This document helps clear up some of the name changes Caldera has gone through. You will note, however, that several of the Exhibits are blank. IBM has asked SCO for these missing exhibits in discovery.
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AGREEMENT AND PLAN OF REORGANIZATION
THE SANTA CRUZ OPERATION, INC.
A CALIFORNIA CORPORATION
1. PLAN OF REORGANIZATION................................................................................ 2
1.1 The Organization of Newco and Merger Sub................................................. 2
1.2 The Merger............................................................................... 2
1.3 SCO Transaction.......................................................................... 3
1.4 Contribution and Transfer of Contributed Stock and Contributed Assets.................... 4
1.5 Closing Matters.......................................................................... 7
1.6 Dissenter's Rights....................................................................... 7
1.7 Newco Plans.............................................................................. 7
1.8 Registration on Form S-8................................................................. 7
1.9 Effects of the Caldera Merger............................................................ 8
1.10 Tax-Free Reorganization.................................................................. 8
1.11 Tax-Free Section 351 Transaction......................................................... 8
1.12 HSR Filings.............................................................................. 9
1.13 Board of Directors and Officers of Newco; Newco Certificate of
Incorporation and Bylaws................................................................. 9
1.14 Registration on Form S-4................................................................. 10
2. REPRESENTATIONS AND WARRANTIES OF SCO................................................................. 10
2.1 Organization; Good Standing; Qualification and Power..................................... 10
2.2 Capital Structure........................................................................ 10
2.3 Authority................................................................................ 11
2.4 SEC Documents............................................................................ 13
2.5 Disclosure; Information Supplied......................................................... 14
2.6 Compliance with Applicable Laws.......................................................... 14
2.7 Litigation............................................................................... 15
2.8 ERISA and Other Compliance............................................................... 16
2.9 Absence of Certain Changes or Events..................................................... 19
2.10 Full Force and Effect.................................................................... 21
2.11 Agreements............................................................................... 21
2.12 No Defaults.............................................................................. 22
2.13 Certain Agreements....................................................................... 22
2.14 Taxes.................................................................................... 22
2.15 Intellectual Property.................................................................... 24
2.16 Fees and Expenses........................................................................ 26
2.17 Insurance................................................................................ 26
2.18 Ownership of Property.................................................................... 26
2.19 Environmental Matters.................................................................... 26
2.20 Interested Party Transactions............................................................ 27
2.21 Fairness Opinion......................................................................... 27
2.22 Title to and Condition and Sufficiency of Group Assets................................... 27
2.23 No Restrictive Agreements................................................................ 28
2.24 Supplier and Customer Relationships...................................................... 28
2.25 Product and Inventory Status............................................................. 28
2.26 Affirmative Vote......................................................................... 29
2.27 State Takeover Statutes.................................................................. 29
2.28 Competition and Fair Trading Laws........................................................ 29
2.29 Grants................................................................................... 29
3. REPRESENTATIONS AND WARRANTIES OF CALDERA AND NEWCO............................... 30
3.1 Organization; Good Standing; Qualification and Power..................................... 30
3.2 Capital Structure........................................................................ 30
3.3 Authority................................................................................ 31
3.4 SEC Documents............................................................................ 32
3.5 Disclosure; Information Supplied......................................................... 33
3.6 Vote Required............................................................................ 33
3.7 Litigation............................................................................... 33
3.8 Valid Issuance........................................................................... 34
3.9 Absence of Certain Changes or Events..................................................... 34
3.10 Taxes.................................................................................... 36
3.11 Intellectual Property.................................................................... 37
3.12 Fees and Expenses........................................................................ 37
3.13 Environmental Matters.................................................................... 37
3.14 Fairness Opinion......................................................................... 38
3.15 Tax Representations...................................................................... 38
4. SCO COVENANTS......................................................................................... 38
4.1 Advice of Changes........................................................................ 38
4.2 Maintenance of Business.................................................................. 38
4.3 Conduct of Business...................................................................... 39
4.4 SCO Corporate Approvals.................................................................. 40
4.5 Letter of SCO's Accountants.............................................................. 40
4.6 Prospectus/Proxy Statement............................................................... 40
4.7 Regulatory Approvals..................................................................... 41
4.8 Necessary Consents....................................................................... 42
4.9 Access to Information.................................................................... 42
4.10 Satisfaction of Conditions Precedent..................................................... 42
4.11 Voting Agreement......................................................................... 42
4.12 Sales Representative and Support Agreement............................................... 42
4.13 Stockholders Agreement................................................................... 42
4.14 No Other Negotiations.................................................................... 43
4.15 Books and Records........................................................................ 44
4.16 [Intentionally Omitted.]................................................................. 44
4.17 Modification of Joint Contributed Agreements and Shared
Contributed Assets....................................................................... 44
4.18 Key Employee Employment Agreements....................................................... 45
4.19 SCO IP Rights............................................................................ 45
4.20 Directors' and Officers' Liability Insurance............................................. 45
4.21 Closing Group Account.................................................................... 45
4.22 SCO Retained Business.................................................................... 45
4.23 Taking of Necessary Action; Further Action............................................... 46
4.24 Accounting Treatments.................................................................... 46
5. CALDERA AND NEWCO COVENANTS........................................................................... 46
5.1 Advice of Changes........................................................................ 46
5.2 Maintenance of Business.................................................................. 46
5.3 Conduct of Business...................................................................... 47
5.4 Stockholder Approval..................................................................... 47
5.5 Letter of Caldera's Accountants.......................................................... 47
5.6 Prospectus/Proxy Statement............................................................... 48
5.7 State Securities Law Compliance.......................................................... 48
5.8 Regulatory Approvals..................................................................... 49
5.9 Necessary Consents....................................................................... 49
5.10 Access to Information.................................................................... 49
5.11 Books and Records........................................................................ 49
5.12 Satisfaction of Conditions Precedent..................................................... 50
5.13 Voting Agreement......................................................................... 50
5.14 Sales Representative and Support Agreement............................................... 50
5.15 Stockholders Agreement................................................................... 50
5.16 Caldera Employee Plans................................................................... 50
5.17 Indemnification and Insurance -- Caldera................................................. 51
5.18 Indemnification and Insurance -- Employees............................................... 52
5.19 Distribution to SCO Shareholders......................................................... 54
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SCO......................................................... 54
6.1 Accuracy of Representations and Warranties............................................... 54
6.2 Covenants................................................................................ 54
6.3 Compliance with Law...................................................................... 55
6.4 Form S-4................................................................................. 55
6.5 Opinion of Caldera and Newco's Counsel................................................... 55
6.6 Stockholder Approval..................................................................... 55
6.7 Tax Opinion.............................................................................. 55
6.8 Designees to the Board of Directors of Newco............................................. 55
6.9 Nasdaq Listing........................................................................... 55
6.10 HSR Act.................................................................................. 55
6.11 Ancillary Agreements..................................................................... 55
6.12 Delivery of Newco Shares................................................................. 56
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF CALDERA AND NEWCO.......................... 56
7.1 Accuracy of Representations and Warranties............................................... 56
7.2 Covenants................................................................................ 56
7.3 Compliance with Law...................................................................... 56
7.4 Consents................................................................................. 56
7.5 Form S-4................................................................................. 56
7.6 Opinion of Counsel to SCO................................................................ 56
7.7 Caldera Stockholder Approval............................................................. 56
7.8 Tax Opinion.............................................................................. 57
7.9 HSR Act.................................................................................. 57
7.10 Ancillary Agreements..................................................................... 57
7.11 Key Employee Term Sheets................................................................. 57
8. TERMINATION OF AGREEMENT.............................................................................. 57
8.1 Termination.............................................................................. 57
8.2 Notice of Termination.................................................................... 59
8.3 Liability................................................................................ 59
8.4 Termination Fee.......................................................................... 59
9. SURVIVAL OF REPRESENTATIONS........................................................................... 60
9.1 Survival of Representations.............................................................. 60
10. ESCROW AND INDEMNIFICATION............................................................................ 60
10.1 Escrow Fund.............................................................................. 60
10.2 Indemnification by SCO................................................................... 60
10.4 Limitations on Indemnification........................................................... 61
10.5 Indemnification Procedures............................................................... 61
11. EMPLOYEE MATTERS...................................................................................... 63
11.1 Right to Offer Employment................................................................ 63
11.2 Termination of Employment................................................................ 65
11.3 Cooperation.............................................................................. 65
12. TAX MATTERS........................................................................................... 66
12.1 Transaction Taxes; Representation; Transaction Tax Indemnity.......................... 66
12.2 Treatment of Indemnity Payments.......................................................... 66
12.3 Indemnity for Taxes...................................................................... 66
12.4 Other Tax Matters........................................................................ 68
12.5 Tax Representations...................................................................... 71
13. MISCELLANEOUS......................................................................................... 72
13.1 Governing Law; Venue..................................................................... 72
13.2 Assignment; Binding upon Successors and Assigns.......................................... 72
13.3 Severability............................................................................. 72
13.4 Counterparts............................................................................. 72
13.5 Other Remedies........................................................................... 72
13.6 Amendment and Waivers.................................................................... 73
13.7 Expenses................................................................................. 73
13.8 Attorneys' Fees.......................................................................... 73
13.9 Notices.................................................................................. 73
13.10 Construction of Agreement................................................................ 74
13.11 No Joint Venture......................................................................... 74
13.12 Further Assurances....................................................................... 74
13.13 Absence of Third Party Beneficiary Rights................................................ 74
13.14 Public Announcement...................................................................... 75
13.15 Certain Defined Terms.................................................................... 75
13.16 Entire Agreement......................................................................... 87
Exhibits
Exhibit A -- Certificate of Merger
Exhibit A-1 -- Certificate of Incorporation
Exhibit 1.4(b) -- Excluded Assets
Exhibit 1.4(c)(i)(B) -- Assumed Liabilities
Exhibit 1.3(b) -- Escrow Agreement
Exhibit 1.13(b) -- Officers
Exhibit 1.13(c)A -- Form of Newco Amended and Restated Certificate of Incorporation
Exhibit 1.13(c)B -- Form of Newco Amended and Restated Bylaws
Exhibit 1.4(a)(i) -- Non US-Contributed Companies and Contributed Assets
Exhibit 4.11A -- Form of Voting Agreement
Exhibit 4.11B -- SCO Affiliates Who Executed Voting Agreements
Exhibit 4.12 -- Sales Representative and Support Agreement
Exhibit 4.13B -- Stockholder Agreement
Exhibit 4.18A -- SCO Key Employees
Exhibit 4.18B -- Form of Key Employee Term Sheet
Exhibit 5.13B -- Caldera Affiliates Who Executed Voting Agreements
Exhibit 6.5 -- Opinion of Counsel of Caldera and Newco
Exhibit 7.6 -- Opinion of Counsel of SCO and Contributing Companies
Exhibit 13.15A -- Contributed Assets
Exhibit 13.15B -- Contributed Contracts
Exhibit 13.15C -- Contributed Subsidiaries
Exhibit 13.15D -- Group Products
Exhibit 13.15E -- Permitted Encumbrances
Schedules -- Caldera Disclosure Letter
-- SCO Disclosure Letter
A. The parties intend that, subject to the terms and conditions of
this Agreement, (i) a new Delaware corporation referred to herein as Newco has
been formed by Caldera solely for the purpose of the transactions contemplated
hereunder; (ii) a newly formed, wholly owned subsidiary of Newco ("Merger Sub")
will be merged with and into Caldera, with Caldera being the surviving
corporation of such merger (the "Merger"), and all outstanding Caldera
securities will be converted, on a share for share basis, into Newco securities
having identical rights, preferences and privileges, with Newco assuming any and
all outstanding options and other rights to purchase shares of capital stock of
Caldera (with all such Newco securities issued to former Caldera security
holders initially representing the Caldera Percentage Interest in Newco), all on
the terms set out in this Agreement and in the Certificate of Merger
substantially in the form of Exhibit A hereto (the "Certificate of Merger") and
the applicable provisions of Delaware Law; (iii) SCO and certain of its
subsidiaries as herein specified will contribute to Newco, all on the terms
herein specified, all of the Contributed Stock of the Contributed Companies
(with each of the Contributed Companies thereby becoming a wholly owned
subsidiary of Newco) and the Contributed Assets in consideration for the
issuance by Newco to SCO of shares of Common Stock of Newco, $0.001 par value
("Newco Common Stock"), and (iv) Newco will assume all options to acquire common
stock of SCO held by the Employees (other than David McCrabb, Jack Moyer and Jim
Wilt) hired or retained by Caldera (the "Optionees") and such options will be
converted into options to purchase Newco Common Stock ("Newco Options") as set
forth herein, which Newco Common Stock issued to SCO and Newco Options will
represent in the aggregate a fully diluted equity interest in Newco equal to the
difference between 100% and the Caldera Percentage Interest. The transactions
described in subpart (iii) and (iv) of the foregoing sentence are collectively
the "SCO Transaction."
1. Plan of Reorganization.
With respect to each such Contributed Asset whose assignment or
transfer to Newco requires the consent, approval or waiver of another party
thereto or any third party, Newco and SCO shall cooperate and use their mutual
reasonable, commercial efforts to obtain such consent, approval or waiver of
such other party or parties or such third party to such assignment or transfer
as promptly as practicable prior to the Effective Time; and each agrees to
supply relevant information to such party or parties or such third party in
order to facilitate such objective. Notwithstanding the foregoing, nothing
contained herein shall obligate Newco or any Contributing Company to expend or
pay any amount to third parties to obtain any consents, approvals or waivers, or
to make alternative arrangements available; provided that where the Contributing
Companies are unable to effectively assign or otherwise transfer to Newco nor
any Contributed Asset without constituting a breach due to such lack of third
party consent, the Contributing Companies shall make available to Newco the net
economic benefits (such as inbound royalty payments, net of actual costs), if
any, received by the Contributing Companies from and after the Effective Time
with respect to any such Contributed Asset.
2. Representations and Warranties of SCO.
Except as set forth in the respectively referenced provisions of
the SCO Disclosure Letter delivered by SCO on behalf of itself and any other
Contributing Companies (collectively, "Representing SCO Entities") to Caldera
concurrently herewith and certified by an officer of SCO, on behalf of all of
the Representing SCO Entities, respectively, to be true, accurate and complete
to the best of his/her knowledge (the "SCO Disclosure Letter"), SCO on behalf of
each and all of the Representing SCO Entities, hereby represents and warrants to
Caldera that as of the date hereof:
(a) Product Quality, Warranty Claims. All Group Products
manufactured, sold, licensed, leased or delivered in connection with the Group
Business conform in all material respects to applicable contractual commitments,
express and implied warranties, and, to SCO's Knowledge, there is no material
Liability (nor any basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand giving rise to any
material Liability) for replacement or repair thereof or other damages in
connection therewith, except for such conformance as would not have a Material
Adverse Effect on Newco.
(b) Inventory. To SCO's Knowledge, its inventories recorded on
the 2000 Group Balance Sheet consist primarily of materials used in operating
system software products, related supplies and packaging materials, all of which
are merchantable, fit for the purpose for which they were procured or
manufactured, and are in a condition and quantity usable in the ordinary course
of business and to SCO's Knowledge, none of these inventories are obsolete,
damaged or defective, except in each case where the failure of these inventories
to be so would not have a Material Adverse Effect on Newco or where a sufficient
provision with respect to the possibility of such failure is included in the
2000 Group Balance Sheet.
2.26 Affirmative Vote.
The affirmative vote of a majority of the votes that holders of the
outstanding shares of SCO's common stock are entitled to vote with respect to
the SCO Transaction is the only vote of the holders of any class or series of
SCO's capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
2.27 State Takeover Statutes.
To SCO's knowledge, no state takeover statute or similar statute or
regulation applies to or purports to apply to the SCO Transaction, the
Agreement, the Ancillary Agreements, or the transactions contemplated hereby and
thereby.
2.28 Competition and Fair Trading Laws. No Contributed Company or, in
relation to the Group Business, Contributing Company is a party to (or concerned
in) any agreement, arrangement, concerted practice or course of conduct which:
(i) is registrable under applicable laws in any relevant jurisdictions; or (ii)
contravenes any such laws; or (iii) falls within Article 81 and/or Articles 82
of the EC Treaty; or (iv) falls within Article 53 and/or Article 54 of the
Agreement on the European Economic Area; or (v) contravenes, or is likely to
contravene, the prohibitions of the Competition Act 1998; or (vi) otherwise
infringes the competition legislation or practice of any other jurisdiction.
No Contributed Company and, in relation to the Group Business, no
Contributing Company has received or is likely to receive any process, notice or
other communication (formal or informal) by or on behalf of the Commission of
the European Communities, the EFTA Surveillance Authority or any other authority
having jurisdiction in competition matters in relation to any aspect of the
Group Business or any agreement, arrangement, concerted practice or course of
conduct to which any of them is, or is alleged to be, a party in relation to the
Group Business.
No Contributed Company and, in relation to the Group Business, no
Contributing Company is subject to any order or judgment given by any court or
governmental or regulatory authority, or party to any undertaking or assurance
given to any such court or authority, in relation to competition matters which
is still in force.
2.29Grants. None of the Contributed Companies have taken any action,
agreed to take any action or failed to take any action as a result of which any
investment or other grant paid for use in the Contributed Companies is liable to
be refunded in whole or in part
(whether as a result of the transaction contemplated by this Agreement or the
Ancillary Agreements).
3. Representations and Warranties of Caldera and Newco.
Except as set forth in the respectively referenced provisions of the
Caldera Disclosure Letter, delivered by Caldera on behalf of Caldera and each
Caldera Subsidiary (collectively, the "Caldera Group"), to SCO concurrently
herewith and certified by an officer of Caldera, on behalf of the Caldera Group,
respectively, to be true, accurate and complete to the best of his knowledge
(the "Caldera Disclosure Letter"), Caldera, on behalf of the Caldera Group,
hereby represents and warrants to SCO that as of the date hereof:
3.1 Organization; Good Standing; Qualification and Power. The Caldera
Subsidiaries are all of the subsidiaries of Caldera or any of its direct or
indirect subsidiaries. Caldera and each of the Caldera Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation, has all requisite corporate power and
authority to own, lease and operate any and all of the Caldera Assets held by
such company and for the Conduct of the Caldera Business as now being conducted,
and is duly qualified and in good standing to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary, other than in such jurisdictions
where the failure so to qualify would not have a Material Adverse Effect on
Caldera. Caldera has delivered to SCO or its counsel complete and correct copies
of the Certificate of Incorporation and Bylaws of Caldera as amended to the date
hereof and will deliver to SCO or its counsel prior to the Effective Time the
equivalent charter documents of Caldera and each of its Subsidiaries as amended
to the Closing. Except for the Caldera Subsidiaries, neither Caldera nor any of
the Caldera Subsidiaries owns, directly or indirectly, any capital stock or
other equity interest of any corporation or has any direct or indirect equity or
ownership interest in any other business, whether organized as a corporation,
partnership, joint venture or otherwise.
3.2 Capital Structure.
(a) Stock and Options. The authorized and issued and as of the
date of July 28, 2000 the outstanding capital stock of Caldera, the Caldera
Subsidiaries and Newco is set forth in Section 3.2(a) of the Caldera Disclosure
Letter. Except as specified in Section 3.2(a) of the Caldera Disclosure Letter,
no shares of the capital stock of Caldera or of any of the Caldera Subsidiaries
are held by any of them in its treasury or reserved for issuance upon the
exercise of options or warrants. All outstanding shares of the capital stock of
Caldera on July 28, 2000 are set forth in Section 3.2(a) of the Caldera
Disclosure Letter and are validly issued, fully paid and nonassessable free and
clear of any Encumbrances and not subject to preemptive rights pursuant to any
statute, pursuant to the Certificate of Incorporation or Bylaws of Caldera, or
pursuant to any agreement or document to which any of them is a party or by
which any of them is bound. All outstanding shares of the capital stock of each
of the Caldera Subsidiaries are validly issued, fully paid and nonassessable and
are owned by Caldera, or one of the Caldera Subsidiaries, free and clear of any
Encumbrances. The Caldera Significant Stockholders who will execute Voting
Agreements collectively own and have the right to vote shares representing
approximately 70% of the capital stock of Caldera as of the date of this
Agreement.
(b) No Other Commitments. Except as set forth in Section 3.2(b)
of the Caldera Disclosure Letter, there are no options, warrants, calls, rights,
commitments, conversion rights or agreements of any character to which Caldera
or any of its respective direct and indirect subsidiaries, is a party or by
which any of them is bound obligating them to issue, deliver or sell, or cause
to be issued, delivered or sold, any shares of its capital stock, or securities
convertible into or exchangeable for shares of its capital stock, or obligating
any of them to grant, extend or enter into any such option, warrant, call,
right, commitment, conversion right or agreement. There is no voting trust,
proxy or other agreement or understanding to which Caldera or any of its
respective direct or indirect subsidiaries is a party with respect to the voting
of the capital stock of any member of the Caldera Group. All shares of capital
stock of any member of the Caldera Group are held free and clear of any
Encumbrances.
(c) Registration Rights. Except as disclosed in the Caldera SEC
Documents, neither Caldera nor any of its respective subsidiaries is under any
obligation to register under the Securities Act any of its presently outstanding
securities or any securities that may be subsequently issued which offering
would have a Material Adverse Effect on Newco.
3.3 Authority.
(a) Corporate Action. Subject to approval of this Agreement and
the Ancillary Agreements by the stockholders of Caldera, Caldera has all
requisite corporate power and authority to enter into this Agreement and the
Ancillary Agreements, to perform its obligations hereunder and thereunder, and
to consummate the transactions contemplated by this Agreement and the Ancillary
Agreements. The Board of Directors of Newco and Caldera have, as of the date of
this Agreement, unanimously (i) determined that the Merger is consistent with
and in furtherance of the long-term business strategy of Caldera and is fair to,
and in the best interests of, Caldera and its stockholders; (ii) has approved
this Agreement, the Ancillary Agreements, the Merger, the SCO Transactions and
other transactions contemplated hereby and thereby; and (iii) has determined to
recommend that the stockholders of Caldera approve the SCO Transaction. This
Agreement and the Voting Agreements have been, and prior to the Effective Time,
the other Ancillary Agreements will be, duly executed and delivered by Newco and
Caldera. Subject to receiving such stockholder approval, this Agreement and the
Voting Agreements are, and at the Closing the other Ancillary Agreements will
be, valid and binding obligations of Newco and Caldera, enforceable against
Newco and Caldera in accordance with their respective terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity.
(b) No Conflict. Neither the execution, delivery and
performance of this Agreement and the Ancillary Agreements nor the consummation
of the transactions contemplated hereby or thereby nor compliance with the
provisions hereof will (i) conflict with, or result in any violations of, or
cause a default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, amendment, cancellation or acceleration of
any obligation contained in, or the loss of any material benefit under, or
result in the creation of any Encumbrance upon the any of the Caldera Assets
under, any term, condition or provision of
(x) the Certificate of Incorporation or Bylaws of Caldera or the equivalent
organizational documents of any of the Caldera Subsidiaries or (y) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other material
agreement, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Caldera, Caldera's property or the Caldera Assets, other than any
such conflicts, violations, defaults, rights or Encumbrances which, individually
or in the aggregate, would not have a Material Adverse Effect on Caldera; or
(ii) require the affirmative vote of the holders of greater than a majority of
the issued and outstanding capital stock of Caldera.
(c) Governmental Consents. Except (i) as set forth in Section
3.3(c) of the Caldera Disclosure Letter; (ii) such filings, authorizations,
orders and approvals as may be required under state takeover laws; (iii) such
filings and notifications as may be necessary under the HSR Act; (iv) the
filings, authorizations, orders, notifications, and approvals contemplated by
this Agreement or the Ancillary Agreements; and (v) such other governmental or
third party consents, filings, authorizations, orders and approvals which, if
not obtained or made, would not have a Material Adverse Effect on Newco or have
a material adverse effect on the ability of Caldera to consummate the
transactions contemplated by this Agreement or the Ancillary Agreements, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental entity is required to be obtained by the Caldera
Group in connection with the execution and delivery of this Agreement or the
Ancillary Agreements by Caldera, Newco, and the Merger Sub or the performance by
them of its respective obligations hereunder or thereunder.
3.4 SEC Documents.
(a) SEC Reports. Caldera has delivered to SCO or its counsel
correct and complete copies of the final version of each report, schedule,
registration statement and definitive proxy statement filed by Caldera with the
SEC on or after March 20, 2000 (the "Caldera SEC Documents"), which are the
material documents (other than preliminary material) that Caldera was required
to file with the SEC on or after March 20, 2000 with respect, in whole or in
part, to Caldera or the Caldera Assets. As of their respective dates or, in the
case of registration statements, their effective dates, none of the Caldera SEC
Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained 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, and there is no requirement under
the Securities Act or the Exchange Act, as the case may be, to have amended any
such filing. The Caldera SEC Documents complied, when filed, in all material
respects with the then applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations promulgated by
the SEC thereunder. Caldera has filed all documents and agreements that were
required to be filed as exhibits to the Caldera SEC Documents.
(b) Caldera Financial Statements; Absence of Undisclosed
Liabilities. The audited consolidated financial statements, dated as of and for
the period ended, October 31, 1999, and the unaudited consolidated financial
statements, dated as of and for the period ending April 30, 2000, of Caldera and
its consolidated subsidiaries ("Caldera Financial Statements") complied as to
form in all material respects with the then applicable accounting requirements
and
the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may have been indicated in the notes thereto) and
fairly present (subject, in the case of the unaudited statements, to normal
year-end audit adjustments) the consolidated financial position of the Caldera
Group as at the respective dates thereof and the consolidated results of its
operations and cash flows for the respective periods then ended. Caldera has no
liabilities or obligations of any nature (matured or unmatured, fixed or
contingent) which are, individually or in the aggregate, of a nature required to
be disclosed on the face of a consolidated balance sheet for Caldera and its
consolidated subsidiaries prepared in accordance with GAAP and which are
material to the Caldera Business, except for such liabilities or obligations as
(i) were accrued or were provided for in the consolidated balance sheet dated
April 30, 2000 included in the Caldera Financial Statements as of the date
thereof (the "Caldera Financial Statements Balance Sheet Date") or (ii) are of a
normally recurring nature and were incurred after the Caldera Financial
Statements Balance Sheet Date in the ordinary course of business consistent with
past practice. All liabilities and valuation accounts established and reflected
in the Caldera Financial Statements are to Caldera's Knowledge reasonably
adequate. At the Caldera Financial Statements Balance Sheet Date, there were no
material loss contingencies which are not adequately provided for in the Caldera
Financial Statements.
3.5 Disclosure; Information Supplied. No representation or warranty
made by Caldera in this Agreement, nor any financial statement, certificate or
exhibit prepared and furnished or to be prepared and furnished by Caldera or its
respective representatives pursuant hereto or in connection with the
transactions contemplated hereby, when taken together, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements or facts contained herein or therein, taken as a whole not
misleading in light of the circumstances under which they were furnished. None
of the information supplied or to be supplied by Caldera for inclusion or
incorporation by reference in the Form S-4 and Prospectus/Proxy Statement will,
at the time the information is supplied contain, after giving effect to any
supplement or amendment thereto, no untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not materially misleading. The Prospectus/Proxy Statement will in all material
respects comply as to form with the provisions of the Exchange Act and the rules
and regulations promulgated by the SEC thereunder.
3.6 Vote Required. The affirmative vote of a majority of the shares
of Caldera Common Stock that cast votes regarding the Merger and the SCO
Transaction in person or by proxy at the Caldera Stockholders Meeting is the
only vote of the holders of any class or series of Caldera's capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
3.7 Litigation. Except as disclosed in the Caldera SEC Documents
filed prior to the date hereof, or as would not reasonably be expected to have a
Material Adverse Effect on Caldera, there is no suit, action, arbitration,
demand, claim or proceeding pending or, to Caldera's Knowledge, threatened
against Caldera or the Caldera Assets; nor is there any judgment, decree,
injunction, ruling or order of any governmental entity or arbitrator or
settlement agreement outstanding against Caldera or any of the Caldera Assets.
Caldera has delivered or made available to SCO or its counsel correct and
complete copies of all material
correspondence prepared by its counsel for Caldera's auditors in connection with
the last two completed audits of Caldera's financial statements and any such
correspondence since the date of the last such audit. No member of the Caldera
Group is a party to any decree, order or arbitration award (or agreement entered
into in any administrative, judicial or arbitration proceeding with any
governmental authority) with respect to the Caldera Assets, Caldera Employees,
or the Caldera Business that could reasonably be expected to have a Material
Adverse Effect on Caldera. Except for violations as would not have a Material
Adverse Effect on Caldera, none of the members of the Caldera Group is in
violation of any decree, order or arbitration award that names such company, or
any of such companies, as a party or that otherwise, to Caldera's Knowledge,
involves such company or any of such company's assets, or of any law, ordinance,
statute, or governmental authority to which the Caldera Assets are subject,
including, without limitation, laws, rules and regulations relating to
occupational health and safety, equal employment opportunities, fair employment
practices, and sex, race, religious and age discrimination. There is no claim,
action, suit, arbitration, mediation, investigation or other proceeding of any
nature pending or, to Caldera's Knowledge, threatened, at law or in equity, by
way of arbitration or before any court, governmental department, commission,
board or agency that: (i) may adversely affect, contest or challenge any party's
authority, right or ability to perform its obligations under this Agreement or
any of the Ancillary Agreements; (ii) challenges or contests Caldera's right,
title or ownership of any of the Caldera Assets or seeks to impose an
Encumbrance (other than a Caldera Permitted Encumbrance) on, or a transfer of
title or ownership of, any of the Caldera Assets; (iii) asserts that any action
taken by any employee, consultant or contractor of Caldera in connection with
the Group Business infringes or misappropriates any Intellectual Property Rights
of any third party; (iv) seeks to enjoin, prevent or hinder operation of the
Caldera Business or the consummation of any of the transactions contemplated by
this Agreement or any of the Ancillary Agreements; (v) would impair or have an
adverse affect on Newco's right or ability to use or exploit any of the Caldera
Assets; or (vi) involves or relates to any potentially material claim against
Caldera by any creditor of Caldera or involves any claim of fraudulent
conveyance or any similar claim, except in cases (ii), (iii) and (v) where such
proceeding could not reasonably be expected to have a Material Adverse Effect on
Newco.
3.8 Valid Issuance. The Newco Common Stock that is being issued
hereunder in connection with the SCO Transaction, when issued and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly authorized and validly issued, fully paid, and
nonassessable.
3.9 Absence of Certain Changes or Events. Except as disclosed on
Section 3.9 of the Caldera Disclosure Letter, since the Caldera Financial
Statements Balance Sheet Date there has not occurred:
(a) any change or event which could reasonably be expected to
have a Material Adverse Effect on Caldera; provided, however, that in no event
will a change in the trading price of Caldera Common Stock be deemed a Material
Adverse Effect on Caldera;
(b) any amendments or changes in the Certificate of
Incorporation or Bylaws (or equivalent governing documents in each relevant
jurisdiction) of any member of the Caldera Group;
(c) any damage, destruction to or loss of Caldera assets not
covered by insurance, which would have a Material Adverse Effect on Caldera;
(d) any redemption, repurchase or other acquisition of shares of
any member of the Caldera Group (other than pursuant to arrangements with
terminated employees or consultants in the ordinary course of business,
consistent with past practice), or any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to the capital stock of any member of the Caldera Group or, with respect
to dividends or other distributions of cash or property arising from the Caldera
Business;
(e) any material increase in or modification of the compensation
or benefits payable or to become payable by Caldera to the Caldera employees,
except in the ordinary course of the business, consistent with past practice and
except as necessary to respond to third party solicitation of Caldera employees;
(f) other than as required by applicable statute or governmental
regulation, any material increase in or modification of any Caldera Group
Benefit Arrangement (including, but not limited to, the granting of stock
options, the acceleration of the vesting schedule in effect for any outstanding
stock options, restricted stock awards or stock appreciation rights) that will
become binding upon Newco upon consummation of the transactions contemplated
herein, for or with respect to any of the Caldera Employees, other than (i) in
the ordinary course of the business, consistent with past practice, or to
respond to third party solicitation of Caldera Employees, and (ii) if occurring
after the date hereof, which is authorized pursuant to Section 5.3 below;
(g) any sale of a material amount of the Caldera Assets, or any
acquisition by any member of the Caldera Group of a material amount of assets,
other than in the ordinary course of the business, consistent with past
practice;
(h) any alteration in any term of any outstanding capital stock
or rights to acquire capital stock of any member of the Caldera Group,
including, but not limited to, acceleration of the vesting or any change in the
terms of any outstanding stock options;
(i) other than in the ordinary course of business, consistent
with past practice, (A) any incurrence, assumption or guarantee by any member of
the Caldera Group of any debt of any person, other than any member of the
Caldera Group, for borrowed money in an amount exceeding $250,000 in the
aggregate; (B) issuance or sale by any member of the Caldera Group of any
securities convertible into or exchangeable for its respective debt securities;
or (C) issuance or sale of options or other rights to acquire from the Caldera
Group, directly or indirectly, debt securities of any member of the Caldera
Group, or any securities convertible into or exchangeable for any such debt
securities;
(j) any creation or assumption by any member of the Caldera
Group of any Encumbrance (other than Caldera Permitted Encumbrances) on any
Caldera Asset in excess of $250,000 individually or in the aggregate, other than
to refinance a liability reflected in the Caldera Financial Statements in the
ordinary course of business;
(k) any making by any member of the Caldera Group of any loan,
advance or capital contribution to or investment in any person other than to
refinance a liability reflected in the Caldera Financial Statements and other
than (i) loans, advances or capital contributions made in the ordinary course of
the business, and (ii) other loans and advances, where the aggregate amount of
all such items outstanding at any time does not exceed $250,000;
(l) any amendment of, relinquishment, termination or non-renewal
by Caldera of any of the Caldera Contracts, other than in the ordinary course of
business consistent with past practice;
(m) any transfer or grant of a right under the Caldera IP
Rights, other than those transferred or granted in the ordinary course of
business, consistent with past practice;
(n) any labor dispute with, or charge of unfair labor practice
by, any member of the Caldera Group (other than routine individual grievances),
any activity or proceeding by a labor union or representative thereof to
organize any Caldera employees or, to Caldera's Knowledge, any campaign being
conducted to solicit authorization from Caldera employees to be represented by
such labor union, where such dispute, practice, activity, proceeding, or
campaign would have a Material Adverse Effect on Caldera;
(o) any change to accounting methods; or
(p) any agreement by any member of the Caldera Group to take any
of the actions described in the preceding clauses (a) through (o) (other than
the transactions contemplated by this Agreement or the Ancillary Agreements).
