FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is
made and entered into as of this ____ day of __________, 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, LMI and Merger Sub, which is a wholly-owned subsidiary of Ebiz, have
entered into an Agreement and Plan of Merger, dated August 7, 2000 (the "Merger
Agreement"), providing for the merger of LMI with and into Merger Sub (the
"Merger"), with Merger Sub constituting the surviving entity.
B. Section 6.1 (d) of the Merger Agreement provides that it is a condition to
the obligation of Ebiz to consummate the Merger that "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".
C. Ebiz has been advised by Southwest Securities, Inc., that it will not issue
its opinion that the Merger is fair to the Ebiz shareholders if the Merger is
consummated at the conversion ratio upon which the LMI common stock and
preferred stock is to be exchanged for Ebiz common stock that is stated in the
Merger Agreement.
D. In order to address the concerns expressed by Southwest Securities, Inc., the
parties to the Merger Agreement have negotiated a reduction of such conversion
ratio from 2.2 shares of Ebiz common stock for each share of LMI common stock or
preferred stock, as currently stated in the Merger Agreement, to the conversion
ratios set forth in this Amendment. The parties to the Merger Agreement have
presented the revised conversion ratios set forth in this Amendment to Southwest
Securities, Inc., and have been advised that it will issue its fairness opinion
based thereon.
AMENDMENT
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:
1. Amendment of Section 1.3. Section 1.3 of the Merger Agreement is hereby
amended to read in its entirety as follows:
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, 1.8 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) 2.0 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) 2.0
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
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.
2. Status of Agreement. This Amendment shall be effective as of August 7,
2000. Ebiz, Merger Sub and LMI hereby ratify, confirm and acknowledge the
Agreement, as amended and modified by this Amendment.
3. 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.
4. Counterparts. This Amendment may be executed in one or more counterparts, and
shall become effective when a counterpart hereof has been executed by each party
hereto.
IN WITNESS WHEREOF, the parties have executed this Amendment by their duly
authorized officers or representatives.
EBIZ:
EBIZ ENTERPRISES, INC.
By:_______________________________
Xxxxxxx X. Xxxxxx
Chief Executive Officer
MERGER SUB:
By:_______________________________
LMI:
XXXXXXXXX.XXX, INC.
By:_______________________________
Xxxxx Xxxx
Chief Executive Officer
