other
place, time and/or date as EZConnect and Encore shall agree (the date of the
Closing, the "Closing DateClosing Date "). Notwithstanding the foregoing,
EZConnect may at its option extend the Closing Date to November 1, 2000 by
purchasing an additional 63,291 shares of Encore Common Stock for a purchase
price of $50,000, or $0.79 per share. EZConnect shall provide written notice
to Encore of its intention to so extend the Closing Date not later than the
close of business on October 10, 2000, in which event the purchase price for
the additional shares shall be paid and the Encore stock certificates shall be
delivered prior to the close of business on October 17, 2000.
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4. Section 1.06(a) is amended by deleting such section in its entirety and
substituting the following therefor:
(a) Conversion of Common Stock. On or before the Closing Date, Encore 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 into shares of Encore Common Stock (through exercise or
otherwise) or terminated. Subject to the terms and conditions of this
Agreement, each share of Encore Common Stock issued and outstanding
immediately prior to the Effective Time (excluding those held by EZConnect or
any of its Subsidiaries (collectively, the "Excluded SharesExcluded Shares
")), and all rights in respect thereof, shall at the Effective Time, without
any action on the part of any holder thereof, forthwith 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 (ii) dividing 2,500,000(subject to
adjustment as provided below) by the number of shares of Encore Common Stock
outstanding on the Closing Date, excluding any shares held by EZConnect (the
"Exchange Ratio"). The Exchange Ratio shall be expressed as a numeral carried
out five decimal places. For purposes of illustration only, assuming there
were 6,020,000 shares of Encore Common Stock outstanding on the Closing Date
(excluding the shares held by EZConnect), each share of Encore Common Stock
would be converted into the right to receive .41528 shares of EZConnect
Preferred Stock (2,500,000 divided by 6,020,000 = .41528).
The cash payment to which each share of Encore Common Stock outstanding
immediately prior to the Effective Time is entitled shall be calculated by
dividing $250,000 by the number of Encore shares outstanding on the Closing
Date, excluding any shares held by EZConnect.
In the event the 2,500,000 shares of EZConnect Preferred Stock to be issued to
the Encore shareholders as provided above would constitute less than 20% of
the Adjusted Fully Diluted Equity (as defined below) of EZConnect immediately
following the Closing, such number of shares of EZConnect Preferred Stock
shall be increased as necessary to constitute 20% of the Adjusted Fully
Diluted Equity immediately following the Closing. For purposes of this
section, Adjusted Fully Diluted Equity shall be calculated by adding the total
number of outstanding shares of all classes and the total number of shares
subject to outstanding stock options, whether vested or unvested, and
subtracting from the total the number of EZConnect securities issued pursuant
to Section 6.13 herein.
5. Section 1.06(b) is amended by deleting such section in its entirety and
substituting the following therefor:
(b) Earn-out Provisions. Seventy-five percent (75%) of the shares of
EZConnect Preferred Stock to be beneficially owned by Tod M. Turley and Kevin
Hamilton pursuant to subparagraph (a) above, shall be placed in escrow with a
mutually acceptable escrow agent (pursuant to a written escrow agreement) and
shall be released from escrow based on the performance criteria set forth
below. During the escrow period, Messrs. Turley and Hamilton shall be
entitled to vote the shares held in escrow. One-half the shares placed in
escrow shall be "earned-out" based on Encore achieving a minimum number of
subscribers (the "Subscriber Base Shares") 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 the combined
companies (the "Continued Growth Shares"). The Subscriber Base Shares and the
Continued Growth Shares shall be released from escrow as follows:
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(i) the Subscriber Base Shares shall be released to Messrs. Turley and
Hamilton (in equal amounts) at such time as Encore has achieved a subscriber
base of 15,000 active mobile identification numbers ("MINS"), which MINS were
acquired in the ordinary course of Encore's business consistent with past
practice; it being understood that the Encore shareholders shall not be given
credit for any MINS acquired at a margin significantly lower, or a cost
significantly higher, than the market conditions prevailing at the time any
such MINS were acquired; provided, that except as provided below, if Encore
has not achieved 15,000 such MINS by that date that is nine (9) months from
the Closing Date (the "MINS Measurement Date"): (x) the escrow shall terminate
with respect to the Subscriber Base Shares and Messrs. Turley and Hamilton
shall receive an aggregate number of Subscriber Base Shares (divided between
them in equal amounts) calculated by multiplying the number of Subscriber Base
Shares held in escrow by a fraction, the numerator of which is the number of
such MINS on the MINS Measurement Date and the denominator of which is 15,000,
and (y) the balance of the Subscriber Base Shares shall be cancelled and
returned to the status of authorized and unissued shares. In the event Encore
is unable to operate its business in the ordinary course due to war, invasion,
hostilities, riots, rebellion, insurrection, seizure, confiscation by order of
any government or public authority, or any event of similar magnitude that is
beyond the control of Encore, the MINS Measurement Date shall be extended for
a number of days equal to the number of days Encore is prevented operating its
business due to the occurrence of such event.