3.10 Taxes. The Caldera Group has properly completed and filed, or
caused to be properly completed and filed, all Tax returns required to be filed
by the Caldera Group and has paid, or caused to be paid, all Taxes that are
shown on such Tax returns as due and payable. All Taxes of the Caldera Group for
all periods through June 30, 2000, have been fully paid (except for Taxes that
are adequately provided for or reflected in the Caldera Financial Statements).
Since June 30, 2000, no material Tax liability has been assessed, or is, to
Caldera's Knowledge, proposed to be assessed, incurred or accrued (other than
liabilities for Taxes arising in the ordinary course of business) against any
member of the Caldera Group. To Caldera's Knowledge, no member of the Caldera
Group has received notification that any material issues have been raised (or
are currently pending) by the Internal Revenue Service or any other taxing
authority, including, without limitation, any sales tax authority, in connection
with any of the Tax returns referred to in the first sentence of this Section
3.10, and no unexpired waivers of statutes of limitations have been given or
requested with respect to Tax returns or Taxes of any member of the Caldera
Group. No taxing authority is currently conducting an audit or investigation of
any of the aforesaid Tax returns or, to Caldera's Knowledge, is about to conduct
such an audit with respect to such Tax returns. Any deficiencies asserted or
assessments (including interest and penalties) made as a result of any
examination by the Internal Revenue Service or by appropriate national, state or
departmental authorities of the Tax returns with respect to SCO and any of its
subsidiaries have been paid or adequately provided for in the Caldera Financial
Statements, and to Caldera's Knowledge no proposed (but unassessed) additional
Taxes have been asserted and no Tax liens have been filed against Caldera or any
of the Caldera Assets other than for Taxes not yet due and payable. Neither
Caldera, nor any member of the Caldera Group (i) has made an election to be
treated as a "consenting corporation" under Section 341(f) of the Internal
Revenue Code or (ii) is a "personal holding company" within the meaning of
Section 542 of the Internal Revenue Code.
3.11 Intellectual Property.
(a) Caldera owns, or has the right to use, sell or license such
Intellectual Property Rights as are necessary or required for the Conduct of the
Caldera Business (such Intellectual Property Rights being hereinafter
collectively referred to as the "Caldera IP Rights") and such ownership or
rights to use, sell or license are reasonably sufficient for the Conduct of the
Caldera Business, except for any failure to own or have the right to use, sell
or license that would not have a Material Adverse Effect on Caldera.
(b) All Caldera IP Rights are owned free and clear of any
Encumbrances.
(c) To Caldera's Knowledge, (i) neither the manufacture,
marketing, license, sale or intended use of any product currently licensed or
sold by Caldera or any of the Caldera Subsidiaries or currently under
development by Caldera or any of the Caldera Subsidiaries violates any license
or agreement relating thereto or infringes any Intellectual Property Right of
any other party, (ii) there is no pending or threatened claim or litigation
contesting the validity, ownership or right to use, sell, license or dispose of
any Caldera IP Right and (iii) no third party has notified Caldera that any
Caldera IP Right or the proposed use, sale, license or disposition thereof,
conflicts or will conflict with the rights of any other party, nor is there any
basis therefor except for any violations, infringements, claims or litigation
that would not have a Material Adverse Effect on Caldera.
3.12 Fees and Expenses. Except for the fees and expenses set forth in
Caldera's engagement letter with Broadview, a copy of which has been provided to
SCO, neither Caldera, Newco nor any of the Caldera Subsidiaries has paid or
become obligated to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated by this Agreement
and the Ancillary Agreements.
3.13 Environmental Matters.
(a) During the period that Caldera has leased or owned its
respective properties or owned or operated its respective facilities, there have
been, to Caldera's Knowledge, no disposals, releases or threatened releases of
Hazardous Materials on, from, under or about such properties or facilities which
would cause a Material Adverse Effect on Newco. To Caldera's Knowledge there is
no presence, disposals, releases or threatened releases of Hazardous Materials
on, from, under or about any of such properties or facilities, which may have
occurred prior to Caldera having taken possession of any of such properties or
facilities where such Hazardous Materials would cause a Material Adverse Effect
on Newco.
(b) None of the properties or facilities of Caldera is or has
been the subject of an Environmental Damage, which would cause a Material
Adverse Effect on Newco. During the time that Caldera has owned or leased its
respective properties and facilities, none of Caldera nor, to Caldera's
Knowledge, any third party, has used, generated, manufactured or stored on,
under or about such properties or facilities or transported to or from such
properties or facilities any Hazardous Materials (except those Hazardous
Materials associated with general office use or janitorial supplies) in a manner
which would result in a Material Adverse Effect on Newco.
(c) During the time that any members of the Caldera Group have
owned or leased its respective properties and facilities, to Caldera's
Knowledge, there has been no litigation brought or threatened against any of
them by, or any settlement reached by any of them with, any party or parties
concerning the presence, disposal, release or threatened release of any
Hazardous Materials on, from or under any of such properties or facilities or
relating to any alleged Environmental Violation, except for litigation or
settlement which would not have a Material Adverse Effect on Newco.
3.14 Fairness Opinion. Caldera's Board of Directors has received an
opinion dated as of the date hereof from Broadview to the effect that, as of the
date hereof, the Caldera Ratio is fair to Caldera from a financial point of
view.
3.15 Tax Representations. Caldera, Newco and the Caldera Significant
Stockholders are aware of no plan or intention by Caldera or Newco or any
corporation related to Caldera immediately after the Effective Time to
repurchase any Newco capital stock issued pursuant to this Agreement from any
person or entity that is or will become a Newco stockholder by reason of the
transactions contemplated by this Agreement. Caldera has not redeemed any shares
of its capital stock or paid any extraordinary dividend in contemplation of the
Merger.
4. SCO Covenants.
4.1 Advice of Changes.
During the period from the date hereof until the earlier of the
Effective Time or the termination of this Agreement in accordance with its
terms, SCO will promptly advise Caldera in writing, (i) of any event occurring
subsequent to the date hereof that would reasonably be likely to render any
representation or warranty contained in Section 2 of this Agreement, if made on
or as of the date of such event or the Effective Time, untrue or inaccurate,
(ii) of any event that would reasonably be likely to have a Material Adverse
Effect on the Group Business, and (iii) of any material breach by SCO of any
covenant or agreement contained in this Agreement; provided, however, that the
delivery of, or failure to deliver, any notice pursuant to this Section 4.1
shall not limit or otherwise affect the remedies available hereunder. Prior to
the Effective Date, the SCO Board of Directors shall take all requisite action
under each of the SCO stock plans to preclude the accelerated vesting of any
outstanding SCO Options or unvested shares of SCO Common Stock for all
Designated Employees; provided, however that such actions shall not be required
with respect to SCO Options granted to Employees whose options are subject to
acceleration pursuant to existing severance or change of control agreements.
4.2 Maintenance of Business. During the period from the date hereof
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, the Contributed Company Group and the Contributing
Companies will use reasonable efforts to carry on and preserve the Group
Business and relationships with customers, suppliers, employees
and others related to Group Business in substantially the same manner as it has
prior to the date hereof.
4.3 Conduct of Business. During the period from the date hereof
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, the Contributed Company Group and SCO will continue
to conduct the Group Business and maintain business relationships related to the
Group Business in the ordinary and usual course consistent with past practice
and, except as otherwise disclosed herein or in the SCO Disclosure Letter, they
will not, without the prior written consent of Caldera, which consent shall not
be unreasonably withheld, take any of the following actions where it would cause
a Material Adverse Effect on the Group Business:
(a) cause any of the Contributed Companies to borrow any money
except for amounts that are not in the aggregate material to the financial
condition of the Group Business, taken as a whole;
(b) cause any of the Group Assets to become subject to any
Encumbrance, except for Group Permitted Encumbrances;
(c) dispose of any of Group Assets except immaterial amounts of
Group Assets in the ordinary course of business, consistent with past practice;
(d) grant any exclusive license to any of the SCO IP Rights or
grant any other license to SCO IP Rights except in the ordinary course of
business, consistent with past practice;
(e) materially amend or terminate any of the Material
Contributed Contracts;
(f) cause any of the Contributed Companies to declare, set aside
or pay any cash or stock dividend or other distribution in respect of capital
stock, or redeem or otherwise acquire any of its capital stock;
(g) permit any of the Contributed Companies to issue or allot or
agree to issue or allot capital stock, shares or loan capital;
(h) cause any of the Contributed Companies to make any loans or
grant any guarantees, except (A) advances that are not material in amount or (B)
loans pursuant to any Section 401(a) Plan;
(i) waive or release any material claim against a third party;
(j) cause any member of the Contributed Company Group to merge,
consolidate or reorganize with or acquire any entity that is not a member of the
Contributed Company Group, except as set forth in the SCO Disclosure Letter and
except as otherwise set forth in the last sentence of Section 4.14(a) or Section
1.4(a) hereof;
(k) amend the Certificate of Incorporation or Bylaws (or
equivalent governing documents in each relevant jurisdiction) of any of the
Contributed Companies;
(l) implement any layoffs or reductions in the work force;
(m) fail to pay or withhold any material Tax related to the
Group Business when due to be paid or withheld;
(n) change accounting methods;
(o) agree to take, or permit any of its subsidiaries to take or
agree to take, or enter into negotiations with respect to, any of the actions
described in the preceding clauses in this Section 4.3.
Notwithstanding the foregoing, nothing in this Section 4.3 hereof
shall restrict or limit the conduct of any business of SCO or its direct or
indirect subsidiaries other than the Group Business and other than with respect
to the Group Assets and nothing herein shall restrict or limit the conduct of
any business of the Contributed Company Group or with respect to the Group
Assets other than as set forth in this Section 4.3.
4.4 SCO Corporate Approvals. SCO will call the SCO Stockholders
Meeting to be held within 40 days after the Form S-4 shall have been declared
effective by the SEC, to submit the SCO Transaction and related matters for the
consideration and approval of the SCO stockholders. Subject to Section 8.1(i)
and (j), the Prospectus/Proxy Statement will include a statement to the effect
that SCO's Board of Directors is recommending that SCO stockholders vote in
favor of the SCO Transaction. The Board of Directors of SCO shall submit this
Agreement and the SCO Transaction to SCO's stockholders whether or not at any
time subsequent to the date hereof such Board determines that it can no longer
make such recommendation. Such meeting will be called, held and conducted, and
any proxies will be solicited, in compliance with applicable law. SCO agrees to
vote in favor of the contribution to Newco of the Contributed Stock and
Contributing Assets at each meeting of stockholders, or written consent in lieu
thereof, of the Contributing Companies. Without limiting the foregoing, SCO
shall vote in favor of the SCO Transaction at each and every stockholders
meeting, or with respect to any written consent in lieu thereof, at which any
proposal regarding any such transactions, including the contribution and
transfer of the Contributed Stock and Contributed Assets, is considered. The
Boards of Directors of each the Contributing Companies (including SCO) and the
Contributed Company Group have approved the SCO Transaction and this Agreement.
4.5 Letter of SCO's Accountants. SCO shall use its reasonable best
efforts to cause to be delivered to Caldera a letter of PriceWaterhouseCoopers
LLP, dated a date within two business days before the date on which the Form S-4
shall become effective and addressed to Caldera, in form and substance
reasonably satisfactory to Caldera and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
4.6 Prospectus/Proxy Statement. SCO will mail to its stockholders in
a timely manner, for the purpose of considering and voting upon the SCO
Transaction at the SCO Stockholders Meeting, the Prospectus/Proxy Statement.
SCO, Caldera and Newco will prepare and file the Prospectus/Proxy Statement
with the SEC as promptly as practicable, and each will use its respective
best reasonable efforts to cause the Form S-4 to become effective
as soon after such filing as practicable. In this regard, SCO, Caldera and
Newco will advise each other promptly as to the time at which the
Form S-4 becomes effective and of the issuance by the SEC of
any stop order suspending the effectiveness of the Form S-4 or the initiation of
any proceedings for such purpose and each will use its respective reasonable
best efforts to prevent the issuance of any stop order and to obtain as soon as
possible the lifting thereof, if issued. Until the Effective Time, SCO will
advise Caldera and Newco promptly of any requirement of the SEC for any
amendment or supplement of the Form S-4 or for additional information, and will
not at any time file any amendment of or supplement to the prospectus contained
therein (or to the prospectus filed pursuant to Rule 424(b) of the SEC) (the
"Prospectus") which shall not have been previously submitted to Caldera in
reasonable time prior to the proposed filing thereof or to which Caldera shall
reasonably object or which is not in compliance in all material respects with
the Securities Act and the rules and regulations issued by the SEC thereunder.
None of the information relating to SCO (or, to SCO's Knowledge, any other
person, contained in any document, certificate or other writing furnished or to
be furnished by SCO) included in (i) the Prospectus/Proxy Statement at the time
the Prospectus/Proxy Statement is mailed, at the time of the SCO Stockholders
Meeting or at the Effective Time, as then amended or supplemented, or (ii) the
Form S-4 at the time the Form S-4 becomes effective or at the Effective Time, as
then amended or supplemented, will contain any untrue statement of a material
fact or will omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading or necessary to correct any statement which has
become false or misleading in any earlier communication. From and after the
date the Form S-4 becomes effective and until the Effective Time, if any event
known to SCO occurs as a result of which the Prospectus/Proxy Statement or Form
S-4 would include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or if it is necessary at any time to amend the Form S-4
or the Prospectus/Proxy Statement to comply with the Securities Act, SCO will
promptly notify Caldera and Newco and an amended or supplemented Form S-4 or
Prospectus/Proxy Statement will be prepared by SCO, Caldera and Newco which will
correct such statement or omission and will use its reasonable best efforts to
cause any such amendment to become effective as promptly as possible. The
Prospectus/ Proxy Statement, as it relates to SCO and information relating to
the Group Business, will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder in
effect at the time the Prospectus/Proxy Statement is mailed.
4.7 Regulatory Approvals. As promptly as reasonably practicable, SCO
will itself, and will cause each member of the Contributed Company Group, to
execute and file, or join in the execution and filing, of any application or
other document that may be necessary in order to obtain the authorization,
approval or consent of any governmental body, federal, state, provincial, local
or foreign, which may be reasonably required, or which Caldera or Newco may
reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement. SCO will itself, and will cause each member of
the Contributed Company Group, to use its reasonable efforts to promptly obtain
all such authorizations, approvals and consents and will cooperate fully with
the other parties in promptly seeking to obtain such authorizations, approvals
and consents.
4.8 Necessary Consents. SCO will itself, and will cause each
Contributing Company and each member of the Contributed Company Group to, use
its reasonable efforts to obtain the consents required in connection with the
Material Contributed Contracts, and to take such other actions as may be
necessary or appropriate for the consummation of the transactions contemplated
hereby and to allow Newco to Conduct the Group Business after the Effective
Time.
4.9 Access to Information. From the date hereof until the Effective
Time, SCO will itself, and will cause the Contributed Company Group, to allow
Caldera and its agents reasonable access to the files, books, records,
technology and offices of SCO and the Contributed Company Group reasonably
requested by Caldera, but only to the extent necessary and relating to the Group
Business, including, without limitation, any and all information relating to
Contributed Company Group's Taxes, commitments, contracts, leases, licenses and
real, personal, intellectual and intangible property and financial condition.
SCO shall use its reasonable efforts to cause its accountants to cooperate with
Caldera and its agents in making available to Caldera all financial information
reasonably requested, including, without limitation, the right to examine all
working papers pertaining to all Tax returns and financial statements prepared
or audited by such accountants. No information or knowledge obtained by any
party hereto in any investigation pursuant to this Section 4.9 will affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger and the
SCO Transaction. All information obtained by Caldera and its agents pursuant to
this Section 4.9 shall be kept confidential in accordance with the
confidentiality agreement, between Caldera and SCO (the "Nondisclosure
Agreement").
4.10 Satisfaction of Conditions Precedent. SCO will itself, and will
cause the Contributing Companies and the Contributed Company Group, to use
reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent that are set forth in Section 8 and to cause the Merger, the SCO
Transaction and the other transactions contemplated by this Agreement to be
consummated. Without limiting the foregoing, in connection with the agreements
to be reached by the parties subsequent to the date hereof and prior to the
Effective Time, the parties agree to negotiate in good faith to reach agreement
on all matters to be included in such agreements promptly after the signing of
this Agreement.
4.11 Voting Agreement. SCO will use its reasonable best efforts to
obtain Voting Agreements in the form attached as Exhibit 4.11A (the "Voting
Agreement"), executed by the SCO affiliates listed on Exhibit 4.11B.
4.12 Sales Representative and Support Agreement. The Sales
Representative and Support Agreement in the form attached as Exhibit 4.12 (the
"Sales Representative and Support Agreement") shall be executed as of the
Effective Time.
4.13 Stockholders Agreement. The Stockholders Agreement in the form
attached as Exhibit 4.13 (the "Stockholders Agreement") shall be executed as of
the Effective Time.
4.14 No Other Negotiations.
(a) SCO shall, and shall cause each Contributing Company and
each member of the Contributed Company Group and their respective officers,
directors or employees and any investment bankers, attorneys or other advisors
and representatives retained by any of them to, cease any and all existing
activities, discussions and negotiations with any parties conducted heretofore
with respect to any SCO Alternative Proposal (as defined below). From and after
the date hereof until the earlier of the Effective Time or the termination of
this Agreement in accordance with its terms, SCO shall not authorize or permit
any Contributing Company or any member of the Contributed Company Group (or any
of their respective officers, directors or employees or any investment bankers,
attorneys or other advisors or representatives retained by any of them),
directly or indirectly, (i) to solicit, initiate or encourage the submission of
any SCO Alternative Proposal, (ii) to engage in discussions or negotiations
regarding, provide non-public information with respect to, or to take any other
action intended, designed or reasonably likely to facilitate any inquiries or
the making of any proposal or offer that constitutes, or would reasonably be
expected to lead to, any SCO Alternative Proposal, (iii) to enter into any
letter of intent, agreement in principle, agreement involving a business
combination or other similar agreement with any person with respect to any SCO
Alternative Proposal, or (iv) to make or authorize any statement, recommendation
or solicitation in support of any SCO Alternative Proposal. For purposes of this
Agreement, "SCO Alternative Proposal" means any proposal or offer from any
person or "group" (as defined under Section 13(d) of the Exchange Act and the
rules and regulations thereunder) for any direct or indirect (a) acquisition,
purchase, sale or other disposition of a material amount of the Group Assets
(other than in the ordinary course and disposal of worn or obsolete items
consistent with past practice), (b) acquisition, purchase, sale or other
disposition of any of the outstanding voting securities of any member of the
Contributed Company Group (other than pursuant to the exercise of outstanding
stock options), or (c) merger, consolidation, business combination, sale of any
of the assets, recapitalization, liquidation, dissolution or similar transaction
involving any member of the Contributed Company Group, other than the
transactions contemplated by this Agreement. Notwithstanding the foregoing or
any other provision of this Agreement, other than actions relating to the
Contributed Company Group, the Group Assets or the Group Business, SCO shall not
be restricted or limited in any way from entering into discussions, negotiations
or agreements of any kind or from taking any other actions of any kind,
including, without limitation, transactions relating to the sale of any of its
or its direct or indirect subsidiaries (other than any member(s) of the
Contributed Company Group), equity securities (other than the Contributed
Stock), or assets (other than Group Assets), or the merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Retained SCO Business.
(b) Notwithstanding Section 4.14(a), prior to obtaining the
approval of the stockholders of SCO of this Agreement and the SCO Transaction by
the requisite vote under applicable law (the "SCO Stockholder Approval"), SCO
may in response to an unsolicited bona fide SCO Alternative Proposal,
participate in discussions or negotiations with, furnish information to a third
party making such proposal (provided that SCO shall have entered into a
confidentiality agreement with such third party with terms no less favorable
than in the letter with Caldera), make or authorize a statement or
recommendation in support of such proposal, if all of the following events shall
have occurred: (i) such third party has made a bona fide written
offer or proposal to the Board of Directors of SCO to consummate a SCO
Alternative Proposal which offer or proposal identifies a price or range of
values to be paid for the outstanding securities or assets of SCO, the
Contributing Companies or the Contributed Company Group, (ii) if consummated,
based on the written advice of investment bankers of nationally recognized
reputation, such Board of Directors has determined that it is financially more
favorable to the stockholders of SCO than the terms of the transactions
contemplated by this Agreement, (iii) such Board of Directors has determined,
after consultation with investment bankers of nationally recognized reputation,
that such third party is financially capable of consummating such SCO
Alternative Proposal (if the SCO Alternative Proposal is for cash); (iv) such
Board of Directors has determined, after consultation with outside legal
counsel, that failure to take such action would be inconsistent with the
fiduciary duties of the Board of Directors to SCO stockholders under applicable
law; and (v) Caldera shall have been notified by SCO in writing of such SCO
Alternative Proposal, including its principal financial and other material terms
and conditions, including the identity of the person making such proposal (it
being understood that any amendment to the price exchange ratio, identity or
principal financial or other material terms shall require an additional notice).
(c) In addition to the obligations set forth in Section 4.14(a),
SCO, as promptly as practicable, shall advise Caldera orally and in writing of
any request for non-public information which SCO reasonably believes could lead
to a SCO Alternative Proposal, or of any SCO Alternative Proposal, the principal
financial and other material terms and conditions of such SCO Alternative
Proposal, and the identity of the person making any such request or SCO
Alternative Proposal. SCO will keep Caldera informed in all material respects of
the status and details (including material amendments) of any such SCO
Alternative Proposal.
4.15 Books and Records. If, in order to properly prepare documents
required to be filed with governmental authorities (including taxing
authorities) or its financial statements, it is necessary that any party hereto
be furnished with additional information relating to the Group Assets or any
member of the Contributed Company Group, and such information is in the
possession of a Contributing Company, then SCO, for itself and the other
Contributing Companies, agree to use its good faith efforts to promptly furnish
such information to the party needing such information. This Section 4.15 shall
survive Closing for two years except for records relating to preparation or
audit of tax returns, for which this Section 4.15 will survive until the
expiration of the applicable Tax statute of limitations.
4.16 [Intentionally Omitted.].
4.17 Modification of Joint Contributed Agreements and Shared
Contributed Assets. SCO will provide to Caldera a list of the Contributed
Contracts and the contracts to which the Contributed Companies are a party which
create rights or obligations of both the Group Business and the SCO Retained
Business (the "Joint Contributed Agreements"). As soon as feasible after the
date hereof, SCO and Caldera will negotiate to agree upon a mutually acceptable
arrangement between SCO and Newco and, if required, other parties with respect
to the treatment of such contracts. SCO will provide a list of the Contributed
Assets which would be impracticable to operate separately by either SCO or
Caldera (the "Shared Contributed Assets"). As soon as feasible after the date
hereof, SCO and Caldera will negotiate to agree upon a mutually acceptable
arrangement, which shall allocate costs in proportion to the benefits received,
between SCO and Newco with respect to such Shared Contributed Contracts.
4.18 Key Employee Employment Agreements. SCO will use its best
efforts to cause (without having to incur any cost) each of the Key Employees
listed on Exhibit 4.18A to execute employment agreements which reflect the terms
set forth in the Key Employee Term Sheet, a form of which is attached hereto as
Exhibit 4.18B.
4.19 SCO IP Rights. As soon as feasible after the date hereof SCO and
Caldera shall confirm whether the Intellectual Property Rights and Intangible
Assets required for the production, development, marketing and support of the
Group Products are included in the Intellectual Property Rights included in the
Group Assets duly transferred to Newco pursuant hereto. If additional items not
so transferred are discovered, then the Group Assets shall be expanded to
include, and there shall be duly assigned to Newco by the appropriate
Contributing Company, all such additional Intellectual Property Rights and
Intangible Assets required for the production of the Group Products. If the
Intellectual Property Rights and Intangible Assets included or added to the
Group Assets are also required for the production of the products produced by
SCO and its subsidiaries (other than the Group Products) then Newco (or its
subsidiary, which receives said Intellectual Property Rights and Intangible
Assets constituting Group Assets) shall provide SCO, or its designated
subsidiary, with a fully paid, non-exclusive, perpetual, irrevocable license to
use such Intellectual Property Rights and Intangible Assets for the purpose of
producing such other products. SCO agrees that if Caldera determines, in its
sole judgment to register the copyrights assigned to it pursuant to the
Copyright Assignments, then SCO shall take all reasonable actions to assist
Caldera to register such copyrights.
4.20 Directors' and Officers' Liability Insurance. SCO shall use its
commercially reasonable efforts to maintain directors' and officers' liability
insurance as SCO shall have in effect from time to time, covering the acts or
omissions on or before the Effective Time of those Employees who are or have
been directors and officers of SCO or its subsidiaries and who become employees
of Newco as of the Effective Time. SCO will not voluntarily seek to increase the
deductible nor decrease the limits under such insurance, provided however such
action shall be governed by the insurance marketplace on commercially reasonable
and available terms, and SCO will endeavor to give written notice to Caldera
prior to any cancellation or non-renewal of the SCO coverage.
4.21 Closing Group Account. SCO shall deliver to Newco the assets and
liabilities section of a balance sheet of the Group Business as of the Closing
Date (the "Closing Group Account") within thirty days following the Closing
Date. Newco shall cooperate by providing access to data and personnel, as
reasonably required by SCO to prepare the Closing Group Account. The Closing
Group Account shall be prepared in the same manner as the 2000 Group Balance
Sheet and in compliance with the representations and warranties contained in
Section 2.4(c) hereof.
4.22 SCO Retained Business. SCO shall use its reasonable best efforts
to transfer or sell all of the Excluded Assets from the Contributed Companies
prior to the Effective Time or as soon as practicable thereafter; provided,
however, that to the extent that any Excluded Assets pursuant to Section
1.4(b)(ii) are included as assets on the Closing Group Account,
Caldera shall pay to SCO an amount, in cash, equal to amount of such assets or
transfer the assets after the Effective Time, as the parties may agree.
4.23 Taking of Necessary Action; Further Action. If, at any time after
the Closing Date, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest Caldera with full right, title and
possession to the Contributed Assets and Contributed Companies, the officers and
directors of SCO are fully authorized in the name SCO or otherwise to take, and
will take, all such lawful and necessary and/or desirable action.
4.24 Accounting Treatments. SCO and Caldera shall use their reasonable
best efforts to gain favorable accounting treatment for the Sales Representative
and Support Agreement, including, if necessary, revising the terms of such
agreement set forth in Exhibit 4.12.
5. Caldera and Newco Covenants.
5.1 Advice of Changes.
(a) During the period from the date hereof until the earlier of
the Effective Time or the termination of this Agreement in accordance with its
terms, Caldera will promptly advise SCO in writing (i) of any event occurring
subsequent to the date hereof that would reasonably be likely to render any
representation or warranty of Caldera or Newco contained in Section 3 of this
Agreement, if made on or as of the date of such event or the Effective Time,
untrue or inaccurate, (ii) of any event that would reasonably be likely to have
a Material Adverse Effect on Caldera, and (iii) of any material breach by
Caldera or Newco of any covenant or agreement contained in this Agreement;
provided, however, that the delivery of, or failure to deliver, any notice
pursuant to this Section 5.1(a) shall not limit or otherwise affect the remedies
available hereunder.
(b) Ten days prior to the Effective Time, Caldera will deliver to SCO
a certificate from Caldera's transfer agent indicating the number of shares of
Common Stock outstanding at the end of business on the eleventh day preceding
the Effective Time and a certificate from Caldera's Secretary indicating the
number of shares of Caldera Common Stock issuable upon exercise or conversion of
any outstanding options, warrants or convertible debentures outstanding on such
date. Caldera will deliver to SCO by the fifteenth business day after the
Effective Time a certificate from Caldera's transfer agent indicating the number
of shares of Common Stock outstanding at the end of business on the day of the
Closing (calculated without regard to the shares of Common Stock issued with
respect to the First SCO Certificate) and a certificate from Caldera's Secretary
indicating the number of shares of Caldera Common Stock issuable upon exercise
or conversion of any outstanding options at the end of business on the day of
the Closing.
5.2 Maintenance of Business. During the period from the date hereof
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Caldera will use its best efforts to carry on and
preserve its business and its relationships with customers, suppliers, employees
and others in substantially the same manner as it has prior to the date hereof.
5.3 Conduct of Business. During the period from the date hereof until
the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Caldera will continue to conduct its business and
maintain its business relationships in the ordinary and usual course and
consistent with past practice and, except as otherwise disclosed herein or in
the Caldera Disclosure Letter, it will not, without the prior written consent of
SCO, which consent shall not be unreasonably withheld or delayed, take any of
the following actions where it would cause a Material Adverse Effect on Caldera:
(a) borrow any money except for (A) amounts that are not in the
aggregate material to the financial condition of Caldera and its subsidiaries,
taken as a whole or (B) pursuant to existing credit facilities;
(b) cause any of the material Caldera Assets to become subject
to any Encumbrance, except for Caldera Permitted Encumbrances and except for
Caldera Encumbrances arising under credit facilities existing as of the date
hereof;
(c) dispose of any of Caldera Assets which are material to the
Caldera Business;
(d) issue capital stock representing more than a 10% interest in
the total outstanding securities of Caldera;
(e) merge, consolidate or reorganize with, or acquire any
entity, except for transactions in which the aggregate consideration is below
$15 million;
(f) amend the Certificate of Incorporation or Bylaws of Caldera
or any of its subsidiaries or as otherwise expressly contemplated by this
Agreement);
(g) agree to take, or permit any Caldera entity to take or agree
to take, or enter into negotiations with respect to, any of the actions
described in the preceding clauses in this Section 5.3(g).
Notwithstanding the foregoing, nothing in this Section 5.3 shall
restrict or limit the conduct of any business of Caldera or its direct or
indirect subsidiaries or the use or disposition of the Caldera Assets, other
than as set forth in this Section 5.3.
5.4 Stockholder Approval. Caldera will call the Caldera Stockholders
Meeting, to be held within 40 days after the Form S-4 shall have been declared
effective by the SEC, to submit the Merger, the SCO Transaction and any related
matters for the consideration and approval of the Caldera stockholders. The
Prospectus/Proxy Statement will include a statement to the effect that Caldera's
Board of Directors is recommending that Caldera stockholders vote in favor of
the Merger and the SCO Transaction. Such meeting will be called, held and
conducted, and any proxies will be solicited, in compliance with applicable law.
5.5 Letter of Caldera's Accountants. Caldera shall use its
reasonable best efforts to cause to be delivered to SCO a letter of Arthur
Andersen LLP, dated a date within two business days before the date on which the
Form S-4 shall become effective and addressed to each of the Contributing
Companies, in form and substance reasonably satisfactory to SCO and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4.
5.6 Prospectus/Proxy Statement. Caldera will mail to its
stockholders in a timely manner, for the purpose of considering and voting upon
the Merger and the SCO Transaction at the Caldera Stockholders Meeting, the
Prospectus/Proxy Statement. SCO, Caldera and Newco will prepare and file the
Prospectus/Proxy Statement with the SEC as promptly as practicable, and each
will use its respective best reasonable efforts to cause the Form S-4 to become
effective as soon after such filing as practicable. In this regard, SCO, Caldera
and Newco will advise each other promptly as to the time at which the Form S-4
becomes effective and of the issuance by the SEC of any stop order suspending
the effectiveness of the Form S-4 or the initiation of any proceedings for such
purpose and each will use its respective reasonable best efforts to prevent the
issuance of any stop order and to obtain as soon as possible the lifting
thereof, if issued. Until the Effective Time, Caldera and Newco will advise SCO
promptly of any requirement of the SEC for any amendment or supplement of the
Form S-4 or for additional information, and will not at any time file any
amendment of or supplement to the prospectus contained therein (or to the
prospectus filled pursuant to Rule 424(b) of the SEC) which shall not have been
previously submitted to SCO in reasonable time prior to the proposed filing
thereof or to which SCO shall reasonably object or which is not in compliance in
all material respects with the Securities Act and the rules and regulations
issued by the SEC thereunder. None of the information relating to Caldera or
Newco (or, to Caldera's or Newco's knowledge, any other person, contained in any
document, certificate or other writing furnished or to be furnished by Caldera)
included in (i) the Prospectus/Proxy Statement by Newco and/or Caldera at the
time the Prospectus/Proxy Statement is mailed, at the time of the Caldera
Stockholders Meeting to vote on the Merger and the SCO Transaction or at the
Effective Time, as then amended or supplemented, or (ii) the Form S-4 at the
time the Form S-4 becomes effective, as then amended or supplemented, will
contain any untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading
or necessary to correct any statement which has become false or misleading in
any earlier communication with respect to the solicitation of proxies for the
Caldera Stockholder Meeting. From and after the date the Form S-4 becomes
effective and until the Effective Time, if any event known to Caldera or Newco
occurs as a result of which the Prospectus/Proxy Statement or Form S-4 would
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or if it is necessary at any time to amend the Form S-4 or the
Prospectus/Proxy Statement to comply with the Securities Act, Caldera and Newco
will promptly notify SCO and SCO, Caldera and Newco will prepare an amended or
supplemented Form S-4 or Prospectus/Proxy Statement which will correct such
statement or omission and will use its reasonable best efforts to cause any such
amendment to become effective as promptly as possible. The Prospectus/Proxy
Statement, as it relates to Caldera and Newco, will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder in effect at the time the Prospectus/Proxy Statement is
mailed.
