See original SEC file that this excerpt taken from at Form S-4 file number 333-45936 2000-09-15
IA-1
243
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CALDERA SYSTEMS, INC.,
A DELAWARE CORPORATION
CALDERA HOLDING, INC.,
A DELAWARE CORPORATION
AND
THE SANTA CRUZ OPERATION, INC.
A CALIFORNIA CORPORATION
AUGUST 1, 2000
244
TABLE OF CONTENTS
PAGE
----
1. PLAN OF REORGANIZATION............................................. A-1
1.1 The Organization of Newco and Merger Sub.................... A-1
1.2 The Merger.................................................. A-2
1.3 SCO Transaction............................................. A-2
1.4 Contribution and Transfer of Contributed Stock and
Contributed Assets.......................................... A-3
1.5 Closing Matters............................................. A-6
1.6 Dissenter's Rights.......................................... A-6
1.7 Newco Plans................................................. A-6
1.8 Registration on Form S-8.................................... A-6
1.9 Effects of the Caldera Merger............................... A-6
1.10 Tax-Free Reorganization..................................... A-6
1.11 Tax-Free Section 351 Transaction............................ A-7
1.12 HSR Filings................................................. A-7
1.13 Board of Directors and Officers of Newco; Newco Certificate
of Incorporation
and Bylaws.................................................. A-7
1.14 Registration on Form S-4.................................... A-8
2. REPRESENTATIONS AND WARRANTIES OF SCO.............................. A-8
2.1 Organization; Good Standing; Qualification and Power........ A-8
2.2 Capital Structure........................................... A-8
2.3 Authority................................................... A-9
2.4 SEC Documents............................................... A-10
2.5 Disclosure; Information Supplied............................ A-11
2.6 Compliance with Applicable Laws............................. A-12
2.7 Litigation.................................................. A-12
2.8 ERISA and Other Compliance.................................. A-13
2.9 Absence of Certain Changes or Events........................ A-15
2.10 Full Force and Effect....................................... A-17
2.11 Agreements.................................................. A-17
2.12 No Defaults................................................. A-18
2.13 Certain Agreements.......................................... A-18
2.14 Taxes....................................................... A-18
2.15 Intellectual Property....................................... A-19
2.16 Fees and Expenses........................................... A-21
2.17 Insurance................................................... A-21
2.18 Ownership of Property....................................... A-21
2.19 Environmental Matters....................................... A-21
2.20 Interested Party Transactions............................... A-22
2.21 Fairness Opinion............................................ A-22
2.22 Title to and Condition and Sufficiency of Group Assets...... A-22
2.23 No Restrictive Agreements................................... A-22
2.24 Supplier and Customer Relationships......................... A-22
2.25 Product and Inventory Status................................ A-23
2.26 Affirmative Vote............................................ A-23
2.27 State Takeover Statutes..................................... A-23
2.28 Competition and Fair Trading Laws........................... A-23
2.29 Grants...................................................... A-23
3. REPRESENTATIONS AND WARRANTIES OF CALDERA AND NEWCO................ A-24
3.1 Organization; Good Standing; Qualification and Power........ A-24
3.2 Capital Structure........................................... A-24
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TABLE OF CONTENTS -- (CONTINUED)
PAGE
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3.3 Authority................................................... A-25
3.4 SEC Documents............................................... A-26
3.5 Disclosure; Information Supplied............................ A-26
3.6 Vote Required............................................... A-27
3.7 Litigation.................................................. A-27
3.8 Valid Issuance.............................................. A-27
3.9 Absence of Certain Changes or Events........................ A-27
3.10 Taxes....................................................... A-29
3.11 Intellectual Property....................................... A-29
3.12 Fees and Expenses........................................... A-29
3.13 Environmental Matters....................................... A-30
3.14 Fairness Opinion............................................ A-30
3.15 Tax Representations......................................... A-30
4. SCO COVENANTS...................................................... A-30
4.1 Advice of Changes........................................... A-30
4.2 Maintenance of Business..................................... A-31
4.3 Conduct of Business......................................... A-31
4.4 SCO Corporate Approvals..................................... A-32
4.5 Letter of SCO's Accountants................................. A-32
4.6 Prospectus/Proxy Statement.................................. A-32
4.7 Regulatory Approvals........................................ A-33
4.8 Necessary Consents.......................................... A-33
4.9 Access to Information....................................... A-33
4.10 Satisfaction of Conditions Precedent........................ A-33
4.11 Voting Agreement............................................ A-33
4.12 Sales Representative and Support Agreement.................. A-34
4.13 Stockholders Agreement...................................... A-34
4.14 No Other Negotiations....................................... A-34
4.15 Books and Records........................................... A-35
4.16 [Intentionally Omitted.].................................... A-35
4.17 Modification of Joint Contributed Agreements and Shared
Contributed Assets.......................................... A-35
4.18 Key Employee Employment Agreements.......................... A-35
4.19 SCO IP Rights............................................... A-35
4.20 Directors' and Officers' Liability Insurance................ A-36
4.21 Closing Group Account....................................... A-36
4.22 SCO Retained Business....................................... A-36
4.23 Taking of Necessary Action; Further Action.................. A-36
4.24 Accounting Treatments....................................... A-36
5. CALDERA AND NEWCO COVENANTS........................................ A-36
5.1 Advice of Changes........................................... A-36
5.2 Maintenance of Business..................................... A-36
5.3 Conduct of Business......................................... A-36
5.4 Stockholder Approval........................................ A-37
5.5 Letter of Caldera's Accountants............................. A-37
5.6 Prospectus/Proxy Statement.................................. A-38
5.7 State Securities Law Compliance............................. A-38
5.8 Regulatory Approvals........................................ A-38
5.9 Necessary Consents.......................................... A-39
5.10 Access to Information....................................... A-39
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TABLE OF CONTENTS -- (CONTINUED)
PAGE
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5.11 Books and Records........................................... A-39
5.12 Satisfaction of Conditions Precedent........................ A-39
5.13 Voting Agreement............................................ A-39
5.14 Sales Representative and Support Agreement.................. A-39
5.15 Stockholders Agreement...................................... A-39
5.16 Caldera Employee Plans...................................... A-39
5.17 Indemnification and Insurance -- Caldera.................... A-40
5.18 Indemnification and Insurance -- Employees.................. A-41
5.19 Distribution to SCO Shareholders............................ A-42
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SCO......................... A-43
6.1 Accuracy of Representations and Warranties.................. A-43
6.2 Covenants................................................... A-43
6.3 Compliance with Law......................................... A-43
6.4 Form S-4.................................................... A-43
6.5 Opinion of Caldera and Newco's Counsel...................... A-43
6.6 Stockholder Approval........................................ A-43
6.7 Tax Opinion................................................. A-43
6.8 Designees to the Board of Directors of Newco................ A-43
6.9 Nasdaq Listing.............................................. A-44
6.10 HSR Act..................................................... A-44
6.11 Ancillary Agreements........................................ A-44
6.12 Delivery of Newco Shares.................................... A-44
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF CALDERA AND NEWCO........... A-44
7.1 Accuracy of Representations and Warranties.................. A-44
7.2 Covenants................................................... A-44
7.3 Compliance with Law......................................... A-44
7.4 Consents.................................................... A-44
7.5 Form S-4.................................................... A-44
7.6 Opinion of Counsel to SCO................................... A-44
7.7 Caldera Stockholder Approval................................ A-44
7.8 Tax Opinion................................................. A-44
7.9 HSR Act..................................................... A-45
7.10 Ancillary Agreements........................................ A-45
7.11 Key Employee Term Sheets.................................... A-45
8. TERMINATION OF AGREEMENT........................................... A-45
8.1 Termination................................................. A-45
8.2 Notice of Termination....................................... A-46
8.3 Liability................................................... A-46
8.4 Termination Fee............................................. A-47
9. SURVIVAL OF REPRESENTATIONS........................................ A-47
9.1 Survival of Representations................................. A-47
10. ESCROW AND INDEMNIFICATION........................................ A-47
10.1 Escrow Fund................................................. A-47
10.2 Indemnification by SCO...................................... A-48
10.4 Limitations on Indemnification.............................. A-48
10.5 Indemnification Procedures.................................. A-48
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TABLE OF CONTENTS -- (CONTINUED)
PAGE
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11. EMPLOYEE MATTERS.................................................. A-50
11.1 Right to Offer Employment................................... A-50
11.2 Termination of Employment................................... A-51
11.3 Cooperation................................................. A-52
12. TAX MATTERS....................................................... A-52
12.1 Transaction Taxes; Representation; Transaction Tax
Indemnity................................................... A-52
12.2 Treatment of Indemnity Payments............................. A-52
12.3 Indemnity for Taxes......................................... A-52
12.4 Other Tax Matters........................................... A-54
12.5 Tax Representations......................................... A-56
13. MISCELLANEOUS..................................................... A-57
13.1 Governing Law; Venue........................................ A-57
13.2 Assignment; Binding upon Successors and Assigns............. A-57
13.3 Severability................................................ A-57
13.4 Counterparts................................................ A-57
13.5 Other Remedies.............................................. A-57
13.6 Amendment and Waivers....................................... A-57
13.7 Expenses.................................................... A-57
13.8 Attorneys' Fees............................................. A-58
13.9 Notices..................................................... A-58
Construction of Agreement...................................
13.10 A-58
No Joint Venture............................................
13.11 A-58
Further Assurances..........................................
13.12 A-59
Absence of Third Party Beneficiary Rights...................
13.13 A-59
Public Announcement.........................................
13.14 A-59
Certain Defined Terms.......................................
13.15 A-59
Entire Agreement............................................
