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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ______)*
Ebiz Enterprises, Inc.
(Name of Issuer)
Common Stock, $0.001 Par Value
(Title of Class of Securities)
278717103
--------------------------------------------------------
(CUSIP Number)
Keith L. Pope
Parr, Waddoups, Brown, Gee & Loveless
185 South State Street, Suite 1300
Salt Lake City, UT 84111
(801) 532-7840
--------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
September 19, 2000
--------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d01(f) or 240.13d-1(g), check
the following box. [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7 for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE> 2
CUSIP No. 278717103
-----------------
--------------------------------------------------------------------------------
1 Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
CALDERA SYSTEMS, INC., A DELAWARE CORPORATION; 87-0617393
--------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [X]
(b) [ ]
--------------------------------------------------------------------------------
3 SEC Use Only
--------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
WC
--------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
--------------------------------------------------------------------------------
6 Citizenship or Place of Organization
DELAWARE
--------------------------------------------------------------------------------
7 Sole Voting Power
-0-
----------------------------------------------------------
Number of 8 Shared Voting Power
Shares
Beneficially 7,407,424
Owned by ----------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person 4,000,000
With ----------------------------------------------------------
10 Shared Dispositive Power
-0-
--------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
7,407,424 (SEE RESPONSES TO ITEMS 4 AND 5)
--------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
--------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
87.2%
--------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
CO
--------------------------------------------------------------------------------
2
<PAGE> 3
CUSIP No. 278717103
-----------------
--------------------------------------------------------------------------------
1 Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
RANSOM H. LOVE
--------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [X]
(b) [ ]
--------------------------------------------------------------------------------
3 SEC Use Only
--------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
N/A
--------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
--------------------------------------------------------------------------------
6 Citizenship or Place of Organization
UNITED STATES
--------------------------------------------------------------------------------
7 Sole Voting Power
-0-
----------------------------------------------------------
Number of 8 Shared Voting Power
Shares
Beneficially 7,407,424
Owned by ----------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person -0-
With ----------------------------------------------------------
10 Shared Dispositive Power
-0-
--------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
7,407,424 (SEE RESPONSES TO ITEMS 4 AND 5)
--------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
--------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
87.2%
--------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
IN
--------------------------------------------------------------------------------
3
<PAGE> 4
CUSIP No. 278717103
-----------------
--------------------------------------------------------------------------------
1 Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
JEFFREY I. RASSAS
--------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [X]
(b) [ ]
--------------------------------------------------------------------------------
3 SEC Use Only
--------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
UNKNOWN
--------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
--------------------------------------------------------------------------------
6 Citizenship or Place of Organization
UNITED STATES
--------------------------------------------------------------------------------
7 Sole Voting Power
-0-
----------------------------------------------------------
Number of 8 Shared Voting Power
Shares
Beneficially 7,407,424
Owned by ----------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person 1,703,212
With ----------------------------------------------------------
10 Shared Dispositive Power
-0-
--------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
7,407,424 (SEE RESPONSES TO ITEMS 4 AND 5)
--------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
--------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
87.2%
--------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
IN
--------------------------------------------------------------------------------
4
<PAGE> 5
CUSIP No. 278717103
-----------------
--------------------------------------------------------------------------------
1 Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
STEPHEN C. HERMAN
--------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [X]
(b) [ ]
--------------------------------------------------------------------------------
3 SEC Use Only
--------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
UNKNOWN
--------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
--------------------------------------------------------------------------------
6 Citizenship or Place of Organization
UNITED STATES
--------------------------------------------------------------------------------
7 Sole Voting Power
-0-
----------------------------------------------------------
Number of 8 Shared Voting Power
Shares
Beneficially 7,407,424
Owned by ----------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person 1,704,212
With ----------------------------------------------------------
10 Shared Dispositive Power
-0-
--------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
7,407,424 (SEE RESPONSES TO ITEMS 4 AND 5)
--------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
--------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
87.2%
--------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
IN
--------------------------------------------------------------------------------
5
<PAGE> 6
CUSIP No. 278717103
-----------------
--------------------------------------------------------------------------------
1 Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
HAYJOUR FAMILY LIMITED PARTNERSHIP
--------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [X]
(b) [ ]
--------------------------------------------------------------------------------
3 SEC Use Only
--------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
UNKNOWN
--------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
--------------------------------------------------------------------------------
6 Citizenship or Place of Organization
UNKNOWN
--------------------------------------------------------------------------------
7 Sole Voting Power
-0-
----------------------------------------------------------
Number of 8 Shared Voting Power
Shares
Beneficially 7,407,424
Owned by ----------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person 1,703,212
With ----------------------------------------------------------
10 Shared Dispositive Power
-0-
--------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
7,407,424 (SEE RESPONSES TO ITEMS 4 AND 5)
--------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
--------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
87.2%
--------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
PN
--------------------------------------------------------------------------------
6
<PAGE> 7
CUSIP No. 278717103
-----------------
--------------------------------------------------------------------------------
1 Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only).
KONA INVESTMENTS LIMITED PARTNERSHIP
--------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [X]
(b) [ ]
--------------------------------------------------------------------------------
3 SEC Use Only
--------------------------------------------------------------------------------
4 Source of Funds (See Instructions)
UNKNOWN
--------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
--------------------------------------------------------------------------------
6 Citizenship or Place of Organization
UNKNOWN
--------------------------------------------------------------------------------
7 Sole Voting Power
-0-
----------------------------------------------------------
Number of 8 Shared Voting Power
Shares
Beneficially 7,407,424
Owned by ----------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting
Person 1,704,212
With ----------------------------------------------------------
10 Shared Dispositive Power
-0-
--------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
7,407,424 (SEE RESPONSES TO ITEMS 4 AND 5)
--------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
--------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
87.2%
--------------------------------------------------------------------------------
14 Type of Reporting Person (See Instructions)
PN
--------------------------------------------------------------------------------
7
<PAGE> 8
CUSIP No. 278717103
-----------------
ITEM 1. SECURITY AND ISSUER
(a) Title of Class of Equity Securities: Common Stock, $0.001 par
value (the "Common Stock")
(b) Name of Issuer: Ebiz Enterprises, Inc. (the "Issuer")
(c) Address of Issuer's Principal Executive Office: 15695 North 83rd
Way, Scottsdale, AZ 85260
ITEM 2. IDENTITY AND BACKGROUND
Caldera Systems, Inc. ("Caldera") is a Delaware corporation that
develops and markets Linux-based business solutions, including eDesktop and
eServer products and provides technical training, certification and support.
Caldera's OpenLearning Providers offer distribution-neutral Linux training and
certification based on Linux Professional Institute certification standards. The
principal business address of Caldera is 240 West Center Street, Orem, Utah.
During the last five years, Caldera has not been convicted in a criminal
proceeding nor has it been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction resulting in a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
The following information is provided pursuant to General Instruction C
of Schedule 13D: The names, business addresses, principal occupations, names and
addresses of employers and citizenship of the executive officers, directors and
controlling shareholders of Caldera are as follows:
Ransom H. Love
240 West Center Street
Orem, UT 84057
Principal Occupation: President, CEO and a Director of Caldera
United States citizen
Richard C. Rife
240 West Center Street
Orem, UT 84057
Principal Occupation: Vice President, Law and Corporate Affairs,
and Secretary of Caldera
United States citizen
Edward E. Iacobucci
240 West Center Street
Orem, UT 84057
Principal Occupation: Recently retired from the positions of Director, Chief
Technical Officer and Vice President, Strategy and Technology, of Citrix
Systems, Inc., the address of which is 6400 NW 6th Way, Ft. Lauderdale, FL
33309, and the business of which is supplying application server software and
services that enable the effective and efficient enterprise-wide deployment and
management of applications, including those designed for Microsoft Corporation
Windows(R) operating systems. Mr. Iacobucci is a Director of Caldera.
United States citizen
8
<PAGE> 9
CUSIP No. 278717103
-----------------
Steven M. Cakebread
111 McInnis Pkwy.
San Rafael, CA 94903
Principal Occupation: Senior Vice President and CFO of Autodesk, Inc., the
address of which is 111 McInnis Pkwy., San Rafael, CA 94903, and the business of
which is the sale of two-dimensional and three-dimensional products used across
industries and in the home for architectural design, mechanical design, spatial
data management and mapping, animation, and visualization applications. Mr.
Cakebread is a Director of Caldera.
United States citizen
Thomas P. Raimondi, Jr.
4905 East La Palma Avenue
Anaheim, CA 92807.
Principal Occupation: President and CEO of MTI Technology Corporation, the
address of which is 4905 East La Palma Avenue, Anaheim, CA 92807, and the
business of which is the design, development, manufacture, sale and support of
a complete line of integrated products and services that provide customers with
a full range of hardware, software and networking components as well as
sophisticated professional services, which are combined into one solution to
provide continuous access to online information.
Mr. Raimondi is a Director of Caldera.
United States citizen
Ralph J. Yarro
240 West Center St.
Orem, UT 84057
Principal Occupation: President, CEO and a Director of The Canopy Group, Inc.,
the address of which is 240 West Center St., Orem, UT 84057, and the business of
which is investments. Mr. Yarro is a Director of Caldera.
United States citizen
Raymond J. Noorda
240 West Center St.
Orem, UT 84057
Principal Occupation: Chairman of the Board of Directors of The Canopy Group,
Inc., the address of which is 240 West Center St., Orem, UT 84057, and the
business of which is investments. Mr. Noorda is a Director and may be deemed to
be a controlling shareholder of Caldera.
United States citizen
John R. Egan
c/o Carruth Management
87 Elm Street
Hopkinton, MA 01748
Principal Occupation: Director and an employee of EMC Corporation, the address
of which is 35 Parkwood Drive, Hopkinton, MA 01748, and the business of which is
a provider of storage-related hardware, software and service products. Mr. Egan
is a Director of Caldera.
United States citizen
Royce D. Bybee
240 West Center Street
Orem, UT 84057
Principal Occupation: Senior Vice President, Sales and Marketing, of Caldera.
United States citizen
9
<PAGE> 10
CUSIP No. 278717103
-----------------
Drew A. Spencer
240 West Center Street
Orem, UT 84057
Principal Occupation: Chief Technical Officer of Caldera.
United States citizen
Benoy Tamang
240 West Center Street
Orem, UT 84057
Principal Occupation: Vice President, Strategic Development, of Caldera.
United States citizen
Alan J. Hansen
240 West Center Street
Orem, UT 84057
Principal Occupation: Chief Financial Officer of Caldera.
United States citizen
None of Caldera or its executive officers, directors or its controlling
shareholder has, during the last five years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors). None of
Caldera or its executive officers, directors or its controlling shareholder has,
during the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction, as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
The information called for by Item 2 relating to Ransom H. Love ("Love")
is as stated above.
The following information relating to Jeffrey I. Rassas ("Rassas"),
Stephen C. Herman ("Herman"), Hayjour Family Limited Partnership ("Hayjour") and
Kona Investments Limited Partnership ("Kona") is provided to the best of the
knowledge of Caldera and Love:
Jeffrey I. Rassas
15695 North 83rd Way
Scottsdale, AZ 85260
Principal Occupation: Director and CEO of the Issuer
United States Citizen
Stephen C. Herman
15695 North 83rd Way
Scottsdale, AZ 85260
Principal Occupation: Director and President of the Issuer
United States Citizen
Hayjour Family Limited Partnership
c/o Jeffrey I. Rassas, General Partner
15695 North 83rd Way
Scottsdale, AZ 85260
Place of Organization: Unknown
Kona Investments Limited Partnership
c/o Stephen C. Herman, General Partner
15695 North 83rd Way
10
<PAGE> 11
CUSIP No. 278717103
-----------------
Scottsdale, AZ 85260
Place of Organization: Unknown
To the best of Caldera's and Love's knowledge, none of Rassas, Herman,
Hayjour or Kona has, during the last five years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors). To the best
of Caldera's and Love's knowledge, none of Rassas, Herman, Hayjour or Kona has,
during the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction, as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The Issuer and Caldera entered into a Purchase and Sale Agreement, dated
September 15, 2000 (the "Purchase and Sale Agreement"), pursuant to which the
Issuer acquired from Caldera all of the intellectual property and certain other
specified assets (such intellectual property and assets to be referred to
hereinafter as the "Assets") related to Caldera's proprietary marketing and
distribution concept. The consideration paid by the Issuer for the Assets
included (i) 1,000,000 shares of the Common Stock and (ii) up to 4,000,000
additional shares of the Common Stock, the actual number of which will depend
upon the amount of gross revenue generated by the Assets. In connection with
such transaction Caldera purchased an additional 3,000,000 shares of the Common
Stock of the Issuer for $1.00/share. The source of the consideration paid for
the 3,000,000 shares of the Common Stock was the working capital of Caldera.
ITEM 4. PURPOSE OF TRANSACTION
See Item 3 above. In addition, pursuant to a Shareholder Voting
Agreement and Proxy, dated September 15, 2000 (the "Voting Agreement"), entered
into by the Issuer, Caldera, Love, Rassas, Herman, Hayjour and Kona (Caldera,
Love, Rassas, Herman, Hayjour and Kona are collectively referred to hereinafter
as the "Reporting Persons") in connection with the Purchase and Sale Agreement,
the directors of the Issuer agreed to cause the size of the Issuer's board of
directors to be increased by one and to appoint an individual designated by
Caldera to fill such newly-created vacancy to serve on the Issuer's board of
directors until the next election of directors in accordance with the Issuer's
bylaws or until such designee sooner dies, resigns or is terminated. Each of the
Reporting Persons agreed, pursuant to the Voting Agreement, to (i) vote or cause
to be voted all shares of the Issuer held by each of them in favor of Caldera's
designee to the Issuer's board of directors and (ii) appoint certain individuals
as proxy to vote all shares of the Common Stock held by each of them with
respect to matters described in the Voting Agreement for the period stated in
the Voting Agreement. As a result of the Voting Agreement, the Reporting Persons
may be deemed to be members of a "group" within the meaning of Rule 13d-5(b)(1)
under the Securities Exchange Act of 1934 (the "Exchange Act"). Each of the
Reporting Persons expressly disclaims beneficial ownership of shares of the
Common Stock other than the shares for which they have sole dispositive power.
Each of the Reporting Persons reserves the right to purchase additional
shares of the Common Stock or to dispose of such securities in the open market,
in privately negotiated transactions or in any other lawful manner in the
future. Except as described above, Caldera and Love presently have no plans or
proposals which relate to or would result in any action enumerated in
subparagraphs (a) through (j) of the instructions for Item 4 of Schedule 13D. To
the knowledge of Caldera and Love and except as described above, Rassas, Herman,
Hayjour and Kona presently have no plans or proposals which relate to or would
result in any action enumerated in subparagraphs (a) through (j) of the
instructions for Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) The responses of the Reporting Persons to Items 7-11 of the cover
sheets to this Schedule 13D (the "Cover Sheets"), which relate to the beneficial
ownership of the Common Stock, are incorporated herein by reference.
11
<PAGE> 12
CUSIP No. 278717103
-----------------
Each of the Reporting Persons, pursuant to the Voting Agreement, has agreed to
certain voting provisions with respect to the election of directors of the
Issuer. As a result of the Voting Agreement, the Reporting Persons may be deemed
to be members of a "group" within the meaning of Rule 13d-5(b)(1) under the
Exchange Act. In the aggregate, 7,407,424 shares, representing 87.2% of the
outstanding shares of the Common Stock, are subject to the Voting Agreement. The
percentage of shares of the Common Stock owned is based upon 8,497,566 shares
outstanding as set forth in the Issuer's Form 10-KSB for the fiscal year ending
June 30, 2000. Each of the Reporting Persons expressly disclaims beneficial
ownership of shares of the Common Stock other than the shares for which they
have sole dispositive power.
Other than Love, who disclaims beneficial ownership of all of the
shares, none of the executive officers, directors or the controlling shareholder
of Caldera is the beneficial owner of shares of Common Stock of the Issuer.
(b) Each of the Reporting Persons has the sole power to vote or direct
the vote, shared power to vote or direct the vote, sole power to dispose of or
direct the disposition of and shared power to dispose of or direct the
disposition of the shares of the Common Stock as listed on such Reporting
Person's respective Cover Sheet.