5.7 State Securities Law Compliance. Caldera and Newco shall use
their respective reasonable best efforts to qualify the Newco Options to be
granted upon cancellation of the Cancelled SCO Options to be assumed by Caldera
pursuant hereto under the state securities or "blue sky" laws of every
jurisdiction of the United States in which (a) the records of Caldera or SCO
as of the Effective Time, indicate that a holder of such options resides and
(b) a Nasdaq Stock Market or other exemption from the qualification
requirements under such laws is unavailable.
5.8 Regulatory Approvals. As promptly as reasonably practicable,
Caldera and Newco will execute and file, or join in the execution and filing, of
any application or other document that may be necessary in order to obtain the
authorization, approval or consent of any governmental body, federal, state,
provincial, local or foreign which may be reasonably required, or which SCO may
reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement. Caldera and Newco will each use its respective
reasonable efforts to promptly obtain all such authorizations, approvals and
consents and will cooperate fully with the other parties in promptly seeking to
obtain all such authorizations, approvals, and consents.
5.9 Necessary Consents. Caldera and Newco will each use its
respective reasonable efforts to obtain the written consents under the Material
Caldera Contracts and to take such other actions as may be necessary or
appropriate to allow the consummation of the transactions contemplated hereby
and to allow Caldera and Newco to carry on Caldera's business and the Group
Business after the Effective Time.
5.10 Access to Information. From the date hereof until the Effective
Time, Caldera and Newco will allow the Contributing Companies and its agents
reasonable access to the files, books, records, technology and offices of
Caldera or Newco reasonably requested by the Contributing Companies including,
without limitation, any and all information relating to Taxes, commitments,
contracts, leases, licenses and real, personal, intellectual and intangible
property and financial condition. Caldera will use its reasonable efforts to
cause its accountants to cooperate with the Contributing Companies and its
agents in making available to such parties all financial information reasonably
requested, including, without limitation, the right to examine all working
papers pertaining to all Tax returns and financial statements prepared or
audited by such accountants. No information or knowledge obtained by any party
hereto in any investigation pursuant to this Section will affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger and the SCO Transaction. All
information obtained by the Contributing Companies or its agents pursuant to
this Section shall be kept confidential in accordance with the Nondisclosure
Agreement.
5.11 Books and Records. If, in order properly to prepare documents
required to be filed with governmental authorities (including taxing
authorities) or its financial statements, it is necessary that any party hereto
be furnished with additional information relating to the Group Assets, and such
information is in the possession of Newco or Caldera, then Caldera and Newco on
behalf of themselves and each member of the Caldera Group (including the
Contributed Companies) agree to use its good faith efforts to promptly furnish
such information to the party needing such information. This Section 5.11 shall
survive Closing for two years except for records relating to preparation of and
audit of tax returns, for which this Section 5.11 will survive until the
expiration of the applicable Tax statute of limitations.
5.12 Satisfaction of Conditions Precedent. Caldera and Newco will
each use their respective reasonable best efforts to satisfy or cause to be
satisfied all the conditions precedent that are set forth in Section 7 and to
cause the Merger, the SCO Transaction and the other transactions contemplated by
this Agreement to be consummated. Without limiting the foregoing, in connection
with the agreements to be reached by the parties subsequent to the date hereof
and prior to the Effective Time, the parties agree to negotiate in good faith to
reach agreement on all matters to be included in such agreements promptly after
the signing of this Agreement.
5.13 Voting Agreement. Caldera will use its reasonable best efforts
to obtain Voting Agreements in the form attached as Exhibit 4.11A executed by
the Caldera affiliates listed on Exhibit 5.13B.
5.14 Sales Representative and Support Agreement. The Sales
Representative and Support Agreement shall be executed as of the Effective Time.
5.15 Stockholders Agreement. The Stockholders Agreement shall be
executed as of the Effective Time.
5.16 Caldera Employee Plans.
(a) Newco will adopt the employee benefit plans maintained by
Caldera (the "Caldera Employee Plans") and will use reasonable efforts to
provide the Caldera Employee Plans to the transferring Employees as is provided
to Caldera's employees who are similarly situated as soon as practicable. To the
extent that Newco does not have Caldera Employee Plans in effect in a
jurisdiction where there are transferring Employees, Newco shall adopt plans
providing comparable benefits to the Caldera Employee Plans for said
transferring Employees. From and after the Effective Time Newco shall provide
all transferring Employees with the opportunity to participate in any employee
stock option or other incentive compensation plan of Newco and its affiliates on
substantially the same terms and subject to substantially the same conditions as
are available to similarly situated employees of Caldera or Newco. Prior to the
Effective Time, Caldera, Newco and SCO shall mutually agree upon an integration
plan relating to the Merger and the SCO Transaction which shall include, among
other things, provisions relating to compensation and other equity incentives
for Employees. In addition, at the Effective Time, Newco shall use its best
efforts to enter into employment agreements which reflect the terms set forth in
the Key Employee Term Sheets (the form of which is attached hereto as Exhibit
4.18B) with the Key Employees who are identified on Exhibit 4.18A attached
hereto.
(b) Waiting Periods, Premiums and Deductibles. Newco shall take
all steps necessary to cause each Caldera Employee Plan to waive any "waiting
period" or other requirement with respect to duration of employment with Newco
which would prevent a transferring Employee or beneficiary thereof who is
otherwise eligible to participate in such Caldera Employee Plan from
participating in such Caldera Employee Plan immediately following the Effective
Time. Newco shall credit each transferring Employee with all deductible payments
and co-payments paid by such transferring Employee under any Group Employee Plan
prior to the Effective Time during the current plan year for purposes of
determining the extent to which any such transferring Employee has satisfied
any deductible or maximum out-of-pocket limitation under any Caldera
Employee Plan for such plan year.
(c) Recognition of Prior Service. Newco shall take all steps
necessary to cause each Caldera Employee Plan to recognize each transferring
Employee's length of service under comparable employee benefit plans maintained
by SCO for purposes of eligibility, participation, vesting and benefit accrual
in such Caldera Employee Plan as if such transferring Employee had been employed
by Newco for such period.
(d) Waiver of Restrictions. Newco shall take all steps necessary
to cause each Caldera Employee Plan which is an "employee welfare benefit plan"
under Section 3(1) of ERISA to waive any restrictions or limitations with
respect to "pre-existing conditions" or prior medical history which would apply
to transferring Employee or beneficiary thereof who is otherwise eligible to
participate in such Caldera Employee Plan from participating in such Caldera
Employee Plan without restriction or limitation.
5.17 Indemnification and Insurance -- Caldera
(a) The Certificate of Incorporation and Bylaws of Newco and
Caldera shall contain the provisions with respect to indemnification and
limitation of liability for monetary damages set forth in the Certificate of
Incorporation and Bylaws of Caldera on the date hereof.
(b) From and after the Effective Time, Newco and Caldera shall
honor, in all respects, all of the indemnity agreements entered into prior to
the date hereof by Caldera, with its respective officers and directors, whether
or not such persons continue in their positions with Newco or Caldera following
the Effective Time. Following the Effective Time, Caldera's form of
indemnification agreement shall be adopted as the form of indemnification
agreement for Newco and the Caldera Surviving Corporation shall be afforded the
opportunity to enter into such indemnification agreement, and shall be covered
by such directors' and officers' liability insurance policies as Newco shall
have in effect from time to time.
(c) After the Effective Time, Newco and Caldera will, jointly and
severally, to the fullest extent permitted under applicable law, indemnify and
hold harmless, each present and former director or officer of Caldera or any of
its subsidiaries (collectively, the "Indemnified Parties") against any costs or
expenses (including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal administrative or
investigative, to the extent arising out of or pertaining to any action or
omission in his or her capacity as a director or officer of Caldera arising out
of or pertaining to the transactions contemplated by this Agreement or the
transactions contemplated hereby for a period of six years after the date of
this Agreement. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (a) any
counsel retained for the defense of the Indemnified Parties for any period after
the Effective Time will be reasonably satisfactory to the Indemnified Parties,
(b) after the Effective Time, Caldera will pay the reasonable fees and expenses
of such counsel, promptly after statements therefor are received, and (c)
Caldera will cooperate in the defense of any such matter; provided, however,
that Caldera will not be liable for any settlement effected without its written
consent (which consent will not be unreasonably withheld); and provided,
further, that, in the event that any claim or claims for indemnification are
asserted or made within such six-year period, all rights to indemnification in
respect of any such claim or claims will continue until the disposition of any
and all such claims. The Indemnified Parties as a group may be defended by only
one law firm (in addition to local counsel) with respect to any single action,
unless there is, under applicable standards of professional conduct, a conflict
on any significant issue between the positions of any two or more Indemnified
Parties.
(d) For the entire period from and after the Effective Time until
at least six years after the Effective Time, Newco will cause Caldera to use its
commercially reasonable efforts to maintain in effect directors' and officers'
liability insurance covering those persons who are currently covered by
Caldera's directors' and officers' liability insurance policy (a copy of which
has been heretofore delivered or made available to SCO) of at least the same
coverage and amounts, containing terms that are no less advantageous with
respect to claims arising at or before the Effective Time than Caldera's
policies in effect immediately prior to the Effective Time to those applicable
to the then current directors and officers of Newco and Caldera; provided,
however, that in no event shall Newco or Caldera be required to expend in excess
of 150% of the annual premium currently paid by Caldera for such coverage in
which event Newco shall purchase such coverage as is available for such 150% of
such annual premium.
(e) Newco and Caldera shall pay all expenses, including
attorneys' fees, that may be incurred by any Indemnified Parties in enforcing
the indemnity and other obligations provided for in this Section 5.17.
(f) In the event Newco or Caldera or any of its respective
successors or assigns (a) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (b) transfers or conveys all or a substantial
portion of its properties or assets to any person or entity, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
5.17, proper provision shall be made so that the successors and the assigns of
Newco and Caldera assume the obligations set forth in this Section 5.17.
(g) The provisions of this Section 5.17 shall survive the
Effective Time and are intended to be for the benefit of, and shall be
enforceable by, each officer and director of Caldera SCO and the Contributed
Company Group described in Sections 5.17 and his or her heirs and
representatives.
5.18 Indemnification and Insurance -- Employees
(a) The Certificate of Incorporation and Bylaws of Newco shall
contain the provisions with respect to indemnification and limitation of
liability for monetary damages set forth in the Certificate of Incorporation and
Bylaws of Caldera as of the date hereof which provisions shall not be amended,
repealed or otherwise modified for a period of ten years from the Effective Time
in any manner that would adversely affect the rights thereunder of individuals
who at the Effective Time were directors, officers, employees or agents of (i)
the Contributed Companies or (ii) of SCO (A) to the extent involved in the Group
Business and (B) provided they become Employees, officers or directors of
Newco("Group Persons"), unless such modification is required by law.
(b) From and after the Effective Time, Newco shall honor, in all
respects, all of the indemnity agreements entered into prior to the date hereof
by SCO or any member of the Contributed Company Group with any Group Persons,
whether or not such persons continue in its positions with Newco following the
Effective Time. Following the Effective Time, Caldera's form of indemnification
agreement shall be adopted as the form of indemnification agreement for Newco
and all continuing officers and directors of Newco shall be afforded the
opportunity to enter into such indemnification agreement, and shall be covered
by such directors' and officers' liability insurance policies as Newco shall
have in effect from time to time.
(c) After the Effective Time, Newco will, jointly and severally,
to the fullest extent permitted under applicable law, indemnify and hold
harmless, subject to Section 5.18(g), each of the Group Persons against any
costs or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal
administrative or investigative, to the extent arising out of or pertaining to
any action or omission in his or her capacity as a director or officer of SCO or
any of the Contributed Companies arising out of or pertaining to the
transactions contemplated by this Agreement for a period of six years after the
Closing Date. Notwithstanding the foregoing, the parties agree that claims
against the Group Persons shall first be made against any directors' and
officers' liability insurance, if any, then maintained by SCO or any of the
Contributed Companies that provides coverage for such Group Persons. In the
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (a) any counsel retained for the
defense of the Group Persons for any period after the Effective Time will be
reasonably satisfactory to the Group Persons, (b) after the Effective Time,
Newco will, subject to Section 5.18(g), pay the reasonable fees and expenses of
such counsel, promptly after statements therefor are received, and (c) Newco
will cooperate in the defense of any such matter; provided, however, that Newco
will not be liable for any settlement effected without its written consent
(which consent will not be unreasonably withheld); and provided, further, that,
in the event that any claim or claims for indemnification are asserted or made
within such six-year period, all rights to indemnification in respect of any
such claim or claims will continue until the disposition of any and all such
claims. The Group Persons as a group may be defended by only one law firm (in
addition to local counsel) with respect to any single action unless there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Group Persons.
(d) Newco shall pay all expenses, including attorneys' fees, that
may be incurred by any Group Persons in enforcing the indemnity and other
obligations provided for its benefit in this Section 5.18.
(e) In the event Newco or any of its respective successors or
assigns (i) consolidates with or merges into any other person or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or a substantial
portion of its properties or assets to any person or entity, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
5.18 proper provision shall be made so that the successors and the assigns of
Newco assume the obligations set forth in this Section 5.18.
(f) The provisions of this Section 5.18 shall survive the
Effective Time and are intended to be for the benefit of, and shall be
enforceable by, each of the Group Persons and his or her heirs and
representatives.
(g) Notwithstanding any provision of this Section 5.18 to the
contrary, Newco shall not assume and shall have no Liability relating to claims
made by SCO optionees arising out of the repurchase, sale, exchange or
cancellation of SCO capital stock or options in connection with the SCO
Transaction (other than its obligations under Section 1.3(a)(ii)) or
specifically relating to matters arising out of the SCO Retained Business.
5.19 Distribution to SCO Shareholders.
Caldera and Newco acknowledge that SCO may wish to distribute to the
shareholders of SCO all or part of its Newco Common Stock. Six (6) months from
the Closing Date, SCO shall be entitled to make such a distribution; provided,
however, that after such six (6) month period, SCO will not distribute to its
shareholders more than 25% of the shares of Newco Common Stock acquired by SCO
pursuant to this agreement during a six (6) month period. Newco will facilitate
such distribution by using its reasonable best efforts to take such actions as
may be required under the federal securities laws and regulations in order for
such shares of Newco Common Stock being distributed to the SCO Shareholders to
be registered with the Securities and Exchange Commission. At the time of such
registrations, Newco and SCO will enter into an agreement containing customary
indemnification provisions which shall be substantially equivalent to the
indemnification provisions in the promissory note issued by SCO to Caldera as of
the date hereof.
6. Conditions Precedent to Obligations of SCO.
The obligations of SCO and the other Contributing Companies hereunder
are subject to the fulfillment or satisfaction on or before the Closing of each
of the following conditions (any one or more of which may be waived by SCO on
behalf of all said entities, but only in a writing signed by SCO):
6.1 Accuracy of Representations and Warranties. The
representations and warranties of Caldera and Newco contained in this Agreement
(i) shall have been true and correct as of the date of this Agreement and (ii)
on and as of the Closing Date with the same force and effect as if they had been
made on the Closing Date, except (A) in each case and in the aggregate does not
constitute a Material Adverse Effect on Caldera and (B) for those
representations and warranties that address matters only as of a particular date
(which shall remain true and correct as of such particular date), and SCO shall
receive a certificate to such effect executed on behalf of Caldera and Newco by
a duly authorized officer of Caldera and of Newco.
6.2 Covenants. Caldera and Newco shall have performed and complied
in all material respects with all of its respective covenants in this Agreement
required to be complied with prior to the Effective Time; and SCO shall receive
a certificate to such effect executed by a duly authorized officer of Caldera
and of Newco at the Effective Time.
6.3 Compliance with Law. There shall be no order, decree or ruling by
any governmental agency which would prohibit or render illegal the transactions
contemplated by this Agreement.
6.4 Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop-order and the
Prospectus/Proxy Statement shall on the Effective Time not be subject to any
proceedings commenced seeking a stop-order or overtly threatened by the SEC.
6.5 Opinion of Caldera and Newco's Counsel. SCO shall have received
from Brobeck, Phleger & Harrison LLP, counsel to Caldera and Newco, an opinion
in the form of Exhibit 6.5 attached hereto, with such assumptions and
qualifications as are customary for such opinions.
6.6 Stockholder Approval. The principal terms of this Agreement, the
Merger and the SCO Transaction shall have been approved and adopted by the
Caldera stockholders and the principal terms of this Agreement and the SCO
Transaction shall have been approved and adopted by the SCO stockholders, in
accordance with California law and its Articles of Incorporation and Bylaws.
6.7 Tax Opinion. SCO shall have received an opinion in form and
substance satisfactory to SCO , from its counsel, to the effect that the SCO
Transaction will be treated as a transfer of property to Newco by the
Contributing Companies governed by Section 351 of the Internal Revenue Code. In
rendering such opinion, counsel shall be entitled to rely on representations of
the parties and of Caldera stockholders as reasonably requested by counsel in
connection with such tax opinion, and the opinion may contain such assumptions
and qualifications as are customary for such opinions. The parties agree to
cooperate with counsel by providing the representations referred to above and
Caldera shall use its best efforts to obtain the requested stockholder
representations.
6.8. Designees to the Board of Directors of Newco. The Board of
Directors of Newco shall have taken appropriate action to elect Doug Michels and
another individual designated by SCO to the Board of Directors of Newco,
effective upon the Effective Time.
6.9. Nasdaq Listing. The Newco Common Stock to be issued in the Merger
and in the SCO Transaction shall have been approved for quotation on the Nasdaq
Stock Market, subject to notice of issuance.
6.10. HSR Act. All waiting periods (and any extensions thereof) under
the HSR Act applicable to transactions contemplated hereby shall have expired or
shall have been terminated.
6.11 Ancillary Agreements. Caldera and Newco shall have executed and
delivered counterparts of each of the Ancillary Agreements to which they are a
party.
6.12 Delivery of Newco Shares. Newco shall have delivered the First SCO
Certificate to SCO.
7. Conditions Precedent to Obligations of Caldera and Newco
The obligations of Caldera, Merger Sub and Newco hereunder are
subject to the fulfillment or satisfaction on or before the Closing of each of
the following conditions (any one or more of which may be waived by Caldera on
behalf of all such parties, but only in a writing signed by Caldera):
7.1 Accuracy of Representations and Warranties. The representations
and warranties of SCO contained in this Agreement (i) shall have been true and
correct as of the date of this Agreement and (ii) shall be true and correct as
of the Closing Date with the same force and effect as if they had been made on
the Closing Date, except (A) in each case and in the aggregate as does not
constitute a Material Adverse Effect on the Group Business and (B) for those
representations and warranties that address matters only as of a particular date
(which shall remain true and correct as of such particular date), and Caldera
shall receive a certificate to such effect executed on behalf of SCO by a duly
authorized officer of SCO.
7.2 Covenants. SCO and the Contributing Companies shall have performed
and complied in all material respects with all of its respective covenants in
this Agreement required to be complied with prior to the Effective Time; and
Caldera shall receive a certificate to such effect signed on behalf of SCO by a
duly authorized officer of SCO.
7.3 Compliance with Law. There shall be no order, decree or ruling by
any court or governmental agency which would prohibit or render illegal the
transactions contemplated by this Agreement.
7.4 Consents. There shall have been obtained on or before the
Effective Time all permits, consents and authorizations as set forth on Section
7.4 of the SCO Disclosure Letter, where the failure to obtain same has resulted,
or reasonably would be expected to result, in a Material Adverse Effect on the
Group Business.
7.5 Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop-order or proceedings
seeking a stop-order and the Prospectus/Proxy Statement shall at the Effective
Time not be subject to any proceedings seeking a stop-order commenced or overtly
threatened by the SEC.
7.6 Opinion of Counsel to SCO. Caldera shall have received from Wilson
Sonsini Goodrich & Rosati, Professional Corporation, counsel to SCO and the
Contributing Companies, an opinion in the form of Exhibit 7.6 attached hereto,
with such assumptions and qualifications as are customary for such opinions.
7.7 Caldera Stockholder Approval. The principal terms of this
Agreement, the Merger and the SCO Transaction shall have been approved and
adopted by the Caldera stockholders and the principal terms of this Agreement
and the SCO Transaction (including the contribution and transfer of the
Contributed Assets) shall have been approved and adopted by the
SCO Stockholders each in accordance with Delaware Law and their respective
Certificates of Incorporation and Bylaws.
7.8 Tax Opinion. Caldera and Newco shall have received an opinion in
form and substance satisfactory to them from their counsel, to the effect that
the Merger will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368 of the Internal Revenue Code.
In rendering such opinion, counsel shall be entitled to rely on representations
of the parties and of Caldera stockholders as reasonably requested by counsel in
connection with such tax opinion, and the opinion may contain such assumptions
and qualifications as are customary for such opinions. The parties agree to
cooperate with counsel by providing the representations referred to above and
Caldera shall use its best efforts to obtain the requested stockholder
representations.
7.9 HSR Act. All waiting periods (and any extensions thereof) under
the HSR Act applicable to the transactions contemplated hereby shall have
expired or shall have been terminated.
7.10 Ancillary Agreements. The Contributing Companies shall have
executed and delivered counterparts of each of the Ancillary Agreements to which
they are a party.
7.11 Key Employee Term Sheets. Each of the Key Employees set forth on
Exhibit 4.18A shall have executed their respective Key Employee Term Sheet.
8. Termination of Agreement
8.1 Termination. This agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the Merger by the
stockholders of Caldera or SCO:
(a) by mutual written agreement of SCO and Caldera;
(b) by SCO, if there has been a material breach by Caldera or
Newco of any representation or warranty set forth in this Agreement on the
part of Caldera or Newco, and, as a result of such breach the conditions
set forth in Section 6.1 would not then be satisfied and such breach is not
cured within thirty (30) days after notice thereof from SCO to Caldera (except
that no cure period shall be provided for a breach by Caldera or Newco which by
its nature cannot be cured);
(c) by SCO, if there has been a material breach by Caldera or
Newco of any covenant or agreement set forth in this Agreement to be performed
by Caldera or Newco or a material breach by the Caldera Significant Stockholders
of any covenant or agreement set forth in the Voting Agreement and as a result
of such breach, the conditions set forth in Section 6.2 would not then be
satisfied and such breach is not cured within thirty (30) days after written
notice thereof from SCO to Caldera (except that no cure period shall be provided
for a breach by Caldera or Newco which by its nature cannot be cured);
(d) by Caldera, if there has been a material breach by SCO of any
representation or warranty set forth in this Agreement on its part, and as a
result of such breach the conditions set forth in Section 7.1 would not then
be satisfied and such breach is not cured within thirty (30) days after written
notice thereof from Caldera to SCO (except that no cure period shall be
provided for a breach by SCO which by its nature cannot be cured);
(e) by Caldera, if there has been a material breach by SCO of any
covenant or agreement set forth in this Agreement to be performed by SCO, and as
a of such breach, the conditions set forth in Section 7.2 would not then be
satisfied and such breach is not cured within thirty (30) days after written
notice thereof from Caldera to SCO (except that no cure period shall be provided
for a breach by SCO or SCO which by its nature cannot be cured);
(f) by Caldera or SCO, if the Merger and the SCO Transaction
shall not have been consummated on or before the Final Date for any reason,
provided that, the right to terminate this Agreement under this Section 8.1(f)
shall not be available to any party whose wrongful action or failure to act or
whose breach of this Agreement or any Ancillary Document, is the cause of such
non-consummation;
(g) by Caldera or SCO, if a permanent injunction or other order
by any federal or state court would make illegal or otherwise restrain or
prohibit the consummation of the Merger and/or the SCO Transaction shall have
been issued and shall have become final and nonappealable;
(h) by Caldera or SCO, if the stockholders of SCO do not approve
the SCO Transaction at a duly convened SCO Stockholders Meeting or any
adjournment thereof by reason of the failure to obtain the required vote (a "SCO
Stockholder Rejection"); provided, that the right to terminate this Agreement
under this Subsection (h) shall not be available to SCO where the failure to
obtain SCO stockholder approval shall have been caused by any breach of this
Agreement or any Ancillary Document by SCO;
(i) by Caldera, if (a) the Board of Directors of SCO shall have
withdrawn (or modified in a manner adverse to the SCO Stockholder Approval or
the consummation of the SCO Transaction) its approval or recommendation of the
SCO Transaction or this Agreement, (b) SCO shall have failed to include in the
Proxy Statement/Prospectus the recommendation of the Board of Directors of SCO
in favor of approval of the SCO Transaction or this Agreement, (c) the Board of
Directors of SCO shall have recommended any SCO Alternative Proposal, which
meets the criteria of 4.14(b)(i)-(v), or (d) the Board of Directors of SCO shall
have resolved to do any of the foregoing (collectively, a "Change in SCO Board
Recommendation");
(j) by Caldera or SCO at any time prior to the SCO Stockholder
Approval, if the Board of Directors of SCO shall have recommended or accepted a
SCO Alternative Proposal provided that SCO is not in breach of Section 4.14;
(k) by Caldera or SCO, if the stockholders of Caldera do not
approve the SCO Transaction at a duly convened Caldera Stockholders Meeting or
any adjournment thereof by reason of the failure to obtain the required vote;
provided, that the right to terminate this Agreement under this Subsection (k)
shall not be available to Caldera where the failure to obtain Caldera
Stockholder Approval shall have been caused by any breach of this Agreement or
any Ancillary Document by Caldera; or
(l) by SCO, if (a) the Board of Directors of Caldera shall have
withdrawn (or modified in a manner adverse to the Caldera Stockholder Approval)
its approval or recommendation of the SCO Transaction, the Merger or this
Agreement, (b) Caldera shall have failed to include in the Proxy
Statement/Prospectus the recommendation of the Board of Directors of Caldera in
favor of approval of the SCO Transaction, the Merger or this Agreement, (c) the
Board of Directors of SCO shall have resolved to do any of the foregoing.
As used herein, the "Final Date" shall be February 28, 2001; and
except that if a temporary, preliminary or permanent injunction or other order
by any Federal or state court which would prohibit or otherwise restrain
consummation of the Merger and/or the SCO Transaction shall have been issued and
shall remain in effect on February 28, 2001, and such injunction shall not have
become final and non-appealable, either party, by giving the other written
notice thereof on or prior to February 28, 2001, may extend the time for
consummation of the Merger and/or the SCO Transaction up to and including the
earlier of the date such injunction shall become final and non-appealable or
March 31, 2001, so long as such party shall, at its own expense, use its
reasonable best efforts to have such injunction dissolved.
8.2 Notice of Termination. Any termination of this Agreement under
Section 8.1 above will be effected by the delivery of notice of the terminating
party to the other party hereto of such termination, specifying the grounds
therefore.
8.3 Liability. If this Agreement is terminated pursuant to Section8.1,
the parties shall have no further obligation or liability to each other except
that the parties will remain liable for: (i) the payment of the Termination Fee,
if any, payable under Section 8.4 below; (ii) damages resulting from their
intentional fraud or willful breach of this Agreement (which will not be limited
by Section 8.4); and (iii) obligations under the parties' nondisclosure
agreement. Sections 13.1 - 13.13 of this Agreement will survive any termination
of this Agreement.
8.4 Termination Fee
(a) Termination Fee.
(i) If this Agreement is terminated by Caldera pursuant to
Section 8.1(i), then SCO shall promptly pay to Caldera (by wire transfer or
cashier's check) a nonrefundable fee equal to 3 1/2% of the number of shares of
Newco Common Stock equal to the SCO Percentage Interest multiplied by the
average closing price of the Caldera Common Stock for the ten (10) days
following the public announcement of this Agreement (the "Termination Fee")
within two (2) business days following delivery of the notice of termination by
Caldera pursuant to Section 8.2;
(ii) If this Agreement is terminated by SCO pursuant to
Section 8.1(l), then Caldera shall promptly pay to SCO (by wire transfer or
cashier's check) the Termination Fee within two (2) business days following
delivery of the notice of termination by SCO pursuant to Section 8.2; and
(iii) If (A) this Agreement is terminated by SCO or Caldera
pursuant to Section 8.1(h) after a SCO Alternative Proposal has been publicly
disclosed or by Caldera pursuant to Section 8.1(c) as the result of a breach by
SCO of Section 4.14 and (B) within 6 months of termination of this Agreement
SCO shall enter into an agreement for a SCO Alternative Proposal which is subsequently
consummated or within 12 months of termination of this Agreement SCO shall
consummate a SCO Alternative Proposal, then SCO shall pay to Caldera (by wire
transfer or cashier's check) the Termination Fee within two (2) business days
upon the consummation of such SCO Alternative Proposal.
(b) SCO and Caldera acknowledge that the agreements contained in
this Section 8.4 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, neither SCO nor Caldera would
enter into this Agreement; accordingly, if either Caldera or SCO fail to timely
pay the amounts due pursuant to this Section 8.4, and, in order to obtain such
payment, the other party commences a suit which results in a judgment against
SCO or Caldera, as the case may be for the amounts set forth in this Section 8.4
and such judgment is not set aside or reversed, such party shall pay the other
party's reasonable costs and expenses (including attorneys' fees and expenses)
in connection with such suit, together with interest on the amounts set forth in
this Section 8.4 at the prime rate as published in The Wall Street Journal on
the date such payment was required to be made.
9. Survival of Representations.
9.1 Survival of Representations. Except as otherwise expressly
provided herein, all representations, warranties and covenants of the parties
contained in this Agreement will remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the parties to this
Agreement, until the second anniversary of the Effective Time, whereupon such
representations, warranties and covenants will expire (except for covenants and
other provisions hereof that by its express terms survive for a longer period);
provided however that all representations and warranties and covenants relating
to Tax matters shall survive for the period of the applicable statute of
limitations.
10. Escrow and Indemnification.
10.1 Escrow Fund. In accordance with Section 1.3(b) hereof,
Caldera shall deliver to the Escrow Agent Shares of Newco Common Stock equal to
an aggregate of ten percent (10%) of the SCO Percentage Interest (the "Escrow
Fund"). The Escrow Fund shall be held by the Escrow Agent for a period of one
year from the Effective Time pursuant to the terms set forth in the Escrow
Agreement. The Escrow Fund shall be available to compensate Caldera Surviving
Corporation and Newco pursuant to the Indemnification obligations of SCO.
10.2 Indemnification by SCO. SCO agrees, notwithstanding any
provision of Section 1.4 hereof to the contrary, to indemnify Newco and Caldera
against, and to hold Newco and Caldera harmless from, all Loss arising out of
any of the following (even if included in the Assumed Liabilities as otherwise
being or allegedly being a Liability of one of the Contributed Companies or of
the Contributed Subsidiaries):
(a) any of the Excluded Liabilities, except as may be provided in Section 12;
(b) any demand, claim, debt, suit, cause of action, arbitration,
investigation or other proceeding made or asserted by any Contributing Company
or any stockholder, creditor, or Affiliate of any Contributing Company or by any
receiver or trustee in bankruptcy of any Contributing Company of the property or
assets of any Contributing Company, asserting that the transfer of the
Contributed Stock and Contributed Assets to Newco hereunder constitutes a
fraudulent conveyance, fraudulent transfer or a preference under any applicable
foreign, state or federal law, including but not limited to the United States
Bankruptcy Code, or any breach by any Contributing Company of its
representations and covenants in Section 1.4(e) hereof or any Liabilities
related to non-compliance with bulk transfer laws in connection with the SCO
Transaction;
(c) the SCO Retained Business;
(d) any material Liability omitted from the Group Financial
Statements that was required by GAAP to be included or reflected therein
(collectively, the "Omitted Balance Sheet Liabilities");
(e) any claim or cause of action brought by any SCO employee
relating in any way to the terms and conditions of the employee's employment
with SCO or the termination thereof, which arises prior to the Closing Date,
regardless of when such claim or cause of action may be discovered or brought;
(f) any breach of the representations and warranties in Section 2 hereof.
10.3 Notwithstanding Section 10.2, all liabilities for Taxes shall be
subject only to the separate tax indemnification provisions of Section 12.
10.4 Limitations on Indemnification. SCO shall not have any liability
under this Section 10 unless the aggregate amount of Loss attributable exceeds
$1,000,000, and, in such event, SCO shall be required to pay the entire amount
of such Loss from the first dollar thereof. SCO shall not have liability for any
Loss in excess of the amount determined by multiplying (i) the number of shares
of Newco Common Stock equal to ten percent (10%) of the SCO Percentage Interest
by (ii) the Caldera Closing Price, except that as such Losses relate to the SCO
IP Rights, SCO shall not have liability for any Loss in excess of the amount
determined by multiplying (i) the number of Shares of Newco Common Stock equal
to fifty percent (50%) of the SCO Percentage Interest by (ii) the Caldera
Closing Price. Notwithstanding the preceding sentence, there shall be no
limitations on liability pursuant to this Section 10 relating to intentional
fraud or misrepresentation by SCO.
10.5 Indemnification Procedures.
(a) Claim Procedure. If Caldera or Newco has or claims to have
incurred or suffered Losses for which it is or may be entitled to
indemnification, compensation or reimbursement under this Section 10 (the
"Indemnitee"), such Indemnitee may, on or prior to the first anniversary of the
Effective Time, deliver a claim notice (a "Claim Notice") to SCO. Each Claim
Notice shall (i) state that such Indemnitee believes that it is entitled to
indemnification, compensation or reimbursement under this Section 10, (ii)
contain a brief description of the circumstances supporting such Indemnitee's
belief that such Indemnitee is so entitled to
indemnification, compensation or reimbursement and (iii) contain a non-binding,
preliminary estimate of the amount of Loss such Indemnitee claims to have so
incurred or suffered (the "Claimed Amount").
(b) Response Notice. Within twenty (20) business days after
receipt by SCO of a Claim Notice, SCO may deliver to the Indemnitee who
delivered the Claim Notice a written response (the "Response Notice") in which
SCO: (i) agrees that the full Claimed Amount is to be paid to the Indemnitee;
(ii) agrees that a part, but not all, of the Claimed Amount is to be paid to the
Indemnitee; or (iii) indicates that no part of the Claimed Amount is to be paid
to the Indemnitee. Any part of the Claimed Amount that SCO does not agree should
be paid to the Indemnitee shall be the "Contested Amount." If a Response Notice
is not delivered to Caldera within such twenty (20) business day period, then
SCO shall be deemed to have agreed that the full Claimed Amount is to be paid to
the Indemnitee.
