================================================================================
STOCK EXCHANGE AGREEMENT
BY AND AMONG
EBIZ ENTERPRISES, INC.,
INFOMAGIC, INC.,
KIM GOLDBERGER,
AND
JOEL GOLDBERGER
MARCH 22, 2000
================================================================================
<PAGE>
STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (this "AGREEMENT") is made and entered into
as of March 22, 2000 by and among Ebiz Enterprises, Inc., a Nevada corporation
("PURCHASER"), InfoMagic, Inc., an Arizona corporation ("COMPANY"), and Kim
Goldberger and Joel Goldberger, (collectively the "STOCKHOLDERS").
RECITALS:
A. The Company owns and operates commercial World Wide Web sites (located
at www.infomagic.com and at www.windowsmegasite.com) that provides the Linux,
windows and open source software community with various software titles;
B. Stockholders, in the aggregate, are the beneficial owners of 100% of the
issued and outstanding capital stock of the Company; and
C. Stockholders and Purchaser desire to exchange all of their capital stock
of the Company for shares of common stock of Purchaser.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
"AFFILIATE" means any business entity which, directly or indirectly, alone
or together with others, controls, is controlled by, or is under common control
with another person.
"AGREEMENT" means this Stock Exchange Agreement and each of the Schedules
and certificates delivered with this Agreement. Such Schedules and certificates
are incorporated by reference and made a part of this Agreement.
"BOOKS" means the books of account, minute books, stock certificate books
and stock transfer ledgers of the Company.
"BUSINESS" means the operation of the Company's business as currently
conducted, including operation of the World Wide Web site currently located at
www.infomagic.com.
"BUSINESS ENTITY" means any person, corporation, partnership, limited
liability company, joint venture, or other entity.
"CODE" means the Internal Revenue Code of 1986, as amended.
<PAGE>
"COMPANY" has the meaning ascribed to it in the introductory paragraph of
this Agreement.
"CONTRACT" means any contract, indenture, mortgage or deed of trust, lease,
guaranty, insurance policy, bond, license, instrument, understanding,
obligation, or other agreement.
"EBIZ SHARES" shall have the meaning ascribed to it in Section 2.1 hereof.
"EMPLOYMENT CONTRACTS" means all employment agreements, consulting
agreements, and collective bargaining agreements.
"EMPLOYMENT PLANS" means all executive compensation plans, bonus plans,
holiday and other bonus practices, deferred compensation agreements, pension or
retirement plans, employee stock option or stock purchase plans, employee life,
health, and accident insurance, and other employee benefit plans, agreements,
arrangements or commitments.
"ENCUMBRANCE" means any mortgage, pledge, lien, claim, charge, security
interest, restriction or other encumbrance.
"ENVIRONMENTAL DOCUMENTS" has the meaning given it in Section 6.15.
"ENVIRONMENTAL LAW" means all Laws relating to the environment or Hazardous
Materials, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Supervened Amendments and
Reauthorization Act of 1986 ("CERCLA"), 42 U.S.C.ss. 9601 ET SEQ.; the Toxic
Substance Control Act ("TSCA"), 15 U.S.C.ss. 2601 ET SEQ.; the Hazardous
Materials Transportation Act, 49 U.S.C.ss. 1802 ET SEQ.; the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C.ss. 9601 ET SEQ.; the Clean
Water Act ("CWA"), 33 U.S.C. ss.1251 ET SEQ.; the Safe Drinking Water Act, 42
U.S.C.ss. 300(f) ET SEQ.; the Clean Air Act ("CAA"), 42 U.S.C. ss. 7401 ET SEQ.;
Federal Insecticide, Fungicide and Rodentcide Act ("FIFRA"), 7 U.S.C.ss. 136 ET
SEQ.; and the Solid Waste Disposal Act ("SWDA"), 42 U.S.C.ss. 6901 ET SEQ.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FINANCIAL STATEMENTS" and "FINANCIAL STATEMENTS DATE" have the meaning
ascribed them in Section 6.8.
"GOVERNMENT" means any legislature, executive, department, administrative
agency, municipality, subdivision, instrumentality, or other authority of the
United States, any state, or any foreign country.
"HAZARDOUS MATERIALS" means hazardous wastes, hazardous substances,
hazardous constituents, toxic substances, pollutants, contaminants, radioactive
materials, related materials, and any other substances, constituents or wastes,
whether solids, liquids or gases, subject to regulation under any Environmental
Laws.
3
<PAGE>
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall have the meanings
ascribed to them in Section 10.1 hereof.
"INTELLECTUAL PROPERTY" means all patents, trademarks, trade names,
Internet domain names, service marks, other trade rights, logos, slogans,
copyrights, licenses and similar intangibles.
"LAW" means any law, statute, ordinance, rule, regulation, order, judgment,
injunction or decree.
"LOSS" means all expenses (including reasonable attorneys fees), losses,
claims, damages and liabilities.
"ORDER" means any order, decree, decision, injunction, finding or judgment.