(c) See Item 3 above.
(d) To the best of Caldera's and Love's knowledge, no other person has
the right to receive or the power to direct the receipt of dividends from, or
the proceeds from, the sale of the above-discussed shares of the Common Stock.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER
For a description of the Purchase and Sale Agreement, see Item 3 above.
For a description of the Voting Agreement, see Item 4 above. On September 15,
2000, Caldera entered into the Investor Rights Agreement with the Issuer,
pursuant to which Caldera has agreed not to sell, transfer or otherwise dispose
of the shares of the Common Stock held by Caldera.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Attached hereto as Exhibit A is the written agreement relating to the
filing of a joint statement by Caldera and Love as required by Rule 13d-1(k)
under the Securities Exchange Act of 1934.
Attached hereto as Exhibit B is the Purchase and Sale Agreement.
Attached hereto as Exhibit C is the Voting Agreement.
12
<PAGE> 13
CUSIP No. 278717103
-----------------
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
CALDERA SYSTEMS, INC., a Delaware corporation
October 20, 2000 By: /s/ ALAN J. HANSEN
--------------------------- ------------------------------------------
Date Alan J. Hansen, CFO
RANSOM H. LOVE
October 20, 2000 /s/ RANSOM H. LOVE
--------------------------- ---------------------------------------------
Date
13
<PAGE> 14
CUSIP No. 278717103
-----------------
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- -----------------------------------------------------------
<S> <C>
A Written agreement relating to the filing of a joint
statement by Caldera and Love as required by Rule 13d-1(k)
under the Securities Exchange Act of 1934
B Purchase and Sale Agreement
C Voting Agreement
</TABLE>
14
<PAGE> 15
EXHIBIT A
AGREEMENT
Each of the undersigned agrees that this Schedule 13D relating to
equity securities of Ebiz Enterprises, Inc. shall be filed on behalf of the
undersigned.
CALDERA SYSTEMS, INC., a Delaware corporation
October 20, 2000 By: /s/ ALAN J. HANSEN
--------------------------- ------------------------------------------
Date Alan J. Hansen, CFO
RANSOM H. LOVE
October 20, 2000 /s/ RANSOM H. LOVE
--------------------------- ---------------------------------------------
Date
15
<PAGE> 16
EXHIBIT B
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered
into as of this 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 desires to acquire all of Caldera Systems' right, title
and interest in and to all of the intellectual property and assets comprising
Caldera Systems' ELM (the "ELM Assets") as such assets are more particularly
described on Exhibit A, attached hereto and made a part hereof; and
WHEREAS, Caldera Systems is willing to sell to Ebiz the ELM Assets on
the terms and conditions set forth in this Agreement; and
WHEREAS, Caldera Systems desires to invest in Ebiz on the condition that
the proceeds of its investment be used solely for development of a viable ELM
Business (as defined below) in Ebiz and Caldera Systems is willing to assist
Ebiz in hiring certain employees of Caldera Systems to assist Ebiz in developing
and operating the ELM Business; and
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
SECTION 1. PURCHASE AND SALE OF ELM ASSETS AND EBIZ SHARES.
1.1 PURCHASE OF ELM ASSETS.
Ebiz hereby agrees to purchase from Caldera Systems and Caldera Systems
agrees to sell to Ebiz all of the ELM Assets described on Exhibit A, on and
subject to the following terms and conditions:
(a) The purchase price for the ELM Assets shall be the combined
total of the following consideration determined and paid in the
following manner:
(i) Upon the execution of this Agreement, Ebiz shall deliver
to Caldera Systems 1,000,000 shares of Ebiz's common
stock.
(ii) Not later than January 15, 2002, Ebiz shall prepare and
deliver to Caldera Systems a written statement (the
"Sales Report") setting forth the total gross revenue
received from Ebiz's ELM operations described on Exhibit
B attached hereto and made a part hereof (the "ELM
Operations") during the twelve-month period commencing
on December 15, 2000, and continuing for the twelve
month period thereafter ending December 15, 2001 (the
"Earn Out Period"). Such gross revenues from Ebiz's ELM
Operations shall be calculated in accordance with United
States generally accepted accounting principles ("GAAP")
and shall take into account all revenues from the
-1-
<PAGE> 17
ELM Operations. Upon receipt of the Sales Report,
Caldera Systems shall have 30 days in which to review
the Sales Report and during such period of time, Ebiz
shall provide Caldera Systems access to such books,
records and employees as Caldera Systems shall
reasonably request in connection with such review.
Caldera Systems may object to the Sales Report by
sending a written notice, explaining in reasonable
detail the reasons for the objection to Ebiz within 10
days following the 30 day review period. Ebiz and
Caldera Systems shall endeavor, in good faith, to
resolve any such objections and reach agreement on the
Sales Report. If Ebiz and Caldera Systems cannot agree
on the Sales Report, each of Ebiz and Caldera Systems
shall select an independent, certified public accounting
firm to review the disputed amounts on the Sales Report
in accordance with the provisions of this Agreement. If
the determination of such accounting firms are less than
10% apart in amount, then the correct amount shall be
deemed to be the average of such determination. If such
determinations are more than 10% apart in value, then
such accounting firms shall select a third, independent,
certified public accounting firm and the correct revenue
shall be deemed to be the average of the determination
of the third accounting firm and the next closest
determination. The determinations made by such
accounting firms shall be final and binding on all
parties, absent manifest error. Ebiz and Caldera Systems
shall each bear one-half of the fees and expenses of all
accountants selected under this Section 1.1 to review
the disputed amounts. If Ebiz does not receive a written
objection to the Sales Report from Caldera Systems
within 10 days following the 30 day review period, the
Sales Report shall be deemed accepted by Caldera
Systems.
Upon determination of the gross revenues received by
Ebiz which are attributable to its ELM Business, such
amount shall be multiplied by 5 and $1,380,000 shall be
subtracted from the resulting amount and the result,
which shall not be less than zero, shall be deemed to be
the base amount (the "Base Amount"). If the result of
the foregoing would be less than zero, then the Base
Amount shall be deemed to be zero.
(iii) As additional consideration for the ELM Assets, Ebiz
agrees to deliver additional shares of Ebiz's common
stock in the amount specified in subsection (A) or
subsection (B) below, as applicable:
(A) If Ebiz's shares are not traded or quoted on any
national securities exchange, or quoted on
NASDAQ's National Market System or quoted on the
NASDAQ Stock market, or quoted in the domestic
over-the-counter market as reported by the
National Quotation Bureau, Inc., or any similar
successor organization at the time of the
calculation of the Base Amount, then Caldera
Systems shall receive one additional share of
Ebiz common stock for each $1.25 of the Base
Amount, not to exceed 4,000,000 shares of
additional Ebiz common stock pursuant to this
subsection (iii)(A).
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(B) If the Ebiz shares of common stock are traded
and quoted on any national securities exchange
or quoted on NASDAQ's National Market or quoted
on the NASDAQ Stock Market or quoted in a
domestic over-the-counter market as reported by
the National Quotation Bureau, Inc., or any
similar successor organization, then the number
of additional shares to be delivered to Caldera
Systems of Ebiz common stock shall be determined
as follows: First, the "fair market value" of
the Ebiz common shares shall be determined. For
purposes of this Agreement, "fair market value"
means the five-day average of the following, as
determined for each of the five business days
immediately preceding the final determination of
the Base Amount: (1) the closing sales price if
such security is listed on a national securities
exchange, or if not, (2) the closing sales price
reported on The NASDAQ Stock Market National
Market, or if there have been no sales on any
such exchange or The NASDAQ Stock Market
National Market on any day, then (3) the average
of the highest bid and lowest asked prices at
the end of such day, or, (4) if on any day such
security is not so listed or reported, the
average of the representative bid and ask prices
quoted on The NASDAQ Stock Market as of 4:00
p.m., New York Time, on such day, or, (5) if on
any day such security is not quoted on The
NASDAQ Stock Market, the average of the highest
bid and lowest ask prices on such day in the
domestic over-the-counter market as reported by
the National Quotation Bureau, Inc., or any
similar successor organization; provided, that
if such security is listed on a national
securities exchange, the term "business days" as
used in this sentence means business days on
which such exchange is open for trading. Once
the fair market value of the Ebiz common shares
has been determined, such amount shall be
discounted by 75% (the "Discounted Value"). One
dollar and thirty-eight cents ($1.38) shall then
be added to the Discounted Value and such amount
shall be deemed to be the "Purchase Price Value"
of a share of Ebiz common stock. However, in no
event shall Purchase Price Value be less than
$1.38 per share. For example, if by using the
formula set forth above, the fair market value
of the Ebiz common shares is $6.00, the
Discounted Value of such shares shall be deemed
to be $1.50 and the Purchase Price Value shall
be deemed to be $2.88 per share. Upon
determining the Purchase Price Value, the Base
Amount shall be divided by the Purchase Price
Value and Caldera Systems shall receive an
additional number of Ebiz common shares equal to
the Base Amount divided by the Purchase Price
Value, rounded to the nearest whole share; up to
a maximum of 4,000,000 additional shares of Ebiz
common stock pursuant to the terms of this
subsection (iii)(B).
1.2 CALDERA SYSTEMS PURCHASE OF EBIZ COMMON SHARES. Pursuant to the terms of
this Agreement, Caldera Systems hereby agrees to purchase 3,000,000 shares of
the common stock of Ebiz for a cash purchase price of $1.00 per share. Such
shares shall be purchased pursuant to the terms and conditions set forth in this
Agreement. At the Closing, Caldera Systems shall deliver to a bank account (the
"Restricted Account") by wire transfer the amount of $3,000,000. Such $3,000,000
shall be used solely for the purpose of developing and implementing an ELM
Business in Ebiz and it shall be used for no other purpose. The terms and
conditions of such use are as set forth on the Use Restriction Agreement
attached hereto as Exhibit C and incorporated herein by this reference. At the
Closing, Ebiz shall deliver 3,000,000 shares of its common stock to Caldera
Systems in exchange for the $3,000,000 payment by Caldera Systems to the
Restricted Account.
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1.3 ADDITIONAL AGREEMENTS REGARDING PURCHASE AND SALE.
(A) As further consideration for the purchase by Ebiz of the ELM Assets
from Caldera Systems, Caldera Systems agrees to assist Ebiz in hiring certain of
Caldera Systems' employees which have been engaged in the development of the ELM
concept and Caldera Systems agrees to use reasonable efforts to make such
employees available to Ebiz for hiring by Ebiz for the continued development and
implementation of the ELM concept. Caldera Systems makes no representations or
warranties regarding the availability of such employees or their willingness to
become employees of Ebiz.
(B) Ebiz agrees to enter into an Investor Rights Agreement (providing
for registration rights, rights of first refusal on future equity offerings of
Ebiz, certain information rights and the right to convert Caldera Systems'
common into preferred stock if Ebiz issues preferred to any party after the date
of this Agreement) in substantially the form of the Investor Rights Agreement
attached hereto as Exhibit D and incorporated herein by this reference.
(C) Ebiz, Caldera Systems and certain key shareholders of Ebiz shall
enter into a shareholders agreement (providing for the election of Caldera
Systems' representatives to the board of directors), such Shareholders Agreement
to be in substantially the form attached hereto as Exhibit E, and incorporated
herein by this reference.
(D) Caldera Systems is hereby granted, on a nonexclusive basis, a
license to use, develop, sell and sublicense, the Oracle based database system
(the "Oracle Database") that the ELM Employees participated in designing and
creating on behalf of Caldera Systems prior to the Closing which Oracle Database
is designed to retain customer, accounting, inventory, website, sales and other
information and which Oracle Database Ebiz, through its ELM development
activities, will continue to develop and complete as part of its ELM development
efforts. For purposes of this Subsection (D), the "Oracle Database" shall mean
the structure and design of such database system only, and shall not include any
data that is entered into the Oracle Database by or on behalf of Ebiz for
storage, management or processing. Ebiz will deliver to Caldera Systems in
electronic and hard copy format a copy of the Oracle Database and all software
comprising a part thereof and all embodiments of the Oracle Database as Caldera
Systems shall reasonably request. Caldera Systems' rights to the Oracle Database
shall be to the Oracle Database as it exists through the completion of the
expenditure of the $3,000,000 contained in the Restricted Account. Caldera
Systems shall have no rights to changes or developments with respect to the
Oracle Database occurring after the completion of the expenditure of such
$3,000,000.
(E) As additional consideration for Caldera Systems' investment in Ebiz,
Ebiz hereby agrees that in all future campaigns, outsourcing relationships or
other business relationships between Ebiz and Caldera Systems, Ebiz will: (i) in
all situations involving the sale or providing of Ebiz products or services to
any of its customers, grant to Caldera Systems business terms for such products
or services equivalent the most favorable terms upon which Ebiz provides such
products or services to any of such customers; and (ii) in connection with any
business transaction in which Ebiz is selecting a person or entity to provide
goods or services to it, Ebiz shall, to the extent such good or service is
offered to such customers by Caldera Systems, consider, in good faith, retaining
Caldera Systems to provide the same; provided, however, Ebiz may determine, in
its sole discretion to obtain such good or service from a party other than
Caldera System on any basis, including, without limitation, price, quality,
experience, timeliness etc., that Ebiz, in its sole discretion, considers
relevant to its decision. The foregoing provisions of Section 1.3 shall
terminate at the time when Caldera shall cease to own at least 25% of the Ebiz
common stock issued to it pursuant to this Agreement.
(F) Ebiz further agrees that all Caldera Confidential Information (as
defined below) delivered by
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Caldera Systems to Ebiz in connection with any program, activity, campaign or
business transaction between Ebiz and Caldera shall be kept confidential by Ebiz
and shall not be used by Ebiz for any purpose other than the business
transactions between Ebiz and Caldera. Ebiz agrees to use all commercially
reasonable efforts to safeguard and maintain the confidentiality of Caldera
Confidential Information and not to use such information for any other purpose
than to complete the business transaction with Caldera Systems. For purposes of
this Agreement, "Caldera Confidential Information" shall mean all information
that is delivered by Caldera Systems to Ebiz that is expressly marked or
identified as "confidential"; provided, however, "Caldera Confidential
Information" shall not include any information that (i) is in Ebiz's possession
at the time of disclosure; (ii) either before or after it has been disclosed to
Ebiz, is part of the public knowledge or literature, not as a result of any
action or inaction of Ebiz; (iii) is of a type or nature that could not be
claimed by Caldera Systems as being proprietary or confidential; (iv) is
approved for release by written authorization of Caldera Systems; or (v) is
required to be disclosed by Ebiz pursuant to subpoena or any applicable law or
governmental order.
1.4 CLOSING.
The closing of the purchase and sale of the ELM Assets and the Ebiz
Shares contemplated by Sections 1.1, 1.2 and 1.3 above (the "Closing") shall
take place at 10:00 a.m. on the date hereof, or at such other time and date as
the parties hereto mutually agree (the "Closing Date").
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CALDERA SYSTEMS RE: ELM ASSETS
In order to induce Ebiz to enter into this Agreement, Caldera Systems
represents and warrants to Ebiz the following, except as set forth on a Schedule
of Exceptions furnished by Caldera Systems to Ebiz (the "Caldera Schedule of
Exceptions"), specifically identifying the relevant subparagraphs(s) hereof,
which exceptions shall be deemed to be representations and warranties as if made
hereunder:
2.1 ORGANIZATION AND CORPORATE POWER.
Caldera Systems is a corporation duly organized and validly existing
under the laws of the State of Delaware, and is qualified to do business as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a material adverse effect on its assets, liabilities, financial
condition, business, or results of operations (a "Material Adverse Effect").
Caldera Systems has all required corporate power and corporate authority to
carry on its business as presently conducted, to enter into and perform this
Agreement and the agreements contemplated hereby to which it is a party and to
carry out the transactions contemplated hereby and thereby, including the sale
of the ELM Assets and the purchase of the Ebiz common shares.
