AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is made and entered
into as of this 7th day of August, 2000 by and among EBIZ ENTERPRISES, INC., a
Nevada corporation ("EBIZ"), XXXXXXXXX.XXX, INC., a Delaware corporation
("LMI"), and LINUX MALL ACQUISITION, INC., a Delaware corporation ("MERGER
SUB").
RECITALS
A. Ebiz and LMI have entered into a letter of intent reflecting each
entity's desire that Ebiz acquire all of the outstanding capital stock and
equity interests of LMI by means of a merger (the "Merger") of LMI with and
into Merger Sub, a direct, wholly owned subsidiary of Ebiz.
B. For federal income tax purposes, the parties intend that the Merger
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE").
C. The parties hereby set forth the terms, considerations and
conditions of the Merger.
AGREEMENT
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE 1
THE MERGER AND RELATED MATTERS
1.1 THE MERGER.
(a) At the Effective Time (as hereinafter defined) and subject to and
upon the terms and conditions of this Agreement, LMI shall merge with and into
Merger Sub in accordance with the provisions of the General Corporation Law of
the State of Delaware (the "DGCL"), the separate corporate existence of LMI
shall cease and Merger Sub shall continue as the surviving corporation (the
"SURVIVING CORPORATION"). The "EFFECTIVE TIME" shall occur upon the filing with
the Delaware Secretary of State of a certificate of merger (the "CERTIFICATE OF
MERGER") substantially in the form of Exhibit A attached hereto and executed in
accordance with the applicable provisions of the DGCL, or at such later time as
may be agreed to by Ebiz and LMI and specified in the Certificate of Merger.
Provided that this Agreement has not been terminated pursuant to Article 9, the
parties will cause the Certificate of Merger to be filed with the Delaware
Secretary of State as soon as practicable after the Closing (as defined in
Section 1.2 below).
(b) The Merger shall have the effects set forth in Sections 259, 260
and 261 of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of LMI shall vest in the Surviving Corporation, and all
debts, liabilities and duties of LMI shall become the debts, liabilities and
duties of the Surviving Corporation. If, at any time after the Effective Time,
the Surviving Corporation considers or is advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties, or assets of either LMI or Merger Sub, or otherwise to carry out the
intent and purposes of this Agreement, the officers and directors of the
Surviving Corporation will be authorized to execute and deliver, in the name and
on behalf of each of LMI and Merger Sub, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of each
of LMI and Merger Sub, all such other actions and things as the Board of
Directors of the Surviving Corporation may determine to be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out the intent and purposes of this Agreement.
1.2 CLOSING.
The closing of the Merger (the "CLOSING") shall take place (i) at 9:00
a.m. (Mountain Standard Time) at the offices of Xxxxx and Xxxx, LLP, within ten
business days following the date on which the last of the conditions set forth
in Article 6 (other than the filing of the Certificate of Merger and other than
any such conditions which by their terms are not capable of being satisfied
until the Closing Date (as hereinafter defined) or thereafter) is satisfied or,
when permissible, waived, or (ii) on such other date and at such other time or
place as is mutually agreed by the parties hereto. The date on which the Closing
occurs is hereinafter referred to as the "CLOSING DATE."
1.3 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any action on the part of Ebiz, Merger Sub, LMI or the
holders of any of their respective securities:
(a) Each share of common stock of LMI, par value $0.01 per share ("LMI
COMMON STOCK") outstanding immediately prior to the Effective Time (other than
those shares for which an election for dissenters' rights has been made as
contemplated by Section 1.4) shall be converted into and represent the right to
receive, and shall be exchangeable for, 2.2 validly issued, fully paid and
non-assessable shares of common stock of Ebiz, par value $0.001 per share ("EBIZ
COMMON STOCK").
(b) Each share of Series A Preferred Stock of LMI (the "LMI SERIES A
PREFERRED STOCK") or Series B Preferred Stock of LMI (the "LMI SERIES B
PREFERRED STOCK"), each par value $0.01 per share (collectively, "LMI PREFERRED
STOCK"), outstanding immediately prior to the Effective Time (other than those
shares for which an election for dissenters' rights has been made as
contemplated by Section 1.4) shall be converted into the number of validly
issued, fully paid and non-assessable shares of Ebiz Common Stock equal to (i)
with respect to the LMI Series A Preferred Stock, the product of (A) 2.2
multiplied by (B) the number of shares of LMI Common Stock into which each share
of LMI Series A Preferred Stock is convertible immediately prior to the
Effective Time and (ii) with respect to the LMI Series B Preferred Stock, the
product of (A) 2.2 multiplied by (B) the number of shares of LMI Common Stock
into which each share of LMI Series B Preferred Stock is convertible immediately
prior to the Effective Time. Immediately prior to the Effective Time, all
outstanding debentures of LMI issued before March 1, 2000 and a Designated
Portion (as hereinafter defined) of the outstanding principal and interest of
each debenture of LMI issued after March 1, 2000 shall be converted
automatically into LMI Preferred Stock in accordance with the terms of such
debentures. "DESIGNATED PORTION" shall mean 30.5%, unless the liquidation
provisions contained in Article IV.B.2(b)(i) of the Certificate of Incorporation
of LMI and Section 3(b)(i) of the Certificate of Designations of Series B
Preferred Stock of LMI are waived, amended or otherwise rendered inapplicable to
the Merger on or before the Closing Date, in which case Designated Portion shall
mean 20%. All LMI Preferred Stock issued upon such conversion shall be converted
into Ebiz Common Stock as provided above. The portion of outstanding principal
and interest of each debenture of LMI issued after March 1, 2000 that remains
unconverted immediately after the Effective Time, which portion shall be 69.5%,
unless the liquidation provisions contained in Article IV.B.2(b)(i) of the
Certificate of Incorporation of LMI and Section 3(b)(i) of the Certificate of
Designations of Series B Preferred Stock of LMI are waived, amended or otherwise
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rendered inapplicable to the Merger on or before the Closing Date, in which case
such portion shall be 80%, shall be assumed by Ebiz at the Effective Time (the
"ASSUMED LMI DEBENTURES") on the terms and conditions set forth in each such
debenture; provided, however, that ninety days after the Effective Time, the
Assumed LMI Debentures shall convert automatically into shares of Ebiz Common
Stock on such a basis that there is issued with respect to each of the Assumed
LMI Debentures the same number of shares of Ebiz Common Stock as would have been
issued with respect to such Assumed LMI Debenture had it been converted into LMI
Preferred Stock immediately prior to the Effective Time. Prior to the Closing,
all outstanding convertible notes (the "CANOPY NOTES") issued to The Canopy
Group, Inc. ("CANOPY") shall, at the election of Canopy and in accordance with
the terms of the Canopy Notes, either be repaid by LMI or be converted into LMI
Common Stock.
(c) For purposes of this Agreement, "MERGER CONSIDERATION" shall mean
(i) with respect to each share of LMI Common Stock, the number of shares of Ebiz
Common Stock into which each share of LMI Common Stock is converted pursuant to
Section 1.3(a) of this Agreement, (ii) with respect to each share of LMI
Preferred Stock, the number of shares of Ebiz Common Stock into which each share
of LMI Preferred Stock is converted pursuant to Section 1.3(b) of this Agreement
and (iii) with respect to the Assumed LMI Debentures, the number of shares of
Ebiz Common Stock into which the Assumed LMI Debentures are to be converted
pursuant to Section 1.3(b) of this Agreement.
1.4 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary in this Agreement, if
appraisal rights are available to holders of LMI Common Stock or LMI Preferred
Stock pursuant to Section 262 of the DGCL ("SECTION 262"), each outstanding
share of LMI Common Stock or LMI Preferred Stock, the holder of which has
demanded and perfected his demand for appraisal of the fair value of such shares
in accordance with Section 262 and has not effectively withdrawn or lost his
right to such appraisal (the "DISSENTING SHARES"), shall not be converted into
or represent a right to receive the Merger Consideration, but the holder thereof
shall be entitled only to such rights as are granted by Section 262. LMI shall
give Ebiz prompt written notice upon receipt of any such written demands for
appraisal of the fair value of shares of LMI Common Stock or LMI Preferred Stock
and of withdrawals of such demands and any other instruments provided pursuant
to Section 262 (any stockholder duly making such demand being hereafter called a
"DISSENTING STOCKHOLDER"). Each Dissenting Stockholder who becomes entitled,
pursuant to the provisions of Section 262, to payment for his shares of LMI
Common Stock or LMI Preferred Stock shall receive payment therefor from the
Surviving Corporation (but only after the amount thereof shall have been agreed
upon or at the times and in the amounts required by Section 262), and such
shares of LMI Common Stock or LMI Preferred Stock, as the case may be, shall be
cancelled.
(b) If any holder of shares of LMI Common Stock or LMI Preferred Stock
who demands appraisal of the fair value of his shares under Section 262 shall
effectively withdraw or lose (through failure to perfect or otherwise) his right
to such appraisal, the shares of LMI Common Stock or LMI Preferred Stock of such
holder shall be converted into a right to receive the Merger Consideration.
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1.5 EXCHANGE OF SHARE CERTIFICATES.
(a) As soon as practicable after the Effective Time and surrender to
Ebiz of any certificate (a "CERTIFICATE") that immediately prior to the
Effective Time represented any shares of LMI Common Stock or LMI Preferred
Stock, Ebiz shall, subject to Section 1.5(c) and Article 10, if such Certificate
represented shares of stock which were converted in the Merger into the right to
receive the Merger Consideration, distribute to the person in whose name such
Certificate shall have been issued, a certificate registered in the name of such
person representing the Merger Consideration payable in respect of such shares.
Each Certificate so surrendered shall forthwith be cancelled.
(b) As soon as practicable after the conversion of the Assumed LMI
Debentures pursuant to Section 1.3(b), Ebiz shall, subject to Section 1.5(c) and
Article 10, distribute to the holders of Assumed LMI Debentures, a certificate
registered in the name of each such holder representing the Merger Consideration
payable in respect of the conversion of the Assumed LMI Debentures.
(c) At and after the Effective Time, there shall be no transfers on
the stock transfer books of the Surviving Corporation of shares of LMI Common
Stock, LMI Preferred Stock or Assumed LMI Debentures that were converted into
the right to receive the Merger Consideration. Each share of Ebiz Common Stock
into which shares of LMI Common Stock or LMI Preferred Stock shall be converted
in the Merger shall be deemed to have been issued at the Effective Time. Each
share of Ebiz Common Stock into which the Assumed LMI Debentures shall be
converted in connection with the Merger shall be deemed to have been issued at
the time such conversion occurs pursuant to Section 1.3(b).
1.6 WARRANTS; STOCK OPTIONS.
(a) Upon the Effective Time, Ebiz shall assume LMI's obligations under
the warrants issued by LMI ("LMI WARRANTS"), a list of which is contained in
Schedule 3.5 and pursuant to the terms of the LMI Warrants, each warrant shall
be exercisable for the number of shares of Ebiz Common Stock to which the holder
of such warrant would have been entitled to receive in the Merger if such holder
had exercised its LMI Warrant immediately before the Merger.
(b) Upon the Effective Time, Ebiz shall assume all outstanding stock
options of LMI (the "LMI STOCK OPTIONS"), a list of which is contained in
Schedule 3.5, with adjustment in the number and exercise price as set forth in
the terms of the LMI Stock Options, and such LMI Stock Options shall be
exercisable for shares of Ebiz Common Stock.
1.7 TAX FREE MERGER. The cancellation of shares of LMI Common Stock
and LMI Preferred Stock issued prior to Closing in exchange for Ebiz Common
Stock is intended to qualify as a reorganization within the meaning of ss.368(a)
of the Code. The parties hereto will perform and refrain from performing all
acts as required by the Code and all rules, regulations or judicial
interpretations thereof as necessary to cause this transaction to be treated as
a reorganization as stated above, to the extent such treatment is available
without altering the terms of this Agreement.
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ARTICLE 2
ADDITIONAL TERMS
2.1 EXECUTIVE MANAGEMENT. Upon consummation of the Merger, the
executive management of Ebiz shall be:
Xxxxxxx Xxxxxx Chairman and President
Xxxxx Xxxx Chief Executive Officer
Xxxxxxx Xxxxxx Chief Marketing Officer
Xxx Xxxxxxx Chief Financial Officer
At the Closing, Ebiz shall offer to enter into Employment Agreements with such
persons substantially in the form attached as Exhibit B hereto.
2.2 BOARD OF DIRECTORS. Upon consummation of the Merger, Ebiz shall
cause the number of members of its Board of Directors to equal seven. Ebiz shall
fill 5 of such 7 directorships by appointing 2 inside Directors as directed by
LMI acting through its Chief Executive Officer and 3 outside Directors as
mutually agreed upon by Ebiz and LMI acting through their respective Chief
Executive Officers (collectively the "APPOINTED DIRECTORS"). Each such Director
shall be appointed to hold office until a successor is properly elected and
qualified. At the next annual or special meeting of Ebiz shareholders following
the Merger at which an election of Directors is properly held, Ebiz shall
nominate the Appointed Directors along with the Directors of Ebiz as of the
Closing for election to the Board of Directors of Ebiz, and shall not nominate
any other person for a Director position. At Closing, the principal shareholders
of Ebiz and LMI shall execute a Shareholder Voting Agreement and Proxy in
substantially the form attached as Exhibit C hereto. As used herein, "principal
shareholder" means any holder of 10% or more of the authorized and outstanding
shares, as of the Closing, of LMI Common Stock or Ebiz Common Stock.
2.3 NAME OF SURVIVING CORPORATION: CERTIFICATE OF INCORPORATION;
BYLAWS
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware law.
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by Delaware law.
2.4 REGISTRATION RIGHTS/LOCK-UP.
(a) At the Closing, Ebiz shall enter into a Registration Rights
Agreement (the "REGISTRATION RIGHTS Agreement") with each of the shareholders of
LMI, substantially in the form attached as Exhibit D hereto. Upon the conversion
of the Assumed LMI Debentures pursuant to Section 1.3(b), Schedule A to the
Registration Rights Agreement shall be automatically amended to list each holder
of an Assumed LMI Debenture as a "Shareholder" with respect to the Ebiz Common
Stock received by such holder in connection with the conversion.
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(b) At the Closing, Ebiz shall cause each of Xxxxxxx Xxxxxx and
Xxxxxxx Xxxxxx to execute and deliver a lock-up agreement (the "LOCK-UP
AGREEMENT") substantially in the form attached as Exhibit E hereto.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF LMI
LMI hereby represents and warrants to Ebiz as follows:
3.1 ORGANIZATION, CAPACITY AND AUTHORITY.
(a) LMI has been duly organized and is validly existing and in good
standing under the laws of the State of Delaware and has the full corporate
power and authority to own its properties and to carry on its business as now
being conducted. LMI is duly qualified and in good standing as a foreign
corporation in the states set forth on Schedule 3.1(a) hereto and is not
required to qualify in any other state as a foreign corporation, where the
failure to do so would have a material adverse effect on its conduct of
business. LMI has full corporate power and authority to enter into this
Agreement and, subject to obtaining the approval of LMI's stockholders, to
perform its obligations hereunder. The execution, delivery and performance of
this Agreement have been duly authorized by the Board of Directors of LMI and no
other corporate proceeding on the part of LMI is necessary to authorize this
Agreement or the transactions contemplated hereby other than the approval of
this Agreement and the transactions contemplated hereby by LMI's stockholders
and holders of LMI debentures.
