Exhibit 10.22
STOCK AND WARRANT PURCHASE AGREEMENT
THIS STOCK AND WARRANT PURCHASE AGREEMENT (this "AGREEMENT") is made as of
October 19, 2000, by and among EBIZ ENTERPRISES, INC., a Nevada corporation (the
"COMPANY"), THE CANOPY GROUP, INC., a Utah corporation (the "PURCHASER") and JEM
VENTURES EBIZ, LLC, a Delaware limited liability company (the "SELLER").
RECITALS:
A. Purchaser desires to purchase 2,500,000 shares of the issued and
outstanding common stock of the Company (the "SHARES");
B. Seller holds a debenture (the "DEBENTURE") issued by the Company that
is convertible into shares of the Company's common stock;
C. Company desires to cause the holder of the Debenture to convert the
Debenture in accordance with its terms, and benefits from such
conversion as a result of a decrease in Company debt and release of
certain collateral securing the Debenture.
D. In order to accomplish the foregoing, the parties hereto hereby make
and enter into this Agreement.
AGREEMENT:
The parties hereby agree as follows:
1. PURCHASE AND SALE OF COMMON STOCK AND WARRANT
1.1 PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, at the Closing, Purchaser agrees to purchase from
Seller and Seller agrees to sell to Purchaser the Shares for the purchase price
of $1.00 per share (the "PURCHASE PRICE"), for an aggregate purchase price of
$2,500,000, payable by wire transfer.
1.2 ISSUANCE OF WARRANTS. Subject to the terms and conditions of this
Agreement, at the Closing, the Company shall issue to Purchaser warrants to
purchase 850,000 shares of the common stock of the Company at $1.00 per share
and warrants to purchase an aggregate of 500,000 shares of Common Stock of the
Company at $1.10 per share (the "WARRANTS") and shall execute warrant agreements
in the forms attached hereto as EXHIBIT A and EXHIBIT B (collectively, the
"WARRANT AGREEMENTS"). The shares of common stock issued to Purchaser pursuant
to the Warrant Agreements shall be hereinafter referred to as the "WARRANT
SHARES."
1.3 CLOSING; DELIVERIES.
(a) The purchase and sale of the Shares and Warrants shall take place
at the offices of Purchaser on or before October 20, 2000, or at such other time
and place as the parties may mutually agree, orally or in writing (which time
and place are designated as the "CLOSING").
(b) At the Closing, Purchaser shall cause a wire transfer in the
amount of the Purchase Price to be made to a bank account designated in writing
by Seller.
(c) At the Closing, Seller shall deliver written instructions for the
conversion of portions of principal of the Debenture in exchange for the Shares
together with written instructions authorizing and directing the Company to
transfer the Shares into Purchaser's name on the books of the Company.
(d) At the Closing, the Company shall deliver to Purchaser the
executed Warrant Agreements.
(e) At the Closing, the Company and Purchaser shall execute an
investors' rights agreement in the form attached hereto as EXHIBIT C (the
"INVESTOR RIGHTS AGREEMENT").
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
As an inducement for the Purchaser to purchase the Shares, such purchase
being of material benefit to the Company, the Company hereby represents,
warrants and covenants to Purchaser as of the date of this Agreement and as of
Closing, the following:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on the business, properties, prospects, condition (financial or
otherwise) or results of operations of the Company and its subsidiaries taken as
a whole or on the consummation of any of the transactions contemplated by this
Agreement (a "MATERIAL ADVERSE EFFECT").
2.2 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the Warrant Agreements and the
Investor's Rights Agreement (this Agreement, the Warrant Agreements and the
Investor's Rights Agreement are collectively referred to herein as the
"TRANSACTION AGREEMENTS"), the performance of all obligations of the Company
hereunder and thereunder and the authorization, issuance and delivery of the
Warrant Shares have been taken or will be taken prior to the Closing. Each of
the Transaction Agreements has been duly and validly executed and delivered by
the Company and each Transaction Agreement constitutes a valid and binding
obligation of the Company enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
2
remedies generally and except as rights to indemnity and contribution may be
limited by federal or state securities laws or the public policy underlying such
laws.