2.2 AUTHORIZATION AND NON-CONTRAVENTION.
The execution, delivery and performance by Caldera Systems of this
Agreement and each other agreement, document and instrument to be executed and
delivered by Caldera Systems pursuant to or as contemplated by this Agreement,
including, without limitation, the sale of the ELM Assets and the purchase of
the Ebiz Shares, have been duly authorized, by all necessary corporate action on
behalf of Caldera Systems. This Agreement and each such other agreement,
document, and instrument, when executed and delivered, will constitute valid and
binding obligations of Caldera Systems, enforceable in accordance with their
respective terms, except as may be limited by applicable law and public policy
and subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors= rights
generally and (ii) general principles of equity and/or laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies, whether such enforceability is considered
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<PAGE> 21
in a proceeding in equity or at law. The execution and delivery by Caldera
Systems of this Agreement and each other agreement, document and instrument to
be executed and delivered by Caldera Systems pursuant hereto or as contemplated
hereby and the performance by Caldera Systems of the transactions contemplated
hereby and thereby, including, without limitation, the sale of the ELM Assets
and the purchase of the Ebiz Shares, do not and will not: (A) violate, conflict
with or result in a default (whether after the giving of notice, lapse of time
or both) under any material contract, mortgage, indenture, contract, instrument
or obligation to which Caldera Systems is a party or by which it or its assets
are bound, or any provision of the Caldera Systems' Articles of Incorporation or
Caldera Systems' Bylaws, or cause the creation of any material lien, charge or
encumbrance upon any of the ELM Assets; (B) violate or result in a violation of,
or constitute a default under, any provision of any material law, regulation or
rule, or any judgment, order, writ, decree or statute of, or any restriction
imposed by, any court or governmental agency applicable to Caldera Systems; (C)
require from Caldera Systems any notice to, declaration or filing with, or
consent or approval of any governmental authority or third party other than such
filings as have been made or consents which have been obtained prior to the
Closing; or (D) accelerate any obligation under, or give rise to a right of
termination, suspension, revocation or impairment of, any material agreement,
permit, license or authorization applicable to any of Caldera Systems'
operations, assets or properties, or by which Caldera Systems is bound.
2.3 PERMITS.
Caldera Systems has all franchises, permits, licenses, and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could have a Material Adverse Affect the business,
properties, prospects or financial condition of Caldera Systems. Caldera Systems
is not in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
2.4 LITIGATION.
There is no action, suit, proceeding or investigation pending or, to the
best of Caldera Systems' knowledge, currently threatened against Caldera Systems
that questions the validity of this Agreement, or the right of Caldera Systems
to enter into this Agreement, or to consummate the transactions contemplated
hereby, or that might result, either individually or in the aggregate, in any
material adverse change in the assets, business, properties, prospects, or
financial condition of Caldera Systems, or in any material impact on the ELM
Assets.
2.5 TITLE TO PROPERTY AND ASSETS; LEASES.
Caldera Systems has good and marketable title to the ELM Assets free and
clear of all mortgages, liens, claims and encumbrances and upon consummation of
the transactions contemplated hereby, Ebiz will acquire the ELM Assets free of
any liens, encumbrances or third-party rights, subject to the qualifications set
forth in Section 2.6 hereof.
2.6 INTELLECTUAL PROPERTY.
To the best of Caldera Systems' knowledge, the ELM Assets have not
infringed and do not infringe the copyrights of any third party. To the best of
Caldera Systems' knowledge, Caldera Systems has not misappropriated and is not
misappropriating any trade secrets or proprietary confidential information of
any third party with respect to the ELM Assets, and the ELM Assets do not
include or embody any trade secret or proprietary confidential information
misappropriated by Caldera Systems from any third party. To the best of Caldera
Systems' knowledge, the ELM Assets have not infringed and do not infringe any
patents, trademarks, service marks, or trade names of any third party. Each item
of Intellectual Property constituting part of the ELM Assets owned by or
licensed to Caldera Systems immediately prior to the Closing hereunder will be
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<PAGE> 22
owned by or licensed by Ebiz on identical terms and conditions immediately
subsequent to the Closing hereunder (i.e., identical to any applicable terms and
conditions immediately prior to the Closing).
(i) To the best of Caldera Systems' knowledge, none of Caldera
Systems and its directors and officers (and employees with
responsibility for Intellectual Property matters) has ever received any
charge, complaint, claim, demand, or notice alleging any such
infringement, misappropriation, or violation by Caldera Systems of
Intellectual Property related to the ELM Assets (including any claim
that Caldera Systems must license or refrain from using any ELM Asset).
Exhibit A sets forth a description of each item of Intellectual Property
constituting part of the ELM Assets. To the best of Caldera Systems'
knowledge and the knowledge of directors and officers (and employees
with responsibility for Intellectual Property matters) of Caldera
Systems, no third party has infringed, misappropriated, or otherwise
violated any ELM Intellectual Property rights of Caldera Systems.
(ii) Exhibit A identifies (a) each patent which has been issued or
assigned to Caldera Systems related to the ELM Assets, (b) each pending
patent application which has been filed by or for Caldera Systems
related to the ELM Assets, (c) each trademark or service mark
registration issued or assigned to Caldera Systems related to the ELM
Assets, (d) each pending trademark or service mark application which has
been filed by or for Caldera Systems related to the ELM Assets, (e) each
copyright registration issued or assigned to Caldera Systems related to
the ELM Assets, (f) each pending copyright application which has been
filed by or for Caldera Systems related to the ELM Assets, and (g) each
license which Caldera Systems has granted to any third party with
respect to any of Caldera Systems' ELM Intellectual Property. Caldera
Systems will deliver to Ebiz correct and complete copies of all such
patents, registrations, applications, and licenses (as amended to date).
Exhibit A also identifies each trade name and each unregistered
trademark or service mark owned or claimed by Caldera Systems in
connection with the ELM Assets. With respect to each patent,
application, and registration (each an "IP item") identified on Exhibit
A:
(A) Caldera Systems possess all right, title, and interest
in and to the IP item, free and clear of any mortgage, lien, claim,
license, or other encumbrance;
(B) to the best of Caldera Systems' knowledge, the IP item
is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(C) to the best of Caldera Systems' knowledge, no action,
suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand is pending or, to the best of Caldera Systems' knowledge,
and the knowledge of the directors and officers (and employees with
responsibility for Intellectual Property matters) of Caldera
Systems is threatened which challenges the legality, validity,
enforceability, use, or ownership of the IP item; and
(D) Caldera Systems has never agreed to indemnify any Person
for or against any interference, infringement, misappropriation, or
other conflict with respect to the IP item.
(iii) Exhibit A identifies each item of Intellectual Property that
any third party owns and licenses to Caldera Systems, excluding licenses
to commercially available software products (e.g., Windows, Microsoft
Office, etc.) used by Caldera Systems as an end user and which is used
in connection with the ELM Assets. Caldera Systems will deliver to Ebiz
at the Closing correct and complete copies of all agreements applicable
to such licenses (as amended to date). The term "license" is intended to
include "sublicense." With respect to each such license and agreement
required to be identified on Exhibit A, to the best of Caldera Systems'
knowledge;
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(A) each such license and agreement are legal, valid,
binding, enforceable, and in full force and effect;
(B) the license and agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms on the day immediately following the Closing;
(C) no party to such license or agreement is in breach or
default, and to the knowledge of Caldera Systems, no event has
occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or
acceleration thereunder;
(D) no party to such license or agreement has repudiated any
provision thereof;
(E) such license or agreement is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge;
and
(F) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, or enforceability of such
license or agreement; and
(G) no consent to the assignment of any of the ELM Assets is
required.
(iv) To the best of Caldera Systems' knowledge and to the knowledge
of the directors and officers (and employees with responsibility for
Intellectual Property matters) of Caldera Systems, neither Ebiz nor
Caldera Systems will infringe, misappropriate, or otherwise violate any
Intellectual Property rights of third parties as a result of the
continued operation by Ebiz of the ELM Operations contemplated by
Exhibit B.
2.7 MANUFACTURING AND MARKETING RIGHTS.
Except as set forth on the Caldera Systems Schedule of Exceptions,
Caldera Systems has not granted rights to manufacture, produce, assemble,
license, market or sell any products or rights related to the ELM Business to
any other person and is not bound by any agreement that affects Caldera Systems'
right to develop, manufacture, assemble, distribute, market or sell products or
services in its ELM Business.
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2.8 EMPLOYEES; EMPLOYEE COMPENSATION.
To the best of Caldera Systems' knowledge, the relationships between
Caldera Systems and the employees who are being made available to be hired by
Ebiz (the "ELM Employees") are good and no labor dispute or claims are pending
or threatened. None of the ELM Employees belong to any union or collective
bargaining unit. Caldera Systems has complied in all material respects with all
applicable state and federal laws related to employment of the ELM Employees. To
the best of Caldera Systems' knowledge, none of the ELM Employees is or will be
in violation of any judgment, decree or order, or any term of any employment
contract, patent disclosure agreement, or other contract or agreement relating
to the relationship of any such employee with Caldera Systems, or any other
party because of the nature of the business conducted or presently proposed to
be conducted by Caldera Systems or to the use by such employee of his or her
best efforts with respect to such business. Subject to general principles
related to wrongful termination of employees, the employment of each ELM
Employee is terminable at the will of Caldera Systems. Attached as Exhibit E is
a list of each of the ELM Employees and their current compensation.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF EBIZ
In order to induce Caldera Systems to enter into this Agreement, Ebiz
represents and warrants to Caldera Systems the following, except as set forth on
a Schedule of Exceptions furnished by Ebiz to Caldera Systems (the "Ebiz
Schedule of Exceptions"), specifically identifying the relevant subparagraph(s)
hereof, which exceptions shall be deemed to be representations and warranties as
if made hereunder:
3.1 ORGANIZATION AND CORPORATE POWER.
Ebiz is a corporation duly organized and validly existing under the laws
of the State of Nevada and is qualified to own and operate its properties and
assets, to do business as a foreign corporation in each jurisdiction in which
the failure to be so qualified would have a Material Adverse Effect. Each
Subsidiary of Ebiz is a corporation duly organized and validly existing under
its state of incorporation and is qualified to own and operate its properties
and assets, to do business as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have a Material Adverse Effect. Each
of Ebiz and its Subsidiaries has all required corporate power and corporate
authority to carry on its business as presently conducted, to enter into and
perform this Agreement and the agreements contemplated hereby to which it is a
party and to carry out the transactions contemplated hereby and thereby,
including the issuance of the Ebiz common shares to be issued to Caldera Systems
hereunder (the "Ebiz Shares"). Ebiz is not in violation of any term of its
Articles of Incorporation, as amended as of the date hereof (the "Ebiz Articles
of Incorporation"), or Bylaws, as amended as of the date hereof (the "Ebiz
Bylaws"), the effect of which would be to have a Material Adverse Effect on
Ebiz.
3.2 AUTHORIZATION AND NON-CONTRAVENTION.
The execution, delivery and performance by Ebiz of this Agreement and
each other agreement, document and instrument to be executed and delivered by
Ebiz pursuant to or as contemplated by this Agreement, including, without
limitation, the issuance and delivery of the Ebiz Shares, have been duly
authorized, by all necessary corporate action on behalf of Ebiz. This Agreement
and each such other agreement, document, and instrument, when executed and
delivered, will constitute valid and binding obligations of Ebiz, enforceable in
accordance with their respective terms, except as may be limited by applicable
law and public policy and subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) general principles of equity
and/or laws relating to the availability of specific performance, injunctive
relief or other equitable remedies, whether such enforceability is considered in
a proceeding in equity or at law. The
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execution and delivery by Ebiz of this Agreement and each other agreement,
document and instrument to be executed and delivered by Ebiz pursuant hereto or
as contemplated hereby and the performance by Ebiz of the transactions
contemplated hereby and thereby, including, without limitation, the offer, sale,
issuance and delivery of the Ebiz Shares, do not and will not: (A) violate,
conflict with or result in a default (whether after the giving of notice, lapse
of time or both) under any material contract, mortgage, indenture, contract,
instrument or obligation to which Ebiz or any of its Subsidiaries is a party or
by which it or its assets are bound, or any provision of the Ebiz Articles of
Incorporation or Ebiz Bylaws, or cause the creation of any material lien, charge
or encumbrance upon any of the assets of Ebiz or any of its Subsidiaries; (B) to
Ebiz's knowledge, violate or result in a violation of, or constitute a default
under, any provision of any material law, regulation or rule, or any judgment,
order, writ, decree or statute of, or any restriction imposed by, any court or
governmental agency applicable to Ebiz or any of its Subsidiaries; (C) require
from Ebiz any notice to, declaration or filing with, or consent or approval of
any governmental authority or third party other than such filings as have been
made prior to the Closing and/or as may be required to secure an exemption from
qualification of the offer and sale of the Ebiz Shares under the Securities Act
of 1933 (the "Securities Act"), and applicable state securities and blue sky
laws; or (D) accelerate any obligation under, or give rise to a right of
termination, suspension, revocation or impairment of, any material agreement,
permit, license or authorization applicable to any of Ebiz's, or any of its
Subsidiaries', business, operations, assets or properties, to which Ebiz, or any
of its Subsidiaries, is a party or by which Ebiz is bound.
3.3 CAPITALIZATION.
(A) For purposes of this Section 3.3, "Merger Agreement" shall mean that
certain Agreement and Plan of Merger, including all appendices and exhibits
thereto, dated August 7, 2000, by and between Ebiz, Linux Mall Acquisition, Inc.
("Merger Sub") and LinuxMall.com, Inc. ("LinuxMall"); "Merger" shall mean the
contemplated merger between Merger Sub and LinuxMall described in the Merger
Agreement; "Merger Consideration" shall mean all shares of common stock of Ebiz
that Ebiz is required to issue pursuant to Section 1.3 of the Merger Agreement;
and "Merger Related Shares" shall mean all shares of preferred or common stock
of Ebiz, other than the Merger Consideration, that Ebiz is or may be obligated
to issue pursuant to any agreement that, pursuant to the Merger Agreement, Ebiz
is expressly required to enter into in connection with the closing of the
Merger.
(B) As of the Closing, without giving effect to the transactions
contemplated hereby, the authorized capital stock of Ebiz consists of 70,000,000
shares of common stock of which 8,737,566 shares are issued and outstanding and
5,000,000 shares of preferred stock of which 7,590 shares are issued and
outstanding. As of the Closing, other than the shares described in the preceding
sentence, and currently outstanding options to purchase 1,152,000 shares of the
common stock of Ebiz, warrants to purchase 382,513 shares of the common stock of
Ebiz, debentures convertible into 3,496,647 shares of the common stock of Ebiz
(based on an assumed price of $2.00 per share; the conversion rate with respect
to these debentures is based upon the per share market price of Ebiz common
stock at the time of conversion), the Merger Consideration and the Merger
Related Shares, Ebiz has not issued any warrants, options, rights (including,
without limitation, conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements or agreements of any kind for the
purchase or acquisition from Ebiz, or any of its Subsidiaries, of any shares of
its, or any of its Subsidiaries', capital stock or other securities, including,
without limitation, any securities convertible into or exercisable or
exchangeable for such shares or any warrants, options or other rights to acquire
any such convertible securities. As of the Closing, and after giving effect to
the transactions contemplated hereby, all of the outstanding shares of capital
stock of Ebiz and each of its Subsidiaries will have been duly and validly
authorized and issued, fully paid and nonassessable and not subject to any
preemptive rights and will have been offered, issued, sold and delivered in
compliance with applicable federal and state securities laws. Except as set
forth in the Ebiz Articles of Incorporation, there are no preemptive rights,
rights of first refusal, put or call rights or
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obligations or anti-dilution rights with respect to the issuance, sale or
redemption of Ebiz's capital stock or other securities. Except for the Merger
Agreement, Ebiz is not a party or subject to any agreement or understanding,
and, to the best of Ebiz's knowledge, there is no agreement or understanding
between any persons that affects or relates to the voting or giving of written
consents with respect to any security or the voting by a director of Ebiz. Upon
the Closing of the transactions contemplated hereby, the 4,000,000 shares of
common stock of Ebiz to be owned by Caldera Systems represents not less than
21.70% of Ebiz's total capital stock on a fully diluted basis (after giving
effect to all outstanding warrants and options and any unallocated stock option
pool of 348,000 shares and after giving consideration to the conversion of any
preferred stock or debentures into common stock of Ebiz).