"PERMITS" means all approvals, permits, licenses, filings, registrations,
certificates, orders, authorizations, qualifications or other consents from any
Government, self-regulatory authority or any other third party.
"PROCEEDING" means any claim, action, suit, mediation, arbitration, labor
grievance, Government investigation or other legal or administrative proceeding.
"PROPERTIES" means all material properties and assets reflected in the
Financial Statements or in Schedule 6.16.
"PURCHASER" has the meaning ascribed to it in the introductory paragraph of
this Agreement.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY RIGHTS" means all subscriptions, options, warrants, calls,
contracts, demands, commitments, convertible securities, or other agreements or
arrangements to acquire common stock or other securities of a business entity.
"SOFTWARE" means all computer software applications utilized by the
Company.
"SHARES" means all of the outstanding capital stock of the Company,
including without limitation, all common stock, all preferred stock, any other
equity interests in the Company, and any options, warrants or other rights to
acquire any equity interests in the Company.
"STOCKHOLDERS" has the meaning ascribed to it in the introductory paragraph
of this Agreement.
4
<PAGE>
"TAX" means any tax, assessment, or governmental charge or deposit
(including income, property, ad valorem, gross receipts, sales, use, value
added, occupation, franchise, transfer, excise, goods and services, payroll,
employment, withholding, and social security tax), and all interest and
penalties, whether disputed or not, imposed by any Government.
"TRANSACTION" means the exchange of stock contemplated by this Agreement
and all other transactions contemplated hereby.
"WEB SITES" means the World Wide Web sites, www.infomagic.com and
www.windowsmegasite.com, and any other Web sites owned or operated by the
Company.
2. EXCHANGE OF STOCK.
2.1 EXCHANGE. At the Closing, Stockholders will transfer all of the Shares,
free and clear of any Encumbrance, to Purchaser, and Purchaser will issue to
Stockholders, in the aggregate, 200,000 shares of the common stock, $.001 par
value per share, of Purchaser (the "EBIZ SHARES"), subject to the restrictions
set forth in Section 4 below. The parties intend the Ebiz Shares to be priced at
the closing bid price of such shares on the effective date of this Agreement.
The parties intend the Transaction to qualify as a reorganization under Section
368(a)(1)(B) of the Code.
2.2 REGISTRATION. At the Closing, the Purchaser and the Stockholders will
enter into the Registration Rights Agreement in form as attached hereto as
Exhibit 2.2.
3. CLOSING. The Closing will take place on March 30, 2000 at 10:00 a.m. at
the offices of Lewis and Roca LLP, counsel for the Purchaser, 40 North Central
Avenue, Phoenix, Arizona, or at another agreed upon time and place.
4. RESTRICTIONS ON EBIZ SHARES.
4.1 RESTRICTED SECURITIES. The Ebiz Shares are not registered under the
Securities Act, or any state securities laws. Accordingly, anything in this
Agreement to the contrary notwithstanding, the Stockholders may not sell,
transfer, assign, pledge or otherwise dispose of any portion of the Ebiz Shares
(a) until a registration statement with respect to the Ebiz Shares has been
filed with the SEC and declared effective or (b) except pursuant to an exemption
from registration under the Securities Act and applicable state laws.
4.2 LOCK-UP. The Stockholders may not sell, transfer, assign, pledge or
otherwise dispose of any portion of the Ebiz Shares, except with the written
consent of Purchaser or as otherwise provided in this Section 4.2. Commencing on
the one-month anniversary of the date the registration statement as contemplated
in the Registration Rights Agreement attached hereto, is declared effective by
the SEC and on each one-month anniversary thereafter, one-twelfth (16,667) of
the Ebiz Shares shall be released from restrictions.
5
<PAGE>
4.3 RESTRICTIVE LEGENDS
(a) The Ebiz Shares shall bear the following restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE (A) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SHARES UNDER SUCH ACT OR
AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
REGISTRATION IS NOT REQUIRED; AND (B) MAY BE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, AS SET FORTH IN A CERTAIN STOCK
EXCHANGE AGREEMENT DATED AS OF MARCH 22, 2000, A COPY OF WHICH
WILL BE FURNISHED TO THE HOLDER OF THIS CERTIFICATE UPON REQUEST.
(b) At such time as the restrictions set forth in this Section 4 lapse
or otherwise become inapplicable, the Stockholders may tender the Ebiz
Shares, to Purchaser's transfer agent for issuance of a new certificate for
such shares that do not bear the foregoing restrictive legend.
5. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder,
jointly and severally, represents and warrants to Purchaser that:
5.1 SHARE OWNERSHIP. Stockholders are the lawful record and beneficial
owners of the Shares which consist of 100,000 shares of the Company's Common
Stock. The Shares constitute 100% of the outstanding capital stock of the
Company.
5.2 NO ENCUMBRANCES. Stockholder owns the Shares free and clear of any
Encumbrance. There are no undisclosed interests in the Shares, nor does
Stockholder know of any assertion of such an interest, or of any facts or
circumstances which would give any person such an interest.
