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UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 27, 1999
Commission file number 000-23795
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EXODUS COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-23795 77-0403076
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
2831 Mission College Boulevard
Santa Clara, California 95054
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(Address of principal executive offices) (Zip Code)
(408) 346-2200
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(Registrant's telephone number, including area code)
<PAGE>
ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS.
On July 27, 1999, Exodus Communications, Inc. ("Exodus" or the
"Company"), acquired all of the outstanding stock of Cohesive Technology
Solutions, Inc., a privately held Delaware corporation ("Cohesive"),
pursuant to an Agreement and Plan of Reorganization dated as of April 21,
1999, as amended by an Amendment thereto dated May 28, 1999 (together,
the "Plan of Reorganization") among Exodus, Cohesive and Marley
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of Exodus. Exodus will account for its acquisition of Cohesive under the
purchase method of accounting.
Pursuant to the terms of the Plan of Reorganization, each share
of Cohesive common stock was converted into the right to receive 0.02622
shares of Exodus common stock and $1.338 in cash; each share of Cohesive
Series A Preferred Stock was converted into the right to receive $122.337
in cash; each share of Cohesive Series B Preferred Stock was converted
into the right to receive $115.965 in cash; each share of Cohesive Series
C Preferred Stock was converted into the right to receive $5.00 in cash;
and each share of Cohesive Series D Preferred Stock which automatically
converted into Cohesive common stock immediately prior to the merger was
converted into the right to receive 0.02622 shares of Exodus common stock
and approximately $6.655 in cash. No fractional shares of Exodus common
stock will be issued in connection with the merger, but in lieu thereof
each holder of Cohesive stock who would otherwise be entitled to receive
a fraction of a share of Exodus common stock, after aggregating all
shares of Exodus common stock to be received by such holder, will receive
from Exodus an amount of cash equal to the average closing price of one
share of Exodus common stock for the five trading days prior to and
including the last trading day immediately preceding the effective time
multiplied by the fraction of a share of Exodus common stock to which
such holder would otherwise be entitled.
By virtue of the merger and without the need for any further action
on the part of any holders thereof, each issued and outstanding option
immediately outstanding prior to the effective time of the merger to
purchase shares of Cohesive common stock (a "Cohesive Option") was assumed
by Exodus and converted into an option to purchase that number of shares
of Exodus common stock determined by multiplying the number of shares of
Cohesive common stock subject to such Cohesive Option immediately prior to
the effective time of the merger by 0.03651, subject to rounding down to
eliminate fractional options, at an exercise price per share of Exodus
common stock equal to the exercise price per share of Cohesive common
stock that was in effect for such Cohesive Option immediately prior to the
effective time divided by 0.03651, subject to rounding up to the nearest
whole cent.
Pursuant to these exchange ratios, in the merger a total of 400,199
shares of Exodus common stock were issued and cash in the amount of
approximately $41.0 million was paid in exchange for all the issued and
outstanding shares of Cohesive capital stock and options to purchase a
total of 102,165 shares of Exodus common stock were assumed by Exodus in
exchange for all issued and outstanding Cohesive Options. In addition,
Exodus paid off a Cohesive credit facility which had a balance of
approximately $6.6 million. Exodus also withheld an estimated maximum
amount of earnout liabilities of Cohesive to third parties of $3.2
million. After Exodus determines that all the earnout liabilities and
related expenses have been fully paid from escrow (as described below),
then any remaining balance will be delivered to the Cohesive stockholders'
representative for distribution to the Cohesive stockholders on a pro rata
basis.
The exchange ratio and the cash payment was determined on the basis
of, among other things (i) a comparison of certain financial and stock
market information for Exodus and certain financial information for
Cohesive with similar types of information for certain other companies in
businesses similar to those of Exodus and Cohesive; and (ii) discussions
between senior management of Exodus and Cohesive regarding the business
and prospects of their respective companies.