(C) If the Merger is consummated, giving effect to the issuance of the
Merger Consideration and the 4,000,000 shares of common stock of Ebiz to be
issued to Caldera Systems in connection with the Closing, but not giving effect
to any other shares of common or preferred stock of Ebiz that may be authorized
or issued after the Closing and assuming that none of the LinuxMall shareholders
exercise their dissenter's rights in connection with the Merger, the authorized
capital stock of Ebiz will consist of 70,000,000 shares of common stock of which
24,117,720 shares will be issued and outstanding and 5,000,000 shares of
preferred stock of which no shares will be issued and outstanding.
3.4 VALID ISSUANCE OF EBIZ SHARES.
The Ebiz Shares, when issued, sold and delivered in accordance with the
terms of this Agreement for the consideration expressed herein, will be duly and
validly issued, fully paid and non-assessable, and will be free of restrictions
on transfer other than restrictions on transfer under this Agreement and under
applicable state and federal securities laws.
3.5 SUBSIDIARIES.
Except as set forth in the Ebiz Schedule of Exceptions, Ebiz does not
own or control, directly or indirectly, any interest in any other corporation,
partnership, limited liability company, association or other business entity.
Ebiz is not a participant in any joint venture, partnership or similar
arrangement.
3.6 CONTRACTS AND OTHER COMMITMENTS.
Neither Ebiz nor any of its Subsidiaries has and/or is bound by any
contract, agreement, lease, commitment, or proposed transaction, judgment,
order, writ or decree, written or oral, absolute or contingent, other than
contracts entered into in the ordinary course of business. For the purpose of
this paragraph, employment and consulting contracts and license agreements and
any other agreements relating to Ebiz's or any of its Subsidiary's acquisition
or disposition of Intellectual Property (other than standard end-user license
agreements) shall not be considered to be contracts entered into in the ordinary
course of business.
3.7 RELATED-PARTY TRANSACTIONS.
No employee, officer, stockholder or director of Ebiz or any of its
Subsidiaries or member of his or her immediate family is indebted to Ebiz, nor
is Ebiz or any Subsidiary indebted (or committed to make loans or extend or
guarantee credit) to any of them, other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of Ebiz or such Subsidiary, and (iii) for other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
Ebiz or such Subsidiary). To
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the best of Ebiz's or such Subsidiary's knowledge, none of such persons has any
direct or indirect ownership interest in any firm or corporation with which Ebiz
or such Subsidiary is affiliated or with which Ebiz or such Subsidiary has a
business relationship, or any firm or corporation that competes with Ebiz or
such Subsidiary, except that employees, stockholders, officers or directors of
Ebiz or such Subsidiary and members of their immediate families may own stock in
publicly-traded companies that may compete with Ebiz or such Subsidiary. To the
best of Ebiz's or such Subsidiary's knowledge, no officer, director or
stockholder or any member of their immediate families is, directly or
indirectly, interested in any material contract with Ebiz or such Subsidiary
(other than such contracts as relate to any such person's ownership of capital
stock or other securities of Ebiz or such Subsidiary).
3.8 REGISTRATION RIGHTS.
Except as set forth in the Caldera Systems Investor Rights Agreement,
Ebiz is presently not under any obligation and has not granted any rights to
register under the Securities Act any of its presently outstanding securities or
any of its securities that may subsequently be issued.
3.9 PERMITS.
Each of Ebiz and its Subsidiaries has all franchises, permits, licenses,
and any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of Ebiz or any such
Subsidiary, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as presently planned to be
conducted. Neither Ebiz nor any Subsidiary is in default in any material respect
under any of such franchises, permits, licenses or other similar authority.
3.10 LITIGATION.
There is no action, suit, proceeding or investigation pending or, to the
best of Ebiz's or any of its Subsidiary's knowledge, currently threatened
against Ebiz or any of its Subsidiaries that questions the validity of this
Agreement, or the right of Ebiz to enter into this Agreement, or to consummate
the transactions contemplated hereby, or that might result, either individually
or in the aggregate, in any material adverse change in the assets, business,
properties, prospects, or financial condition of Ebiz or any of its
Subsidiaries, or in any material change in the current equity ownership of Ebiz
or any of its Subsidiaries.
3.11 RETURNS AND COMPLAINTS.
Neither Ebiz nor any of its Subsidiaries has received any customer
complaints concerning alleged defects in its products (or the design thereof)
that, if true, would materially adversely affect the operations or financial
condition of Ebiz or any of its Subsidiaries.
3.12 DISCLOSURE.
Ebiz has provided Caldera Systems with all the information reasonably
available to it without undue expense that Caldera Systems has requested in
writing for deciding whether to purchase the Ebiz Shares and all information
that Ebiz believes is reasonably necessary to enable Caldera Systems to make an
informed investment decision. The foregoing representation is limited to
specific information regarding Ebiz and is not intended to extend to such
matters as general economic conditions or industry-wide type risks.
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3.13 OFFERING.
Subject, in part, to the truth and accuracy of Caldera Systems'
representations set forth in this Agreement, the offer, sale and issuance of the
Ebiz Shares as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act, and neither Ebiz, any of its Subsidiaries,
nor any authorized agent acting on its behalf will take any action hereafter
that would cause the loss of such exemption.
3.14 TITLE TO PROPERTY AND ASSETS; LEASES.
Except (i) as reflected in the Ebiz Financial Statements (defined in
paragraph 3.15), (ii) for liens for current taxes not yet delinquent, (iii) for
liens imposed by law and incurred in the ordinary course of business for
obligations not past due to carriers, warehousemen, laborers, materialmen and
the like, (iv) for liens in respect of pledges or deposits under workers'
compensation laws or similar legislation or (v) for minor defects in title, none
of which, individually or in the aggregate, materially interferes with the use
of such property, each of Ebiz and its Subsidiaries has good and marketable
title to its property and assets free and clear of all mortgages, liens, claims
and encumbrances. With respect to the property and assets it leases, each of
Ebiz and its Subsidiaries is in compliance with such leases and, to the best of
its knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances, subject to clauses (i)-(v) above.
3.15 FINANCIAL STATEMENTS.
Ebiz has delivered to Caldera Systems its unaudited financial statements
(balance sheet and profit and loss statement, statement of stockholders' equity
and statement of cash flows, including notes thereto) at June 30, 2000 and for
the fiscal year then ended (the "Ebiz Financial Statements"). The Ebiz Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated. The
Ebiz Financial Statements fairly present the financial condition and operating
results of Ebiz as of the dates, and for the periods, indicated therein. Except
as set forth in the Ebiz Financial Statements, neither Ebiz nor any of its
Subsidiaries has any material liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to June
30, 2000 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in the Ebiz Financial Statements, which in both
cases, individually or in the aggregate, are not material to the financial
condition or operating results of Ebiz or any of its Subsidiaries. Except as
disclosed in the Ebiz Financial Statements, neither Ebiz nor any of its
Subsidiaries is a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation. Ebiz and each of its Subsidiaries maintains and
will continue to maintain a standard system of accounting established and
administered in accordance with GAAP.
3.16 CHANGES.
Since June 30, 2000 there has not been any event or condition of any
type that has materially and adversely affected the business, properties or
financial condition of Ebiz or any of its Subsidiaries.
3.17 INTELLECTUAL PROPERTY.
To the best of Ebiz's and its Subsidiaries' knowledge, Ebiz, its
Subsidiaries and their products have not infringed and do not infringe the
copyrights of any third party. To the best of Ebiz's and its Subsidiaries'
knowledge, neither Ebiz nor its Subsidiaries has misappropriated or is
misappropriating any trade secrets or proprietary confidential information of
any third party, and the products of Ebiz and its Subsidiaries do not
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include or embody any trade secret or proprietary confidential information
misappropriated by Ebiz or its Subsidiaries from any third party. To the best of
Ebiz's and its Subsidiaries' knowledge, each of Ebiz and its Subsidiaries and
their respective products have not infringed and do not infringe any patents,
trademarks, service marks, or trade names of any third party. Each item of
Intellectual Property owned by or licensed to Ebiz and its Subsidiaries
immediately prior to the Closing hereunder will be owned by or licensed to Ebiz
and the Subsidiary on identical terms and conditions immediately subsequent to
the Closing hereunder (i.e., identical to any applicable terms and conditions
immediately prior to the Closing).
(i) To the best of Ebiz's and its Subsidiaries' knowledge, none of
Ebiz or its Subsidiaries or their directors and officers (and employees
with responsibility for Intellectual Property matters) has ever received
any charge, complaint, claim, demand, or notice alleging any such
infringement, misappropriation, or violation by Ebiz or its Subsidiaries
of Intellectual Property (including any claim that Ebiz and its
Subsidiaries must license or refrain from using any Intellectual
Property rights of any third party). To the best of Ebiz's and its
Subsidiaries' knowledge and the knowledge of directors and officers (and
employees with responsibility for Intellectual Property matters) of Ebiz
and its Subsidiaries, no third party has infringed, misappropriated, or
otherwise violated any Intellectual Property rights of Ebiz and its
Subsidiaries.
(ii) The Ebiz Schedule of Exceptions identifies (a) each patent
which has been issued or assigned to Ebiz or any of its Subsidiaries,
(b) each pending patent application which has been filed by or for Ebiz
or any of its Subsidiaries, (c) each trademark or service mark
registration issued or assigned to Ebiz or any of its Subsidiaries, (d)
each pending trademark or service mark application which has been filed
by or for Ebiz or any its Subsidiaries, (e) each copyright registration
issued or assigned to Ebiz or any of its Subsidiaries, (f) each pending
copyright application which has been filed by or for Ebiz or any of its
Subsidiaries, and (g) each license which Ebiz and its Subsidiaries has
granted to any third party with respect to any of Ebiz's Intellectual
Property excluding licenses to end users of Company products granted in
the ordinary course of business. Ebiz has delivered to Caldera Systems
correct and complete copies of all such patents, registrations,
applications, and licenses (as amended to date). The Ebiz Schedule of
Exceptions also identifies each trade name and each unregistered
trademark or service mark owned or claimed by any of Ebiz and its
Subsidiaries in connection with any of their businesses. With respect to
each IP item identified in the Ebiz Schedule of Exceptions:
(A) Ebiz and its Subsidiaries possess all right, title, and
interest in and to the IP item, free and clear of any mortgage,
lien, claim, license, or other encumbrance;
(B) to the best of Ebiz's and its Subsidiaries' knowledge,
the IP item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(C) to the best of Ebiz's or its Subsidiaries' knowledge, no
action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the best of Ebiz's or
its Subsidiaries' knowledge, and the knowledge of the directors and
officers (and employees with responsibility for Intellectual
Property matters) of Ebiz and its Subsidiaries, is threatened which
challenges the legality, validity, enforceability, use, or
ownership of the IP item; and
(D) none of Ebiz and its Subsidiaries has ever agreed to
indemnify any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the IP item.
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(iii) The Ebiz Schedule of Exceptions identifies each item of
Intellectual Property that any third party owns and licenses to any of
Ebiz and its Subsidiaries, excluding licenses to commercially available
software products (e.g., Windows, Microsoft Office, etc.) used by any of
Ebiz and its Subsidiaries as an end user. The term "license" is intended
to include "sublicense." With respect to each such license and agreement
required to be identified in the Ebiz Schedule of Exceptions, to the
best of Ebiz's or its Subsidiaries' knowledge;
(A) such license and agreement are legal, valid, binding,
enforceable, and in full force and effect;
(B) such license and agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms on the day immediately following the Closing;
(C) no party to such license or agreement is in breach or
default, and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) no party to such license or agreement has repudiated any
provision thereof;
(E) such license or agreement is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge;
and
(F) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, or enforceability of the
license or agreement.
(iv) To the best of Ebiz's and its Subsidiaries' knowledge and to
the knowledge of the directors and officers (and employees with
responsibility for Intellectual Property matters) of Ebiz and its
Subsidiaries, neither Ebiz nor any of its Subsidiaries will infringe,
misappropriate, or otherwise violate any Intellectual Property rights of
third parties as a result of the continued operation of its businesses
as presently conducted and as presently proposed to be conducted.
3.18 MANUFACTURING AND MARKETING RIGHTS.
Except as set forth on the Ebiz Schedule of Exceptions, neither Ebiz nor
any of its Subsidiaries has granted rights to manufacture, produce, assemble,
license, market or sell its products to any other person and is not bound by any
agreement that affects Ebiz's or such Subsidiary's exclusive right to develop,
manufacture, assemble, distribute, market or sell its products.
3.19 EMPLOYEES; EMPLOYEE COMPENSATION.
To the best of Ebiz's and its Subsidiary's knowledge, the relationships
between Ebiz and its Subsidiaries and their respective employees are good and no
labor dispute or claims are pending or threatened. None of Ebiz's or any of its
Subsidiary's employees belongs to any union or collective bargaining unit. To
the best of Ebiz's and its Subsidiaries' knowledge, Ebiz and each of its
Subsidiaries has complied in all material respects with all applicable state and
federal laws related to employment. To the best of Ebiz's and it Subsidiary's
knowledge, no employee of Ebiz or any such Subsidiary is or will be in violation
of any judgment, decree or order, or any term of any employment contract, patent
disclosure agreement, or other contract or agreement relating to the
relationship of any such employee with Ebiz, any of its Subsidiaries, or any
other
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party because of the nature of the business conducted or presently proposed to
be conducted by Ebiz or any of its Subsidiaries or to the use by the employee of
his or her best efforts with respect to such business. Neither Ebiz nor any of
its Subsidiaries is aware that any officer or key employee, or that any group of
key employees, intends to terminate their employment with Ebiz or any of its
Subsidiaries, nor does Ebiz or any of its Subsidiaries have a present intention
to terminate the employment of any of the foregoing. Subject to general
principles related to wrongful termination of employees, the employment of each
officer and employee of Ebiz and each of its Subsidiaries is terminable at the
will of Ebiz or such Subsidiary, as applicable.
3.20 TAX RETURNS, PAYMENTS, AND ELECTIONS.
Ebiz and each of its Subsidiaries has timely filed all tax returns and
reports (federal, state and local) as required by law. These returns and reports
are true and correct in all material respects. Ebiz and each of its Subsidiaries
has paid all taxes and other assessments due, except those contested by it in
good faith. Neither Ebiz nor any of its Subsidiaries has elected pursuant to the
Code, to be treated as an S corporation or a collapsible corporation pursuant to
Section 1362(a) or Section 341(f) of the Code, nor has it made any other
elections pursuant to the Code (other than elections that relate solely to
methods of accounting, depreciation or amortization) that would have a material
effect on the business, properties, prospects or financial condition of Ebiz or
any of its Subsidiaries. Neither Ebiz nor any of its Subsidiaries has ever had
any tax deficiency proposed or assessed against it and has not executed any
waiver of any statute of limitations on the assessment or collection of any tax
or governmental charge. None of Ebiz's or any Subsidiary's income tax returns
(federal or otherwise) and none of its state income or franchise tax or sales or
use tax returns has ever been audited by governmental authorities. Ebiz and each
of its Subsidiaries has made adequate provisions on its books of account for all
taxes, assessments and governmental charges with respect to its business,
properties and operations for such period. Ebiz and each of its Subsidiaries has
withheld or collected from each payment made to each of its employees, the
amount of all taxes, including, but not limited to, federal income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositaries.