2.3 VALID ISSUANCE OF SECURITIES. The Shares, when issued upon
conversion of the Debenture as specified above, will be validly issued, fully
paid and nonassessable and free of restrictions on transfer. The Warrants and
the Warrant Shares, when sold, issued and delivered in accordance with the terms
hereof for the consideration expressed herein, will be validly issued, fully
paid and nonassessable and free of restrictions on transfer other than
restrictions on transfer under this Agreement and applicable state and federal
securities laws. Based in part upon the representations of Purchaser in this
Agreement, the Warrants and the Warrant Shares will be issued in compliance with
applicable federal securities and state securities laws.
2.4 CAPITALIZATION.
(a) AUTHORIZED AND OUTSTANDING CAPITAL STOCK. The authorized
capital stock of the Company consists of: 70,000,000 shares of common stock
and 5,000,000 shares of preferred stock of which 22,596,544 shares of
common stock and 7,590 shares of preferred stock, designated as Series A
10% Convertible Preferred are outstanding or have been designated to be
issued by the Company. The Company has outstanding stock options to
purchase 1,507,450 shares of common stock and anticipates issuing
additional options to purchase 5,400,000 shares of common stock. The
Company has outstanding warrants to purchase 5,308,254 shares of common
stock. The Company has assumed debentures outstanding that will be
converted, with accrued interest, into 2,509,810 shares of common stock in
January 2001 and has outstanding the Debenture, which is convertible into
common stock at variable prices. The exercise price for each of such
outstanding options, warrants and debentures is accurately set forth on
SCHEDULE 2.4(A) hereto.
(b) NO OTHER RIGHTS. Except as disclosed on SCHEDULE 2.4(B)
hereto, there are no preemptive, subscription, "CALL," right of first
refusal or other similar rights to acquire any capital stock or other
voting securities of the Company or any of its subsidiaries that have been
issued or granted to any person and no other obligations of the Company or
any of its subsidiaries to issue, grant, extend or enter into any security,
option, warrant, "CALL," right, commitment, agreement, arrangement or
undertaking with respect to any of their respective capital stock.
(c) SUBSIDIARIES. SCHEDULE 2.4(C) hereto lists all the
subsidiaries of the Company. Except as disclosed on SCHEDULE 2.4(C) hereto,
the Company does not own or control, directly or indirectly, any interest
in any other corporation, partnership, limited liability company,
unincorporated business organization, association, trust or other business
entity.
2.5 REPORTING COMPANY STATUS/SHARE REGISTRATION. The Company has
registered its common stock pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"). The Company has registered the
Shares for resale by the Seller pursuant to the applicable provision of the
3
Securities Act of 1933, as amended ("SECURITIES ACT") and the rules and
regulations thereunder and has caused the registration statement related to the
Shares to be declared effective by the Securities and Exchange Commission
("COMMISSION"). Upon issuance, the certificate representing the Shares will be
issued free of any restrictive legend thereon.
2.6 RECENT STOCK ISSUANCES. SCHEDULE 2.6 hereto sets forth (i) all
issuances and sales by the Company since January 1, 2000, of its capital stock,
and other securities convertible into or exercisable or exchangeable for capital
stock of the Company, (ii) the amount of such securities sold, including the
amount of any underlying shares of capital stock, (iii) purchaser thereof, and
(iv) the amount paid therefor.
2.7 ISSUANCE OF ADDITIONAL STOCK, OPTIONS OR WARRANTS. Notwithstanding
anything to the contrary contained in this Agreement, the Company agrees that if
it issues, during the next 18 months after Closing, any additional common stock
or warrants or options to purchase any additional common stock of the Company
(excluding common stock underlying any outstanding debentures, options,
warrants, convertible securities or the like), and if the purchase price of the
common stock or the strike or exercise price for the warrants or options is less
than the Purchase Price (the "LESSER PRICE"), then the Company shall forthwith
either (i) issue additional shares of common stock to Purchaser sufficient to
increase the number of shares Purchaser receives under this Agreement to the
amount it would have received if the Purchase Price had been equal to the Lesser
Price, or (ii) refund the difference in cash to Purchaser.