(c) Payment of Claimed Amount. If SCO delivers a Response
Notice agreeing that some or all of the Claimed Amount is to be paid to the
Indemnitee (the "Agreed Amount"), SCO shall pay the Indemnitee in cash, within
twenty (20) business days from the date of the Response Notice, any portion of
the Agreed Amount that is not satisfied by delivery of Escrow Shares pursuant to
the terms of the Escrow Agreement. Such payment shall be deemed to be made in
full satisfaction of the claim described in such Claim Notice, provided,
however, that if such claim involves ongoing Losses, then such payment shall be
deemed to be made in full satisfaction only of the Losses incurred as of the
date specified in such Claim Notice.
(d) Settlement. If SCO delivers a Response Notice indicating
that there is a Contested Amount, SCO and the Indemnitee shall attempt in good
faith for a period of thirty (30) days from the date of the Response Notice to
resolve the dispute related to the Contested Amount. If the Indemnitee and SCO
resolve such dispute, such resolution shall be binding on SCO and all of the
Indemnitees and a settlement agreement shall be signed by the Indemnitee and SCO
containing the terms of such resolution.
(e) Third Party Claims.
(i) Within fifteen (15) days after receipt of notice of
commencement of any action by any third party evidenced by service of process or
other legal pleading, or with reasonable promptness after the assertion in
writing of any claim by a third party, Caldera shall give SCO written notice
thereof together with a copy of such claim, process or other legal pleading, and
SCO shall have the right to undertake the defense, thereof through a legal
representative of SCO's own choosing.
(ii) In the event that SCO, by the thirtieth day after
receipt of notice of any such claim (or, if earlier, by the tenth day preceding
the day on which an answer or other pleading must be served in order to prevent
judgment by default in favor of the person asserting such claim), does not elect
to defend against such claim, Caldera (upon further notice to SCO) will have the
right to undertake the defense, compromise or settlement of such claim on behalf
of and for the account and risk of SCO subject to the right of SCO to assume the
defense of such claims at any time prior to settlement, compromise or final
determination thereof. The reasonable costs of defense of any third party action
or claim by Caldera shall be paid from the Escrow Shares.
(iii) Notwithstanding Sections 11.5(e)(i) and (ii), Caldera
shall have the right to retain control of the defense of any third party action
or claim described in Section 11.5(e)(i) which involves potential Losses in
excess of the value of the Escrow Shares remaining in the Escrow Account or
could reasonably be expected to materially affect Caldera's on-going operations.
In such event, SCO shall have the right to be present at the negotiation,
defense and settlement of such action or claim. Caldera shall not agree to any
settlement of any such action or claim without the consent of SCO, which shall
not be unreasonably withheld.
(f) Satisfaction. In the event SCO incurs liability for Losses
which is not satisfied by delivery of shares from the Escrow Fund, SCO may elect
to pay the amount due either in cash or by delivering shares of Newco Common
Stock. For this purpose, the Newco Common Stock will be valued at the average
closing price of the Caldera Common Stock for the ten days following the public
announcement of this Agreement, as adjusted for stock splits, stock dividends,
changes in the Caldera Ratio and other recapitalizations.
11. Employee Matters.
11.1 Right to Offer Employment.
(a) Employees. Schedule 11.1 of the SCO Disclosure Letter
contains a preliminary list (the "Preliminary List") of each Contributed Company
employee or consultant and each other employee or consultant of SCO or the Group
Business who works in, or provides services in connection with or is assigned to
the Group Business or any of the Group Assets (each a "Potential Employee").
Within five (5) days after the date hereof, SCO shall deliver to Newco a final
list of the Potential Employees (the "Final List"), which list shall identify
those Potential Employees who are active employees of the Group Business as of
that date, including those on vacation, sick leave, maternity or parental leave,
disability leave, family leave or personal leave of absence, who work full or
part time, and which shall separately identify those employees who are on a
workers' compensation-related or disability leave or long-term sick leave. The
Final List shall contain, with respect to each Potential Employee, a true and
accurate list of all locations at which Potential Employees are working as of
such date, together with the date of hire, location of employment, years of
employment or service, current annual base salary or base wage, and of all other
compensation arrangements for such Potential Employees, including bonuses,
commissions or other compensation arrangements or benefit plans whether oral or
written, contractual or discretionary. Within sixteen (16) days of receipt of
the Final List, Caldera shall deliver to SCO a list that identifies: (i) those
Potential Employees of the Group Business to whom it shall make offers of
employment and (ii) those Potential Employees of the Contributed Companies that
it expects to retain, each pursuant to Section 11.1(e) (the "Designated
Employees"). For purposes of this Agreement, "Employees" means only those
Designated Employees given offers of employment or retained by Newco pursuant to
Section 11.1(e). For a period of two years from the Closing Date, neither Newco,
any of its subsidiaries nor their employees (including former employees of SCO)
may employ, make offers of employment to or otherwise solicit any employees of
SCO as of the date hereof who are not Designated Employees.
(b) The parties acknowledge and agree that in those
jurisdictions in which the EC Directive 77/187 (the Acquired Rights Directive)
(the "Employment Regulations") apply, the contracts of employment of the
Designated Employees designated as "Employees" pursuant to Section 11.1(e) will
have effect from the Effective Time (which shall be the "time of transfer" for
the purposes of the Employment Regulations) as if originally made between Newco
and each such Employee. If any contract of employment is not disclosed by SCO in
the Final List or any other contract of employment of any employee other than an
Employee is in effect as if originally made between Newco and the employee
concerned as a result of the Employment Regulations: (i) Newco may, upon
becoming aware of any such contract, terminate it forthwith; and (ii) SCO and
each Group Business shall indemnify and hold harmless Newco against any costs,
claims, liabilities and expenses of any nature (including legal expenses on an
indemnity basis) arising out of such termination and against sums payable to or
on behalf of such employee in respect of his employment whether arising before
or after the Closing.
(c) Newco shall credit Employees with their then current accrued
vacation with SCO or the Contributed Companies. All other emoluments and
outgoings (including and without limitation, wages, salaries, bonuses,
commissions, withholding taxes, social security contributions, pension
contributions) and other costs and expenses of, and all other obligations in
respect of, the Employees in respect of the period to, and including, the
Closing shall be discharged by SCO and any relevant Group Business. SCO and each
Group Business shall indemnify and keep indemnified Newco against all
liabilities arising from any failure by SCO and any Group Business so to
discharge.
(d) SCO and each Group Business shall indemnify and hold
harmless Newco from and against all losses, costs, claims, demands, actions,
fines, penalties, awards, liabilities and expenses (including legal expenses on
an indemnity basis) (i) which are attributable to any act, omission, breach or
default by SCO or any Group Business prior to the Closing in respect of any of
the obligations of SCO or any Group Business (in either case, whether arising
under common law, statute, custom or otherwise) to or in relation to any of its
employees or former employees (including but not limited to any liability
arising out of the termination or dismissal of any Potential Employee or former
employee and which Newco may incur or suffer as a result of succeeding to SCO or
any Group Business as the employer of any Potential Employee); or (ii) in
connection or as a result of any claim or demand by a Potential Employee on the
grounds that the Potential Employee has suffered any loss, harm or damage in
relation to pension rights caused by the transactions set forth in this
Agreement (including without limitation the calculation of any transfer value of
accrued rights on transfer) to the Potential Employees; or (iii) in connection
or as a result of any claim or demand by a Potential Employee that the identity
of Newco is to the Potential Employee's detriment, whether or not such claim or
claims arises or arise prior to, on or after the Closing.
(e) Offers of Employment. Effective at the Effective Time,
Newco shall offer to employ any of the Designated Employees of the Group
Business (other than Designated Employees of the Contributed Companies) subject
to Newco's standard terms, conditions and policies of employment and the terms
of this Agreement, and shall offer such Designated Employees as it determines,
in its sole discretion, to hire (i) salary consistent with the salary earned by
such Potential Employees prior to the Effective Time but only to the extent such
salary is not in excess of industry norms (taking into account the geographic
location of the Employees); and (ii) participation in incentive compensation arrangements
consistent with the incentive compensation arrangements of employees of Caldera
in comparable positions. This Section 11.1(b) shall not be construed to create
any third party beneficiary rights or any other rights of any kind in any
Designated Employee and no Designated Employee shall have any cause of action as
a third party beneficiary. Such offers of employment that will be extended by
Newco to Employees will be on the same basis of time commitment (full or part
time) as such Employee was employed immediately prior to the Effective Time. In
addition, SCO shall cause the termination of any Potential Employees of the
Contributed Companies who are not Designated Employees prior to the Effective
Time. Unless the parties otherwise agree, on the date of the Closing, SCO shall
notify each Employee who accepts an offer of employment extended by Newco as of
the Effective Time, in a writing reasonably satisfactory to Newco, that such
Employee's employment with SCO or any of its direct or indirect subsidiaries is
then terminated. For a period of two years from the Closing Date, neither SCO
nor any of its subsidiaries nor any of its employees may employ, make offers of
employment to or otherwise solicit any of the employees of Newco or any of its
subsidiaries as of the date hereof or any of the Designated Employees.
(f) Severance. SCO shall be responsible for any and all
severance that may become due as a result of the transaction contemplated by
this Agreement for all employees except for those Employees hired by Newco
pursuant to Section 11.1(b); provided, however, that if Caldera does not make a
reasonable offer of employment to a Designated Employee then Caldera shall be
responsible for any and all severance that may become due as a result of the
transaction or the termination of such employee.
11.2 Termination of Employment.
(a) SCO agrees to comply with the provisions of the WARN Act and
any other federal, state, provincial or local or foreign statute or regulation
or EU Directive regulation regarding termination of employment, plant closing or
layoffs and to perform all obligations required of SCO with respect to the
cessation of any operations of the Group Business or any other business of SCO
or its subsidiaries, or the termination, re-assignment, re-location or change in
position as terms and conditions of employment of any Employee (or other
employee of them) who does not accept Newco's offer of employment.
(b) In the United States, SCO shall (i) provide continuation
health care coverage to all employees of the Group Business and their qualified
beneficiaries who incur a qualifying event prior to the Effective Time, who are
not given offers of employment by Newco or who do not accept Newco's offer of
employment pursuant to Section 11.1(b) in accordance with the continuation
health care coverage requirements of COBRA and (ii) provide COBRA continuation
coverage to any former employee of the Contributed Company Group who was
previously employed in the Group Business (collectively, the "Former Employees")
and its qualified beneficiaries to whom, at the Effective Time, such
continuation coverage was being provided or to whom SCO was under an obligation
to provide such continuation coverage at the election of such Former Employee or
qualified beneficiary.
11.3 Cooperation. SCO, Caldera and Newco agree, for themselves and
its affected subsidiaries, to cooperate fully with respect to the actions which
are necessary or reasonably desirable to accomplish the transactions
contemplated hereunder, including, without limitation, the provision of records
and information as each may reasonably request and in order to meet the
notification and consultation requirements of the Acquired Rights Directive in
accordance with the relevant regulations or laws adopting such directive in
all relevant jurisdictions, or any other similar notification and consultation
obligation the making of all appropriate filings under ERISA and the Internal
Revenue Code.
12. Tax Matters.
12.1 Transaction Taxes; Representation; Transaction Tax
Indemnity. SCO and Caldera shall bear equally any and all sales, use, excise,
value added, registration, stamp, property, documentary, transfer, withholding
and similar taxes, levies and duties (including all real estate transfer taxes,
but not any real estate transfer taxes that would be triggered as a result of a
change in control of a corporation) incurred, or that may be payable to any
taxing authority, with respect to the sale, transfer, or delivery of the
Contributed Stock and Assets and the assumption of the Assumed Liabilities,
including any such taxes, levies and duties imposed in connection with such
transactions (collectively, "Transaction Taxes"); provided, however, that
Caldera shall not be responsible for any Transaction Taxes in excess of
$300,000. Newco and SCO agree to cooperate in minimizing the amount of any
Transaction Taxes and in the filing of all necessary documentation and all Tax
returns, reports and forms ("Returns") with respect to all Transaction Taxes,
including any available pre-sale filing procedures.
Notwithstanding any other provision of this Agreement, the
Unixware source code, object code and related documentation ("Unixware
Software") or other software shall remain the property of SCO until (i)
expeditiously delivered to Newco at SCO's facility in Murray Hill, New Jersey,
(ii) transferred by remote telecommunication from SCO's place of business, to or
through Newco's computer with no tangible personal property transferred to
Newco, such as storage media, except for user manuals, or (iii) installed by SCO
on Newco's computer without the transfer of title or possession of storage media
or any tangible personal property other than user manuals. Newco agrees that it
will not transfer the Unixware Software or other software on tangible media into
California.
12.2 Treatment of Indemnity Payments. All payments made by SCO
or Newco, as the case may be, to or for the benefit of the other party pursuant
to any indemnification obligations under this Agreement shall, to the extent
appropriate under applicable Tax law, be treated for Tax purposes as adjustments
to the value of the Contributed Stock and Contributed Assets.
12.3 Indemnity for Taxes.
(a) Except as otherwise provided in this Section 12.3,
from and after the Closing, SCO shall timely pay and indemnify and save Newco
and its Affiliates and Caldera harmless from any liability for, or arising out
of or based upon, or relating to any Tax (including, without limitation, any
obligation to contribute to the payment of a Tax determined on a consolidated
basis or otherwise with respect to a group of corporations that includes or
included SCO) (i) of SCO or any member of the affiliated group of corporation
(as defined in Section 1504 of the Code or otherwise) of which SCO is a member
(other than any member of the Contributed Company Group or with respect to
any Tax relating to the income, business, assets, property or operations of the
Group Business) for any taxable period; (ii) relating to the income, business,
assets, property or operations of the Group Business or of the Contributed
Company Group to the extent that such
liability for Tax is not reflected in the SCO Disclosure Letter or the Group
Financial Statements and is either (A) in respect of any taxable period that
ends prior to the Closing Date or in respect of any taxable period that
includes, but does not end on the Closing Date, the portion of such period
ending on the Closing Date or (B) with respect to an excess loss account in the
stock of any Contributed Company or from a deferred intercompany transaction
(including any such transaction resulting from a distribution or deemed
distribution of Newco Common Stock by any Contributing Company) entered into on
or prior to the Closing Date and is triggered as a result of the Contributed
Company Group ceasing to be affiliated with SCO; (iii) under Subpart F of the
Code attributable to transactions undertaken by SCO or any of its affiliates
before or after the Effective Time; or (iv) as a result of a breach of any
representation, warranty, covenant or agreement made herein by SCO.
(b) Notwithstanding anything contained in this Section 12.3(b),
SCO shall not be obligated to indemnify Newco for any Tax (including, without
limitation any obligation to contribute to the payment of a Tax determined on a
consolidated basis with respect to a group of corporations that includes or
included SCO) by reason of an election or deemed election (including any
protective election) with respect to transactions described in this Agreement
made or filed post-Closing by Newco or any member of the Contributed Companies
under Section 338 of the Internal Revenue Code. Further, no Section 338 election
shall be made with respect to any of the transactions described in this
Agreement.
(c) Except to the extent otherwise provided in this Section
12.3(c), Newco shall timely pay and indemnify and save SCO and its Affiliates
harmless from any liability for, or arising out of or based upon or relating to
any Tax (including, without limitation, any obligation to contribute to the
payment of a Tax determined on a consolidated basis with respect to a group of
corporations that includes or included SCO) (i) relating to the income,
business, assets, property or operations of the Group Business by Newco and its
Affiliates or any member of the Contributed Company Group in respect of all
taxable periods beginning after the Closing Date, or, in the case of any taxable
period that includes but does not end on the Closing Date, the portion of such
period commencing on the day following the Closing Date; (ii) to the extent such
liability for Tax is reflected in the Group Financial Statements or the SCO
Disclosure Letter and such liability is for Tax relating to the income,
business, assets, property or operations of the Group Business or of any member
of the Contributed Company Group; (iii) under Subpart F of the Code attributable
to transactions undertaken by Newco or Caldera or any of their Affiliates after
the Effective Time; or (iv) as a result of a breach of any representation,
warranty, covenant or agreement made herein by Newco, Caldera or Merger Sub.
(d) If, as a result of any action, suit, investigation, audit,
claim, assessment or amended Tax Return, there is any change after the Closing
Date in an item of income, gain, loss, deduction or credit that results in an
increase in a Tax liability for which SCO would otherwise be liable pursuant to
paragraph (a) of this Section 12.3, and such change results in a decrease in the
Tax liability of Newco or any Affiliate or successor thereof for any taxable
year or period beginning after the Closing Date or for the portion of any
Straddle Period beginning after the Closing Date (assuming for purposes of this
sentence that Newco and its Affiliates are liable for income tax at the highest
applicable corporate federal, state, local and/or foreign rates), SCO shall not be
liable pursuant to such paragraph (a) with respect to such increase to the
extent of such decrease. If, as a result of any action, suit, investigation,
audit, claim, assessment or amended Tax Return, there is any change after the
Closing Date in an increase in an item of income, gain, loss, deduction, or credit
that results in an increase in a Tax liability for which Newco would otherwise be
liable pursuant to paragraph (c) of this Section 12.3, and such change results
in a decrease in the Tax liability of SCO or any Affiliate or successor thereof
(other than Newco) for any taxable year or period ending on or before the
Closing Date or for the portion of any Straddle Period ending on the
Closing date (other than by reason of a carryback of losses or deductions),
Newco shall not be liable pursuant to such paragraph (c) with respect to such
increase to the extent of such decrease.
(e) For purposes of this Section 12.3, it shall be assumed that
SCO and its Affiliates are liable for income tax at the highest applicable
corporate federal, state, local and/or foreign rates, without reduction on
account of net operating losses or other tax attributes.
12.4 Other Tax Matters.
(a) SCO, Newco and Caldera will cooperate fully with each other
in connection with the preparation of all returns and reports of Taxes,
information returns, and all audit examinations of, or claims or assertions
against, any member of the Contributed Company Group, in each case including but
not limited to the furnishing or making available of records, books of account
or other materials and appropriate personnel necessary or helpful to the defense
against the assertions of any taxing authority. SCO shall, within ninety days
after the Effective Time, deliver to Newco a schedule listing the tax basis of
each of the Contributed Stock and Assets, along with copies of supporting
calculations, information and records.
(b) Except as provided in Section 12.4(c), in the event and to
the extent that SCO or any member of an affiliated group of corporations (as
defined in Section 1504 of the Internal Revenue Code or otherwise) of which SCO
is a member (other than any member of the Contributed Company Group) receives a
refund or credit of Taxes for any taxable period that ends prior to the
Effective Time or in respect of any period that includes, but does not end on,
the Effective Time, the portion of such period ending on the Effective Time (the
"Pre-Closing Period") which is attributable to the carry back of losses, credits
or similar items from any Tax return of any member of the Contributed Company
Group, and in any case, in respect of any taxable period that begins after the
Effective Time or in respect of any period that includes, but does not end on
the Effective Time, the portion of such period commencing on the day following
the Effective Time (the "Post-Closing Period"), SCO shall pay to Newco, net of
any additional Tax payable by SCO or its Affiliates by reason of such carryback,
the amount of such refund or credit (including any interest received thereon) or
Tax reduction. In the event that any refund or credit of Taxes or Tax reductions
for which a payment has been made pursuant to this Section 12.4(b) subsequently
is reduced or disallowed, the Contributed Companies and Newco shall indemnify
and hold harmless SCO and its Affiliates for any Tax liability, including
interest and penalties, assessed by reason of such reduction or disallowance.
(c) In the event that an indemnified party receives a refund or
credit relating to Taxes for which the other party is required to indemnify the
first party pursuant to Section 12.3 of this Agreement (including, but not
limited to VAT refunds), such indemnified party agrees to pay to the indemnifying
party the amount of such refund or credit (including any interest received thereon).
In the event that any refund or credit of Taxes for which a payment has been made
pursuant to this Section 12.4(c) subsequently is reduced or disallowed, the indemnifying
party shall indemnify and hold harmless the indemnified party for any Tax
liability, including interest and penalties, assessed by reason of such
reduction or disallowance.
(d) If any claim for Tax relating to the Group Business or the
Contributed Company Group is asserted against SCO or any Affiliate for any Pre-
Closing Period, SCO shall promptly notify Newco in writing of such fact. SCO and
its duly appointed representatives shall have the sole right to negotiate,
resolve, settle or contest any such claim for Tax; provided, however, that they
shall deal fairly and in good faith with respect to any claim for Tax which
would require a payment by Newco to SCO or its Affiliates under Section 12.3(c)
or this Section 12.4 and provided further, that with respect to any claim which
would require a payment by Newco or have a Material Adverse Effect on the Group
Business, no settlement will be agreed to without Newco's prior written consent.
Such consent shall not be unreasonably withheld. Newco shall bear the legal and
accounting costs and expenses incurred in contesting a matter for which it has
withheld its consent. If any claim for Tax relating to the Contributed Company
Group for any Post-Closing Period comes to the attention of SCO, SCO will notify
Newco promptly of such claims and will cooperate fully with Newco and the
Contributed Company Group in the resolution of such claim. A failure to promptly
notify pursuant to this Section 12.4(d) shall not preclude another party's
indemnification obligation.
(e) SCO shall prepare any Tax returns (including any amendments
thereto) of the members of the Contributed Company Group for all taxable periods
that end, with respect to the Contributed Company Group, on or before the
Effective Time (including any short period ending on the Effective Time) and
which are due either before or after the Effective Time and shall deliver to
Newco for signing by the appropriate party and filing, any Tax returns of the
members of the Contributed Company Group (including any amendments thereto) with
respect to any such period that have not been filed prior to the Effective Time.
SCO shall deliver any such tax return or the portion thereof relating to the
Group Business to Newco at least fifteen days prior to the date such tax return
is due to be filed (taking into account any applicable extensions). SCO shall
report for federal income tax purposes the operations of the Group Business and
the Contributed Company Group for any short period ending on the Effective Time,
and shall be responsible for the filing of, the consolidated tax returns of
SCO's consolidated group which will include the income of the Group Business and
the Contributed Company Group through the Effective Time and Newco will pay to
SCO any amounts relating to such tax returns required by Section 12.3(c) prior
to the filing of such tax returns. In order appropriately to apportion any taxes
relating to a period that includes (but that would not, but for this Section
12.4(e) end on the Effective Time), the parties hereto will, to the extent
permitted by applicable law, elect with the relevant taxing authority to treat
for all purposes the Effective Time as the last day of a taxable period of any
member of the Contributed Company Group. SCO shall, in respect of such returns,
and Newco and the Contributed Company Group for returns with respect to the
Post-Closing Period shall determine the income, gain, expenses, losses,
deductions and credits of the Group Business and the Contributed Company Group
in a manner (i) consistent with prior practice and actual operations in a manner
that apportions such income, gain, expenses, loss, deductions and credits
equitably from period to period and (ii) consistent with prior years.
(f) The provisions of this Section 12 with respect to the
consolidated groups or consolidated returns that include SCO or its Affiliates
other than a Contributed Company shall apply mutatis mutandis with respect to
combined or unitary groups or returns thereof.
(g) Newco and SCO shall make (or indemnify the payor against)
payments of estimated taxes (including amounts due with extensions) for which
they are responsible under this Agreement in a timely manner. A payment or
indemnity obligation under this Section 12 which is not made or satisfied when
due shall accrue interest at the rate applicable to late payments of the
pertinent Tax. Notwithstanding anything in this Section 12 to the contrary, a
party shall not have to bear the cost of a Tax liability more than once (e.g., a
payment of an estimated tax shall be credited against any payment due when the
return is filed).
(h) Except as provided in paragraph 12.4(e), for purposes of
allocating a Tax for which a party is otherwise responsible under Section 12.3
or this Section 12.4, the portion of those Taxes that are attributable to the
operations of the Group Business or of any member of the Contributed Company
Group for a relevant period (the "Interim Period") shall be (i) in the case of a
Tax that is not based on a net income, the total amount of such Tax for the
Interim Period in question multiplied by a fraction, the numerator of which is
the number of days in the Interim Period and the denominator of which is the
total number of days in such period, and (ii) in the case of a Tax that is based
on net income, the Tax that is due shall be an amount as equitably determined by
the parties based upon a hypothetical closing of the books.
(i) If Newco, a Contributed Company or any of its respective
Affiliates receive any notice of the assertion of any Tax liability relating to
a member of the Contributed Company Group for which SCO may be liable under this
Agreement, Newco shall give prompt written notice thereof to SCO.
(j) After the Closing, Newco and the Contributed Companies will
provide reasonable access to all relevant Newco and Contributed Company Group
books, records, agreements and memoranda, and provide such assistance to SCO as
SCO and its Affiliates shall reasonably request, with respect to any federal,
foreign, state, provincial or local Tax matters pertaining to the members of the
Contributed Company Group for taxable periods or transactions on or prior to the
Effective Time. Newco will notify SCO prior to disposition of such Tax records,
if such disposition will take place within ten years after the Effective Time.
After the Closing, the parties will provide reasonable access to all relevant
SCO and Contributed Companies' books, records, agreements, memoranda and tax
returns, and provide copies of such information and such assistance to the other
party as it shall reasonably request, with respect to any federal, foreign,
state, provincial or local Tax matters pertaining to the Contributed Assets and
the Contributed Company Group for taxable periods or transactions on or prior to
the Effective Time.
(k) Notwithstanding anything in this Agreement to the contrary,
SCO and Newco covenant and agree (unless there has been a final determination as
defined in Section 1313(a) of the Code or any other event which conclusively establishes a
contrary position) for all Tax purposes, including all Tax Returns and any Tax
examinations, proceedings or controversies, to (and to cause any Affiliate or
successor to its assets or businesses to) take each of the positions set forth
below (and not to take any position inconsistent therewith) and to use good
faith and reasonable best efforts to defend such positions:
(i) The Merger (A) will qualify as a tax-free
reorganization described in Section 368(a) of the Code and (B) when taken
together with the SCO Transaction, will qualify as a tax free transfer of the
stock of Caldera to Newco governed by Section 351(a) of the Code.
(ii) The SCO Transaction will, when taken together with the
Merger, qualify as a transfer of the Contributed Stock and Contributed Assets to
Newco governed by Section 351 of the Code.
(l) SCO and Newco agree to report to the other any communication
from or with the Internal Revenue Service or any other Taxing Authority which
relates in any way to the characterization of the transactions governed by this
Agreement. Each of SCO and Newco will file with its Federal income tax return
for the taxable year in which the Merger and SCO Transaction occurs (which tax
return shall be timely filed) the information required by Treas. Reg. sec.
1.351-3 and 1.368-3 and to provide each other upon request with a statement to
the effect that such party has complied with this requirement after filing. SCO,
the Contributed Companies, and Newco also will maintain such permanent records
as are required by Treas. Reg. sec. 1.351-3(c) and 1.368-3.
(m) Neither Caldera nor Newco has any plan or intention to
terminate the existence of Newco; to dispose of the assets contributed to Newco,
except in the ordinary course of business or in a contribution to the capital of
a wholly-owned subsidiary of Newco; to reacquire any stock to be issued in the
transactions contemplated by this Agreement; or to take any other action that
would reasonably be expected to cause the Merger and the SCO Transaction not to
be treated as a tax-free exchange under Section 351 of the Code. Neither Caldera
nor Newco knows of any plan or intention of any Caldera Significant Stockholder
to dispose of any Newco shares issued in the transactions contemplated by this
Agreement. SCO knows of no plan or intention to terminate the existence of Newco
or to dispose of the assets contributed to Newco, except in the ordinary course
of business or in a contribution to the capital of a wholly-owned subsidiary of
Newco. SCO has no plan or intention to dispose of any Newco shares issued in the
transactions contemplated by this Agreement, except for distributions of Newco
stock to SCO's shareholders, or to take any other action that would reasonably
be expected to cause the merger and the SCO Transaction not to be treated as an
exchange under Section 351 of the Code.
12.5 Tax Representations. Newco, Caldera and the Caldera Significant
Stockholder covenant and represent that Caldera, Newco and the Caldera
Significant Stockholder shall make such representations and covenants as their
respective counsel shall reasonably request prior to the closing for purposes of
establishing the qualification under Section 351 of the SCO Transaction and the
qualification of the Merger as a Section 368 transaction. Any such
representations shall be considered to be part of this Section 12.5(a).
13. Miscellaneous.
13.1 Governing Law; Venue.
(a) Governing Law. The internal laws of the State of New
York (irrespective of its choice of law principles) will govern the validity of
this Agreement, the construction of its terms and the interpretation and
enforcement of the rights and duties of the parties hereto, except that the
fiduciary duties of the directors and managers of parties hereto and its
Affiliates shall be governed by the law of the jurisdiction of such company's
formation.
(b) Venue. The parties agree that any dispute regarding
the interpretation or validity of, or otherwise arising out of this Agreement,
shall be subject to the exclusive jurisdiction of the California State Courts in
and for Santa Clara County, California or, in the event of federal jurisdiction,
the United States District Court for the Northern District of California sitting
in Santa Clara County, California, and each party hereby agrees to submit to the
personal and exclusive jurisdiction and venue of such courts and not to seek the
transfer of any case or proceeding out of such courts.
13.2 Assignment; Binding upon Successors and Assigns. None of
the parties hereto may assign any of its rights or obligations hereunder without
the prior written consent of the other parties hereto; provided, however, that
the sale or other transfer of the stock of any Contributing Company shall not be
deemed an assignment provided that this Agreement remains enforceable against
the Contributing Company after such stock sale or transfer. Subject to the
preceding sentence, this Agreement will be binding upon and inure to the benefit
of the parties hereto and its respective successors and permitted assigns.
13.3 Severability. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the greatest extent possible, the economic,
business and other purposes of the void or unenforceable provision.
13.4 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all the parties reflected hereon as signatories.
13.5 Other Remedies. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other. The parties agree that specific performance is an appropriate
remedy for a breach of its respective obligations under this Agreement.
13.6 Amendment and Waivers. Any term or provision of this Agreement
may be amended by the parties hereto at anytime by execution of an instrument in
writing signed on behalf of each of SCO and Caldera. At any time prior to the
Closing, the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only by a writing signed by the party or parties to be bound thereby. The waiver
by a party of any breach hereof or default in the performance hereof will not be
deemed to constitute a waiver of any other default or any succeeding breach or
default. Delay in exercising any right under this Agreement shall not constitute
a waiver of such right. This Agreement may be amended by the parties hereto at
any time before or after approval of such party's stockholders, but, after such
approval, no amendment will be made which by applicable law requires the further
approval of a party's stockholders without obtaining such further approval.
13.7 Expenses. Except as herein expressly provided to the contrary
in this Agreement or the Ancillary Agreements, each party will bear its
respective fees and expenses incurred with respect to the negotiation,
preparation and performance of this Agreement and the transactions contemplated
hereby.
13.8 Attorneys' Fees. Should suit be brought to enforce or interpret
any part of this Agreement, the prevailing party will be entitled to recover, as
an element of the costs of suit and not as damages, reasonable attorneys' fees
to be fixed by the court (including, without limitation, costs, expenses and
fees on any appeal). The prevailing party will be entitled to recover its costs
of suit, regardless of whether such suit proceeds to final judgment.
13.9 Notices. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
If to SCO to:
The SCO, Inc.
425 Encinal
Santa Cruz, California
Attention: Chief Executive Officer
and Law and Corporate Affairs
Telecopier: XXXXXXXXXXX
With a copy to:
Wilson, Sonsini, Goodrich & Rosati
[address, fax]
And if to Caldera or Newco to:
Caldera Systems, Inc.
[address, fax]
With a copy to:
Brobeck, Phleger & Harrison LLP
[address, fax]
All such notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of a telecopy, when the party receiving such copy shall have
confirmed receipt of the communication, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following dispatch,
and (d) in the case of mailing, on the third business day following such
mailing.
13.10 Construction of Agreement. This Agreement has been negotiated
by the respective parties hereto and its attorneys and the language hereof will
not be construed for or against either party. A reference to a Section or an
exhibit will mean a Section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole.
13.11 No Joint Venture. Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other and its status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
13.12 Further Assurances. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement and the Ancillary Agreements.
13.13 Absence of Third Party Beneficiary Rights. Except as provided
in Sections 5.17 and 5.18, no provisions of this Agreement are intended, nor
will be interpreted, to provide or create any third party beneficiary rights of
any kind in any holder of the stock of Caldera, Newco, any Contributing Company
or a member of the Contributed Company Group or any Employee, client, customer,
Affiliate, stockholder, partner or any party hereto or any other person or
entity, and, except as so provided, all provisions hereof will be personal
solely between the parties to this Agreement and no other person or entity shall
have any cause of action as a third party beneficiary of this Agreement.
13.14 Public Announcement. Upon execution of this Agreement, Caldera
and SCO promptly will issue a joint press release approved by both parties
announcing the Merger and the SCO Transaction. Thereafter, Caldera or SCO may
issue such press releases, and make such other disclosures regarding the Merger
and the SCO Transaction, as they may each determine (after consultation with
legal counsel) to be required under applicable securities laws or the rules of
the Nasdaq Stock Market; Caldera and SCO shall confer with the other party prior
to any press release or disclosure relating to the Merger or SCO Transaction.
13.15 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings.
"2000 Group Balance Sheet" is defined in Section 2.4(c).
"Affiliate" means, with respect to a specified person, any other
person that directly or indirectly controls, is controlled by, or is under
common control with, such specified person or which hold at least a 10%
ownership interest in said person.
"Agreed Amount" is defined in Section 10.5(c).
"Ancillary Agreements" means, collectively, the Stockholder Agreement,
the Escrow Agreement, the Bills of Transfer, the Sales Representative and
Support Agreement, the agreements relating to the Patent Assignment, the
Copyright Assignment and the Trademark Assignment, the Web-Top Sublicense and
the Voting Agreements.
"Assumed Liabilities" is defined in Section 1.4(c)(i).
"Bills of Transfer" means each of the Bills of Transfer for each
respective jurisdiction for the Contributed Assets and Contributed Companies (or
other documents of transfer) to be executed and delivered by the holders of such
Contributed Assets and Newco or its subsidiaries at the Effective Time in the
forms reasonably acceptable to SCO and Newco.