(ii) the Continued Growth Shares shall be released to Messrs. Turley and
Hamilton as follows: (x) one-half of the Continued Growth shares shall be
released to Messrs. Turley and Hamilton (in equal amounts) on that date which
is one year from the Closing Date; and (y) one-twelfth of the Continued Growth
Shares remaining in escrow after delivery of the shares contemplated by
subparagraph (x) shall be released to Messrs. Turley and Hamilton (in equal
amounts) on the last day of each of the twelve calendar months occurring after
the first anniversary of the Closing Date; in each case subject to forfeiture
based on the following described events. If either Mr. Turley or Mr. Hamilton
should voluntarily terminate his employment with EZConnect, or if EZConnect
should terminate either of such persons employment as a result of a material
breach by such persons of the terms of their respective employment agreements,
all shares held in escrow for the person whose employment is terminated, on
the date such employment is terminated, shall be cancelled and returned to the
status of authorized and unissued shares. If the employment of either Mr.
Turley or Mr. Hamilton should be terminated under circumstances giving rise to
the cancellation of the shares held for him in escrow, the shares remaining in
escrow shall be released to the person whose employment is continuing in
accordance with the above schedule.
6. Section 1.06(c) is amended by deleting such section in its entirety and
substituting the following therefor:
The Designation of Rights, Privileges and Preferences of the EZConnect
Preferred Stock, which is attached as Exhibit "A" to the Agreement shall be
amended prior to the Closing Date to: (i) reduce the amount of the liquidation
preference to $3.40 per share; (ii) provide that the liquidation preference is
applicable in the event of a sale of EZConnect; and (iii) change the date on
which the EZConnect Preferred Stock shall automatically be converted to
EZConnect common stock to October 17, 2003.
7. Section 4.03 of the Agreement is amended by inserting the following new
sentence at the end of such section:
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Notwithstanding the foregoing, subject to applicable federal and state
securities laws and regulations, Encore shall not be precluded from discussing
with third parties the potential sale of securities of EZConnect prior to the
consummation or termination of the transactions contemplated by this
Agreement.
8. The Agreement is amended by deleting Section 4.05 thereof in its entirety
and substituting the following therefor:
Section 4.05 Limit on Encore Business Transactions. Notwithstanding any
provision to the contrary contained herein, during the period from the
execution of this Agreement until the earlier of the Effective Time or the
date of termination of this Agreement, Encore shall not, without the prior
written consent of EZConnect, which consent shall not be unreasonably
withheld, enter into any agency agreement or any other agreement involving
total payments of $20,000 or more over the term of such agreement. In the
event EZConnect fails to respond to any Encore request for consent under this
subparagraph within 48 hours, it shall be deemed to have consented to the
agreement with respect to which consent was being requested. In addition,
Encore shall not, without the prior written consent of EZConnect, take any
action that would be inconsistent in nature or amount with the expenditures
set forth in the Encore Budget through September 2000.
9. Section 5.05 of the Agreement is amended by inserting the following new
sentence at the end of such section:
Commencing with the Closing Date and continuing for as long as Tod Turley is
the owner of shares representing not less than 5% of the total voting power of
EZConnect's outstanding securities, Mr. Turley shall be invited to attend all
meetings of the Board of Directors as a guest and shall be provided with
copies of the written materials provided to the EZConnect directors from time
to time, subject to Mr. Turley's execution of an appropriate non-disclosure
agreement.