13.16 A-68
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TABLE OF CONTENTS -- (CONTINUED)
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
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249
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is entered
into as of August 1, 2000, by and among Caldera Systems, Inc., a Delaware
corporation including for all purposes Caldera Surviving Corporation,
("Caldera"), Caldera Holding, Inc., a Delaware corporation ("Newco") and The
Santa Cruz Operation, Inc., a California corporation ("SCO"). The terms defined
in Section 13.15 of this Agreement shall have the meanings therein specified in
this Agreement.
RECITALS
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."
B. The Newco Common Stock and the Newco Options issued in the Merger and in
the SCO Transaction will be registered under the Securities Act, pursuant to a
Newco registration statement on Form S-4 or Form S-8, as set forth herein.
C. For federal income tax purposes, it is intended that (i) the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code and (ii) that the Merger and the portion of the SCO
Transaction described in Recital A (iii) above qualify as an exchange under the
provisions of Section 351 of the Internal Revenue Code.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Plan of Reorganization.
1.1 The Organization of Newco and Merger Sub. Caldera has formed Newco
under the laws of the State of Delaware for the purposes of the transactions
contemplated by the Merger and in accordance with the terms of this Agreement.
Newco currently has no outstanding securities and has conducted no business and,
prior to the Effective Time, will not issue any securities, will conduct no
business or operations, will have no assets and will enter into no agreements
nor incur any obligations or Liabilities, except as required or contemplated by
this Agreement or necessary to perform its obligations hereunder. As soon as
practicable after the date hereof, Newco shall form the Merger Sub as a wholly
owned subsidiary, which will conduct no business prior to Closing except as
expressly contemplated hereunder.
250
1.2 The Merger. At the Closing, subject to the terms and conditions of
this Agreement, Caldera will execute and deliver and will file with the
Secretary of State of the State of Delaware in accordance with relevant
provisions of the Delaware Law, a Certificate of Merger providing for the Merger
of Merger Sub with and into Caldera, with Caldera being the surviving
corporation upon the effectiveness of the Merger and thereby becoming a wholly
owned subsidiary of Newco, pursuant to this Agreement, the Certificate of Merger
and in accordance with applicable provisions of the Delaware Law as follows:
(a) Conversion of Caldera Common Stock. Each share of the Common
Stock of Caldera ("Caldera Common Stock") that is issued and outstanding
immediately prior to the Effective Time will by virtue of the Merger and at
the Effective Time, and without any further action on the part of Caldera,
Newco or any holder of Caldera Common Stock, be converted into one share
(the "Caldera Ratio") of validly issued, fully paid and nonassessable Newco
Common Stock.
(b) Conversion of Caldera Options.
(i) Conversion. At the Effective Time, each of the then
outstanding options to purchase shares of Caldera Common Stock
(collectively, the "Caldera Options") (consisting of all outstanding
options granted under the stock option plans of Caldera or the Caldera
Subsidiaries, including but not limited to its 1998 Stock Option Plan
and its 1999 Omnibus Stock Incentive Plan (collectively, the "Caldera
Plans"), and any individual non-Plan options), will, by virtue of the
Merger, and without any further action on the part of any holder
thereof, be assumed by Newco and converted into an option to purchase an
equivalent number of shares of Newco Common Stock, at an exercise price
per share equal to the per share exercise price of such Caldera Option
in effect at the Effective Time. The term, exercisability, vesting
schedule, status as an "incentive stock option" under Section 422 of the
Internal Revenue Code, if applicable, and all other terms and conditions
of the Caldera Options will be unchanged and all references in any
option agreement governing such option to Caldera shall be deemed to
refer to Newco, where appropriate. Continuous service as an employee or
consultant with Caldera or any of the Caldera Subsidiaries will be
credited to an optionee of Caldera for purposes of determining the
number of shares of Newco Common Stock vested and exercisable under the
assumed Caldera Option after the Closing.
(ii) Stock Rights. At the Effective Time, Newco will assume all of
Caldera's obligations under Caldera's 2000 Employee Stock Purchase Plan
(the "Caldera Stock Purchase Plan") and each of the then outstanding
rights to purchase shares of Caldera Common Stock under such plan
(collectively, the "Caldera Stock Purchase Plan Rights"), will by virtue
of the Merger, and without any further action on the part of any holder
thereof, be assumed and converted into a right to purchase the same
number of shares of Newco Common Stock on the next "purchase date" (as
such term is defined in the Caldera Stock Purchase Plan) following the
Effective Time at a purchase price per share determined in accordance
with the Caldera Stock Purchase Plan.
(c) Cancellation of Caldera-Owned Shares. Each share of Caldera
Common Stock held in the treasury of Caldera or any of which are owned by
Newco, Caldera, or any direct or indirect wholly owned subsidiary of Newco
or Caldera immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof.
1.3 SCO Transaction.
(a) Issuance of Newco Common Stock. At the Effective Time 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:
(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 Newco Options pursuant to
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251
Section 1.3(a)(iii) below and (b) 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.
(ii) [Intentionally Omitted.]
(iii) Assumption and Conversion of SCO Options. At the Effective
Time, each of the then outstanding options to purchase shares of SCO
Common Stock held by the Optionees (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), will, by virtue of the Merger, and
without any further action on the part of any holder thereof, 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 a 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 a 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.
(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 ten percent (10%) of the SCO Percentage
Interest (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.
(c) Termination of Newco Options. All shares of Common Stock
underlying Newco Options assumed pursuant to Section 1.3(a)(iii) which
terminate without being exercised by the Optionees shall be issued by
Caldera to SCO on a quarterly basis.
1.4 Contribution and Transfer of Contributed Stock and Contributed Assets.
(a) Contribution and Transfer. Subject to the terms and conditions of
this Agreement and in consideration for the issuance by Newco of Newco
Common Stock as provided above, the Contributing Companies shall at the
Effective Time, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged on behalf of each of the
Contributing Companies, contribute and transfer and deliver to Newco or
cause to be contributed, transferred and delivered to Newco, and at the
Effective Time Newco shall accept the contribution and transfer from the
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252
Contributing Companies of all right, title and interest in and to the
Contributed Stock and Contributed Assets. Notwithstanding the preceding,
the Contributed Assets and Contributed Companies which are located outside
of the United States shall be purchased and sold by and among the Newco and
SCO entities located in such countries in exchange for stock or cash
consideration as the parties shall agree before the Effective Time. Such
payment shall be included within and shall not change the total amount of
The SCO Percentage Interest and the Cash Consideration. The parties shall
execute, or cause to be executed, Bills of Transfer relevant to their
particular jurisdiction reflecting the transfer of any such Contributed
Assets which shall reflect the purchase price allocation as agreed. Such
amounts shall be reported as the purchase price for all foreign Tax
reporting purposes in each relevant jurisdiction and no party shall have a
position inconsistent therewith.
(b) Excluded Assets.
(i) Excluded Assets. SCO is not selling and Caldera shall not
acquire from SCO any of the following assets or any interest therein
(collectively, the "Excluded Assets"):
(A) any assets related solely to the SCO Retained Business;
(B) any cash and cash equivalents and any accounts receivable
(the "Cash Equivalents") of the Contributing Companies and the
Contributed Companies;
(C) those assets set forth on Exhibit 1.4(b).
(ii) Net Cash Equivalents. "Net Cash Equivalent" shall mean the
net book value of any cash and cash equivalents held by any of the
Contributed Companies, including but not limited to accounts receivable,
accounts payable and third party debt obligations. To the extent the Net
Cash Equivalents of any Contributed Company are or are expected to be
positive as of the Effective Time, either SCO will withdraw that value
from the Contributed Company at or before the Effective Time or Caldera
will cause that value to be paid or credited to SCO at or promptly after
the Effective Time. To the extent the Net Cash Equivalents of any
Contributed Company are negative as of the Effective Time, SCO will pay
or credit such amount to Caldera at or promptly after the Effective
Time. The payment or credits will be treated as either a dividend by the
Contributed Company or as an adjustment to the Cash Consideration as the
parties may agree.
(c) Assumption and Exclusion of Liabilities.
(i) Assumed Liabilities. As a result of the transfer to Newco of
the Contributed Stock, Newco will as a matter of law own all of the
outstanding equity capital of the Contributed Companies, which
Contributed Companies and their respective Contributed Subsidiaries
(collectively, the "Contributed Company Group") in turn shall remain
liable for their respective Liabilities. In addition, subject to the
terms and conditions of this Agreement, Newco (or a subsidiary of Newco
designated by Newco and acceptable to SCO) shall, at the Effective Time,
assume, and thereafter pay, perform and discharge when due those (and
only those) Liabilities of the Contributing Companies and/or their
direct and indirect subsidiaries (excluding the Liabilities of the
Contributed Company Group, which are governed by the first sentence of
this Section 1.4(c)(i)) that are expressly listed in the following
subparagraphs of this Section 1.4(c)(i) (collectively, the "Assumed
Liabilities") and no other Liabilities of the Contributing Companies
whatsoever:
(A) all Liabilities of the Contributing Companies under all
Contributed Contracts;
(B) all Liabilities of the Contributing Companies that are
included in the Closing Group Account or that are listed on Exhibit
1.4(c)(i)(B) attached hereto; and
(C) those Tax liabilities for which Newco is responsible
pursuant to Section 12 below.
(ii) Excluded Liabilities Not Assumed. Except for the Liabilities
of the Contributed Company Group (which will remain the sole
responsibility of the applicable member of the
A-4
253
Contributed Company Group) and except for the Assumed Liabilities
expressly described above in Section 1.4(c), Newco shall not assume,
pay, perform or discharge, or otherwise have any obligation,
responsibility or liability whatsoever for, any and all Liabilities of
SCO or its direct and indirect subsidiaries (whether now existing or
hereafter arising), and said companies shall retain, and shall be solely
responsible and liable for paying, performing and discharging when due,
all such Liabilities (collectively, the "Excluded Liabilities").