2.8 NON-CONTRAVENTION. Except as set forth on SCHEDULE 2.8, the
execution and delivery by the Company of the Transaction Agreements, the
issuance of the Shares, the issuance of the Warrants and the consummation by the
Company of the other transactions contemplated hereby and thereby, do not, and
compliance with the provisions of the Transaction Agreements will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or result in
the creation of any lien upon any of the properties or assets of the Company or
any of its subsidiaries under, or result in the termination of, or require that
any consent be obtained or any notice be given with respect to, (i) the
Certificate of Incorporation or Bylaws of the Company or the comparable charter
or organizational documents of any of its subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease, contract or other agreement,
instrument or permit applicable to the Company or any of its subsidiaries or
their respective properties or assets, or (iii) any law applicable to, or any
judgment, decree or order of any court or government body having jurisdiction
over, the Company or any of its subsidiaries or any of their respective
properties or assets.
2.9 APPROVALS. No authorization, approval or consent of any court or
public or governmental authority is required to be obtained by the Company for
the purchase and sale of the Shares or the issuance of the Warrants, except such
authorizations, approvals and consents as have been obtained by the Company
prior to the date hereof.
4
2.10 COMMISSION FILINGS. The Company has properly and timely filed
with the Commission all reports, proxy statements, forms and other documents
required to be filed with the Commission under the Exchange Act since January
2000 (the "COMMISSION FILINGS"). As of their respective dates, (i) the
Commission Filings complied in all material respects with the requirements of
the Exchange Act and the rules and regulations of the Commission promulgated
thereunder applicable to such Commission Filings, and (ii) none of the
Commission Filings contained at the time of its filing any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Commission Filings, as of the dates of
such documents, were true and complete in all material respects and complied
with applicable accounting requirements and the published rules and regulations
of the Commission with respect thereto, were prepared in accordance with
generally accepted accounting principles in the United States ("GAAP") (except
in the case of unaudited statements permitted under the Exchange Act) applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly presented the consolidated financial position of
the Company and its subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments that
in the aggregate are not material and to any other adjustment described
therein).
2.11 ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 2.11,
since the most recent date of the financial statements contained in the
Commission Filings, there has not occurred any change, event, development or
condition in the business, financial condition, prospects or results of
operations of the Company and the subsidiaries, having or reasonably likely to
have a Material Adverse Effect and the Company and its subsidiaries have
conducted their respective businesses only in the ordinary course.
2.12 FULL DISCLOSURE. There is no fact known to the Company (other
than general economic or industry conditions known to the public generally) that
has not been disclosed in writing to Purchaser that (i) reasonably could be
expected to have a Material Adverse Effect on the Company, (ii) reasonably could
be expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to the Transaction Agreements or (iii)
reasonably affect Purchaser's decision to purchase the Shares.
2.13 ABSENCE OF LITIGATION. Except as set forth on SCHEDULE 2.13,
there are (i) no suits, actions or proceedings pending or, to the knowledge of
the Company, threatened against the Company or any of its subsidiaries, (ii) no
complaints, lawsuits, charges or other proceedings pending or, to the knowledge
of the Company, threatened in any forum by or on behalf of any present or former
employee of the Company or any of its subsidiaries, any applicant for employment
or classes of the foregoing alleging breach of any express or implied contract
of employment, any applicable law governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship, and (iii) no judgments, decrees, injunctions or
orders of any court or other governmental entity or arbitrator outstanding
against the Company or any subsidiary.
5
2.14 ABSENCE OF EVENTS OF DEFAULT. No "EVENT OF DEFAULT" (as defined
in any agreement or instrument to which the Company is a party) and no event
which, with notice, lapse of time or both, would constitute an Event of Default
(as so defined), has occurred and is continuing.