3.21 ENVIRONMENTAL AND SAFETY LAWS.
Neither Ebiz nor any of its Subsidiaries is in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety except to the extent that the effect of which
would not have a Material Adverse Effect on Ebiz, and no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
SECTION 4. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF CALDERA SYSTEMS
(A) Caldera Systems represents to Ebiz that (i) it has such knowledge
and experience in financial and business matters and in private placement
transactions of securities of companies in a similar stage of development as
Ebiz that it is capable of evaluating the merits and risks of the investment
contemplated by such purchasing party under this Agreement and making an
informed investment decision with respect thereto, (ii) it is able to bear the
economic risk of such investment and can afford to sustain a substantial loss on
such investment, (iii) it is an "accredited investor" as such term is defined in
Rule 501 under the Securities Act, (iv) it is purchasing the securities
purchased by it hereunder for its own account, for investment only and not with
a view to, or any present intention of, effecting a resale or distribution of or
selling or granting any participation in such securities or any part thereof,
(v) it realizes that the basis for any exemption pursuant to which the
securities such party is purchasing hereunder have been issued may not be
present if, notwithstanding the
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representations made by such party hereunder, such party has in mind merely
acquiring the securities is purchasing hereunder for a fixed or determinable
period in the future, or for a market rise, or for sale if the market does not
rise and (vi) it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to such securities. Caldera Systems
acknowledges that the securities purchased by it hereunder have not been
registered under the Securities Act or the securities laws of any state or other
jurisdiction in reliance on an exemption from registration thereunder and
reliance on such exemption by the issuer of such securities is predicated on the
representations and warranties set forth in this Agreement. Furthermore, Caldera
Systems acknowledges that such securities cannot be disposed of unless they are
subsequently registered under the Securities Act and any applicable state laws
or an exemption from such registration is available.
(B) Caldera Systems understands that the securities have not been
registered under the Securities Act. In particular, Caldera Systems is aware
that the securities purchased by it hereunder may not be sold pursuant to Rule
144 promulgated under the Securities Act unless all of the conditions of that
Rule are met.
(C) Caldera Systems represents that it has had an opportunity to ask
questions and receive answers from Ebiz regarding the terms and conditions of
the offering of such securities and the business, properties, prospects and
financial condition of Ebiz and to obtain additional information (to the extent
Ebiz possessed such information or could acquire it without unreasonable effort
or expense) necessary to verify the accuracy of any information furnished to
Caldera Systems or to which Caldera Systems had access. The foregoing, however,
does not limit or modify the representations and warranties of Ebiz in Section 3
of this Agreement or the right of Caldera Systems to rely thereon.
SECTION 5. CLOSING
5.1 CLOSING. Upon the execution of this Agreement, a Closing shall be
held. At the Closing, the following shall occur:
(a) DELIVERIES BY CALDERA SYSTEMS. At the Closing, Caldera Systems shall
deliver to Ebiz the following:
(i) An assignment or other instrument of transfer assigning
to Ebiz all of Caldera Systems' right, title and
interest in and to the ELM Assets;
(ii) $3,000,000 by wire transfer to the Restricted Account;
(iii) An executed copy of the Use Restriction Agreement;
(iv) An executed copy of the Investor Rights Agreement;
(v) An executed copy of the Shareholders Agreement;
(vi) An Assignment and Bill of Sale transferring the ELM
Assets to Ebiz; and
(vii) Such other documents and instruments as Ebiz shall, in
its reasonable discretion, require to close and
consummate the transactions contemplated hereby; such
documents to be in form and substance reasonably
satisfactory to Caldera Systems.
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(b) DELIVERIES BY EBIZ. At the Closing, Ebiz shall deliver to
Caldera Systems the following:
(i) A copy of instructions sent to Ebiz's Transfer Agent
instructing the Transfer Agent to deliver to Caldera
Systems share certificates for 4,000,000 shares of the
common stock of Ebiz. Ebiz covenants and agrees that
such share certificates will be delivered to Caldera
Systems within seven (7) days of the Closing;
(ii) An executed copy of the Use Restriction Agreement;
(iii) An executed copy of the Investor Rights Agreement;
(iv) An executed copy of the Shareholders Agreement executed
by Ebiz and the key shareholders of Ebiz who are
required to execute such agreement; and
(v) Such other documents and instruments as Caldera Systems
shall, in its reasonable discretion, require to close
and consummate the transactions contemplated hereby;
such documents to be in form and substance reasonably
satisfactory to Ebiz.
SECTION 6. POST CLOSING COVENANTS
6.1 DEVELOPMENT OF ELM BUSINESS.
During the twelve month period following the Closing, Ebiz agrees to use
its good faith and commercially-reasonable efforts to develop the ELM Business
and to generate revenue from such business during the fifteen month period
following the Closing.
6.2 LOCATION OF ELM BUSINESS.
In order to facilitate the transition of the ELM Employees from Caldera
Systems to Ebiz, Ebiz agrees that during the longer of: (i) the one year period
of time following the Closing; or (ii) until all of the funds in the Restricted
Account have been spent, Ebiz will conduct its ELM Business operations in the
Utah County, Utah area during the period specified above and agrees not to
require any ELM Employee to transfer out of such area as a condition of
continuing employment.
6.3 NONCOMPETE.
For a period of three (3) years following the date hereof, Caldera
Systems shall not: (i) directly or indirectly compete with Ebiz or any of its
successors or assigns, with respect to any aspect of the ELM Business; (ii)
directly or indirectly engage in or conduct any business operations the same as
or similar to the ELM Business or any material aspect thereof; or (iii) directly
or indirectly assist any person or entity in connection with any activity or
matter described in the immediately preceding clause (i) or (ii).
Notwithstanding anything in this Section 6.3 to the contrary, Caldera Systems
shall be entitled to make investments in any entity it chooses so long as in
connection with such investment Caldera Systems does not actively assist such
entity in competing with Ebiz in the ELM Business, and such investment shall not
be deemed a violation of this Agreement unless Caldera Systems shall acquire a
controlling interest in such entity. Nothing in this Section 6.3 shall be
construed as permitting Caldera Systems to infringe upon or violate any
intellectual property right of Ebiz at any time, whether prior to or after the
expiration of such
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three (3) year period. Caldera Systems acknowledges and agrees that the terms of
this Section 6.3 are reasonable as to duration and scope and that because of the
intangible nature of most or all of the ELM Assets, Caldera Systems compliance
with the provisions of this Section 6.3 is reasonably necessary to permit Ebiz
to realize the benefits intended to be conferred upon it pursuant to this
Agreement and by the ELM Assets. The parties understand and agree that money
damages may not be a sufficient remedy for any breach of this Section 6.3 by
Caldera Systems and that Ebiz shall be entitled to injunctive relief as a remedy
for any such breach.
6.4 SHAREHOLDERS AGREEMENT.
Within twenty-one (21) days of the Closing, or seven (7) days following
the merger of Ebiz and LinuxMall.com, whichever shall be later, Ebiz shall
obtain and deliver to Caldera Systems an amendment to the Shareholders Agreement
whereby shareholders holding a majority of the Ebiz voting shares following the
merger shall have agreed to be bound by the terms of the Shareholders Agreement.
SECTION 7. GENERAL
7.1 AMENDMENTS, WAIVERS AND CONSENTS.
For the purposes of this Agreement and all agreements executed pursuant
hereto, no course of dealing between or among any of the parties hereto and no
delay on the part of any party hereto in exercising any rights hereunder or
thereunder shall operate as a waiver of the rights hereof and thereof. 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 amendment to this Agreement may be made without the written
consent of all of the parties hereto.
7.2 LEGEND ON SECURITIES.
The parties acknowledge and agree that the following legend shall be
typed on each certificate evidencing any of the securities issued hereunder:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS
AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
ASSIGNED EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES
AND BLUE SKY LAWS RELATING TO THE DISPOSITION OF SECURITIES, PROVIDED THAT AN
OPINION OF COUNSEL TO SUCH EFFECT IS PROVIDED TO THE ISSUER OF SUCH SECURITIES,
IN FORM SATISFACTORY TO SUCH ISSUER, IN CONNECTION THEREWITH.
7.3 GOVERNING LAW.
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 laws principles thereof and each
party hereby expressly submits themselves to the exclusive, personal
jurisdiction of the courts situate in the State
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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, or arising out of, this
Agreement or the subject matter hereof.
7.4 SECTION HEADINGS.
The descriptive headings in this Agreement have been inserted for
convenience only and shall not be deemed to limit or otherwise affect the
construction or interpretation of any provision thereof or hereof.
7.5 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be taken to be an original; but such
counterparts shall together constitute but one and the same document. This
Agreement may be executed by facsimile signatures, each of which will be deemed
an original.
7.6 ENTIRE AGREEMENT.
This Agreement, including the exhibits, documents and instruments
referred to herein or therein, constitutes 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.
7.7 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
The warranties, representations and covenants of Ebiz and Caldera
Systems contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
7.8 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 (including permitted transferees of any
securities issued hereunder). 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.
7.9 NOTICES.
Unless otherwise provided, all notices and other communications required
or permitted under this Agreement shall be in writing and shall be mailed by
United States first-class mail, postage prepaid, sent by facsimile or delivered
personally by hand or by a nationally recognized courier addressed to the party
to be notified at the address or facsimile number indicated for such person at
the address set forth below, or at such other address or facsimile number as
such party may designate by ten (10) days' advance written notice to the other
parties hereto:
If to Caldera Systems: Caldera Systems, Inc.
240 West Center Street
Orem, Utah 84057
Attention: President
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with a copy to:
Caldera Systems, Inc.
240 West Center Street
Orem, Utah 84057
Attention: Richard Rife,
General Counsel
If to Ebiz: Ebiz Enterprises Inc.
15695 North 83rd Way
Scottsdale, AZ 85260
Attn: Jeffrey I. Rassas
David Shaw
Fax: 480-778-1001
with copies to:
Thomas J. Morgan
Lewis and Roca LLP
40 North Central Avenue
Phoenix, Arizona 85004
Fax: 602-734-3911
David H. Little
Holme Roberts & Owen, LLP
111 East Broadway, Suite 1100
Salt Lake City, Utah 84111
Fax: 801-521-9639
All such notices and other written communications shall be effective on the date
of mailing, confirmed facsimile transfer or delivery.
7.10 ATTORNEYS' FEES.
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 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.
7.11 SEVERABILITY.
If one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provision shall be excluded from this Agreement and
the balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
SECTION 8 DEFINITIONS
For the purposes of this Agreement, each of the following terms shall
have the meaning set forth opposite such term below:
-21-
<PAGE> 37
"ELM Business" means a web-based business to business (b2b) entity
creating revenue through information/knowledge exchange, product sales
commission, advertising, membership and channel development fees.
"knowledge" of a person shall mean actual knowledge of such person after
(i) with respect to representations, warranties and statements made by or with
respect to Caldera Systems, inquiry of the officers and directors of Caldera
Systems and those management-level employees of Caldera Systems who have
responsibility for the area of inquiry and (ii) with respect to representations,
warranties and statements made by or with respect to Ebiz inquiry of the
officers and directors of Ebiz and those management-level employees of Ebiz who
have responsibility for the area of inquiry.
"Intellectual Property" shall mean (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Subsidiary" shall mean any corporation with respect to which a
specified party (or a Subsidiary thereof) owns a majority of the common stock or
has the power to vote or direct the voting of sufficient securities to elect a
majority of the directors. "Subsidiaries" shall mean, for purposes of this
Agreement, each Subsidiary of a party, collectively and individually.
-22-
<PAGE> 38
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
Ebiz Enterprises Inc.
a Nevada corporation
By: /s/ JEFFREY I. RASSAS
---------------------------------
Its: CEO/Founder
--------------------------------
Caldera Systems, Inc.,
a Delaware corporation
By: /s/ RANSOM H. LOVE
---------------------------------
Its: President/CEO
--------------------------------
-23-
<PAGE> 39
SCHEDULE OF EXHIBITS
Exhibit A Description of ELM Assets
Exhibit B ELM Business Operations
Exhibit C Use Restriction Agreement
Exhibit D Investor Rights Agreement
Exhibit E Shareholders Agreement
Exhibit F List of ELM Employees and Compensation
<PAGE> 40
EXHIBIT A
ELM ASSETS
The Elm Assets consist of the following:
1. All of Caldera Systems' right, title and interest in the ideas and concepts
which it has developed to the date of this Agreement which are part of the ELM
Business concept which Caldera Systems is transferring to Ebiz pursuant to the
Agreement.
2. All of the personal property described on Schedule I, attached hereto and
made a part hereof.