"CERCLA" is the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Sec. 9601 et seq., as amended.
"Certificate of Merger" is defined in Recital A.
"Claim Notice" is defined in Section 10.5(a).
"Claimed Amount" is defined in Section 10.5(a).
"Closing" has the meaning specified for such term in Section 1.5.
"Closing Date" is defined in Section 1.5.
"Closing Group Account" is defined in Section 4.21.
"COBRA" is defined in Section 2.8(c).
"Conduct of the Group Business" means the conduct in all material
respects of the Group Business as conducted on the date hereof and at Closing.
"Contested Amount" is defined in Section 10.5(b).
"Contributed Assets" shall mean those assets, including real property
assets, that are owned, leased or licensed by the Contributing Companies that
are (a) listed on Exhibit 13.15A attached hereto, (b) Intellectual Property
Rights used in the production, development, support or marketing of the Group
Products, or (c) used in the Group Business, and (d) all Contributed Contracts
to which any of the Contributing Companies is a party, but in all cases
excluding the Excluded Assets.
"Contributed Companies" means The Santa Cruz Operation Limited; The
Santa Cruz Operation (France) SARL; The Santa Cruz Operation (Deutschland) GmbH;
The Santa Cruz Operation (Italia) Srl; The Santa Cruz Operation Pty. Limited;
SCO Canada, Co.; The Santa Cruz Operation de Mexico, S. De R.L. De C. V.; The
Santa Cruz Operation (Asia) Ltd.; SCO Foreign Sales Corporation; SCO, Kabushiki
Kaisha; The Santa Cruz Operation Latin America, Inc.; Nihon SCO Limited; SCO do
Brazil Limitada; SCO Software (China) Company, Ltd.; and Unix System
Technologies China Company, Ltd. (USTC).
"Contributed Company Group" has the meaning in Section 1.4(c)(i).
"Contributed Company Property" shall mean all of the assets, real,
personal, tangible and intangible, owned, leased, licensed or otherwise held by
any member of the Contributed Company Group.
"Contributed Contracts" means all agreements, contracts,
understandings, arrangements, commitments, mortgages, indentures, leases,
licenses, permits, franchises, instruments, notes, bonds, indemnities,
guarantees, loan agreements, credit agreements, representations, warranties,
deeds, assignments, powers of attorney, certificates, purchase orders, work
orders, insurance policies, benefit plans, covenants, assurances or undertakings
of any nature which are used in the Group Business including but not limited to
those listed on Exhibit 13.15B attached hereto subject in the case of Joint
Contributed Agreements to the provisions of Section 4.17, excluding the Excluded
Assets.
"Contributed Stock" means all of the capital stock of the Contributed
Companies.
"Contributed Subsidiaries" means the direct or indirect subsidiaries
of the Contributed Companies identified in Exhibit 13.15C attached hereto.
"Contributing Companies" means SCO and any subsidiary of SCO (other
than the Contributed Companies) which may own any interest in the Contributed
Stock and Assets to be conveyed to Newco or that is liable for any Assumed
Liability to be assumed by Newco under the term of this Agreement.
"Copyright Assignment" means a form of assignment mutually acceptable
to Caldera and SCO assigning all copyrights included in the Contributed Assets.
"Caldera Assets" are the tangible and intangible, real and personal
assets owned, leased or licensed by Caldera.
"Caldera Balance Sheet" is defined in Section 3.14.
"Caldera Business" is the business of Caldera as carried on
immediately prior to the SCO Transaction, including without limitation Caldera's
business of developing, manufacturing, marketing, licensing, distributing,
using, operating, installing, servicing, supporting, maintaining, repairing or
otherwise using or commercially exploiting all or any aspect of any or all of
the Caldera Products or Caldera Assets.
"Caldera Closing Price" means the average closing price that Caldera
Common Stock for the five day period ending on the trading day prior to the
Closing.
"Caldera Common Stock" is defined in Section 1.2(a).
"Caldera Contracts" means all agreements, contracts, understandings,
arrangements, commitments, mortgages, indentures, leases, licenses, permits,
franchises, instruments, notes, bonds, indemnities, guarantees, loan agreements,
credit agreements, representations, warranties, deeds, assignments, powers of
attorney, certificates, purchase orders, work orders, insurance policies,
benefit plans, covenants, assurances or undertakings of any nature to which
Caldera or the Caldera Subsidiaries are a party.
"Caldera Disclosure Letter" is defined in the preamble of Section 3.
"Caldera Employees" are the employees of Caldera.
"Caldera Employee Plans" is defined in Section 5.16(a).
"Caldera Financial Statements" is defined in Section 3.4(b).
"Caldera Financial Statements Balance Sheet Date" is defined in
Section 3.4(b).
"Caldera Group" is defined in the Preamble of Section 3.
"Caldera IP Rights" is defined in Section 3.15(a).
"Caldera IP Rights Agreements" is defined in Section 3.15(c).
"Caldera's Knowledge" or "Known to Caldera". A particular fact or
other matter shall be deemed to be within "Caldera's Knowledge" or "Known to
Caldera" if any officer of Caldera has current actual knowledge of such fact or
other matter.
"Caldera Options" is defined in Section 1.2(b)(i).
"Caldera Percentage Interest" means 72% of the fully diluted equity
interest in Newco (taking into account all options, warrants and convertible
debentures on an as-converted basis).
"Caldera Permitted Encumbrance" means Encumbrances (a) as disclosed as
an Encumbrance in the Caldera Disclosure Schedule (b) Encumbrances for
liabilities reflected in the Caldera Financial Statements, (c) liens for current
taxes not yet delinquent, (d) liens imposed by law and incurred in the ordinary
course of business to carriers, warehousemen, laborers, material men and the
like not yet due, (e) immaterial imperfections of title set forth in the Caldera
Disclosure Letter (f) Encumbrances which are not material in amount or which
will not materially interfere with the use of the Caldera Assets for the Conduct
of the Caldera Business.
"Caldera Plans" is defined in Section 1.2(b)(i).
"Caldera Products" means the operating system software and other
products marketed or sold by Caldera and all of software products currently
under development by or for Caldera or for use or sale or license by Caldera (in
each case together with all of the software, products, and other items listed on
Caldera's products price list) and all derivative works, upgrades,
modifications, enhancements and configurations of any of the foregoing and all
software and components included in any configuration of any of the foregoing,
and all development tools, utilities and diagnostics used to develop any of the
foregoing in each case (whether or not ever commercially offered or price-
listed, and whether or not in development).
"Caldera Ratio" is defined in Section 1.2(a).
"Caldera Restrictive Agreements" is defined in Section 3.23.
"Caldera SEC Documents" is defined in Section 3.4(a).
"Caldera Significant Stockholder" means Ray Noorda, The Canopy Group,
Inc. And MTI Technology Corporation.
"Caldera Stock Purchase Plan" is defined in Section 1.2(b)(ii).
"Caldera Stock Purchase Plan Rights" is defined in Section 1.2(b)(ii).
"Caldera Stockholder Approval" is defined in Section 5.20(b).
"Caldera Subsidiary" shall mean any direct or indirect subsidiary of
Caldera listed on Exhibit 13.15G attached hereto.
"Caldera Surviving Corporation" is defined in Section 1.9.
"Delaware Law" means the Delaware General Corporation Law, as in
effect from time to time.
"Disposal," "release," and "threatened release" shall have the
definitions assigned thereto by the CERCLA.
"Dollars" or "$" means U.S. dollars.
"Effective Time" shall mean the effective time and date that the
Certificate of Merger is deemed filed with the Secretary of State of the State
of Delaware in accordance with the relevant provisions of the Delaware Law.
"Employee" and "Employees" is defined in Section 11.1(a).
"Employee Benefit Plan" is defined in Section 2.8(a).
"Encumbrance" means any pledge, lien, collateral assignment, security
interest, mortgage, deed of trust, title retention, conditional sale or other
security arrangement, or any charge, adverse claim of title, ownership or use,
or any other encumbrance of any kind.
"Environmental Damage" means any actual or alleged Liability
(including without limitation Liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or relating to (i) the
presence, discharge, emission or release into the environment of any Hazardous
Substance or (ii) facts or circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.
"Environmental Laws" means all federal, state, provincial, local and
international laws and regulations relating to pollution, the protection of
human health or the environment (including without limitation ambient air,
surface water, ground water, land surface or subsurface strata), including
without limitation laws and regulations relating to emissions, discharges,
releases or threatened releases of Hazardous Substances, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rulings and regulations promulgated thereunder.
"Escrow Agreement" is defined in Section 1.3(b).
"Escrow Shares" is defined in Section 1.3(b).
"Exchange Act" is the Security Exchange Act of 1934, as amended.
"Excluded Assets" is defined in Section 1.4(b).
"Excluded Liabilities" is defined in Section 1.4(c)(ii).
"Final Date" is defined in the last paragraph of Section 8.1.
"Final List" is defined in Section 12.1(a).
"First SCO Certificate" is defined in Section 1.3(a)(i).
"Foreign Employee Plans" is defined in Section 2.8(h).
"Form S-4" is defined in Section 1.14.
"Form S-8" is defined in Section 1.7.
"Former Employees" is defined in Section 11.2(b).
"GAAP" means United States generally accepted accounting principles
and practices as in effect from time to time and applied consistently throughout
the periods involved.
"Governmental Antitrust Authority" means any federal, state, local or
non-U.S. governmental or quasi-governmental authority charged with the
administration or enforcement of antitrust, competition or merger control laws
or regulations.
"Governmental Permits" means all municipal, state, local, federal and
other governmental franchises, permits, licenses, agreements, waivers and
authorizations from, issued or granted by, any jurisdiction.
"Group Assets" shall mean the Contributed Assets and all Contributed
Company Property, considered collectively.
"Group Benefit Arrangements" is defined in Section 2.8(a).
"Group Business" means the business of SCO and its direct and indirect
subsidiaries with respect to (i) the Group Products, as reflected in the 2000
Group Balance Sheet, including without limitation the business of developing,
manufacturing, marketing, licensing, distributing, using, operating, installing,
servicing, supporting, maintaining, repairing or otherwise using or commercially
exploiting all or any aspect of any or all of the Group Products or of any
Intangible Assets or Intellectual Property Rights related to any of the Group
Products, and (ii) the professional services division, but excluding the SCO
Retained Business.
"Group Employee Plans" is defined in Section 2.8(a).
"Group Financial Statements" has the meaning given in Section 2.4(c).
"Group Financial Statements Balance Sheet Date" is defined in Section
2.4(c).
"Group Governmental Permits" means those Governmental Permits required
for the Conduct of the Group Business (including without limitation the
manufacture or sale of the Group Products) that are held by any member of the
Contributed Company Group or held, in whole or in part, primarily by a
Contributing Company and required for the Conduct of the Group Business, or
necessary for the use or operation of any of the Group Assets (including without
limitation the Real Property Assets) or the manufacture or sale of any of the
Group Products, to the extent legally transferable in accordance with this
Agreement.
"Group Permitted Encumbrance" means Encumbrances (a) as disclosed as
an encumbrance in Exhibit 13.15E attached hereto (b) Encumbrances for
Liabilities reflected in the Group Financial Statements, (c) liens for taxes not
yet delinquent, (d) liens imposed by law and incurred in the ordinary course of
business to carriers, warehousemen, laborers, material men and the like not yet
due and payable, (e) immaterial imperfections of title set forth in the SCO
Disclosure Letter (f) Encumbrances which are not material in amount or which
will not materially interfere with the use of the Group Assets for the Conduct
of the Group Business.
"Group Persons" is defined in Section 5.18(a).
"Group Products" means the operating system software and other
products listed in the Group product list attached hereto as Exhibit 13.15D
marketed or sold by any member of the Contributed Company Group or the
Contributing Companies and all software under development for or licensed by the
Group Business (together with all derivative works, upgrades, modifications,
enhancements and configurations of any of the foregoing now existing or under
development and all software and components included in any configuration of any
of the foregoing, and all development and QA tools, utilities and diagnostics
used to develop any of the foregoing, in each case whether or not ever
commercially offered or price-listed, and whether or not in development).
"Group Restrictive Agreements" is defined in Section 2.23.
"Hazardous Materials" means: (i) any pollutant, contaminant, toxic,
hazardous or noxious substance or waste which is regulated by the laws of any
state, local, provincial, federal or other governmental authority or
jurisdiction, and includes but is not limited to (a) any oil or petroleum
compounds, flammable substances, explosives, radioactive materials, or any other
materials or pollutants which pose a hazard to persons or cause any real
property to be in violation of any Environmental Laws, (b) to the extent so
regulated, asbestos or any asbestos-containing material of any kind or
character, (c) polychlorinated biphenyls, as regulated by the Toxic Substances
Control Act, 15 U.S.C. sec. 2601 et seq., (or equivalent or similar legislation
in other relevant jurisdictions) (d) any material or substances designated as
"hazardous substances" pursuant to (1) Section 311 of the Clean Water Act, 33
U.S.C. sec. 1251 et seq., (or equivalent or similar legislation in other
relevant jurisdictions) or (2) Section 101 of CERCLA, (or equivalent or similar
legislation in other relevant jurisdictions) (e) "chemical substance," "new
chemical substance," or "hazardous chemical substance or mixture" pursuant to
Sections 3, 6 and 7 of the Toxic Substances Control Act, 15 U.S.C. sec. 2601 et
seq., (or equivalent or similar legislation in other relevant jurisdictions) and
(f) any "hazardous waste" pursuant to Section 1004 of the Resource Conservation
and Recovery Act, 42 U.S.C. sec. 6901 et seq. (or equivalent or similar
legislation in other relevant jurisdictions)
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Parties" is defined in Section 5.17(c).
"Indemnitee" is defined in Section 10.5(a).
"Insolvency Action" means, with respect to a person, any or all of the
following: (i) the voluntary or involuntary filing, with respect to such person,
of a petition for relief, or any other effort to seek relief, under any
Insolvency Proceeding; (ii) such person or any of its assets otherwise becoming
the subject of an Insolvency Proceeding; (iii) the formal or informal
dissolution, liquidation or winding up of such person, or any efforts to
initiate or carry out such dissolution, liquidation or winding up; (iv) the
appointment of (or efforts or attempts to appoint)
a receiver, liquidator, sequestrator, trustee, custodian or other similar
officer with respect to such person or any part of its assets or properties; or
(v) any composition of the indebtedness of such person or any assignment for the
benefit of such person's creditors.
"Insolvency Proceeding" means any or all of the following actions,
events or proceedings: (i) any voluntary or involuntary case, contested matter
or other proceeding under the United States Bankruptcy Code, as amended, and any
successor law or laws thereto; or (ii) any case, action or other proceeding
under any bankruptcy, insolvency, debt reorganization or similar law (whether
now or hereafter in effect) of any state, country or other jurisdiction.
"Intangible Assets" means, collectively, all intangible assets,
properties and rights required for the development of the Group Products,
constituting software (in both source code and binary code form), technology,
works of authorship, manuals, logbooks, notebooks, user's guides, programmers'
notes, documentation, know-how, trade secrets and training materials (for both
training of customers and of service personnel).
"Intellectual Property Rights" means, collectively, all of the
following worldwide intangible legal rights including those existing or acquired
by ownership, license or other legal operation, whether or not filed, perfected,
registered or recorded and whether now or hereafter existing, filed, issued or
acquired: (i) patents, patent applications, and patent rights, including any and
all continuations, continuations-in-part, divisions, reissues, reexaminations or
extensions thereof; (ii) inventions (whether patentable or not in any country),
invention disclosures, industrial designs, improvements, trade secrets,
proprietary information, know-how, technology and technical data; (iii) rights
associated with works of authorship (including without limitation audiovisual
works), including without limitation copyrights, copyright applications and
copyright registrations, moral rights, database rights, mask work rights, mask
work applications and mask work registrations; (iv) rights in trade secrets
(including without limitation rights in industrial property, customer, vendor
and prospect lists and all associated information or databases and other
confidential or proprietary information), and all rights relating to the
protection of the same including without limitation rights under nondisclosure
agreements; (v) any other proprietary rights in technology, including software,
all source and object code, algorithms, architecture, structure, display
screens, layouts, inventions, development tools and all documentation and media
constituting, describing or relating to the above, including, without
limitation, manuals, memoranda, records, business information, or trade marks,
trade dress or names, anywhere in the world; (vi) any rights analogous to those
set forth in the preceding clauses and any other proprietary rights relating to
intangible property, including without limitation brand names, trademarks,
service marks, domain names, trademark and service mark registrations and
applications therefor, trade names, rights in trade dress and packaging and all
goodwill associated with the same; and (vii) all rights to sue or make any
claims for any past, present or future infringement, misappropriation or
unauthorized use of any of the foregoing rights and the right to all income,
royalties, damages and other payments that are now or may hereafter become due
or payable with respect to any of the foregoing rights, including without
limitation damages for past, present or future infringement, misappropriation or
unauthorized use thereof; and (viii) rights under license agreements for the
foregoing.
"Intercompany Accounts" means the net amounts payable by or owing to
the Group Business as of the Effective Time as a consequence of the Conduct of
the Group Business, in the ordinary course, (i) pursuant any general services agreement
between the Contributed Company Group, on the one hand, and SCO and its direct
or indirect subsidiaries (other than the Contributed Company Group) on the other
hand, or (ii) as a consequence of reimbursements by SCO of amounts paid by it
for the Conduct of the Business in the ordinary course; provided, however that
in no event shall the Group Business be responsible for amounts attributable to
the SCO Retained Business.
"Interim Period" is defined in Section 12.5(h).
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and the rulings and regulations promulgated thereunder.
"Joint Contributed Agreements" is defined in Section 4.17.
"Key Employees" means those individuals identified in Exhibit 4.18A
attached hereto.
"Key Employee Term Sheets" means the Key Employee Term Sheets in the
form attached hereto as Exhibit 4.18B.
"Liabilities" (or when used with reference to a single item described
below, "Liability") means debts, liabilities and obligations (whether pecuniary
or not, including without limitation obligations to perform or forbear from
performing acts or services), fines or penalties, whether accrued or fixed,
absolute or contingent, matured or unmatured, determined or determinable, known
or unknown, including without limitation those arising under any law, action or
governmental order, liabilities for Taxes and those arising under any contract,
agreement, arrangement, commitment or undertaking of any kind whatsoever
(whether written or oral, express or implied), including, without limitation,
those arising under any Contributed Contract.
"Loss" means and includes any and all Liability, loss, damage, claim,
expense, cost, fine, fee, penalty, obligation, or injury, including, without
limitation, those resulting from any and all claims, actions, suits, demands,
assessments, investigations, judgments, orders, awards, arbitrations,
settlements or other proceedings, together with reasonable costs and expenses,
including the reasonable attorneys' and experts' fees, court costs, arbitration
costs, filing fees and other legal costs and expenses relating thereto, together
with interest accrued on each of the foregoing amounts from the date the same
was incurred at the lower of (i) the prime rate as published by The Wall Street
Journal or (ii) the highest rate of interest permitted under applicable law;
provided, however, that in determining the amount of any Loss, there shall be
deducted any Tax overlaps attributable to the events giving rise to the Loss.
"Material Adverse Effect on Caldera" means any event, change or effect
would have a material adverse effect on the business, tangible and intangible
assets, financial condition, and results of operations of Caldera and the
Caldera Subsidiaries, Caldera together with the Caldera Subsidiaries, as a
whole, or prevent in any material respect the performance by Caldera and its
subsidiaries of the actions anticipated by this Agreement and the Ancillary
Agreements to be taken by them on or before the Closing; provided however that
none of the following shall be deemed to be a Material Adverse Effect on
Caldera: (i) changes in market price or trading
volume of Caldera common stock or (b) changes attributable to the public
announcement or pendency of the transactions contemplated hereby.
"Material Adverse Effect on Newco" means any event, change or effect
would have a material adverse effect on the business, tangible and intangible
assets, financial condition, and future operations of Newco and its
subsidiaries, Newco together with its subsidiaries as a whole, after the
Effective Time or prevent in any material respect Newco from taking the actions
anticipated by this Agreement and the Ancillary Agreements to be taken by Newco
and its subsidiaries on and after the Effective Time.
"Material Adverse Effect on the Group Business" means any event,
change or effect which would have a material adverse effect on the business,
tangible and intangible assets, financial condition, and results of operations
of the Group Business, taking such Group Business as a whole, or prevent in any
material respect the performance by SCO and its subsidiaries of the actions
anticipated by this Agreement and the Ancillary Agreements to be taken by them
on or before the Closing; provided however that none of the following shall be
deemed to be a Material Adverse Effect on the Group Business: (i) changes in
market price or trading volume of SCO common stock or (b) changes attributable
to the public announcement or pendency of the transactions contemplated hereby.
"Material Contributed Contracts" is defined in the Preamble of Section
2.11.
"Material Caldera Contracts" is defined in Section 3.11.
"Merger" is defined in Recital A.
"Merger Sub" is defined in Recital A.
"Multiemployer Plan" is defined in Section 2.8(b).
"Multiple Employer Plan" is defined in Section 2.8(b).
"Newco" means Caldera Holding Inc., a Delaware corporation.
"Newco Common Stock" is defined in Recital A.
"Newco Offer" is defined in Recital A.
"Newco Options" is defined in Recital A.
"Newco Plans" is defined in Section 1.6.
"Newco Rights Agreement" is defined in Section 1.12.
"Nondisclosure Agreement" is defined in Section 4.9.
"Omitted Balance Sheet Liabilities" is defined in Section 10.1(e).
"Optionees" is defined in Recital A.
"Patent Assignment" is defined in Section 7.15.
"Person" means any individual, partnership, limited liability company,
firm, corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
"Post-Closing Period" is defined in Section 12.5(b).
"Potential Employee" is defined in Section 11.1.
"Pre-Closing Period" is defined in Section 12.5(b).
"Preliminary List" is defined in Section 11.1(a).
"Prospectus" is defined in Section 5.6.
"Prospectus/Proxy Statement" is defined in Section 1.14.
"Real Property Assets" shall mean all real property assets required
for the Conduct of the Group Business.
"Representing SCO Entities" is defined in the Preamble of Section 2.
"Response Notice" is defined in Section 10.5(b).
"Returns" is defined in Section 12.1.
"SEC" is the Securities and Exchange Commission.
"Securities Act" is the Securities Act of 1933, as amended.
"Shared Contributed Contracts" is defined in Section 4.17.
"Solvent" shall mean, with respect to any person on a particular date,
that on such date (a) the fair value of the property of such person is greater
than the total amount of liabilities, including contingent liabilities, of such
person; (b) the present fair salable value of the assets of such person is not
less than the amount that will be required to pay the probable liability of such
person on its debts as they become absolute and matured; (c) such person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such person's ability to pay as such debts and liabilities mature; and
(d) such person is not engaged in a business or transaction, and is not about to
engage in a business or transaction, for which such person's property would
constitute an unreasonably small capital. The amount of contingent liabilities
(such as litigation, guarantees and pension plan liabilities) at any time shall
be computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"Stock Rights" is defined in Section 1.7.
"Stockholder Agreement" is defined in Section 4.18.
"SCO" means The SCO, Inc., a Delaware corporation.
"SCO Alternative Proposal" is defined in Section 4.14(a).
"SCO Closing Price" means the average closing price of SCO Common
Stock for the five day period ending on the trading day prior to the Closing.
"SCO Consolidated Financial Statements" is defined in Section 2.4(b).
"SCO Consolidated Financial Statements Balance Sheet" is defined in
Section 2.4(b).
"SCO Disclosure Letter" is defined in Section 2.
"SCO IP Rights" is defined in Section 2.15(a).
"SCO IP Rights Agreements" is defined in Section 2.15(c).
"SCO's Knowledge" or "Known to SCO." A particular fact or other matter
shall be deemed to be within "SCO's Knowledge" or "Known to SCO" if any
executive officer of SCO or a Contributed Company or any executive officer of
SCO responsible for the Group Business has current actual knowledge of such fact
or other matter after reasonable investigation.
"SCO Options" is defined in Section 1.3(ii).
"SCO Per Share Value" is defined in Section 1.3(a)(ii).
"SCO Percentage Interest" means a fully diluted equity interest in
Newco (taking into account all options, warrants and convertible debentures on
an as-converted basis) equal to 100% less the Caldera Percentage Interest.
"SCO Ratio" is defined in Section 1.3(a)(ii).
"SCO Retained Business" means the business of SCO that does not
constitute the Group Business consisting of the Tarantella business.
"SCO SEC Documents is defined in Section 2.4(a).
"SCO Stockholder Rejection" is defined in Section 8.1(h).
"SCO Transaction" shall have the meaning described in Recital A
hereto.
"Tax" or "Taxes" means all taxes of any kind whatsoever (whether
payable directly or by withholding), including without limitation franchise,
income, gross receipts, personal property, real property, ad valorem, value
added, sales, use, documentary, stamp, intangible personal property, withholding
or other taxes, together with any interest and penalties, additions to tax or
additional amounts with respect thereto imposed by any taxing authority.
"Termination Fee" is defined in Section 8.4(a)(i).
"Threshold Amount" is defined in Section 10.1(e).
"Trademark Assignment" is defined in Section 7.15.
"Transaction Taxes" is defined in Section 12.1.
"UK" means the United Kingdom of Great Britain and Northern Ireland.
"Unforeseen Tax Liabilities" is defined in Section 10.1(e).
"Voting Agreement" is defined in Section 5.15.
"WebTop Sublicense" means a mutually agreeable license agreement
between SCO and Caldera providing for the license of the WebTop Product from
Caldera to SCO.
13.16 Entire Agreement. This Agreement and the exhibits hereto
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto other than the
Nondisclosure Agreement, which shall remain in full force and effect. The
express terms hereof control and supersede any course of performance or usage of
the trade inconsistent with any of the terms hereof.
[REMAINDER OF PAGE LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and Plan of Reorganization as of the date first above written.
THE SANTA CRUZ OPERATION, INC.
a California corporation
By: /s/ Douglas Michels
------------------------------------------
Douglas Michels
President and Chief Executive Officer
CALDERA SYSTEMS, INC.
a Delaware corporation
By: /s/ Ransom Love
------------------------------------------
Ransom Love
President and Chief Executive Officer
CALDERA HOLDING INC.
a Delaware corporation
By: /s/ Ransom Love
------------------------------------------
Ransom Love
President and Chief Executive Officer
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
********************************************************************
EXHIBIT 1.4(b)
EXCLUDED ASSETS
********************************************************************
EXHIBIT 1.4(c)(I)(B)
ASSUMED LIABILITIES
********************************************************************
EXHIBIT 1.13(b)
OFFICERS
*********************************************************************
EXHIBIT 1.4(a)(i)
NON US-CONTRIBUTED COMPANIES AND CONTRIBUTED ASSETS
*********************************************************************
EXHIBIT 4.11B
SCO AFFILIATES WHO EXECUTED VOTING AGREEMENTS
**********************************************************************
EXHIBIT 4.18A
SCO KEY EMPLOYEES
************************************************************************
EXHIBIT 5.13B
CALDERA AFFILIATES WHO EXECUTED VOTING AGREEMENTS
*************************************************************************
EXHIBIT 13.15A
CONTRIBUTED ASSETS
**************************************************************************
EXHIBIT 13.15B
CONTRIBUTED CONTRACTS
**************************************************************************
EXHIBIT 13.15C
CONTRIBUTED SUBSIDIARIES
***************************************************************************
EXHIBIT 13.15D
GROUP PRODUCTS
****************************************************************************
EXHIBIT 13.15E
PERMITTED ENCUMBRANCES
*****************************************************************************
AMENDMENT TO
AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION (this "Amendment")
is entered into as of September 13, 2000, by and among Caldera Systems, Inc., a
Delaware corporation including for all purposes Caldera Surviving Corporation,
("Caldera"), Caldera, Inc., a Delaware corporation ("Newco") and The Santa Cruz
Operation, Inc., a California corporation ("SCO").
RECITALS
A. On August 1, 2000, Caldera, Newco and SCO entered into an
Agreement and Plan of Reorganization (the "Agreement") which all parties to the
Agreement wish to amend pursuant to the terms and conditions of this Amendment.
B. All terms not otherwise defined herein shall have the meanings
set forth in Section 13.15 of the Agreement.
NOW, THEREFORE, the parties hereby agree to amend the Agreement as
follows:
1. Section 1.3(a)(i) and (iii) of the Agreement are amended in their
entirety as follows:
1.3 SCO Transaction.
(a) Issuance of Newco Common Stock.
(i) Consideration. Issue to SCO that number of issued, fully
paid and nonassessable shares of Newco Common Stock equal to The SCO Percentage
Interest, less (a) the number of shares of Newco Common Stock issuable upon
exercise of the Replacement Options pursuant to Section 1.3(a)(iii) below
multiplied by .75, (b) the number of shares of Newco Common Stock issuable upon
exercise of the SCO Options assumed by Newco pursuant to Section 1.3(a)(iii)
below multiplied by .75 and (c) the Escrow Shares issued to SCO and placed
directly into escrow by Caldera pursuant to Section 1.3(b) below, with such
number of shares to be appropriately adjusted in the event of any Caldera stock
split, stock combination, reclassification or other similar capital change (the
"First SCO Certificate") and pay SCO cash consideration equal to seven million
dollars ($7,000,000) (the "Cash Consideration"), by wire transfer of immediately
available funds or upon the cancellation of SCO's outstanding indebtedness to
Caldera.
(iii) Assumption or Replacement of SCO Options. Prior to the
Effective Time, each employee or consultant of SCO who is offered and accepts
employment or a consulting position with New Caldera and who has then
outstanding options to purchase shares of SCO Common Stock held by such Optionee
(collectively, the "SCO Options")(consisting of all outstanding options granted
under the stock option plans of SCO or the SCO Subsidiaries, and
any individual non-plan options held by the Optionees) shall elect one of
the following alternatives with respect to each grant of options held by such
employee or consultant:
(A) Each of the then outstanding SCO Options held by such
employee or consultant may be cancelled and replaced with an option to purchase
one share of Newco Common Stock for each two shares of SCO Common Stock
("Replacement Options") subject to an SCO Option at the Effective Time with an
exercise price per share of Newco Common Stock equal to the fair market value of
Newco Common Stock immediately after the Effective Time, rounded up to the
nearest cent. The vesting schedule of employees and consultants electing this
alternative shall be determined as follows: (i) the number of vested shares of
common stock under the Replacement Option grant will equal the number of vested
shares of common stock subject to the cancelled SCO option grant immediately
prior to the Effective Time multiplied by 0.25 and (ii) the remaining unvested
Replacement Options will vest over a period of months determined by the
following equation: 48 months less the product of the number of months vested
under the SCO option grant multiplied by 0.5; or
(B) Each of the then outstanding SCO Options held by such
employee or consultant may be assumed by Newco and converted into an option to
purchase one share of Newco Common Stock for each two shares of SCO Common Stock
subject to an SCO Option at the Effective Time (the "SCO Ratio") at an exercise
price per share of Newco Common Stock equal to the exercise price per share of
such assumed SCO Option immediately prior to the Effective Time divided by the
SCO Ratio, rounded up to the nearest cent. Except as set forth in the preceding
sentence, the term, exercisability, vesting schedule, and all other terms and
conditions of the SCO Options will be unchanged and all references in any option
agreement governing such option to SCO shall be deemed to refer to Newco, where
appropriate; provided, however, that the outstanding SCO Options previously
designated as "incentive stock options" under Section 422 of the Internal
Revenue Code may, as a result of the foregoing adjustments, be converted into
non-statutory stock options. Continuous service as an employee or consultant
with SCO or any of the SCO Subsidiaries will be credited to the Optionee for
purposes of determining the number of shares of Newco Common Stock vested and
exercisable under the assumed SCO Option after the Closing. If the foregoing
calculation results in a Newco Option, which is issued for an SCO Option, being
exercisable for a fraction of a share of Newco Common Stock, then the number of
shares of Newco Common Stock subject to such option will be rounded down to the
nearest whole number of shares, with no cash being payable for such resulting
fractional share.
2. Section 1.3(c) of the Agreement is hereby deleted in its entirety.
3. Section 13.15 of the Agreement is hereby amended as follows:
(a) The following definition is hereby amended in its entirety: "Caldera
Percentage Interest" means 72% of the fully diluted equity interest in Newco
(taking into account all options, warrants and convertible debentures on an as-
converted basis except for any Replacement Options issued or SCO Options assumed
pursuant to Section 1.3(a)(iii)).
(b) The following definition is hereby added in its entirety: "Replacement
Options" is defined in Section 1.3(a)(iii)(A).
(c) The following definition is hereby amended in its entirety: "SCO
Ratio" is defined in Section 1.3(a)(iii)(B).
4. All references to the form of Sales Representative and Support
Agreement, attached as Exhibit 4.12 of the Agreement shall hereby be replaced by
references to the form of Sales Representative and Support Agreement attached
hereto as Exhibit 4.12A (the "Sales Representative Agreement") and the form of
Open Server Research and Development Agreement attached hereto as Exhibit 4.12B
(the "Open Server Agreement"). The Sales Representative Agreement and Open
Server Agreement shall be executed at the Effective Time.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Agreement and Plan of Reorganization as of the date first above written.
THE SANTA CRUZ OPERATION, INC.
a California corporation
By: /s/ Douglas L. Michels
-----------------------------------------
Douglas Michels
President and Chief Executive Officer
CALDERA SYSTEMS, INC.
a Delaware corporation
By: /s/ Ransom H. Love
-----------------------------------------
Ransom Love
Chief Executive Officer
CALDERA, INC.
a Delaware corporation
By: /s/ Ransom H. Love
-----------------------------------------
Ransom Love
Chief Executive Officer
[SIGNATURE PAGE TO AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION]
************************************************************************
SECOND AMENDMENT TO
AGREEMENT AND PLAN OF REORGANIZATION
THIS SECOND AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION (this "Second
Amendment") is entered into as of December 12, 2000, by and among Caldera
Systems, Inc., a Delaware corporation including for all purposes Caldera
Surviving Corporation, ("Caldera"), Caldera International, Inc., a Delaware
corporation ("Newco") and The Santa Cruz Operation, Inc., a California
corporation ("SCO").