10. Article V of the Agreement is amended by inserting the following new
sections 5.11 and 5.12 immediately after existing section 5.10:
Section 5.11 Encore Obligation to Purchase Intellectual Property. In the
event the transactions contemplated by this Agreement are not completed and
this Agreement is terminated, upon notice from EZConnect provided not later
than ninety (90) days following the termination date of this Agreement, Encore
shall be required to purchase EZConnect's intellectual property, trade secrets
and contract rights (including prospect and customer lists), to the extent
assignable, pertaining to EZConnect's wireless Internet convergent services
business plan for an amount equal to the amounts paid to or invested in Encore
by EZConnect from and after the date of this Amendment No. 2, specifically
including the $100,000 investment provided for in Section 1.01(e) and the
$50,000 investment provided for in Section 1.03(a), up to a maximum payment of
$150,000. Payment shall be made by Encore in the form of a non-interest
bearing promissory note due and payable in a lump sum twelve (12) months from
the termination date of this Agreement. The note will be secured by the
intellectual property, trade secrets and contract rights so conveyed to Encore
and shall be subordinated to any senior debt of Encore.
Section 5.12 Encore Option to Repurchase Encore Stock. In the event the
transactions contemplated by this Agreement are not completed and this
Agreement is terminated, Encore shall have the right for a period of ninety
(90) days' following the termination date of this Agreement to repurchase all
or any portion of the shares of Encore Common Stock owned by EZConnect for a
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cash purchase price equal to the amount paid by EZConnect for such shares
(i.e. $0.79 per share).
11. Section 6.05 of the Agreement is amended by deleting such section in its
entirety and substituting the following therefor:
Section 6.05 Employment Agreements. The employment agreements entered into
by EZConnect with each of Tod M. Turley and Kevin Hamilton, which are attached
as Exhibits "C-1" and "C-2" to the Agreement, shall be amended prior to the
Closing Date to: (i) extend the Probation Period (as defined therein) through
the Closing Date; (ii) specify reasonably achievable management business
objectives which are conditions to the quarterly vesting of the stock options
granted under such agreements; and (iii) amend the non-competition provision
to generally prohibit direct competition with the Company in the private label
wireless industry in any geographic market in which the Company is conducting
operations for a period of one year following the termination of such
employment agreements (except in the cases of termination without cause or
termination by the executive for good reason), which non-competition provision
shall be substantially identical to the non-competition provision contained in
the revised employment agreement of J. Greg Spencer with EZConnect.
12. Section 6.07 of the Agreement is amended by deleting such section in its
entirety.
13. Article VI is amended by adding the following new sections 6.13 and 6.14
immediately after existing section 6.12:
Section 6.13 Additional Funding at Closing. On or prior to the Closing Date,
EZConnect shall have received not less than $1,000,000 from the sale of
additional equity securities. The equity securities to be sold by EZConnect
shall not have liquidation preferences greater than the EZConnect Series A
Preferred Stock on the Closing Date.
Section 6.14 Opinion of Counsel. EZConnect shall deliver at Closing a legal
opinion as to the capitalization of EZConnect on the Closing Date, which shall
address the authorized capital of the Company, the number of issued and
outstanding shares of common and preferred stock, the number of outstanding
stock options and similar rights to acquire additional securities in the
future, and the number of shares reserved for issuance in the future.
14. The Agreement is amended by deleting Section 7.10 in its entirety.
15. Section 7.14 of the Agreement is amended by deleting such section in its
entirety and substituting the following therefore:
Section 7.14 Changes in Encore Payment Terms. The Encore vendors described
below shall have consented in writing to change Encore's trade credit
arrangements to terms not less favorable to Encore than those described below,
which agreements shall not cause Encore to provide more than $300,000 in
additional security to such vendors: (a) Sprint Spectrum LP: "net 10 days,"
(b) Focus Affiliates, Inc. and any other material supplier of equipment to
Encore: "net 30 days," and (c) any vendor providing material billing, sales
and customer support services to Encore (other than Martin Dawes Technologies,
Ltd.): "net 30 days." Any additional security required to be provided by
Encore to such vendors (within the limits described above) in order to achieve
the payment terms described above, shall be provided by EZConnect at or within
thirty days after the Closing Date.
