Exhibit 10.25
EBIZ ENTERPRISES, INC.
INVESTORS' RIGHTS AGREEMENT
THIS INVESTOR'S RIGHTS AGREEMENT (this "AGREEMENT") is made as of October
20, 2000, by and between EBIZ ENTERPRISES, Inc., a Nevada corporation (the
"COMPANY"), and THE CANOPY GROUP, INC., a Utah corporation ("INVESTOR").
RECITALS
A. The Company, Investor and JEM Ventures EBIZ, LLC ("JEM") have entered
into a Stock and Warrant Purchase Agreement (the "PURCHASE AGREEMENT") of even
date herewith pursuant to which (i) JEM has agreed to sell to Investor and
Investor has agreed to purchase from JEM shares of the Company's Common Stock
and (ii) the Company has agreed to issue to Investor and Investor has agreed to
purchase from the Company warrants to purchase shares of the Company's Common
Stock (the "WARRANTS").
B. A condition to Investor's obligations under the Purchase Agreement is
that the Company and Investor enter into this Agreement in order to provide
Investor with (i) certain rights to register shares of the Company's Common
Stock to be issued to Investor upon exercise of the Warrants, (ii) certain
rights to receive or inspect information pertaining to the Company, and (iii) a
right of first refusal with respect to certain issuances by the Company of its
securities. The Company desires to induce Investor to purchase shares of Common
Stock and the Warrants pursuant to the Purchase Agreement by agreeing to the
terms and conditions set forth herein.
AGREEMENT
The parties hereby agree as follows:
1. REGISTRATION RIGHTS. The Company and Investor covenant and agree as
follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The terms "REGISTER," "REGISTERED," and "REGISTRATION" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"ACT"), and the declaration or ordering of effectiveness of such registration
statement or document.
(b) The term "REGISTRABLE SECURITIES" means (i) the shares of
Common Stock issuable upon exercise of the Warrants (such shares of Common Stock
are collectively referred to hereinafter as the "STOCK"), (ii) any other shares
of Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the Stock, PROVIDED HOWEVER, that the foregoing definition shall exclude in all
cases any Registrable Securities sold by a person in a transaction in which his
or her rights under this Agreement are not assigned. Notwithstanding the
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foregoing, Common Stock or other securities shall only be treated as Registrable
Securities if and so long as they have not been (A) sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction, or (B) sold in a transaction exempt from the registration and
prospectus delivery requirements of the Act under Section 4(1) thereof so that
all transfer restrictions, and restrictive legends with respect thereto, if any,
are removed upon the consummation of such sale;
(c) The number of shares of "REGISTRABLE SECURITIES THEN
OUTSTANDING" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;
(d) The term "HOLDER" means any person owning or having the right
to acquire Registrable Securities or any assignee thereof in accordance with
Section 1.11 hereof;
(e) The term "FORM S-3" means such form under the Act as in
effect on the date hereof or any successor form under the Act; and
(f) The term "SEC" means the Securities and Exchange Commission.
1.2 DEMAND REGISTRATION.
(a) If the Company shall receive at any time after the date of
this Agreement, a written request from a Holder or Holders that the Company file
a registration statement under the Act covering the registration of at 500,000
shares of Registrable Securities, then the Company shall file within 30 days of
the receipt of such request, a registration statement under the Act for all
Registrable Securities which the Holders request to be registered and shall use
its best efforts to effect as soon as possible the registration of such
Registrable Securities.
(b) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than sixty (60) days after receipt of the request of
the Initiating Holders; PROVIDED, HOWEVER, that the Company may not utilize this
right more than once in any twelve-month period.
(c) In addition, the Company shall not be obligated to effect, or
to take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two (2) registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective; or
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(ii) If the initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below.
1.3 PIGGYBACK REGISTRATION. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock under the Act in connection with the public offering of such securities
solely for cash (other than a registration relating solely to the sale of
securities to participants in a Company stock plan or a transaction covered by
Rule 145 under the Act), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 4.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 1
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to ninety (90) days.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement for up to ninety (90) days.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
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(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, such
obligation to continue for ninety (90) days.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) Use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 1, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
1.5 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities. The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or 1.12 of this Agreement if, as
a result of the application of the preceding sentence, the number of shares or
the anticipated aggregate offering price of the Registrable Securities to be
included in the registration does not equal or exceed the number of shares or
the anticipated aggregate offering price required to originally trigger the
Company's obligation to initiate such registration as specified in subsection
1.2(a) or subsection 1.12(b)(2),whichever is applicable.