5.3 NO RESTRICTIONS ON SALE. No provision of any Contract or Law to which
Stockholder is a party, or to which the Shares are subject, would prevent,
limit, or condition the sale of the Shares to Purchaser.
5.4 NO DEFAULT. The execution, delivery, and performance of this Agreement
by Stockholder will not (with or without the giving of notice or the passage of
time) conflict with, result in a default under, or result in the creation of any
Encumbrance pursuant to, any Contract or Law to which Stockholder is a party or
by which the Shares are subject.
5.5 AUTHORITY AND AUTHORIZATION. Stockholder has the full power and
authority to enter into this Agreement and to carry out the transactions
contemplated by this Agreement. Stockholder has (a) taken all actions, and (b)
secured all Permits required to authorize the execution, delivery and
consummation of this Agreement and the Transaction.
6
<PAGE>
5.6 BINDING EFFECT. This Agreement, and each other document executed by
Stockholder in connection with this Agreement, constitutes the valid, binding
and enforceable obligation of Stockholder.
5.7 DISCLOSURE. No representation or warranty by Stockholder in this
Agreement (a) contains any untrue statement of a material fact or (b) omits to
state any material fact required to make the statements made in this Agreement
not misleading. The representations and warranties contained in this Agreement
will not be affected or deemed waived by reason of any investigation by
Purchaser or its representatives.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company and each
Stockholder, jointly and severally, represent and warrant to Purchaser that:
6.1 ORGANIZATION AND AUTHORITY TO CONDUCT BUSINESS; CORPORATE ACTION
(a) The Company is duly organized, validly existing and in good
standing under the laws of Arizona. The Company has all requisite corporate
power and authority to carry on its business as now being conducted, to
own, lease, or operate its properties and to consummate the Transaction.
The Company has delivered to Purchaser complete copies of the Company's
certificate of incorporation and bylaws as amended.
(b) All necessary corporate action has been taken to approve this
Agreement and the Transaction, including without limitation, approvals of
the Company's board of directors and its stockholders.
6.2 AUTHORIZATION AND APPROVAL OF AGREEMENT. The Company has taken all
actions and has secured all Permits required to authorize the execution,
delivery, and consummation of this Agreement and the Transaction.
6.3 BINDING EFFECT. This Agreement, and each document executed by the
Company in connection with this Agreement, constitutes the valid, binding and
enforceable obligation of the Company.
6.4 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. The execution,
delivery, and performance of this Agreement by the Company will not (with or
without the giving of notice or the passage of time) conflict with, result in a
default under, or result in the creation of any Encumbrance pursuant to, (a) the
Company's certificate of incorporation or bylaws or (b) any Contract or Law to
which the Company is a party or by which it may be bound.
6.5 SUBSIDIARIES. The Company does not own, directly or indirectly, any
equity capital stock or other equity interest in any other business entity.
7
<PAGE>
6.6 CAPITALIZATION. The authorized, issued, and outstanding capital stock
of the Company, and the record and beneficial owners of such capital stock, are
as set forth on Schedule 6.6. Except as set forth on Schedule 6.6, there are no
outstanding Security Rights under which the Company or any Stockholder is or may
become obligated to issue, assign or transfer any shares of the capital stock of
the Company. All the Shares are validly issued and outstanding, fully paid and
nonassessable.
6.7 TRANSACTIONS WITH AFFILIATES. The Company has not, directly or
indirectly, (a) purchased, sold, leased, or otherwise acquired or disposed of
any property; (b) obtained any services from or furnished any services to; or
(c) otherwise dealt with, any Stockholder, or any stockholder of an Affiliate of
the Company, except for compensation for services as a director, officer, or
employee of the Company. The Company does not owe any amount to, is not owed any
amount by, and does not have any Contract with or commitment to any Stockholder,
director, officer, employee, or consultant, except for Contracts for current
services not yet due. No property or assets of any Stockholder, or any Affiliate
of any Stockholder, is used by the Company.
6.8 ABSENCE OF UNDISCLOSED LIABILITIES. The Company's balance sheets,
income statements and cash flow statements (the "FINANCIAL STATEMENTS") for the
year ending September 30, 1999, 1998 and 1997 and for the three months ended
December 31, 1999 (the "FINANCIAL STATEMENT DATES"), each of which has been
delivered to Purchaser, have been prepared in accordance with United States
generally accepted accounting procedures consistently applied. As of the
Financial Statements Date, the Company had no material debts or liabilities
except as disclosed in the Financial Statements or this Agreement. Since the
Financial Statements Date, the Company has not incurred any additional material
debts or liabilities other than in the ordinary course of operating the
Business.
6.9 LITIGATION. There is no Proceeding pending or, to the Company's or the
Stockholders' knowledge, threatened, and there is no Order in effect or, to the
Company's or the Stockholders' knowledge, threatened against or relating to (a)
the Company, (b) the Company's officers, directors, or employees, (c) the
Company's properties, assets, or business, or (d) the Transaction. Neither the
Company nor any of the Stockholders knows, or has reason to know, of any basis
for such a Proceeding or Order.
