USE RESTRICTION AGREEMENT
This Use Restriction Agreement (the "Agreement") is made and entered into
as of the 15th day of September, 2000 by and between Ebiz Enterprises, Inc., a
Nevada corporation ("Ebiz"), and Caldera Systems, Inc., a Delaware corporation,
("Caldera Systems").
WHEREAS, Caldera Systems has developed a marketing and distribution concept
called Electronic Linux Marketplace ("ELM"); and
WHEREAS, Ebiz and Caldera Systems have entered into a Purchase and Sale
Agreement of even date herewith (the "Purchase and Sale Agreement") pursuant to
which Ebiz is acquiring from Caldera Systems intellectual property and other
assets comprising Caldera Systems' ELM; and
WHEREAS, pursuant to Section 1.2 of the Purchase and Sale Agreement,
Caldera Systems is investing $3,000,000 in Ebiz through the purchase of
3,000,000 shares of the common stock of Ebiz at a purchase price of $1.00 per
share on the condition that the proceeds of Caldera Systems' $3,000,000
investment (the "Caldera Investment") be used solely for development of a viable
ELM business in Ebiz; and
WHEREAS, Caldera Systems and Ebiz have agreed that the Caldera Investment
will be held in a separate account from which Ebiz may withdraw funds solely for
the purpose of developing and implementing ELM.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Purchase and Sale Agreement, the
parties hereto agree as follows:
1. ESTABLISHMENT OF ACCOUNT
On or before the Closing Date (as defined in the Purchase and Sale
Agreement), Ebiz shall open and establish an interest-bearing checking account
(the "Account") at CitiBank (the "Bank"). The Account shall be established in
the name of Ebiz and shall be owned by Ebiz. Distributions, payments and
expenditures from the Account shall be restricted, however, as provided in
Section 3 below.
1. Deposit to Account
Pursuant to Section 1.2 of the Purchase and Sale Agreement, Caldera Systems
shall deliver by wire transfer the Caldera Investment of $3,000,000 into the
Account on the Closing Date. Except with the written consent of Caldera Systems,
Ebiz shall not deposit any other funds in the Account.
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3. Disbursements From Account
(a) Funds held in the Account shall be applied by Ebiz solely for the
purpose of funding the development, implementation and operation of ELM as a
viable business operation of Ebiz and shall be used for no other purpose.
Notwithstanding the foregoing, all interest earned on funds in the Account shall
belong to and may be withdrawn by Ebiz in its sole discretion.
(b) To assure compliance with Section 3(a) above, no distribution,
disbursements or payments from the Account shall be made except for those
budgeted items and amounts that have been pre-approved in writing by Caldera
Systems, acting through a designated representative of Caldera Systems (the
"Caldera Representative"), as provided in Sections 3(d) below. The initial
Caldera Representative shall be _____________________. Caldera Systems shall
have the right to remove and replace any Caldera Representative and to designate
one or more other persons as the Caldera Representative at any time upon written
notice to Ebiz
(c) Within five (5) business days after the Closing Date (as defined in the
Purchase and Sale Agreement), Ebiz shall provide Caldera Systems with an initial
budget (the "Initial Budget") of the costs and expenses it expects to incur
during the remainder of September 2000 and all of October 2000 in developing,
implementing and operating ELM as a viable business operation of Ebiz. By
October 10, 2000 and by the tenth day of each of the successive four months
thereafter, Ebiz shall provide Caldera Systems with a one- month budget (a
"One-Month Budget") of the costs and expenses it expects to incur during the
next calendar month in developing, implementing and operating ELM as a viable
business operation of Ebiz. By the tenth day of March 2001 and by the tenth day
of each successive third month thereafter, Ebiz shall provide Caldera Systems
with a three-month rolling budget (a "Rolling Quarterly Budget") of the costs
and expenses it expects to incur during the next calendar quarter in developing,
implementing and operating ELM as a viable business operation of Ebiz. The
Initial Budget and each One-Month Budget and Rolling Quarterly Budget shall
describe in reasonable detail the full nature and extent of the proposed
activities, costs and expenses for the applicable budget period, and the
relationship of the proposed payments to the development, implementation and
operation of ELM. In no event shall the Initial Budget be for an amount in
excess of $400,000. In no event shall any One-Month Budget be for an amount in
excess of $200,000. In no event shall any Rolling Quarterly Budget be for an
amount in excess of $600,000.