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
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and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company.
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing, and
qualification fees, printers' and accounting fees relating or apportionable
thereto and the reasonable fees and disbursements of one counsel for the selling
Holders selected by them with the approval of the Company, which approval shall
not be unreasonably withheld, but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling shareholders according to
the total amount of securities entitled to be included therein owned by each
selling shareholder or in such other proportions as shall mutually be agreed to
by such selling shareholders) but in no event shall (i) the amount of securities
of the selling Holders included in the offering be reduced below twenty percent
(20%) of the total amount of securities included in such offering, unless such
offering is the initial public offering of the Company's securities in which
case the selling shareholders may be excluded if the underwriters make the
determination described above and no other shareholder's securities are included
or (ii) notwithstanding (i) above, any shares being sold by a shareholder
exercising a demand registration right similar to that granted in Section 1.2 be
excluded from such offering. For purposes of the preceding parenthetical
concerning apportionment, for any selling shareholder which is a holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and shareholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "SELLING
SHAREHOLDER," and any pro rata reduction with respect to such "SELLING
SHAREHOLDER" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"SELLING SHAREHOLDER," as defined in this sentence.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
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1.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"VIOLATION"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; or (iii) any violation or alleged violation by the
Company of the Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Act, the Exchange Act or any state securities
law; and the Company will pay to each such Holder, underwriter or controlling
person, as incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this subsection 1.10(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation with occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided that,
in no event shall any indemnity under this subsection 1.10(b) exceed the net
proceeds from the offering received by such Holder, except in the case of
willful fraud by such Holder.
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(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; provided, that, in no event shall any contribution by a Holder
under this Subsection 1.10(d) exceed the net proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
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(f) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times so long as the Company
remains subject to the periodic reporting requirements under Sections 13 or
15(d) of the Exchange Act;
(b) take such action, as is necessary to enable the Holders to
utilize Form S-3 for the sale of their Registrable Securities;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144,
the Act and the Exchange Act, or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
1.12 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of not less than 500,000 shares of the Registrable Securities
then outstanding a written request or requests that the Company effect a
registration on Form S-3, provided that the Company is eligible to register such
securities on Form S-3, and any related qualification or compliance with respect
to all or a part of the Registrable Securities owned by such Holder or Holders,
the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 1.12: (i) if
Form S-3 is not available for such offering by the Holders; (ii) if the Company
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shall furnish to the Holders a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than sixty (60) days after receipt of the
request of the Holder or Holders under this Section 1.12; provided, however,
that the Company shall not utilize this right more than once in any twelve month
period; (iii) if the Company has already effected two registrations on Form S-3
for the Holders pursuant to this Section 1.12; or (iv) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.12, including (without limitation)
all registration, filing, qualification, printers' and accounting fees and the
reasonable fees and disbursements of a single counsel for the selling Holder or
Holders and counsel for the Company, but excluding any underwriters' discounts
or commissions associated with Registrable Securities, shall be borne pro rata
by the Holder or Holders participating in the Form S-3 Registration.
Registrations effected pursuant to this Section 1.12 shall not be counted as
demands for registration or registrations effected pursuant to Sections 1.2 or
1.3, respectively.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of at least 250,000 shares of such securities, provided the Company is,
within a reasonable time after such transfer, furnished with written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act. For the purposes of determining the number
of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under Section 1.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the outstanding Registrable Securities, enter
into any agreement relating to registration rights with any holder or
prospective holder of any securities of the Company unless the terms of such
registration rights are subordinate to or on parity with the registration rights
granted to Investor as set forth Section 1 of this Agreement.
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2. INSPECTION. The Company shall permit each Investor who holds not less
than 250,000 shares of Registrable Securities, at such Investor's expense, to
visit and inspect the Company's properties, to examine its books of account and
records and to discuss the Company's affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by Investor;
PROVIDED, HOWEVER, that the Company shall not be obligated pursuant to this
Section 2 to provide access to any information which it reasonably considers to
be a trade secret or similar confidential information.
3. INVESTOR'S RIGHT OF FIRST REFUSAL.
3.1 RIGHT OF FIRST REFUSAL. Subject to the terms and conditions
specified in this Section 3, the Company hereby grants to Investor a right of
first refusal with respect to an Investor's Pro Rata Portion (as hereinafter
defined) of future sales by the Company of any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("SHARES"). For purposes of this Section 3, an "INVESTOR" includes any
general partners, shareholders and affiliates of an Investor. An Investor who
chooses to exercise the right of first refusal may designate as purchasers under
such right itself or its partners or affiliates in such proportions as it deems
appropriate. An Investor's "PRO RATA PORTION" for purposes of this Section 3 is
the ratio that (x) the sum of the number of shares of the Company's Common Stock
then held by Investor and the number of shares of the Company's Common Stock
issuable upon exercise of the Warrants then held by Investor bears to (y) the
sum of the total number of shares of the Company's Common Stock then
outstanding.
3.2 NOTICE OF RIGHT. In the event the Company proposes to undertake an
issuance of Shares, it shall give Investor written notice of its intention,
describing the type of Shares and the price and terms upon which the Company
proposes to issue the same. Investor shall have fifteen (15) days from the date
of receipt of any such notice to agree to purchase shares of such Shares (up to
the amount referred to in subsection 3.1), and upon the terms specified in the
notice, by giving written notice to the Company and stating therein the quantity
of Shares to be purchased.
3.3 EXERCISE OF RIGHT. If Investor exercises its right of first
refusal under this Agreement, the closing of the purchase of the Shares with
respect to which such right has been exercised shall take place within thirty
(30) calendar days after Investor gives notice of such exercise, which period of
time shall be extended in order to comply with applicable laws and regulations.
Upon exercise of such right of first refusal, the Company and Investor shall be
legally obligated to consummate the purchase contemplated thereby and shall use
their best efforts to secure any approvals required in connection therewith.
3.4 LAPSE AND REINSTATEMENT OF RIGHT. In the event Investor fails to
exercise the right of first refusal provided in this Section 3 within said
fifteen (15) day period, the Company shall have thirty (30) days thereafter to
sell or enter into an agreement (pursuant to which the sale of Shares covered
thereby shall be closed, if at all, within sixty (60) days from the date of said
agreement) to sell the Shares not elected to be purchased by Investor at the
price and upon the terms no more favorable to the purchasers of such securities
than specified in the Company's notice. In the event the Company has not sold
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the Shares or entered into an agreement to sell the Shares within said thirty
(30) day period (or sold and issued Shares in accordance with the foregoing
within sixty (60) days from the date of said agreement), the Company shall not
thereafter issue or sell any Shares without first offering such securities to
Investor in the manner provided above.
3.5 EXCLUSIONS FROM DEFINITION OF SHARES. The right of first refusal
in this Section 3 shall not be applicable (i) shares of Common Stock issuable or
issued to employees, consultants or directors of this Corporation pursuant to a
stock plan approved by the Board of Directors of the Company, or (ii) to the
issuance of securities pursuant to the conversion or exercise of currently
outstanding convertible or exercisable securities, or (iii) to the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise, or (iv) to the issuance of securities that, with unanimous
approval of the Board of Directors of the Company, are not offered to any
existing shareholder of the Company.
4. MISCELLANEOUS.
4.1 SUCCESSORS AND ASSIGNS. 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 or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
4.2 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of Utah, without giving effect to the principles of
conflicts of law.
4.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
4.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.5 NOTICES. Unless otherwise provided, any notice required or
permitted by this Agreement shall be in writing and shall be deemed sufficient
on the date of delivery, when delivered personally or by overnight courier or
sent by telegram or fax, or forty-eight (48) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid, and addressed
to the party to be notified at such party's address as set forth herein, or as
subsequently modified by written notice.
4.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
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<PAGE>
4.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of at least 50% of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
4.8 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (x) such
provision shall be excluded from this Agreement, (y) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (z) the
balance of the Agreement shall be enforceable in accordance with its terms.
4.9 AGGREGATION OF STOCK. Except with respect to Section 1.11, all
shares of the Registrable Securities held or acquired by affiliated entities or
persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.
IN WITNESS WHEREOF, the parties hereto executed this Investor's Rights
Agreement as of the date first written above.
EBIZ ENTERPRISES, INC.
By: /s/ Stephen C. Herman
-----------------------------------
Name: Stephen C. Herman
Title: Chief Financial Officer
Address: 15695 North 83rd Way
Scottsdale, Arizona 85260
THE CANOPY GROUP, INC.
By: /s/ Darcy Mott
-----------------------------------
Name: Darcy Mott
Title: Chief Financial Officer and
Treasurer
Address: 240 West Center Street
Orem, UT 84057
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