2.15 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. The Company has
delivered to Purchaser true and complete copies of the audited balance sheets of
the Company as of June 30, 2000 and 1999, and the related audited statements of
income, changes in stockholders' equity and cash flows for the fiscal year then
ended including the related notes and schedules thereto (the "FINANCIAL
STATEMENTS"). The Financial Statements are complete and correct in all material
respects, have been prepared in accordance with GAAP, and fairly present the
financial position, results of operations and cash flows of the Company as of
the dates and for the periods indicated. For purposes hereof, the balance sheet
of the Company as of June 30, 2000 is hereinafter referred to as the "BALANCE
SHEET" and June 30, 2000 is hereinafter referred to as the "BALANCE SHEET DATE."
The Company has no indebtedness, obligations or liabilities of any material
nature (whether accrued, absolute, contingent or otherwise, and whether due or
to become due), which was not fully reflected in, reserved against or otherwise
described in the Balance Sheet or the notes thereto or incurred in the ordinary
course of business consistent with the Company's past practices since the
Balance Sheet Date.
2.16 COMPLIANCE WITH LAWS; PERMITS. Each of the Company and its
subsidiaries is in compliance with all laws, rules, regulations, codes,
ordinances and statutes (collectively, "LAWS") applicable to it or to the
conduct of its business. The Company possesses all material permits, approvals,
authorizations, licenses, certificates and consents from all public and
governmental authorities which are necessary to conduct its business.
2.17 RELATED PARTY TRANSACTIONS. Except as set forth in the Commission
Filings, neither the Company nor any of its officers, directors or "AFFILIATES"
(as such term is defined in Rule 12b-2 under the Exchange Act) nor any family
member of any officer, director or Affiliate of the Company has borrowed any
moneys from or has outstanding any indebtedness or other similar obligations to
the Company or any of the subsidiaries. Except as set forth in the Commission
Filings, neither the Company nor any of its officers, directors or Affiliates
nor any family member of any officer, director or Affiliate of the Company (i)
owns any direct or indirect interest constituting more than a 1% equity (or
similar profit participation) interest in, or controls or is a director,
officer, partner, member or employee of, or consultant or lender to or borrower
from, or has the right to participate in the profits of, any person or entity
which is (a) a competitor, supplier, customer, landlord, tenant, creditor or
debtor of the Company or any subsidiary, (b) engaged in a business related to
the business of the Company or any subsidiary, or (c) a participant in any
transaction to which the Company or any subsidiary is a party or (ii) is a party
to any contract, agreement, commitment or other arrangement with the Company or
any subsidiary.
2.18 INTELLECTUAL PROPERTY. The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
6
procedures) and other similar rights and proprietary knowledge (collectively,
"INTANGIBLES") necessary for the conduct of its business as now being conducted.
The Company has all right, title and interest in all of the Intangibles, free
and clear of any and all liens, security interests or other encumbrances. The
Company is not infringing upon or in conflict with any right of any other person
with respect to any Intangibles. Except as disclosed on SCHEDULE 2.13 hereto,
(i) no claims have been asserted by any individual, partnership, corporation,
unincorporated organization or association, limited liability company, trust or
other entity (collectively, a "PERSON") contesting the validity, enforceability,
use or ownership of any Intangibles, and the Company has no knowledge of any
basis for such claim, and (ii) neither the Company nor the subsidiaries has any
knowledge of infringement or misappropriation of the Intangibles by any third
party.
2.19 CONTRACTS. All contracts, agreements, notes, instruments,
franchises, leases, licenses, commitments, arrangements or understandings,
written or oral (collectively, "CONTRACTS") which are material to the business
and operations of the Company and the subsidiaries are in full force and effect
and constitute legal, valid and binding obligations of the Company and the
subsidiaries and, to the best knowledge of the Company, the other parties
thereto; the Company and the subsidiaries and, to the best knowledge of the
Company, each other party thereto, have performed in all material respects all
obligations required to be performed by them under the Contracts, and no
material violation or default exists in respect thereof, nor any event that with
notice or lapse of time, or both, would constitute a default thereof, on the
part of the Company and the subsidiaries or, to the best knowledge of the
Company, any other party thereto; none of the Contracts is currently being
renegotiated; and the validity, effectiveness and continuation of all Contracts
will not be materially adversely affected by the transactions contemplated by
this Agreement.