6.10 BANKRUPTCY PROCEEDINGS. The Company is not involved in any Proceeding
by or against it (a) under state or federal bankruptcy laws, (b) under any other
insolvency or debtors' relief act, or (c) for the appointment of a trustee,
receiver, liquidator, assignee, sequestrator or other similar official.
6.11 TAXES.
(a) The Company has paid, or will pay before their due date, all Taxes
due on or before the Closing and has reserved amounts necessary to pay
Taxes due after the date hereof with respect to periods ending on or before
the date hereof;
8
<PAGE>
(b) The Company has timely filed, or will timely file, all tax returns
required in connection with any Taxes, and has not made any requests for
extensions. All such returns are accurate and comply with applicable Law;
(c) The Company has made all deposits required by law and (i) has not
been delinquent in the payment of any Tax or (ii) has paid any penalty
associated with a delinquency; and
(d) The Company is not subject to any Tax audit, has no reassessment
of any Tax currently proposed, and knows of no basis for any such
reassessment.
6.12 COMPLIANCE WITH LAWS, PERMITS, AND CONTRACTS.
(a) The Company has complied in all material respects with all Laws
applicable to its Business, Properties and operations as presently
conducted;
(b) The Company have secured and is in compliance with all material
Permits required for its Business, Properties and operations as presently
conducted;
(c) The Company has not offered, paid, or agreed to pay money or
anything of value for the purpose of, or with the intent of, obtaining or
maintaining business for the Company, or otherwise benefiting the Company,
in violation of any Law (including Section 30A(a) of the Securities
Exchange Act of 1934, as amended); and
(d) The ownership and present use of the Company's properties, and the
conduct of its business (i) does not materially conflict with the rights of
any other person, and (ii) will not (with or without the giving of notice
or the passage of time) conflict with or result in a default under (A) the
Company's certificate of incorporation or bylaws or (B) any Contract or Law
to which the Company is a party or by which it is affected.
6.13 ENFORCEABILITY OF CONTRACTS; NO DEFAULTS. Except as set forth in
Schedule 6.13, (a) all Contracts identified in this Agreement to which the
Company is a party are effective, valid, binding and enforceable in accordance
with their terms and (b) neither the Company nor any Stockholder knows, or has
reason to know, of any material default (or event which, after notice or lapse
of time, would constitute a material default).
6.14 ENVIRONMENTAL MATTERS
(a) The Company is in material compliance with Environmental Laws;
(b) The Company has secured all Permits, if any, required under
Environmental Laws for the operation of the Businesses (and such Permits,
if any, are listed on Schedule 6.14);
9
<PAGE>
(c) Neither the Company nor any Stockholder knows, or has reason to
know, of any pending or threatened Proceedings against the Company with
respect to Environmental Laws;
(d) Neither the Company nor any Stockholder knows, or has reason to
know, of any act attributable to the Company that could give rise to
liability under CERCLA or any other Environmental Law. Neither the Company
nor any Subsidiary has submitted notice pursuant to Section 103 of CERCLA
with respect to any of the Properties;
(e) The Company does not own or operate any underground storage tanks;
and
(f) No Hazardous Materials have been released, discharged, deposited,
emitted, leaked, spilled, poured, emptied, injected, dumped or disposed of
on, in, or under the Properties by the Company in a manner that violates
any applicable Environmental Law.
6.15 PROPERTIES. SCHEDULE 6.15 LISTS:
(a) (i) All real property owned, leased or used by the Company; (ii)
the terms on which the Company owns, leases or uses such property; and
(iii) the terms of any Encumbrances affecting such property; and
(b) (i) All tangible personal property (other than inventory and
supplies) owned, leased or used by the Company; (ii) the terms on which the
Company owns, leases, or uses such property; and (iii) the terms of any
Encumbrances affecting such property.
The Company has good title to all material Properties, free of any Encumbrance,
except (1) Properties sold or otherwise disposed of in the ordinary course of
the Business after the Financial Statements Date or (2) as set forth in the
Financial Statements or in Schedule 6.15. The Properties are in good operating
condition and repair, are suitable for the purposes used, and are adequate for
the current operations of the Company. Neither the Company nor any Stockholder
knows, or has reason to know, of any pending or threatened condemnation
affecting the Properties.
6.16 INSURANCE. Schedule 6.16 lists all insurance policies insuring the
Company, and all performance bonds issued in favor of the Company, specifying
(a) the name of the insurer or bonding the Company, (b) the risk insured or
bonded against, (c) the limits of coverage, (d) the deductible (if any), (e) the
premium (including any proposed premium increases known to the Company), (f) any
notice of cancellation or nonrenewal received by the Company, and (g) the date
through which coverage will continue by virtue of premiums already paid.