(iii) Intercompany Accounts. One or more Contributed Companies is
likely to owe intercompany debt to SCO. The amount of any such
intercompany debt remaining after payment by Newco to SCO of any Net
Cash Equivalents will be treated as an Excluded Liability and will be
cancelled by SCO.
(d) Asset Contribution. The SCO will, and will cause each of the
other Contributing Companies to, take all actions and sign and deliver any
and all instruments and documents (including Bills of Transfer for each
relevant jurisdiction) reasonably necessary or appropriate to fully effect
and perfect the transfer to Newco of any and all of the Contributed Stock
and Contributed Assets held by either of them and any Contributed Contracts
to which they are a party.
(e) Unassignable Assets. Notwithstanding any other provision of this
Agreement or any of the Ancillary Agreements, to the extent that any of the
Contributed Assets are not assignable or otherwise transferable by the
Contributing Companies to Newco without the consent, approval or waiver of
another party thereto or any third party (including any governmental
agency), or if such assignment or transfer would constitute a breach
thereof or of any other material contract binding upon the transferor or
any of its Affiliates, or a violation of any applicable law, then neither
this Agreement nor such Ancillary Agreements shall constitute an assignment
or transfer (or an attempted assignment or transfer) thereof until such
consent, approval or waiver of such party or parties has been duly
obtained.
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.
(f) No Fraudulent Conveyance. The Contributing Companies are not
entering into this Agreement or any Ancillary Agreement with the intent to
defraud, delay or hinder their respective creditors and the consummation of
the transactions contemplated by this Agreement, and the Ancillary
Agreements referenced in this Agreement will not have any such effect.
Except for the Assumed Liabilities, the transfer of the Contributed Stock
and Contributed Assets pursuant hereto will not give rise to any right of
any creditor of the Contributing Companies to assert any claim whatsoever
against Newco or any of the Contributed Stock and Contributed Assets in the
hands of Newco or any of Newco's respective successors and assigns
following the Effective Time which would have a Material Adverse Effect on
Newco. SCO and its consolidated subsidiaries, taken as a group are Solvent,
and will continue to be Solvent immediately following the transfer of the
Contributed Stock and Contributed Assets pursuant to this Agreement.
Neither SCO nor any of its consolidated subsidiaries nor any of the
Contributed Stock and Contributed Assets is subject to, or the subject of,
any Insolvency Proceeding or Insolvency Action. No writ of attachment,
execution or similar process
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has been ordered, executed or filed against any of the Contributed Stock
and Contributed Assets. There is not any reason to expect that any of the
aforementioned actions, or any similar action, will take place or be taken,
and there are no grounds for any of the aforementioned actions or like
action. The parties agree that the securities issued by Newco to SCO and
the Optionees and the other obligations on Newco's part to be performed
under the terms of this Agreement and the Ancillary Agreements constitute
full and fair equivalent consideration for the Contributed Stock and
Contributing Assets exchanged therefor and the covenants, agreements and
performances of the Contributing Companies under this Agreement and the
Ancillary Agreements.
1.5 Closing Matters. Unless this Agreement has been terminated as
provided in Section 8 below, the closing of the transactions contemplated by
this Agreement (the "Closing") (i) will take place at the offices of Brobeck,
Phleger & Harrison LLP at Two Embarcadero Place, 2200 Geng Road, Palo Alto,
California 94303 on a date (the "Closing Date") and at a time to be mutually
agreed upon by the parties, which date shall be as soon as practicable after the
Caldera Stockholders Meeting and SCO Stockholders Meeting and, in any event, no
later than the third business day after all conditions to Closing set forth
herein shall have been satisfied or waived, unless another place, time and date
is mutually selected by SCO and Caldera and (ii) will take place concurrently
with the Effective Time.
1.6 Dissenter's Rights. It shall be the sole responsibility of SCO to
disclose any dissenter's rights which SCO stockholders have with respect to the
SCO Transaction; these rights shall be disclosed to Caldera in writing no later
than the date of filing the Proxy/Prospectus.
1.7 Newco Plans. Newco shall assume, effective as of the Closing, the
Caldera Plans, Caldera Stock Purchase Plan and non-plan grants and awards, as
amended through the Effective Time (collectively, the "Newco Plans"). Newco
shall also reserve a sufficient number of shares of Newco Common Stock for
issuance pursuant to the SCO Options assumed by Newco pursuant to Section
1.3(a)(ii) herein.
1.8 Registration on Form S-8. Newco will cause the Newco Common Stock
issuable upon exercise of outstanding awards under the Newco Plans or upon
exercise of the SCO Options assumed by Newco (collectively, the "Stock Rights")
and the shares reserved for issuance pursuant to future awards under the Newco
Plans to be registered on Form S-8 (the "Form S-8") promulgated by the SEC prior
to, but in no event later than, 10 days after the Effective Time and Newco will
use its reasonable best efforts to maintain the effectiveness of such
registration statement or registration statements for so long as any such Stock
Rights shall remain outstanding.
1.9 Effects of the Caldera Merger. At the Effective Time: (a) the
separate existence of Merger Sub will cease and Merger Sub will be merged with
and into Caldera, with Caldera being the surviving corporation of the Merger
(the "Caldera Surviving Corporation"), pursuant to the terms of this Agreement
and the Certificate of Merger; (b) the Certificate of Incorporation of the
Caldera Surviving Corporation shall be in the form attached as Exhibit A-1 to
the Certificate of Merger; (c) the Bylaws of Caldera immediately prior to the
Effective Time will be the Bylaws of the Caldera Surviving Corporation; (d) the
directors and officers of Caldera immediately prior to the Effective Time will
be the directors and officers of the Caldera Surviving Corporation; (e) each
share of the Common Stock of Merger Sub outstanding immediately prior to the
Effective Time will be converted into one share of Common Stock of the Caldera
Surviving Corporation; (f) each share of Caldera Common Stock, each Caldera
Option, and each Caldera Stock Purchase Plan Right outstanding immediately prior
to the Effective Time will be converted, as provided above in this Section
1.2(b). The Merger will, from and after the Effective Time, have all of the
effects provided by applicable law, including, without limitation, the Delaware
Law.
1.10 Tax-Free Reorganization. The parties adopt this Agreement (to the
extent it relates to the Merger) as a plan of reorganization and intend the
Merger to be a tax-free reorganization under Section 368(a)(1)(A) of the
Internal Revenue Code by virtue of the provisions of Section 368(a)(2)(E) of the
Internal Revenue Code. The Newco Common Stock issued in the Merger will be
issued solely in exchange for the Caldera Common Stock, and no other transaction
other than the Merger represents,
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provides for or is intended to be an adjustment to the consideration paid for
the Caldera Common Stock. No consideration that could constitute "other
property" within the meaning of Section 356(b) of the Internal Revenue Code is
being transferred by Newco for the Caldera Common Stock in the Merger. The
parties shall not take a position on any tax return inconsistent with this
Section 1.10. In addition, Newco hereby represents, and will represent as of the
Effective Time, that it intends to continue Caldera's historic businesses or use
a significant portion of Caldera's business assets in a trade or business. None
of the parties shall cause a transaction, without offsetting compensation to the
other party, that would result in income to SCO under the Subpart F provisions
of the Internal Revenue Code.
1.11 Tax-Free Section 351 Transaction. The contribution and transfer of
the Contributed Stock and Contributed Assets to Newco in exchange for Newco
Common Stock, together with the Merger, are intended to constitute an exchange
within the meaning of Section 351 of the Internal Revenue Code. The Newco Common
Stock issued to SCO therein will be issued solely in exchange for the
Contributed Stock and Contributed Assets transferred in the SCO Transaction and
no consideration (other than the cash consideration) that could constitute other
property within the meaning of Internal Revenue Code Section 351(b) is being
transferred by Newco to SCO. The parties shall not take a position on any tax
return inconsistent with this Section 1.11.
1.12 HSR Filings. Caldera, SCO and Newco will as promptly as practicable
prepare and file the applicable notices and forms (if any) required to be filed
by them under the HSR Act or comparable laws of non-U.S. governmental entities,
and comply promptly with any appropriate requests from the Federal Trade
Commission, the United States Department of Justice or any other Governmental
Antitrust Authority for additional information and documentary material. The
parties hereto will not take any action that will have the effect of delaying,
impairing or impeding the termination of any waiting period or the receipt of
any required approvals of a Government Antitrust Authority. Without limiting the
generality of the parties' undertakings pursuant to this Section 1.12, the
parties shall use their reasonable best efforts to prevent the entry in a
judicial or administrative proceeding brought under any antitrust law by any
Governmental Antitrust Authority or any other party of any permanent or
preliminary injunction or other order that would make consummation of the SCO
Transaction or the Merger in accordance with the terms of this Agreement
unlawful under appropriate anti-trust laws or that would prevent or delay such
consummation as a consequence of such laws. Each party hereto shall promptly
inform the other of any material communication between such party and the
Federal Trade Commission, the Department of Justice or any other Governmental
Antitrust Authority regarding any of the transactions contemplated hereby. If
any party or any Affiliate of such party receives a request for additional
information or for documents or any material from any such Governmental
Antitrust Authority with respect to the transactions contemplated hereby, then
such party shall endeavor in good faith to make or cause to be made, as soon as
reasonably practicable and after consultation with the other parties, an
appropriate response in compliance with such request. Further, no written
materials shall be submitted by any party to the Federal Trade Commission, the
Department of Justice or any other Governmental Antitrust Authority in
connection with HSR Act compliance or the merger control regulations of any
other state or country, nor shall any oral communications be initiated with such
governmental entities by any party, without prior disclosure to and coordination
with the other parties and its counsel. Each party hereto will cooperate in
connection with reaching any understandings, undertakings or agreements (oral or
written) involving the Federal Trade Commission, the Department of Justice or
any other Governmental Antitrust Authority in connection with the transactions
contemplated hereby.