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16. Section 8.01 of the Agreement is amended by deleting such section in its
entirety and substituting the following therefor:
Section 8.01 Termination. This Agreement may be terminated at any time
before the Effective Time (except as otherwise provided) as follows:
(a) by mutual written consent of each of EZConnect and Encore;
(b) by any Party, if the Effective Time shall not have occurred by the close
of business on October 17, 2000 Termination Dateand EZConnect has not extended
the Closing Date in the manner provided in Section 1.03(a) or, if Closing Date
has been so extended by EZConnect, if the Effective Time shall not have
occurred by the close of business on November 1, 2000 (the "Termination
Date"); provided, however, that the right to terminate this Agreement under
this Section 8.01(b) shall not be available to any Party whose failure to
fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before the Termination Date;
(c) by any Party, if a Governmental Entity shall have issued an order, decree
or injunction having the effect of making the Merger illegal or permanently
prohibiting the consummation of the Merger, and such order, decree or
injunction shall have become final and nonappealable (but only if such Party
shall have used its reasonable best efforts to cause such order, decree or
injunction to be lifted or vacated);
(d) by any Party if (i) there shall have been a material breach by the other
of any of its representations, warranties, covenants or agreements contained
in this Agreement, and such breach shall be incapable of being cured or, if
capable of being cured, shall not have been cured within 10 days after written
notice thereof shall have been received by the Party alleged to be in breach;
(e) by EZConnect if the Encore shareholders fail to approve this Agreement
and the Merger in the manner required by the California Corporations Code;
(f) by Encore if approval of this Agreement and/or the Merger by the
EZConnect shareholders is required by the NRS and such approval is not
obtained;
(g) by Encore if EZConnect should enter into an EZConnect Acquisition
Transaction not approved by Encore in the manner provided in Section 4.04;
(h) by Encore if the receipt of the EZConnect Preferred Stock is determined
to be taxable to the Encore shareholders as provided in Section 5.10; and
(i) by EZConnect at any time during the twenty (20) day period following the
date of this Amendment No. 2 if it reasonably concludes that the facts and
circumstances surrounding the agreement between Encore and Martin Dawes
Technologies, Ltd. pose a material liability or risk to Encore.
17. Sections 9.06(i) and (ii) of the Agreement are amended by deleting such
sections in their entirety and substituting the following therefor:
(i) "Encore Material Adverse EffectAbacus Material Adverse Effect# " means any
change in or effect (x) that is or will be materially adverse to the business,
results of operations, or financial condition of Encore and its Subsidiaries
taken as a whole, or (y) that will prevent or materially impair Encore'
ability to consummate the Merger, provided that an Encore Material Adverse
Effect shall not include (xxx) changes or effects relating to economic
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conditions or financial markets in general or the wireless communications
industry in general, (yyy) the payment of salaries to Tod Turley and Kevin
Hamilton subsequent to the date of this Agreement in amounts not greater than
those forth in the Encore Budget for the period through September 2000, or
(zzz) the fact and circumstances surrounding the agreement between Encore and
Martin Dawes Technologies, Ltd. if EZConnect does not exercise its right to
terminate this Agreement as a result thereof within twenty (20) days following
the date of this Amendment No. 2.
(ii) "EZConnect Material Adverse Effect Alphabet Material Adverse Effect& "
means any change in or effect (x) that is or will be materially adverse to the
business, results of operations or financial condition of EZConnect and its
Subsidiaries taken as a whole, or (y) that will prevent or materially impair
EZConnect's ability to consummate the Merger or to issue shares of EZConnect
Common Stock in accordance with the terms hereof, provided that an EZConnect
Material Adverse Effect shall not include (vvv) changes or effects relating to
economic conditions or financial markets in general or the wireless
communications industry in general, (www) changes in EZConnect's business plan
and nature of operations consistent with those disclosed in the EZConnect
Disclosure Schedules, (xxx) the issuance of additional equity or debt
securities of EZConnect to fund the obligations of EZConnect under this
Agreement, (yyy) the restructuring of EZConnect's capitalization as outlined
in Exhibit "A" to this Amendment No. 2, or (zzz) the departure from EZConnect
of one of its senior executive officers. A decline in the stock market price
of the shares of EZConnect Common Stock in and of itself shall not be deemed
an "EZConnect Material Adverse Effect."
18. Except as expressly provided herein, the Agreement shall be unchanged and
shall continue in full force and effect.
19. EZConnect waives any breach by Encore of Section 4.03 of the Agreement
arising as a result of Encore's discussions with potential investors during
the period from September 15, 2000 through September 22, 2000.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to the
Agreement to be executed by their respective officers, thereunto duly
authorized, as of the date first above written.
EZConnect:
EZConnect, Inc., A Nevada Corporation
By: /S/ J. Greg Spencer
Its: President
Encore:
Encore Wireless, Inc., A California Corporation
By: /S/ Tod M. Turley
Its: President
Merger Sub: EZConnect Merger Co., A Nevada Corporation
By: /S/ J. Greg Spencer
President