10
<PAGE>
6.17 CONTRACTS. Schedule 6.17 lists:
(a) Each loan, conditional sales, or security agreement of the Company
with an unpaid balance, including accrued interest;
(b) Each license agreement relating to intellectual property of the
Company (other than licenses for "OFF-THE-SHELF" software or licenses
incidental to leases of computers, office or photographic equipment used in
the ordinary course of the business); and
(c) All Contracts of the Company, but excluding (i) Contracts listed
or excluded elsewhere in this Agreement and (ii) any Contract entered into
in the ordinary course of business terminable by the Company without
penalty upon less than 30 days notice.
6.18 EMPLOYMENT MATTERS.
(a) Schedule 6.18 lists: (i) all Employment Contracts and Employment
Plans to which the Company is a party or is bound or which relate to the
operation of the Business, if any, and (ii) the names and current annual
rates of compensation of all personnel (including employees and independent
contractors).
(b) The Company (i) is in material compliance with all Laws regulating
employment practices, terms and conditions of employment and wages and
hours; (ii) is not subject to any unfair labor practice complaint or other
petition before the National Labor Relations Board; (iii) is not subject to
any labor strike, dispute, slow-down or stoppage; (iv) is not subject to
any Proceeding arising out of or under collective bargaining agreement; and
(v) has not experienced any primary work stoppage or other labor difficulty
involving its employees during the past three years.
(c) The Company has administered and maintained the Employment Plans,
if any, in material compliance with all applicable Laws. Neither the
Company nor any Stockholder knows, or has reason to know, of any prohibited
transaction (as defined in ERISA) relating to any Employment Plan.
6.19 NO GUARANTIES. The Company has not guaranteed the obligations or
liabilities of any other person or entity.
6.20 INTELLECTUAL PROPERTY.
(a) Schedule 6.20 lists all Intellectual Property that the Company
owns, uses, or has registered. The Company is not obligated to pay any
royalty with respect to any Intellectual Property. Neither the Company nor
any Stockholder knows, or has reason to know, of (a) any pending or
threatened Proceedings alleging that the Company has infringed on any third
party's Intellectual Property or (b) any basis for such Proceedings.
11
<PAGE>
(b) The Company owns all right, title and interest in and to the
Intellectual Property, including without limitation, any Intellectual
Property that has been designed or developed by the Stockholders or
employees or independent contractors of the Company.
6.21 INFORMATION TECHNOLOGY.
(a) Schedule 6.21 sets forth a list of the Company's Software. Except
as otherwise noted in Schedule 6.21, all of the Software complies with the
necessary requirements to function effectively on and after this date and
is "YEAR 2000 COMPLIANT." A description of any Software material to the
Business that is not "YEAR 2000 COMPLIANT" or otherwise cannot function
effectively as of this date, and an estimate of the expenditures necessary
to upgrade or replace such Software are included in Schedule 6.21.
(b) To the extent any of the Software has been designed or developed
by the Stockholders or any of the Company's employees or independent
contractors, such Software is original and capable of copyright protection
in the United States and the Company has complete rights to and ownership
of such Software, including possession of, or ready access to, the source
code for such Software in its most recent version. No part of any such
Software is an imitation or copy of, or infringes upon, the software of any
other person or entity, or violates or infringes upon any common law or
statutory rights of any person or entity, including without limitation,
rights relating to defamation, contractual rights, copyrights, trade
secrets and rights of privacy or publicity. Neither the Company nor any
Stockholder has sold, assigned, licensed, distributed or in otherwise
disposed of or encumbered any of the Software.
(c) To the extent licensed from a third party, the Company holds the
Software pursuant to valid license agreements and is in full compliance
with all material terms of such license agreements.
(d) Schedule 6.21 sets forth the current physical location of the
computer server currently hosting the Company's Web Sites. Such server is
validly owned, or a portion thereof is validly leased, by the Company. The
applicable Internet hosting contract that describes the Company's
contractual obligations, terms of the contract, associated costs, corporate
information of the host and amount of bandwidth to which the server is
connected to the Internet has been previously provided to Purchaser.
Schedule 6.21 further sets forth (a) the name and IP address of each Web
Site homepage, when the homepage was granted, the date and amount of the
next annual payment, and the requirements or limitations for termination,
if any (b) a list of any an all software that can be downloaded from the
Web Sites and (c) a list of any license agreements displayed on the Web
Sites prior to downloading any particular software. The Web Sites contain
all legal disclaimers believed by the Company to be required or
appropriate.
6.22 RECEIVABLES. All receivables reflected in the Financial Statements,
and all receivables which have arisen since the Financial Statement Date, arose
from transactions in the ordinary course of business. The Company expects such
12
<PAGE>
receivables to be (or to have been) fully collected when due, except to the
extent of the normal allowance for doubtful accounts as reflected on the
Financial Statements.
6.23 RECORDS. The Books of the Company are complete and correct in all
material respects. Neither the Company nor any Stockholder knows of any material
transactions involving the Company which properly should have been, but are not,
set forth in the Books.