1.13 Board of Directors and Officers of Newco; Newco Certificate of
Incorporation and Bylaws.
(a) Board of Directors. At the Effective Time, Newco will have a
Board of Directors consisting of nine directors. At the Effective Time, the
directors of Newco shall consist of the current Caldera directors plus Doug
Michels and one other individual to be named by SCO, nominees of SCO. At
the Effective Time, Ralph J. Yarro shall be the Chairman of the Board of
Newco.
(b) Officers. At the Effective Time, the officers of Newco shall be
as set forth on Exhibit 1.13(b).
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(c) Certificate of Incorporation and Bylaws. Attached hereto as
Exhibits 1.13(c)A and 1.13(c)B are the respective forms of Amended and
Restated Certificate of Incorporation and Bylaws of Newco to be in effect
at the Effective Time.
1.14 Registration on Form S-4. The Newco Common Stock to be issued in the
Merger to Caldera stockholders and the Newco Common Stock to be issued in the
SCO Transaction to SCO and pursuant to the assumption of SCO Options shall be
registered under the Securities Act on Form S-4. As promptly as practicable
after the date hereof, Newco, with the cooperation of Caldera and SCO, shall
prepare and file with the SEC a Form S-4 registration statement (the "Form
S-4"), together with the prospectus/joint proxy statement to be included therein
(the "Prospectus/Proxy Statement") and any other documents required by the
Securities Act or the Exchange Act in connection with the Merger and the SCO
Transaction.
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:
2.1 Organization; Good Standing; Qualification and Power. The Contributed
Subsidiaries are all of the subsidiaries of the Contributed Companies or any of
their direct or indirect subsidiaries. Each of the Contributed Companies, and
the Contributed Subsidiaries and each of the Contributing Companies 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 Group Assets held by such
company and for the Conduct of the Group Business as now being conducted by such
company, 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 the Group Business. SCO has delivered to Caldera or its counsel
complete and correct copies of the charter documents of the Contributed
Companies and the Contributed Subsidiaries. Except for the Contributed
Subsidiaries, none of the Contributed Companies nor any of the Contributed
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.
2.2 Capital Structure.
(a) Stock and Options. The authorized, issued and as of the date of
July 28, 2000, the outstanding capital stock of the Contributed Companies
and the Contributed Subsidiaries is set forth in Section 2.2(a) of the SCO
Disclosure Letter. Except as specified in Section 2.2(a) of the SCO
Disclosure Letter, no shares of the capital stock of the Contributed
Companies or of any of the Contributed Subsidiaries are held by any of them
in its treasury or reserved for issuance upon the exercise of options or
warrants. Except as specified in Section 2.2(a) of the SCO Disclosure
Letter, all outstanding shares of the capital stock of the Contributed
Companies on July 28, 2000 are set forth in Section 2.2(a) of the SCO
Disclosure Letter and are validly issued, fully paid and nonassessable and
free and clear of any Encumbrances and not subject to preemptive rights
under any statute, pursuant to the Certificate of Incorporation or Bylaws
or Memorandum and Articles of Incorporation (or similar governing documents
in each relevant jurisdiction) of the Contributed Companies, 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 Contributed Subsidiaries are validly issued, fully paid and
nonassessable and are owned by a Contributed Company, or one of the
Contributed Subsidiaries, free and clear of any Encumbrances. SCO has
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provided Caldera with a correct and complete list of each of the SCO
Options as of July 28, 2000, including the name of the Optionees, the plan
pursuant to which such SCO Options were issued (if applicable), the number
of shares covered by such SCO Options, the per share exercise price of such
SCO Options, and the vesting schedule applicable to such SCO Options,
including the number of shares vested as of such date and will provide a
final list of such information on the Closing Date. All the outstanding SCO
Options have been issued in compliance with all applicable federal and
state securities laws. Doug Michels owns and has the right to vote shares
representing approximately 10% of the capital stock of SCO as of the date
of this Agreement.
(b) No Other Commitments. Except as set forth in Section 2.2(b) of
the SCO Disclosure Letter there are no options, warrants, calls, rights,
commitments, conversion rights or agreements of any character to which the
Contributed Companies 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 SCO 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 Contributed Company Group. All
shares of capital stock of any member of the Contributed Company Group are
held free and clear of any Encumbrances.
(c) Registration Rights. Neither the Contributed Companies nor the
Contributing Companies is under any obligation to register under the
Securities Act (or equivalent or similar legislation in each relevant
jurisdiction) any of the presently outstanding securities of the
Contributed Companies or any securities of the Contributed Companies that
may be subsequently issued.
(d) Caldera Ownership. Except as set forth in Section 2.2(d) of the
SCO Disclosure Letter, none of SCO or any of its direct or indirect
subsidiaries owns, or will own immediately prior to the Effective Time, any
Caldera Common Stock.
2.3 Authority.
(a) Corporate Action. Subject to approval of this Agreement and the
Ancillary Agreements by SCO's stockholders, SCO and each of the
Contributing Companies have 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 SCO has, as of the date of this Agreement, unanimously (i)
approved and declared advisable this Agreement and the Ancillary Agreements
and has approved the SCO Transaction and the other transactions
contemplated hereby, (ii) determined that the SCO Transaction is consistent
with and in furtherance of the long-term business strategy of SCO and fair
to, and in the best interests of, SCO and its stockholders and (iii)
determined to recommend that the stockholders of SCO adopt and approve this
Agreement and approve the SCO Transaction. Prior to the Effective Time,
this Agreement and the Ancillary Agreements will be approved by the Board
of Directors of each of the other Contributing Companies. This Agreement
has been and, prior to the Effective Time, the Ancillary Agreements will
be, duly executed and delivered by the Contributing Company party to such
agreement. Subject to receiving such stockholder approval, this Agreement
is, or, in the case of each of the Ancillary Agreements will be, a valid
and binding obligation of the Contributing Company party to such agreement,
each enforceable against the Contributing Company party to such agreement
in accordance with its 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
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benefit under, or result in the creation of any Encumbrance upon any of the
Group Assets or Contributed Stock under, any term, condition or provision
of (x) the Certificate of Incorporation or Bylaws or equivalent
organizational documents of any of the Contributing Companies or the
Contributed Companies or any of the Contributed Subsidiaries or (y) any of
the Contributed Contracts or any other loan or credit agreement, note,
bond, mortgage, indenture, lease or other material agreement, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
the Contributed Companies, the Contributed Companies' Property, the
Contributed Stock or the Contributed 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 the Group Business;
or (ii) require the affirmative vote of the holders of greater than a
majority of the issued and outstanding capital stock of any member of the
Contributing Companies or any member of the Contributed Company Group.
(c) Governmental Consents. Except (i) as set forth in Section 2.3(c)
of the SCO 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 the Contributing
Companies 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 Contributing Companies or any member of the
Contributed Company Group in connection with the execution and delivery of
this Agreement or the Ancillary Agreements by SCO or the performance of the
Contributing Companies and the Contributed Companies of the respective
obligations herein pertaining to such company.
2.4 SEC Documents.
(a) SEC Reports. SCO has delivered to Caldera or its counsel correct
and complete copies of the final version of each report, schedule,
registration statement and definitive proxy statement filed by SCO with the
SEC on or after July 1, 1995 with respect to the Group Business or the
Group Assets (the "SCO SEC Documents"), which are the material documents
(other than preliminary proxy material) that SCO was required to file with
the SEC on or after July 1, 1995 with respect to the Group Business or the
Group Assets. As of their respective dates or, in the case of registration
statements, their effective dates, none of the SCO 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 as of such time of filing, and there is no
requirement under the Securities Act or the Exchange Act, as the case may
be, to have amended any such filing, except for such requirements as were
fulfilled by the filing of such SCO SEC Documents, the SCO 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, and SCO
has filed in all material respects all documents and agreements that were
required to be filed as exhibits to the SCO SEC Documents.
(b) SCO Financial Statements; Absence of Undisclosed Liabilities. The
audited consolidated financial statements dated as of and for the period
ending September 30, 1999 and the unaudited consolidated financial
statements dated as of and for the period ending June 30, 2000 of SCO and
its consolidated subsidiaries (the "SCO Consolidated 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)
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and fairly present (subject, in the case of the unaudited statements, to
normal year-end audit adjustments) the consolidated financial position of
SCO and its respective consolidated subsidiaries as at the respective dates
thereof and the consolidated results of its operations and cash flows for
the respective periods then ended. SCO 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 SCO and its consolidated
subsidiaries prepared in accordance with GAAP and which would have a
Material Adverse Effect on the Group Business, except for such liabilities
or obligations as (i) were accrued or provided for in the consolidated
balance sheet at June 30, 2000 included in the SCO Consolidated Financial
Statements as of the date thereof (the "SCO Consolidated Financial
Statements Balance Sheet Date") or (ii) are of a normally recurring nature
and were incurred after the SCO Consolidated 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 SCO Consolidated Financial Statements are, to SCO's Knowledge,
reasonably adequate. At the SCO Consolidated Financial Statements Balance
Sheet Date, there were no material loss contingencies arising from the
conduct of the business of SCO and its consolidated subsidiaries which are
required to be provided for or disclosed, but are not provided for or
disclosed, in the SCO Consolidated Financial Statements.