Pursuant to the terms of the Plan of Reorganization, Exodus, Anthony
de Nicola as the representative of the Cohesive stockholders and an
independent escrow agent entered into an escrow agreement, pursuant to
which $10,000,000 that was issued in the merger to the Cohesive common
stockholders was placed in an escrow account to secure and collateralize
the indemnification obligations of the Cohesive stockholders to Exodus and
certain affiliates of Exodus.
In connection with the merger, Steve Bennion, Paul Brady and Dennis
Rohan entered into employment and/or noncompetition agreements with Exodus
and Sub, as the surviving corporation in the merger. Messrs. Bennion,
Brady and Rohan were officers of Cohesive immediately prior to the
effective time of the merger.
The funds comprising the cash payments paid to the Cohesive
stockholders were derived from Exodus' working capital cash reserves.
Cohesive is a leading professional services company with an
advanced technology focus and in-depth expertise in computer network
design, implementation and support, web and application development,
e-mail and messaging, e-commerce, Internet and intranet development,
information technology security and strategy, system integration, and
project management. Cohesive offers a variety of services, including
network design and development, web and application development and
information technology strategy and project management. Exodus intends to
continue to conduct Cohesive's business following the acquisition.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
It is impracticable for Exodus to currently provide the required
financial statements for Cohesive called for by Item 7(a). Pursuant to
paragraph (a)(4) of Item 7 of Form 8-K, the financial statements of
Cohesive required to be filed under paragraph (a) of this Item 7 will be
filed as soon as practicable, but not later than required by Item 7 of
Form 8-K.
(b) Pro Forma Financial Information.
It is impracticable for Exodus to currently provide the pro forma
financial information with respect to the acquisition of Cohesive by
Exodus called for by this Item 7(b). Pursuant to paragraphs (b)(2) and
(a)(4) of Item 7, the pro forma financial statements required to be filed
under paragraph (b) of this Item 7 will be filed as soon as practicable,
but not later than required by paragraphs (b)(2) and (a)(4) of Item 7 of
Form 8-K.
(c) Exhibits.
The following exhibits are filed herewith:
2.01 Agreement and Plan of Reorganization by and among Registrant,
Cohesive Technology Solutions, Inc. and Marley Acquisition
Corp. dated April 22, 1999. (Included in Appendix A to the
prospectus forming a part of the Registration Statement on
Form S-4 (File No. 333-79655) and incorporated herein by
reference.)
2.02 Amendment to Agreement and Plan of Reorganization by and among
Registrant, Cohesive Technology Solutions, Inc. and Marley
Acquisition Corp. dated May 28, 1999. (Included in Appendix A
to the prospectus forming a part of the Registration Statement
on Form S-4 (File No. 333-79655) and incorporated herein by
reference.)
99.01 Press Release dated July 28, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, Exodus has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: August 11, 1999
EXODUS COMMUNICATIONS, INC.
By: /s/ Richard S. Stoltz
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Richard S. Stoltz
Executive Vice President, Finance,
Chief Financial Officer and Chief
Operating Officer
EXHIBIT INDEX
Exhibit
2.01 Agreement and Plan of Reorganization by and among Registrant,
Cohesive Technology Solutions, Inc. and Marley Acquisition Corp.
dated April 22, 1999. (Included in Appendix A to the prospectus
forming a part of the Registration Statement on Form S-4 (File No.
333-79655) and incorporated herein by reference.)
2.02 Amendment to Agreement and Plan of Reorganization by and among
Registrant, Cohesive Technology Solutions, Inc. and Marley
Acquisition Corp. dated May 28, 1999. (Included in Appendix A to the
prospectus forming a part of the Registration Statement on Form S-4
(File No. 333-79655) and incorporated herein by reference.)
99.01 Press Release dated July 28, 1999.
Contact: Maureen O'Connell
Exodus Communications, Inc.
(408) 346-2218
[email protected]
EXODUS COMPLETES ACQUISITION OF
COHESIVE TECHNOLOGY SOLUTIONS, INC.