6.24 OFFICIAL FILINGS COMPLETE. The Company has made all necessary
Government filings except where the failure to make such filings would not have
a material adverse effect on the Business or the Company's financial condition.
6.25 ABSENCE OF CHANGES OR EVENTS. Since the Financial Statements Date the
Company has conducted business only in the ordinary course and has not taken,
entered into any agreement, or made any commitment to take, any of the following
actions:
(a) Incurred any obligation or liability, except liabilities (i) for
trade or business obligations incurred in the ordinary course of business
or (ii) which do not materially affect its business or financial condition;
(b) Paid any obligation or liability other than current liabilities
(i) shown on the Financial Statements or (ii) incurred since the Financial
Statements Date in the ordinary course of business;
(c) Declared or paid dividends or other distributions to any of the
Stockholders or purchased, retired or redeemed, or obligated itself to
purchase, retire or redeem, any of its capital stock or other securities;
(d) Issued or sold any shares of, or Security Rights to, its capital
stock or other securities;
(e) Acquired any capital stock of, interest in, or other securities of
any business entity, or otherwise made any loan or advance to or investment
in any business entity;
(f) Subjected any of its property, business or assets to any
Encumbrance, except in the ordinary course of business;
(g) Sold or otherwise disposed of any material assets, except in the
ordinary course of business;
(h) Canceled, compromised, waived, or released any debt, claim, or
right of substantial value, except in the ordinary course of business;
13
<PAGE>
(i) Received or given notice of termination of any Contract whose
termination has had, or may have, a material adverse effect on its business
or financial condition;
(j) To its knowledge, or the knowledge of any Stockholder, experienced
any labor union organizing activity, had any actual or threatened employee
strikes, work stoppages, slow-downs, or lock-outs, or had any material
change in the terms of agreements with its employees, agents, customers or
suppliers;
(k) Made or agreed to make any change in the compensation payable to
any director, officer, or employee;
(l) Acquired any capital assets which cost in excess of an aggregate
of $10,000;
(m) Instituted, settled or agreed to settle any material Proceeding;
or
(n) Suffered any change, event, condition, damage, destruction, or
loss having a material adverse affect on its business or financial
condition.
6.26 DATABASE. Notwithstanding anything to the contrary herein, the
Company's database has a minimum of 40,000 active listees.
6.27 DISCLOSURE. No representation or warranty by the Company in this
Agreement (a) contains any untrue statement of a material fact or (b) omits or
will omit to state any material fact required to make the statements made in
this Agreement not misleading. The representations and warranties contained in
this Agreement will not be affected or deemed waived by reason of any
investigation by Purchaser or its representatives.
7. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to Stockholders that:
7.1 ORGANIZATION AND AUTHORITY; CORPORATE ACTION
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has all requisite
power and authority to carry on its business as now being conducted, to
own, lease, or operate its properties, to enter into this Agreement and to
consummate the Transaction.
(b) All necessary corporate action has been taken to approve this
Agreement and the Transaction, including without limitation, approval of
Purchaser's board of directors.
7.2 AUTHORIZATION AND APPROVAL OF AGREEMENT. Purchaser has taken all
actions and has secured, or will secure before the Closing, all Permits required
to authorize the execution, delivery, and consummation of this Agreement and the
Transaction.
14
<PAGE>
7.3 BINDING EFFECT. This Agreement, and each document executed by Purchaser
in connection with this Agreement, constitutes the valid, binding and
enforceable obligation of Purchaser.
7.4 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. The execution,
delivery, and performance of this Agreement by Purchaser will not (with or
without the giving of notice or the passage of time) conflict with, result in a
default under, or result in the creation of any Encumbrance pursuant to (a)
Purchaser's certificate of incorporation or bylaws or other governing documents
or (b) any Contract or Law to which Purchaser is a party or by which it may be
bound.
7.5 INVESTMENT INTENT. Purchaser acknowledges that (a) the Shares are not
registered under the Securities Act, and (b) Purchaser may not resell the Shares
unless they are registered or exempt from registration. Purchaser is acquiring
the Shares for its own account, for investment purposes only and not with a view
toward their distribution.
7.6 LITIGATION. There is no Proceeding pending or, to Purchaser's
knowledge, threatened and there is no Order in effect or, to Purchaser's
knowledge, threatened against or relating to the Transaction and Purchaser does
not know, or have reason to know, of any basis for such a Proceeding or Order.
7.7 DISCLOSURE. No representation or warranty by Purchaser in this
Agreement (a) contains or will contain any untrue statement of a material fact
or (b) omits or will omit to state any material fact required to make the
statements made in this Agreement not misleading. The representations and
warranties contained in this Agreement will not be affected or deemed waived by
reason of any investigation by the Company, Stockholders, or their
representatives.
8. OBLIGATIONS AT AND AFTER CLOSING.
8.1 COMPANY AND STOCKHOLDER DELIVERIES. On the date hereof, the Company and
Stockholders will deliver to Purchaser:
(a) stock certificates for the Shares, endorsed in blank or
accompanied by separately executed stock powers.