(c) Group Financial Statements; Absence of Undisclosed
Liabilities. Attached as Schedule 2.4(c)(1) to the SCO Disclosure Letter
are the audited combined financial statements of the Group Business dated
as of and for the period ended June 30, 2000 including a combined balance
sheets as of June 30, 2000 (the "2000 Group Balance Sheet") and a combined
balance sheet for September 30, 1999 and 1998, together with combined
statements of operations, cash flows, and Group Business equity for the two
years and nine months in the period ended September 30, 1999 (collectively
the "Group Financial Statements"). The Group Financial Statements comply in
all material respects with the then applicable accounting requirements and
rules and regulations of the SEC with respect thereto, and present fairly,
in all material respects, the combined financial position of the Group
Business as of September 30, 1999 and June 30, 2000, and the combined
results of its operations and its cash flows for each of the two years and
nine months in the period ended September 30, 1999, in conformity with
GAAP. The Contributed Company Group and the Contributing Companies (with
respect to the Group Business) have no Liabilities of any nature (matured
or unmatured, fixed or contingent) which (i) are related to or arose in
connection with the Group Business; (ii) individually or in the aggregate,
are of a nature required to be recorded on the face of or disclosed in the
notes to the Group Financial Statements; and (iii) are material to the
Group Business taken as a whole, except for such Liabilities as (A) were
accrued, provided for or disclosed in the Group Financial Statements or (B)
are of a normally recurring nature and were incurred after June 30, 2000
(the "Group 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 Group Financial
Statements are, to SCO's Knowledge, reasonably adequate. To SCO's
Knowledge, at the Group Financial Statements Balance Sheet Date, there were
no material loss contingencies which are not properly provided for or
disclosed in the Group Financial Statements.
2.5 Disclosure; Information Supplied. No representation or warranty made
by SCO in this Agreement, nor any final financial statement, certificate or
exhibit prepared and furnished or to be prepared and furnished by it, or its
representatives pursuant hereto or in connection with the transactions
contemplated hereby, 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 SCO 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, any 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.
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2.6 Compliance with Applicable Laws. Except as disclosed in the SCO SEC
Documents filed prior to the date hereof, the Group Business is not being
conducted and no Contributed Company is in violation of any law, ordinance,
regulation, rule or order of any governmental entity where such violation would
have a Material Adverse Effect on the Group Business. Except as disclosed in the
SCO SEC Documents filed prior to the date hereof, neither SCO, any Contributing
Company, nor any member of the Contributed Company Group has been notified in
writing by any governmental entity that any investigation or review with respect
to the Contributed Companies or any of the Contributed Subsidiaries, any of the
Group Assets or the Group Business is pending or threatened, nor has any
governmental entity notified any of them in writing of its intention to conduct
the same. The Group Assets include all permits, licenses and franchises from
governmental entities required for the Conduct of the Group Business, except for
those whose absence would not have a Material Adverse Effect on the Group
Business and those which would terminate as a consequence of the SCO
Transaction.
2.7 Litigation. Except as would not reasonably be expected to have a
Material Adverse Effect on the Group Business or as set forth in Section 2.7 of
the SCO Disclosure Letter or as disclosed in the SCO SEC Documents, there is no
suit, action, arbitration, demand, investigation, claim or proceeding pending
or, to SCO's Knowledge, threatened against the Contributed Company Group, any of
the Contributing Companies or the Group Assets; nor is there any judgment,
decree, injunction, ruling or order of any governmental entity, statutory body
or arbitrator or settlement or compromise agreement outstanding against the
Contributed Company Group or any of the Contributing Companies or the Group
Assets. SCO has delivered or made available to Caldera or its counsel correct
and complete copies of all material correspondence prepared by its counsel for
SCO auditors in connection with the last two completed audits of SCO's Financial
Statements and the audit of the Group Financial Statements and any such
correspondence since the date of the last such audit. No member of the
Contributed Company Group and none of the Contributing Companies is a party to
any decree, judgment, order or arbitration award (or agreement entered into in
any administrative, judicial, investigative or arbitration proceeding with any
governmental authority) with respect to the Group Assets, Employees, or Group
Business that could reasonably be expected to have a Material Adverse Effect on
the Group Business. Except for violations as would not have a Material Adverse
Effect on the Group Business, none of the Contributing Companies nor any member
of the Contributed Company Group is in violation of any decree, judgement, order
or arbitration award that names such company, or any of such companies, as a
party or that otherwise, to SCO's Knowledge, involves such company or any of the
Group Assets, or in violation of any law, ordinance, statute, regulation or EU
directive or decree, order, judgment or ruling of any governmental authority to
which the Group Assets or the Contributed Stock 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, disability and age discrimination. To SCO's Knowledge, there is
no claim, action, suit, arbitration, mediation, investigation or other
proceeding of any nature pending or, threatened, at law or in equity, by way of
arbitration or before any court, tribunal, governmental department, statutory
body, 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 the Contributing Companies' or the Contributed Companies' right, title
or ownership of any of the Group Assets or the Contributed Stock or seeks to
impose an Encumbrance (other than a Group Permitted Encumbrance) on, or a
transfer of title or ownership of, any of the Group Assets or the Contributed
Stock; (iii) asserts that any action taken by any employee, consultant or
contractor of the Contributed Companies or Contributing Companies 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 Group Business; (v) seeks to enjoin, prevent, or hinder the consummation of
any of the transactions contemplated by this Agreement or any of the Ancillary
Agreements; (vi) would impair or have an adverse affect on Newco's right or
ability to use or exploit any of the Group Assets; (vii) involves or relates to
any potentially material claim against Contributing Companies or the Group
Assets by any creditor thereof; or (viii) involves any claim of fraudulent
conveyance or any similar claim, except in cases (ii), (iii), (iv), (vi) and
(vii) where such proceeding could not reasonably be expected to have a Material
Adverse Effect on Newco.
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2.8 ERISA and Other Compliance.
(a) Section 2.8 of the SCO Disclosure Letter lists each employment,
severance, compensation or other similar contract, arrangement or policy
and each plan or arrangement (written or oral, contractual or
discretionary) providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, severance benefits,
disability or permanent health insurance benefits, death benefits,
hospitalization or other medical benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, commissions, stock options, stock
purchase, phantom stock, stock appreciation, save as you earn or other
forms of incentive compensation or post-retirement insurance, compensation
or benefits for employees, consultants or directors (other than workers
compensation, unemployment compensation and other government mandated
programs) which both (A) is entered into, maintained or contributed to, as
the case may be, by any member of the Contributed Company Group or any of
the Contributing Companies, and (B) covers any Employee (collectively as
the "Group Benefit Arrangements"). Each Group Benefit Arrangement
maintained by any member of the Contributed Company Group has been
maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Group Benefit Arrangement except as would not have a
Material Adverse Effect on the Group Business. Section 2.8(a) of the SCO
Disclosure Letter also identifies each "employee benefit plan," as defined
in Section 3(3) of ERISA ("Employee Benefit Plan"), in which any of the
Employees participate (collectively, the "Group Employee Plans"). Copies of
all Group Benefit Arrangements have been made available to Caldera or its
counsel. All contributions or premiums currently due and payable with
respect to any of the Group Employee Plans have been made as required under
ERISA or have been accrued on the 2000 Group Balance Sheet or will be made
prior to the Effective Time. Any Contributed Company Employee Plan intended
to be qualified under Section 401(a) of the Code has either obtained from
the Internal Revenue Service a favorable determination letter as to its
qualified status under the Code, including all amendments to the Code
effected by the Tax Reform Act of 1986, or has applied to the Internal
Revenue Service for such a determination letter prior to the expiration of
the requisite period under applicable Treasury Regulations or Internal
Revenue Service pronouncements in which to apply for such determination
letter and to make any amendments necessary to obtain a favorable
determination or has been established under a standardized prototype plan
for which an Internal Revenue Service opinion letter has been obtained by
the plan sponsor and is valid as to the adopting employer. Each Contributed
Company has made available upon Newco's request the most recent Internal
Revenue Service determination or opinion letter issued with respect to each
such Contributed Company Employee Plan, and nothing has occurred since the
issuance of each such letter which could reasonably be expected to cause
the loss of the tax-qualified status of any Contributed Company Employee
Plan subject to Code Section 401(a).
(b) None of the Group Employee Plans maintained by any of the
Contributing Companies or any member of the Contributed Company Group (i)
is a multiemployer plan, within the meaning of Section 3(37) or 4001(a)(3)
of ERISA (a "Multiemployer Plan"), or a single employer pension plan,
within the meaning of Section 4001(a)(15) of ERISA, for which Newco could
incur liability under Section 4063 or 4064 of ERISA (a "Multiple Employer
Plan"), or (ii) provides or promises to provide retiree medical or life
insurance benefits except in connection with (a) benefit coverage mandated
by applicable law, including without limitation, coverage provided pursuant
to Section 4980B of the Code; (b) death or disability benefits under any of
the Group Benefit Arrangements; (c) benefits arising in connection with a
separation or severance program, plan or arrangement; and (d) life
insurance benefits for any employee who dies while in service with any of
the Contributing Companies or any member of the Contributed Company Group.
None of the Contributing Companies or any member of the Contributed Company
Group has incurred or will incur prior to or as of the Effective Time any
material liability under, arising out of or by operation of Title IV of
ERISA (other than liability for premiums to the Pension Benefit Guaranty
Corporation arising in the ordinary course), including any liability in
connection with (i) the termination or
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reorganization of any employee pension benefit plan subject to Title IV of
ERISA or (ii) with withdrawal from any Multiemployer Plan or Multiple
Employer Plan.
(c) The appropriate Contributing Company or Contributed Company has
timely provided, or will have provided prior to the Effective Time, to
Employees entitled thereto all required notices and made coverage available
pursuant to Section 4980B of the Internal Revenue Code and the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), with
respect to any "qualifying event" (as defined in Section 4980B(f)(3) of the
Internal Revenue Code). The appropriate Contributing Company or Contributed
Company will timely provide to Employees entitled thereto all required
notices and make coverage available pursuant to Internal Revenue Code
Section 4980B and COBRA with respect to any "qualifying event" (as defined
in Section 4980B(f)(3) of the Internal Revenue Code) occurring prior to and
including the Effective Time. No material Tax payable on account of Section
4980B of the Internal Revenue Code has been incurred by the Contributing
Companies or any of the Contributed Companies with respect to any current
Employees (or its beneficiaries).
(d) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other
service provider of the Contributed Companies or the Contributing Companies
to severance benefits or any other payment or (ii) accelerate the time of
payment or vesting (including any SCO Option or unvested shares of SCO
Common Stock), or increase the amount of compensation due any such employee
or other service provider. No payment or benefit payable or which may
become payable by any of the Contributed Companies or by any of the
Contributing Companies with respect to any current or former employee, or
other current or former service provider shall constitute a "parachute
payment" (as defined in Section 280G(b)(2) of the Internal Revenue Code).
Within five (5) business days following the date of this Agreement, SCO
shall identity in Section 2.8 of the SCO Disclosure Letter all persons on
the Section 11.1 Schedule who SCO reasonably believes are, as of the date
of this Agreement, "disqualified individuals" (within the meaning of
Section 280G of the Code and the regulations promulgated thereunder) with
respect to the Contributing Companies or the Contributed Companies. Within
five (5) business days prior to the expected Closing Date, SCO shall revise
Section 2.8 of the SCO Disclosure Letter to reflect any additional
information which SCO reasonably believes would impact the determination of
persons who are of such date "disqualified individuals" (within the meaning
of Section 280G of the Code and the regulations promulgated thereunder).
(e) To SCO's Knowledge, no Employee who is a key developer of a Group
Product is subject to any agreement, obligation, order or other legal
hindrance that impedes or might impede such Employee from devoting his or
her full business time to the affairs of Newco after the Effective Time.
(f) None of the Contributed Companies are indebted to any executive
officer or director of any such Contributed Company, whether by loan,
advance or otherwise, other than for salaries accrued but not yet payable
and reimbursable out-of-pocket expenses incurred in the ordinary course of
business consistent with past practice and not yet payable, nor, except as
described in Section 2.8(f) to the SCO Disclosure Letter or except as
disclosed in the 2000 Group Balance Sheet or the SCO SEC Documents, is any
officer, director, employee or shareholder so indebted to any of SCO or any
of the Contributed Companies, nor does any Employee have any right to force
SCO or any Contributing Company to repurchase any stock.
(g) The Contributed Company Group and the Contributing Companies are
in compliance in all material respects with all currently applicable laws
and regulations, domestic or foreign, respecting employment, discrimination
in employment, terms and conditions of employment, wages, hours,
governmental and administrative contribution requirements and occupational
safety and health and employment practices, and is not engaged in any
unfair labor practice with respect to the Employees in each of the
countries where the Contributed Company Group and the Contributing
Companies have employees. The Contributed Company Group and the
Contributing Companies have withheld all amounts required by law or by
agreement to be withheld from the wages, salaries, and other payments
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to Employees; and is not liable for any arrears of wages or any taxes or
any penalty for failure to comply with any of the foregoing. The
Contributing Company Group and the Contributing Companies are not liable
for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation
benefits, social security or other benefits or obligations for Employees
(other than routine payments to be made in the normal course of business
and consistent with past practice). There are no pending claims against the
Contributed Company Group and the Contributing Companies under any workers
compensation plan, policy, statute or regulation or any other plan or
policy to which the Contributed Company Group and/or any Contributing
Company are parties or for long term disability. There are no controversies
or disputes pending or, to the knowledge of the Contributed Company Group
and the Contributing Companies, threatened, between the Contributed Company
Group and the Contributing Companies and any of their respective employees,
which controversies have or could reasonably be expected to result in an
action, suit, proceeding, claim, arbitration or investigation before any
agency, court or tribunal, foreign or domestic. None of the Contributed
Company Group or the Contributing Companies is a party to any collective
bargaining agreement or other labor union contract nor does the Contributed
Company Group and the Contributing Companies know of any activities or
proceedings of any labor union to organize any such Employees. To SCO's
knowledge, no Employees of the Contributed Company Group and the
Contributing Companies are in violation of any term of any employment
contract, patent disclosure agreement, enforceable noncompetition
agreement, or any enforceable restrictive covenant to a former employer
relating to the right of any such Employee to be employed by SCO because of
the nature of the business conducted or presently proposed to be conducted
by SCO or to the use of trade secrets or proprietary information of others.
(h) Section 2.8(h) of the SCO Disclosure Letter lists, with respect to
any member of the Contributed Company Group or any of the Contributing
Companies, all employee benefit plans, programs or arrangements for
employees who work outside the United States ("Foreign Employee Plans").
Except as disclosed in Section 2.8(h) of the SCO Disclosure Letter, no
member of the Contributed Company Group or any of the Contributing
Companies maintains any Foreign Employee Plans other than those required by
applicable law. SCO has furnished or made available to Caldera a copy of
each of the Foreign Employee Plans. Each Foreign Employee Plan has been
operated and administered in accordance with its terms and applicable laws,
rules and regulations.
2.9 Absence of Certain Changes or Events. Except as disclosed in Section
2.9 of the SCO Disclosure Letter, since the Group 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 the Group Business;
(b) any amendments or changes in the Certificate of Incorporation or
Bylaws (or similar or equivalent governing documents on each relevant
jurisdiction) of any member of the Contributed Company Group;
(c) any damage, destruction or loss to or of the Group Assets not
covered by insurance, which would have a Material Adverse Effect on the
Group Business;
(d) any redemption, repurchase or other acquisition of shares of any
member of the Contributed Company Group, or any declaration, setting aside
or payment of any dividend or other distribution by any Contributing
Company or any member of the Contributed Company Group to any entity other
than a member of the Contributed Company Group (whether in cash, stock or
property) of the Group Assets or any proceeds generated by the conduct of
the Group Business;
(e) any material increase in or modification of the compensation or
benefits payable, or to become payable, by the Contributed Companies to the
Employees, except in the ordinary course of the business, consistent with
past practice or except as necessary to respond to third party solicitation
of Employees,
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(f) other than as required by applicable statute or governmental
regulation, any material increase in or modification of any Group Benefit
Arrangement (including, but not limited to, the granting of stock options,
the acceleration of the vesting schedules in effect for 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 Employees, other
than increases or modifications occurring after the date hereof, which are
authorized pursuant to Section 4.3 below;
(g) any sale of a material amount of the Group Assets, or any
acquisition by any member of the Contributed Company Group of a material
amount of assets;
(h) any stock/share capital being allotted or issued or agreed to be
allotted or issued or any alteration in any term of any outstanding capital
stock or rights to acquire capital stock, share or loan capital of any
member of the Contributed Company Group, including, but not limited to,
acceleration of the vesting or any change in the terms of any outstanding
stock options;
(i) (A) any incurrence, assumption or guarantee by any member of the
Contributed Company Group of any debt of any person, other than any member
of the Contributed Company Group, for borrowed money in an amount exceeding
$250,000 in the aggregate; (B) issuance or sale by any member of the
Contributed Company Group of any securities convertible into or
exchangeable for their respective debt securities; or (C) issuance or sale
of options or other rights to acquire from SCO or the Contributed Company
Group, directly or indirectly, debt securities of any member of the
Contributed Company Group, or any securities convertible into or
exchangeable for any such debt securities;
(j) any creation or assumption by a Contributing Company or a member
of the Contributed Company Group of any Encumbrance (other than Group
Permitted Encumbrances) on any Group Asset in excess of $250,000
individually or in the aggregate, other than to refinance a liability
reflected in the SCO Financial Statements or the Group Financial Statements
in the ordinary course of business;
(k) any making by any member of the Contributed Company Group of any
loan, advance or capital contribution to or investment in any person other
than to refinance a liability reflected in the SCO Financial Statements or
the Group 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 any such items
outstanding at any time does not exceed $250,000;
(l) any amendment of, relinquishment, termination or non-renewal by
the Contributing Companies or the Contributed Company Group of any
Contributed Contract, other than in the ordinary course of business
consistent with past practice;
(m) any transfer or grant of a right under Intellectual Property
Rights included in the Group Assets, except in the ordinary course of
business, consistent with past practice,
(n) any labor dispute with, or charge of unfair labor practice by, SCO
(relating to Employees) or any member of the Contributed Company Group
(other than routine individual grievances), any activity or proceeding by a
labor union or representative thereof to organize any Employees or, to
SCO's Knowledge, any campaign being conducted to solicit authorization from
Employees to be represented by such labor union, where such dispute,
practice, activity, proceeding, or campaign would have a Material Adverse
Effect on the Group Business;
(o) any change in accounting methods;
(p) any agreement by any member of the Contributed Company 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).
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2.10 Full Force and Effect. Each of the Contributed Contracts and Group
Governmental Permits is in full force and effect and is not subject to any
breach or default thereunder by any Contributing Company or any member of the
Contributed Company Group or, to SCO's Knowledge, any other party thereto,
except for those Contributed Contracts and Group Governmental Permits, the
absence of which would not have a Material Adverse Effect on the Group Business.
2.11 Agreements. Section 2.11 of the SCO Disclosure Letter lists all the
contracts as of the date hereof of the type described below to which any member
of the Contributed Company Group is a party and which is material to the Group
Business (herein, the "Material Contributed Contracts") (and copies of all such
Material Contributed Contracts have been identified to and made available for
review by Caldera or its counsel):
(a) contract with or commitment to any labor union which would have a
Material Adverse Effect on the Group Business;
(b) continuing contract for the future purchase, sale or manufacture
of products, material, supplies, equipment or services requiring payment to
or from any member of the Contributed Company Group or any Contributing
Company, the non-continuance of which would have a Material Adverse Effect
on the Group Business, or in which any member of the Contributed Company
Group or any Contributing Company has granted or received manufacturing
rights, most favored nations pricing provisions or exclusive marketing
rights relating to the Group Products, other than purchase contracts with
vendors who are not the top ten (10) vendors of any member of the
Contributed Company Group or of any Contributing Companies (as measured by
purchases from them in the most recently ended fiscal year);
(c) contract providing for the development of technology used or
incorporated in any Group Products currently distributed in connection with
the Group Business or which requires any member of the Contributed Company
Group to perform specified development work for a third party, the non-
continuance of which would have a Material Adverse Effect on the Group
Business;
(d) joint venture contract or agreement or other agreement which is
reasonably expected to involve a sharing of profits or losses in any one
year in excess of $100,000 individually or in the aggregate from any joint
enterprise with any party (other than any member of the Contributed Company
Group);
(e) indenture, mortgage, promissory note, loan agreement, guarantee or
other agreement or commitment for the borrowing of money, for a line of
credit or for a leasing transaction of a type required to be capitalized
(other than those reflected in the SCO Financial Statements or the Group
Financial Statements, or those pursuant to which payments by any member of
the Contributed Company Group will not exceed $50,000 individually or
$250,000 in the aggregate);
(f) agreement or arrangement for the sale of any Group Assets having a
value individually or in the aggregate exceeding $100,000 (other than those
entered into in the ordinary course of business consistent with past
practice);
(g) agreement which would restrict Newco from engaging in any material
aspect of the Group Business or from selling any of the material Group
Products in any material geographic area (including any agreement pursuant
to which any of them has granted exclusive rights in the Group Products to
a third party);
(h) SCO IP Rights Agreement (as defined in Section 2.15 below), other
than agreements entered into with customers in the ordinary course of
business; or
(i) agreement between or among SCO and any member of the Contributed
Company Group regarding inter-company loans, revenue or cost or Tax
sharing, ownership or license of SCO IP Rights for Group Products, or
intercompany royalties or dividends.
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2.12 No Defaults. Notwithstanding Section 1.4(c), there exists no event
(including closing of the transactions contemplated by this Agreement),
condition or occurrence which, after notice or lapse of time, or both, would
constitute a default by the Contributing Companies who are parties thereto under
any Contributed Contract in any manner which would have a Material Adverse
Effect on the Group Business.
2.13 Certain Agreements. Neither the execution and delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby, will, (i) result in any payment in an amount
exceeding $50,000 individually or $250,000 in the aggregate (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due by any member of the Contributed Company Group (or by
any Contributing Company, with respect to the Group Business) or to any
Employee(s) or other current or former service provider under any Group Benefit
Arrangement or otherwise, (ii) increase any benefits otherwise payable by Newco
under any Group Benefit Arrangement by more than $50,000 individually or
$250,000 in the aggregate, or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
2.14 Taxes. SCO and each of its subsidiaries have properly completed and
timely filed, or caused to be properly completed and timely filed, all Tax
returns required to be filed by them and have paid, or caused to be paid, all
Taxes that are shown on such Tax returns as due and payable. All Taxes of SCO
and its subsidiaries for all periods through June 30, 2000, have been fully paid
(except for Taxes that are adequately provided for or reflected in the SCO
Consolidated Financial Statements). Since June 30, 2000, no material Tax
liability has been assessed, or is, to SCO's Knowledge, proposed to be assessed,
incurred or accrued (other than liabilities for Taxes arising in the ordinary
course of business) against SCO or any of its subsidiaries. To SCO's Knowledge,
neither SCO nor any of its subsidiaries has received any 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 2.14, and no unexpired waivers of statutes
of limitations have been given or requested with respect to Tax returns or Taxes
of SCO and its consolidated subsidiaries. No taxing authority is currently
conducting an audit or investigation of any of the aforesaid Tax returns or to
SCO's Knowledge is about to conduct such an audit or investigation 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, provincial 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 SCO Consolidated Financial
Statements, and, to SCO's Knowledge, no proposed (but unassessed) additional
Taxes have been asserted and no Tax liens have been filed against SCO or any of
its subsidiaries other than for Taxes not yet due and payable. Neither SCO nor
any member of the Contributed Company 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;
(b) If any of the capital assets of the UK Contributed Companies were
disposed of for a consideration equal to the book value of that asset in or
adopted for the purposes of the SCO Consolidated Financial Statements, no
liability to corporation tax on chargeable gains or balancing charge under
the Capital Allowances Act 1990 would arise (for this purpose there shall
be disregarded any relief or allowance available to the UK Contributed
Companies (other than amounts falling to be deducted from the consideration
receivable under section 38 of the TCGA)). No chargeable gain or balancing
charge would arise on the disposal by the Contributing Company of any asset
acquired since the SCO Consolidated Financial Statements Date for a
consideration equal to the consideration actually given for the acquisition
of such asset (disregarding any indexation relief);
(c) The UK Contributed Companies have not entered into any
transaction, contract or arrangement, whether verbal or written and whether
made within or outside the UK, under which it has or may become liable to
pay or to account for stamp duty or stamp duty reserve tax and which
liability remains unsatisfied;
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(d) The UK Contributed Companies have not entered into any indemnity,
guarantee, covenant, charge or other agreement under which they have agreed
to, or can be procured to pay a sum equivalent to or by reference to
another person's liability to Tax, nor do any other circumstances exist
whereby the Contributed Companies would have to make such a payment;
(e) All reliefs assumed as an asset or otherwise taken into account in
the SCO Consolidated Financial Statements are available to be utilized by
the UK Contributed Companies at Closing;
(f) The UK Contributing Companies have never been members of a group
of companies for UK tax purposes other than a group comprising only the UK
Contributing Companies;
(g) The provisions of Part XV of the UK Value Added Tax Regulations
1995 (capital goods scheme) do not apply to any of the UK Contributed
Assets;
(h) No election has been nor will before Closing be made pursuant to
paragraph 2 of Schedule 10 to the Value Added Tax Act 1994 ("VATA 1994") in
relation to any of the UK Properties or any part of any of them;
(i) All UK value added tax payable upon the importation of goods, and
all excise duties payable to HM Customs and Excise payable in respect of
the UK Contributed Assets have been paid in full, and none of the UK
Contributed Assets is liable to confiscation, forfeiture or distress;
(j) All documents (other than those which have ceased to have any
legal effect) to which the UK Contributed Companies or any member of the UK
Contributed Companies group of companies is a party and which are material
to the title of the UK Contributed Assets have been duly stamped and no
such documents which are outside the UK would attract stamp duty if they
were bought into the UK;
(k) All National Insurance and sums payable by the UK Contributed
Companies to the UK Inland Revenue under the PAYE system have been duly and
properly paid. Proper records have been maintained in respect of all such
matters.
(l) There is no unsatisfied liability to capital transfer tax or
inheritance tax attached or attributable to any of the UK Contributed
Assets and none of the UK Contributed Assets are, or are likely to be,
subject to an Inland Revenue charge as mentioned in Section 237 of the
Inheritance Tax Act 1984; and
(m) No person is liable to capital transfer tax or inheritance tax
attributable to the value of any of the UK Contributed Assets in
consequence no person has the power under Section 212 of the Inheritance
Tax Act 1984 to raise the amount of such tax by the sale or mortgage of or
by a charge on any of the UK Contributed Assets.
2.15 Intellectual Property.
(a) The Contributed Companies and, insofar as it relates to the Group
Business, the Contributing Companies own, or have the right to use, sell or
license such Intellectual Property Rights as are necessary or required for
the Conduct of the Group Business (such Intellectual Property Rights being
hereinafter collectively referred to as the "SCO IP Rights") and such
ownership or rights to use, sell or license are reasonably sufficient for
the Conduct of the Group 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 the Group Business.
(b) All SCO IP Rights are owned free and clear of any Encumbrances
(other than Group Permitted Encumbrances).
(c) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any material instrument or material agreement in respect
of any SCO IP Rights licensed by or to any Contributing Company or
Contributed Company (the "SCO IP Rights Agreements"), will not cause the
forfeiture or termination
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or give rise to a right of forfeiture or termination of any SCO IP Right or
materially impair the right of Newco to use, sell or license any SCO IP
Right or portion thereof (except where such breach, forfeiture, termination
or impairment would not have a Material Adverse Effect on the Group
Business).
(d) There are no royalties, honoraria, fees or other payments payable
by any member of the Contributed Company Group or any Contributing Company
to any person by reason of the ownership, use, license, purchase, sale or
disposition or acquisition of any of the SCO IP Rights in an amount
exceeding $100,000 in any one year.
(e) To SCO's Knowledge, no third party is infringing or
misappropriating any of the SCO IP Rights.
(f) To SCO's Knowledge, (i) neither the manufacture, marketing,
license, sale or intended use of any Group Product 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 SCO IP Right, and (iii) no third party has notified the
Contributing Companies or the Contributed Company Group that any SCO 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 the Group Business.
(g) The Contributing Companies and the Contributed Company Group have
taken reasonable and practicable steps designed to safeguard and maintain
the secrecy and confidentiality of, and its proprietary rights in, all
material trade secrets or other confidential information constituting SCO
IP Rights. To SCO's Knowledge, no current or prior officers, employees or
consultants of the Contributing Companies or the Contributed Company Group
claim an ownership interest in or have a lien on any SCO IP Rights or any
form of compensation out of the ordinary course of business as a result of
having been involved in the development of such property while so employed,
or retained, or otherwise. To SCO's Knowledge, all development employees of
the SCO IP Rights, and all other officers, employees and consultants of the
Contributed Company Group have executed and delivered an agreement
regarding the protection of proprietary information and the assignment to
his/her employer or principal of the SCO IP Rights arising from the
services performed by such persons, except where this absence of such
agreement would not have a Material Adverse Effect on the Group Business.
(h) Section 2.15(h) of the SCO Disclosure Letter lists each license,
sublicense, agreement or other permission pursuant to which SCO or the
Contributed Business Group is entitled to use third party IP Rights
(excluding shrink wrap licenses to commercially available software sold at
retail) as of the date hereof, the absence of which would have a Material
Adverse Effect on the Group Business that a third party owns and that SCO
or the Contributed Business Group uses pursuant to a license, sublicense,
agreement or other permission, and describes and identifies such license,
sublicense, agreement or other permission (excluding shrink wrap licenses
to commercially available software sold at retail). Such license,
sublicense, agreement or permission covering the item is legal, valid,
binding, enforceable and in full force and effect and will continue to be
legal, valid, binding, enforceable and in full force and effect on
identical terms to Newco's benefit immediately following the Effective
Time, except where it would not have a Material Adverse Effect on Newco,
and such license, sublicense, agreement or permission does not restrict the
ability to market any material Group Product in any material jurisdiction
or with respect to any material market or industry, and neither SCO nor the
Contributed Company Group is in breach or default of any such license,
sublicense, agreement or permission in a manner which would have a Material
Adverse Effect on the Group Business. No person other than the Contributing
Companies holds any license or other right to manufacture, modify, or
create derivative works of any of the Group Products, other than OEM
agreements that would not have a Material Adverse Effect on the Group
Business. No person (other than Newco) will be or become entitled to
receive a copy of source code of any software included among the Group
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Assets as a result of this Agreement, any Ancillary Agreement or any other
agreement or transaction contemplated by this Agreement. Except as
disclosed in Section 2.15(h) of the SCO Disclosure Letter, to SCO's
Knowledge, no person holds or has been granted access to any copy of source
code of any software included among the Group Assets unless such person has
agreed in writing (i) to hold such source code in confidence and take
reasonable steps to preserve the secrecy of such source code, and (ii) not
to use such source code for any purpose except (A) to support such person's
internal use of such source code or (B) to modify such source code solely
for the purpose of internally using such modifications. None of SCO or the
Contributed Companies have knowingly taken or knowingly failed to take any
action that, directly or indirectly, has caused any Intellectual Property
Rights in source code of material Group Products to enter the public
domain, such as would have a Material Adverse Effect on the Group Business.
2.16 Fees and Expenses. Except for the fees and expenses set forth in
SCO's engagement letter with Chase HQ, a copy of which has been provided to
Caldera, no member of the Contributed Company Group and none of the Contributing
Companies 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.
2.17 Insurance. The members of the Contributed Company Group maintain
fire and casualty, general liability, business interruption, directors and
officers, product liability and sprinkler and water damage insurance that they
believe to be reasonable for its respective businesses.
2.18 Ownership of Property. Except for Group Permitted Encumbrances, the
Contributed Company Group and the Contributing Companies own, or at the
Effective Time will own, the Contributed Company Assets, free and clear of all
Encumbrances. All real and personal property included in the Group Assets is in
good working condition and suitable for its intended use, subject to ordinary
wear and tear. To SCO's Knowledge, no member of the Contributed Company Group is
in violation in any material respect with any zoning, building or safety
ordinance, regulation or requirement or other law or regulation applicable to
the operation of its respective owned or leased properties.
2.19 Environmental Matters.
(a) During the period that the Contributed Companies and the
Contributing Companies (with respect to the Group Assets or any real estate
leased thereunder) have leased or owned its respective properties or owned
or operated its respective facilities, there have been, to SCO'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 SCO'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 said Member of the Contributed Company Group or the
Contributing Companies (with respect to the Group Assets or any real estate
leased thereunder) 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 which are Group Assets is or
has been the subject of an Environmental Violation, which would cause a
Material Adverse Effect on Newco. During the time that a Member of the
Contributed Company Group or the Contributing Companies (with respect to
the Group Assets or any real estate leased thereunder) owned or leased its
respective properties and facilities, none of said companies and, to SCO's
Knowledge, no third party, 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 member of the Contributed Company Group
and the Contributing Companies (with respect to the Group Assets or any
real estate leased thereunder) owned or leased its respective properties
and facilities, to SCO's Knowledge, there has been no litigation brought or
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threatened against any such Company, or any settlement reached by any such
Company 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.
2.20 Interested Party Transactions. Except as disclosed in the SCO SEC
Documents, no officer or director of a Contributing Company, or any "affiliate"
or "associate" (as those terms are defined in Rule 405 promulgated under the
Securities Act) of a Contributing Company has, either directly or indirectly, a
material interest in: (i) any person or entity which purchases from or sells,
licenses or furnishes to the Contributed Company Group in connection with the
Group Business, any goods, property, technology or intellectual or other
property rights or services; or (ii) any Contributed Contract; which, in the
case of either subpart (i) or (ii) would have a Material Adverse Effect on the
Group Business.
2.21 Fairness Opinion. SCO's Board of Directors has received an opinion
dated as of the date hereof from Chase HQ to the effect that, as of the date
hereof, the terms of the transactions contemplated by this Agreement and the
Ancillary Agreements are fair to SCO from a financial point of view.
2.22 Title to and Condition and Sufficiency of Group Assets. A member of
the Contributed Company Group and/or a Contributing Company owns or at the
Closing will own the Group Assets and have good and marketable title thereto,
free and clear of all Encumbrances whatsoever, other than the Group Permitted
Encumbrances. The Group Assets transferred to Newco constitute all assets,
properties, rights, contracts and Intellectual Property Rights that are
necessary or required for the Conduct of the Group Business as currently
conducted, without (i) the need to purchase, license or acquire any other
material asset or property; (ii) violating any contractual rights of any third
party; or (iii) infringing, misappropriating or misusing any software or
Intellectual Property Rights of any third party, except for such assets,
properties, rights, contracts, software and Intellectual Property Rights, the
absence of which, individually or in the aggregate, would not have a Material
Adverse Effect on the Group Business. Title to all Group Assets is freely
transferable to and, with respect to the Contributed Assets and Contributed
Stock, will be transferred to Newco free and clear of all Encumbrances, other
than Group Permitted Encumbrances. Such transfer of the Contributed Assets and
Contributed Stock can occur without obtaining the consent or approval of any
person, except where the failure to transfer the Group Asset would not have a
Material Adverse Effect on Newco. At the Closing, the Contributing Companies
will contribute, transfer and deliver to Newco all right, title and interest in
and to all Contributed Assets and Contributed Stock, free and clear of all
Encumbrances, other than Group Permitted Encumbrances.
2.23 No Restrictive Agreements. Other than this Agreement and the
Ancillary Agreements, neither any Member of the Contributed Company Group nor
SCO nor any of the Group Assets is bound, or materially and adversely affected
by, any judgment, injunction, order, decree, contract, covenant or agreement
(noncompete or otherwise) that restricts or prohibits (or purports to restrict
or prohibit) the Conduct of the Group Business or from competing for the sale of
the Group Products anywhere in the world (including without limitation any
contracts, covenants or agreements restricting the geographic area in which the
Group Business may sell, license, market, distribute or support any Group
Products) or restricting the markets, customers or industries that Newco may
address after the Closing in the Conduct of the Group Business (collectively,
"Group Restrictive Agreements"), in a manner, in any of the foregoing cases,
which will have a Material Adverse Effect on Newco.
2.24 Supplier and Customer Relationships. To SCO's Knowledge, (i) the
Contributed Company Group has good commercial working relationships with the
customers for the Group Business, and (ii) since January 1, 2000 no customer of,
or supplier to the Group Business has cancelled or otherwise terminated any
material relationship concerning the Group Business with the Contributed Company
Group or SCO (with respect to the Group), or materially decreased or limited its
purchases or provision of materials supplied to the Group Business or under any
Material Contributed Contract from the corresponding period in 1999, where any
of the foregoing actions would cause a Material Adverse Effect
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on the Group Business, and to SCO's Knowledge, no such customer or supplier has
threatened to take any such action.
2.25 Product and Inventory Status.
(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.
2.29 Grants. 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
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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.
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(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.
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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.
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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;
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(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
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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
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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
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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.
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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 result 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;
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(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 Section 8.1,
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.
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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.
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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
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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.
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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
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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
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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
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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.
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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
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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
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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).
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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.
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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: (831) 427-5454
With a copy to: Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Michael Danaher
Telecopier: (650) 493-6811
And if to Caldera or Newco to: Caldera Systems, Inc.
240 West Center Street
Orem, Utah 84057
Attention: Chief Executive Officer
Telecopier: (801) 765-1313
With a copy to: Brobeck, Phleger & Harrison LLP
370 Interlocken Boulevard, Suite 500
Broomfield, Colorado 80021
Attention: John E. Hayes, III
Telecopier: (303) 410-2199
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.
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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).
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"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,
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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).
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"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).
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"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
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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
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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
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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.
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"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).
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"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]
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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]
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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
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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]
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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 MICHELS
----------------------------------
Douglas Michels
President and Chief Executive
Officer
CALDERA SYSTEMS, INC.
a Delaware corporation
By: /s/ RANSOM LOVE
----------------------------------
Ransom Love
Chief Executive Officer
CALDERA, INC.
a Delaware corporation
By: /s/ RANSOM LOVE
----------------------------------
Ransom Love
Chief Executive Officer
[SIGNATURE PAGE TO AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION]
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