(d) As soon as reasonably practicable following receipt of the Initial
Budget and each One-Month Budget and Rolling Quarterly Budget, Caldera Systems
shall either (i) consent to the proposed budget and cause a Caldera
Representative to submit written approval of the proposed budget to Ebiz, or
(ii) request from Ebiz such additional information regarding the proposed budget
as Caldera Systems determines in good faith is necessary to verify that the
items in the proposed budget are for valid purposes in developing, implementing
and operating ELM as a viable business operation of Ebiz. If Caldera Systems
requests such additional information, Caldera Systems may withhold its consent
and written approval to the proposed budget until such additional information,
satisfactory to Caldera Systems acting in good faith, is provided by Ebiz.
Caldera Systems shall not unreasonably withhold or delay its consent and written
approval of any proposed budget. In no event shall the Initial Budget be
approved by Caldera Systems for an amount in excess of $400,000. In no event
shall any One-Month Budget be approved by Caldera Systems for an amount in
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excess of $200,000. In no event shall any Rolling Quarterly Budget be approved
by Caldera Systems for an amount in excess of $600,000. No consent by Caldera
Systems to any proposed budget shall operate as a waiver of any breach by Ebiz
of Section 3(a) of this Agreement.
(e) Ebiz shall provide to Caldera Systems, at the same time that it submits
each rolling updated budget, a report (a "Report") describing in reasonable
detail the full nature and extent of all activities undertaken in developing and
implementing ELM and all disbursements, distributions or payments made from the
Account during the prior budget period. Each Report shall specify in detail the
activities undertaken, the purpose or purposes of the disbursements,
distributions and payments, the names of the payees, the amounts paid to each
such payee, the date or dates any costs or expenses were incurred, and the
relationship of the disbursements, distributions and payments to the development
and implementation of ELM.
4. Transfer/Closing of Account
Except with the prior written consent of Caldera Systems, Ebiz shall not
terminate, transfer, pledge, assign, encumber or otherwise transfer or close the
Account prior to the disbursement of all funds contained therein.
5. Account Statements
Ebiz shall provide to Caldera Systems copies of all bank statements,
documentation, and correspondence with the Bank relating to the Account as soon
as reasonably practicable after the receipt of such items by Ebiz. Ebiz shall
take such actions as are necessary to authorize Caldera Systems to receive
directly from the Bank such information regarding the Account as Caldera Systems
may reasonably request.
6. Miscellaneous
(1) All taxes on earnings of the Account shall be payable by Ebiz and any
customary bank charges with respect to the Account shall be charged against the
account unless otherwise paid by Ebiz.
(2) No amendment to this Agreement may be made without the written consent
of all the parties hereto and no covenant or other provision hereof may be
waived otherwise than by a written instrument signed by the party or parties so
waiving such covenant or other provision. No course of dealing between or among
the parties hereto and no delay on the part of any party hereto in exercising
any rights hereunder shall operate a waiver of those rights.
(3) This Agreement shall be deemed to be a contract made under, and shall
be construed in accordance with, the laws of the State of Utah, as applied to
agreements among Utah residents entered into and to be performed entirely within
Utah, without giving effect to conflict of law principles. Each party hereby
expressly submits itself to the exclusive, personal jurisdiction of the courts
situated in the State of Utah with respect to any and all claims, demands and/or
causes of action asserted or filed by any party in any way relating to, arising
out of, this Agreement or the subject matter hereof.
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(4) This Agreement and the Purchase and Sale Agreement constitute the
entire agreement, and supersedes all other prior agreements and understandings,
both written and oral, among the parties, with respect to the subject matter
hereof.
(5) Except as otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto
whether respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
(6) Unless otherwise provided, all notices and other communications
required or permitted under this Agreement shall be made as provided in Section
7.9 of the Purchase and Sale Agreement. All notices and communications to the
Caldera Representative shall be made to his or her attention at Caldera Systems.
(7) If any action at law or inequity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to be
reimbursed by the non-prevailing party for reasonable attorneys' fees, costs and
disbursements, in addition to any other relief to which such party may be
entitled.
(h) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement. This Agreement may be executed by facsimile
signatures, each of which will be deemed an original.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by the proper and duly authorized officers as of the day
and year first above written.
Ebiz Enterprises Inc.
A NEVADA CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
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Its: Chief Executive Officer
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Caldera Systems, Inc.,
A DELAWARE CORPORATION
By: /s/ Ransom H. Love
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Its: Chief Executive Officer
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