(b) a certificate dated the date of the Closing executed by the
Stockholders, in their individual capacity and on behalf of the Company,
stating that all representatives and warranties as set forth in Section 5
and Section 6 above, are true and accurate as of the date of the Closing;
(c) an opinion of the Company's and the Stockholders' counsel, dated
the date of the Closing, stating that (i) the Company is validly organized
and in good standing under the laws of the State of Arizona; (b) the Shares
are validly issued, fully paid and nonassessable; and (c) this Agreement,
and the other agreements contemplated herein, are enforceable against the
Company and the Stockholders in accordance with their terms.
15
<PAGE>
8.2 PURCHASER DELIVERIES. On the date hereof, Purchaser will deliver to the
Stockholders:
(a) a certified instruction for issuance of the Ebiz Shares to the
Stockholders; and
(b) an opinion of Purchaser's counsel, dated the date hereof, stating
that (i) Purchaser is validly organized and in good standing under the laws
of the State of Nevada; (b) the Ebiz Shares, when issued, will be validly
issued, fully paid and nonassessable; and (c) this Agreement, and the other
agreements contemplated herein, are enforceable against Purchaser in
accordance with their terms.
8.3 ADDITIONAL AGREEMENTS. On the date hereof, the Stockholders and
Purchaser shall execute and deliver to each other the Registration Rights
Agreement with respect to the Ebiz Shares.
8.4 ADDITIONAL DOCUMENTS. After the Closing, each party will execute and
deliver other documents and take further action, as any other party reasonably
deems necessary, to carry out the transactions contemplated by this Agreement,
to more effectively transfer the Shares to Purchaser, to confirm Purchaser's
title to the Shares or to put Purchaser in possession and operating control of
the Company.
9. RESTRICTIVE COVENANTS.
9.1 NONCOMPETITION. Each of the Stockholders agrees that he will not,
directly or indirectly, for a period of three years following the date of this
Agreement, engage in the development, management or ownership of any other
business that would be competitive with (a) any business conducted by the
Company on the date hereof or (b) any business operated by Purchaser through its
World Wide Web site, www.TheLinuxStore.com, on the date hereof, or acquire or
retain any financial ownership interest in any business which is so engaged
anywhere within the United States. The foregoing notwithstanding, nothing in
this Agreement shall prohibit any Stockholder from owning up to 1% of the
outstanding common stock of any publicly traded company, regardless of whether
such company is a competitor of the Company or Purchaser.
9.2 REASONABLE RESTRICTION. In light of the Stockholders' knowledge and
experience in the Linux community, each Stockholder agrees that the covenant set
forth in Section 9.1 above is (a) necessary to protect the interests of
Purchaser and the Company and (b) reasonable in scope, geographic area and
duration.
9.3 REMEDIES. Each Stockholder agrees that a violation of the covenant set
forth in Section 9.1 above would cause the Company and Purchaser to suffer
irreparable harm for which damages would be difficult, if not impossible, to
ascertain and monetary damages would be inadequate. Accordingly, in addition to
all other remedies the Company and Purchaser may have at law or equity, each
Stockholder agrees that Purchaser and the Company shall be entitled to seek and
obtain temporary and/or permanent injunctive relief for any violations or
threatened violations of Section 9.1 above.
16
<PAGE>
10. INDEMNIFICATION
10.1 AGREEMENT TO INDEMNIFY. Each of the Company, the Stockholders and
Purchaser (each, an "INDEMNIFYING PARTY") agrees to indemnify and hold each
other party (each, an "INDEMNIFIED PARTY" harmless in respect of the aggregate
of all indemnifiable damages incurred by such Indemnified Party. For this
purpose, "indemnifiable damages" means all expenses, losses, costs,
deficiencies, liabilities and damages (including related counsel fees and
expenses) incurred or suffered by an Indemnified Party resulting from (a) any
inaccurate representation or warranty made by the Indemnifying Party in or
pursuant to this Agreement, as the case may be; or (b) any default in the
performance of any of the covenants or agreements made by an Indemnifying Party
in this Agreement. Without limiting the generality of the foregoing, with
respect to the measurement of "indemnifiable damages," the Indemnified Party
shall have the right to be put in the same financial position as it would have
been in had each of the representations and warranties of the Indemnifying Party
been true and correct and had each of the covenants of the Indemnifying Party
been performed in full, but shall specifically exclude any consequential or
punitive damages.
10.2 QUALIFICATIONS. The foregoing obligation of an Indemnifying Party to
indemnify an Indemnified Party in Section 10.1 shall be subject to each of the
following qualifications:
(a) Each of the representations and warranties made by each party to
this Agreement or pursuant hereto, shall survive for a period of two years
after the date hereof, notwithstanding any investigation at any time made
by or on behalf of the other parties, and thereafter all such
representations and warranties shall be extinguished; PROVIDED, HOWEVER,
that the representations and warranties made by the Company in Section 6.11
hereof shall in each case survive until the first anniversary of the later
of (i) the date on the which applicable period of limitation on assessment
or refund of tax has expired, or (ii) the date on which the applicable
taxable year (or portion thereof) has been closed. No claim for the
recovery of indemnifiable damages may be asserted by an Indemnified Party
against a Indemnifying Party or its successors in interest after such
representations and warranties shall be thus extinguished; provided,
however, that claims first asserted in writing within the applicable period
shall not thereafter be barred.
(b) Each Indemnified Party acknowledges and consents that it may seek
to recover by any legal means indemnifiable damages directly from an
Indemnifying Party or its successors in interest. Each Indemnified Party
agrees to give prompt written notice to each Indemnifying Party of each
claim for indemnifiable damages which it believes it has suffered;
PROVIDED, HOWEVER, that no delay in the giving of such notice shall affect
the rights of an Indemnified Party to recover indemnifiable damages
hereunder except to the extent that the Indemnifying Party suffers actual
damages caused by such delay. Upon receipt of such notice, the Indemnifying
Party shall assume the defense of any such claim through counsel of its own
choosing; PROVIDED, HOWEVER, that assumption of the defense by the
Indemnifying Party shall constitute an agreement to indemnify the
Indemnified Party against any judgment or settlement arising from such
claim, subject to the limitations hereinafter set forth. If the
17
<PAGE>
Indemnifying Party declines to assume any such defense, it or he shall be
liable for all costs and expenses of defending such claim, including
reasonable fees and disbursements of counsel. In such event, after having
first provided the Indemnifying Party an opportunity to fulfill the
Indemnifying Party's obligations to the Indemnified Party hereunder, the
Indemnified Party then brings any action against the Indemnifying Party
upon any claim under this Section, the Indemnifying Party shall be liable
to the Indemnified Party for its reasonable fees and disbursements of
counsel in connection therewith if the Indemnified Party prevails in the
action.
(c) In no event shall the liability of any party under this Agreement
exceed $700,000.
11. GENERAL.
11.1 INTEGRATION AND AMENDMENT. This Agreement constitutes the entire
agreement of the parties, and supersedes all prior agreements or understandings
among the parties, with respect to its subject matter. This Agreement may be
amended only in a written agreement signed by all of the parties.
11.2 WAIVERS. No waiver under this Agreement is valid unless it is in
writing and signed by the party giving the waiver. A waiver of a particular
matter does not waive a subsequent or similar matter.
11.3 EXPENSES.
(a) Each party is solely responsible for its own expenses relating to
the preparation, execution, and consummation of this Agreement and the
Transaction PROVIDED, HOWEVER, that the Company shall not bear any such
costs or expenses.
(b) In any Proceeding arising under or related to this Agreement the
prevailing party is entitled, in addition to other amounts it recovers, to
have the other party pay all costs and expenses (including reasonable
attorneys' fees) incurred in connection with the Proceeding.
(c) Each party is solely responsible for, and indemnifies the other
parties against, obligations to any broker, finder or intermediary retained
by it.
11.4 BINDING EFFECT. This Agreement is binding upon, and inures to the
benefit of, each party and its successors and assigns.
11.5 NO BENEFIT TO OTHERS. This Agreement is solely for the benefit of the
parties (and their successors and assigns) and does not confer any rights on any
other persons.
11.6 SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement, as determined by a court of competent jurisdiction, shall not
affect the validity or enforceability of the other provisions of this Agreement
18
<PAGE>
or this Agreement as a whole. Any invalid or unenforceable provision hereof
shall be deemed modified to the least extent necessary to make such provision
valid and enforceable in accordance with the intent of the parties.
11.7 CONSTRUCTION AND HEADINGS. Whenever a singular word is used in this
Agreement it also includes the plural if required by the context, and vice
versa. Paragraph headings are for convenience only and do not define or limit
the contents of a paragraph.
11.8 COOPERATION. In order to carry out this Agreement, each party will
cooperate, take further action, and execute and deliver further documents as
reasonably requested by any other party.
11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together are one original.
11.10 GOVERNING LAW. This Agreement shall be governed by the Laws of the
State of Arizona, without regard to conflicts of law principles. Exclusive
jurisdiction and venue for any litigation arising under this Agreement is in the
federal and state courts sitting in Maricopa County, Arizona.
11.11 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of other parties PROVIDED,
HOWEVER that any party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing party will use its
reasonable efforts to advise the other parties prior to making the disclosure.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PURCHASER:
EBIZ ENTERPRISES, INC.
By: /s/ Jeffrey I. Rassas
-------------------------------------
Name: Jeffrey I. Rassas
-----------------------------------
Title: Chief Executive Officer
----------------------------------
COMPANY:
INFOMAGIC, INC.
By: /s/ Joel Goldberger
-------------------------------------
Name: Joel Goldberger
-----------------------------------
Title: President
----------------------------------
STOCKHOLDERS:
/s/ Kim Goldberger
----------------------------------------
Kim Goldberger
/s/ Joel Goldberger
----------------------------------------
Joel Goldberger
20
