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 3rd day of October, 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
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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.
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IN WITNESS WHEREOF, the parties have executed this Amendment by their duly
authorized officers or representatives.
EBIZ:
EBIZ ENTERPRISES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Chief Executive Officer
MERGER SUB:
By: /s/ Xxxxxxx X. Xxxxxx
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President
LMI:
XXXXXXXXX.XXX, INC.
By: /s/ Xxxxx Xxxx
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Xxxxx Xxxx
Chief Executive Officer
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