Acquisition Enables Exodus to Offer Comprehensive Professional
Services Support for Outsourcing Complex Web Hosting of
Mission-Critical Business Operations
SANTA CLARA, Calif., - July 28, 1999 - Exodus CommunicationsTM, Inc.
(NASDAQ: EXDS), a leading provider of Internet system and network
management solutions for enterprises with mission-critical Internet
operations, today announced it has completed the acquisition of Cohesive
Technology Solutions, Inc. for approximately $100 million.
The acquisition of Cohesive enables ExodusTM to provide its
customers with the expertise and scalability to help them design, deploy
and manage their increasingly complex and mission-critical Internet
operations. The Cohesive team, combined with Exodus' Arca SystemsTM
security consultants and Exodus' existing Professional Services group,
will become part of the expanded Exodus Professional Services team with a
staff of more than 400 professionals worldwide.
"We are delighted to welcome the Cohesive team to Exodus," said
Ellen M. Hancock, president and CEO of Exodus. "With the acquisition of
Cohesive, we believe Exodus is uniquely positioned to offer the most
complete complex Web hosting solutions."
Already, Exodus and Cohesive have successfully worked together with
a number of new customers. In addition, the two companies have worked
together to provide vital expertise to existing clients, many of whom
require Exodus' and Cohesive's network, systems, Internet application and
security expertise.
- more -
The acquisition of Cohesive strengthens Exodus as a provider of
outsourcing services to businesses with mission-critical Internet
operations. Exodus defined the Internet Data Center market in 1996 and
has since expanded into complex managed service offerings. With Cohesive,
Exodus now has a full suite of complex managed service offerings
including:
o Monitoring
o IT security
o Disaster recovery
o Systems/database administration
o Storage
o Data network services
o Internet and intranet application development
In addition, Exodus plans to leverage Cohesive's expertise in:
o Systems integration
o IT strategy project management
o E-commerce
o Database design and integration
Exodus will continue to expand its service offerings to meet the
growing needs of its customers.
- more -
About Exodus Communications
Exodus Communications is a leading provider of Internet system,
network management solutions and technology professional services for
enterprises with mission-critical Internet operations. The Company
manages Internet Web sites and its network infrastructure from 13
Internet Data Centers (IDCs) located in the United States and Europe.
Exodus currently has IDCs located in the Boston, Chicago, London, Los
Angeles, New York, Seattle (2), Silicon Valley (4) and Washington, D.C.
(2) metropolitan areas. The Company has announced the planned addition of
six additional IDCs and three international server hosting sites by the
end of 1999, bringing the total number of Exodus sites to 22 worldwide.
Exodus' wholly owned subsidiary, Arca Systems, is a premier provider of
advanced network and system security consulting services. Arca designs
and develops state-of-the-art security technology solutions for complex
and sensitive information networks and systems. More information on
Exodus can be found at www.exodus.net.
Forward Looking Statements
This press release contains forward-looking statements including
statements related to the anticipated benefits resulting from the
acquisition of Cohesive Technology Solutions by Exodus; the growth of
services supplied to Exodus' and Cohesive's customers; the continuation
of Cohesive's business and services offerings; and the expectation that
the Cohesive business will complement Exodus' other service offerings and
lead to the development of other technologies. Actual results may differ
materially due to a number of risks including: the operational challenges
of integrating the Cohesive business into Exodus; the current and future
reputation of the Cohesive business and its employees; the continued
employment of Cohesive's employees with Cohesive or Exodus, and the risk
that Cohesive customers may not continue to be customers of Cohesive or
will fail to order new services in the future. The matters discussed in
this press release also involve risks and uncertainties described from
time to time in Exodus' filings with the Securities and Exchange
Commission (SEC). In particular, see Exodus' annual and quarterly reports
filed with the SEC. Exodus does not assume any obligation to update the
forward-looking information contained in this press release.
# # #
Exodus, Exodus Communications and Arca systems are trademarks of Exodus
Communications Inc., and may be registered in certain jurisdictions. All
other trademarks mentioned in this document are the property of their
respective owners.