2.20 REGISTRATION RIGHTS. Except as set forth on SCHEDULE 2.20, no
Person has, and as of the Closing, except as provided in the Investors' Rights
Agreement, no Person shall have, any demand, "PIGGY-BACK" or other rights to
cause the Company to file any registration statement under the Securities Act,
relating to any of its securities or to participate in any such registration
statement.
2.21 BUSINESS PLAN. Any business information of the Company previously
submitted to Purchaser in any form, including the projections contained therein,
was prepared by the senior management of the Company in good faith and is based
on assumptions that the Company believes are reasonable. Except as disclosed in
writing to Purchaser, the Company is not aware of any fact or condition that
could reasonably be expected to result in the Company not achieving the results
described in such business plan.
2.22 NOTE REPAYMENT. Within seven days of the Closing, Company shall
repay the indebtedness plus all accrued interest owed to Purchaser by Company in
the original principal amount of $500,000 and by LinuxMall, Inc. in the original
principal amount of $500,000. Purchaser agrees to extend the term of payment of
each note representing such indebtedness to the date seven days from the
Closing.
7
2.23 BOARD REPRESENTATION. So long as Purchaser holds at least
1,875,000 of the Shares purchased under this Agreement or the Warrants (adjusted
for stock splits, stock dividends, recapitalization and similar capital
adjustments), Purchaser shall have the right to designate a person with the
approval of the Company which approval shall not be unreasonably withheld who
shall be appointed a member to the Company's Board of Directors. Upon
designation, Company shall cause such designee to be appointed to the Board of
Directors and shall use its best efforts to cause such designee (or successor
designee) to be reelected to as a member of the Board of Directors of the
Company. Upon exercise of Purchaser's right of designation, the Company may
increase the number of members of its Board of Directors by one from the then
existing total or may appoint such designee to fill any vacancy in the existing
Board of Directors. The initial person designated by Purchaser is Ransom Love,
who has also been designated to serve as a member of the Company's Board of
Directors by Caldera Systems, Inc. In the event that Ransom Love declines or
fails to serve as Purchaser's designee, or in the event Purchaser determines to
designate a different person, then the designee shall be such other person as
Purchaser shall designate with the approval of the Company which approval shall
not be unreasonably withheld. The designation of a person other than Ransom Love
by Purchaser shall not affect or alter the rights of Caldera Systems, Inc. to
continue to designate Ransom Love to serve as a member of the Board of Directors
of the Company.
2.24 NO MISREPRESENTATION. No representation or warranty of the
Company contained in this Agreement or any of the other Transaction Agreements,
any schedule, annex or exhibit hereto or thereto or any agreement, instrument or
certificate furnished by the Company to Purchaser pursuant to this Agreement
contains any 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.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents, warrants and covenants to the Company and the
Purchaser as of the date of this Agreement and as of Closing, the following:
3.1 AUTHORIZATION. All action on the part of Seller and its managers
and members as necessary for the authorization, execution and delivery of this
Agreement and the performance of all obligations of Seller hereunder have been
taken or will be taken prior to the Closing.
3.2 OWNERSHIP. Seller owns all right, title and interest in and to the
Shares and the sale and transfer of the Shares to Purchaser in accordance with
the terms of this Agreement shall be free and clear of any liens, security
interests or other encumbrances, including any restrictions on transfer imposed
by federal or state securities law.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents, warrants and covenants to the Company and the
Seller as of the date of this Agreement and as of Closing, the following:
8
4.1 AUTHORIZATION. All corporate action on the part of Purchaser, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of the Transaction Agreements, the performance of all obligations
of Purchaser hereunder and thereunder has been taken or will be taken prior to
the Closing.