<PAGE> 41
SCHEDULE I
<TABLE>
<CAPTION>
10/23/00
partnerAxis Software Assets
Employee Package Name Version SN Notes
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brian Rasmussen MS Windows 98 Came with PC
-----------------------------------------------------------------------------------------------------------------------
Brian Rasmussen J builder Free
-----------------------------------------------------------------------------------------------------------------------
Brian Rasmussen Corel Word Perfect Office 2000 linux WLSNR-52445Q295
-----------------------------------------------------------------------------------------------------------------------
Bryan Standley MS Windows 98 Came with PC
-----------------------------------------------------------------------------------------------------------------------
Bryan Standley MS Office 97
-----------------------------------------------------------------------------------------------------------------------
Bryan Standley Norton AntiVirus Came with PC
-----------------------------------------------------------------------------------------------------------------------
Bryan Standley Adobe Illustrator
-----------------------------------------------------------------------------------------------------------------------
Bryan Standley Adobe Acrobat 4
-----------------------------------------------------------------------------------------------------------------------
Bryan Standley QuarkXpress
-----------------------------------------------------------------------------------------------------------------------
Bryan Standley MS Visio 2000
-----------------------------------------------------------------------------------------------------------------------
Bryan Standley Corel WP Office
-----------------------------------------------------------------------------------------------------------------------
Bryan Standley Adobe PhotoShop
-----------------------------------------------------------------------------------------------------------------------
Dean Taylor MS Windows 98 T77MR-HWP2F-QY6HG-TBMXY-7GD Came with PC
-----------------------------------------------------------------------------------------------------------------------
Dean Taylor MS Office upgrade 2000 QT23D-R2KTB-HQ9WJ=H6DKG-XDWQW
-----------------------------------------------------------------------------------------------------------------------
Dean Taylor MS Office 97 Using 2000
-----------------------------------------------------------------------------------------------------------------------
Jen LeDoux MS Windows 98 XCJVM-XGFYG-W9T93-F9P87-F9P87-QGTPJ Came with PC
-----------------------------------------------------------------------------------------------------------------------
Jen LeDoux MS Office 2000 CG8GD-TDTJM-Y8PQT-6B999-KYYGQ
-----------------------------------------------------------------------------------------------------------------------
Jen LeDoux Norton AntiVirus Came with PC
-----------------------------------------------------------------------------------------------------------------------
Jen LeDoux Adobe Acrobat 4 90008639
-----------------------------------------------------------------------------------------------------------------------
Jen LeDoux Franklin Covey
-----------------------------------------------------------------------------------------------------------------------
Jen LeDoux MS Visio 2000
-----------------------------------------------------------------------------------------------------------------------
Kevin Wade MS Windows 98 Came with PC
-----------------------------------------------------------------------------------------------------------------------
Kevin Wade MS Visio 2000
-----------------------------------------------------------------------------------------------------------------------
Mark Hanks MS Office 2000 TTRYQ-3CDFJ-YY4C6-JWC99-6QR46
-----------------------------------------------------------------------------------------------------------------------
Mark Hanks MS Project 98 4912-2977987
-----------------------------------------------------------------------------------------------------------------------
Mark Hanks QuarkXpress WX13696266752
-----------------------------------------------------------------------------------------------------------------------
Mark Hanks Simplicity Milestone 5200-992204508
-----------------------------------------------------------------------------------------------------------------------
Mark Hanks Partition Magic PM400EICD-693707
-----------------------------------------------------------------------------------------------------------------------
Mark Weeden MS Windows 98 Came with PC
-----------------------------------------------------------------------------------------------------------------------
Mark Weeden J builder Free
-----------------------------------------------------------------------------------------------------------------------
Mark Weeden Visual H Came with PC
-----------------------------------------------------------------------------------------------------------------------
Nathaniel Monson MS Windows 98 Came with PC
-----------------------------------------------------------------------------------------------------------------------
Nathaniel Monson VMWare has only 1 copy
-----------------------------------------------------------------------------------------------------------------------
Scott Winn MS Windows 98 JFFD6-6BXWW-RCC78-GY2JK-8737W Came with PC
-----------------------------------------------------------------------------------------------------------------------
Scott Winn MS Office 2000 H7K6J-QCVJB-4C6B2-FKGF8-69VBY
-----------------------------------------------------------------------------------------------------------------------
Scott Winn Visio 2000 123165-501773
-----------------------------------------------------------------------------------------------------------------------
Scott Winn Rapid DQL 5.5 E1114079171299
-----------------------------------------------------------------------------------------------------------------------
Scott Winn ER/Studio P1630022310100
-----------------------------------------------------------------------------------------------------------------------
Scott Winn Rapid SQL P1430163640100
-----------------------------------------------------------------------------------------------------------------------
Scott Winn DB Artisan Changer Mngr
-----------------------------------------------------------------------------------------------------------------------
Tim Christensen MS Windows 98 BC42K-RK2GD-RJQC9-HYWWD-WW2V3 Came with PC
-----------------------------------------------------------------------------------------------------------------------
Tim Christensen MS Office 2000 CG8GD-TDTJM-Y8PQT-68999KYYGQ
-----------------------------------------------------------------------------------------------------------------------
Tim Christensen MS Project 2000 8923-0378386
-----------------------------------------------------------------------------------------------------------------------
Tim Christensen Adobe Acrobat 4 KWW400R7267727-391
-----------------------------------------------------------------------------------------------------------------------
Tim Christensen McAfee Anti Virus Came with PC
-----------------------------------------------------------------------------------------------------------------------
Tim Christensen Homesite 4.5
-----------------------------------------------------------------------------------------------------------------------
Tom Lonni MS Windows 98 TBJ2R-JYJDR-79XQY-PTF2F-FHPY6 Came with PC
-----------------------------------------------------------------------------------------------------------------------
Tom Lonni Visio 2000
-----------------------------------------------------------------------------------------------------------------------
Tom Lonni MS Office 2000 FX64F-RGMPJ-K22TD-TR9PC-X6CH6
-----------------------------------------------------------------------------------------------------------------------
Tom Lonni Code Write 6 CW600-2T9H-68312
-----------------------------------------------------------------------------------------------------------------------
Tom Lonni Code Write 6 CW600-H1AT-68325
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 42
10/20/00
partnerAxis Equipment Assets
<TABLE>
<CAPTION>
Employee Asset # Equipment Model Sn Notes
--------------- ------- ---------------------- --------------- --------- -----------------------
<S> <C> <C> <C> <C> <C>
Brian Rasmussen 1933 Mahogany Desk 30X60
Brian Rasmussen 1934 Mahogany Bookcase 3672
Brian Rasmussen 1955 Display Phone Toshiba
Brian Rasmussen 2603 Pentium III (IPX) Eng Specs
Brian Rasmussen 3372 OptiQuest 19" Monitor Q95 9L95107364
Brian Rasmussen Whiteboard 4x6
Brian Rasmussen Side Chair Small side arm chair
Brian Rasmussen 2450 Roller desk chair
Bryan Standley 1004 Iomega Zip Drive
Bryan Standley 1029 DeskJet Printer 1000c SG755120YW This is an older Printer
Bryan Standley 1883 Mahogany Desk 30X60 Caldera has on Lease
Bryan Standley 1884 Mahogany Bookcase 3672 Caldera has on Lease
Bryan Standley 2936 KDS 19" Monitor VS-195E 992036989
Bryan Standley 4730 Hon Swivel Chair 7803
Bryan Standley 5534 Display Phone Toshiba
Bryan Standley 5535 Display Phone Toshiba Does Not have this phone
Bryan Standley Side Chair Plain no arm side chair
Bryan Standley Side Chair Plain no arm side chair
Bryan Standley Whiteboard 4x6
Dean Taylor 1909 Mahogany Desk 3672 Caldera has on Lease
Dean Taylor 1910 Mahogany Bookcase 3672
Dean Taylor 2359 Chair Stationary Gr/BK
Dean Taylor 2434 Chair with Rollers Lt bl/bk
Dean Taylor 2530 OptiQuest 19" Monitor VCDTS21383-1M 2J91201279
Dean Taylor 2911 IBM ThinkPad I 1472 2611-472 AA-DJNDC
Dean Taylor 3202 Chair Stationary
Dean Taylor 3546 File Cabinet 4 Drawer
Dean Taylor 5561 Mahogany Credenza 18X72
Dean Taylor 5562 Display Phone Toshiba
Dean Taylor 2397 Book Shelf Base is Broken
Dean Taylor 5566 Roller Side Chair Won't Raise
Dean Taylor 5565 Roller Side Chair Won't Raise
Dean Taylor Whiteboard 4x6
Dean Taylor Whiteboard 2x3
Dean Taylor Whiteboard 2x3
Jen LeDoux 1913 Mahogany Desk
Jen LeDoux 1914 Mahogany Bookcase
Jen LeDoux 2221 Pedistal File
Jen LeDoux 3284 Hon Swivel Chair
Jen LeDoux 3299 AMD K6-2 450 PC
Jen LeDoux 3402 KDS 19" Monitor
Jen LeDoux 5559 Display Phone Toshiba
Jen LeDoux Whiteboard 2x3
Jen LeDoux Cork Bulliten board 4x5
Jen LeDoux 3105 Side Chair Older Side Chair
Jen LeDoux 2930 Older CPU Older Dept Computer
Jen LeDoux 1129 Older Monitor Older Dept Monitor
Kevin Wade 1915 Mahogany Desk
Kevin Wade 2444 Cabinet With Bookshelf
Kevin Wade 3360 IBM Thinkpad 600E 2645-5BU 78-MHRZ6
Kevin Wade 3362 KDS 19" Monitor VS-195E 792009932
Kevin Wade 5556 Display Phone Toshiba
Kevin Wade 5557 Chair Hiback with rollers
Kevin Wade Side Chair Older Side Chair
Kevin Wade Whiteboard 4x5
Mark Hanks 1902 Mahogany Desk
Mark Hanks 1903 Mahogany Bookcase
Mark Hanks 2220 Lateral File
Mark Hanks 2925 IBM Thinkpad I 1472 2611-472 AA-DRXLW
Mark Hanks 2945 KDS 19" Monitor VS-195E
Mark Hanks 3278 Hon Swivel Chair 7808BP19T
</TABLE>
<PAGE> 43
<TABLE>
<S> <C> <C> <C> <C> <C>
Mark Hanks 5571 Display Phone Toshiba
Mark Hanks Whiteboard 3x4
Mark Hanks Side Chair Old side chair with metal arns
Mark Hanks Side Chair Old side chair with metal arns
Mark Weeden 1936 Mahogany Desk
Mark Weeden 1957 Display Phone Toshiba Not Taking
Mark Weeden 1958 Display Phone Toshiba
Mark Weeden 2626 AMPTron CS 19
Mark Weeden 3376 Intel Pentium III 550 Eng Specs
Mark Weeden 3434 Intel Pentium III 550 Eng Specs
Mark Weeden 3435 OptiQuest 19" Monitor Q95 9L00808499 Does not have
Mark Weeden 3700 Bookcase Wooden
Mark Weeden 4749 Hon Swivel Chair 7803
Mark Weeden 2603 AMD K6-2 450 PC
Mark Weeden Whiteboard 4x6
Mark Weeden OmniQube Switchbox
Nathaniel Monson 1942 Mahogany Desk
Nathaniel Monson 1966 Display Phone Toshiba
Nathaniel Monson 2941 Intel Pentium III 450 Eng Specs
Nathaniel Monson 2942 KDS 19" Monitor VS-195E 1282099293
Nathaniel Monson 3086 Chair with rollers
Nathaniel Monson 3554 Dell Poweredge Server 2400 Server
Nathaniel Monson 3555 Dell 15" monitor MX-06204T Included with server
Nathaniel Monson 1941 Bookshelf Wooden
Scott Winn 1911 Mahogany Desk
Scott Winn 1912 Mahogany Bookcase
Scott Winn 3300 AMD K6-2 450 PC Reg Spec
Scott Winn 3301 KDS 19" Monitor VS-195E 1092044362
Scott Winn 3452 OptiQuest 19" Monitor Q95 9L95107366
Scott Winn 5560 Display Phone Toshiba
Scott Winn 4714 Hon Swivel Chair 7808
Scott Winn Whiteboard 3x5
Tim Christensen 1901 Mahogany Desk
Tim Christensen 2931 AMD K6-2 450 PC Reg Spec
Tim Christensen 2937 KDS 19" Monitor VS-195E 992034429
Tim Christensen 3282 Hon Swivel Chair 7808BPT
Tim Christensen 3701 Bookcase Wooden
Tim Christensen 5572 Display Phone Toshiba
Tom Lonni 1916 Mahogany Desk
Tom Lonni 3359 IBM Thinkpad 600E 2645-5BU 78-DFHL2
Tom Lonni 3361 KDS 19" Monitor VS-195E 992037286
Tom Lonni 4715 Hon Swivel Chair 7808
Tom Lonni 2443 Cabinet With Bookshelf
Tom Lonni 5555 Display Phone Toshiba
Tom Lonni Side Chair Older Side Chair
Tom Lonni Side Chair Older Side Chair
Tom Lonni Whiteboard 3X4
Group 10 Floor mats
Group 11 Waste Baskets
Total
</TABLE>
<PAGE> 44
EXHIBIT B
ELM Business Operations
ELM BUSINESS DESCRIPTION
Ebiz plans, through a division or wholly-owned subsidiary which Ebiz
intends to name "partnerAxis," to build a profit and margin generating
infrastructure for partnerAxis and its partners by providing an
electronic Linux marketplace for seekers and providers of Linux based
solutions. partnerAxis calls this the Electronic Linux Marketplace
(ELM).
The ELM is a unique virtual community specifically designed to attract
users, visionary manufacturers, and electronic Solution Providers (eSPs)
by providing the knowledge and opportunities they need to propel Linux
solutions (or any other innovation) across what is commonly known in the
information technology community as the Technology Adoption Life Cycle
`chasm', by combining features and functionality of e-Tailers,
e-Channels and Portals.
ELM BENEFITS
The ELM will provide the following benefits for the users below:
- Manufacturers - A quick, inexpensive, and effective method to
launch technical products into niche-specific markets in advance of
general market acceptance. Manufacturers gain direct access to an
established Linux channel at a lower cost than what they would have
to invest to build a channel themselves.
- eSPs - The ELM re-establishes the value of the eSP as technical
specialists by including them in the sales process of the Internet
economy. It provides them with credit on product sales and service
leads and with the strategic partnerships, specialized knowledge
and innovative products and services they need to identify and meet
their customers' needs.
- End Users - The ELM provides end users with the ability to easily
find solutions, products, services and information in one location.
It is a comprehensive repository of knowledge and products in the
Linux marketplace.
- partnerAxis - A significant revenue opportunity and a way to build
and strengthen our own channel and construct a vendor-neutral
marketplace focused specifically on gaining general market
acceptance for our products.
REVENUE OPPORTUNITY
partnerAxis brokers shelf space in the ELM to Manufacturers. This
shelf-space, in the form of Knowledge Points, provides the manufacturers
the opportunity to showcase their products, services, and solutions and
communicate with the channel.
A Knowledge Point is an information exchange point whereby seekers and
providers of Linux solutions gain knowledge and information to make
intelligent decisions that meet their needs.
partnerAxis currently intends to charge each customer $0.50 per
Knowledge Point per eSP per month. For example, if has 3,000 eSPs in its
database and 150 manufacturers choose to purchase 2 Knowledge Points
each, partnerAxis would receive monthly revenue $450,000 (3,000 eSPs *
150 manu. * 2 KPs * $0.50).
In addition to direct revenue from Knowledge Points, partnerAxis will
evaluate the possibility of obtaining additional revenue via web
advertising, eSP subscriptions, and on demand, customized services for
those who need assistance in building their own Linux channel.
COMPETITIVE ADVANTAGES
Traditional Internet businesses can be classified based on one of three
Internet business models: e-Channels, Portals or e-Tailers. e-Channels
are proprietary business networks setup by manufacturers
<PAGE> 45
to support their channel. Portals are virtual communities that derive
most of their revenue from advertising, and e-Tailers are primarily
Internet storefronts that rely on revenue from direct product sales,
which exclude the channel.
The Electronic Linux Marketplace is uniquely positioned because it
combines and extends features and functionality from all three of these
business models. It is a virtual community designed to embrace new
technology by creating a public business network that includes the
channel at the center of the sales process. Furthermore, it derives
revenue by brokering manufacturers' product and service information,
which makes it immune to the emerging trend of product margins
approaching zero.
<PAGE> 46
EXHIBIT C
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.
2. 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.
1
<PAGE> 47
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
excess of
2
<PAGE> 48
$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
3
<PAGE> 49
action asserted or filed by any party in any way relating to, arising out of,
this Agreement or the subject matter hereof.
(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.
4
<PAGE> 50
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:
------------------------------------
Its:
----------------------------------
CALDERA SYSTEMS, INC.,
A DELAWARE CORPORATION
By:
------------------------------------
Its:
----------------------------------
5
<PAGE> 51
EXHIBIT D
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement"), dated the 15th day of
September, 2000, by and between Ebiz Enterprises, Inc., a Nevada corporation
(the "Company"), and Caldera Systems, Inc., a Delaware corporation (the
"Holder").
WITNESSETH
WHEREAS, concurrently with the execution of this Agreement, the Company
and the Holder have entered into a Purchase and Sale Agreement (the "Purchase
Agreement") pursuant to the terms of which the Company has agreed to issue
certain shares of its common stock (as more particularly defined herein, the
"Shares"), to the Holder; and
WHEREAS, as a condition to the effectiveness of the obligations of the
Company and the Holder pursuant to the Purchase Agreement, the Company and the
Holder have agreed to enter into this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the following respective meanings:
a. "Commission" shall mean the United States Securities
and Exchange Commission or any other Federal agency at the time
administering the Securities Act.
b. 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, and the declaration or ordering of
effectiveness of such registration statement or document by the
Commission.
c. The term "Registrable Stock" means all Shares that
are issued or to be issued to the Holder pursuant to the terms
of the Purchase Agreement and any Common Stock 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, such Shares or any preferred stock of the
Company granted to the Holder pursuant to the terms of this
Agreement or the Purchase Agreement; provided, however, that
shares of Registrable Stock shall cease to be Registrable Stock
if they are sold or transferred pursuant to a registered public
offering or other transaction which does not result in
restrictions on resale being imposed on the transfer by virtue
of Federal or state securities laws.
d. "Common Stock" means the common stock of the Company.
e. "Securities Act" shall mean the United States
Securities Act of 1933, as amended, or any successor or other
similar Federal statute, and the rules and regulations of the
Commission thereunder and the forms prescribed thereby, all as
the same shall be in effect at the time. "Exchange Act" shall
mean the United States Securities Exchange Act of 1934, as
amended, or any successor or other similar Federal statute, and
the rules and regulations of the Commission thereunder and the
forms prescribed thereby, all as the same shall be in effect at
the time.
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f. "Shares" means all the shares of Common Stock or
other shares of capital stock of the Company which are issued
or to be issued to the Holder pursuant to the terms of the
Purchase Agreement or this Agreement.
2. Representations and Warranties, etc.
a. The Holder hereby represents and warrants to, and
covenants with, the Company that:
(i) The Holder will not sell, transfer or
otherwise dispose of the Shares, except upon the
conditions specified herein, which conditions are
intended to ensure compliance with the provisions of the
Securities Act.
(ii) The Holder understands and agrees with the
Company that, except as set forth in and subject to the
provisions of this Agreement:
(A) The Company is under no obligation
to register the sale, transfer or other
disposition of the Shares or to take any other
action necessary in order to make an exemption
from registration available to the Holder,
except to remain current in its reporting
obligations under the Exchange Act (if
applicable).
(B) Stop transfer instructions will be
given to the transfer agent with respect to the
Shares.
(iii) The Holder acknowledges that the
certificates representing the Shares, and any
substitutions or replacements thereof, shall bear a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933,
(THE "ACT") AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES
ONLY AND NOT WITH A VIEW TO THE DISTRIBUTION THEREOF,
AND SUCH SECURITIES OR ANY INTEREST THEREIN MAY NOT BE
SOLD OR OFFERED FOR SALE EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT, OR (B)
PURSUANT TO AN AVAILABLE EXEMPTION.
b. Certain Other Matters. It is understood and agreed
that the stop transfer instructions referred to above will be
removed as to a particular Share or block of Shares if (i) a
distribution by the Holder of such Shares has been registered
under the Securities Act or (ii) permitted under the provisions
of Rule 144(k) promulgated under the Securities Act (as then in
effect). The Company hereby agrees to remain current in its
reporting requirements under the Exchange Act (if applicable).