RECITALS
A. On August 1, 2000, Caldera, Newco and SCO entered into an Agreement and
Plan of Reorganization (the "Agreement") which all parties to the Agreement wish
to amend pursuant to the terms and conditions of this Amendment.
B. All terms not otherwise defined herein shall have the meanings set
forth in Section 13.15 of the Agreement.
NOW, THEREFORE, the parties hereby agree to amend the Agreement as follows:
1. Section 1.3(a)(iii)(A) of the Agreement is amended in its entirety as
follows:
(A) Each of the then outstanding SCO Options held by such employee or
consultant may be cancelled and replaced with an option to purchase one share of
Newco Common Stock for each two shares of SCO Common Stock ("Replacement
Options") subject to an SCO Option at the Effective Time with an exercise price
per share of Newco Common Stock equal to the fair market value of Newco Common
Stock immediately prior to the Effective Time, rounded up to the nearest cent.
The vesting schedule of employees and consultants electing the Replacement
Option alternative will remain the same.
2. Section 1.15 is hereby added to the Agreement as follows:
1.15 Transition Cost Sharing. Caldera and SCO agree to share transition
costs relating to the SCO Transaction from the date of the Agreement to the
Closing Date as set forth in the Transition Costs Memorandum attached hereto as
Exhibit 1.15.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Agreement and Plan of Reorganization as of the date first above written.
THE SANTA CRUZ OPERATION, INC.
a California corporation
By: /s/ Steven M. Sabbath
---------------------------------------
Steven M. Sabbath
Senior Vice President, Law & Corporate
Affairs
CALDERA SYSTEMS, INC.
a Delaware corporation
By: /s/ Ransom H. Love
---------------------------------------
Ransom Love
Chief Executive Officer
CALDERA, INC.
a Delaware corporation
By: /s/ Ransom H. Love
----------------------------------------
Ransom Love
Chief Executive Officer
[SIGNATURE PAGE TO AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION]
************************************************************************
Exhibit 1.15
Transition Costs Memorandum
The purpose of this Memorandum is to memorialize the agreement of The Santa Cruz
Operation ("SCO") and Caldera Systems, Inc. ("Caldera") with respect to the
sharing of transition costs relating to the planned acquisition by Caldera of
the SCO Server and Professional Services Divisions ("Acquisition").
1. Background. The parties understand that, even if the Acquisition had not
occurred, SCO would have undergone a reduction in its workforce. The
parties further understand that, if SCO had restructured to remain a
standalone company, it would have terminated 150 more employees than it did
in anticipation of the Acquisition, at an estimated cost to SCO of
approximately $3,200,000.
The carrying costs for these additional 150 employees are approximately
$4,200,000 per quarter. As SCO would have terminated them in August, they
will have been on the SCO payroll an additional four months as of December
31, 2000, at a total cost to SCO of approximately $5,600,000.
In addition, stay-on bonuses of $600,000 have been promised to transition
employees, resulting in a total cost to SCO of $6,200,000.
Therefore, the net incremental cost being borne by SCO as a result of the
Acquisition is approximately $3 million ($6,200,000 that SCO bore minus the
$3,200,000 that SCO saved by not terminating the 150 employees in August).
2. Agreement to Share Transition Costs. After some discussion, the parties
have agreed to split the net incremental costs on a 50:50 basis. Caldera,
therefore, agrees to pay SCO the sum of $1,500,000, which is intended to
reimburse SCO for a 50 percent portion of the costs from August 2000
through December 2000.
3. One-Time-Only Basis. The parties agree that this cost sharing arrangement
is being done on a one-time-only basis and that Caldera is not agreeing to
pay or share transition or termination costs that SCO may incur hereafter,
regardless of how long it takes to obtain SEC and shareholder approval and
to consummate the Acquisition.
****************************************************************************
THIRD AMENDMENT TO
AGREEMENT AND PLAN OF REORGANIZATION
THIS THIRD AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION (this
"Amendment") is entered into as of February 9, 2001, by and among Caldera
Systems, Inc., a Delaware corporation including for all purposes Caldera
Surviving Corporation, ("Caldera"), Caldera International, Inc., a Delaware
corporation ("Newco") and The Santa Cruz Operation, Inc., a California
corporation ("SCO").
RECITALS
A. On August 1, 2000, Caldera, Newco and SCO entered into an
Agreement and Plan of Reorganization, which was amended on September 13, 2000
and December 12, 2000 (as amended, the "Agreement") which all parties to the
Agreement wish to further amend pursuant to the terms and conditions of this
Amendment.
B. All terms not otherwise defined herein shall have the meanings
set forth in Section 13.15 of the Agreement.
NOW, THEREFORE, the parties hereby agree to amend the Agreement as
follows:
1. The introductory sentence of Section 1.3(a) of the Agreement is hereby
replaced with the following text:
(a) Issuance of Newco Common Stock. At the times set forth below, and
subject to the terms and conditions of this Agreement, Newco will, in
consideration for the contribution and transfer of the Contributed Stock and
Contributed Assets to Newco as contemplated by this Agreement, perform the
following:
2. Section 1.3(a)(i) of the Agreement is hereby replaced with the
following text:
(i) Consideration.
(A) At the Effective Time, Newco shall (i) issue to SCO
that number of issued, fully paid and nonassessable shares of Newco Common Stock
equal to the sum of 16 million shares less the Escrow Shares issued to SCO and
placed directly into escrow by Caldera pursuant to Section 1.3(b) below (but not
less any shares issuable pursuant to options granted or assumed pursuant to
1.3(a)(iii)), with the number of shares to be appropriately adjusted in the
event of any Caldera stock split, stock combination, reclassification or other
similar capital change (the "First SCO Certificate"), (ii) pay SCO cash
consideration equal to twenty-three million dollars ($23,000,000) (the "Cash
Consideration"), by the combination of a wire transfer of immediately available
funds and the cancellation of SCO's then outstanding indebtedness to Caldera and
(iii) issue to SCO a non-interest bearing, secured promissory note (the "Secured
Note") in the amount of $8 million (subject to certain rights of setoff as
provided therein), secured by the assets of the OpenServer Business, and in the form
attached as Exhibit 1.3(a)(1).
(B) During the three year period (the "Earn-out Period")
beginning with the first, full Caldera Fiscal Quarter following the Effective
Time (provided that if the Effective Time falls within the first five days of
any Caldera Fiscal Quarter, then the Earn-out Period shall begin with such
Caldera Fiscal Quarter), SCO shall be entitled to receive from Newco on each
Earn-out Payment Date 45% of the amount by which OpenServer Revenue for the
prior four full Caldera Fiscal Quarters is higher than the cumulative Earn-out
Thresholds for such periods (such amount, an "Earn-out Amount"). Notwithstanding
the intention of this provision that the parties shall share in the future
revenue of the OpenServer Business as operated by Newco, such operation of the
OpenServer Business shall be in Newco's sole discretion, and Newco shall be
under no obligation to provide any minimum level of support to the OpenServer
Business.
3. Section 1.3(b) is hereby replaced in its entirety with the following
text:
(b) Escrow. As soon as practicable after the Effective Time, and
subject to and in accordance with the provisions of Section 10 and the Escrow
Agreement, a form of which is attached as Exhibit 1.3(b) (the "Escrow
Agreement"), Caldera shall deliver to the Escrow Agent on behalf of SCO a
certificate representing one million six hundred thousand (1,600,000) shares of
Newco Common Stock (the "Escrow Shares"). The Escrow Shares distributed to the
Escrow Agent shall be held in escrow and shall be available to transfer to
Caldera for certain damages as provided in Section 10. To the extent not
transferred to Caldera for such damages, the Escrow Shares shall be released to
SCO, all as provided in Section 10 and the Escrow Agreement.
4. Section 1.4(b)(i)(B) is hereby amended by adding the following phrase
to the end of such section:
", except for rights associated with the Commit Transaction
Receivables"
5. Section 1.4(b)(i) is hereby amended by adding the following sentence
to the end of such section:
Notwithstanding Sections 1.4(b)(i)(A)-(C), Newco's continued use
of certain Excluded Assets as part of UnixWare and OpenServer, and sale of
certain unbundled and bundled products including certain Excluded Assets,
is set forth in Exhibit 1.4(b)(i).
6. A new Section 1.4(c)(i)(D) is hereby added to the Reorganization
Agreement:
(D) all Liabilities relating to Commit Transaction
Receivables.
7. Section 4.2 of the Agreement is hereby amended by adding to the end of
such section the following:
"Without limiting the foregoing, SCO shall be required to budget at
least (and shall not be required to budget more than) $21.4 million for the
maintenance of the Group Business during the three month period ended March 31,
2001, of which amount, $1.9 million shall be applied specifically to SCO's
professional services line of business. If the Effective Time has not occurred
prior to March 31, 2001, then SCO shall be required to budget an amount for the
three month period ended June 30, 2001 to be agreed by the parties at such time
and which shall be commensurate with historical expenses to revenue ratios.
8. Sections 4.12, 4.24 and 5.14 are hereby deleted in their entirety.
Exhibit 4.12 is also deleted in its entirety.
9. A new Section 5.20 shall be added as follows:
5.20 Reimbursement for Pre-paid Commissions and Royalties. During
the period beginning on the Effective Time and ending on the one year
anniversary of the Effective Time, Newco shall, on a quarterly basis, reimburse
SCO for any sales commissions or royalties previously paid by SCO that relate to
Commit Transaction Receivables that are actually collected by Newco during such
period.
10. All references in Section 8.1 to "February 28, 2001" are hereby
replaced with "May 31, 2001", and the reference to "March 31, 2001" in such
section is hereby replaced with "June 30, 2001".
11. Section 8.4(a)(i) is hereby replaced in its entirety with the
following text:
(i) If this Agreement is terminated by Caldera pursuant to
Section 8.1(i), then SCO shall promptly pay to Caldera (by wire transfer or
cashier's check) a nonrefundable fee equal to five hundred sixty thousand
(560,000) multiplied by the average closing price of the Caldera Common Stock
for the ten (10) days following the public announcement of this Agreement (the
"Termination Fee") within two (2) business days following delivery of the notice
of termination by Caldera pursuant to Section 8.2;
12. Section 10.1 is hereby replaced in its entirety with the following
text:
Escrow Fund. In accordance with Section 1.3(b) hereof, Caldera
shall deliver to the Escrow Agent one million six hundred thousand (1,600,000)
shares of Newco Common Stock (the "Escrow Fund"). The Escrow Fund shall be held
by the Escrow Agent for a period of one year from the Effective Time pursuant to
the terms set forth in the Escrow Agreement. The Escrow Fund shall be available
to compensate Caldera Surviving Corporation and Newco pursuant to the
Indemnification obligations of SCO.
13. Section 10.4 is hereby replaced in its entirety with the following
text:
Limitations on Indemnification. SCO shall not have any liability
under this Section 10 unless the aggregate amount of Loss attributable exceeds
$1,000,000, and, in such event, SCO shall be required to pay the entire amount
of such Loss from the first dollar thereof. SCO shall not have liability for any
Loss in excess of the amount determined by multiplying (i) one million six
hundred thousand (1,600,000) by (ii) the Caldera Closing Price,
except that as such Losses relate to the SCO IP Rights, SCO shall not have
liability for any Loss in excess of the amount determined by multiplying (i)
eight million (8,000,000) by (ii) the Caldera Closing Price. Notwithstanding the
preceding sentence, there shall be no limitations on liability pursuant to this
Section 10 relating to intentional fraud or misrepresentation by SCO.
14. Current Exhibit 1.4(b) of the Agreement is hereby amended and replaced
in its entirety with Attachment A.
15. Current Exhibit 13.15A of the Agreement, the Contributed Assets, is
hereby amended to have added to it the contents of Attachment B to this
Amendment.
16. Current Exhibit 13.15B of the Agreement, the Contributed Contracts, is
hereby amended to have added to it the contents of Attachment C to this
Amendment.
17. Current Exhibit 13.15D of the Agreement, the Group Products, is hereby
amended to have added to it the contents of Attachment D to this Amendment.
18. Current Exhibit 13.15E of the Agreement, the Permitted Encumbrances,
is hereby amended to have added to it the contents of Attachment E to this
Amendment.
19. The definition for "Contributed Assets" contained in Section 13.15 is
hereby replaced in its entirety with the following text:
"Contributed Assets" shall mean (i) those assets, including real
property assets, that are owned, leased or licensed by the Contributing
Companies that are (A) listed on Exhibit 13.15A attached hereto, (B)
Intellectual Property Rights used in the production, development, support or
marketing of the Group Products or (C) used in the Group Business, (ii) all
Commit Transaction Receivables and (iii) all Contributed Contracts to which any
of the Contributing Companies is a party, but in all cases excluding the
Excluded Assets.
20. The following definitions are hereby added to Section 13.15:
"Caldera Fiscal Quarter" shall mean any three-month period ending
on any of the following days of the year: October 31, January 31, April 30 or
July 31.
"Commit Transaction Receivables" shall mean that portion of
accounts receivable arising from transactions involving Group Products for which
a contractual right to payment or true up is not yet due SCO at the Effective
Time. By way of example, and to the parties current knowledge, Exhibit 13.15F
reflects the Commit Transaction Receivables that would exist if the Effective
Time were as of the date hereof.
"Earn-out Amount" is defined in Section 1.3(a)(1)(B).
"Earn-out Payment Date" means the 45th day following each of the
fourth, the eighth and the twelfth full Caldera Fiscal Quarters following the
Effective Time.
"Earn-out Period" is defined in Section 1.3(a)(1)(B).
"Earn-out Threshold", with respect to any particular Caldera
Fiscal Quarter, shall be as set forth on Exhibit 13.15G.
"OpenServer Business" means the business of SCO and its direct
and indirect subsidiaries with respect to the OpenServer Products, including
without limitation the business of developing, manufacturing, marketing,
licensing, distributing, using, operating, installing, servicing, supporting,
maintaining, repairing or otherwise using or commercially exploiting the
OpenServer Products; provided, however, that the OpenServer Business shall in no
way include any other line of business of Newco, notwithstanding that such other
line of business may incorporate OpenServer kernel or library code that
implements less than 15% of the OpenServer Application Binary Interfaces.
"OpenServer Products" means all software, development tools,
compilers, libraries, driver kits, utilities, and the operating system software
and other products in whole or in part based on or developed from or for the
AT&T Unix System V version 3.2 kernel and any succssor to that kernel, including
the kernel, the code base, the application program interfaces, the application
binary interfaces, derivative works thereof, and those products offered under
the names or marks "Appliance Server", SCO Admin, SCO OpenServer Enterprise
System, SCO OpenServer Host System, SCO OpenServer Internet FastStart System, or
SCO OpenServer Desktop System, SCO Virtual Disk Manager, SCO Doctor, SCO
ARCserve/Open, SCO Merge, SCO OpenServer SMP(TM) Licenses, SCO PPP from Morning
Star, SCO Internet Security Package, SCO Internet to NetWare Gateway, and
Interscan VirusWall, and all successors, upgrades, enhancements, releases, new
versions, and updates to any of the above that have been developed or acquired
by the Contributing Companies as of the Effective Time.
"OpenServer Revenue" shall mean all revenue relating to the
OpenServer Business, less product returns and provisions for bad debt.
"Secured Note" is defined in Section 1.3(a)(1)(A).
21. The definitions for "Caldera Percentage Interest" and "SCO Percentage
Interest" found in Section 13.15 are deleted in their entirety.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Agreement and Plan of Reorganization as of the date first above written.
THE SANTA CRUZ OPERATION, INC.
a California corporation
By: /s/ Douglas L. Michels
-----------------------------------------
Douglas Michels
President and Chief Executive Officer
CALDERA SYSTEMS, INC.
a Delaware corporation
By: /s/ Ransom H. Love
-----------------------------------------
Ransom Love
Chief Executive Officer
CALDERA INTERNATIONAL, INC.
a Delaware corporation
By: /s/ Ransom H. Love
--------------
Chief Executive Officer
[SIGNATURE PAGE TO AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION]
***********************************************************************
EXHIBIT 2
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made and entered into as of May 7,
2001, by and among Caldera International, Inc., a Delaware corporation
("Newco"), Caldera Systems, Inc., a Delaware corporation including for all
purposes Caldera Surviving Corporation ("Caldera"), The Santa Cruz Operation,
Inc., a California corporation ("SCO") and Wells Fargo Bank West, N.A. (the
"Escrow Agent").
RECITALS
A. Newco, Caldera, and SCO have entered into that certain Agreement and
Plan of Merger and Reorganization dated as of August 1, 2000 (as amended, the
"Reorganization Agreement"), pursuant to which, among other things, (i) Caldera
will merge with a subsidiary of Newco, with Caldera being the surviving
corporation (the "Caldera Surviving Corporation") and all outstanding Caldera
securities will be exchanged for shares of common stock of Newco ("Newco Common
Stock"), and (ii) SCO will contribute to Newco certain assets and the stock of
certain of its subsidiaries in consideration for the issuance to SCO of certain
shares of Newco Common Stock.
B. The Reorganization Agreement contemplates the establishment of an
escrow arrangement to secure certain of the indemnification and other
obligations of SCO under the Reorganization Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given to them in the Reorganization
Agreement, a copy of which is attached hereto as Exhibit A.
2. Escrow and Indemnification.
(a) Shares and Stock Powers Placed in Escrow. At the Effective Time,
or as soon thereafter as reasonably possible: (i) Newco shall issue a
certificate for 1,600,000 shares of Newco Common Stock registered in the name of
SCO, evidencing the shares of Newco Common Stock to be held in escrow in
accordance with this Agreement and the Reorganization Agreement and (ii) SCO
shall deliver to the Escrow Agent an original "assignment separate from
certificate" (the "Stock Power") endorsed by SCO in blank, in the form attached
hereto as Exhibit B. SCO has agreed in the Reorganization Agreement to indemnify
and hold harmless Newco and Caldera from and against certain Losses and Taxes.
The shares of Newco Common Stock being held in escrow pursuant to this Agreement
and the Reorganization Agreement (the "Escrow Shares") shall constitute an
escrow fund (the "Escrow Fund") with respect to the indemnification obligations
of SCO under the Reorganization Agreement and shall be security for such
indemnity obligation, subject to the limitations, and in the manner provided, in
this Agreement. The Escrow Fund shall be held as a trust fund and shall not be
subject to any lien, attachment, trustee process or any other judicial process
of any creditor of SCO or of any party hereto. The Escrow Agent agrees
to accept delivery of the Escrow Fund and the Stock Power
and to hold the Escrow Fund and Stock Power in an escrow account (the "Escrow
Account"), subject to the terms and conditions of this Agreement.
(b) Voting of Escrow Shares. SCO shall be entitled to exercise all
voting rights with respect to such Escrow Shares.
(c) Dividends, Etc. Newco, Caldera and SCO agree among themselves,
for the benefit of Newco and the Escrow Agent, that any securities or other
property distributable (whether by way of dividend, stock split or otherwise) in
respect of or in exchange for any Escrow Shares shall not be distributed to SCO,
but rather shall be distributed to and held by the Escrow Agent in the Escrow
Account. Ordinary cash dividends will be paid by Newco directly to SCO and not
to the Escrow Agent. Unless and until the Escrow Agent shall actually receive
such additional securities or other property, it may assume without inquiry that
the Escrow Shares currently being held by it in the Escrow Account are all that
the Escrow Agent is required to hold. At the time any Escrow Shares are required
to be released from the Escrow Account to any Person pursuant to this Agreement,
any securities or other property previously received by the Escrow Agent in
respect of or in exchange for such Escrow Shares shall be released from the
Escrow Account to such Person.
(d) Transferability. The interests of SCO in the Escrow Account and
in the Escrow Shares shall not be assignable or transferable, other than by
operation of law. No transfer of any of such interests by operation of law shall
be recognized or given effect until Newco, Caldera and the Escrow Agent shall
have received written notice of such transfer.
(e) Fractional Shares. No fractional shares of Newco Common Stock
shall be retained in or released from the Escrow Account pursuant to this
Agreement. In connection with any release of Escrow Shares from the Escrow
Account, Newco, Caldera and the Escrow Agent shall "round down" in order to
avoid retaining any fractional share in the Escrow Account and in order to avoid
releasing any fractional share from the Escrow Account. When shares are "rounded
down," no cash-in-lieu payments need to be made.
3. Administration of Escrow Account. Except as otherwise provided herein,
the Escrow Agent shall administer the Escrow Account as follows:
(a) Claim Procedure. If any Person that is entitled to
indemnification, compensation or reimbursement under Section 10 or Section 12 of
the Reorganization Agreement (an "Indemnitee") has or claims to have incurred or
suffered Losses or Taxes for which it is or may be entitled to indemnification,
compensation or reimbursement under Section 10 or Section 12 of the
Reorganization Agreement, such Indemnitee may, on or prior to the first
anniversary of the Effective Time (the "Termination Date"), deliver a claim
notice (a "Claim Notice") to SCO and the Escrow Agent. Each Claim Notice shall
state that such Indemnitee believes that there is or has been a breach of a
representation, warranty or covenant contained in the Reorganization Agreement
or that such Indemnitee is otherwise entitled to indemnification, compensation
or reimbursement under Section 10 or Section 12 of the Reorganization Agreement
and contain a brief description of the circumstances supporting such
Indemnitee's belief that there is or has been such a breach or that such
Indemnitee is so entitled to indemnification, compensation or reimbursement
and shall, to the extent possible, contain a non-binding, preliminary estimate
of the amount of Losses or Taxes such Indemnitee claims to have so incurred
or suffered (the "Claimed Amount").
(b) Response Notice. Within twenty (20) business days after receipt
by SCO of a Claim Notice, SCO may deliver to the Indemnitee who delivered the
Claim Notice and to the Escrow Agent a written response (the "Response Notice")
in which SCO: (i) agrees that a whole number of Escrow Shares having a Total
Value (as defined below) equal to the full Claimed Amount may be released from
the Escrow Account to the Indemnitee; (ii) agrees that Escrow Shares having a
Total Value equal to part, but not all, of the Claimed Amount (the "Agreed
Amount") may be released from the Escrow Account to the Indemnitee; or (iii)
indicates that no part of the Claimed Amount may be released from the Escrow
Account to the Indemnitee. Any part of the Claimed Amount that SCO does not
agree should be released to the Indemnitee shall be the "Contested Amount." If a
Response Notice is not received by the Escrow Agent within such twenty (20)
business day period, then SCO shall be deemed to have agreed that Escrow Shares
having a Total Value equal to the full Claimed Amount may be released to the
Indemnitee from the Escrow Account.
(c) Full Agreement as to Claimed Amount. If SCO delivers a Response
Notice agreeing that Escrow Shares having a Total Value equal to the full
Claimed Amount may be released from the Escrow Account to the Indemnitee, or if
SCO does not deliver a Response Notice in accordance with Section (a)(b), the
Escrow Agent shall promptly following the receipt of the Response Notice (or, if
the Escrow Agent has not received a Response Notice, promptly following the
expiration of the twenty (20) business day period referred to in Section
(a)(b)), deliver to such Indemnitee such number of Escrow Shares. Such payment
shall be deemed to be made in full satisfaction of the claim described in such
Claim Notice, provided, however, that if such claim involves ongoing Losses or
Taxes, then such payment shall be deemed to be made in full satisfaction only of
the Losses or Taxes, as the case may be, incurred as of the date specified in
such Claim Notice.
(d) Partial Agreement as to Claimed Amount. If SCO delivers a
Response Notice agreeing that Escrow Shares having a Total Value equal to part,
but not all, of the Claimed Amount may be released from the Escrow Account to
the Indemnitee, the Escrow Agent shall promptly following the receipt of the
Response Notice deliver to such Indemnitee the number of Escrow Shares having a
Total Value equal to the Agreed Amount.
(e) Settlement. If SCO delivers a Response Notice indicating that
there is a Contested Amount, SCO and the Indemnitee shall attempt in good faith
to resolve the dispute related to the Contested Amount. If the Indemnitee and
SCO shall resolve such dispute, such resolution shall be binding on SCO and all
of the Indemnitees and a settlement agreement shall be signed by the Indemnitee
and SCO and sent to the Escrow Agent, who shall, upon receipt thereof, if
applicable, release Escrow Shares from the Escrow Account in accordance with
such agreement.
(f) Arbitration. If SCO and the Indemnitee are unable to resolve the
dispute relating to any Contested Amount within thirty (30) business days after
the delivery of the Response Notice, then the claim described in the Claim
Notice shall be settled by binding arbitration in [the County of Santa Clara
in the State of California] in accordance with the Commercial Arbitration
Rules then in effect of the American Arbitration Association
(the "AAA Rules"). Arbitration will be conducted by three (3) arbitrators;
one (1) selected by the Indemnitee, one (1) selected by
SCO and the third selected by the first two arbitrators. If the Indemnitee or
SCO fails to select an arbitrator prior to the expiration of the thirty (30)
business day period referred to in the first sentence of this Section 3(f), then
the other shall be entitled to select the second arbitrator. The parties agree
to use all reasonable efforts to cause the arbitration hearing to be conducted
within sixty (60) calendar days after the appointment of the last of the three
arbitrators and to use all reasonable efforts to cause the arbitrators' decision
to be furnished within ninety five (95) calendar days after the appointment of
the last of the three arbitrators. The parties further agree that discovery
shall be completed at least twenty (20) business days prior to the date of the
arbitration hearing. The arbitrators' decision shall relate solely to whether
the Indemnitee is entitled to recover the Contested Amount (or a portion
thereof), and the portion of such Contested Amount the Indemnitee is entitled to
recover. The final decision of the arbitrators shall be furnished to SCO, the
Indemnitee and the Escrow Agent in writing and shall constitute a conclusive
determination of the issue in question, binding upon SCO, the Indemnitee and the
Escrow Agent and shall not be contested by any of them. The non-prevailing party
in any arbitration shall pay the reasonable expenses (including attorneys' fees)
of the prevailing party, any additional reasonable fees and expenses (including
reasonable legal fees) of the Escrow Agent, and the fees and expenses associated
with the arbitration (including the arbitrators' fees and expenses). For
purposes of this Section 3(f), the non-prevailing party shall be deemed to be
the Indemnitee if it is entitled to recover less than fifty percent (50%) of the
Claimed Amount; otherwise it shall be SCO. Any amounts payable by SCO shall be
paid out of Escrow Shares, after payment of any amounts then payable to
Indemnitees.
(g) Release of Escrow. The Escrow Agent shall release Escrow Shares
from the Escrow Account in connection with any Contested Amount as soon as
reasonably possible after delivery to it of: (i) a copy of a settlement
agreement executed by the Indemnitee and SCO setting forth instructions to the
Escrow Agent as to the number of Escrow Shares, if any, to be released from the
Escrow Account, with respect to such Contested Amount or (ii) a copy of the
award of the arbitrators referred to and as provided in Section 3(f) setting
forth instructions to the Escrow Agent as to the number of Escrow Shares, if
any, to be released from the Escrow Account, with respect to such Contested
Amount.
4. Release of Escrow Shares.
(a) Newco Common Stock Transfer Agent. The Escrow Agent is not the
stock transfer agent for the Newco Common Stock. Accordingly, if a distribution
of a number of shares of Newco Common Stock less than all of the Escrow Shares
is to be made, the Escrow Agent shall requisition the appropriate number of
shares from such stock transfer agent, delivering to it the appropriate stock
certificates and related Stock Powers. For the purposes of this Agreement, the
Escrow Agent shall be deemed to have delivered Newco Common Stock to the Person
entitled to it when the Escrow Agent has delivered such certificate and Stock
Power to such stock transfer agent with instructions to deliver it to the
appropriate Person. Distributions of Newco Common Stock shall be made to Newco
or SCO, as appropriate, at the addresses described in Section 11(b).
(b) Distribution of Escrow Shares to SCO. As soon as reasonably
possible after the Termination Date, the Escrow Agent shall distribute or cause
the stock transfer agent for the Newco Common Stock to distribute to SCO the
Escrow Shares then held in escrow; provided, however, that notwithstanding the
foregoing, if, prior to the Termination Date, any Indemnitee has given a Claim
Notice containing a claim which has not been resolved prior to the Termination
Date in accordance with Section 3, the Escrow Agent shall retain in the Escrow
Account after the Termination Date Escrow Shares having a Total Value equal to
one hundred ten percent (110%) of the Claimed Amount or Contested Amount, as the
case may be, with respect to all claims that have not then been resolved.
5. Valuation of Escrow Shares, Etc.
(a) Total Value. With respect to any specified number of Escrow
Shares, the Total Value of such Escrow Shares shall be determined by multiplying
such number of Escrow Shares by the Caldera Closing Price.
(b) Stock Splits. All numbers contained in, and all calculations required to
be made pursuant to, this Agreement shall be adjusted as appropriate to reflect
any stock split, reverse stock split, stock dividend or similar transaction
effected by Newco after the date hereof; provided, however, that the Escrow
Agent shall have received notice of such stock split, reverse stock split, stock
dividend or similar transaction and shall have received the appropriate number
of additional shares of Newco Common Stock or other property pursuant to Section
2(c) hereof. In the event of any such stock split, reverse stock split, stock
dividend or similar transaction, Newco shall deliver to SCO and the Escrow Agent
a notice setting forth the new number of Escrow Shares held in the Escrow Fund.
Unless and until the Escrow Agent receives the certificates representing
additional shares of Newco Common Stock or other property pursuant to Section
2(c), the Escrow Agent may assume without inquiry that no such stock or other
property has been or is required to be issued with respect to Escrow Shares.
6. Fees and Expenses. Upon the execution of this Agreement by all
parties heand the initial deposit of the Escrow Fund in the Escrow Account, fees
and expenses, in accordance with Exhibit C attached hereto, will be payable to
the Escrow Agent. This annual Escrow Agent fee will cover the first twelve
months of the escrow. In accordance with Exhibit C attached hereto, the Escrow
Agent will also be entitled to reimbursement for reasonable and documented out-
of-pocket expenses, including those of its counsel, incurred by the Escrow Agent
in the performance of its duties hereunder and the execution and delivery of
this Agreement. All such fees and expenses shall be paid equally by SCO on one
side and Newco and Caldera on the other.
7. Limitation of Escrow Agent's Liability.
(a) Liability of Escrow Agent. The Escrow Agent undertakes to perform
such duties as are specifically set forth in this Agreement only and shall have
no duty under any other agreement or document notwithstanding their being
referred to herein or attached hereto as an exhibit. The Escrow Agent shall not
be liable except for the performance of such duties as are specifically set
forth in this Agreement, and no implied covenants or obligations shall be read
into this Agreement against the Escrow Agent. The Escrow Agent shall incur no
liability with respect to any action taken by it or for any inaction on its part in reliance
upon any notice, direction, instruction, consent, statement or other document
believed by it to be genuine and duly authorized, nor for any other action or
inaction except for its own willful misconduct or negligence. The Escrow Agent
may rely on and use the Stock Power and shall not be liable in connection
therewith. In all questions arising under this Agreement, the Escrow Agent may
rely on the advice of counsel, and for anything done, omitted or suffered in
good faith by the Escrow Agent based upon such advice the Escrow Agent shall not
be liable to anyone. The Escrow Agent shall not be required to take any action
hereunder involving any expense unless the payment of such expense is made or
provided for in a manner reasonably satisfactory to it. In no event shall the
Escrow Agent be liable for incidental, punitive or consequential damages.
(b) Indemnification of Escrow Agent. Newco and SCO hereby agree to
indemnify the Escrow Agent, its officers, directors, employees and agents for,
and hold it harmless against, any loss, liability or expense incurred without
negligence or willful misconduct on the part of Escrow Agent, arising out of or
in connection with its carrying out of its duties hereunder. This right of
indemnification shall survive the termination of this Agreement, and the
resignation of the Escrow Agent. The costs and expenses of enforcing this right
of indemnification shall also be paid by Newco and SCO.
8. Termination. This Agreement shall terminate on the Termination Date
or, if earlier, upon the release by the Escrow Agent of the entire Escrow Fund
in accordance with this Agreement; provided, however, that if the Escrow Agent
has received from any Indemnitee a Claim Notice setting forth a claim that has
not been resolved by the Termination Date, then this Agreement shall continue in
full force and effect until the claim has been resolved and the Escrow Shares
have been released in accordance with this Agreement.
9. Successor Escrow Agent. In the event the Escrow Agent becomes
unavailable or unwilling to continue as escrow agent under this Agreement, the
Escrow Agent may resign and be discharged from its duties and obligations
hereunder by giving its written resignation to the parties to this Agreement.
Such resignation shall take effect not less than thirty (30) calendar days after
it is given to all parties hereto. Newco may appoint a successor Escrow Agent
only with the consent of SCO (which consent shall not be unreasonably withheld
or delayed). If the parties fail to agree on a successor Escrow Agent within
such time, the Escrow Agent shall have the right to apply to a court of
competent jurisdiction for the appointment of a successor Escrow Agent. The
successor Escrow Agent shall execute and deliver to the Escrow Agent an
instrument accepting such appointment, and the successor Escrow Agent shall,
without further acts, be vested with all the estates, property rights, powers
and duties of the predecessor Escrow Agent as if originally named as Escrow
Agent herein. The Escrow Agent shall act in accordance with written instructions
from Newco as to the transfer of the Escrow Fund to a successor escrow agent.
10. Miscellaneous.
(a) Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
(b) Notices. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth below (or to such other address
or facsimile telephone number as such party shall have specified in a written
notice given to the other parties hereto):
If to Escrow Agent:
Wells Fargo Bank West, N.A.
Corporate Trust and Escrow
Services
[address, phone, fax, email]
Attention: Ethel M. Vick, Trust Officer
If to Caldera or Newco:
Caldera Systems, Inc.
[address, phone, fax, contact]
with a copy (which shall not constitute notice) to:
Brobeck, Phleger & Harrison LLP
[address]
Broomfield, Colorado 80209
Facsimile: xxxxxxx
Attention: John E. Hayes, III
If to SCO:
The Santa Cruz Operation, Inc.