4.2 PURCHASE ENTIRELY FOR OWN ACCOUNT; ABILITY TO BEAR RISK. This
Agreement is made with Purchaser in reliance upon Purchaser's representation to
the Company, which by Purchaser's execution of this Agreement, Purchaser hereby
confirms, that the Warrants and the Warrant Shares will be acquired for
investment for Purchaser's own account, not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof, and that Purchaser has
no present intention of selling, granting any participation in, or otherwise
distributing the same. Purchaser further represents that it has not been formed
for the specific purpose of acquiring the Warrants or the Warrant Shares, and
Purchaser does not presently have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to such
person or to any third person, with respect to the Warrants or any portion of
the Warrant Shares. Purchaser's present financial condition is such that it is
under no present or contemplated future need to dispose of the Warrants or
Warrant Shares, or any portion thereof to satisfy any existing or contemplated
undertaking, need, or indebtedness. Purchaser is capable of bearing the economic
risk and the burden of this venture, including, but not limited to, the
possibility of the complete loss of the purchase amount and the limited
transferability of the Warrants and the Warrant Shares, which may make the
liquidation of the Warrants and the Warrant Shares impossible for the indefinite
future.
4.3 RESTRICTED SECURITIES. Purchaser understands that the Warrants and
the Warrant Shares have not been, and will not be, registered under the
Securities Act, by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of Purchaser's
representations as expressed herein. Purchaser understands that the Warrants and
Warrant Shares are characterized as "RESTRICTED SECURITIES" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations the Warrants and the Warrant Shares may be resold without
registration under the Securities Act only in certain limited circumstances.
4.4 LEGENDS. Purchaser understands that the Warrants and the Warrant
Shares, and any securities issued in respect thereof or exchange therefor, may
bear a restrictive legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE
SECURITIES LAWS IN RELIANCE UPON CERTAIN EXEMPTIONS FROM REGISTRATION,
AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR UNLESS THE COMPANY RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO IT THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE ACT.
9
In addition, the Warrants and the Warrant Shares, and any securities issued in
respect thereof or exchange therefor, may bear any legend required by the Blue
Sky laws of any state to the extent such laws are applicable to the Warrants or
the Warrant Shares represented by the certificate so legended.
4.5 ACCREDITED INVESTOR. Purchaser is an accredited investor as
defined in Rule 501 (a) of Regulation D promulgated under the Securities Act.
4.6 KNOWLEDGE AND EXPERIENCE. Purchaser is experienced in evaluating
and making speculative investments, and has the capacity to protect its
interests in connection with the purchase of the Warrants and the Warrant
Shares. Purchaser has such knowledge and experience in financial and business
matters in general, and investments in particular, that it is capable of
evaluating the merits and risks of its purchase of the Warrants and the Warrant
Shares.
4.7 MANNER OF SALE. Purchaser has had the opportunity to ask questions
of and receive answers from the Company concerning the terms and conditions of
this transaction. At no time was Purchaser presented with or solicited by or
through any leaflet, public promotional meeting, television advertisement or any
other form of general advertising.
5. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING
The obligations of Purchaser to the Company and Seller under this Agreement
are subject to the fulfillment, on or before the Closing, of each of the
following conditions, unless otherwise waived:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company and the Seller contained in Sections 2 and 3, respectively, shall
be true and correct on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing.
5.2 PERFORMANCE. The Company and the Seller shall have performed and
complied with all covenants, agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied with by it on or
before the Closing.
5.3 QUALIFICATIONS. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful sale and transfer of the
Shares and the issuance of the Warrants pursuant to this Agreement shall be
obtained and effective as of the Closing.
5.4 WARRANT AGREEMENTS. The Company shall have executed and delivered
the Warrant Agreements, in substantially the form attached hereto as EXHIBIT A
and EXHIBIT B.
10
5.5 INVESTOR'S RIGHTS AGREEMENT. The Company and Purchaser shall have
executed and delivered the Investor's Rights Agreement, in substantially the
form attached hereto as EXHIBIT C.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING
The obligations of the Company to Purchaser and Seller under this Agreement
are subject to the fulfillment, on or before the Closing, of each of the
following conditions, unless otherwise waived:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Seller and Purchaser contained in Sections 3 and 4, respectively, shall be
true and correct on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
6.2 PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed by Purchaser and Seller on or prior to the
Closing shall have been performed or complied with in all material respects.
6.3 QUALIFICATIONS. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful sale and transfer of the
Shares and the issuance of the Warrants pursuant to this Agreement shall be
obtained and effective as of the Closing.
6.4 DEBENTURE MODIFICATION. The Company and Seller have executed and
delivered the letter agreement, in substantially the form attached hereto as
EXHIBIT D.
7. CONDITIONS OF THE SELLER'S OBLIGATIONS AT CLOSING
The obligations of the Seller to the Company and Purchaser under this
Agreement are subject to the fulfillment, on or before the Closing, of each of
the following conditions, unless otherwise waived:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company and Purchaser contained in Sections 2 and 4, respectively, shall
be true and correct on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
7.2 PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company and Purchaser on or prior to the
Closing shall have been performed or complied with in all material respects.
7.3 QUALIFICATIONS. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful sale and transfer of the
Shares and the issuance of the Warrants pursuant to this Agreement shall be
obtained and effective as of the Closing.
11
8. MISCELLANEOUS
8.1 SURVIVAL OF WARRANTIES. Unless otherwise set forth in this
Agreement, the warranties, representations and covenants of the Company and
Purchaser contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
8.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
8.3 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Utah, without giving effect to principles of conflicts of law.
8.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
8.5 EXPENSES. Each party to this Agreement shall pay its own expenses
incurred with respect to this Agreement, the documents referred to herein and
the transactions contemplated hereby and thereby, irrespective of whether such
transactions are consummated; provided, however, that if the transactions are
consummated, Company shall reimburse Purchaser up to $5,000 of its legal fees
incurred in the transaction.
8.6 ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of the
Transaction Agreements, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
8.7 ENTIRE AGREEMENT. This Agreement, and the documents referred to
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
existing between the parties hereto are expressly canceled.
8.8 OTHER AGREEMENTS. Except as specifically set forth in this
Agreement, no provision herein shall adversely affect or be deemed a waiver of
the provisions of any other agreement of the parties or their rights and
obligation as set forth in such agreements.
8.9 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
12
when transmitted if transmitted by telecopy; the day after it is sent, if sent
for next day delivery to a domestic address by recognized overnight delivery
service (E.G., Federal Express); and upon receipt, if sent by certified or
registered mail, return receipt requested. In each case notice shall be sent to
the parties at the addresses specified below their respective signatures, or to
such other addresses as the parties may specify in writing from time to time.
IN WITNESS WHEREOF, the parties have executed this Stock and Warrant
Purchase Agreement as of the date first written above.
COMPANY:
EBIZ ENTERPRISES, INC.
By: /s/ Stephen C. Herman
---------------------------------------
Name: Stephen C. Herman
Title: Chief Operations Officer
Address: 15695 North 83rd Way
Scottsdale, Arizona 85260
SELLER:
JEM VENTURES EBIZ, LLC
By: /s/ David A. White
---------------------------------------
Name: David A. White
Title: Member Manager
Address: 600 Central Avenue, Suite 214
Highland Park, Illinois 60035
PURCHASER:
THE CANOPY GROUP, INC.
By: /s/ Darcy Mott
---------------------------------------
Name: Darcy Mott
Title: Chief Financial Officer and
Treasurer
Address: 240 West Center Street
Orem, Utah 84057
13
EXHIBIT A
WARRANT AGREEMENT
EXHIBIT B
WARRANT AGREEMENT
EXHIBIT C
INVESTOR'S RIGHTS AGREEMENT
EXHIBIT D
LETTER AGREEMENT REGARDING DEBENTURE