The Company agrees, upon the request of the Holder, to make
available to the Holder and to any prospective transferee of the
Registrable Shares of the Holder, information concerning the
Company described in Rule 144A(d)(4) of the Securities Act.
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3. Demand Registration.
a. Upon the written request of the Holder, the Holder may
request that the Company effect the registration on Form S-1 or Form S-2
of all or part of its Registrable Stock under the Securities Act
(provided that the number of Shares to be included in such registration
is at least $1,000,000 in then current market value of such Shares) and
in such request, the Holder shall state the then intended method of
disposition by the Holder. The Company shall as soon as possible use
diligent best efforts to prepare and file with the Commission a
registration statement and such other documents, including an amended or
supplemented prospectus, as may be necessary to permit a public offering
and sale of such Registrable Stock in the United States in compliance
with the provisions of the Securities Act, all to the extent required to
permit the disposition (in accordance with the intended methods thereof
as aforesaid) by the Holder of the Registrable Stock to be so
registered. If such sale of Registrable Stock is to be pursuant to an
underwritten public offering, the underwriter shall be selected by the
Holder. The Company shall only be required to effect two registrations
pursuant to this Section 3.
b. The Company shall not be required to effect any registration
under Section 3(a): (i) prior to six months following the date of this
Agreement; or (ii) (A) within nine months after the completion of any
public offering of its securities pursuant to which the Holder was
afforded the right to register as many shares of its Registrable Stock
as requested or (B) within six months after any other public offering by
the Company.
c. The Company shall have the right to include in a registration
statement or post-effective amendment to a registration statement filed
pursuant to this Section 3 other securities of the Company then proposed
to be distributed, except that, to the extent consistent with the rights
of other holders of the Company's securities, if and to the extent that
the underwriter or underwriters acting in connection with any public
offering pursuant to such registration statement reasonably determine
that the inclusion of any such other securities may substantially
prejudice or hinder the offering of Registrable Stock, the number of
such other securities shall be reduced or eliminated prior to any
reduction in the number of shares of Registrable Stock to be so
registered and offered.
d. If, at any time prior to the effectiveness of the
registration statement filed in connection with such registration, the
Company furnishes to the Holder a certificate signed by the President
that in the good faith judgment of the Board of Directors of the Company
it would be seriously detrimental to the Company and its stockholders to
effect such registration at such scheduled time and it is therefore
essential to defer the filing of such registration statement, the
Company may, by delivery of written notice to the Holder, delay the
registration of such Registrable Stock for up to 90 days, provided the
Company may not use this right more than once in any 12 month period.
4. Incidental Registration.
If, at any time, the Company proposes to register shares of
Common Stock or securities convertible into or exercisable for Common
Stock under the Securities Act (other than pursuant to a registration
statement on Form S-4 or S-8 or any successor form, or filed in
connection with an exchange offer or an offering of securities solely to
the existing shareholders or employees of the Company), whether for sale
for its own account or for the account of any other person holding
registration rights with respect to the securities of the Company, then
the Company shall give written notice of such proposed registration to
the Holder at least thirty days before the anticipated filing date of
such registration statement
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<PAGE> 54
which notice shall describe the material terms of the proposed
registration, and such notice shall offer the Holder the opportunity to
register such number of shares of Registrable Stock as the Holder may
request. As promptly as practicable (but no later than 15 days) after
the provision of such notice, the Holder shall so notify the Company,
and the Company shall use diligent best efforts to cause the managing
underwriter or underwriters of any proposed underwritten offering
pursuant to such registration statement to permit such to include such
Registrable Stock in such offering on the same terms and conditions as
any similar securities of the Company included therein; provided,
however, that if the managing underwriter or underwriters of any such
public offering delivers an opinion to the Holder that the total amount
of Registrable Stock which the Holder proposes to include in the
offering when added to the securities being sold by the Company and any
other persons or entities, in any such public offering, is such as to
materially and adversely affect the success of any such public offering,
then the amount of Registrable Stock to be offered for the account of
the Holder proposed to be included in any such public offering shall be
reduced or limited to the extent necessary to reduce the total amount of
Registrable Stock to be included in any such public offering to the
amount recommended by such managing underwriter, provided, no such
reduction may reduce the amount of Registrable Stock being sold by the
Holder to less than the lesser of: (i) twenty percent (20%) of the
shares being sold in such offering by entities other than the Company or
entities exercising demand registration rights; or (ii) the number of
Shares requested to be registered by the Holder. If the Holder
disapproves of the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration, and shall not be transferred
in a public distribution prior to ninety (90) days after the effective
date of the registration statement relating thereto. Notwithstanding the
foregoing, if, at any time after giving written notice of its intention
to register Common Stock or other securities convertible into or
exercisable for Common Stock and prior to the effectiveness of the
registration statement filed in connection with such registration, the
Company determines for any reason either not to effect such registration
or to delay such registration, the Company may, at its election, by
delivery of written notice to the Holder, (i) in the case of a
determination not to effect registration, relieve itself of its
obligations to register any Registrable Stock in connection with such
registration, or (ii) in the case of a determination to delay such
registration, delay the registration of such Registrable Stock for the
same period as the delay in the registration of such other shares of
Common Stock or other securities convertible into or exercisable for
Common Stock. The Company agrees that it shall not grant incidental or
"piggyback" registration rights superior to those held by the Holder,
without the consent of the Holder.
5. Registration on Form S-3; Termination.
a. If the Holder requests that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for a public
offering of shares of the Registrable Stock, the reasonably anticipated
aggregate offering price to the public of which, net of underwriting
discounts and commissions would exceed $500,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Stock
for such an offering, the Company shall use diligent best efforts to
cause such Registrable Stock to be registered for the offering on such
form; provided, however, that the Company shall not be required to
effect more than one (1) registration pursuant to this Section 5 in any
twelve (12) month period. The Company will as soon as possible use its
diligent best efforts to effect such registration (including, without
limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so
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<PAGE> 55
requested and as would permit or facilitate the sale and distribution of
all or such portion of such Registrable Stock as are specified in such
request. The substantive provisions of Section 6 shall be applicable to
each registration initiated under this Section 5.
b. Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to Section 5(a) (i) not permitted
by the Commission; (ii) in any particular jurisdiction in which the
Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance
unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act; (iii) during the
period starting with the date sixty (60) days prior to the filing of,
and ending on the earlier of (x) one year after the date sixty (60) days
prior to the Company's date of filing of, or (y) a date six (6) months
following the effective date of, a registration statement (other than
with respect to a registration statement relating to a Rule 145
transaction, an offering solely to employees or any other registration
which is not appropriate for the registration of Registrable
Securities), provided that the Company is actively employing diligent
best efforts to cause such registration statement to become effective;
or (iv) if the Company shall furnish to the Holder a certificate signed
by the President of the Company stating that, in the good faith judgment
of the Company=s Board of Directors, it would be seriously detrimental
to the Company or its shareholders for a registration statement to be
filed in the near future, then the Company's obligation to use diligent
best efforts to file a registration statement shall be deferred for a
period not to exceed sixty (60) days after the receipt of the request to
file such registration by the Holder provided, that the Company may not
use this right more than once in any 12 month period.
c. The Holder's rights pursuant to Sections 3, 4 and 5 above
shall expire (a) on the date when all of the Registrable Securities held
by such Holder may be sold in a single ninety (90) day period pursuant
to Rule 144 under the 1933 Act; or (b) upon the date that is seven years
after the effective date of this Agreement.
6. Obligations of the Company. Whenever required under this Agreement to
effect the registration of any Registrable Stock, the Company shall, as
expeditiously as is possible:
a. Prepare and file with the Commission a registration statement
or post-effective amendment with respect to such Registrable Stock that
complies with the requirements of the Securities Act and use its
diligent best efforts to cause such registration statement or
post-effective amendment to become and, during the distribution of such
Registrable Stock, to remain effective; provided, however, that such
registration statement or post-effective amendment shall not be required
to remain effective for a period of more than twelve months.
b. Prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in
connection with such registration statement and any and all such
documents as may be necessary to keep such registration statement
effective during the distribution of such Registrable Stock (subject to
the proviso in subsection (a) above) and to comply with the provisions
of the Securities Act with respect to the disposition of all securities
covered by such registration statement or post-effective amendment
thereto and to cause such registration statement to become and remain
(subject to the proviso in subsection (a) above) effective under the
Securities Act.
c. Furnish to the Holder such numbers of copies of such
registration statement and the form of prospectus included therein and
any amendments or supplements thereto, including a preliminary
prospectus, in conformity with the requirements of the Securities Act,
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<PAGE> 56
and such other documents as the Holder may reasonably request in order
to facilitate the disposition of Registrable Stock owned by the Holder
thereof in compliance with all applicable laws and regulations.
d. Use its best efforts to (i) register and qualify the
Registrable Stock covered by such registration statement under such
other securities or blue sky or other similar laws of such jurisdictions
as shall be reasonably requested by the Holder, and (ii) to keep such
registration or qualification effective during the distribution of such
securities (subject to the proviso in subsection (a) above); and do any
and all other acts and things necessary or desirable to enable the
Holder to consummate the disposition of the Registrable Stock; 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. Anything in
this Agreement to the contrary notwithstanding with respect to the
bearing of expenses, if any jurisdiction in which the securities shall
be qualified shall require that expenses incurred in connection with the
qualification of the securities in that jurisdiction be borne by selling
shareholders, then such expenses shall be payable by the Holder of
Registrable Stock to the extent required by such jurisdiction.
e. In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement with respect
to such offering, in usual and customary form, with the managing
underwriter of such offering. The Holder shall also enter into and
perform its respective obligations under such an agreement.
f. Notify the Holder during any period that a prospectus
relating to Registrable Stock covered by such registration statement is
required to be delivered under the Securities Act of the happening of
any event or the existence of any circumstances 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.
g. Furnish to the Holder, on the date that shares of Registrable
Stock are delivered to the underwriters for sale in connection with a
registration pursuant to this Agreement, if such securities are being
sold by or through underwriters, or, on the date that the registration
statement with respect to such securities becomes effective, (i) an
opinion, dated such date, of 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 Holder 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, and to the Holder.
7. Furnish Information. The Holder shall furnish to the Company such
reasonable information regarding the Holder, the Registrable Stock, and the
intended method of disposition of such securities as shall be reasonably
requested by the Company to effect the registration of Registrable Stock as to
which the Holder has requested registration.
8. Expenses of Registration. All expenses incident to the Company's
performance of or compliance with this Agreement including, without limitation,
all registration and filing fees, fees and expenses of complying with the state
securities or blue sky laws, printing expenses, listing fees, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents, registrars and depositories, and fees and disbursements of
counsel for the Company and of
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<PAGE> 57
independent public accountants (including the expense of any special audit), but
excluding underwriting commissions and discounts of any such underwriter and the
fees and disbursements of counsel for the Holder, shall be borne by the Company.
The Holder shall bear all underwriting commissions and discounts incurred in
connection with any offering of Registrable Stock with respect to a registration
pursuant to this Agreement, as well as its fees and disbursements of counsel if
the Holder has counsel separate from counsel for the Company.
9. Indemnification and Contribution. In the event any shares of
Registrable Stock are included in a registration statement under Sections 3, 4,
and 5 hereof:
a. To the extent permitted by law, the Company will indemnify
and hold harmless the Holder, each of its directors and officers and any
underwriter (to the extent provided in any underwriting agreement), any
other person or entity selling Registrable stock in such registration
statement, and each director and officer of, any person, if any, who
controls the Holder or any such underwriter or such other person or
entity within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, liabilities (joint or several) or
expenses (including legal fees) to which they may become subject under
the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, liabilities or expenses (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 Securities Act, the
Exchange Act, any federal or state securities or other similar law or
any rule or regulations promulgated under the Securities Act, the
Exchange Act or any federal or state securities or other similar law;
provided, however, that the indemnity agreement contained in this
subsection 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 to the Holder or
any other person described above as an indemnitee 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 which occurs in reliance upon
and in conformity with written information furnished expressly for use
in connection with such registration by, or which results from the bad
faith or gross negligence of, the Holder, any underwriter for the
Company or controlling person of the Holder.
b. To the extent permitted by law, the Holder will indemnify and
hold harmless the Company, each of its directors, and its officers, each
person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter (to the extent provided in any
underwriting agreement), any other person or entity selling securities
in such registration statement, and each director and officer of, any
person, if any, who controls such underwriter or such other person or
entity, against any losses, claims, damages, liabilities (joint or
several) or expenses (including legal fees) to which the Company or any
such director, officer, controlling person, or underwriter or
controlling person, or such other person or entity or director, officer
or controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses,
claims, damages, liabilities or expenses (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 the Holder expressly
for use and used in any such registration statement, and in connection
with such registration
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of securities of the Holder pursuant to this Agreement or results from
the bad faith or gross negligence of the Holder, or any underwriter for
the Holder in connection with any such registration; provided, however,
that the indemnity agreement contained in this subsection (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, and
provided further, that the obligations of the Holder shall be limited to
an amount equal to the proceeds to the Holder of the Registrable Stock
sold in connection with such registration.
c. Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action (including any
governmental action), such indemnified party will deliver to each
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 notified, to assume the defense thereof
with counsel mutually satisfactory to the parties. An indemnified party
shall have the right to retain its own counsel; however, the fees and
expenses of such counsel shall be borne by such indemnified party,
unless representation of such indemnified party by the indemnifying
party's counsel would be inappropriate due to actual or potential
conflicts of interest. 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, 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.
d. If an indemnification event shall occur that is indemnifiable
under subsections (a) and (b) of this Section, and both the Company and
the Holder have indemnifiable liability therefore, then each
indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages,
liabilities or expenses (including legal fees) or actions in such
proportion as is appropriate to reflect the relative fault of the
Company, on the one hand, and the Holder, on the other, in connection
with the statements or omissions which resulted in such losses, claims,
damages, liabilities or expenses or actions as well as any other
relevant equitable considerations, including the failure to give the
notice required under such subsections. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact relates to information
supplied by the Company on the one hand, or the Holder, on the other
hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Company and the Holder agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation or by any other method of allocation which did not take
account of the equitable considerations referred to above in this
subsection. No person guilty of fraudulent misrepresentations (within
the meaning of Section 11(f) of the Securities Act), shall be entitled
to contribution from any person who is not guilty of such fraudulent
misrepresentation.
e. The obligations of the Company and the Holder or Holders of
Registrable Stock under this Section shall survive the completion of any
offering of Registrable Stock in a registration statement under this
Agreement.
10. Successors and Assigns. The registration rights provided herein may
be transferred by the Holder, provided that (a) the Company is given written
notice thereof, (b) the transfer (i) is in connection with a transfer of all
securities of the Company held by the Holder, or (ii) involves a
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transfer of at least 200,000 shares of Registrable Stock (as appropriately
adjusted for stock splits and the like), or (iii) is to constituent partners or
shareholders of the Holder who agree to act through a single representative and
(c) the transferee enters into a counterpart of this Agreement and agrees to be
bound by the provisions hereof. This Agreement shall inure to the benefit of and
be enforceable at any time and from time to time by any Holder or Holders of any
Registrable Stock, whether so expressed in this Agreement or not, provided that
the termination of registration rights in respect of any shares of Registrable
Stock by reason of the terms of this Agreement shall be binding upon any
transferee of such shares, and, in the event such termination applies to only a
portion of the shares of Registrable Stock at the time held by any Holder
thereof, in the absence of contrary agreement between the Holder and any
transferee of such shares, upon the transfer of less than all of the shares by
the Holder after such termination, such termination shall apply pro rata to the
shares so transferred and the shares retained by the Holder, or any subsequent
transferee. Upon the request of any the Holder, the Company will confirm in
writing to any transferee of the Holder's Registrable Stock the Company's
continuing obligation to afford such transferee the benefits of the Company's
covenants contained in this Agreement, but no failure of the Company to confirm
such obligations shall in any way impair such transferee's rights under this
Agreement.
11. Amendments and Waivers. This Agreement may be amended, and the
Company may take any action herein prohibited or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent of each Holder to such amendment, action or omission to act. Any
amendment to this Agreement shall be in writing signed by all the parties
hereto.
12. Nominees for Beneficial Owners. In the event that any Registrable
Stock is held by a nominee for the beneficial owner thereof, the beneficial
owner thereof may, at its election, be treated as the Holder of such Registrable
Stock for purposes of any request or other action by the Holder pursuant to this
Investor Rights Agreement. If the beneficial owner of any Registrable Stock
elects to be treated as the Holder for such purposes, the Company may require
assurances reasonably satisfactory to it of such owner's beneficial ownership of
such Registrable Stock.
13. Right to Participate in Certain Sales of Additional Securities.
(a) The Company agrees that it will not sell or issue any shares
of capital stock of the Company, or other securities convertible into or
exchangeable for capital stock of the Company, or options, warrants or
rights carrying any rights to purchase capital stock of the Company (the
"Offered Securities") unless the Company first submits written notice
(the "Preemptive Rights Notice") to the Holder identifying the terms of
the proposed sale (including price, number or aggregate principal amount
of securities and all other material terms), and offers to the Holder
the opportunity to purchase its Pro Rata Allotment (as hereinafter
defined) of the securities on terms and conditions, including price, not
less favorable than those on which the Company proposes to sell such
securities to a third party or parties. The Company's offer to the
Holder shall remain open and irrevocable for a period of thirty (30)
days during which time the Holder may accept such offer by written
notice to the Company setting forth the maximum number of shares or
other securities to be purchased by the Holder. Any securities so
offered which are not purchased by the Holder pursuant to such offer may
be sold by the Company, but only on the terms and conditions set forth
in the initial offer to the Holder at any time within 120 days following
the termination of the above-referenced 30-day period. The closing of
the sale of the securities to the Holder shall be subject to the closing
of the sale of the remaining Offered Securities. For purposes of this
Agreement, the Holder's Pro Rata Allotment with respect to Offered
Securities shall be equal to the total number of such Offered Securities
proposed to be issued by the Company multiplied by a fraction, the
numerator of which is the number of Shares (determined on an
as-converted basis into the Company's Common Stock) owned by the Holder
immediately
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prior to the issuance of such Offered Securities, and the denominator of
which is the total number of Shares of Common Stock outstanding
immediately prior to the issuance of such Offered Securities.
(b) Notwithstanding the foregoing, the right to purchase shall
be inapplicable with respect to any issuance or proposed issuance by the
Company of (i) shares of Common Stock issued to officers, directors,
employees or consultants of the Company pursuant to any Company
incentive plan or upon the exercise of options or other rights issued to
such officers, directors, employees or consultants pursuant to any
Company incentive plan or any successor plan thereto, (ii) Common Stock
issued upon conversion of any preferred stock or convertible debentures
issued by the Company, and existing as of the date of this Agreement,
(iii) securities as a result of any stock split, stock dividend,
reclassification or reorganization of the Company's stock, and (iv)
Common Stock issued upon conversion of any options or warrants existing
as of the date of this Agreement.
(c) The rights of the Holder set forth in this Section 13 are
transferable to each transferee of Shares of capital stock of the
Company hereunder. Each such subsequent holder of such Shares must
consent in writing to be bound by the terms and conditions of this
Agreement in order to acquire the rights granted hereunder.
14. Information and Protective Covenants.
(a) The Company will maintain a comparative system of accounts
in accordance with generally accepted accounting principles, keep full
and complete financial records and furnish to the Holder the following
reports: (i) within 120 days after the end of each fiscal year, a copy
of the consolidated balance sheet of the Company as at the end of such
year, together with a consolidated statement of income and retained
earnings of the Company for such year, audited and certified by
independent public accountants of recognized national standing
reasonably satisfactory to the Holder, prepared in accordance with
generally accepted accounting principles consistently applied; (ii)
within 45 days after the end of each quarter commencing with the quarter
ending December 31, 2000, a consolidated unaudited balance sheet of the
Company as at the end of such quarter and a consolidated unaudited
statement of income and retained earnings for the Company for such
quarter and for the year to date; (iii) within 30 days after the end of
each month commencing with the month ending October 31, 2000, a
consolidated unaudited balance sheet of the Company as at the end of
such month and an unaudited statement of income and retained earnings
for the Company for such month and for the year to date, each of the
foregoing balance sheets and statements of income and retained earnings
to set forth in comparative form the corresponding figures for the prior
fiscal period and the fiscal year end budget and to include a brief
written discussion and analysis by management of such annual financial
statements; and (iv) such other financial information as the Holder may
reasonably request, including, without limitation, certificates of the
principal financial officer of the Company concerning compliance with
the covenants of the Company under this Section 14.
(b) All transactions by and between the Company and any officer,
employee, director or stockholder of the Company or persons controlling,
controlled by, under common control with or otherwise affiliated with
such officer, employee, director or stockholder shall be conducted on an
arm's-length basis, and shall be on terms and conditions no less
favorable to the Company than could be obtained from nonrelated persons.
(c) The Company shall, upon the written request of the Holder,
provide to the Holder and to any prospective institutional transferee of
any shares designated by the Holder,
10
<PAGE> 61
such financial and other information as is available to the Company or
can be obtained by the Company without material expense and as such
Holder may reasonably determine is required to permit such transfer to
comply with the requirements of Rule 144A promulgated under the Act.
(d) The Company will ensure that meetings of the Board of
Directors are held at least twice each year at intervals of not more
than six months. The Company shall pay such Directors for their
reasonable travel and other reasonable expenses incurred in connection
with attending such meetings. The Company's Articles of Incorporation
and By-Laws will provide for exculpation and indemnification of the
directors and limitations on the liability of the directors to the
fullest extent permitted under applicable state law.
(e) The Company will furnish to the Holder, upon reasonable
notice, reasonable information regarding its business and, at all
reasonable times during the Company's normal business hours and upon
reasonable notice and as often as the Holder shall reasonably request,
permit any authorized representative designated by the Holder to visit
and inspect any of its properties, including its books and records (and
to make copies and extracts therefrom), and to discuss their affairs,
finances and accounts with their officers.
(f) The Company agrees that it will not enter into or amend any
agreement, contract, commitment or understanding which would restrict or
prohibit the exercise by the Holder of any of the Holder's rights under
this Agreement or any of the other documents, agreements or instruments
contemplated hereunder.
15. Conversion to Preferred Stock. If, at any time after the date of
this Agreement, the Company shall issue any series of preferred stock to any
person or entity, then the Holder shall immediately have the right to elect to
convert all or any part of its shares of the Company's common stock into shares
of preferred stock of the same series and on the same terms and conditions as
the Company proposes to issue preferred stock to any other person or entity. The
Company shall give the Holder not less than 30 days advance notice prior to the
time that it shall issue any preferred stock to any party and the Holders may at
any time during such 30-day period elect to convert all or any portion of its
Shares into shares of preferred stock upon the terms and conditions which the
Company proposes to issue preferred stock to any other person or entity. This
right shall be a continuing right in the Holder and shall apply to all future
series of preferred shares which the Company proposes to issue so long as the
Holder shall own any of the shares issued or to be issued in connection with the
Purchase Agreement. For purposes of the conversion, the Holder's shares shall be
valued based upon the fair market value of the Company's common stock at the
time of the issuance of the preferred stock into which such shares will be
converted.
16. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid, addressed
a. If to the Holder, at the address shown on the stock or
warrant transfer books of the Company unless the Holder has advised the
Company in writing of a different address as to which notices shall be
sent under this Investor Rights Agreement, and
b. If to the Company, at 15695 North 83rd Way, Scottsdale,
Arizona 85260 to the attention of the President, or to such other
address as the Company shall have furnished to each Holder.
Any such notices of change in address of any Holder or the
Company shall be given in accordance with this Agreement.
11
<PAGE> 62
17. Miscellaneous.
a. Entire Agreement. This Agreement, together with the Purchase
Agreement and the other agreements and documents contemplated thereby,
embodies the entire agreement and understanding between the Company and
the other parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations,
correspondence, undertakings, communications and understandings relating
to the subject matter hereof.
b. Governing Law. This Agreement and all questions relating to
its validity, interpretation, performance and enforcement shall be
construed in accordance with Utah law.
c. Headings. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning
hereof.
d. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, with the same force
and effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto
shall have received counterparts hereof signed by the other parties
hereto; provided, however, that the Company's agreement with each of the
Holders in this Agreement is a separate agreement and is not contingent
upon the execution hereof by other parties. This Agreement may be
executed by facsimile signatures, each of which will be deemed an
original.
e. Attorneys' Fees. In the event that any action, suit,
litigation, arbitration, or proceeding is brought by any party under
this Agreement to enforce or construe any of the terms, the party that
prevails by enforcing this Agreement shall be entitled to recover, in
addition to all other amounts and relief, its reasonable costs and
attorneys' fees incurred in connection with such action, suit,
litigation, arbitration, claim or proceeding.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
Ebiz Enterprises, Inc.
a Nevada corporation
By:
------------------------------------
Its: President
CALDERA SYSTEMS, INC.,
a Delaware corporation
By:
------------------------------------
Its:
----------------------------------
12
<PAGE> 63
EXHIBIT E
SHAREHOLDER VOTING AGREEMENT AND PROXY
Reference is made to that certain Purchase and Sale Agreement of even
date herewith (the "Purchase Agreement") by and between Ebiz Enterprises, Inc.,
a Nevada corporation ("Ebiz"), and Caldera Systems, Inc., a Delaware corporation
("Caldera"), pursuant to which, among other things, Caldera will purchase up to
8,000,000 shares of the common stock of Ebiz.
In consideration of Ebiz and Caldera entering into the Purchase
Agreement and consummating the transactions contemplated therein, and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the undersigned hereby agree as follows:
1. Jeffrey I. Rassas and Stephen C. Herman, as the only directors of
Ebiz, shall cause the size of Ebiz's board of directors to be increased by one
and shall appoint Ransom Love (or such other individual as may be designated by
Caldera) to fill such newly-created vacancy and to serve on the board of
directors until the next election of directors in accordance with Ebiz's bylaws,
or until he sooner dies, resigns or is terminated.
2. From and after the date hereof, at each regularly scheduled election
of directors of Ebiz at which Mr. Love's seat is up for reelection until this
agreement is terminated pursuant to Section 4 below (each, an "Election"), each
of the undersigned shall vote (or cause to be voted) all Ebiz shares conferring
the right to vote held by the undersigned (the "Shares") in favor of Ransom Love
(or such other individual as may be designated by Caldera) to serve on the board
of directors of Ebiz until his successor has been duly qualified and elected in
accordance with Ebiz's bylaws, or until he sooner dies, resigns or is
terminated.
3. For the purpose of voting the Shares with respect to the matters
described herein, each of the undersigned hereby appoints, effective as of the
closing of the transactions contemplated in the Purchase Agreement, Jeffrey I.
Rassas, Stephen C. Herman and Ransom Love each as proxy to vote all Shares
registered in the name of the undersigned at a meeting of shareholders or by
written consent, with all power possessed by the undersigned, including full
power of substitution thereof, for a period ending upon the termination of this
Agreement pursuant to Section 4 below, to be irrevocable during such period.
This proxy is coupled with an interest. This voting agreement and proxy shall be
binding on the undersigned's successors and assigns.
4. This agreement shall automatically terminate upon the first to occur
of: (i) the date that is seven years after the date of this Agreement; or (ii)
the date upon which Caldera first owns less than 25% of the shares of Ebiz
common stock issued to it pursuant to this Agreement.
Signatures on Following Page
<PAGE> 64
IN WITNESS WHEREOF, each of the undersigned has caused this Shareholder
Voting Agreement and Proxy to be executed and delivered as of September 15,
2000.
Caldera Systems, Inc.
By:
------------------------------------
Name
----------------------------------
Title
----------------------------------
Ebiz Enterprises, Inc.
By:
------------------------------------
Name
----------------------------------
Title
----------------------------------
Hayjour Family Limited Partnership
By
------------------------------------
Name: Jeffrey I. Rassas
Title: General Partner
Kona Investments Limited Partnership
By
------------------------------------
Name: Stephen C. Herman
Title: General Partner
---------------------------------------
Ransom Love
---------------------------------------
Jeffrey I. Rassas
---------------------------------------
Stephen C. Herman
<PAGE> 65
EXHIBIT F
<TABLE>
<S> <C>
Mark Weeden 70,000
Nathaniel Monson 42,000
Brian Rasmussen 65,000
Dean Taylor 110,000
Tom Lonni 93,000
Mark Hanks 52,000
Kevin Wade 87,000
Scott Winn 75,000
Jennifer Ledoux 33,000
Tim Christensen 55,000
Bryan Standley 53,000
</TABLE>
<PAGE> 66
EXHIBIT C
SHAREHOLDER VOTING AGREEMENT AND PROXY
Reference is made to that certain Purchase and Sale Agreement of even
date herewith (the "Purchase Agreement") by and between Ebiz Enterprises, Inc.,
a Nevada corporation ("Ebiz"), and Caldera Systems, Inc., a Delaware corporation
("Caldera"), pursuant to which, among other things, Caldera will purchase up to
8,000,000 shares of the common stock of Ebiz.
In consideration of Ebiz and Caldera entering into the Purchase
Agreement and consummating the transactions contemplated therein, and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the undersigned hereby agree as follows:
1. Jeffrey I. Rassas and Stephen C. Herman, as the only directors of
Ebiz, shall cause the size of Ebiz's board of directors to be increased by one
and shall appoint Ransom Love (or such other individual as may be designated by
Caldera) to fill such newly-created vacancy and to serve on the board of
directors until the next election of directors in accordance with Ebiz's bylaws,
or until he sooner dies, resigns or is terminated.
2. From and after the date hereof, at each regularly scheduled election
of directors of Ebiz at which Mr. Love's seat is up for reelection until this
agreement is terminated pursuant to Section 4 below (each, an "Election"), each
of the undersigned shall vote (or cause to be voted) all Ebiz shares conferring
the right to vote held by the undersigned (the "Shares") in favor of Ransom Love
(or such other individual as may be designated by Caldera) to serve on the board
of directors of Ebiz until his successor has been duly qualified and elected in
accordance with Ebiz's bylaws, or until he sooner dies, resigns or is
terminated.
3. For the purpose of voting the Shares with respect to the matters
described herein, each of the undersigned hereby appoints, effective as of the
closing of the transactions contemplated in the Purchase Agreement, Jeffrey I.
Rassas, Stephen C. Herman and Ransom Love each as proxy to vote all Shares
registered in the name of the undersigned at a meeting of shareholders or by
written consent, with all power possessed by the undersigned, including full
power of substitution thereof, for a period ending upon the termination of this
Agreement pursuant to Section 4 below, to be irrevocable during such period.
This proxy is coupled with an interest. This voting agreement and proxy shall be
binding on the undersigned's successors and assigns.
4. This agreement shall automatically terminate upon the first to occur
of: (i) the date that is seven years after the date of this Agreement; or (ii)
the date upon which Caldera first owns less than 25% of the shares of Ebiz
common stock issued to it pursuant to this Agreement.
Signatures on Following Page
<PAGE> 67
IN WITNESS WHEREOF, each of the undersigned has caused this Shareholder
Voting Agreement and Proxy to be executed and delivered as of September 15,
2000.
Caldera Systems, Inc.
By: /s/ RANSOM H. LOVE
------------------------------------
Name: Ransom H. Love
----------------------------------
Title: President & CEO
---------------------------------
Ebiz Enterprises, Inc.
By: /s/ JEFFREY I. RASSAS
------------------------------------
Name: Jeffrey I. Rassas
----------------------------------
Title: CEO/Founder
---------------------------------
Hayjour Family Limited Partnership
By: /s/ JEFFREY I. RASSAS
------------------------------------
Name: Jeffrey I. Rassas
----------------------------------
Title: General Partner
---------------------------------
Kona Investments Limited Partnership
By: /s/ STEPHEN C. HERMAN
------------------------------------
Name: Stephen C. Herman
----------------------------------
Title: General Partner
---------------------------------
/s/ RANSOM LOVE
---------------------------------------
Ransom Love
/s/ JEFFREY I. RASSAS
---------------------------------------
Jeffrey I. Rassas
/s/ STEPHEN C. HERMAN
---------------------------------------
Stephen C. Herman