[address, fax]
Attention: Law and Corporate Affairs
with a copy (which shall not constitute notice) to:
Wilson, Sonsini, Goodrich & Rosati
[address, fax]
Attention: Michael Danaher
All such notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of a telecopy, when the party receiving such copy shall have
confirmed receipt of the communication, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following dispatch,
and (d) in the case of mailing, on the third business day following such
mailing.
The Escrow Agent may assume that any Claim Notice, Response Notice or
other notice of any kind required to be delivered to the Escrow Agent and any
other Person has been received by such other Person if it has been received by
the Escrow Agent, but the Escrow Agent need not inquire into or verify such
receipt.
(c) Headings. The bold faced headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
(d) Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
(e) Governing Law; Venue.
(i) Governing Law. This Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the State
of New York (without giving effect to principles of conflicts of laws).
(ii) Venue. The parties agree that any dispute regarding
the interpretation or validity of, or otherwise arising out of this Agreement,
shall be subject to the exclusive jurisdiction of the California State Courts in
and for Santa Clara County, California or, in the event of federal jurisdiction,
the United States District Court for the Northern District of California sitting
in Santa Clara County, California, and each party hereby agrees to submit to the
personal and exclusive jurisdiction and venue of such courts and not to seek the
transfer of any case or proceeding out of such courts.
(f) Successors and Assigns. This Agreement shall be binding upon each
of the parties hereto and each of their respective permitted successors and
assigns, if any. SCO may not assign its rights under this Agreement without the
express prior written consent of Newco and Caldera. Nothing in this Agreement is
intended to confer, or shall be deemed to confer, any rights or remedies upon
any person or entity other than the parties hereto and their permitted
successors and assigns. This Agreement shall inure to the benefit of: SCO;
Newco; Caldera; Escrow Agent and the respective successors and assigns, if any,
of the foregoing.
(g) Waiver. No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No Person shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
(h) Amendments. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of Newco, Caldera, the Escrow Agent and SCO.
(i) Severability. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
(j) Parties in Interest. None of the provisions of this Agreement is
intended to provide any rights or remedies to any Person other than the parties
hereto and their respective successors and assigns, if any.
(k) Entire Agreement. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof.
(l) Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any Legal Proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.
(m) Tax Reporting Information and Certification of Tax Identification
Numbers. As a result of Section (c) hereof, the Escrow Fund will not generate
any income. The Escrow Agent shall have no tax reporting obligations under this
Agreement.
(n) Construction.
(i) For purposes of this Agreement, whenever the context
requires: the singular number shall include the
plural, and vice versa; the masculine gender shall
include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter
genders; and the neuter gender shall include the
masculine and feminine genders.
(ii) The parties hereto agree that any rule of construction
to the effect that ambiguities are to be resolved
against the drafting party shall not be applied in the
construction or interpretation of this Agreement.
(iii) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be
deemed to be terms of limitation, but rather shall be
deemed to be followed by the words "without
limitation."
[THIS SPACE INTENTIONALLY LEFT BLANK]
SIGNATURE PAGE TO ESCROW AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed this Escrow Agreement as
of the day and year first above written.
The SANTA CRUZ OPERATION, Inc.
/s/ Steven M. Sabbath
------------------------------------
By: Steven M. Sabbath
-------------------------------
Title: Secretary
----------------------------
CALDERA INTERNATIONAL, Inc.
/s/ Ransom H. Love
------------------------------------
By: Ransom H. Love
-------------------------------
Title:
----------------------------
Caldera Systems, Inc.
/s/ Ransom H. Love
------------------------------------
By: Ransom H. Love
-------------------------------
Title:
----------------------------
WELLS FARGO BANK WEST, N.A.
/s/ Ethel M. Vick
------------------------------------
By: Ethel M. Vick
Title: Trust Officer
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED the Santa Cruz Operation sell(s), assign(s) and
transfer(s) unto Caldera International, Inc. (the "Company"), 1,600,000 shares
of the Common Stock of the Company standing in its name on the books of the
Company represented by Certificate No. _____________________ herewith and do(es)
hereby irrevocably constitute and appoint _____________________________ Attorney
to transfer the said stock on the books of the Company with full power of
substitution in the premises.
Dated: ________________
Signature
----------------------------------
Instruction: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate.
*************************************************************************
Exhibit B
Escrow Fees and Expenses
WELLS FARGO BANK WEST, N.A.
CORPORATE TRUST SERVICES
ESCROW FEE SCHEDULE
Inception Fee . $500
Annual Administration Fee*
Minimum Annual Fee $2,000.00
Annual Subaccount Fee (if applicable)
Per Subaccount $ 500.00
Transaction Charges
Security Transactions $ 25.00
Wire Transfers $ 15.00
Receipts $ 5.00
Disbursements $ 5.00
Preparing Interest Allocations $ 10.00/
calculation
Preparing and Filing Taxpayer Reports
Each 1099 $ 25.00
Minimum Charge $ 100.00
*Billed annually in advance; no proration.
Extraordinary Services
Additional reasonable compensation will be charged for extraordinary services
based on our then current standard hourly charge. Extraordinary services
include, but are not limited to, attending escrow closings, processing
assignments of escrow interest, reviewing and accepting modifications or
amendments to the escrow agreement, and letter of credit draws.
Reimbursables
All out-of-pocket expenses incurred in the administration of the account,
including, but not limited to, postage, telephone charges, insurance,
photocopies, supplies, and legal fees, with the exception of legal fees incur
red at the inception of the account, will be billed to the customer at cost.
Overdrafts
Any overdrafts at Wells Fargo Bank West caused by failed or incomplete wires of
funds or failed or incomplete securities deliveries will be reimbursable to
Wells Fargo Bank West at prime plus two percent (2%).
***********************************************************************
EXHIBIT 3
STOCKHOLDER AGREEMENT
This Stockholder Agreement (the "Agreement") is entered into as of May 7, 2001,
(the "Effective Date") by and among Caldera Systems, Inc., a Delaware
corporation ("Caldera"), Caldera International, Inc., a Delaware corporation
("Newco"), The Santa Cruz Operation, Inc., a California corporation (together
with its subsidiaries, "SCO"), The Canopy Group, Inc. ("Canopy") and MTI
Technology Corporation ("MTI").
RECITALS
A. The parties have entered into an Agreement and Plan of Reorganization
(the "Plan") whereby (i) a newly formed, wholly owned subsidiary of Newco
("Newco Caldera Merger Sub") will be merged with and into Caldera, with Caldera
being the surviving corporation of such merger (the "Caldera Merger"); (ii) all
Caldera securities will be converted, on a share-for-share basis, into Newco
securities with identical rights, preferences and privileges (and Newco will
assume all outstanding options, warrants, convertible debentures and other
rights to purchase shares of capital stock of Caldera); and (iii) SCO will
transfer to Newco all assets used in connection with the business previously
carried on by SCO's Server Division and Professional Services Division (the
"Server Division"), in consideration for which Newco will issue Newco securities
to SCO and assume the options held by former Server Division employees who
become employees of Newco, which Newco securities in the aggregate will
represent 28% of the fully diluted equity securities of Newco (collectively, the
"Reorganization").
B. As an inducement for Newco to enter into the Plan, the parties desire
to enter into this Agreement, which shall become effective on the Effective Time
of the Reorganization and, among other things, grants SCO certain rights and
places certain restrictions on SCO and on the Newco securities that SCO now
holds or hereafter acquires.
NOW, THEREFORE, in consideration of the above recitals and the mutual covenants
hereinafter set forth, the parties hereby agree as follows:
1. Board Of Directors.
1.1 Appointments. Upon the closing of the Reorganization, Newco shall
increase the size of its Board of Directors (the "Newco Board") to nine persons.
At or prior to the next meeting of Newco's board of directors, Newco agrees to
appoint two designees of SCO that are reasonably acceptable to Newco. Newco
agrees that for so long as SCO owns at least 10% of the outstanding Common Stock
of Newco, the number of directors comprising the Newco Board shall not be
increased to a number greater than nine (9), except upon written consent of SCO.
1.2 SCO Designees. (a) For so long as SCO owns at least 20% of the
outstanding Common Stock of Newco, Newco and its Board of Directors shall
nominate, in connection with each stockholder solicitation relating to the election
of Newco directors, two candidates designated by SCO who are reasonably
acceptable to Newco.
(b) For so long as SCO owns at least 10% and not more than 19.9% of
the outstanding Common Stock of Newco, Newco and the Newco Board shall nominate,
in connection with each stockholder solicitation relating to the election of
Newco directors, one candidate designated by SCO who is reasonably acceptable to
Newco.
1.3 Affiliates. For purposes of this Agreement, all shares held by an
entity or person controlling, controlled by or under common control with SCO
will be deemed to be owned by SCO.
1.4 Voting Of Management Shares. Newco shall use its best efforts (i) to
cause the Newco Board to unanimously recommend to its stockholders that such
stockholders vote in favor of the designee(s) of SCO under Section 1.2 of this
Agreement (the "SCO Designee(s)"); and (ii) to cause the shares for which
Newco's management holds proxies to be voted in favor of the election of such
SCO Designee(s) nominated pursuant to this Agreement.
1.5 Vacancies. In the event that any SCO Designee shall cease to serve as
a member of the Board of Directors of Newco for any reason, the vacancy
resulting therefrom shall be filled by another SCO Designee.
1.6 Equal Treatment. Newco shall provide to the SCO Designee(s) that are
not employees of Newco the same compensation, rights and benefits and
indemnities as are provided to other non-employee members of the Newco Board.
1.7 Termination. All rights and obligations under this Section 1 shall
terminate and have no further force or effect immediately upon SCO ceasing to
hold at least 10% of the outstanding Common Stock of Newco.
1.8 Voting Of SCO Shares. SCO agrees to vote all of the shares of Newco
held by it in favor of the Newco nominees for election to the Newco Board.
1.9 Voting of Certain Caldera Stockholders. Canopy and MTI agree to vote
all of the shares of Newco held by them in favor of the SCO Designee(s)
nominated by the Newco Board pursuant to Section 1.2.
2. Restrictions Upon Transfer Of Shares.
2.1 Permitted Sales Of Newco Stock. For so long as SCO owns (of record or
beneficially) at least 5% of the outstanding Common Stock of Newco, SCO agrees
that (i) it will only sell, transfer, assign, pledge, hypothecate or otherwise
dispose of ("Transfer") any Newco securities, directly or indirectly, pursuant
to the applicable restrictions, if any, of Rule 144 under the Securities Act of
1933, as amended (the "Securities Act") and (ii) that it will not Transfer,
directly or indirectly, any Newco securities constituting 5% or more of the
outstanding securities of Newco, to any person or "group" in one or a series
of transactions, without the prior written consent of Newco.
2.2 Private Sales. SCO agrees to notify and collaborate with Newco before
consummating any sales of Newco Common Stock in private transactions. Newco
agrees to cooperate with and provide reasonable assistance to SCO in
consummating any such sales.
3. Voting Provisions.
3.1 Directed Voting. For so long as SCO owns (of record or beneficially)
at least 10% of the outstanding Common Stock of Newco, in connection with all
matters to be voted on by the stockholders of Newco, SCO shall vote all shares
of Newco Common Stock then owned, directly or indirectly, by it in every case in
accordance with the recommendation of the board of directors of Newco, except
that SCO may vote its shares as it determines in its sole discretion as to the
following specific matters: (i) a change in the Fundamental Rights (as defined
below) of Newco Common Stock; (ii) a Corporate Event; (iii) a recapitalization
in which Newco Common Stock is converted or exchanged for a security having
substantially different Fundamental Rights than Newco Common Stock; (iv) any
transaction or matter involving or relating to a conflict of interest between
any member of the Board of Directors and Newco; (v) any business properly
brought before any meeting of the stockholders by a stockholder in accordance
with Section 12 of Newco's bylaws; and (vi) any amendment to the bylaws of
Newco.
A "Corporate Event" shall include any merger, acquisition,
consolidation or reorganization, any transaction of a type contemplated by
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code") or any
other similar transaction whereby (a) Newco is acquired by a third party, (b)
where there has been a "change of control" such that the stockholders of Newco
prior to a transaction own, in the aggregate, less than a majority of the
outstanding stock of Newco or the acquiring entity after the transaction, (c)
Newco acquires another entity, or (d) Newco acquires all or substantially all of
the assets of another entity.
"Fundamental Rights" shall mean the right to vote Newco's shares and
to participate pro rata with other holders of Newco Common Stock in any
distribution to the holders of Newco Common Stock.
3.2 No Dissent. For so long as SCO owns (of record or beneficially) at
least 5% of the outstanding Newco Common Stock, SCO agrees that it will not
exercise dissenter's or appraisal rights or otherwise dissent or seek appraisal
rights with respect to any Corporate Event involving Newco that has been
approved by the Newco Board.
4. Standstill Provisions.
4.1 Standstill. SCO hereby agrees that, until the fifth anniversary of
the Effective Date, SCO will not, without Newco's prior written consent:
(i) acquire, or enter into discussions, negotiations, arrangements or
understandings with any third party to acquire, beneficial ownership (as
defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") of any Newco securities entitled to vote with respect
to the election of any directors of Newco ("Voting Stock"), any securities
convertible into, exchangeable for or exercisable for, or that may
otherwise become, Voting Stock, or any other right to acquire Voting Stock,
if the effect of such acquisition would be that SCO would then beneficially
own and/or have the right to acquire more than twenty-eight percent (28%)
of the Voting Stock (the "Standstill Percentage");
(ii) make, or in any way participate in, any "solicitation" of
"proxies" (as such terms are defined or used in Regulation 14A under the
Exchange Act, as such Regulation is currently in effect) with respect to
the voting of any Voting Stock if Newco is at the time of such solicitation
publicly-traded and subject to the proxy rules promulgated under the
Exchange Act;
(iii) otherwise seek, either alone or in concert with others, to
control the Newco Board; or
(iv) disclose any intention, plan or arrangement inconsistent with
the foregoing.
For purposes of this Section 4.1, any shares of Newco Common Stock or
options or rights to acquire such Newco Common Stock acquired by SCO Affiliates
who are also employees or directors of Newco pursuant to Newco's option and
employee stock purchase plans (including any options to purchase Newco
securities issued to such persons under the terms of the Plan) shall be excluded
from the calculation of the number of shares of Voting Stock held by SCO.
4.2 Exceptions To Standstill. Notwithstanding the restrictions set forth
in Section 4.1 above:
(a) Acquisitions. SCO may acquire Voting Stock, and the limitations
of Section 4.1 shall be suspended, upon the earlier of: (i) the date that a
third party not affiliated with SCO commences a tender or exchange offer
that is made and is not withdrawn or terminated to purchase, or to exchange
for cash or other consideration, Voting Stock that, if accepted or if
otherwise successful, would result in such person or group beneficially
owning or having the right to acquire shares of Voting Stock (not counting
any shares of Voting Stock originally acquired by such third party from SCO
or any SCO Affiliate) with aggregate Voting Power (as defined below)
representing more than 50% of the Total Voting Power (as defined below) of
Newco then in effect provided, however, that the foregoing standstill
limitation will be reinstated if any such tender or exchange offer is
withdrawn or terminated, (ii) the public announcement by Newco that it has
entered into any agreement with respect to a merger, consolidation,
reorganization or similar transaction involving Newco in which all the
stockholders of Newco before such transaction collectively will own less
than 50% of the outstanding voting stock of the surviving or acquiring
entity immediately after such transaction provided, however; that the
foregoing standstill limitation will be reinstated if such transaction is
terminated prior to consummation thereof, or (iii) the sale or disposition
of all or substantially all of Newco's assets.
(b) No Obligation To Dispose. SCO will not be obliged to dispose of
any Voting Stock to the extent that the aggregate percentage of the Total
Voting Power represented by shares of Voting Stock beneficially owned by
SCO or which SCO has a right to acquire is increased beyond the Standstill
Percentage: (i) as a result of a recapitalization of Newco or a repurchase
or exchange of securities by Newco or any other action taken by Newco or
its affiliates; (ii) as the result of any acquisition of Voting Stock made
during the period when SCO's "standstill" obligations are suspended
pursuant to Section 4.2(a); (iii) by way of stock dividend or other
distribution or rights or offerings made available to holders of shares of
Voting Stock generally; or (iv) with the consent of a simple majority of
the members of Newco's Board of Directors that have not been designated by
SCO.
(c) Voting Power. As used in this Section 4, (i) the term "Voting
Power" means the number of votes such Voting Stock is entitled to cast with
respect to the election of directors of Newco at any meeting of
stockholders of Newco; and (ii) the term "Total Voting Power" means the
total number of votes which may be cast in the election of directors of
Newco at any meeting of stockholders of Newco if all Voting Stock was
represented and voted to the fullest extent possible at such meeting, other
than votes that may be cast only upon the happening of a contingency that
has not occurred.
For purposes of this Section 4, "SCO" shall mean not only SCO, as defined
in the preamble of this Agreement, but also any entity or person controlling,
controlled by or under common control with SCO (except as set forth in the last
paragraph of Section 4.1).
5. General Provisions.
5.1 Notices. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
If to SCO to:
The Santa Cruz Operation, Inc.
[address, fax, contact]
With a copy to:
Wilson, Sonsini, Goodrich & Rosati
[address]
Attention: Michael Danaher
[fax]
And if to Caldera or
Newco to:
Caldera Systems, Inc.
[address, fax, contact]
With a copy to:
Brobeck, Phleger & Harrison LLP
[address]
Attention: John E. Hayes, III
[fax]
All such notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of a telecopy, when the party receiving such copy shall have
confirmed receipt of the communication, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following dispatch,
and (d) in the case of mailing, on the third business day following such
mailing.
5.2 Entire Agreement. This Agreement constitutes and contains the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes any and all prior negotiations, correspondence,
agreements, understandings, duties or obligations between the parties respecting
the subject matter hereof.
5.3 Amendment And Waivers. Any term or provision of this Agreement may be
amended by the parties hereto at anytime by execution of an instrument in
writing signed on behalf of each of SCO and Caldera. The waiver by a party of
any breach hereof or default in the performance hereof will not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
Delay in exercising any right under this Agreement shall not constitute a waiver
of such right.
5.4 Governing Law; Venue.
(i) Governing Law. The internal laws of the State of Delaware
(irrespective of its choice of law principles) will govern the validity of
this Agreement, the construction of its terms and the interpretation and
enforcement of the rights and duties of the parties hereto, except that the
fiduciary duties of the directors and managers of parties hereto and its
Affiliates shall be governed by the law of the jurisdiction of such
company's formation.
(ii) Venue. The parties agree that any dispute regarding the
interpretation or validity of, or otherwise arising out of this Agreement,
shall be subject to the exclusive jurisdiction of the California State
Courts in and for Santa Clara County, California or, in
the event of federal jurisdiction, the United States District Court for the
Northern District of California sitting in Santa Clara County, California,
and each party hereby agrees to submit to the personal and exclusive
jurisdiction and venue of such courts and not to seek the transfer of any
case or proceeding out of such courts.
5.5 Severability. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the intent of
the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the greatest extent possible, the economic, business and
other purposes of the void or unenforceable provision.
5.6 Assignment; Binding Upon Successors And Assigns. SCO may not assign
any of its rights or obligations hereunder without the prior written consent of
the other parties hereto. Subject to the preceding sentence, this Agreement will
be binding upon and inure to the benefit of the parties hereto and its
respective successors and permitted assigns.
5.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all the parties reflected hereon as signatories.
5.8 Attorneys' Fees. Should suit be brought to enforce or interpret any
part of this Agreement, the prevailing party will be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including, without limitation, costs, expenses and fees
on any appeal). The prevailing party will be entitled to recover its costs of
suit, regardless of whether such suit proceeds to final judgment.
IN WITNESS WHEREOF, the parties hereto have executed this Stockholder
Agreement as of the date and year first above written.
CALDERA SYSTEMS, INC.
By: /s/ Ransom H. Love
-----------------------------
Ransom Love
President & CEO
CALDERA INTERNATIONAL, INC.
By: /s/ Ransom H. Love
-----------------------------
Ransom Love
President & CEO
THE SANTA CRUZ OPERATION, INC.
By: /s/ Douglas Michels
-----------------------------
Douglas Michels
President & CEO
MTI TECHNOLOGY CORPORATION
By: /s/ Thomas Raimondi
-----------------------------
THE CANOPY GROUP, INC.
By: /s/ Ralph Yarro
-----------------------------
[SIGNATURE PAGE TO STOCKHOLDER AGREEMENT]
******************************************************************************
Exhibit 4
THIS SECURED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS (COLLECTIVELY, THE "ACTS"), AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED OR DISPOSED OF
EXCEPT PURSUANT TO REGISTRATION UNDER SUCH ACTS OR UNLESS THE CORPORATION HAS
RECEIVED AN OPINION OF COUNSEL, OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE
CORPORATION, THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED PROMISSORY NOTE
$8,000,000.00 Orem, Utah May 7, 2001
FOR VALUE RECEIVED, the undersigned, Caldera International, Inc., a
Delaware corporation ("Borrower"), promises to pay to The Santa Cruz Operation,
Inc., a California Corporation ("Lender"), the sum of Eight Million Dollars
($8,000,000.00) in lawful money of the United States of America. Other than as
provided below with respect to past due principal amounts, no interest shall
accrue or be payable under this promissory note (this "Note"). Subject to
applicable deductions described below, the principal of this Note shall be due
and payable in four consecutive quarterly installments of $2 million each, with
the first such installment due on the first day of the fifth, full Caldera
Fiscal Quarter following the Effective Date. This note is a full recourse note
with respect to the Borrower.
All terms not otherwise defined herein shall have the meanings
ascribed to them in that certain Agreement and Plan of Reorganization, dated
August 1, 2000, among the Lender, the Borrower and Caldera Systems, Inc. (as
amended, the "Reorganization Agreement").
Payment of this Note is secured by a Security Agreement executed on
this date by Borrower and covering all of the assets of Borrower relating to
Borrower's OpenServer Business. If action is instituted to collect this note,
the Borrower promises to pay all costs and expenses, including reasonable
attorneys' fees, incurred in connection with such actions.
All past due principal and accrued interest on this Note shall bear
interest from maturity until paid at the lesser of (i) the rate of 10% per annum
or (ii) the highest rate for which Borrower may legally contract under
applicable law. All payments on past due principal and accrued interest
hereunder shall be payable in lawful money of the United States of America which
shall be legal tender for public and private debts at the time of payments.
1. Right of Offset and Reduction. The principal amount of this Note
shall be reduced by an amount (the "Reduction Amount") equal to the sum of (i)
all Commit Transaction Receivables for which payment has not been received prior
to the one-year anniversary of the Effective Time, plus (ii) 50% of Borrower's
costs (excluding internal, employee costs) in collecting Commit Transaction
Receivables during the period beginning on the Effective Time
and ending on the one-year anniversary of the Effective Time; provided that if
Borrower forgives payment under or replaces any Commit Transaction Receivables
without Lender's consent, no deduction relating to the non-payment of such
forgiven or replaced Commit Transaction Receivables will be allowed. Borrower
agrees to use commercially reasonable business practices in collecting the
Commit Transaction Receivables. The Reduction Amount shall be applied first
against the initial installment payment under this Note and then, to the extent
necessary, shall be applied against the second, third and/or fourth installment
payments, in that order.
2. Prepayments. This Note may be prepaid by Borrower in whole or in
part without the consent of the holder and without prepayment penalty of any
kind.
3. Default; Remedies. The entire unpaid balance of this Note shall
be immediately due and payable at the option of the holder hereof upon the
occurrence of an Event of Default. For the purposes of this Agreement, an Event
of Default shall have occurred if (i) the Borrower shall have materially failed
to perform any covenant or other obligation hereunder, and such failure shall
have continued for twenty (20) days after Borrower shall have received notice
thereof, (ii) the Borrower shall commence a voluntary case or other proceeding
seeking liquidation or other reorganization with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or shall
make a general assignment for the benefit of creditors, or shall fail generally
to pay its debts as they become due; or (iii) an involuntary case or other
proceeding shall be commenced against the Borrower seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, liquidator, receiver, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 90 consecutive days.
4. No Waiver; Cumulative Rights. No delay on the part of the holder of
this Note in the exercise of any power or right under this Note or under any
other instrument executed pursuant hereto shall operate as a waiver thereof, nor
shall a single or partial exercise of any power or right preclude other or
further exercise thereof or the exercise of any other power or right.
6. Waiver. Borrower and all endorsers, sureties and guarantors of this
Note waive demand, presentment, protest, notice of dishonor, notice of
nonpayment, notice of intention to accelerate, notice of acceleration, notice of
protest and any and all lack of diligence or delay in collection or the filing
of suit hereon which may occur, and agree to all extensions and partial
payments, before or after maturity, without prejudice to the holder hereof.
7. Collection Costs. In the event that, upon an Event of Default, any
amount under this Note is collected in whole or in part through suit,
arbitration or mediation, then and in any such case there shall be added to the
unpaid principal balance hereof all costs of collection, including, but not limited
to, reasonable attorneys' fees and expenses) whether or not suit is filed.
8. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of California.
9. Venue. The parties agree that any dispute regarding the
interpretation or validity of, or otherwise arising out of this Note, shall be
subject to the exclusive jurisdiction of the California State Courts in and for
Santa Clara County, California or, in the event of federal jurisdiction, the
United States District Court for the Northern District of California sitting in
Santa Clara County, California, and each party hereby agrees to submit to the
personal and exclusive jurisdiction and venue of such courts and not to seek the
transfer of any case or proceeding out of such courts.
10. Headings. The headings of the sections of this Note are inserted for
convenience of reference only and shall not be deemed to constitute a part
hereof.
11. Usury. All agreements between Borrower and the holder of this Note,
whether now existing or hereafter arising and whether written or oral, are
expressly limited so that in no contingency or event whatsoever, whether by
acceleration of the maturity of this Note or otherwise, shall the amount paid,
or agreed to be paid, to the holder hereof for the use, forbearance or detention
of the money to be loaned hereunder or otherwise, exceed the maximum amount
permissible under applicable law. If from any circumstances whatsoever
fulfillment of any provision of this Note or of any other document evidencing,
securing or pertaining to the indebtedness evidenced hereby, at the time
performance of such provision shall be due, shall involve transcending the limit
of validity prescribed by law, then ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity, and if from any such
circumstances the holder of this Note shall ever receive anything of value as
interest or deemed interest by applicable law under this Note or any other
document evidencing, securing or pertaining to the indebtedness evidenced hereby
or otherwise an amount that would exceed the highest lawful rate, such amount
that would be excessive interest shall be applied to the reduction of the
principal amount owing under this Note or on account of any other indebtedness
of Borrower to the holder hereof relating to this Note, and not to the payment
of interest, or if such excessive interest exceeds the unpaid balance of
principal of this Note and such other indebtedness, such excess shall be
refunded to Borrower. In determining whether or not the interest paid or
payable with respect to any indebtedness of Borrower to the holder hereof, under
any specific contingency, exceeds the highest lawful rate, Borrower and the
holder hereof shall, to the maximum extent permitted by applicable law, (i)
characterize any nonprincipal payment as an expense, fee or premium rather than
as interest, (ii) amortize, prorate, allocate and spread the total amount of
interest throughout the full term of such indebtedness so that the actual rate
of interest on account of such indebtedness is uniform throughout the term
thereof, and/or (iii) allocate interest between portions of such indebtedness,
to the end that no such portion shall bear interest at a rate greater than that
permitted by law. The terms and provisions of this paragraph shall control and
supersede every other conflicting provision of all agreements between Borrower
and the holder hereof.
12. Successors and Assigns. All of the stipulations, promises and
agreements in this Note made by or on behalf of Borrower shall bind the
successors and assigns of Borrower, whether so expressed or not, and inure to
the benefit of the successors and assigns of Borrower and Lender. Any assignee
of Borrower or Lender shall agree in writing prior to the effectiveness of such
assignment to be bound by the provisions hereof. Borrower shall not assign this
Note or any of its rights, interests or obligations under this Note to any third
party, other than by operation of law, without Lender's written consent, which
shall not be unreasonably withheld.
13. Severability. In the event any one or more of the provisions
contained in this Note shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Note shall be construed as
if such invalid, illegal or unenforceable provision had never been contained
herein.
14. Notices. All notices and other communications hereunder shall be in
writing or by telex, telegram or telecopy, and shall be deemed to have been duly
made when delivered in person or sent by telex, telegram, telecopy, same day or
overnight courier, or 72 hours after having been deposited in the United States
first class or registered or certified mail return receipt requested, postage
prepaid, to a party at the address set forth below (which may be changed in
accordance with these notice procedures):
If to Lender:
The Santa Cruz Operation, Inc.
[address, fax, contact]
with a copy (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati
[address, fax, contact
If to Borrower:
Caldera Systems, Inc.
[address, fax, contact]
4
with a copy (which shall not constitute notice) to:
Brobeck, Phleger & Harrison LLP
[address]
Attention: John E. Hayes, III
Fax: (303) 410-2199
5
IN WITNESS WHEREOF, the undersigned has executed this Secured
Promissory Note on and as of the date first set forth above.
CALDERA INTERNATIONAL, INC.
By:/s/ Ransom Love
--------------------------
Ransom Love
Agreed and Accepted:
THE SANTA CRUZ OPERATION, Inc.
By: ____________________________
**************************************************************************
Exhibit 5
SECURITY AGREEMENT
This Security Agreement, (as amended, modified or otherwise supplemented
from time to time, this "Agreement"), is made and entered into as of May 7, 2001
by and between _____ , a Delaware corporation, with principal offices at 240
West Center Street, Orem, Utah 84057 ("Debtor"), and The Santa Cruz Operation,
Inc., a California corporation with principal offices at 425 Encinal, Santa
Cruz, California 95061 ("Secured Party").
R E C I T A L
In connection with the execution of the Secured Promissory Note of even
date herewith (the "Note") and as security for its obligations under the Note,
Debtor has agreed, among other things, to grant Secured Party a security
interest in the Collateral (as defined below) on the terms set forth in this
Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing recitals, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. All capitalized terms used in this Agreement that are
listed on Exhibit A attached hereto (which is incorporated by this reference)
will have the meanings indicated thereon. Unless otherwise defined herein, all
other capitalized terms used in this Agreement will have the same meanings given
to such terms in the Note and/or in that certain Agreement and Plan of
Reorganization, dated August 1, 2000, among the Secured Party, the Debtor and
_________________ (as amended, the "Reorganization Agreement").
2. Grant of Security Interest; Collateral Assignment. As collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the Obligations, and
subject to Prior Liens, Debtor hereby grants to Secured Party a first priority
security interest in the following assets of Debtor relating to the OpenServer
Business, which assets are collectively referred to herein as the "Collateral":
(a) General Intangibles. All of Debtor's General Intangibles directly
relating to the OpenServer Business, now existing or hereafter arising or
acquired, together with the proceeds therefrom. As used herein, the term
"General Intangibles" means all personal property (including things in action)
other than goods, accounts, chattel paper, documents, instruments, and money,
and includes, but is not limited to, business records, deposit accounts,
inventions, Intellectual Property, designs, patents, patent applications, patent
rights, trademarks, trademark applications, trademark registrations, service
marks, service mark applications, service registrations, trade names, goodwill,
technology, know-how, confidential information, trade secrets, customer lists,
supplier lists, copyrights, copyright applications, copyright registrations,
licenses, permits, franchises, tax refund claims, and any letters of credit,
guarantee claims, security interests, or other security held by Debtor to secure
any "Accounts" (as hereinafter defined).
(b) Accounts (including Accounts Receivable). All of Debtor's
Accounts directly relating to the OpenServer Business, whether now existing or
hereafter arising or acquired, together with the proceeds therefrom. As used
herein, the term "Accounts" means any right of Debtor to receive payment from
another person or entity, including payment for goods sold or leased, or for
services rendered, no matter how evidenced or arising, and regardless of whether
yet earned by performance. It includes, but is not limited to, accounts,
accounts receivable, contract rights, contracts receivable, purchase orders,
notes, drafts, acceptances, all rights to payment earned or unearned under a
charter or other contract involving the use or hire of a vessel and all rights
incident to the charter or contract, and other forms of obligations and
receivables.
(c) Inventory. All of Debtor's Inventory directly relating to the
OpenServer Business, whether now owned or hereafter acquired, together with the
products and proceeds there from and all packaging, manuals, and instructions
related thereto. As used herein, the term "Inventory" means all goods,
merchandise, and personal property held for sale or lease or furnished or to be
furnished under contracts of service, and all raw materials, work in process, or
materials used or consumed in Debtor's business, wherever located and whether in
the possession of Debtor, a warehouseman, a bailee, or any other person.
(
title, and interest in any chattel paper, documents, or instruments, now owned
or hereafter acquired or arising, or now or hereafter coming into the
possession, control, or custody of either Debtor or Secured Party, in each case
directly relating to or arising from the OpenServer Business, together with all
proceeds there from. The terms "chattel paper," "documents," and "instruments"
shall have those meanings ascribed to them in the California Uniform Commercial
Code.
(e) Excluded Assets. Notwithstanding the foregoing, in no event shall
Collateral include, and Secured Party shall not be deemed to have an interest
in, any of Debtor's right, title or interest (a) in any Intellectual Property if
the grant of such interest shall constitute or result in the abandonment,
invalidation or rendering unenforceable any right, title or interest of Debtor
therein, (b) in any license, contract or agreement to which Debtor is a party or
any of its rights or interests thereunder to the extent, but only to the extent,
that such a grant would, under the terms of such license, contract or agreement,
or otherwise, result in a breach or termination of the terms or, constitute a
default under or termination of, any such license, agreement or contract (other
than to the extent that any such term would be rendered ineffective pursuant to
the Uniform Commercial Code of any relevant jurisdiction, and any other
applicable law or principles of equity); provided that immediately upon the
ineffectiveness, lapse or termination of any such provision, the Collateral
shall include, and Debtor shall be deemed to have granted a security interest
in, all such rights and interests as if such provision had never been in effect,
and (c) in any of the outstanding capital stock of a controlled foreign
corporation, as such term is defined in the Internal Revenue Code of 1986,
as amended, in excess of 65% of the voting power of all classes of capital
stock of such controlled foreign corporation entitled to vote.