(b) Except as set forth on Schedule 3.1(b), LMI does not directly or
indirectly own any equity or similar interest in, or any interest convertible or
exchangeable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
3.2 NO CONFLICT, BREACH OR DEFAULT. The execution and delivery of this
Agreement and the performance by LMI of the terms hereof do not (a) assuming the
approval of this Agreement and the transactions contemplated hereby by LMI's
stockholders, conflict with or result in a violation of the Certificate of
Incorporation or Bylaws of LMI, (b) violate any order, writ, judgment or decree
to which LMI is a party or is subject, or (c) conflict with or result in a
violation of, or result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of LMI under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
lease, license, agreement or other instrument or obligation to which LMI is
bound or by which LMI or any of its properties or assets may be bound except, in
the case of this clause (c), where such conflict, violation, default,
termination, cancellation or acceleration would not, individually or in the
aggregate, have a material adverse effect on the transactions contemplated
hereby or on the business, assets, results of operations, financial condition or
prospects ("MATERIAL ADVERSE EFFECT") of LMI.
3.3 APPROVALS AND CONSENTS. Except for the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, and except as
set forth on Schedule 3.3 hereto, no approval, authorization, consent,
exemption, registration, filing or other action by or filing with any
governmental authority is required in connection with the execution and delivery
by LMI of this Agreement or the transactions contemplated herein.
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3.4 VALID OBLIGATION. This Agreement constitutes a legal, valid and
binding obligation of LMI enforceable against LMI in accordance with its terms,
except that (a) the enforceability of the same may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting enforcement of
creditors' rights generally, and (b) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
3.5 CAPITAL STOCK OF LMI. The authorized capital stock of LMI consists
of 25,000,000 shares of common stock, $.01 par value, of which 2,651,662 shares
are issued and outstanding and 15,000,000 shares of preferred stock, $.001 par
value, of which (i) 2,400,000 shares have been designated as Series A Preferred
Stock of which no shares are outstanding, (ii) 8,600,000 shares have been
designated as Series B Preferred Stock of which no shares are outstanding and
(iii) 4,000,000 shares are undesignated of which no shares are outstanding. LMI
has awarded options to purchase 559,250 shares of common stock under the 2000
Incentive Stock Option Plan. All the outstanding shares of common stock of LMI
have been duly and validly authorized and issued, and are fully-paid and
non-assessable, and there exist no preemptive rights of any present or former
stockholders of the common stock. Except as set forth on Schedule 3.5, LMI has
no other outstanding securities convertible into or exercisable for its capital
stock and no other agreements of any nature whatsoever whereby LMI may, under
any circumstances, be obligated to issue, sell, repurchase or redeem additional
shares of capital stock.
3.6 LMI FINANCIAL STATEMENTS.
(a) Schedule 3.6(a) hereto sets forth a listing of financial
statements of LMI delivered to Ebiz (collectively, the "LMI FINANCIAL
STATEMENTS"). The LMI Financial Statements are true, accurate and complete and
present fairly the financial position of LMI as of the dates stated and the
results of the operations of LMI for the periods stated.
(b) LMI has no liabilities or obligations of a material nature
(whether accrued, absolute, asserted, unasserted, known, unknown, contingent or
otherwise) except for those described in the most current LMI Financial
Statements ("CURRENT LMI FINANCIAL STATEMENTS"), described in Schedule 3.6(b)
hereto or otherwise disclosed to Ebiz.
3.7 BOOKS AND RECORDS. The books and records of LMI are complete and
correct and have been maintained in accordance with sound business practices,
including the maintenance of an adequate system of internal controls. The books
and records, financial and otherwise, of LMI accurately set out and disclose the
financial position of LMI, and all transactions of LMI have been accurately
recorded in such books and records. The minute books of LMI contain accurate and
complete records of all meetings held of, and all material corporate actions
taken by, its shareholders or Board of Directors or any committee of its Board
of Directors.
3.8 REGULATORY FILINGS. LMI has heretofore filed all reports,
registration statements and schedules as required pursuant to any applicable law
except where the failure to make such filings has not had and could not be
reasonably expected to have a Material Adverse Effect on LMI. All such filings
by LMI complied as of their respective dates in all material respects with the
applicable requirements of such laws and the rules and regulations adopted
thereunder.
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3.9 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 3.9, since the date of the most current LMI Financial Statements
delivered to Ebiz, there has not been any change in the affairs, prospects,
condition (financial or otherwise, or arising as a result of any legislative or
regulatory change), operations, liabilities, earnings or business of LMI which
has had or reasonably could be expected to have, individually or in the
aggregate with other changes, a Material Adverse Effect on LMI.
3.10 NO BREACH OF STATUTE, DECREE OR ORDER. Except as disclosed in
Schedule 3.10, LMI is not in default under, or in violation in any material
respect of, any material applicable statute, law, ordinance, decree, order, rule
or regulation of any state or federal regulatory agency or any other
governmental body, and the consummation of this Agreement and the transactions
contemplated hereby will not constitute or result in any such default, breach or
violation. Except as set forth in Schedule 3.10, there is no known or suspected
material action or proceeding by any governmental body pending or threatened
against LMI relating to the conduct of its business, and, to the best of LMI's
knowledge, there is no basis for any such action or proceeding.
3.11 LITIGATION. Except as described in Schedule 3.11 or otherwise
similarly disclosed to Ebiz, there is no suit, claim, action, proceeding or
governmental investigation now pending or threatened, nor, to the best of LMI's
knowledge, is there any condition or set of facts which will give rise to any
litigation, against LMI before any court, administrative or regulatory body or
any governmental agency arising out of or relating to any aspect of the
business, or any part of the properties, of LMI, or concerning the transactions
contemplated by this Agreement. Except as disclosed in Schedule 3.11, there are
no decrees, injunctions or orders of any court or governmental department or
agency outstanding or threatened against LMI relating to any aspect of its
business or any part of its properties or that could prevent consummation of the
transactions contemplated by this Agreement.
3.12 EMPLOYEE BENEFIT PLANS; EMPLOYEE MATTERS.
(a) Except for the plans and arrangements set forth on Schedule
3.12(a) (the "LMI PLANS"), neither LMI nor any member of the LMI Controlled
Group (as hereinafter defined) now maintains, has ever maintained or contributed
to, or has any plans or commitments for, any employee benefit plans (as such
term is defined in ss. 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) or any other retirement, pension, stock option,
stock appreciation right, profit sharing, incentive compensation, deferred
compensation, savings, thrift, vacation pay, severance pay, or other employee
compensation or benefit plan, agreement, practice, or arrangement, whether
written or unwritten, whether or not legally binding. For purposes of this
Agreement, "LMI CONTROLLED GROUP" means a controlled or affiliated group within
the meaning of Code ss. 414(b), (c), (m), or (o) of which LMI is a member. LMI
has made available to Ebiz correct and complete copies of all LMI Plans
(including a detailed written description of any LMI Plan that is unwritten,
including a description of eligibility criteria, participation, vesting,
benefits, funding arrangements and assets and any other provisions relating to
LMI) and, with respect to each LMI Plan, a copy of each of the following: (i)
the most recent favorable determination letter issued by the Internal Revenue
Service, (ii) materials submitted to the Internal Revenue Service in support of
a pending determination letter request, (iii) the most recent letter issued by
the Internal Revenue Service recognizing tax exemption, (iv) each insurance
contract, trust agreement, or other funding vehicle, (v) the three most recently
filed Forms 5500 plus all schedules and attachments, and (vi) each summary plan
description or other general explanation or communication distributed or
otherwise provided to employees with respect to each LMI Plan that describes the
terms of the LMI Plan.
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(b) Each LMI Plan has at all times been in compliance, in form and in
operation, in all material respects with all applicable requirements of law and
regulations, including without limitation, ERISA.
(c) With respect to each LMI Plan, there are no actions, suits,
grievances, arbitrations or other manner of dispute, or claims with respect to
any LMI Plan (except for routine claims for benefits made in the ordinary course
of plan administration for which plan administrative procedures have not been
exhausted) pending, threatened or imminent against or with respect to any LMI
Plan, any plan sponsor, or any fiduciary (as such term is defined in ERISA ss.
3(21)) of such LMI Plan, and LMI has no knowledge of any facts that could give
rise to any action, suit, grievance, arbitration or other manner of dispute, or
claim.
(d) Neither LMI nor any member of the LMI Controlled Group has any
liability for post-retirement welfare benefits except for the continuation
coverage required by Code ss. 4980B.
(e) The consummation of the transactions contemplated by this
Agreement will not result in any "excess parachute payments" within the meaning
of Code ss. 280G.
(f) No LMI Plan provides retiree medical or retiree life insurance
benefits to any person and LMI is not contractually or otherwise obligated
(whether or not in writing) to provide any person with life insurance or medical
benefits upon retirement or termination of employment, other than as required by
the provisions of Sections 601 through 608 of ERISA and Section 4980B of the
Code.
(g) Schedule 3.12(g) sets forth a true and complete list of each of
the following agreements, arrangements and commitments to which LMI is a party
or by which it may be bound (the "LMI EMPLOYMENT CONTRACTS"): (i) each
employment, consulting, agency or commission agreement not terminable without
liability to LMI upon 60 days' or less prior notice to the employee, consultant
or agent and involving compensation or remuneration of more than $50,000 per
annum; (ii) each labor union or collective bargaining agreement; (iii) each
agreement with any executive officer or other key employee of LMI the benefits
of which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving LMI of the nature contemplated by this
Agreement; (iv) each agreement with respect to any officer or other key employee
of LMI providing any term of employment or compensation guarantee extending for
a period longer than one year; and (v) each equity incentive plan and each other
agreement or plan any of the benefits of which will be increased, or the vesting
of the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement. True and complete copies of each LMI Employment Contract have
been made available to Ebiz.
3.13 PERMITS AND LICENSES. LMI has such permits, licenses and
authorities as required by any governmental authority with jurisdiction over LMI
with respect to its business as currently conducted and to own or lease, operate
and use its assets and properties, except where the failure to have such
permits, licenses or authorities has not had and could not reasonably be
expected to have a Material Adverse Effect on LMI. Except as may be expressly
permitted by the terms of this Agreement or otherwise disclosed in this
Agreement or any schedule hereto, the business of LMI as presently conducted in
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any jurisdiction complies in all material respects with all known and suspected
applicable legal requirements of such jurisdiction, all known and suspected
requisite governmental approvals have been duly obtained and are in full force
and effect, and there is no basis for any governmental body to deny or rescind
any approval for the conduct of the business of LMI.
3.14 MATERIAL CONTRACTS. Attached hereto as Schedule 3.14 is a list of
all contracts of LMI ("LMI MATERIAL CONTRACTS") (a) for an aggregate payment by
or to it of more than $10,000, (b) extending for a term beyond 12 months, (c)
relating to the acquisition or disposition of any material asset or any interest
in any business enterprise, (d) containing a guaranty of liabilities or
obligations of others, (e) containing any covenant limiting the freedom of LMI
to engage in any line of business or to compete with any person or entity or (f)
for all policies of insurance in force as of the date hereof. True and complete
copies of all LMI Material Contracts have been made available to Ebiz. LMI has
fulfilled, or taken all actions necessary to enable it to fulfill when due, its
obligations under each of such contracts. All parties thereto have complied in
all material respects with the provisions thereof and no party is in breach or
violation of, or in default under such contracts.
3.15 TAX Matters.
(a) All Returns (as hereinafter defined) required to be filed by LMI
have been duly filed on a timely basis and all Returns filed by or on behalf of
LMI (including all attached statements and schedules) are true, complete and
correct in all respects, except for such failures to file and failures to be
true, complete and correct as would not, individually or in the aggregate, have
a Material Adverse Effect on LMI. No claim has been made or threatened in
writing by any jurisdiction where LMI does not file returns that LMI is or may
be subject to Taxes in that jurisdiction. All Taxes (as hereinafter defined)
shown to be payable on such Returns or on subsequent assessments with respect
thereto have been paid in full on a timely basis, except to the extent any
nonpayment is reflected as a liability on the LMI Financial Statements. No other
Taxes are payable by LMI with respect to items or periods covered by such
Returns (whether or not shown on or reportable on such Returns), except for such
Taxes as would not, individually or in the aggregate, have a Material Adverse
Effect on LMI.
(b) LMI has withheld and paid over all Taxes required to have been
withheld and paid over (including any estimated taxes), and has complied with
all information reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in connection with amounts
paid or owing to any employee, creditor, independent contractor or other third
party, except for such failures to withhold or pay over and such failures to
comply as would not, individually or in the aggregate, have a Material Adverse
Effect on LMI.
(c) No Return filed by or on behalf of LMI contains any position that
is or would be subject to penalties under section 6602 of the Code and the
Regulations thereunder (and any corresponding provision of state, local or
foreign law).
(d) There are no liens on any of the assets of LMI with respect to
Taxes, other than liens for Taxes not yet due and payable or for Taxes that are
being contested in good faith through appropriate proceedings and for which
appropriate reserves have been established, except for such liens as would not,
individually or in the aggregate, have a Material Adverse Effect on LMI.
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(e) Except as disclosed on Schedule 3.15(e), LMI has never been
included in an affiliated group of corporations, within the meaning of section
1504 of the Code and never been a member of any combined or unitary group.
(f) LMI has furnished Ebiz with true and complete copies of: (i) all
Returns of LMI for all periods since May 30, 1998, and (ii) all tax audit
reports, work papers, statements of deficiencies or closing or other agreements
received by LMI or on its behalf relating to Taxes.
(g) LMI does not do business in, or derive a material amount of income
from, any state, local, territorial or foreign taxing jurisdiction other than
those for which Returns have been furnished to Ebiz.
(h) Except for items disclosed on Schedule 3.15(h) attached hereto:
(i) None of the Returns of LMI has ever been audited by a
governmental or taxing authority and there are no audits, inquiries,
investigations or examinations relating to any such Returns pending or, to the
knowledge of LMI, threatened in writing.
(ii) No deficiencies exist or have been asserted in writing with
respect to Taxes of LMI and no written notice has been received by LMI with
respect to the failure to file any Return or pay any Taxes.
(iii) LMI is not a party to any action or proceeding for
assessment or collection of Taxes, nor has any such action or proceeding been
asserted or, to the knowledge of LMI, threatened in writing against it or any of
its assets.
(iv) No extension of time to file any Return (which has not been
filed) has been requested by or granted to LMI. No waiver or extension of any
statute of limitations is in effect with respect to Taxes or Returns of LMI.
(v) LMI is not (and has never been) a party to any tax sharing
agreement, tax indemnity agreement, tax allocation agreement, or similar
arrangement with any person.
(vi) No action has been taken that would have the effect of
deferring any significant liability for Taxes of LMI from a period prior to
Closing to a period after Closing.
(vii) LMI has never been an "S corporation" under the Code.
(viii) LMI's liability for unpaid Taxes for all periods ending on
or before May 31, 2000 determined according to generally accepted accounting
principles ("GAAP") does not exceed the amount of the current liability accruals
for Taxes (excluding reserves for deferred Taxes) on the LMI financial
statements as of that date, and the amount of LMI's liability for unpaid Taxes
for all periods ending on or before the Closing Date determined on a GAAP basis
will not exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred Taxes) as such accruals will be reflected on
the balance sheet of LMI as of the Closing Date, except to the extent any excess
of such Taxes over the relevant current liability accrual amount would not have
a Material Adverse Effect on LMI.
(i) Subject to the items disclosed on Schedule 3.15(h) attached
hereto:
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(i) LMI is not required to treat any asset as owned by another
person for federal income tax purposes or as tax-exempt bond financed property
or tax-exempt use property within the meaning of Section 168 of the Code.
(ii) LMI has not entered into any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of any amount subject to the provisions of Section
280G or Section 4999 of the Code or any similar provision of state, local or
foreign tax law.
(iii) LMI has not made an election under Section 338 of the Code
and no action has been taken that would result in any income tax liability to
LMI as a result of a deemed election within the meaning of Section 338 of the
Code.
(iv) No consent under Section 341(f) of the Code has been filed
with respect to LMI.
(v) LMI has not disposed of any property that is currently or was
previously being accounted for under the installment method.
(vi) Within the last five years, LMI has not agreed to make, and
has not been required to make, any adjustment under Code Section 481 by reason
of a change in accounting method or otherwise.
(vii) LMI is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code and Ebiz is not
required to withhold any amount on the acquisition of the shares of LMI.
(viii) LMI has not made and will not make a deemed dividend
election under Treas. Xxx.xx. 1.1502-32(f)(2) or a consent dividend under
Section 565 of the Code.
(ix) None of the assets or operations of LMI is subject to any
joint venture, partnership or other arrangement or contract that is treated as a
partnership for federal income tax purposes.
(x) LMI has not made any election comparable to those described
in this section under any state, local or foreign tax laws nor is it required to
apply any rules comparable to those described in this Section under any state,
local or foreign tax laws.
(xi) The transactions contemplated hereby are not subject to the
tax withholding provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code, or of any other provision of law.
(j) Schedule 3.15(j) contains information that is accurate and
complete in all material respects with respect to: (A) all tax elections in
effect with respect to LMI; (B) the current tax basis of the assets of LMI
broken out by asset class; (C) the net operating losses of LMI by taxable year;
(D) the net capital losses of LMI by taxable year; and (E) the overall foreign
losses of LMI under Section 904(f) of the Code that are subject to recapture.
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(k) There are no transfer taxes (exclusive of income taxes) that will
become due and payable as a result of the Merger under Colorado, Delaware or
federal law.
(l) "TAXES" as used in this Agreement means all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, imposed by any governmental authority,
which taxes shall include, without limiting the generality of the foregoing, all
income or profits taxes, payroll and employee withholding taxes, unemployment
insurance, social security taxes, sales and use taxes, value added taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, escheat
amounts, stamp taxes, environmental taxes, severance taxes, production taxes,
transfer taxes, workers' compensation, Pension Benefit Guaranty Corporation
premiums and other governmental charges, and other obligations of the same or of
a similar nature to any of the foregoing.
(m) "RETURNS" as used in this Agreement means all returns,
declarations, reports, forms, claims for refund, estimates, information returns
and statements and other documentation, including amendments, required to be
maintained or filed with or supplied to any governmental authority in connection
with any Taxes.
3.16 TITLE TO PROPERTIES. Except as disclosed in Schedule 3.16, LMI
has good and marketable title, free and clear of any mortgage, pledge, lien,
charge or other encumbrance, to all of its real and/or personal property and
other assets whether reflected on the Current LMI Financial Statements or
otherwise, or acquired by it subsequent to the date thereof or used by it in the
ordinary course of its business, except for (a) liens or encumbrances on such
property or assets described in the Current LMI Financial Statements, (b) liens
for current taxes not yet due and payable, (c) such imperfections of title and
encumbrances, if any, as are not material in character, amount or extent and do
not detract from the value or interfere with the present or presently
contemplated future use of the properties subject thereto or affected thereby,
and (d) acquisitions and dispositions in the ordinary course of business. LMI
enjoys peaceable and undisturbed possession under all material leases under
which it is operating, and all of its premises which are leased, are in good
condition and repair and are suitable for the purposes for which such premises
are being utilized. LMI has not received any notice of violation of any
applicable zoning ordinance or other law, order, regulation or requirement
relating to its operations or to its owned or leased properties.
3.17. ENVIRONMENTAL MATTERS. To the best knowledge of LMI, LMI has
duly complied with, and the operation of its business, equipment and other
assets and the facilities owned or leased by LMI are in compliance with the
provisions of all applicable federal, state and local environmental, health and
safety laws, statutes, ordinances, rules and regulations of any governmental or
quasi governmental authority relating to (i) errors or omissions, (ii)
discharges to the atmosphere, soils, surface water or ground water, (iii) solid
or liquid waste disposal, (iv) the use, storage, generation, handling,
transport, discharge, release or disposal of toxic or hazardous substances or
waste, (v) the emission of non-ionizing electromagnetic radiation or (vi) other
environmental, health or safety matters, including without limitation, all
maters set forth in the Comprehensive Environmental Response, Compensation and
Liability Act, as amended; the Occupational Safety and Health Act; the Resource
Conservation Recovery Act of 1976; the Federal Water Pollution Control Act of
1970; the Safe Drinking Water Act of 1974; the Toxic Substances Control Act of
1976; the Occupational Safety and the Clean Air Act, as amended (collectively,
"ENVIRONMENTAL AND HEALTH LAWS"). To the knowledge of the Company, there are no
investigations, administrative proceedings, judicial actions, orders, claims or
notices that are pending, anticipated or threatened against LMI relating to
13
violations of the Environmental and Health Laws. The Company has not received a
notice of, and does not know or have any reason to suspect, facts which
constitute a violation of any Environmental and Health Laws which relate to the
use, ownership or occupancy of any property or facilities used by LMI in
connection with the operation of its business or any activity of the business of
LMI which would result in a violation or threatened violation of any
Environmental or Health Laws.
3.18 INTELLECTUAL PROPERTY.
(a) LMI owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, trade dress, business names, product
names, logos, slogans, domain names, technology, processes, schematics,
know-how, trade secrets, computer software programs or applications (in both
source code and object code form), design and program documentation, analysis,
data flow diagrams, website content and all other tangible or intangible
proprietary information or material ("INTELLECTUAL PROPERTY") used in the
business of LMI as currently conducted, except to the extent that the failure to
have such rights has not and could not reasonably be expected to have a Material
Adverse Effect on LMI.
(b) Schedule 3.18 (b) lists: (i) all patents and patent applications
and all registered and unregistered trademarks, trade names and service marks,
registered domain names and registered and unregistered copyrights, which LMI
considers to be material to its business and included in the Intellectual
Property, including the jurisdictions in which each such Intellectual Property
right has been issued or registered or in which any application for such
issuance and registration has been filed, (ii) all material licenses,
sublicenses and other agreements as to which LMI is a party and pursuant to
which any person is authorized to use any Intellectual Property, and (iii) all
material licenses, sublicenses and other agreements as to which LMI is a party
and pursuant to which LMI is authorized to use any third party patents,
trademarks or copyrights, including software ("LMI THIRD PARTY INTELLECTUAL
PROPERTY RIGHTS"), in each case which are incorporated in, are, or form a part
of any product or service of LMI.
(c) To the knowledge of LMI, there has not been and currently is no
unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property or any trade secret of LMI, or any LMI Third Party
Intellectual Property Right, by any third party, including any employee or
former employee of LMI. LMI has not entered into any agreement to indemnify any
other person against any charge of infringement of any Intellectual Property,
other than indemnification provisions contained in purchase orders arising in
the ordinary course of business, or contained in license agreements relating to
Intellectual Property licensed to or by LMI in the ordinary course of business.
(d) LMI is not, and will not be as a result of the execution and
delivery of this Agreement or the performance of LMI's obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Intellectual Property or LMI Third Party Intellectual Property Rights, the
breach of which could have a Material Adverse Effect on LMI.
(e) All patents, registered trademarks, service marks, registered
domain names and copyrights held by LMI are valid and subsisting. LMI (i) has
not been sued in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, domain names, copyrights
or violation of any trade secret or other proprietary right of any third party
and (ii) has not brought any action, suit or proceeding for infringement of
Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party. To the knowledge of LMI, the
14
manufacture, marketing, licensing or sale of the products and services of LMI
does not infringe any patent, trademark, service xxxx, copyright, trade secret,
domain name or other proprietary right of any third party.
(f) LMI has secured valid written assignments from all consultants and
employees who contributed to the creation or development of Intellectual
Property of the rights to such contributions that LMI does not already own by
operation of law.
3.19 CONDITIONS AND SUFFICIENCY OF ASSETS. All real property and
equipment of LMI are structurally sound and in good operating condition and
repair and are adequate for the uses thereof. None of the real property or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repair that are not material. The real property and equipment
are sufficient for the continued conduct of the business of LMI.
3.20 ACCURACY OF STATEMENTS. LMI has disclosed to Ebiz all facts
required to be disclosed by this Agreement and material to the liabilities,
assets, business, prospects, conditions, organization and operations (financial
and otherwise) of LMI. Neither this Agreement nor any exhibit or schedule hereto
nor any certificate, document, instrument or information furnished or to be
furnished by LMI to Ebiz in connection with this Agreement or any of the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact or omit or will omit to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
under which they are made, not misleading.
3.21 BROKERS' AND FINDERS' FEES. Except for commissions or fees
payable to Chase Securities, Inc., LMI has not incurred, and will not incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or investment bankers' fees or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF EBIZ
AND MERGER SUB
Ebiz and Merger Sub hereby represent and warrant to LMI as follows:
4.1 (a) ORGANIZATION AND AUTHORITY OF EBIZ. Ebiz has been duly
organized and is validly existing and in good standing under the laws of the
State of Nevada and has the full corporate power and authority to own its
properties and to carry on its business as now being conducted. Ebiz is duly
qualified and in good standing as a foreign corporation in the states set forth
on Schedule 4.1(a) hereto and is not required to qualify in any other state as a
foreign corporation, where the failure to do so would have a material adverse
effect on its conduct of business. Ebiz and Merger Sub have full corporate power
and authority to enter into this Agreement and to perform their respective
obligations hereunder. The execution, delivery and performance of this Agreement
has been duly authorized by the respective Boards of Directors of Ebiz and
Merger Sub and no other corporate proceedings on the part of Ebiz or Merger Sub
are necessary to authorize this Agreement and the transactions contemplated
hereby.
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(b) EBIZ SUBSIDIARIES. Each wholly or partially owned subsidiary
(singularly "SUBSIDIARY" and collectively, the "SUBSIDIARIES") of Ebiz,
including Merger Sub, is set forth on Schedule 4.1(b) hereto. Each Subsidiary
has been duly organized and is validly existing and in good standing under the
laws of its state of organization as set forth in Schedule 4.1(b) and has the
full corporate power and authority to own its properties and to carry on its
business as now being conducted. Each Subsidiary is duly qualified as a foreign
corporation in the states set forth on Schedule 4.1(b) and is not required to
qualify in any other state as a foreign corporation, where the failure to do so
would have a material adverse effect on its conduct of business. Except as noted
on Schedule 4.1(b), Ebiz owns 100% of the outstanding equity interest of each of
the Subsidiaries.
4.2 NO CONFLICT, BREACH OR DEFAULT. The execution and delivery of this
Agreement and the performance by Ebiz and Merger Sub of its terms do not (a)
conflict with or result in a violation of the articles of incorporation or
bylaws or other organizational documents of Ebiz or any Subsidiary, (b) violate
any order, writ, judgment or decree to which Ebiz or any Subsidiary is a party
or is subject, or (c) conflict with or result in a violation of, or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Ebiz or any Subsidiary under, any of the terms,
conditions or provisions of any note, bond mortgage, indenture, deed of trust,
lease, license, agreement or other instrument or obligation to which Ebiz or any
Subsidiary is bound or by which Ebiz or any Subsidiary or any of their
properties or assets may be bound, except, in the case of this clause (c), where
such conflict, violation, default, termination, cancellation or acceleration
would not individually or in the aggregate, have a Material Adverse Effect on
Ebiz.
4.3 APPROVALS AND CONSENTS. Except as set forth on Schedule 4.3
hereto, no approval, authorization, consent, exemption, filing, registration or
other action by or filing with any governmental authority is required in
connection with the execution and delivery by Ebiz and Merger Sub of this
Agreement or the transactions contemplated herein or therein.
4.4 VALID OBLIGATION. This Agreement constitutes a legal, valid and
binding obligation of Ebiz and Merger Sub enforceable against each of them in
accordance with its terms, except that (a) the enforceability of the same may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting enforcement of creditors' rights generally, and (b) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
4.5 VALIDLY ISSUED SHARES; SECURITIES ACT EXEMPTION; BLUE SKY.
(a) Upon issuance, all Ebiz Common Stock to be issued to the
shareholders of LMI in exchange for the LMI Common Stock and LMI Preferred Stock
will be duly authorized, validly issued, fully paid and nonassessable
outstanding shares of the capital stock of Ebiz.
(b) The issuance of the Ebiz Common Stock to the shareholders of LMI
pursuant to the terms of this Agreement constitutes a transaction exempt from
registration under the Securities Act of 1933, as amended (the "SECURITIES
ACT").
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(c) Ebiz has obtained all necessary Blue Sky law permits and
qualifications, or has available exemptions therefrom, for the issuance of the
Ebiz Common Stock to the shareholders of LMI pursuant to the terms of this
Agreement.
4.6 CAPITAL STOCK OF EBIZ AND MERGER SUB. The authorized capital stock
of Ebiz consists of 70,000,000 shares of common stock and 5,000,000 shares of
preferred stock of which 9,041,166 shares of common stock and 7,590 shares of
preferred stock designated as its Series A 10% Convertible Preferred are
outstanding. An additional 575,732 shares of common stock have been reserved for
issuance upon the exercise of outstanding warrants. Ebiz has awarded options to
purchase 761,700 shares of common stock under its 1998 Equity Incentive Plan and
has additional options to purchase 850,000 shares of common stock outstanding.
The authorized capital stock of Merger Sub consists of 1000 shares of common
stock, 100 of which are issued and outstanding. All of the issued and
outstanding shares of Merger Sub are owned by Ebiz. All the outstanding shares
of common stock of Ebiz and Merger Sub are duly and validly authorized and
issued, fully-paid and non-assessable, and there exist no preemptive rights of
any present or former stockholders of the common stock. Except as set forth in
Schedule 4.6, Ebiz has no other outstanding securities convertible into or
exercisable for its capital stock and no other agreements of any nature
whatsoever whereby Ebiz may, under any circumstances, be obligated to issue,
sell, repurchase or redeem shares of its capital stock. Ebiz has a sufficient
number of Ebiz Common Stock authorized to issue the Merger Consideration at the
Effective Time and to fulfill the obligations under the LMI Warrants and the LMI
Stock Options that are to be assumed by Ebiz at the Effective Time.
4.7 EBIZ FINANCIAL STATEMENTS.
(a) Schedule 4.7(a) hereto sets forth a listing of financial
statements of Ebiz delivered to LMI (collectively, the "EBIZ FINANCIAL
STATEMENTS"). The Ebiz Financial Statements are true, accurate and complete and
present fairly the consolidated financial position of Ebiz and its Subsidiaries
as of the dates stated and the results of the operations of Ebiz and its
Subsidiaries for the periods stated and have been prepared in accordance with
GAAP, consistently applied with all adjustments as mandated by any agency or
other authority.
(b) Neither Ebiz nor its Subsidiaries have any liabilities or
obligations of a material nature (whether accrued, absolute, asserted,
unasserted, known, unknown, contingent or otherwise) except for those disclosed
in the most current Ebiz Financial Statements ("CURRENT EBIZ FINANCIAL
STATEMENTS") or in Schedule 4.7(b) hereto.
4.8 BOOKS AND RECORDS. The books and records of Ebiz and of each
Subsidiary are complete and correct and have been maintained in accordance with
sound business practices and the requirements of Section 13(b)(2) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), including the
maintenance of an adequate system of internal controls. The books and records,
financial and otherwise, of Ebiz and each Subsidiary accurately set out and
disclose the financial position of Ebiz and of each Subsidiary, and all
transactions of Ebiz and of each Subsidiary have been accurately recorded in
such books and records in accordance with GAAP. The minute books of Ebiz and of
each Subsidiary contain accurate and complete records of all meetings held of,
and all material corporate actions taken by, the shareholders, Board of
Directors or any committee of the Board of Directors of Ebiz or such
Subsidiaries.
4.9 REGULATORY FILINGS. Ebiz and each Subsidiary has heretofore filed
all reports, registration statements and schedules as required pursuant to any
applicable law except where the failure to make such filings has not had and
17
could not be reasonably expected to have a Material Adverse Effect on Ebiz. All
such filings by Ebiz and each such Subsidiary complied as of their respective
dates in all material respects with the applicable requirements of such laws and
the rules and regulations adopted thereunder.
4.10 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 4.10, since the date of the most Current Ebiz Financial Statements
delivered to LMI, there has not been any change in the affairs, prospects,
condition (financial or otherwise, or arising as a result of any legislative or
regulatory change), operations, liabilities, earnings or business of Ebiz or any
Subsidiary which has had or reasonably could be expected to have, individually
or in the aggregate with other changes, a Material Adverse Effect on Ebiz.
4.11 NO BREACH OF STATUTE, DECREE OR ORDER. Except as disclosed in
Schedule 4.11, neither Ebiz nor any Subsidiary is in default under, or in
violation in any respect of, any material applicable statute, law, ordinance,
decree, order, rule or regulation of any state or federal regulatory agency or
any other governmental body, and the consummation of this Agreement and the
transactions contemplated hereby will not constitute or result in any such
default, breach or violation. Except as set forth in Schedule 4.11, there is no
known or suspected material action or proceeding by any governmental body,
pending or threatened against Ebiz or any Subsidiary relating to the conduct of
its business, and to the best of Ebiz's knowledge there is no basis for any such
action or proceeding.
4.12 LITIGATION. Except as disclosed in Schedule 4.12, there is no
suit, claim, action, proceeding or governmental investigation now pending or
threatened, nor, to the best of Ebiz's knowledge, is there any condition or set
of facts which will give rise to any litigation, against Ebiz or any Subsidiary
before any court, administrative or regulatory body or any governmental agency
arising out of or relating to any aspect of the business, or any part of the
properties, of Ebiz or any Subsidiary, or concerning the transactions
contemplated by this Agreement. Except as disclosed in Schedule 4.12, there are
no decrees, injunctions or orders of any court or governmental department or
agency outstanding or threatened against Ebiz or any Subsidiary relating to any
aspect of its business or any part of its properties or that could prevent
consummation of the transactions contemplated by this Agreement.
4.13 EMPLOYEE BENEFIT PLANS; EMPLOYEE MATTERS.
(a) Except for the plans and arrangements set forth on Schedule
4.13(a) (the "EBIZ Plans"), neither Ebiz nor any member of the Ebiz Controlled
Group (as hereinafter defined) now maintains, has ever maintained or contributed
to, or has any plans or commitments for, any employee benefit plans (as such
term is defined in ERISA ss. 3(3)) or any other retirement, pension, stock
option, stock appreciation right, profit sharing, incentive compensation,
deferred compensation, savings, thrift, vacation pay, severance pay, or other
employee compensation or benefit plan, agreement, practice, or arrangement,
whether written or unwritten, whether or not legally binding. For purposes of
this Agreement, "EBIZ CONTROLLED GROUP" means a controlled or affiliated group
within the meaning of Code ss. 414(b), (c), (m), or (o) of which Ebiz is a
member. Ebiz has made available to LMI correct and complete copies of all Ebiz
Plans (including a detailed written description of any Ebiz Plan that is
unwritten, including a description of eligibility criteria, participation,
vesting, benefits, funding arrangements and assets and any other provisions
relating to Ebiz) and, with respect to each Ebiz Plan, a copy of each of the
following: (i) the most recent favorable determination letter issued by the
Internal Revenue Service, (ii) materials submitted to the Internal Revenue
18
Service in support of a pending determination letter request, (iii) the most
recent letter issued by the Internal Revenue Service recognizing tax exemption,
(iv) each insurance contract, trust agreement, or other funding vehicle, (v) the
three most recently filed Forms 5500 plus all schedules and attachments, and
(vi) each summary plan description or other general explanation or communication
distributed or otherwise provided to employees with respect to each Ebiz Plan
that describes the terms of the Ebiz Plan.
(b) Each Ebiz Plan has at all times been in compliance, in form and in
operation, in all material respects with all applicable requirements of law and
regulations, including without limitation, ERISA.
(c) With respect to each Ebiz Plan, there are no actions, suits,
grievances, arbitrations or other manner of dispute, or claim with respect to
any Ebiz Plan (except for routine claims for benefits made in the ordinary
course of plan administration for which plan administrative procedures have not
been exhausted) pending, threatened or imminent against or with respect to any
Ebiz Plan, any plan sponsor, or any fiduciary (as such term is defined in ERISA
ss. 3(21)) of such Ebiz Plan, and Ebiz has no knowledge of any facts that could
give rise to any action, suit, grievance, arbitration or other manner of
dispute, or claim.
(d) Neither Ebiz nor any member of the Ebiz Controlled Group has any
liability for post-retirement welfare benefits except for the continuation
coverage required by Code ss. 4980B.
(e) The consummation of the transactions contemplated by this
Agreement will not result in any "excess parachute payments" within the meaning
of Code ss. 280G.
(f) No Ebiz Plan provides retiree medical or retiree life insurance
benefits to any person and Ebiz is not contractually or otherwise obligated
(whether or not in writing) to provide any person with life insurance or medical
benefits upon retirement or termination of employment, other than as required by
the provisions of Sections 601 through 608 of ERISA and Section 4980B of the
Code.
(g) Schedule 4.13(g) sets forth a true and complete list of each of
the following agreements, arrangements and commitments to which Ebiz or any
Subsidiary is a party or by which it may be bound (the "EBIZ EMPLOYMENT
CONTRACTS"): (i) each employment, consulting, agency or commission agreement not
terminable without liability to Ebiz or any Subsidiary upon 60 days' or less
prior notice to the employee, consultant or agent and involving compensation or
remuneration of more than $50,000 per annum; (ii) each labor union or collective
bargaining agreement; (iii) each agreement with any executive officer or other
key employee of Ebiz or any Subsidiary the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a transaction
involving Ebiz or any Subsidiary of the nature contemplated by this Agreement;
(iv) each agreement with respect to any officer or other key employee of Ebiz or
any Subsidiary providing any term of employment or compensation guarantee
extending for a period longer than one year; and (v) each equity incentive plan
and each other agreement or plan any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. True and complete copies of each Ebiz Employment
Contract have been made available to LMI.
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4.14 PERMITS AND LICENSES. Ebiz and each Subsidiary has such permits,
licenses and authorities as required by any governmental authority with
jurisdiction over Ebiz or any Subsidiary with respect to its business as
currently conducted and to own or lease, operate and use its assets and
properties except where the failure to have such permits, licenses or
authorities has not had and could not be reasonably expected to have a Material
Adverse Effect on Ebiz. Except as may be expressly permitted by the terms of
this Agreement or otherwise disclosed in this Agreement or any schedule hereto,
the business of Ebiz and each Subsidiary as presently conducted in any
jurisdiction complies in all material respects with all known and suspected
applicable legal requirements of such jurisdiction, all known and suspected
requisite governmental approvals have been duly obtained and are in full force
and effect, and there is no basis for any governmental body to deny or rescind
any approval for the conduct of the business of Ebiz or any Subsidiary.
4.15 MATERIAL CONTRACTS. Attached hereto as Schedule 4.15 is a list of
all contracts of Ebiz and each of its Subsidiaries (the "EBIZ MATERIAL
CONTRACTS") (a) for an aggregate payment by or to it of more than $10,000, (b)
extending for a term beyond 12 months, (c) relating to the disposition or
acquisition of any material asset or any interest in any business enterprise,
(d) containing a guaranty of liabilities or obligations of others, (e)
containing any covenant limiting the freedom of Ebiz or any Subsidiary to engage
in any line of business or compete with any person or entity, or (f) for all
policies of insurance in force as of the date hereof. True and complete copies
of all Ebiz Material Contracts have been delivered to LMI. Ebiz and each
Subsidiary, as applicable, has fulfilled, or taken all actions necessary to
enable it to fulfill when due its obligations under each of such contracts. All
parties thereto have complied in all material respects with the provisions
thereof and no party is in breach or violation of, or in default under such
contracts.
4.16 TAX MATTERS.
(a) All Returns required to be filed by Ebiz or any Subsidiary have
been duly filed on a timely basis and all Returns filed by or on behalf of Ebiz
or any Subsidiary (including all attached statements and schedules) are true,
complete and correct in all respects, except for such failures to file and
failures to be true, complete and correct as would not, individually or in the
aggregate, have a Material Adverse Effect on Ebiz. No claim has been made or
threatened in writing by any jurisdiction where Ebiz or any Subsidiary does not
file returns that Ebiz or any Subsidiary is or may be subject to Taxes in that
jurisdiction. All Taxes shown to be payable on such Returns or on subsequent
assessments with respect thereto have been paid in full on a timely basis,
except to the extent any nonpayment is reflected as a liability on the Ebiz
Financial Statements. No other Taxes are payable by Ebiz or any Subsidiary with
respect to items or periods covered by such Returns (whether or not shown on or
reportable on such Returns), except for such Taxes as would not, individually or
in the aggregate, have a Material Adverse Effect on Ebiz.
(b) Ebiz and each Subsidiary has withheld and paid over all Taxes
required to have been withheld and paid over (including any estimated taxes),
and has complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid or owing to any employee, creditor, independent
contractor or other third party, except for such failures to withhold or pay
over and such failures to comply as would not, individually or in the aggregate,
have a Material Adverse Effect on Ebiz.
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(c) No Return filed by or on behalf of Ebiz or any Subsidiary contains
any position that is or would be subject to penalties under section 6602 of the
Code and the Regulations thereunder (and any corresponding provision of state,
local or foreign law).
(d) There are no liens on any of the assets of Ebiz or any Subsidiary
with respect to Taxes, other than liens for Taxes not yet due and payable or for
Taxes that are being contested in good faith through appropriate proceedings and
for which appropriate reserves have been established, except for such liens as
would not, individually or in the aggregate, have a Material Adverse Effect on
Ebiz.
(e) Except as disclosed on Schedule 4.16(e), neither Ebiz nor any
Subsidiary has been included in an affiliated group of corporations, within the
meaning of section 1504 of the Code or been a member of any combined or unitary
group.
(f) Ebiz has furnished LMI with true and complete copies of: (i) all
Returns of Ebiz and each Subsidiary for all periods since June 30, 1997, and
(ii) all tax audit reports, work papers, statements of deficiencies or closing
or other agreements received by Ebiz, any Subsidiary or on any of their behalf
relating to Taxes.
(g) Neither Ebiz nor any Subsidiary does business in, or derives a
material amount of income from, any state, local, territorial or foreign taxing
jurisdiction other than those for which Returns have been furnished to LMI.
(h) Except for items disclosed on Schedule 4.16(h) attached hereto:
(i) None of the Returns of Ebiz or any Subsidiary has ever been
audited by a governmental or taxing authority and there are no audits,
inquiries, investigations or examinations relating to any such Returns pending
or, to the knowledge of Ebiz, threatened in writing.
(ii) No deficiencies exist or have been asserted in writing with
respect to Taxes of Ebiz or any Subsidiary and no written notice has been
received by Ebiz or any Subsidiary with respect to the failure to file any
Return or pay any Taxes.
(iii) Neither Ebiz nor any Subsidiary is a party to any action or
proceeding for assessment or collection of Taxes, nor has any such action or
proceeding been asserted or, to the knowledge of Ebiz, threatened in writing
against Ebiz, any Subsidiary or any of their respective assets.
(iv) No extension of time to file any Return (which has not been
filed) has been requested by or granted to Ebiz or any Subsidiary. No waiver or
extension of any statute of limitations is in effect with respect to Taxes or
Returns of Ebiz or any Subsidiary.
(v) Neither Ebiz nor any Subsidiary is (and has never been) a
party to any tax sharing agreement, tax indemnity agreement, tax allocation
agreement, or similar arrangement with any person.
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(vi) No action has been taken that would have the effect of
deferring any significant liability for Taxes of Ebiz or any Subsidiary from a
period prior to closing to a period after closing.
(vii) Neither Ebiz nor any Subsidiary has ever been an "S
corporation" under the Code.
(viii) The aggregate liability of Ebiz and the Subsidiaries for
unpaid Taxes for all periods ending on or before March 31,2000 determined on a
GAAP basis does not exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) on the Ebiz financial statements
as of that date, and the aggregate liability of Ebiz and the Subsidiaries for
unpaid Taxes for all periods ending on or before the Closing Date determined on
a GAAP basis will not exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) as such accruals will be reflected
on the balance sheet of Ebiz as of the Closing Date, except to the extent any
excess of such Taxes over the relevant current liability accrual amount would
not have a Material Adverse Effect on Ebiz.
(i) Subject to the items disclosed on Schedule 4.16(h) attached
hereto:
(i) Neither Ebiz nor any Subsidiary is required to treat any
asset as owned by another person for federal income tax purposes or as
tax-exempt bond financed property or tax-exempt use property within the meaning
of Section 168 of the Code.
(ii) Neither Ebiz nor any Subsidiary has entered into any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any amount subject to the
provisions of Section 280G or Section 4999 of the Code or any similar provision
of state, local or foreign tax law.
(iii) Neither Ebiz nor any Subsidiary has made an election under
Section 338 of the Code and no action has been taken that would result in any
income tax liability to Ebiz or any Subsidiary as a result of a deemed election
within the meaning of Section 338 of the Code.
(iv) No consent under Section 341(f) of the Code has been filed
with respect to Ebiz or any Subsidiary.
(v) Neither Ebiz nor any Subsidiary has disposed of any property
that is currently or was previously being accounted for under the installment
method.
(vi) Within the last five years, neither Ebiz nor any Subsidiary
has agreed to make, and has been required to make, any adjustment under Code
Section 481 by reason of a change in accounting method or otherwise.
(vii) Neither Ebiz nor any Subsidiary is a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code.
(viii) Neither Ebiz nor any Subsidiary has made or will make a
deemed dividend election under Treas. Xxx.xx. 1.1502-32(f)(2) or a consent
dividend under Section 565 of the Code.
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(ix) None of the assets or operations of Ebiz or any Subsidiary
is subject to any joint venture, partnership or other arrangement or contract
that is treated as a partnership for federal income tax purposes.
(x) Neither Ebiz nor any Subsidiary has made any elections
comparable to those described in this section under any state, local or foreign
tax laws or is required to apply any rules comparable to those described in this
Section under any state, local or foreign tax laws.
(xi) The transactions contemplated hereby are not subject to the
tax withholding provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code, or of any other provision of law.
(j) Schedule 4.16(j) contains information that is accurate and
complete in all material respects with respect to: (A) all tax elections in
effect with respect to Ebiz and each Subsidiary; (B) the current tax basis of
the assets of Ebiz and each Subsidiary broken out by asset class; (C) the net
operating losses of Ebiz and each Subsidiary by taxable year; (D) the net
capital losses of Ebiz and each Subsidiary by taxable year; and (E) the overall
foreign losses of Ebiz and each Subsidiary under Section 904(f) of the Code that
are subject to recapture.
(k) There are no transfer taxes (exclusive of income taxes) that will
become due and payable as a result of the Merger transaction under Arizona,
Delaware, Nevada or federal law.
4.17 TITLE TO PROPERTIES. Except as disclosed in Schedule 4.17, Ebiz
and each Subsidiary has good and marketable title, free and clear of any
mortgage, pledge, lien, charge or other encumbrance, to all of its real and/or
personal property and other assets whether reflected on the Current Ebiz
Financial Statements or otherwise, or acquired by it subsequent to the date
thereof or used by it in the ordinary course of its business, except for (a)
liens or encumbrances on such property or assets described in the Current Ebiz
Financial Statements, (b) liens for current taxes not yet due and payable, (c)
such imperfections of title and encumbrances, if any, as are not material in
character, amount or extent and do not detract from the value or interfere with
the present or presently contemplated future use of the properties subject
thereto or affected thereby, and (d) acquisitions and dispositions in the
ordinary course of business. Ebiz and each Subsidiary enjoys peaceable and
undisturbed possession under all material leases under which it is operating,
and all of its premises which are leased, are in good condition and repair and
are suitable for the purposes for which such premises are being utilized.
Neither Ebiz nor any Subsidiary has received any notice of violation of any
applicable zoning ordinance or other law, order, regulation or requirement
relating to its operations or to its owned or leased properties.
4.18. ENVIRONMENTAL MATTERS To the best knowledge of Ebiz, Ebiz and
each Subsidiary has duly complied with, and the operation of its business,
equipment and other assets and the facilities owned or leased by Ebiz or any
Subsidiary are in compliance with the provisions of all applicable federal,
state and local environmental, health and safety laws, statutes, ordinances,
rules and regulations of any governmental or quasi governmental authority
relating to (i) errors or omissions, (ii) discharges to the atmosphere, soils,
surface water or ground water, (iii) solid or liquid waste disposal, (iv) the
use, storage, generation, handling, transport, discharge, release or disposal of
toxic or hazardous substances or waste, (v) the emission of non-ionizing
electromagnetic radiation or (vi) Environmental and Health Laws. To the
23
knowledge of Ebiz, there are no investigations, administrative proceedings,
judicial actions, orders, claims or notices that are pending, anticipated or
threatened against Ebiz or any Subsidiary relating to violations of the
Environmental and Health Laws. Ebiz has not received a notice of, and does not
know or have any reason to suspect, facts which constitute a violation of any
Environmental and Health Laws which relate to the use, ownership or occupancy of
any property or facilities used by Ebiz or any Subsidiary in connection with the
operation of its business or any activity of the business of Ebiz or any
Subsidiary which would result in a violation or threatened violation of any
Environmental or Health Laws.
4.19 INTELLECTUAL PROPERTY.
(a) Ebiz owns, or is licensed or otherwise possesses legally
enforceable rights to use all Intellectual Property used in the business of Ebiz
as currently conducted, except to the extent that the failure to have such
rights has not and could not reasonably be expected to have a Material Adverse
Effect on Ebiz.
(b) Schedule 4.19(b) lists: (i) all patents and patent applications
and all registered and unregistered trademarks, trade names and service marks,
registered domain names and registered and unregistered copyrights, which Ebiz
considers to be material to its business and included in the Intellectual
Property, including the jurisdictions in which each such Intellectual Property
right has been issued or registered or in which any application for such
issuance and registration has been filed, (ii) all material licenses,
sublicenses and other agreements as to which Ebiz is a party and pursuant to
which any person is authorized to use any Intellectual Property, and (iii) all
material licenses, sublicenses and other agreements as to which Ebiz is a party
and pursuant to which Ebiz is authorized to use any third party patents,
trademarks or copyrights, including software ("EBIZ THIRD PARTY INTELLECTUAL
PROPERTY RIGHTS"), in each case which are incorporated in, are, or form a part
of any product or service of Ebiz.
(c) To the knowledge of Ebiz, there has not been and currently is no
unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property or any trade secret of Ebiz, or any Ebiz Third Party
Intellectual Property Right, by any third party, including any employee or
former employee of Ebiz. Ebiz has not entered into any agreement to indemnify
any other person against any charge of infringement of any Intellectual
Property, other than indemnification provisions contained in purchase orders
arising in the ordinary course of business, or contained in license agreements
relating to Intellectual Property licensed to or by Ebiz in the ordinary course
of business.
(d) Ebiz is not, and will not be as a result of the execution and
delivery of this Agreement or the performance of Ebiz's obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Intellectual Property or Ebiz Third Party Intellectual Property Rights, the
breach of which could have a Material Adverse Effect on Ebiz.
(e) All patents, registered trademarks, service marks, registered
domain names and copyrights held by Ebiz are valid and subsisting. Ebiz (i) has
not been sued in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, domain names, copyrights
or violation of any trade secret or other proprietary right of any third party
and (ii) has not brought any action, suit or proceeding for infringement of
Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party. To the knowledge of Ebiz, the
manufacture, marketing, licensing or sale of the products and services of Ebiz
24
does not infringe any patent, trademark, service xxxx, copyright, trade secret,
domain name or other proprietary right of any third party.
(f) Ebiz has secured valid written assignments from all consultants
and employees who contributed to the creation or development of Intellectual
Property of the rights to such contributions that Ebiz does not already own by
operation of law.
4.20 CONDITIONS AND SUFFICIENCY OF ASSETS. All real property and
equipment of Ebiz and each Subsidiary is structurally sound and in good
operating condition and repair and are adequate for the uses thereof. None of
the real property or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repair that are not material. The real
property and equipment are sufficient for the continued conduct of the business
of Ebiz and each Subsidiary.
4.21 EBIZ REPORTS AND FINANCIAL STATEMENTS. Ebiz has made available to
LMI true and complete copies of all reports, registration statements, definitive
proxy statements and other documents (in each case together with all amendments
thereto) filed by Ebiz or its predecessor with the Securities and Exchange
Commission (the "COMMISSION") since October 1, 1999 (such reports, registration
statements, definitive proxy statements and other documents, together with any
amendments thereto, are sometimes collectively referred to as the "EBIZ
COMMISSION FILINGS"). The Ebiz Commission Filings constitute all of the
documents (other than preliminary material) that Ebiz or its predecessor was
required to file with the Commission since such date. As of their respective
dates, each of the Ebiz Commission Filings complied in all material respects
with the applicable requirements of the Securities Act, the Exchange Act and the
rules and regulations under each such Act, and none of the Ebiz Commission
Filings contained as of such date any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. When filed with the Commission, the financial statements
included in the Ebiz Commission Filings complied as to form in all material
respects with the applicable rules and regulations of the Commission. Ebiz has
complied with all of the rules, regulations and requirements for trading of
Ebiz's common stock on the OTC Bulletin Board.
4.22 ACCURACY OF STATEMENTS. Ebiz has disclosed to LMI all facts
required to be disclosed by this Agreement and material to the liabilities,
assets, business, prospects, conditions, organization and operations (financial
and otherwise) of Ebiz and its Subsidiaries. Neither this Agreement nor any
exhibit or schedule hereto nor any certificate, documents, instrument or
information furnished or to be furnished by Ebiz or Merger Sub to LMI in
connection with this Agreement or any of the transactions contemplated hereby,
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they are made, not
misleading.
4.23 BROKERS AND FINDERS' FEES. Ebiz has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar changes in
connection with this Agreement or any transaction contemplated hereby.
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ARTICLE 5
COVENANTS OF LMI AND EBIZ
5.1 ACCESS TO INFORMATION. LMI shall provide Ebiz, its counsel,
accountants and other representatives and Ebiz shall provide LMI, its counsel,
accountants and other representatives full access, from and after the date of
this Agreement, to all of their respective properties, books, contracts,
commitments and records, and each shall furnish to the other during such period
all such information concerning its affairs as the other may reasonably request.
In addition, each shall make its officers, personnel and vendors available to
discuss with the designated representatives of the other the substance of all
documents, financial statements and other information provided by the party to
the other and such other matters as either party shall deem pertinent to the
transactions contemplated by this Agreement.
5.2 CONDUCT OF BUSINESS. Except as otherwise consented to in writing
by the other, from the effective date of execution of this Agreement until the
Closing Date or the date of termination of this Agreement, each of LMI and Ebiz
shall:
(a) maintain and operate its properties in a manner consistent with
the efficient operation of its business and conduct its business only in the
ordinary course. It shall not be considered to be in the ordinary course of its
business to make any acquisition of direct or indirect ownership or control of
voting shares of any other corporation, or of any interest in any partnership,
joint venture, association or similar organization, other than shares acquired
in satisfaction of a security interest or of a debt previously contracted or in
a fiduciary or custodial capacity.
(b) punctually pay and discharge all Taxes, assessments and
governmental charges lawfully imposed upon it or any of its property, or upon
the income and profits thereof; provided, however, that nothing herein contained
shall require a party to pay or discharge any Tax assessment or governmental
charge so long as the validity thereof shall be contested in good faith and by
appropriate proceedings unless property essential to the conduct of its business
will be lost, forfeited or materially endangered.
(c) maintain its existence as a corporation in good standing under the
laws of its state of organization and comply in all material respects with all
laws, governmental regulations, rules and ordinances, and judicial orders,
judgments and decrees applicable to its business or its properties, except while
contesting the validity of any of the foregoing in good faith and by appropriate
proceedings.
(d) notify the other of the commencement of any material litigation
against it or of the existence of any adverse business conditions threatening
its continued, normal business operations or of any agreement, consent or order
involving its operations.
(e) at all times maintain, preserve and keep its properties in good
repair, working order and condition in all material respects so that the
business carried on in connection therewith may be properly and advantageously
conducted.
(f) make every reasonable effort to fulfill its contractual
obligations and to maintain in effect its insurance as currently in effect.
(g) use its best efforts to preserve its business relations with its
present customers.
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(h) use its best efforts to assure, to the extent within its control,
the satisfaction of the conditions to the effectiveness of the transactions
contemplated in this Agreement.
5.3 NEGATIVE COVENANTS. Prior to the Closing Date or the termination
of this Agreement, neither LMI nor Ebiz shall, unless the other shall have
otherwise consented in writing:
(a) amend its Articles of Incorporation or Bylaws, except to the
extent necessary to effect the transactions contemplated by this Agreement, and,
in the case of LMI, as referenced in Section 1.3(b) of this Agreement;.
(b) issue, sell or otherwise dispose of any shares of its capital
stock or any of its securities convertible into or representing a right or
option to purchase any such shares or enter into other agreements to issue or
sell any shares of its capital stock or change the presently outstanding shares
of such stock into a greater or lesser number of shares either by way of a
recapitalization, reorganization, consolidation of shares or the like, or by way
of a merger or consolidation, other than (i) the sale by LMI of such shares of
LMI Preferred Stock and/or LMI Common Stock as are necessary in order to
consummate the proposed bridge financing and investment transaction with Canopy
or similar investor, or the proposed asset acquisition and investment
transaction with Caldera Systems, Inc. ("CALDERA") or (ii) the issuance by Ebiz
of such shares of Ebiz Common Stock as are required to comply with the terms of
the $7,100,000 Subordinated Convertible Debenture, dated August 25, 1999, issued
by Ebiz in favor of JEM Ventures EBIZ, LLC.
(c) purchase, redeem, retire or otherwise acquire or sell,
hypothecate, pledge or otherwise encumber, any shares of its capital stock.
(d) declare, set aside, make or pay stock or cash dividends on any
share of its capital stock or make any other distribution of assets to the
holders of any shares of its capital stock.
(e) institute a wage or salary adjustment increasing the base
compensation rate of any person whose annual base compensation rate on the date
hereof exceeds $25,000, pay a new employee an annual base compensation rate
exceeding $50,000, enter into any agreement, understanding or commitment,
written or oral, which obligates LMI, its successors or assigns, to pay, at any
time, to a new employee an annual base compensation rate exceeding $50,000, or
institute or agree to institute wage or salary adjustments which, taken either
individually or in the aggregate, increase by more than 10% the aggregate of the
annual base compensation rates paid by either on the date hereof to all of its
employees.
(f) enter into or institute any employment contracts, including but
not limited to employee policy manual, deferred compensation, non-competition,
bonus, stock option, profit-sharing, pension, retirement, consultation after
retirement, payments upon retirement, severance agreement, incentive,
extraordinary vacation accrual, education payment or benefit, disability,
medical, life or other insurance plan or arrangement or, except as required by
applicable law or regulation, renew, amend, modify or terminate any such
arrangement or plan now in existence.
(g) enter into any agreement, understanding or commitment, written or
oral, with any other person which is in any manner inconsistent with its
obligations arising under this Agreement, other than those agreements,
understandings and commitments entered into by LMI in connection with the
contemplated bridge financing and investment transaction with Canopy or asset
acquisition and investment transaction with Caldera.
27
(h) make any loan, advance or commitment to extend credit to any of
its directors, officers or any affiliated or related persons of such directors
or officers; renew any outstanding loan or any outstanding commitment to extend
credit to any of its directors, officers or any affiliated or related persons of
such directors or officers; increase any outstanding loan to any of its
directors, officers or any affiliated or related persons of such directors or
officers; or enter into any agreement, understanding or commitment, written or
oral, which obligates it, its successors or assigns, to make any loan or advance
or payment to any of its directors or officers or to any affiliated or related
persons of any such directors or officers.
(i) sell, lease or otherwise transfer or dispose of any property or
asset, other than in the ordinary course of business consistent with past
practice.
(j) take, or agree to take, any other action that would make any of
its representations or warranties contained in this Agreement untrue.
5.4 CONTINUED RELATIONSHIPS. LMI shall preserve intact the business of
LMI and Ebiz shall preserve intact the business of Ebiz and each of the
Subsidiaries and keep available the services of their respective officers and
employees and maintain good relationships with suppliers, customers and others
having business relationships with any of the parties, and shall not cause any
change in the business, condition or results of operations which may have an
adverse effect on any the assets, business, condition or prospects of the
respective party.
5.5 CONFIDENTIALITY.
(a) Except as contemplated by this Agreement, as required by law or
otherwise expressly consented to in writing by Ebiz and LMI, all information or
documents furnished hereunder by any party shall be kept strictly confidential
by the party or parties to whom furnished at all times prior to the Closing
Date, and in the event such transactions are not consummated, each shall return
to the other all documents furnished hereunder and copies thereof upon request
and shall continue to keep confidential all information furnished hereunder and
shall not thereafter use the same for its advantage. Notwithstanding the
foregoing, (i) Ebiz or LMI may, with the consent of the other, which consent
shall not be unreasonably withheld or delayed, issue or make a press release,
announcement or other disclosure regarding this Agreement and the transactions
contemplated hereby which it reasonably determines necessary or desirable under
applicable law, and (ii) Ebiz may, at any time after the date of this Agreement,
file with the Commission a form 8-K pursuant to the Exchange Act with respect to
the transactions contemplated by this Agreement, which Form 8-K may include,
among other things, financial statements and pro forma financial information
with respect to LMI. Prior to the Closing Date or termination of this Agreement,
LMI shall cooperate with Ebiz and provide such information and documents as may
be required in connection with any such filings.
(b) If the Closing is not consummated, each party hereto will hold,
and Ebiz shall cause its Subsidiaries to hold, in absolute confidence any
information obtained from another party except to the extent (i) such party is
required to disclose such information by law or regulation, (ii) disclosure of
such information is necessary in connection with the pursuit of a claim by such
party against another party, (iii) such information was known by such party
prior to such disclosure or was thereafter developed or obtained by such party
independent of such disclosure, or (iv) such information becomes generally
available to the public or is otherwise no longer confidential. Prior to any
28
disclosure of information pursuant to the exception in clause (i) or (ii) of the
preceding sentence, the party intending to disclose the same shall so notify the
party which provided the same in order that such party may seek a protective
order or other appropriate remedy should it choose to do so. Notwithstanding the
foregoing, Ebiz or LMI may, with the consent of the other, which consent shall
not be unreasonably withheld or delayed, issue or make a press release,
announcement or other disclosure regarding the termination of this Agreement and
the transactions contemplated hereby which it reasonably determines necessary or
desirable under applicable law.
5.6 NO SOLICITATION. LMI, Ebiz and those acting on behalf of either
will not, and LMI and Ebiz will use their best efforts to cause their officers,
employees, agents, and representatives (including any investment banker) to not,
directly or indirectly, solicit, encourage, or initiate any discussions with, or
negotiate or otherwise deal with, or provide any information to, any person or
entity other than the other and its officers, employees, and agents, concerning
any merger, other business combination, sale of substantial assets, or similar
transaction involving either or any sale of any of their capital stock or of the
capital stock or other securities or assets of either. Each will notify the
other immediately upon receipt of any inquiry, offer or proposal relating to any
of the foregoing. None of the foregoing shall prohibit (i) sale of equity stock
of Ebiz or conversion of debt of LMI as contemplated under this Agreement, (ii)
providing information to others in a manner in keeping with the ordinary conduct
of the parties' business, or providing information to government authorities or
(iii) pursuit of the transactions referenced in Section 5.3(b) of this Agreement
with respect to Canopy or Caldera.
5.7 AGREEMENT OF AFFILIATES. If the Merger will qualify for
pooling-of-interests accounting treatment, shares of Ebiz Common Stock issued to
affiliates of LMI in exchange for their shares of LMI Common Stock or LMI
Preferred Stock shall not be transferable until such time as the financial
results covering at least 30 days of combined operations of Ebiz and LMI have
been published within the meaning of Section 201.01 of the Commission's
Codification of Financial Reporting Policies. Ebiz shall be entitled to place a
restrictive legend on certificates issued to LMI affiliates to enforce the
provisions of this section.
5.8 NOTIFICATION OF CERTAIN MATTERS. Between the date hereof and the
Closing Date, each party will give prompt notice in writing to the other party
of: (i) any information that indicates that any of its representations or
warranties contained herein was not true and correct as of the date hereof or
will not be true and correct at and as of the Closing Date with the same force
and effect as if made at and as of the Closing Date (except for changes
permitted or contemplated by this Agreement), (ii) the occurrence of any event
which will result, or has a reasonable prospect of resulting, in the failure of
any condition specified in Article 6 hereof to be satisfied or (iii) any notice
or other communication from any third party alleging that the consent of such
third party is or may be required in connection with the transactions
contemplated by this Agreement or that such transactions otherwise may violate
the rights of or confer remedies upon such third party.
5.9 ACTIONS BY MERGER SUB. In its capacity as the sole stockholder of
Merger Sub, Ebiz shall cause Merger Sub to approve and adopt the Merger and to
take all corporate action necessary on its part to consummate the Merger and the
transactions contemplated hereby. Merger Sub shall not conduct any other
business, and will have no other assets or liabilities.
5.10 AMENDMENT OF STOCK OPTION PLAN. Prior to the Closing Date, Ebiz
shall amend its 1998 Equity Incentive Plan to increase the number of shares
authorized under such plan to an amount sufficient to assume all outstanding LMI
Stock Options pursuant to Section 1.6(b) hereof.
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5.11 CONVERSION OF EBIZ PREFERRED STOCK. Prior to the Closing Date,
Ebiz shall cause any and all outstanding shares of its preferred stock to be
converted into shares of Ebiz Common Stock.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS TO THE OBLIGATION OF EBIZ TO CLOSE. The obligation of
Ebiz to consummate the transactions contemplated hereby shall be subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
(a) during the period from the date of the Current LMI Financial
Statements to the Closing Date, there shall not have occurred any material
adverse change, other than as set forth on any schedule or exhibit hereto, in
the financial condition, business or operation of LMI taken as a whole, and Ebiz
shall have received at the Closing a certificate dated as of the Closing Date,
signed by the Chief Executive Officer and Chief Financial Officer of LMI to that
effect;
(b) each of the representations and warranties of LMI contained in
this Agreement shall, in all material respects, be true when made and as of the
Closing Date, with the same effect as though such representations and warranties
had been made on and as of such date; each of the covenants and agreements of
LMI to be performed on or prior to the Closing Date shall have been duly
performed in all material respects; and Ebiz shall have received at the Closing
a certificate to that effect dated as of the Closing Date and executed by the
Chief Executive Officer and Chief Financial Officer of LMI;
(c) Ebiz shall have received an opinion from Holme Xxxxxxx & Xxxx,
LLP, counsel to LMI, substantially in the form of Exhibit F attached hereto;
(d) Ebiz shall have received an opinion from Southwest Securities,
Inc. or similarly qualified firm, as determined by Ebiz, to the effect that the
Merger is fair to its shareholders;
(e) all outstanding debentures of LMI issued before March 1, 2000 and
the Designated Portion of the value of each outstanding debenture of LMI issued
after March 1, 2000 shall have been converted into LMI Preferred Stock or other
equity of LMI, or shall have been converted automatically in accordance with the
terms of such debentures or upon the consummation of the Merger, and all
outstanding Canopy Notes shall have been repaid or converted into LMI Common
Stock;
(f) there shall not have been issued or be in effect any order of any
court, agency or other tribunal of competent jurisdiction which has the effect
of prohibiting or prohibits the performance of the Agreement and the
transactions contemplated thereby or imposes limitations on the ability of LMI
to exercise and possess all of its rights, privileges, immunities and franchises
or to otherwise conduct its business (with limitations applicable only to all
similar entities engaged in similar business) as of the Closing Date;
(g) all proceedings, corporate or otherwise, to be taken in connection
with the transactions contemplated by this Agreement, including the shareholder
approvals of the transactions contemplated by this Agreement, shall have
30
occurred and all appropriate documents incident thereto as Ebiz may reasonably
request shall have been delivered to it, including, without limitation, the
receipt of appropriate consents from any third parties which may be necessary to
effect the transactions contemplated hereby;
(h) no action, suit or proceeding before any court or any governmental
or regulatory authority shall have been commenced or threatened, and no
investigation by any governmental or regulatory authority shall have been
commenced against the parties hereto or any of the affiliates, associates,
officers or directors, or any of them, seeking to restrain, prevent or change
the transactions contemplated hereby, or questioning the validity or legality of
any such transactions contemplated hereby, or questioning the validity or
legality of any such transactions, or seeking damages in connection with any of
such transactions;
(i) LMI shall have received any requisite approvals to this Agreement
from all third parties having, under the terms of its respective loan, lease and
other agreements, the right to approve or reject this Agreement or to cancel its
agreement with LMI on or before the Closing Date; LMI hereby represents that all
such third parties will have been disclosed to Ebiz as of the Closing Date; (j)
LMI shall have received confirmation, in form and substance mutually agreeable
to Ebiz and LMI, of at least $2,000,000 in new funding;
(k) Xxxx Xxxxxxx shall have transferred to LMI such number of shares
of LMI Common Stock as would, if converted in the Merger, be converted into at
least 200,000 shares of Ebiz Common Stock pursuant to the conversion ratio set
forth in Section 1.3(a) of this Agreement; and
(l) LMI shall execute and deliver or cause to be executed and
delivered to Ebiz such documents as are required at the Closing, pursuant to
Article 7.
6.2 CONDITIONS TO THE OBLIGATION OF LMI TO CLOSE. The obligation of
LMI to consummate the transactions contemplated hereby shall be subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
(a) during the period from the date of the Current Ebiz Financial
Statements to the Closing Date, there shall not have occurred any material
adverse change, other than as set forth on any schedule or exhibit hereto, in
the financial condition, business or operation of Ebiz taken as a whole, and LMI
shall have received at the Closing a certificate dated as of the Closing Date,
signed by the Chief Executive Officer and Chief Financial Officer of Ebiz to
that effect;
(b) each of the representations and warranties of Ebiz and Merger Sub
contained in this Agreement shall, in all material respects, be true when made
and as of the Closing Date, with the same effect as though such representations
and warranties had been made on and as of such date; each of the covenants and
agreements of Ebiz and Merger Sub to be performed on or prior to the Closing
Date shall have been duly performed in all material respects; and LMI shall have
received at the Closing a certificate to that effect dated as of the Closing
Date and executed by the Chief Executive Officer and Chief Financial Officer of
Ebiz;
(c) LMI shall have received an opinion from Xxxxx and Xxxx, LLP,
counsel to Ebiz, substantially in the form attached as Exhibit G hereto;
31
(d) LMI's stockholders shall have approved the Merger pursuant to the
requirements of the DGCL, a majority of the holders of each class of outstanding
debentures of LMI shall have approved the Merger and LMI shall have received all
other approvals reasonably necessary, in the opinion of LMI, to consummate the
Merger, including, without limitation, the consents and waivers described in the
Information Statement relating to the Merger, dated on or about the date hereof,
furnished to holders of securities of LMI;
(e) there shall not have been issued or be in effect any order of any
court, agency or other tribunal of competent jurisdiction which has the effect
of prohibiting or prohibits the performance of the Agreement and the
transactions contemplated thereby or imposes limitations on the ability of Ebiz
to exercise and possess all of its rights, privileges, immunities and franchises
or to otherwise conduct its business (with limitations applicable only to all
similar entities engaged in similar business) as of the Closing Date;
(f) all proceedings, corporate or otherwise, to be taken in connection
with the transactions contemplated by this Agreement, including the shareholder
approvals of the transactions contemplated by this Agreement, shall have
occurred and all appropriate documents incident thereto as LMI may reasonably
request shall have been delivered to it, including, without limitation, the
receipt of appropriate consents from any third parties which may be necessary to
effect the transactions contemplated hereby;
(g) no action, suit or proceeding before any court or any governmental
or regulatory authority shall have been commenced or threatened, and no
investigation by any governmental or regulatory authority shall have been
commenced against the parties hereto or any of the affiliates, associates,
officers or directors, or any of them, seeking to restrain, prevent or change
the transactions contemplated hereby, or questioning the validity or legality of
any such transactions contemplated hereby, or questioning the validity or
legality of any such transactions, or seeking damages in connection with any of
such transactions; and
(h) Ebiz and each Subsidiary shall have received any requisite
approvals to this Agreement from all third parties having, under the terms of
its respective loan, lease and other agreements, the right to approve or reject
this Agreement or to cancel its agreement with Ebiz on or before the Closing;
Ebiz hereby represents that all such third parties will have been disclosed to
LMI as of the Closing Date; and
(i) Ebiz shall execute and deliver or cause to be executed and
delivered to LMI such documents as are required at the Closing, pursuant to
Article 7.
ARTICLE 7
CLOSING
7.1 DOCUMENTS TO BE DELIVERED BY EBIZ. At the Closing, Ebiz will
deliver the following to LMI:
(a) SHARE CERTIFICATES. Certificates representing the shares of Ebiz
Common Stock constituting the Merger Consideration other than such certificates
to be issued after Closing with respect to the Assumed LMI Debentures pursuant
to Section 1.3(b) of this Agreement;
32
(b) CERTIFIED RESOLUTIONS. Certified resolutions of each of the Board
of Directors of Ebiz and Merger Sub approving the execution, delivery and
performance of this Agreement and authorizing the consummation of the
transactions contemplated hereby;
(c) OFFICER'S CERTIFICATE. A certificate, dated as of the Closing
Date, signed by the Chief Executive Officer and Chief Financial Officer of Ebiz,
as required pursuant to Section 6.2;.
(d) OPINION. A written opinion of Xxxxx and Roca, LLP, counsel to Ebiz
addressed to LMI, dated as of the Closing Date, in substantially the form
attached as Exhibit G;
(e) GOOD STANDING CERTIFICATES. Governmental certificates showing that
Ebiz is duly incorporated, validly existing and in good standing in the State of
Nevada and qualified to do business as a foreign corporation in each state
listed in Schedule 4.1(a), certified as of a date not more than ten (10) days
before the Closing Date;
(f) WARRANTS. Warrants exercisable for shares of Ebiz Common Stock,
approved by the Board of Directors of Ebiz and issued to the holders of
outstanding LMI Warrants pursuant to the terms and conditions set forth in
Section 1.6(a);
(g) STOCK OPTIONS. Notices of grant or equivalent documentation
approved by the Board of Directors of Ebiz and issued to each holder of LMI
Stock Options, evidencing the assumption of the LMI Stock Options listed in
Schedule 3.5 pursuant to the terms and conditions set forth in Section 1.6(b);
(h) LOCK UP AGREEMENTS. Lock Up Agreements executed by each of Xxxxxxx
Xxxxxx and Xxxxxxx Xxxxxx as required pursuant to Section 2.4(b) and in
substantially the form attached as Exhibit E;
(i) COMPENSATION AGREEMENT. A Compensation Agreement substantially in
the form attached as Exhibit H; and
(j) OTHER DOCUMENTS. Such additional certificates, instruments,
documents, information and materials as LMI may reasonably request.
7.2 DOCUMENTS TO BE DELIVERED BY LMI. At the Closing, LMI will deliver
the following to Ebiz:
(a) SHARE CERTIFICATES. Certificates representing the shares of the
outstanding LMI Common Stock and LMI Preferred Stock;
(b) CERTIFIED RESOLUTIONS. Certified resolutions of the Board of
Directors of LMI approving the execution, delivery and performance of this
Agreement and authorizing the consummation of the transactions contemplated
hereby;
(c) OFFICER'S CERTIFICATE. A certificate, dated as of the Closing
Date, signed by the Chief Executive Officer and Chief Financial Officer of LMI,
as required pursuant to Section 6.1;
33
(d) OPINION. A written opinion of Holme Xxxxxxx & Xxxx LLP, counsel to
LMI addressed to Ebiz, dated as of the Closing Date, in substantially the form
attached as Exhibit F;
(e) GOOD STANDING CERTIFICATES. Governmental certificates showing that
LMI is duly organized, validly existing and in good standing in the State of
Delaware and qualified to do business as a foreign corporation in each state
listed in Schedule 3.1(a), certified as of a date not more than ten (10) days
before the Closing Date; and
(f) OTHER DOCUMENTS. Such additional certificates, instruments,
documents, information and materials as Ebiz may reasonably request.
7.3 MUTUAL DELIVERIES. At the Closing, each of Ebiz and LMI, as
applicable, shall execute and deliver or cause to be executed and delivered:
(a) A Certificate of Merger substantially in the form attached as
Exhibit A;
(b) Employment Agreements as required pursuant to Section 2.1 in
substantially the form attached as Exhibit B;
(c) A Shareholder Voting Agreement and Proxy, as required pursuant to
Section 2.2 and in substantially the form attached hereto as Exhibit C; and
(d) A Registration Rights Agreement as required pursuant to Section
2.4(a) and in substantially the form attached hereto as Exhibit D.
ARTICLE 8
AMENDMENT AND WAIVER
8.1 AMENDMENT AND MODIFICATION. This Agreement may only be amended or
modified in a writing signed by Ebiz and LMI at any time prior to the Closing
Date.
8.2 WAIVER. At any time prior to the Closing Date, the parties hereto
may by mutual agreement extend the time for the performance of any of the
obligations or other acts of any other party hereto. Any party may waive any
inaccuracies in the representations and warranties of any other party contained
herein or in any schedule or document delivered pursuant hereto and waive
compliance by any other party with any of the covenants, agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the parties hereto.
ARTICLE 9
TERMINATION
9.1 TERMINATION BY PARTIES. This Agreement may be terminated prior to
the Closing Date:
(a) (i) At the option of Ebiz, upon written notice to the other
parties, if in the good faith opinion of the Board of Directors of Ebiz, LMI has
breached any of the representations and warranties or other covenants of this
Agreement or any condition precedent set forth in Section 6.1 has failed to
occur, or (ii) at the option of LMI, upon written notice to the other parties,
if in the good faith opinion of the Board of Directors of LMI, either Ebiz or
34
Merger Sub has breached any of the representations and warranties or other
covenants of this Agreement or any condition precedent set forth in Section 6.2
has failed to occur;
(b) by mutual agreement of Ebiz and LMI; and
(c) at the option of the respective Board of Directors of Ebiz or LMI,
if any litigation is instituted against LMI or Ebiz, the object of which is to
enjoin any party from proceeding with the transactions contemplated under this
Agreement or to seek damages against any party hereto or any officer, director
or agent of any party as a result of the transactions proposed under this
Agreement.
9.2 EFFECT OF TERMINATION. In the event this Agreement is terminated
as provided in Sections 9.1(b) or 9.1(c) or as provided in Section 9.1(a) to the
extent such termination is a result of a condition precedent having failed to
occur, this Agreement shall be void and of no further force and effect, and,
except as set forth herein and Section 5.5 above, there shall be no further
liability on the part of Ebiz or LMI or any of their respective directors,
officers or stockholders as a result of this Agreement. Section 5.5 shall
survive any termination of this Agreement.
ARTICLE 10
INDEMNIFICATION
10.1 DEFINITIONS. Capitalized terms used in this Article 10 and not
defined elsewhere in this Agreement shall have the meanings ascribed to them
below:
"APPLICABLE STOCK PERCENTAGE" shall mean, with respect to each LMI
Stockholder, the percentage that corresponds to a fraction, the numerator of
which is an amount equal to the total number of shares (on a fully diluted
basis) of LMI Common Stock or securities convertible into LMI Common Stock held
by such LMI Stockholder immediately prior to the Effective Time and the
denominator of which is an amount equal to the total number of shares (on a
fully diluted basis) of LMI Common Stock or securities convertible into LMI
Common Stock outstanding as of immediately prior to the Effective Time.
"DAMAGES" shall mean any loss, liability, obligation, debt, claim,
damage or expense (including costs of investigation and defense and reasonable
attorneys' fees).
"DUE DATE" shall mean the date that is 30 days after the
Indemnification Determination Date.
"EBIZ AVERAGE TRADING PRICE" shall mean, with respect to any trading
day, the average of the high and low bid prices for Ebiz Common Stock as
reported by the OTC Bulletin Board for such day.
"EBIZ DESIGNATED REPRESENTATIVE" shall mean Xxxxxxx Xxxxxx; provided,
however, if Ebiz designates any person to succeed Xxxxxxx Xxxxxx as the Ebiz
Designated Representative by a writing executed by an authorized officer of
Ebiz, then the Ebiz Designated Representative shall mean such successor.
35
"EBIZ INDEMNIFICATION AMOUNT" shall mean the total amount of all
Damages, without any offset with respect to the LMI Indemnification Amount, due
and payable to Ebiz pursuant to Section 10.3(b), as determined by Final
Decision.
"EBIZ SHARE VALUE" shall mean the per share Ebiz Average Trading Price
as of the fifth trading day prior to the Due Date.
"ESCROW AGENT" shall mean Colonial Trust, or such other escrow agent
as may be agreed upon in writing by the Ebiz Designated Representative and the
LMI Designated Representative.
"ESCROWED SHARES" shall mean 5 percent of (i) the shares of Ebiz
Common Stock to be delivered to the LMI Stockholders pursuant to Section 1.3 of
this Agreement and (ii) the shares of Ebiz Common Stock issued upon conversion
of the Assumed LMI Debentures pursuant to Section 1.3(b) of this Agreement, all
such shares referenced in the immediately preceding clauses (i) or (ii) to be
deposited into an escrow account to be held by the Escrow Agent.
"FINAL DECISION" shall mean a final, binding written agreement
executed by the Ebiz Designated Representative and the LMI Designated
Representative, pursuant to which such Representatives agree as to the Ebiz
Indemnification Amount and the LMI Indemnification Amount; provided, however, if
such Representatives cannot agree upon such Amounts, then Final Decision shall
mean a final, non-appealable decision of the arbitrator pursuant to Section
10.5, or if such decision is appealed to a court of law, a final, non-appealable
judgement or order issued by a court of competent jurisdiction, setting forth
such Amounts.
"INDEMNIFICATION CAP" shall mean $1,000,000.00.
"INDEMNIFICATION CLAIM" shall mean a claim asserted by the LMI
Designated Representative pursuant to Section 10.3(a) or a claim asserted by the
Ebiz Designated Representative pursuant to Section 10.3(b), in each case, by
providing written notice of such claim to other Representative in accordance
with Section 10.4(a) below.
"INDEMNIFICATION DETERMINATION DATE" shall mean the date upon which
all Indemnification Claims are resolved by Final Decision.
"LMI DESIGNATED REPRESENTATIVE" shall mean Xxxxx Xxxx, provided,
however, if the LMI Stockholders designate any person to succeed Xxxxx Xxxx as
the LMI Designated Representative by a written consent executed by LMI
Stockholders holding not less that a majority of all shares of LMI Common Stock
held by the LMI Stockholders at the time the LMI Stockholders are determined,
then the LMI Designated Representative shall mean such successor.
"LMI INDEMNIFICATION AMOUNT" shall mean the total amount of all
Damages, without any offset with respect to the Ebiz Indemnification Amount,
owed by Ebiz to the LMI Stockholders pursuant to Section 10.3(a), as determined
by Final Decision.
"LMI STOCKHOLDERS" shall mean (i) holders of LMI Common Stock or LMI
Preferred Stock immediately prior to the Effective Time, whose shares of stock
are converted in the Merger into the right to receive the Merger Consideration
and (ii) holders of Assumed LMI Debentures at the Effective Time, who, upon the
36
conversion of such debentures, are entitled to receive the Merger Consideration
as provided by Section 1.3 of this Agreement.
"NET INDEMNIFICATION AMOUNT" shall mean the difference between (i) the
LMI Indemnification Amount and (ii) the Ebiz Indemnification Amount.
10.2 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. All
representations, warranties, covenants and obligations in this Agreement or in
the certificates delivered pursuant to Sections 6.1(a), 6.1(b), 6.2(a) and
6.2(b) or any other certificate delivered pursuant to this Agreement (other than
the Certificate of Merger) will survive until the expiration of all periods
during which a "NOTICE OF CLAIM" may be submitted as provided in Section
10.4(a); provided, however, if any Notice of Claim is submitted within the time
period provided for the submission thereof pursuant to Section 10.4(a), the
non-survival of any such representation, warranty, covenant or obligation shall
not affect, terminate or prejudice any Indemnified Claim as to which such Notice
of Claim is timely submitted. The right to indemnification, payment of Damages,
or other remedy based on the representations, warranties, covenants and
obligations in this Agreement will not be affected by any investigation
conducted with respect to, or any knowledge acquired or capable of being
acquired, whether before or after the execution and delivery of this Agreement
or the Closing Date, with respect to the accuracy of or compliance with any such
representation or warranty, or the performance of or compliance with any such
covenant or obligation.
10.3 INDEMNIFICATION AFTER EFFECTIVE TIME. If the Merger is
consummated pursuant to this Agreement, the indemnification provisions of this
Article 10 shall be effective immediately after the Effective Time:
(a) INDEMNIFICATION OF LMI STOCKHOLDERS. In accordance with the
procedures and subject to the limitations set forth in Sections 10.4 and 10.5
below, Ebiz shall defend, indemnify and hold harmless the LMI Stockholders from
and against any Damages arising, directly or indirectly, from and in connection
with (a) any inaccuracy or breach of any representation or warranty made by Ebiz
in this Agreement or in any certificate delivered by Ebiz pursuant to this
Agreement (except the Certificate of Merger), or (b) any failure by Ebiz to
perform or comply with any covenant or obligation of Ebiz in this Agreement.
(b) INDEMNIFICATION OF EBIZ. In accordance with the procedures and
subject to the limitations set forth in Sections 10.4 and 10.5 below, the LMI
Stockholders shall defend, indemnify and hold harmless Ebiz from and against any
Damages arising, directly or indirectly, from and in connection with (a) any
inaccuracy or breach of any representation or warranty made by LMI in this
Agreement or in any certificate delivered by LMI pursuant to this Agreement
(except the Certificate of Merger), or (b) any failure by LMI to perform or
comply with any covenant or obligation of LMI in this Agreement.
(c) INTENDED THIRD PARTY BENEFICIARIES. The provisions contained in
this Article 10 are intended to benefit the LMI Stockholders, provided the
rights and remedies of the LMI Stockholders under this Article 10 may only be
exercised by or on their behalves by the LMI Designated Representative, and are
subject to the limitations and conditions set forth in this Article 10. The Ebiz
shareholders shall not constitute third party beneficiaries under this Agreement
and shall have no right to enforce any right or remedy hereunder.
37
(d) EXCLUSIVE REMEDIES. After the Effective Time, the remedies
provided in this Article 10 shall be the sole and exclusive remedies available
to LMI, the LMI Stockholders and Ebiz with respect to the matters described in
Sections 10.3(a) or 10.3(b) of this Agreement.
10.4 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS.
(a) TIME LIMIT TO ASSERT CLAIM. All Indemnification Claims held by the
LMI Stockholders or Ebiz shall expire and be of no force or effect unless: (i)
in the case of the LMI Stockholders, the LMI Designated Representative submits
to the Ebiz Designated Representative a Notice of Claim meeting the requirements
set forth in this subsection (a) within 9 months after the Effective Time, or,
if later, within 30 days after the Ebiz Designated Representative submits a
Notice of Claim to the LMI Designated Representative; and (ii) in the case of
Ebiz, the Ebiz Designated Representative submits to the LMI Designated
Representative a Notice of Claim meeting the requirements set forth in this
subsection (a) within 9 months after the Effective Time, or, if later, within 30
days after the LMI Designated Representative submits a Notice of Claim to the
Ebiz Designated Representative. To be effective, a Notice of Claim shall be in
writing, signed by the Designated Representative submitting the Indemnification
Claim, delivered in accordance with Section 11.6 of this Agreement, and specify,
in general terms, the basis for the claim and the amount of Damages being
claimed.
(b) DE MINIMUS CLAIM. If it is determined by Final Decision that the
Net Indemnification Amount is less than $250,000.00, then no person shall have
any obligation to any other person under Section 10.3, and the Escrowed Shares
shall be transferred to the LMI Stockholders pursuant to Section 10.4(f) of this
Agreement. If the Net Indemnification Amount is greater than $250,000.00, then
the party prevailing under any Final Decision shall be entitled to recover its
full Indemnification Amount, subject to any other limitations set forth in this
Article 10, including, without limitation, Sections 10.4(c) and (e) hereof, it
being intended that such Indemnification Amount shall be payable from the first
dollar.
(c) OFFSET OF CLAIMS. If it is determined by Final Decision that the
Ebiz Indemnification Amount is greater than the LMI Indemnification Amount, then
the LMI Indemnification Amount shall be offset against the Ebiz Indemnification
Amount, the LMI Stockholders shall not be entitled to any recovery whatsoever
with respect to their Indemnification Claims, and Ebiz shall only be entitled to
recover with respect to its Indemnification Claims an amount equal to the excess
of the Ebiz Indemnification Amount over the LMI Indemnification Amount. If it is
determined by Final Decision that the LMI Indemnification Amount is greater than
the Ebiz Indemnification Amount, then the Ebiz Indemnification Amount shall be
offset against the LMI Indemnification Amount, Ebiz shall not be entitled to any
recovery whatsoever with respect to its Indemnification Claims, and the LMI
Stockholders shall only be entitled to recover with respect to their
Indemnification Claims an amount equal to the excess of the LMI Indemnification
Amount over the Ebiz Indemnification Amount.
(d) DUE DATE. All amounts which become payable pursuant to this
Article 10 shall be due and payable on the Due Date.
(e) INDEMNIFICATION CAP. Notwithstanding anything in this Section 10
to the contrary, neither the LMI Stockholders, as a group, nor Ebiz, shall be
entitled to any recovery in excess of the Indemnification Cap.
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(f) ESCROW. The Escrowed Shares, when initially issued, shall be
issued to the Escrow Agent as nominee of the LMI Stockholders, such shares to be
deposited in an escrow account. The Escrowed Shares shall be allocated against
the number of shares of Ebiz Common Stock to which each LMI Stockholder is
entitled on a pro rata basis in accordance with the relative Applicable Stock
Percentage of each LMI Stockholder. The Escrowed Shares shall be held by the
Escrow Agent in escrow, and shall be transferred or released by the Escrow Agent
only as follows. If no Notice of Claim is submitted by the Ebiz Designated
Representative to the LMI Designated Representative within the applicable time
period provided in Section 10.4(a), then the Escrow Agent shall promptly
transfer all of the Escrowed Shares to the LMI Stockholders on a pro rata basis
in accordance with the relative Applicable Stock Percentage of each LMI
Stockholder. If a Notice of Claim is submitted by the Ebiz Designated
Representative to the LMI Designated Representative within the applicable time
period provided in Section 10.4(a), then the Escrow Agent shall hold the
Escrowed Shares until the first to occur of the issuance of a Final Decision or
the waiver and release by Ebiz of the Indemnification Claims to which the Notice
of Claim relates. If the Final Decision results in Ebiz being entitled to no
payment pursuant to this Article 10 or if Ebiz waives and releases its
Indemnification Claims, then the Escrow Agent shall promptly transfer all of the
Escrowed Shares to the LMI Stockholders on a pro rata basis in accordance with
the relative Applicable Stock Percentage of each LMI Stockholder. If, however,
pursuant to the Final Decision it is determined that Ebiz is entitled pursuant
to this Article 10 to receive payment with respect to its Indemnification
Claims, then the Escrow Agent shall transfer to Ebiz on the Due Date such number
of Escrowed Shares as have an aggregate Ebiz Share Value equal to the amount of
such payment and shall transfer all of the remaining Escrowed Shares to the LMI
Stockholders on a pro rata basis in accordance with the relative Applicable
Stock Percentage of each LMI Stockholder. Any LMI Stockholder may, but shall not
be required, to redeem any Escrowed Shares allocable to him that are required to
be transferred to Ebiz pursuant to this subsection (f) by paying to the Escrow
Agent, prior to the transfer thereof to Ebiz, the Ebiz Share Value of such
Escrowed Shares. Any Escrowed Shares that are so redeemed shall be transferred
to the redeeming LMI Stockholder and the cash paid to redeem such Escrowed
Shares shall be paid, in lieu of such shares, to Ebiz.
(g) NON-RECOURSE OBLIGATIONS. Ebiz's sole recourse with respect to any
amount to which it is entitled to receive from the LMI Stockholders pursuant to
this Article 10 shall be to the Escrowed Shares. No LMI Stockholder shall have
any personal liability to Ebiz whatsoever under this Article 10.
(h) PAYMENT TO LMI STOCKHOLDERS. Any amount which Ebiz is obligated to
pay to the LMI Stockholders pursuant to this Article 10 shall be payable to the
LMI Stockholders on a pro rata basis in accordance with the relative Applicable
Stock Percentage of each LMI Stockholder. At the option of the Board of Ebiz,
each LMI Stockholder shall receive any amount to which it is entitled under this
Article 10 either in cash or in Ebiz Common Stock, valued at the Ebiz Share
Value.
10.5 DISPUTE RESOLUTION PROCEDURE. Within the 10 days after the the
first date upon which each Designated Representative has submitted a Notice of
Claim to the other, or, if only one Designated Representative submits a Notice
of Claim, within 10 days after the expiration of the last deadline for the
submission of a Notice of Claim pursuant to Section 10.4(a) (such 10th day is
referred to herein as the "BASE Date"), the Ebiz Designated Representative and
the LMI Designated Representative shall meet and engage in good faith
negotiations to resolve any pending Indemnification Claims. If the Designated
Representatives cannot resolve the dispute within 30 days after the Base Date,
the Designated Representatives shall mediate the dispute in accordance with the
39
Commercial Mediation Rules of the American Arbitration Association ("AAA"), but
the mediation proceeding may not revoke or revise any provision of this
Agreement. If within 60 days after the Base Date the matter has not been
resolved to the satisfaction of the Designated Representatives, either
Designated Representative may submit the matter to arbitration in accordance
with the Commercial Arbitration Rules of the AAA, by a sole arbitrator, but the
arbitration proceeding may not revoke or revise any provision of this Agreement.
The arbitrator selected shall be an independent third party and shall have
knowledge and experience in the matters addressed by the claim. Arbitration
shall be the sole and exclusive remedy of the LMI Stockholders and Ebiz with
respect to any Indemnification Claim; PROVIDED, that the arbitrator shall not
have the power or authority to award consequential, incidental or punitive
damages. Unless all the parties to an arbitration otherwise consent in writing,
the location of the arbitration hearings and the place of entry of the award
shall be in Phoenix, Arizona. The parties consent to exclusive jurisdiction of,
and agree that sole venue will lie in, the state and federal courts in Arizona
or the state of the otherwise agreed location for any allowable judicial
proceeding relating to any arbitration under this Agreement, including entry of
a judgment on the award. The arbitration award shall be final and binding and
shall not be reviewable in any court on any grounds except corruption, fraud or
undue means of a party or for evident partiality or corruption of the
arbitrator. The parties intend to eliminate all other court review of the award
and the arbitration proceedings. Except for a proceeding to enforce or confirm
an award or except for a proceeding brought by all parties to the dispute to
vacate or modify an award, the initiation of any suit relating to an
Indemnification Claim that is arbitrable under this Agreement shall constitute a
material breach of this Agreement.
10.6 EXERCISE OF RIGHTS WITH RESPECT TO ESCROWED SHARES. During the
period the Escrowed Shares are held in escrow pursuant to Section 10.4(f), the
LMI Stockholders shall be entitled to exercise the voting rights with respect to
such shares in proportion to their relative Applicable Stock Percentages. The
LMI Stockholders shall also be entitled to any dividends or other distributions
with respect to the Escrowed Shares in such proportions.
ARTICLE 11
MISCELLANEOUS
11.1 ENTIRE AGREEMENT. This Agreement, and the exhibits and schedules
attached hereto, and the agreements contemplated by this Agreement contain the
entire agreement among the parties and supersede all prior agreements,
arrangements and understandings relating to the subject matter hereof. There are
nor written or oral agreements, understandings, representations or warranties
between the parties other than those set forth or referred to in this Agreement.
11.2 EXPENSES. All legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses. Notwithstanding the
foregoing, if this Agreement is terminated by a party (the "Non-breaching
Party") as a result of a material breach by the other party (the "Breaching
Party") of its covenants or agreements contained herein or the representations
and warranties made by it herein, the Breaching Party shall reimburse the
Non-breaching Party for all reasonable out-of-pocket fees and expenses
(including, without limitation, fees and expenses of counsel and accountants)
incurred in connection with the negotiation, preparation and performance of this
Agreement and the transactions contemplated hereby. Such payment shall be made
by the Breaching Party within 5 business days of receipt of documentation from
the Non-breaching Party in reasonable detail supporting the amount of such costs
and expenses. The remedies set forth in this Section 11.2 shall be in addition
to any other rights and remedies allowed by law.
40
11.3 ATTORNEYS FEES. Notwithstanding Section 11.2 above, in the event
of any proceeding to enforce this Agreement, the prevailing party shall be
entitled to receive from the losing party all reasonable costs and expenses,
including the reasonable fees of attorneys, accountants and other experts,
incurred by the prevailing party in investigating and prosecuting (or defending)
such action at trial or upon any appeal.
11.4 SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
11.5 ASSIGNMENT. This Agreement shall not be assigned by any party
without the written consent of the other parties and any attempted assignment
without such written consent shall be null and void and without legal effect.
11.6 NOTICES. All notices hereunder shall be deemed given if in
writing and delivered personally or sent by telex, telegram, telecopier,
registered mail or certified mail (return receipt requested) to the parties at
the addresses below (or at such other addresses as shall be specified by like
notice). Any notice, however given, shall be effective five days after it is
sent.
If to Ebiz: Ebiz Enterprises, Inc.
00000 Xxxxx 00xx Xxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
Fax: 000-000-0000
With a copy to: Xxxxxx X. Xxxxxx
Xxxxx and Xxxx LLP
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Fax: 000-000-0000
If to LMI: XxxxxXxxx.xxx, Inc.
00000 Xxxx Xxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxx
Fax: 000-000-0000
With a copy to: Xxxxx X. Xxxxxx
Holme Xxxxxxx & Xxxx LLP
0000 Xxxxxxx Xx., Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Fax: 000-000-0000
11.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Arizona without regard to conflict
of law principles.
41
11.8 EQUITABLE REMEDIES. The parties acknowledge that the remedies at
law may be inadequate to protect against any default hereunder, and consent to
the granting of injunctive relief or other forms of equitable relief by a court
of competent jurisdiction or a similar judicial body, whether temporary,
preliminary or final, whether or not actual damages can be shown.
11.9 NUMBER OF DAYS. In computing the number of days for purposes of
this Agreement, all days will be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls on a
Saturday, Sunday or day that is a legal holiday in the State of Arizona, then
the final day will be deemed to be the next day that is not a Saturday, Sunday
or day that is a legal holiday in the State of Arizona.
11.10 PROVISIONS SEVERABLE. The provisions of this Agreement are
independent of and severable from each other, and no provision will be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
Further, if a court of competent jurisdiction determines that any provision of
this Agreement is invalid or unenforceable as written, the court may interpret,
construe, rewrite or revise such provision, to the fullest extent allowed by
law, so as to make it valid and enforceable, consistent with the intent of the
parties hereto.
11.11 CONSTRUCTION. The parties hereto hereby acknowledge and agree
that each party has participated in the drafting of this Agreement and that this
Agreement has been, to the extent it was felt necessary, reviewed by the
respective legal counsel for the parties hereto and that the rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party will not be applied to the interpretation of this Agreement. No
inference in favor of, or against, any party will be drawn from the fact that
one party has drafted any portion hereof.
11.12 HEADINGS. The headings contained in this Agreement are for
convenience only and will not affect the meaning or interpretation of this
Agreement.
11.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original as against any
party whose signature appears thereon, and all of which will together constitute
one and the same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, bears the signatures of all
of the parties reflected hereon as the signatories. Any photocopy or
telefacsimilie of this Agreement, with all signatures reproduced on one or more
sets of signature pages, will be considered for all purposes as if it were an
executed counterpart of this Agreement.
11.14 RECITALS, SCHEDULES AND EXHIBITS. The recitals, schedules and
exhibits referred to in this Agreement shall be construed with and are an
integral part of this Agreement and are incorporated herein by this reference.
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IN WITNESS WHEREOF, this Agreement has been executed by each of the
parties as of the day and year first above written.
EBIZ:
EBIZ ENTERPRISES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxx
Chief Executive Officer
MERGER SUB:
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
President
LMI:
XXXXXXXXX.XXX, INC.
By: /s/ Xxxxx Xxxx
-------------------------------------
Xxxxx Xxxx
Chief Executive Officer
43
EXHIBIT AND SCHEDULE LIST
Exhibit A Form of Certificate of Merger
Exhibit B Form of Employment Agreement
Exhibit C Form of Shareholder Voting Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Lock-Up Agreement
Exhibit F Form of Opinion of Holme Xxxxxxx & Xxxx LLP
Exhibit G Form of Opinion of Xxxxx and Roca LLP
Exhibit H Form of Compensation Agreement
Schedule 3.1(a) LMI Jurisdictions of Qualification
Schedule 3.1(b) LMI Interests in Other Business Entities
Schedule 3.3 LMI Approvals and Consents
Schedule 3.5 LMI Options, Warrants and Convertible Securities
Schedule 3.6(a) LMI Financial Statements
Schedule 3.6(b) LMI Additional Liabilities
Schedule 3.9 LMI Adverse Changes and Events
Schedule 3.10 LMI Defaults
Schedule 3.11 LMI Litigation
Schedule 3.12(a) LMI Plans
Schedule 3.12(g) LMI Employee Contracts, Etc.
Schedule 3.14 LMI Material Contracts and Insurance Policies
Schedule 3.15(e) LMI Taxes
Schedule 3.15(h) LMI Certain Tax Exceptions
Schedule 3.15(j) LMI Certain Tax Elections, Etc.
44
Schedule 3.16 LMI Title Defects
Schedule 3.18(b) LMI Intellectual Property
Schedule 4.1(a) Ebiz Jurisdictions of Qualification
Schedule 4.1(b) Ebiz Subsidiaries
Schedule 4.3 Ebiz Approvals and Consents
Schedule 4.6 Ebiz Options, Warrants and Convertibles
Schedule 4.7(a) Ebiz Financial Statements
Schedule 4.7(b) Ebiz Additional Liabilities
Schedule 4.10 Ebiz Adverse Changes and Events
Schedule 4.11 Ebiz Defaults
Schedule 4.12 Ebiz Litigation
Schedule 4.13(a) Ebiz Plans
Schedule 4.13(g) Ebiz Employee Contracts
Schedule 4.15 Ebiz Material Contracts and Insurance Policies
Schedule 4.16(e) Ebiz Taxes due or unfiled or extended
Schedule 4.16(h) Ebiz Certain Tax Exceptions
Schedule 4.16(j) Ebiz Certain Tax Elections, Etc.
Schedule 4.17 Ebiz Encumbrances
Schedule 4.19(b) Ebiz Intellectual Property
45