3. Representations and Warranties. Debtor hereby represents and warrants
to Secured Party that:
(a) Title; No Other Liens. Except for (i) the liens granted to
Secured Party pursuant to this Agreement, (ii) the Prior Liens and (iii) the
Permitted Liens, Debtor owns (and, in the case of after-acquired Collateral,
will own at the time it is acquired) all right, title and interest in and to
each item of the Collateral free and clear of any and all liens, claims,
security interests, encumbrances and restrictions of any kind. No security
agreement, financing statement or other public notice with respect to all or any
part of the Collateral is on file or of record in any public office, except such
as may have been filed in favor of Secured Party pursuant to this Agreement, and
except such as may have been filed with respect to the Prior Liens or the
Permitted Liens.
(b) No Consents. Debtor has all right, power and authority necessary
to grant Secured Party the security interest granted in Section 2 above, without
the need for the consent or approval of any third party other than consents or
approvals that have been obtained.
(c) Location of Collateral. The Collateral (other than the
Intellectual Property) is located and will at all times be kept at Debtor's
office at the address indicated above, and such other premises owned or leased
by Debtor.
4. Covenants. Debtor covenants and agrees with Secured Party that, from
and after the date of this Agreement until all Obligations are paid in full and
satisfied:
(a) Further Documentation. Upon Secured Party's written request and
at Debtor's sole expense, Debtor will promptly and duly execute and deliver such
further instruments and documents and take such further action as Secured Party
may reasonably request for the purpose of obtaining, giving notice of,
protecting, preserving and perfecting the security interests granted under this
Agreement, including, without limitation, the filing of any financing or
continuation statements under the Code in effect in any jurisdiction with
respect to the security interests created hereby and the recording of the
security interests granted hereunder in any Intellectual Property with the
appropriate governmental or other authorities in any jurisdiction. Debtor agrees
that a carbon, photographic or other reproduction of this Agreement (or, if
appropriate, any other Security Document) will be sufficient as a financing
statement for filing in any jurisdiction, if permitted by such jurisdiction.
(b) Maintenance of Records. Debtor will keep and maintain complete
records of the Collateral as it does in the ordinary course of business. For
Secured Party's further security, Secured Party will have a security interest in
all of the books and records of Debtor pertaining to the Collateral.
(c) No Liens on Collateral. Debtor will not create, incur or permit
to exist, will defend the Collateral against, and will take such other action as
is necessary to remove, any lien, claim, security interest or encumbrance on or
to any of the Collateral, other than the liens granted to Secured Party under
this Agreement and Permitted Liens.
(d) Limitation on Dispositions of Collateral. Debtor will use all
commercially reasonable efforts to preserve the Collateral without material
impairment while conducting its business in the ordinary course in a manner that
is consistent with Debtor's past business practices or Lender's past business
practices as historical owner and operator of the OpenServer Business. Debtor
will not, through any license, encumbrance, assignment, transfer or disposition
of any of the Collateral, any creation of obligations of Debtor, any issuance of
securities, or any other action, (i) avoid or seek to avoid the observation or
performance of any of the terms to be observed or performed by Debtor under this
Agreement, (ii) materially impair the benefit of this Agreement or the
Collateral to Secured Party, or (iii) materially and adversely affect Secured
Party's ability to operate, or obtain the financial or economic benefit of, the
Collateral in accordance with the terms of this Agreement; provided, however,
that Debtor may enter into Licenses with third parties in the ordinary course of
its business and consistent with past licensing practice of Intellectual
Property owned or licensed by Debtor or by Lender as historical owner and
operator of the OpenServer Business. Debtor will at all times in good faith
take, and assist in taking, all such action as may be necessary or appropriate
to protect Secured Party's rights under this Agreement from impairment and to
preserve for Secured Party's benefit the value of the Collateral.
(e) No Change in Location, Name, etc. Except upon thirty (30) days
prior written notice to Secured Party, Debtor will not move the Collateral
(other than the Intellectual Property) from the location specified in Section
3(c) above or change Debtor's name, identity or structure to such an extent that
any financing statement or other Security Documents filed by Secured Party would
become misleading.
(f) Payment of Taxes and Assessments. Debtor will pay prior to
delinquency all taxes and assessments assessed against, levied upon or placed
against the Collateral, other than taxes and assessments being contested in good
faith and by appropriate proceedings, and for which adequate reserves are
maintained on the books of the Debtor in accordance with GAAP.
5. Secrecy and Assignment of Intellectual Property. Debtor will use
commercially reasonable efforts to ensure that each current and future employee
and contractor hired or engaged by Debtor who receives trade secrets or other
confidential and proprietary information of Debtor and/or who in the course of
his/her employment or engagement with Debtor is involved in any way whatsoever
with the Intellectual Property executes and delivers to Debtor a Debtor's
employee or contractor invention assignment and confidentiality agreement, in
Debtor's customary form, imposing invention and intellectual property rights
assignment obligations and confidentiality obligations on the part of such
employee or contractor to Debtor. Debtor will further take reasonable steps and
procedures to preserve and protect the secrecy of Debtor's trade secrets and
other confidential or proprietary information.
6. Appointment of Secured Party as Attorney-in-Fact.
(a) Powers. Debtor hereby irrevocably constitutes and appoints
Secured Party, and any agent of Secured Party, with full power of substitution,
as its true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of Debtor and in the name of Debtor or in the
name of Secured Party, from time to time in Secured Party's discretion, for the
purpose of carrying out the terms of this Agreement, to take any and all
appropriate actions and to execute any and all documents which may be necessary
or desirable to accomplish the purposes of this Agreement, including (without
limiting the generality of the foregoing) to execute, in connection with any
sale or other disposition of Collateral pursuant to Section 7 hereof, any
endorsements, assignments, bills of sale, licenses or other instruments of
conveyance or transfer with respect to the Collateral. This power of attorney
is a power coupled with an interest and is irrevocable.
(b) No Duty on Secured Party's Part. The powers conferred on Secured
Party hereunder are solely to protect Secured Party's interests in the
Collateral and will not impose any duty upon it to exercise any such powers.
Secured Party and its agents will not be responsible to Debtor for any act or
failure to act hereunder, except for Secured Party's own gross negligence or
willful misconduct. It is further agreed and understood between the parties
hereto that such care as Secured Party gives to the safekeeping of its own
property of like kind shall constitute reasonable care of the Collateral when in
Secured Party's possession.
7. Secured Party's Rights and Remedies; Release.
(a) General Remedies. If an Event of Default occurs, then in addition
to exercising any other right or remedies Secured Party may have under the Note,
at law or in equity, or pursuant to the provisions of the Code, Secured Party
may, at its sole option and without demand first made, exercise any one, some or
all of the following rights and remedies:
(i) Collect the Collateral and its Proceeds;
(ii) Take possession of the Collateral and its Proceeds
wherever such may be found or require Debtor to assemble the Collateral and its
Proceeds and make it available to Secured Party at a place designated by Secured
Party which is reasonably convenient to Debtor and Secured Party;
(iii) Proceed with the foreclosure of the security interest in
the Collateral or any part thereof granted herein and the sale or endorsement
and collection of the Proceeds of such Collateral in any manner permitted by law
or provided for herein;
(iv) Sell, lease, license or otherwise dispose of the
Collateral or any part thereof at public or private sale, with or without having
the Collateral at the place of sale, after giving Debtor ten (10) days prior
written notice of such sale, lease, license or other disposition of Collateral;
(v) Institute a suit or other action against Debtor for
recovery on the Note;
(vi) Exercise any rights and remedies of a secured party under
the Code; and/or
(vii) With respect to any Software, Inventions, Documentation,
Intellectual Property and Licenses, in the exercise of the rights of a secured
party under applicable law with respect thereto, and subject to the rights of
any licensor of any such property not owned by Debtor, use, exercise, practice,
reproduce, perform, display, distribute, create derivative works, make, have
made, sell, license, sublicense, transfer, assign and commercialize.
(b) No Election of Remedies. The election by Secured Party of any
right or remedy will not prevent Secured Party from exercising any other right
or remedy against Debtor.
(c) Proceeds. If an Event of Default occurs, all proceeds and
payments with respect to the Collateral will be retained by Secured Party (or,
if received by Debtor, will be held in trust and will be delivered by Debtor to
Secured Party in the original form received, endorsed in blank) and held by
Secured Party as part of the Collateral or applied by Secured Party to the
payment of the Obligations.
(d) Sale of Collateral. Any item of Collateral may be sold, leased or
licensed or otherwise disposed of for cash or other value at public or private
sale or other disposition and the Proceeds thereof collected by or for Secured
Party. Debtor agrees to promptly execute and deliver, or promptly cause to be
executed and delivered, such instruments, documents, assignments, waivers,
certificates and affidavits and supply or cause to be supplied such further
information and take such further action as Secured Party may require in
connection with any such sale or disposition. Secured Party shall have the
right upon any such public sale or sales, and, to the extent permitted by law,
upon any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in Debtor, which
right or equity is hereby waived or released. If any notice of a proposed sale,
lease, license or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least ten (10) days
before such sale, lease, license or other disposition. Secured Party agrees to
give Debtor ten (10) days prior written notice of any sale, lease, license or
other disposition of Collateral (or any part thereof) by Secured Party.
(e) Application of Proceeds. The proceeds of all sales and
collections in respect of the Collateral, the application of which is not
otherwise specifically herein provided for, will be applied as follows:
(i) First, to the payment of the costs and expenses of such
sale or sales and collections and the attorneys' fees and out-of-pocket expenses
incurred by Secured Party relating to costs of collection;
(ii) Second, any surplus then remaining will be applied first,
to the payment of all unpaid interest accrued under the Note, next to the
payment of unpaid principal under the Note, and next to the satisfaction of any
remaining Obligations; and
(iii) Third, any surplus then remaining will be paid to Debtor.
(f) Liability for Deficiency. Debtor will remain liable for any
deficiency if the Proceeds of any sale or other disposition of the Collateral
are insufficient to pay the Obligations and the fees and disbursements of any
attorneys or agents employed by Secured Party to collect such deficiency.
(g) Limitation on Duties Regarding Collateral. Secured Party's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under the Code or otherwise, shall be to deal with
it in the same manner as Secured Party deals with similar property for its own
account. Secured Party and its agents will not be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so nor will any of them be under any obligation to sell or otherwise
dispose of any Collateral upon the request of Debtor or otherwise.
(h) Recourse. If, after Secured Party has exercised its rights and
remedies against the Collateral, any deficiencies remain with respect to the
payment of the Obligations, Secured Party shall have the rights and remedies of
an unsecured creditor with respect to all other assets of Debtor.
(i) Release. Upon the full and complete payment and performance when
due of the Obligations, upon Debtor's written request and at Debtor's sole
expense, Secured Party will promptly and duly execute and deliver such further
instruments and documents and take such further action as Debtor may reasonably
request for the purpose of releasing or terminating the security interests
granted under this Agreement.
8. Governing Law; Venue.
(i) This Agreement shall be governed by and construed under the laws
of the State of California as applied to agreements among California residents
entered into and to be performed entirely within California, without reference
to principles of conflict of laws or choice of laws (except to the extent
governed by the Code).
(ii) The parties agree that any dispute regarding the interpretation
or validity of, or otherwise arising out of this Agreement, shall be subject to
the exclusive jurisdiction of the California State Courts in and for Santa Clara
County, California, or, in the event of federal jurisdiction, the United States
District Court for the Northern District of California sitting in Santa Clara
County, California, and each party hereby agrees to submit to the personal and
exclusive jurisdiction and venue of such courts and not to seek the transfer of
any case or proceeding out of such courts.
9. No Waiver. Secured Party will not by any act (except by a written
instrument pursuant to Section 11 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Event of Default or in any breach of any of the terms and
conditions hereof. No failure to exercise, nor any delay in exercising, on the
part of Secured Party, any right, power or privilege hereunder will operate as a
waiver thereof. No single or partial exercise of any right, power or privilege
hereunder will preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. A waiver by Secured Party of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Secured Party would otherwise have on any future occasion.
The rights and remedies of Secured Party herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
10. Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the successors and permitted
assigns of the parties; provided, however, that Debtor may not assign or
delegate any of its rights or obligations hereunder without Secured Party's
prior written consent, and any assignment or delegation without such consent
shall be void. Nothing herein shall be interpreted to prevent, limit or
otherwise restrain Debtor's grant of licenses to customers and other third
parties in the ordinary course of its business.
11. Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of both Debtor and Secured Party.
12. Rights and Remedies Cumulative. The rights and remedies herein
provided will be cumulative and not exclusive of any other rights or remedies
provided by law or otherwise.
13. Severability. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the intent of
the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
14. Notices. Any notice or other communication required or permitted to
be given under this Agreement shall be in writing, shall be delivered by hand or
overnight courier service, by certified mail, postage prepaid, or by facsimile,
and will be deemed given upon delivery, if delivered personally, one business
day after deposit with a national courier service for overnight delivery, or one
business day after transmission by facsimile with confirmation of receipt, and
three days after deposit in the mails, if mailed, to the following addresses:
(i) If to Debtor:
Name
Address
Attention: President and CEO
With a copy (which shall not constitute notice) to:
Brobeck Phleger & Harrison LLP
[address]
Attention: John E. Hayes, III
(ii) If to Secured Party:
The Santa Cruz Operation, Inc.
[address]
Attention: Chief Executive Officer and Law and Corporate
Affairs
With a copy (which shall not constitute notice) to:
Wilson, Sonsini, Goodrich & Rosati
[address]
Attention: Michael Danaher
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 14, except that notices of change of address
shall only be effective upon receipt.
15. 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 recover, as an element of the costs of suit and not as damages,
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled. The prevailing party will be
entitled to recover its costs of suit, regardless of whether such suit proceeds
to final judgment.
16. Entire Agreement. This Agreement, the Note and the Reorganization
Agreement and all exhibits and schedules hereto and thereto, when taken
together, constitute the entire understanding and agreement of the parties
hereto with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements or understandings, inducements or conditions, express
or implied, written or oral, between the parties with respect hereto.
17. Construction of Agreement. This Agreement has been negotiated by the
respective parties hereto and their attorneys and the language hereof will not
be construed for or against either party. Unless otherwise explicitly set
forth, a reference to a Section or an Exhibit will mean a Section in, or Exhibit
to, this Agreement, all of which Exhibits are incorporated herein by this
reference. The titles and headings herein are for reference purposes only and
will not in any manner limit the construction of this Agreement, which will be
considered as a whole.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement will
become binding when one or more counterparts hereof, individually or taken
together, will bear the signatures of all parties reflected hereon as
signatories.
[Signature page to follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the date first above written.
Secured Party: Debtor:
THE SANTA CRUZ OPERATION, INC. ( )
By: By:
------------------------------- --------------------------------
Name: Name:
----------------------------- ------------------------------
Title: Title:
---------------------------- -----------------------------
[Signature Page to Security Agreement between
The Santa Cruz Operation, Inc. and______.]
Attachments:
Exhibit A - Definitions
EXHIBIT A
DEFINITIONS
As used in the Security Agreement to which this Exhibit A is attached, the
following terms will have the following meanings:
(a) "Capitalized Lease Obligations" shall mean any and all lease
obligations that, in accordance with GAAP, are required to be capitalized on the
books of a lessee.
(b) "Code" means the Uniform Commercial Code (or successor law) as from
time to time in effect in the State of California.
(c) "Collateral" will have the meaning assigned to such term in Section 2
of the Security Agreement.
(d) "Copyrights" means all past, present and future copyrights, copyright
applications and copyright registrations in the United States and in any and all
other countries and jurisdictions, including, without limitation, all of the
exclusive rights afforded a copyright owner in the United States under 17 U.S.C.
(S)106 and any rights relating to copyrights which may in the future arise by
act of Congress or any foreign governmental entity, and any rights given to a
copyright owner or registrant in or under any copyright conventions, treaties or
foreign laws, and further including, without limitation, all renewals
extensions, and modifications thereof, all income, royalties, damages and
payments now or hereafter due and/or payable under or with respect thereto, the
right to sue for, and to recover damages and receive remedies for, all past,
present and future infringements thereof, and all other rights of any kind
whatsoever accruing thereunder or pertaining thereto anywhere in the world.
(e) "Documentation" means, collectively: (i) all documentation, manuals,
drawings, designs, plans, blueprints, specifications, schematics, layouts, flow
charts, logic diagrams, engineering and test reports, components lists, customer
lists, suppliers lists, user, installation or repair manuals, programmers'
notes, programming documentation, any recorded information regarding any
Invention, and any other works of authorship; (ii) all documentation regarding
the design, development, testing or manufacture of any products or any equipment
used to design, develop, test, or manufacture any such products or components of
such products; (iii) all field repair data, sales data and other information
relating to sales or service of any products; and (iv) all media in which or on
which any of the are recorded or stored or from which they can be read or
retrieved.
(f) "Event of Default" Ten (10) days after written notice from Secured
Party to Debtor for monetary defaults and thirty (30) days after written notice
from Secured Party to Debtor for non-monetary defaults, if such defaults are not
cured within such ten (10) day or thirty day (30) periods, respectively, each of
the following shall constitute an event of default ("Event of Default") under
this Agreement:
(i) Default in Payment. If Debtor fails to make any payment due
and payable under the terms of the Note or this Agreement.
(ii) Representations and Warranties. If any of the representations
and warranties made by Borrower shall be false or misleading in any material
respect when made.
(iii) Covenants. If Borrower shall be in material default under any
of the material terms, covenants, conditions, or obligations under any Loan
Document.
(iv) Dissolution. If Borrower is dissolved.
(v) Receiver. If a receiver, trustee, or custodian is appointed
for any part of the Collateral, or any part of the Collateral is assigned for
the benefit of creditors.
(vi) Impairment to Lien. If at any time any lien created under the
Note or this Agreement on any of the Collateral may be impaired by any material
lien, encumbrance or other defect other than the Prior Liens or the Permitted
Liens.
(vii) Bankruptcy. If a petition in bankruptcy is filed against
Debtor, and such petition is not dismissed within ninety (90) days of filing, a
petition in bankruptcy is filed by Borrower or a receiver, trustee or custodian
of any part of the Collateral is appointed; or if Borrower files a petition for
reorganization under any of the provisions of the Bankruptcy Act or any law,
State or Federal, or makes an assignment for the benefit of creditors or is
adjudged insolvent by any State or Federal Court of competent jurisdiction.
(viii) Judgment or Attachment. If any writ, attachment, citation,
judgment, lien or distress warrant being issued against or levied on the
Collateral for an amount in excess of $100,000.00 and such judgment or
attachment is not vacated, discharged, stayed or bonded pending appeal, or paid
or otherwise fully satisfied within thirty (30) days of the date it is entered.
(ix) Diminished Value. If the Collateral is subject to any
uninsured loss, theft, damage or destruction to the Collateral which materially
and substantially diminishes the value of the Collateral.
(g) "General Intangibles" has the meaning as set forth in Section 2(a) of
this Agreement.
(h) "Governmental Authority" shall mean any domestic or foreign national,
state or local government, any political subdivision thereof, any department,
agency, authority or bureau of any of the foregoing, or any other entity
exercising executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government.
(i) "Governmental Charges" shall mean all taxes, levies, assessments, fees,
claims or other charges imposed by any Governmental Authority upon or relating
to (i) Debtor, (ii) the Note, (iii) employees, payroll, income or gross receipts
of Debtor, (iv) the ownership or use of any of its assets by Debtor, or (v) any
other aspect of the business of Debtor.
(j) "Intellectual Property" means, any, some or all of the following: (i)
Copyrights, Patents, Mask Works, Trademarks, know-how, trade secrets,
proprietary information, Moral Rights and any and all other forms of
intellectual property; (ii) all Licenses and similar rights granted to or held
by Debtor with respect to any Copyrights, Patents, Mask Works, Trademarks,
Inventions, Software, Documentation, know-how, trade secrets, proprietary
information, Moral Rights or other form of intellectual property, (iii) all
licenses, consents, permits, variances, certifications and approvals of
governmental agencies; and (iv) all causes of action, claims and warranties in
respect of any of the items listed above.
(k) "Inventions" means all past, present and future inventions,
improvements, enhancements, processes, production or manufacturing methods,
compositions of matter, formulas, Software, works of authorship, data, and other
proprietary information, whether or not protected or protectable by copyright,
patent, mask work, trade secret or other laws regarding intellectual property.
(l) "Licenses" means all past, present and future licenses, sublicenses,
covenants-not-to-sue, consents and authorizations relating to any Intellectual
Property, Documentation, Software or Inventions.
(m) "Loan Documents" means the Note and this Agreement together with all
schedules and exhibits attached thereto.
(n) "Mask Work" means mask work as defined in the Semiconductor Chip
Protection Act of 1984 and all registrations of claims of protection for such
mask work under the laws of the United States of America or any other
jurisdiction.
(o) "Moral Rights" means any right to claim authorship to or to object to
any distortion, mutilation, or other modification or other derogatory action in
relation to a work, whether or not such would be prejudicial to the author's
reputation, and any similar right, existing under common or statutory law of any
country in the world or under any treaty, regardless of whether or not such
right is denominated or generally referred to as a "moral right." "Moral Rights"
include, without limitation, anything designated as a moral right under any law,
statute, treaty or convention.
(p) "Obligations" means all obligations, liabilities and indebtedness of
Debtor to Secured Party and/or its assigns, whether direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter incurred, which
may arise under or out of the Loan Documents, whether for obligations with
respect to principal, interest, costs, expenses (including, without limitation, all
reasonable fees and disbursements of counsel to Secured
Party) or otherwise.
(q) "Patents" means all past, present and future patents and patent
applications in the United States and in all other countries and jurisdictions,
including, without limitation, the inventions and improvements described or
claimed therein, together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, and all rights given to a patent
owner in or under any patent conventions, treaties and foreign laws, and further
including, without limitation, all income, royalties, damages and payments now
or hereafter due and/or payable under or with respect thereto, the right to sue
for, and to recover damages and receive remedies for, all past, present and
future infringements thereof, and all rights of any kind accruing thereunder or
pertaining thereto anywhere in the world.
(r) "Permitted Liens" shall mean and include:
(i) Liens securing obligations of less than $50,000 each, and
that are:
(A) Liens for taxes or other Governmental Charges not at the
time delinquent or thereafter payable without penalty or being contested in good
faith, provided provision is made to the reasonable satisfaction of Secured
Party for the eventual payment thereof if subsequently found payable, (adequate
reserves maintained on the books of the Debtor in accordance with GAAP shall be
deemed reasonably satisfactory to Secured Party);
(B) Liens of carriers, warehousemen, mechanics, materialmen,
vendors, and landlords incurred in the ordinary course of business for sums not
overdue or being contested in good faith, provided provision is made to the
reasonable satisfaction of Secured Party for the eventual payment thereof if
subsequently found payable;
(C) Deposits under workers' compensation, unemployment
insurance and social security laws or to secure the performance of bids,
tenders, contracts (other than for the repayment of borrowed money) or leases,
or to secure statutory obligations of surety or appeal bonds or to secure
indemnity, performance or other similar bonds in the ordinary course of
business;
(D) Liens securing obligations under a Capitalized Lease
Obligation or operating lease and if such Liens do not extend to property other
than the property leased under such Capitalized Lease Obligation or operating
lease; and
(E) Liens upon any equipment acquired or held by Debtor to
secure the purchase price of such equipment or indebtedness incurred solely for
the purpose of financing the acquisition of such equipment;
(F) Easements, reservations, rights of way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances affecting real property in a manner not materially or adversely
affecting the value or use of such property;
(G) Liens on insurance proceeds in favor of insurance
companies to secure the financing of insurance premiums;
(H) Liens which constitute rights of setoff of a customary
nature or bankers' Liens with respect to amounts on deposit, whether arising by
operation of law or by contract, in connection with arrangements entered into
with banks in the ordinary course of business not relating to a financing
transaction;
(ii) Liens arising out of a judgment or award in circumstances not
constituting an Event of Default;
(iii) Leases, subleases, licenses and sublicenses entered into by
Debtor in the ordinary course of business;
(iv) Liens in favor of Secured Party, or;
(v) Liens that have been approved in writing by Secured Party.
(vi) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described in
clauses (i) through (v) above, provided that any extension, renewal or
replacement lien shall be limited to the property encumbered by the existing
lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
(s) "Prior Liens" means any lien(s) pertaining to the Collateral in effect
prior to the close of the Reorganization Agreement, which is/are assumed by
Debtor in connection with the transfer of the Collateral to Debtor.
(s) "Proceeds" means whatever is received upon the sale, exchange,
collection, licensing or other disposition of Collateral or proceeds of
Collateral, including, without limitation, insurance proceeds.
(t) "Software" means all past, present and future computer programs, in any
and all forms including source code, object code, executable code, binary code
and machine readable code, and including applications, system software,
communications software, development tools, software utilities, development
environments, interfaces, and other computer code, and further including the
graphics, sounds, data and other content in or generated by the foregoing
computer programs.
(u) "Trademarks" means all past, present and future trade names,
trademarks, trademark applications, trademark registrations, service marks,
service mark applications, and service mark registrations in the United States
and any and all other countries and jurisdictions, including, without
limitation, all renewals of trademark and service mark registrations, and all
rights given to a trademark or service mark owner or registrant in or under any
trademark or service mark conventions, treaties and foreign laws, and further
including, without limitation, all income, royalties, damages and payments now
or hereafter due and/or payable under or with respect thereto, the right to sue for, and to recover damages and receive remedies for, all past, present and future infringements thereof, and all rights
of any kind accruing thereunder or pertaining thereto anywhere in the world.
************************************************************************
CALDERA AND SCO EXPAND ACQUISITION AGREEMENT TO INCLUDE
SCO OPENSERVER TECHNOLOGY
OREM, UT/SANTA CRUZ, CA--FEBRUARY 9, 2001--Caldera Systems, Inc., (Nasdaq: CALD)
and The Santa Cruz Operation, Inc. (SCO) (Nasdaq: SCOC) today announced they
have amended the agreement to purchase the SCO Server Software and Professional
Services divisions by Caldera Systems. Under the terms of the new agreement, the
SCO OpenServer product line will be included as part of the proposed SCO Server
Software Division acquisition, giving Caldera complete ownership of SCO's
operating system products. In the original agreement announced on August 2,
2000, SCO retained the SCO OpenServer intellectual property and Caldera
purchased the rest of the SCO server business and acted as sole distributor for
SCO OpenServer products.
As a result of the new agreement, the companies will file an amended
Joint Proxy Statement/Prospectus with the Securities and Exchange Commission.
Due to the revised transaction terms, the companies expect the transaction to
close during the second calendar quarter of 2001, instead of the previously
anticipated first calendar quarter.
The terms of the new agreement call for Caldera to pay SCO cash
consideration of $23 million at the close of the transaction as well as a note
for $8 million due in four quarterly installments beginning in the second year
following the close of the transaction. Additionally, SCO will receive 16
million shares of the resulting company, Caldera International, Inc. The
companies have also agreed to share revenue from SCO
OpenServer products for a period of three years, if sales exceed pre-defined
levels during that time. Caldera will also receive an assignment by SCO of its
accounts receivable from certain long-term agreements that become due subsequent
to the close of the transaction. These receivables will vary depending on the
timing of the transaction and product usage by customers, currently estimated to
be $3-4 million.
The terms of the previous agreement called for $7 million in cash at
closing and approximately 18 million shares, of which approximately 2 million
would be used to fund options for SCO employees transferring to Caldera. In the
new agreement, Caldera will provide for options to those employees.
Ransom Love, president of Caldera Systems, commented, "With the SCO
OpenServer technology purchase, Caldera will not only have created the first and
largest combined UNIX and Linux channel, it will be able to provide all current
SCO Server Software Division customers with new and existing solutions from one
source. The purchase further simplifies Caldera's internal administration,
roadmap control and communication, allowing better service to its customers."
Doug Michels, CEO of SCO said, "I am pleased that the simplification of
the transaction will help SCO achieve its goal of creating a pure-play company
focused on our Tarantella products. The overall consideration and increased cash
component will enable us to proceed with our plan to reinvent ourselves around
our Tarantella business and drive Tarantella, Inc. to be the leading provider of
web-enabling software."
ABOUT SCO OPENSERVER TECHNOLOGY
SCO OpenServer products are cost effective and reliable commercial UNIX
server systems for small to medium businesses and major retail replicated sites.
SCO OpenServer products deliver high quality UNIX applications on the Intel
processor-based hardware platform and are the cornerstone of a leadership role
that SCO has played in the UNIX-on-Intel market.
CALDERA SYSTEMS, INC.
Caldera Systems, Inc. (Nasdaq: CALD) is the "Unifying UNIX with Linux for
Business" technology leader in developing and marketing successful Linux-based
business solutions, including its award-winning OpenLinux, NetWare for Linux,
Linux technical training, certification and support--with free 30-day phone
support and on-site consulting. Caldera OpenLearning Providers offer exceptional
distribution-neutral Linux training and certification based on Linux
Professional Institute (LPI(TM)) certification
standards. Caldera Systems supports the open source community and is a leader
in, and advocate of Linux Standard Base (LSB(TM)) and LPI(TM).
Caldera, Inc. was co-founded in 1994 by Ransom Love. Caldera Systems, Inc. was
founded by Ransom Love in 1998 to develop Linux-based business solutions. Based
in Orem, UT, Caldera Systems has offices and 1000+ resellers worldwide. For more
information, see www.calderasystems.com or in the US call 888-GO-Linux
(888-465-4689).
THE SANTA CRUZ OPERATION, INC.
With headquarters in Santa Cruz, CA, The Santa Cruz Operation, Inc. is comprised
of three independent divisions -- Tarantella, Inc., the Server Software
Division, and the Professional Services Division. The Server Software Division
is a leading provider of UNIX server operating systems. Tarantella, Inc.
promotes a range of software technologies and products that web-enable any
application instantly, for access by users anywhere. The Professional Services
Division helps organizations create and deploy personalized IT strategies. The
three divisions sell and support their products and services through a worldwide
network of distributors, resellers, systems integrators, and OEMs. For more
information, visit SCO's home page at www.sco.com and www.tarantella.com
Caldera is a registered trademark of Caldera Systems, Inc. All other products,
services, companies, events and publications are trademarks, registered
trademarks or servicemarks of their respective owners in the U.S. and/or other
countries. Linux is a registered trademark of Linus Torvalds in the US and other
countries
The Santa Cruz Operation, SCO, SCO OpenServer, and Tarantella are trademarks or
registered trademarks of The Santa Cruz Operation, Inc. in the USA and other
countries. UNIX is a registered trademark of The Open Group in the US and other
countries. All other brand or product names are or may be trademarks of, and are
used to identify products or services of, their respective owners.
FORWARD LOOKING STATEMENTS
The statements set forth above include forward-looking statements that involve
risks and uncertainties. All forward-looking statements included in this release
are based upon information available to Caldera and SCO as of the date of the
release, and neither Caldera, SCO nor the combined companies assume any
obligation to update any such forward-looking statement. These statements are
not guarantees of future performance and actual results could differ materially
from current expectations. Factors that could cause or contribute to such
differences include, but are not limited to 1) the potential disruption of
Caldera's and SCO's businesses that might result from employee or customer
uncertainty, and lack of focus following announcement of the amended acquisition
agreement in connection with integrating the operations of Caldera and SCO; 2)
product integration risk due to overlapping products and technologies; 3) the
possibility that the transactions described herein might not be consummated; 4)
the effects of the public announcement of the amended acquisition agreement on
Caldera's and SCO's stock prices, their sales and operating results, their
ability to attract and retain key personnel and the progress of certain of their
development projects; 5) the risk that the announcement of the amended
acquisition agreement could result in decisions by customers to defer purchases
of products of Caldera or SCO; 6) the substantial charges to be incurred due to
the amended acquisition agreement, primarily in the second and third quarters of
the year; 7) the risk that redundancy in staffing and infrastructure could
reduce efficiency and increase costs; 8) the difficulties of managing
geographically dispersed operations; and 9) the risk that other benefits sought
to be achieved by the amended acquisition agreement will not be achieved. These
and other factors are risks associated with Caldera's and SCO's businesses that
may affect their operating results and are discussed in SCO's Annual Report on
Form 10-K for the fiscal year ended September 30, 2000 filed with the Securities
and Exchange Commission ("SEC") on December 18, 2000, Caldera's Annual Report on
Form 10-K for the fiscal year ended October 31, 2000 filed with the SEC on
January 29, 2001, and Caldera's and SCO's quarterly reports on Form 10-Q filed
with the SEC.
Additional Information and Where to Find It: The parties urge investors and
security holders to review the following documents regarding the acquisition,
including amendments that may be made to them, because they contain important
information:
- Caldera's Registration Statement on SEC Form S-4 and
- Caldera and SCO's Joint Proxy Statement/Prospectus.
These documents and amendments to these documents have been or will be filed
with the United States Securities and Exchange Committee. Investors and security
holders are urged to read the Registration Statement and the Joint Proxy
Statement/Prospectus carefully as they are available. The Registration Statement
and the Joint Proxy Statement/Prospectus will contain important information
about Caldera, SCO, the acquisition, the persons soliciting proxies relating to
the acquisition, their interests in the acquisition, and related matters.
Investors and security holders will be able to obtain free copies of these
documents, as they are available, through the Web site maintained by the SEC at
http://www.sec.gov
Free copies of the Joint Proxy Statement/Prospectus and these other documents
may also be obtained from Caldera by directing a request through the Investors
Relations portion of Caldera's Web site at http://www.caldera.com or by mail to
Caldera Systems, Inc., 240 West Center Street, Orem, Utah 84057, attention:
Investor Relations, telephone (801) 765-4999; or from SCO by directing a request
through the Investors Relations portion of SCO's Web site at http://www.sco.com
or by mail to The Santa Cruz Operation, Inc., 425 Encinal Street, Santa Cruz,
California 95061, attention: Investor Relations, telephone (831) 427-7399.
In addition to the Registration Statement and the Joint Proxy
Statement/Prospectus, Caldera and SCO file annual, quarterly and special
reports, proxy statements and other information with the SEC. You may read and
copy any reports, statements or other information filed by Caldera or SCO at the
SEC public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549 or
at any of the SEC's other public reference rooms in New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms.