Agreement and Plan of Reorganization - Caldera Systems Inc., Caldera Holdings Inc. and The Santa Cruz Operation Inc.
EXECUTION COPY
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
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TABLE OF CONTENTS
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1. PLAN OF REORGANIZATION......................................................................2
1.1 The Organization of Newco and Merger Sub .................................2
1.2 The Merger. ..............................................................2
1.3 SCO Transaction ..........................................................3
1.4 Contribution and Transfer of Contributed Stock and Contributed Assets.....4
1.5 Closing Matters ..........................................................7
1.6 Dissenter's Rights........................................................7
1.7 Newco Plans ..............................................................7
1.8 Registration on Form S-8..................................................7
1.9 Effects of the Caldera Merger.............................................8
1.10 Tax-Free Reorganization...................................................8
1.11 Tax-Free Section 351 Transaction..........................................8
1.12 HSR Filings ..............................................................9
1.13 Board of Directors and Officers of Newco; Newco Certificate of
Incorporation and Bylaws..................................................9
1.14 Registration on Form S-4..................................................10
2. REPRESENTATIONS AND WARRANTIES OF SCO.......................................................10
2.1 Organization; Good Standing; Qualification and Power......................10
2.2 Capital Structure ........................................................10
2.3 Authority ................................................................11
2.4 SEC Documents ............................................................13
2.5 Disclosure; Information Supplied..........................................14
2.6 Compliance with Applicable Laws...........................................14
2.7 Litigation ...............................................................15
2.8 ERISA and Other Compliance................................................16
2.9 Absence of Certain Changes or Events......................................19
2.10 Full Force and Effect.....................................................21
2.11 Agreements ...............................................................21
2.12 No Defaults ..............................................................22
2.13 Certain Agreements........................................................22
2.14 Taxes ....................................................................22
2.15 Intellectual Property.....................................................24
2.16 Fees and Expenses ........................................................26
2.17 Insurance ................................................................26
2.18 Ownership of Property.....................................................26
2.19 Environmental Matters.....................................................26
2.20 Interested Party Transactions.............................................27
2.21 Fairness Opinion .........................................................27
2.22 Title to and Condition and Sufficiency of Group Assets....................27
2.23 No Restrictive Agreements.................................................28
2.24 Supplier and Customer Relationships.......................................28
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2.25 Product and Inventory Status..............................................28
2.26 Affirmative Vote .........................................................29
2.27 State Takeover Statutes...................................................29
2.28 Competition and Fair Trading Laws.........................................29
2.29 Grants ...................................................................29
3. REPRESENTATIONS AND WARRANTIES OF CALDERA AND NEWCO.........................................30
3.1 Organization; Good Standing; Qualification and Power......................30
3.2 Capital Structure ........................................................30
3.3 Authority ................................................................31
3.4 SEC Documents ............................................................32
3.5 Disclosure; Information Supplied..........................................33
3.6 Vote Required ............................................................33
3.7 Litigation ...............................................................33
3.8 Valid Issuance ...........................................................34
3.9 Absence of Certain Changes or Events......................................34
3.10 Taxes ....................................................................36
3.11 Intellectual Property.....................................................37
3.12 Fees and Expenses ........................................................37
3.13 Environmental Matters.....................................................37
3.14 Fairness Opinion .........................................................38
3.15 Tax Representations.......................................................38
4. SCO COVENANTS...............................................................................38
4.1 Advice of Changes ........................................................38
4.2 Maintenance of Business...................................................38
4.3 Conduct of Business.......................................................39
4.4 SCO Corporate Approvals...................................................40
4.5 Letter of SCO's Accountants...............................................40
4.6 Prospectus/Proxy Statement................................................40
4.7 Regulatory Approvals......................................................41
4.8 Necessary Consents........................................................42
4.9 Access to Information.....................................................42
4.10 Satisfaction of Conditions Precedent......................................42
4.11 Voting Agreement .........................................................42
4.12 Sales Representative and Support Agreement................................42
4.13 Stockholders Agreement....................................................42
4.14 No Other Negotiations.....................................................43
4.15 Books and Records ........................................................44
4.16 [Intentionally Omitted.]..................................................44
4.17 Modification of Joint Contributed Agreements and Shared Contributed
Assets....................................................................44
4.18 Key Employee Employment Agreements........................................45
4.19 SCO IP Rights ............................................................45
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4.20 Directors' and Officers' Liability Insurance..............................45
4.21 Closing Group Account.....................................................45
4.22 SCO Retained Business.....................................................45
4.23 Taking of Necessary Action; Further Action................................46
4.24 Accounting Treatments.....................................................46
5. CALDERA AND NEWCO COVENANTS.................................................................46
5.1 Advice of Changes ........................................................46
5.2 Maintenance of Business...................................................46
5.3 Conduct of Business.......................................................47
5.4 Stockholder Approval......................................................47
5.5 Letter of Caldera's Accountants...........................................47
5.6 Prospectus/Proxy Statement................................................48
5.7 State Securities Law Compliance...........................................48
5.8 Regulatory Approvals......................................................49
5.9 Necessary Consents........................................................49
5.10 Access to Information.....................................................49
5.11 Books and Records ........................................................49
5.12 Satisfaction of Conditions Precedent......................................50
5.13 Voting Agreement .........................................................50
5.14 Sales Representative and Support Agreement................................50
5.15 Stockholders Agreement....................................................50
5.16 Caldera Employee Plans....................................................50
5.17 Indemnification and Insurance -- Caldera..................................51
5.18 Indemnification and Insurance -- Employees................................52
5.19 Distribution to SCO Shareholders..........................................54
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SCO..................................................54
6.1 Accuracy of Representations and Warranties................................54
6.2 Covenants ................................................................54
6.3 Compliance with Law.......................................................55
6.4 Form S-4 .................................................................55
6.5 Opinion of Caldera and Newco's Counsel....................................55
6.6 Stockholder Approval......................................................55
6.7 Tax Opinion ..............................................................55
6.8 Designees to the Board of Directors of Newco..............................55
6.9 Nasdaq Listing ...........................................................55
6.10 HSR Act ..................................................................55
6.11 Ancillary Agreements......................................................55
6.12 Delivery of Newco Shares..................................................56
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF CALDERA AND NEWCO....................................56
7.1 Accuracy of Representations and Warranties................................56
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7.2 Covenants ................................................................56
7.3 Compliance with Law.......................................................56
7.4 Consents .................................................................56
7.5 Form S-4 .................................................................56
7.6 Opinion of Counsel to SCO.................................................56
7.7 Caldera Stockholder Approval..............................................56
7.8 Tax Opinion ..............................................................57
7.9 HSR Act ..................................................................57
7.10 Ancillary Agreements......................................................57
7.11 Key Employee Term Sheets..................................................57
8. TERMINATION OF AGREEMENT....................................................................57
8.1 Termination ..............................................................57
8.2 Notice of Termination.....................................................59
8.3 Liability ................................................................59
8.4 Termination Fee ..........................................................59
9. SURVIVAL OF REPRESENTATIONS.................................................................60
9.1 Survival of Representations...............................................60
10. ESCROW AND INDEMNIFICATION .................................................................60
10.1 Escrow Fund .............................................................60
10.2 Indemnification by SCO...................................................60
10.4 Limitations on Indemnification...........................................61
10.5 Indemnification Procedures...............................................61
11. EMPLOYEE MATTERS ...........................................................................63
11.1 Right to Offer Employment................................................63
11.2 Termination of Employment................................................65
11.3 Cooperation .............................................................65
12. TAX MATTERS ................................................................................66
12.1 Transaction Taxes; Representation; Transaction Tax Indemnity.............66
12.2 Treatment of Indemnity Payments..........................................66
12.3 Indemnity for Taxes......................................................66
12.4 Other Tax Matters .......................................................68
12.5 Tax Representations......................................................71
13. MISCELLANEOUS ..............................................................................72
13.1 Governing Law; Venue.....................................................72
13.2 Assignment; Binding upon Successors and Assigns..........................72
13.3 Severability ............................................................72
13.4 Counterparts ............................................................72
13.5 Other Remedies ..........................................................72
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13.6 Amendment and Waivers....................................................73
13.7 Expenses ................................................................73
13.8 Attorneys' Fees .........................................................73
13.9 Notices .................................................................73
13.10 Construction of Agreement................................................74
13.11 No Joint Venture ........................................................74
13.12 Further Assurances.......................................................74
13.13 Absence of Third Party Beneficiary Rights................................74
13.14 Public Announcement......................................................75
13.15 Certain Defined Terms....................................................75
13.16 Entire Agreement ........................................................87
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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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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:
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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.
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.
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(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 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
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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 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.
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(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
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(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 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
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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 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.
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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, 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
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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
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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 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
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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 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,
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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) 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
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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
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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.
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
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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 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
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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 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
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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
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in the ordinary course of the business, consistent with past practice or except
as necessary to respond to third party solicitation of Employees,
(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;
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(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).
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
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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.
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
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aggregate, or (iii) result in the acceleration of the time of payment or vesting
of any such benefits.
2.14 Taxes(a). 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.
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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 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
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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 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.
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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
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.
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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.
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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 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
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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 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
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Subsidiaries, neither Caldera nor any of the Caldera Subsidiaries owns, directly
or indirectly, any capital stock or other equity interest of any corporation or
has any direct or indirect equity or ownership interest in any other business,
whether organized as a corporation, partnership, joint venture or otherwise.
3.2 Capital Structure.
(a) Stock and Options. The authorized and issued and as of
the date of July 28, 2000 the outstanding capital stock of Caldera, the Caldera
Subsidiaries and Newco is set forth in Section 3.2(a) of the Caldera Disclosure
Letter. Except as specified in Section 3.2(a) of the Caldera Disclosure Letter,
no shares of the capital stock of Caldera or of any of the Caldera Subsidiaries
are held by any of them in its treasury or reserved for issuance upon the
exercise of options or warrants. All outstanding shares of the capital stock of
Caldera on July 28, 2000 are set forth in Section 3.2(a) of the Caldera
Disclosure Letter and are validly issued, fully paid and nonassessable free and
clear of any Encumbrances and not subject to preemptive rights pursuant to any
statute, pursuant to the Certificate of Incorporation or Bylaws of Caldera, or
pursuant to any agreement or document to which any of them is a party or by
which any of them is bound. All outstanding shares of the capital stock of each
of the Caldera Subsidiaries are validly issued, fully paid and nonassessable and
are owned by Caldera, or one of the Caldera Subsidiaries, free and clear of any
Encumbrances. The Caldera Significant Stockholders who will execute Voting
Agreements collectively own and have the right to vote shares representing
approximately 70% of the capital stock of Caldera as of the date of this
Agreement.
(b) No Other Commitments. Except as set forth in Section
3.2(b) of the Caldera Disclosure Letter, there are no options, warrants, calls,
rights, commitments, conversion rights or agreements of any character to which
Caldera or any of its respective direct and indirect subsidiaries, is a party or
by which any of them is bound obligating them to issue, deliver or sell, or
cause to be issued, delivered or sold, any shares of its capital stock, or
securities convertible into or exchangeable for shares of its capital stock, or
obligating any of them to grant, extend or enter into any such option, warrant,
call, right, commitment, conversion right or agreement. There is no voting
trust, proxy or other agreement or understanding to which Caldera or any of its
respective direct or indirect subsidiaries is a party with respect to the voting
of the capital stock of any member of the Caldera Group. All shares of capital
stock of any member of the Caldera Group are held free and clear of any
Encumbrances.
(c) Registration Rights. Except as disclosed in the
Caldera SEC Documents, neither Caldera nor any of its respective subsidiaries is
under any obligation to register under the Securities Act any of its presently
outstanding securities or any securities that may be subsequently issued which
offering would have a Material Adverse Effect on Newco.
3.3 Authority.
(a) Corporate Action. Subject to approval of this
Agreement and the Ancillary Agreements by the stockholders of Caldera, Caldera
has all requisite corporate power and authority to enter into this Agreement and
the Ancillary Agreements, to perform its obligations hereunder and thereunder,
and to consummate the transactions contemplated by this Agreement and the
Ancillary Agreements. The Board of Directors of Newco and Caldera have,
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as of the date of this Agreement, unanimously (i) determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Caldera
and is fair to, and in the best interests of, Caldera and its stockholders; (ii)
has approved this Agreement, the Ancillary Agreements, the Merger, the SCO
Transactions and other transactions contemplated hereby and thereby; and (iii)
has determined to recommend that the stockholders of Caldera approve the SCO
Transaction. This Agreement and the Voting Agreements have been, and prior to
the Effective Time, the other Ancillary Agreements will be, duly executed and
delivered by Newco and Caldera. Subject to receiving such stockholder approval,
this Agreement and the Voting Agreements are, and at the Closing the other
Ancillary Agreements will be, valid and binding obligations of Newco and
Caldera, enforceable against Newco and Caldera in accordance with their
respective terms, except as enforceability may be limited by bankruptcy and
other similar laws and general principles of equity.
(b) No Conflict. Neither the execution, delivery and
performance of this Agreement and the Ancillary Agreements nor the consummation
of the transactions contemplated hereby or thereby nor compliance with the
provisions hereof will (i) conflict with, or result in any violations of, or
cause a default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, amendment, cancellation or acceleration of
any obligation contained in, or the loss of any material benefit under, or
result in the creation of any Encumbrance upon the any of the Caldera Assets
under, any term, condition or provision of (x) the Certificate of Incorporation
or Bylaws of Caldera or the equivalent organizational documents of any of the
Caldera Subsidiaries or (y) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other material agreement, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Caldera, Caldera's property or
the Caldera Assets, other than any such conflicts, violations, defaults, rights
or Encumbrances which, individually or in the aggregate, would not have a
Material Adverse Effect on Caldera; or (ii) require the affirmative vote of the
holders of greater than a majority of the issued and outstanding capital stock
of Caldera.
(c) Governmental Consents. Except (i) as set forth in
Section 3.3(c) of the Caldera Disclosure Letter; (ii) such filings,
authorizations, orders and approvals as may be required under state takeover
laws; (iii) such filings and notifications as may be necessary under the HSR
Act; (iv) the filings, authorizations, orders, notifications, and approvals
contemplated by this Agreement or the Ancillary Agreements; and (v) such other
governmental or third party consents, filings, authorizations, orders and
approvals which, if not obtained or made, would not have a Material Adverse
Effect on Newco or have a material adverse effect on the ability of Caldera to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements, no consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental entity is required to be obtained
by the Caldera Group in connection with the execution and delivery of this
Agreement or the Ancillary Agreements by Caldera, Newco, and the Merger Sub or
the performance by them of its respective obligations hereunder or thereunder.
3.4 SEC Documents.
(a) SEC Reports. Caldera has delivered to SCO or its
counsel correct and complete copies of the final version of each report,
schedule, registration statement and
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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
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supplied by Caldera for inclusion or incorporation by reference in the Form S-4
and Prospectus/Proxy Statement will, at the time the information is supplied
contain, after giving effect to any supplement or amendment thereto, no untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not materially misleading. The
Prospectus/Proxy Statement will in all material respects comply as to form with
the provisions of the Exchange Act and the rules and regulations promulgated by
the SEC thereunder.
3.6 Vote Required. The affirmative vote of a majority of the
shares of Caldera Common Stock that cast votes regarding the Merger and the SCO
Transaction in person or by proxy at the Caldera Stockholders Meeting is the
only vote of the holders of any class or series of Caldera's capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
3.7 Litigation. Except as disclosed in the Caldera SEC Documents
filed prior to the date hereof, or as would not reasonably be expected to have a
Material Adverse Effect on Caldera, there is no suit, action, arbitration,
demand, claim or proceeding pending or, to Caldera's Knowledge, threatened
against Caldera or the Caldera Assets; nor is there any judgment, decree,
injunction, ruling or order of any governmental entity or arbitrator or
settlement agreement outstanding against Caldera or any of the Caldera Assets.
Caldera has delivered or made available to SCO or its counsel correct and
complete copies of all material correspondence prepared by its counsel for
Caldera's auditors in connection with the last two completed audits of Caldera's
financial statements and any such correspondence since the date of the last such
audit. No member of the Caldera Group is a party to any decree, order or
arbitration award (or agreement entered into in any administrative, judicial or
arbitration proceeding with any governmental authority) with respect to the
Caldera Assets, Caldera Employees, or the Caldera Business that could reasonably
be expected to have a Material Adverse Effect on Caldera. Except for violations
as would not have a Material Adverse Effect on Caldera, none of the members of
the Caldera Group is in violation of any decree, order or arbitration award that
names such company, or any of such companies, as a party or that otherwise, to
Caldera's Knowledge, involves such company or any of such company's assets, or
of any law, ordinance, statute, or governmental authority to which the Caldera
Assets are subject, including, without limitation, laws, rules and regulations
relating to occupational health and safety, equal employment opportunities, fair
employment practices, and sex, race, religious and age discrimination. There is
no claim, action, suit, arbitration, mediation, investigation or other
proceeding of any nature pending or, to Caldera's Knowledge, threatened, at law
or in equity, by way of arbitration or before any court, governmental
department, commission, board or agency that: (i) may adversely affect, contest
or challenge any party's authority, right or ability to perform its obligations
under this Agreement or any of the Ancillary Agreements; (ii) challenges or
contests Caldera's right, title or ownership of any of the Caldera Assets or
seeks to impose an Encumbrance (other than a Caldera Permitted Encumbrance) on,
or a transfer of title or ownership of, any of the Caldera Assets; (iii) asserts
that any action taken by any employee, consultant or contractor of Caldera in
connection with the Group Business infringes or misappropriates any Intellectual
Property Rights of any third party; (iv) seeks to enjoin, prevent or hinder
operation of the Caldera Business or the consummation of any of the transactions
contemplated by this Agreement or any of the Ancillary Agreements; (v) would
impair or have
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an adverse affect on Newco's right or ability to use or exploit any of the
Caldera Assets; or (vi) involves or relates to any potentially material claim
against Caldera by any creditor of Caldera or involves any claim of fraudulent
conveyance or any similar claim, except in cases (ii), (iii) and (v) where such
proceeding could not reasonably be expected to have a Material Adverse Effect on
Newco.
3.8 Valid Issuance. The Newco Common Stock that is being issued
hereunder in connection with the SCO Transaction, when issued and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly authorized and validly issued, fully paid, and
nonassessable.
3.9 Absence of Certain Changes or Events. Except as disclosed on
Section 3.9 of the Caldera Disclosure Letter, since the Caldera Financial
Statements Balance Sheet Date there has not occurred:
(a) any change or event which could reasonably be expected
to have a Material Adverse Effect on Caldera; provided, however, that in no
event will a change in the trading price of Caldera Common Stock be deemed a
Material Adverse Effect on Caldera;
(b) any amendments or changes in the Certificate of
Incorporation or Bylaws (or equivalent governing documents in each relevant
jurisdiction) of any member of the Caldera Group;
(c) any damage, destruction to or loss of Caldera assets
not covered by insurance, which would have a Material Adverse Effect on Caldera;
(d) any redemption, repurchase or other acquisition of
shares of any member of the Caldera Group (other than pursuant to arrangements
with terminated employees or consultants in the ordinary course of business,
consistent with past practice), or any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to the capital stock of any member of the Caldera Group or, with respect
to dividends or other distributions of cash or property arising from the Caldera
Business;
(e) any material increase in or modification of the
compensation or benefits payable or to become payable by Caldera to the Caldera
employees, except in the ordinary course of the business, consistent with past
practice and except as necessary to respond to third party solicitation of
Caldera employees;
(f) other than as required by applicable statute or
governmental regulation, any material increase in or modification of any Caldera
Group Benefit Arrangement (including, but not limited to, the granting of stock
options, the acceleration of the vesting schedule in effect for any outstanding
stock options, restricted stock awards or stock appreciation rights) that will
become binding upon Newco upon consummation of the transactions contemplated
herein, for or with respect to any of the Caldera Employees, other than (i) in
the ordinary course of the business, consistent with past practice, or to
respond to third party solicitation of Caldera Employees, and (ii) if occurring
after the date hereof, which is authorized pursuant to Section 5.3 below;
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(g) any sale of a material amount of the Caldera Assets,
or any acquisition by any member of the Caldera Group of a material amount of
assets, other than in the ordinary course of the business, consistent with past
practice;
(h) any alteration in any term of any outstanding capital
stock or rights to acquire capital stock of any member of the Caldera Group,
including, but not limited to, acceleration of the vesting or any change in the
terms of any outstanding stock options;
(i) other than in the ordinary course of business,
consistent with past practice, (A) any incurrence, assumption or guarantee by
any member of the Caldera Group of any debt of any person, other than any member
of the Caldera Group, for borrowed money in an amount exceeding $250,000 in the
aggregate; (B) issuance or sale by any member of the Caldera Group of any
securities convertible into or exchangeable for its respective debt securities;
or (C) issuance or sale of options or other rights to acquire from the Caldera
Group, directly or indirectly, debt securities of any member of the Caldera
Group, or any securities convertible into or exchangeable for any such debt
securities;
(j) any creation or assumption by any member of the
Caldera Group of any Encumbrance (other than Caldera Permitted Encumbrances) on
any Caldera Asset in excess of $250,000 individually or in the aggregate, other
than to refinance a liability reflected in the Caldera Financial Statements in
the ordinary course of business;
(k) any making by any member of the Caldera Group of any
loan, advance or capital contribution to or investment in any person other than
to refinance a liability reflected in the Caldera Financial Statements and other
than (i) loans, advances or capital contributions made in the ordinary course of
the business, and (ii) other loans and advances, where the aggregate amount of
all such items outstanding at any time does not exceed $250,000;
(l) any amendment of, relinquishment, termination or
non-renewal by Caldera of any of the Caldera Contracts, other than in the
ordinary course of business consistent with past practice;
(m) any transfer or grant of a right under the Caldera IP
Rights, other than those transferred or granted in the ordinary course of
business, consistent with past practice;
(n) any labor dispute with, or charge of unfair labor
practice by, any member of the Caldera Group (other than routine individual
grievances), any activity or proceeding by a labor union or representative
thereof to organize any Caldera employees or, to Caldera's Knowledge, any
campaign being conducted to solicit authorization from Caldera employees to be
represented by such labor union, where such dispute, practice, activity,
proceeding, or campaign would have a Material Adverse Effect on Caldera;
(o) any change to accounting methods; or
(p) any agreement by any member of the Caldera Group to
take any of the actions described in the preceding clauses (a) through (o)
(other than the transactions contemplated by this Agreement or the Ancillary
Agreements).
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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.
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3.12 Fees and Expenses. Except for the fees and expenses set
forth in Caldera's engagement letter with Broadview, a copy of which has been
provided to SCO, neither Caldera, Newco nor any of the Caldera Subsidiaries has
paid or become obligated to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated by this Agreement
and the Ancillary Agreements.
3.13 Environmental Matters.
(a) During the period that Caldera has leased or owned its
respective properties or owned or operated its respective facilities, there have
been, to Caldera's Knowledge, no disposals, releases or threatened releases of
Hazardous Materials on, from, under or about such properties or facilities which
would cause a Material Adverse Effect on Newco. To Caldera's Knowledge there is
no presence, disposals, releases or threatened releases of Hazardous Materials
on, from, under or about any of such properties or facilities, which may have
occurred prior to Caldera having taken possession of any of such properties or
facilities where such Hazardous Materials would cause a Material Adverse Effect
on Newco.
(b) None of the properties or facilities of Caldera is or
has been the subject of an Environmental Damage, which would cause a Material
Adverse Effect on Newco. During the time that Caldera has owned or leased its
respective properties and facilities, none of Caldera nor, to Caldera's
Knowledge, any third party, has used, generated, manufactured or stored on,
under or about such properties or facilities or transported to or from such
properties or facilities any Hazardous Materials (except those Hazardous
Materials associated with general office use or janitorial supplies) in a manner
which would result in a Material Adverse Effect on Newco.
(c) During the time that any members of the Caldera Group
have owned or leased its respective properties and facilities, to Caldera's
Knowledge, there has been no litigation brought or threatened against any of
them by, or any settlement reached by any of them with, any party or parties
concerning the presence, disposal, release or threatened release of any
Hazardous Materials on, from or under any of such properties or facilities or
relating to any alleged Environmental Violation, except for litigation or
settlement which would not have a Material Adverse Effect on Newco.
3.14 Fairness Opinion. Caldera's Board of Directors has received
an opinion dated as of the date hereof from Broadview to the effect that, as of
the date hereof, the Caldera Ratio is fair to Caldera from a financial point of
view.
3.15 Tax Representations. Caldera, Newco and the Caldera
Significant Stockholders are aware of no plan or intention by Caldera or Newco
or any corporation related to Caldera immediately after the Effective Time to
repurchase any Newco capital stock issued pursuant to this Agreement from any
person or entity that is or will become a Newco stockholder by reason of the
transactions contemplated by this Agreement. Caldera has not redeemed any shares
of its capital stock or paid any extraordinary dividend in contemplation of the
Merger.
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4. SCO Covenants.
4.1 Advice of Changes.
During the period from the date hereof until the earlier of the
Effective Time or the termination of this Agreement in accordance with its
terms, SCO will promptly advise Caldera in writing, (i) of any event occurring
subsequent to the date hereof that would reasonably be likely to render any
representation or warranty contained in Section 2 of this Agreement, if made on
or as of the date of such event or the Effective Time, untrue or inaccurate,
(ii) of any event that would reasonably be likely to have a Material Adverse
Effect on the Group Business, and (iii) of any material breach by SCO of any
covenant or agreement contained in this Agreement; provided, however, that the
delivery of, or failure to deliver, any notice pursuant to this Section 4.1
shall not limit or otherwise affect the remedies available hereunder. Prior to
the Effective Date, the SCO Board of Directors shall take all requisite action
under each of the SCO stock plans to preclude the accelerated vesting of any
outstanding SCO Options or unvested shares of SCO Common Stock for all
Designated Employees; provided, however that such actions shall not be required
with respect to SCO Options granted to Employees whose options are subject to
acceleration pursuant to existing severance or change of control agreements.
4.2 Maintenance of Business. During the period from the date
hereof until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, the Contributed Company Group and the
Contributing Companies will use reasonable efforts to carry on and preserve the
Group Business and relationships with customers, suppliers, employees and others
related to Group Business in substantially the same manner as it has prior to
the date hereof.
4.3 Conduct of Business. During the period from the date hereof
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, the Contributed Company Group and SCO will continue
to conduct the Group Business and maintain business relationships related to the
Group Business in the ordinary and usual course consistent with past practice
and, except as otherwise disclosed herein or in the SCO Disclosure Letter, they
will not, without the prior written consent of Caldera, which consent shall not
be unreasonably withheld, take any of the following actions where it would cause
a Material Adverse Effect on the Group Business:
(a) cause any of the Contributed Companies to borrow any
money except for amounts that are not in the aggregate material to the financial
condition of the Group Business, taken as a whole;
(b) cause any of the Group Assets to become subject to any
Encumbrance, except for Group Permitted Encumbrances;
(c) dispose of any of Group Assets except immaterial
amounts of Group Assets in the ordinary course of business, consistent with past
practice;
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(d) grant any exclusive license to any of the SCO IP
Rights or grant any other license to SCO IP Rights except in the ordinary course
of business, consistent with past practice;
(e) materially amend or terminate any of the Material
Contributed Contracts;
(f) cause any of the Contributed Companies to declare, set
aside or pay any cash or stock dividend or other distribution in respect of
capital stock, or redeem or otherwise acquire any of its capital stock;
(g) permit any of the Contributed Companies to issue or
allot or agree to issue or allot capital stock, shares or loan capital;
(h) cause any of the Contributed Companies to make any
loans or grant any guarantees, except (A) advances that are not material in
amount or (B) loans pursuant to any Section 401(a) Plan;
(i) waive or release any material claim against a third
party;
(j) cause any member of the Contributed Company Group to
merge, consolidate or reorganize with or acquire any entity that is not a member
of the Contributed Company Group, except as set forth in the SCO Disclosure
Letter and except as otherwise set forth in the last sentence of Section 4.14(a)
or Section 1.4(a) hereof;
(k) amend the Certificate of Incorporation or Bylaws (or
equivalent governing documents in each relevant jurisdiction) of any of the
Contributed Companies;
(l) implement any layoffs or reductions in the work force;
(m) fail to pay or withhold any material Tax related to
the Group Business when due to be paid or withheld;
(n) change accounting methods;
(o) agree to take, or permit any of its subsidiaries to
take or agree to take, or enter into negotiations with respect to, any of the
actions described in the preceding clauses in this Section 4.3.
Notwithstanding the foregoing, nothing in this Section 4.3 hereof
shall restrict or limit the conduct of any business of SCO or its direct or
indirect subsidiaries other than the Group Business and other than with respect
to the Group Assets and nothing herein shall restrict or limit the conduct of
any business of the Contributed Company Group or with respect to the Group
Assets other than as set forth in this Section 4.3.
4.4 SCO Corporate Approvals. SCO will call the SCO Stockholders
Meeting to be held within 40 days after the Form S-4 shall have been declared
effective by the SEC, to submit the SCO Transaction and related matters for the
consideration and approval of the SCO
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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
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state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading or necessary to correct any statement which has become false or
misleading in any earlier communication. From and after the date the Form S-4
becomes effective and until the Effective Time, if any event known to SCO occurs
as a result of which the Prospectus/Proxy Statement or Form S-4 would include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
if it is necessary at any time to amend the Form S-4 or the Prospectus/Proxy
Statement to comply with the Securities Act, SCO will promptly notify Caldera
and Newco and an amended or supplemented Form S-4 or Prospectus/Proxy Statement
will be prepared by SCO, Caldera and Newco which will correct such statement or
omission and will use its reasonable best efforts to cause any such amendment to
become effective as promptly as possible. The Prospectus/ Proxy Statement, as it
relates to SCO and information relating to the Group Business, will comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations thereunder in effect at the time the Prospectus/Proxy
Statement is mailed.
4.7 Regulatory Approvals. As promptly as reasonably practicable,
SCO will itself, and will cause each member of the Contributed Company Group, to
execute and file, or join in the execution and filing, of any application or
other document that may be necessary in order to obtain the authorization,
approval or consent of any governmental body, federal, state, provincial, local
or foreign, which may be reasonably required, or which Caldera or Newco may
reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement. SCO will itself, and will cause each member of
the Contributed Company Group, to use its reasonable efforts to promptly obtain
all such authorizations, approvals and consents and will cooperate fully with
the other parties in promptly seeking to obtain such authorizations, approvals
and consents.
4.8 Necessary Consents. SCO will itself, and will cause each
Contributing Company and each member of the Contributed Company Group to, use
its reasonable efforts to obtain the consents required in connection with the
Material Contributed Contracts, and to take such other actions as may be
necessary or appropriate for the consummation of the transactions contemplated
hereby and to allow Newco to Conduct the Group Business after the Effective
Time.
4.9 Access to Information. From the date hereof until the
Effective Time, SCO will itself, and will cause the Contributed Company Group,
to allow Caldera and its agents reasonable access to the files, books, records,
technology and offices of SCO and the Contributed Company Group reasonably
requested by Caldera, but only to the extent necessary and relating to the Group
Business, including, without limitation, any and all information relating to
Contributed Company Group's Taxes, commitments, contracts, leases, licenses and
real, personal, intellectual and intangible property and financial condition.
SCO shall use its reasonable efforts to cause its accountants to cooperate with
Caldera and its agents in making available to Caldera all financial information
reasonably requested, including, without limitation, the right to examine all
working papers pertaining to all Tax returns and financial statements prepared
or audited by such accountants. No information or knowledge obtained by any
party hereto in any investigation pursuant to this Section 4.9 will affect or be
deemed to modify any
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representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger and the SCO Transaction. All information
obtained by Caldera and its agents pursuant to this Section 4.9 shall be kept
confidential in accordance with the confidentiality agreement, between Caldera
and SCO (the "Nondisclosure Agreement").
4.10 Satisfaction of Conditions Precedent. SCO will itself, and
will cause the Contributing Companies and the Contributed Company Group, to use
reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent that are set forth in Section 8 and to cause the Merger, the SCO
Transaction and the other transactions contemplated by this Agreement to be
consummated. Without limiting the foregoing, in connection with the agreements
to be reached by the parties subsequent to the date hereof and prior to the
Effective Time, the parties agree to negotiate in good faith to reach agreement
on all matters to be included in such agreements promptly after the signing of
this Agreement.
4.11 Voting Agreement. SCO will use its reasonable best efforts
to obtain Voting Agreements in the form attached as Exhibit 4.11A (the "Voting
Agreement"), executed by the SCO affiliates listed on Exhibit 4.11B.
4.12 Sales Representative and Support Agreement. The Sales
Representative and Support Agreement in the form attached as Exhibit 4.12 (the
"Sales Representative and Support Agreement") shall be executed as of the
Effective Time.
4.13 Stockholders Agreement. The Stockholders Agreement in the
form attached as Exhibit 4.13 (the "Stockholders Agreement") shall be executed
as of the Effective Time.
4.14 No Other Negotiations.
(a) SCO shall, and shall cause each Contributing Company
and each member of the Contributed Company Group and their respective officers,
directors or employees and any investment bankers, attorneys or other advisors
and representatives retained by any of them to, cease any and all existing
activities, discussions and negotiations with any parties conducted heretofore
with respect to any SCO Alternative Proposal (as defined below). From and after
the date hereof until the earlier of the Effective Time or the termination of
this Agreement in accordance with its terms, SCO shall not authorize or permit
any Contributing Company or any member of the Contributed Company Group (or any
of their respective officers, directors or employees or any investment bankers,
attorneys or other advisors or representatives retained by any of them),
directly or indirectly, (i) to solicit, initiate or encourage the submission of
any SCO Alternative Proposal, (ii) to engage in discussions or negotiations
regarding, provide non-public information with respect to, or to take any other
action intended, designed or reasonably likely to facilitate any inquiries or
the making of any proposal or offer that constitutes, or would reasonably be
expected to lead to, any SCO Alternative Proposal, (iii) to enter into any
letter of intent, agreement in principle, agreement involving a business
combination or other similar agreement with any person with respect to any SCO
Alternative Proposal, or (iv) to make or authorize any statement, recommendation
or solicitation in support of any SCO Alternative Proposal. For purposes of this
Agreement, "SCO Alternative Proposal" means any proposal or offer from any
person or "group" (as defined under Section 13(d) of the
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Exchange Act and the rules and regulations thereunder) for any direct or
indirect (a) acquisition, purchase, sale or other disposition of a material
amount of the Group Assets (other than in the ordinary course and disposal of
worn or obsolete items consistent with past practice), (b) acquisition,
purchase, sale or other disposition of any of the outstanding voting securities
of any member of the Contributed Company Group (other than pursuant to the
exercise of outstanding stock options), or (c) merger, consolidation, business
combination, sale of any of the assets, recapitalization, liquidation,
dissolution or similar transaction involving any member of the Contributed
Company Group, other than the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, other
than actions relating to the Contributed Company Group, the Group Assets or the
Group Business, SCO shall not be restricted or limited in any way from entering
into discussions, negotiations or agreements of any kind or from taking any
other actions of any kind, including, without limitation, transactions relating
to the sale of any of its or its direct or indirect subsidiaries (other than any
member(s) of the Contributed Company Group), equity securities (other than the
Contributed Stock), or assets (other than Group Assets), or the merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Retained SCO Business.
(b) Notwithstanding Section 4.14(a), prior to obtaining
the approval of the stockholders of SCO of this Agreement and the SCO
Transaction by the requisite vote under applicable law (the "SCO Stockholder
Approval"), SCO may in response to an unsolicited bona fide SCO Alternative
Proposal, participate in discussions or negotiations with, furnish information
to a third party making such proposal (provided that SCO shall have entered into
a confidentiality agreement with such third party with terms no less favorable
than in the letter with Caldera), make or authorize a statement or
recommendation in support of such proposal, if all of the following events shall
have occurred: (i) such third party has made a bona fide written offer or
proposal to the Board of Directors of SCO to consummate a SCO Alternative
Proposal which offer or proposal identifies a price or range of values to be
paid for the outstanding securities or assets of SCO, the Contributing Companies
or the Contributed Company Group, (ii) if consummated, based on the written
advice of investment bankers of nationally recognized reputation, such Board of
Directors has determined that it is financially more favorable to the
stockholders of SCO than the terms of the transactions contemplated by this
Agreement, (iii) such Board of Directors has determined, after consultation with
investment bankers of nationally recognized reputation, that such third party is
financially capable of consummating such SCO Alternative Proposal (if the SCO
Alternative Proposal is for cash); (iv) such Board of Directors has determined,
after consultation with outside legal counsel, that failure to take such action
would be inconsistent with the fiduciary duties of the Board of Directors to SCO
stockholders under applicable law; and (v) Caldera shall have been notified by
SCO in writing of such SCO Alternative Proposal, including its principal
financial and other material terms and conditions, including the identity of the
person making such proposal (it being understood that any amendment to the price
exchange ratio, identity or principal financial or other material terms shall
require an additional notice).
(c) In addition to the obligations set forth in Section
4.14(a), SCO, as promptly as practicable, shall advise Caldera orally and in
writing of any request for non-public information which SCO reasonably believes
could lead to a SCO Alternative Proposal, or of any
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SCO Alternative Proposal, the principal financial and other material terms and
conditions of such SCO Alternative Proposal, and the identity of the person
making any such request or SCO Alternative Proposal. SCO will keep Caldera
informed in all material respects of the status and details (including material
amendments) of any such SCO Alternative Proposal.
4.15 Books and Records. If, in order to properly prepare
documents required to be filed with governmental authorities (including taxing
authorities) or its financial statements, it is necessary that any party hereto
be furnished with additional information relating to the Group Assets or any
member of the Contributed Company Group, and such information is in the
possession of a Contributing Company, then SCO, for itself and the other
Contributing Companies, agree to use its good faith efforts to promptly furnish
such information to the party needing such information. This Section 4.15 shall
survive Closing for two years except for records relating to preparation or
audit of tax returns, for which this Section 4.15 will survive until the
expiration of the applicable Tax statute of limitations.
4.16 [Intentionally Omitted.].
4.17 Modification of Joint Contributed Agreements and Shared
Contributed Assets. SCO will provide to Caldera a list of the Contributed
Contracts and the contracts to which the Contributed Companies are a party which
create rights or obligations of both the Group Business and the SCO Retained
Business (the "Joint Contributed Agreements"). As soon as feasible after the
date hereof, SCO and Caldera will negotiate to agree upon a mutually acceptable
arrangement between SCO and Newco and, if required, other parties with respect
to the treatment of such contracts. SCO will provide a list of the Contributed
Assets which would be impracticable to operate separately by either SCO or
Caldera (the "Shared Contributed Assets"). As soon as feasible after the date
hereof, SCO and Caldera will negotiate to agree upon a mutually acceptable
arrangement, which shall allocate costs in proportion to the benefits received,
between SCO and Newco with respect to such Shared Contributed Contracts.
4.18 Key Employee Employment Agreements. SCO will use its best
efforts to cause (without having to incur any cost) each of the Key Employees
listed on Exhibit 4.18A to execute employment agreements which reflect the terms
set forth in the Key Employee Term Sheet, a form of which is attached hereto as
Exhibit 4.18B.
4.19 SCO IP Rights. As soon as feasible after the date hereof SCO
and Caldera shall confirm whether the Intellectual Property Rights and
Intangible Assets required for the production, development, marketing and
support of the Group Products are included in the Intellectual Property Rights
included in the Group Assets duly transferred to Newco pursuant hereto. If
additional items not so transferred are discovered, then the Group Assets shall
be expanded to include, and there shall be duly assigned to Newco by the
appropriate Contributing Company, all such additional Intellectual Property
Rights and Intangible Assets required for the production of the Group Products.
If the Intellectual Property Rights and Intangible Assets included or added to
the Group Assets are also required for the production of the products produced
by SCO and its subsidiaries (other than the Group Products) then Newco (or its
subsidiary, which receives said Intellectual Property Rights and Intangible
Assets constituting Group Assets) shall provide SCO, or its designated
subsidiary, with a fully paid, non-exclusive, perpetual, irrevocable license to
use such Intellectual Property Rights and Intangible Assets for
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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
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reasonably be likely to render any representation or warranty of Caldera or
Newco contained in Section 3 of this Agreement, if made on or as of the date of
such event or the Effective Time, untrue or inaccurate, (ii) of any event that
would reasonably be likely to have a Material Adverse Effect on Caldera, and
(iii) of any material breach by Caldera or Newco of any covenant or agreement
contained in this Agreement; provided, however, that the delivery of, or failure
to deliver, any notice pursuant to this Section 5.1(a) shall not limit or
otherwise affect the remedies available hereunder.
(b) Ten days prior to the Effective Time, Caldera will
deliver to SCO a certificate from Caldera's transfer agent indicating the number
of shares of Common Stock outstanding at the end of business on the eleventh day
preceding the Effective Time and a certificate from Caldera's Secretary
indicating the number of shares of Caldera Common Stock issuable upon exercise
or conversion of any outstanding options, warrants or convertible debentures
outstanding on such date. Caldera will deliver to SCO by the fifteenth business
day after the Effective Time a certificate from Caldera's transfer agent
indicating the number of shares of Common Stock outstanding at the end of
business on the day of the Closing (calculated without regard to the shares of
Common Stock issued with respect to the First SCO Certificate) and a certificate
from Caldera's Secretary indicating the number of shares of Caldera Common Stock
issuable upon exercise or conversion of any outstanding options at the end of
business on the day of the Closing.
5.2 Maintenance of Business. During the period from the date
hereof until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, Caldera will use its best efforts to
carry on and preserve its business and its relationships with customers,
suppliers, employees and others in substantially the same manner as it has prior
to the date hereof.
5.3 Conduct of Business. During the period from the date hereof
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Caldera will continue to conduct its business and
maintain its business relationships in the ordinary and usual course and
consistent with past practice and, except as otherwise disclosed herein or in
the Caldera Disclosure Letter, it will not, without the prior written consent of
SCO, which consent shall not be unreasonably withheld or delayed, take any of
the following actions where it would cause a Material Adverse Effect on Caldera:
(a) borrow any money except for (A) amounts that are not
in the aggregate material to the financial condition of Caldera and its
subsidiaries, taken as a whole or (B) pursuant to existing credit facilities;
(b) cause any of the material Caldera Assets to become
subject to any Encumbrance, except for Caldera Permitted Encumbrances and except
for Caldera Encumbrances arising under credit facilities existing as of the date
hereof;
(c) dispose of any of Caldera Assets which are material to
the Caldera Business;
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(d) issue capital stock representing more than a 10%
interest in the total outstanding securities of Caldera;
(e) merge, consolidate or reorganize with, or acquire any
entity, except for transactions in which the aggregate consideration is below
$15 million;
(f) amend the Certificate of Incorporation or Bylaws of
Caldera or any of its subsidiaries or as otherwise expressly contemplated by
this Agreement);
(g) agree to take, or permit any Caldera entity to take or
agree to take, or enter into negotiations with respect to, any of the actions
described in the preceding clauses in this Section 5.3(g).
Notwithstanding the foregoing, nothing in this Section 5.3 shall
restrict or limit the conduct of any business of Caldera or its direct or
indirect subsidiaries or the use or disposition of the Caldera Assets, other
than as set forth in this Section 5.3.
5.4 Stockholder Approval. Caldera will call the Caldera
Stockholders Meeting, to be held within 40 days after the Form S-4 shall have
been declared effective by the SEC, to submit the Merger, the SCO Transaction
and any related matters for the consideration and approval of the Caldera
stockholders. The Prospectus/Proxy Statement will include a statement to the
effect that Caldera's Board of Directors is recommending that Caldera
stockholders vote in favor of the Merger and the SCO Transaction. Such meeting
will be called, held and conducted, and any proxies will be solicited, in
compliance with applicable law.
5.5 Letter of Caldera's Accountants. Caldera shall use its
reasonable best efforts to cause to be delivered to SCO a letter of Arthur
Andersen LLP, dated a date within two business days before the date on which the
Form S-4 shall become effective and addressed to each of the Contributing
Companies, in form and substance reasonably satisfactory to SCO and customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
5.6 Prospectus/Proxy Statement. Caldera will mail to its
stockholders in a timely manner, for the purpose of considering and voting upon
the Merger and the SCO Transaction at the Caldera Stockholders Meeting, the
Prospectus/Proxy Statement. SCO, Caldera and Newco will prepare and file the
Prospectus/Proxy Statement with the SEC as promptly as practicable, and each
will use its respective best reasonable efforts to cause the Form S-4 to become
effective as soon after such filing as practicable. In this regard, SCO, Caldera
and Newco will advise each other promptly as to the time at which the Form S-4
becomes effective and of the issuance by the SEC of any stop order suspending
the effectiveness of the Form S-4 or the initiation of any proceedings for such
purpose and each will use its respective reasonable best efforts to prevent the
issuance of any stop order and to obtain as soon as possible the lifting
thereof, if issued. Until the Effective Time, Caldera and Newco will advise SCO
promptly of any requirement of the SEC for any amendment or supplement of the
Form S-4 or for additional information, and will not at any time file any
amendment of or supplement to the prospectus contained therein (or to the
prospectus filled pursuant to Rule 424(b) of the SEC) which shall not have been
previously submitted to SCO in reasonable
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time prior to the proposed filing thereof or to which SCO shall reasonably
object or which is not in compliance in all material respects with the
Securities Act and the rules and regulations issued by the SEC thereunder. None
of the information relating to Caldera or Newco (or, to Caldera's or Newco's
knowledge, any other person, contained in any document, certificate or other
writing furnished or to be furnished by Caldera) included in (i) the
Prospectus/Proxy Statement by Newco and/or Caldera at the time the
Prospectus/Proxy Statement is mailed, at the time of the Caldera Stockholders
Meeting to vote on the Merger and the SCO Transaction or at the Effective Time,
as then amended or supplemented, or (ii) the Form S-4 at the time the Form S-4
becomes effective, as then amended or supplemented, will contain any untrue
statement of a material fact or will omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading or necessary to correct
any statement which has become false or misleading in any earlier communication
with respect to the solicitation of proxies for the Caldera Stockholder Meeting.
From and after the date the Form S-4 becomes effective and until the Effective
Time, if any event known to Caldera or Newco occurs as a result of which the
Prospectus/Proxy Statement or Form S-4 would include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or if it is necessary
at any time to amend the Form S-4 or the Prospectus/Proxy Statement to comply
with the Securities Act, Caldera and Newco will promptly notify SCO and SCO,
Caldera and Newco will prepare an amended or supplemented Form S-4 or
Prospectus/Proxy Statement which will correct such statement or omission and
will use its reasonable best efforts to cause any such amendment to become
effective as promptly as possible. The Prospectus/Proxy Statement, as it relates
to Caldera and Newco, will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder in
effect at the time the Prospectus/Proxy Statement is mailed.
5.7 State Securities Law Compliance. Caldera and Newco shall use
their respective reasonable best efforts to qualify the Newco Options to be
granted upon cancellation of the Cancelled SCO Options to be assumed by Caldera
pursuant hereto under the state securities or "blue sky" laws of every
jurisdiction of the United States in which (a) the records of Caldera or SCO as
of the Effective Time, indicate that a holder of such options resides and (b) a
Nasdaq Stock Market or other exemption from the qualification requirements under
such laws is unavailable.
5.8 Regulatory Approvals. As promptly as reasonably practicable,
Caldera and Newco will execute and file, or join in the execution and filing, of
any application or other document that may be necessary in order to obtain the
authorization, approval or consent of any governmental body, federal, state,
provincial, local or foreign which may be reasonably required, or which SCO may
reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement. Caldera and Newco will each use its respective
reasonable efforts to promptly obtain all such authorizations, approvals and
consents and will cooperate fully with the other parties in promptly seeking to
obtain all such authorizations, approvals, and consents.
5.9 Necessary Consents. Caldera and Newco will each use its
respective reasonable efforts to obtain the written consents under the Material
Caldera Contracts and to take
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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.
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5.14 Sales Representative and Support Agreement. The Sales
Representative and Support Agreement shall be executed as of the Effective Time.
5.15 Stockholders Agreement. The Stockholders Agreement shall be
executed as of the Effective Time.
5.16 Caldera Employee Plans.
(a) Newco will adopt the employee benefit plans maintained
by Caldera (the "Caldera Employee Plans") and will use reasonable efforts to
provide the Caldera Employee Plans to the transferring Employees as is provided
to Caldera's employees who are similarly situated as soon as practicable. To the
extent that Newco does not have Caldera Employee Plans in effect in a
jurisdiction where there are transferring Employees, Newco shall adopt plans
providing comparable benefits to the Caldera Employee Plans for said
transferring Employees. From and after the Effective Time Newco shall provide
all transferring Employees with the opportunity to participate in any employee
stock option or other incentive compensation plan of Newco and its affiliates on
substantially the same terms and subject to substantially the same conditions as
are available to similarly situated employees of Caldera or Newco. Prior to the
Effective Time, Caldera, Newco and SCO shall mutually agree upon an integration
plan relating to the Merger and the SCO Transaction which shall include, among
other things, provisions relating to compensation and other equity incentives
for Employees. In addition, at the Effective Time, Newco shall use its best
efforts to enter into employment agreements which reflect the terms set forth in
the Key Employee Term Sheets (the form of which is attached hereto as Exhibit
4.18B) with the Key Employees who are identified on Exhibit 4.18A attached
hereto.
(b) Waiting Periods, Premiums and Deductibles. Newco shall
take all steps necessary to cause each Caldera Employee Plan to waive any
"waiting period" or other requirement with respect to duration of employment
with Newco which would prevent a transferring Employee or beneficiary thereof
who is otherwise eligible to participate in such Caldera Employee Plan from
participating in such Caldera Employee Plan immediately following the Effective
Time. Newco shall credit each transferring Employee with all deductible payments
and co-payments paid by such transferring Employee under any Group Employee Plan
prior to the Effective Time during the current plan year for purposes of
determining the extent to which any such transferring Employee has satisfied any
deductible or maximum out-of-pocket limitation under any Caldera Employee Plan
for such plan year.
(c) Recognition of Prior Service. Newco shall take all
steps necessary to cause each Caldera Employee Plan to recognize each
transferring Employee's length of service under comparable employee benefit
plans maintained by SCO for purposes of eligibility, participation, vesting and
benefit accrual in such Caldera Employee Plan as if such transferring Employee
had been employed by Newco for such period.
(d) Waiver of Restrictions. Newco shall take all steps
necessary to cause each Caldera Employee Plan which is an "employee welfare
benefit plan" under Section 3(1) of ERISA to waive any restrictions or
limitations with respect to "pre-existing conditions" or prior medical history
which would apply to transferring Employee or beneficiary thereof who is
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otherwise eligible to participate in such Caldera Employee Plan from
participating in such Caldera Employee Plan without restriction or limitation.
5.17 Indemnification and Insurance -- Caldera.
(a) The Certificate of Incorporation and Bylaws of Newco
and Caldera shall contain the provisions with respect to indemnification and
limitation of liability for monetary damages set forth in the Certificate of
Incorporation and Bylaws of Caldera on the date hereof.
(b) From and after the Effective Time, Newco and Caldera
shall honor, in all respects, all of the indemnity agreements entered into prior
to the date hereof by Caldera, with its respective officers and directors,
whether or not such persons continue in their positions with Newco or Caldera
following the Effective Time. Following the Effective Time, Caldera's form of
indemnification agreement shall be adopted as the form of indemnification
agreement for Newco and the Caldera Surviving Corporation shall be afforded the
opportunity to enter into such indemnification agreement, and shall be covered
by such directors' and officers' liability insurance policies as Newco shall
have in effect from time to time.
(c) After the Effective Time, Newco and Caldera will,
jointly and severally, to the fullest extent permitted under applicable law,
indemnify and hold harmless, each present and former director or officer of
Caldera or any of its subsidiaries (collectively, the "Indemnified Parties")
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal administrative or investigative, to the extent arising out of or
pertaining to any action or omission in his or her capacity as a director or
officer of Caldera arising out of or pertaining to the transactions contemplated
by this Agreement or the transactions contemplated hereby for a period of six
years after the date of this Agreement. In the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), (a) any counsel retained for the defense of the Indemnified Parties for
any period after the Effective Time will be reasonably satisfactory to the
Indemnified Parties, (b) after the Effective Time, Caldera will pay the
reasonable fees and expenses of such counsel, promptly after statements therefor
are received, and (c) Caldera will cooperate in the defense of any such matter;
provided, however, that Caldera will not be liable for any settlement effected
without its written consent (which consent will not be unreasonably withheld);
and provided, further, that, in the event that any claim or claims for
indemnification are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims will continue until the
disposition of any and all such claims. The Indemnified Parties as a group may
be defended by only one law firm (in addition to local counsel) with respect to
any single action, unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two or
more Indemnified Parties.
(d) For the entire period from and after the Effective
Time until at least six years after the Effective Time, Newco will cause Caldera
to use its commercially reasonable efforts to maintain in effect directors' and
officers' liability insurance covering those persons who are currently covered
by Caldera's directors' and officers' liability insurance policy (a copy
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of which has been heretofore delivered or made available to SCO) of at least the
same coverage and amounts, containing terms that are no less advantageous with
respect to claims arising at or before the Effective Time than Caldera's
policies in effect immediately prior to the Effective Time to those applicable
to the then current directors and officers of Newco and Caldera; provided,
however, that in no event shall Newco or Caldera be required to expend in excess
of 150% of the annual premium currently paid by Caldera for such coverage in
which event Newco shall purchase such coverage as is available for such 150% of
such annual premium.
(e) Newco and Caldera shall pay all expenses, including
attorneys' fees, that may be incurred by any Indemnified Parties in enforcing
the indemnity and other obligations provided for in this Section 5.17.
(f) In the event Newco or Caldera or any of its respective
successors or assigns (a) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (b) transfers or conveys all or a substantial
portion of its properties or assets to any person or entity, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
5.17, proper provision shall be made so that the successors and the assigns of
Newco and Caldera assume the obligations set forth in this Section 5.17.
(g) The provisions of this Section 5.17 shall survive the
Effective Time and are intended to be for the benefit of, and shall be
enforceable by, each officer and director of Caldera SCO and the Contributed
Company Group described in Sections 5.17 and his or her heirs and
representatives.
5.18 Indemnification and Insurance -- Employees.
(a) The Certificate of Incorporation and Bylaws of Newco
shall contain the provisions with respect to indemnification and limitation of
liability for monetary damages set forth in the Certificate of Incorporation and
Bylaws of Caldera as of the date hereof which provisions shall not be amended,
repealed or otherwise modified for a period of ten years from the Effective Time
in any manner that would adversely affect the rights thereunder of individuals
who at the Effective Time were directors, officers, employees or agents of (i)
the Contributed Companies or (ii) of SCO (A) to the extent involved in the Group
Business and (B) provided they become Employees, officers or directors of Newco
("Group Persons"), unless such modification is required by law.
(b) From and after the Effective Time, Newco shall honor,
in all respects, all of the indemnity agreements entered into prior to the date
hereof by SCO or any member of the Contributed Company Group with any Group
Persons, whether or not such persons continue in its positions with Newco
following the Effective Time. Following the Effective Time, Caldera's form of
indemnification agreement shall be adopted as the form of indemnification
agreement for Newco and all continuing officers and directors of Newco shall be
afforded the opportunity to enter into such indemnification agreement, and shall
be covered by such directors' and officers' liability insurance policies as
Newco shall have in effect from time to time.
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(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.
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5.19 Distribution to SCO Shareholders.
Caldera and Newco acknowledge that SCO may wish to distribute to
the shareholders of SCO all or part of its Newco Common Stock. Six (6) months
from the Closing Date, SCO shall be entitled to make such a distribution;
provided, however, that after such six (6) month period, SCO will not distribute
to its shareholders more than 25% of the shares of Newco Common Stock acquired
by SCO pursuant to this agreement during a six (6) month period. Newco will
facilitate such distribution by using its reasonable best efforts to take such
actions as may be required under the federal securities laws and regulations in
order for such shares of Newco Common Stock being distributed to the SCO
Shareholders to be registered with the Securities and Exchange Commission. At
the time of such registrations, Newco and SCO will enter into an agreement
containing customary indemnification provisions which shall be substantially
equivalent to the indemnification provisions in the promissory note issued by
SCO to Caldera as of the date hereof.
6. Conditions Precedent to Obligations of SCO.
The obligations of SCO and the other Contributing Companies
hereunder are subject to the fulfillment or satisfaction on or before the
Closing of each of the following conditions (any one or more of which may be
waived by SCO on behalf of all said entities, but only in a writing signed by
SCO):
6.1 Accuracy of Representations and Warranties. The
representations and warranties of Caldera and Newco contained in this Agreement
(i) shall have been true and correct as of the date of this Agreement and (ii)
on and as of the Closing Date with the same force and effect as if they had been
made on the Closing Date, except (A) in each case and in the aggregate does not
constitute a Material Adverse Effect on Caldera and (B) for those
representations and warranties that address matters only as of a particular date
(which shall remain true and correct as of such particular date), and SCO shall
receive a certificate to such effect executed on behalf of Caldera and Newco by
a duly authorized officer of Caldera and of Newco.
6.2 Covenants. Caldera and Newco shall have performed and
complied in all material respects with all of its respective covenants in this
Agreement required to be complied with prior to the Effective Time; and SCO
shall receive a certificate to such effect executed by a duly authorized officer
of Caldera and of Newco at the Effective Time.
6.3 Compliance with Law. There shall be no order, decree or
ruling by any governmental agency which would prohibit or render illegal the
transactions contemplated by this Agreement.
6.4 Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop-order and the
Prospectus/Proxy Statement shall on the Effective Time not be subject to any
proceedings commenced seeking a stop-order or overtly threatened by the SEC.
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6.5 Opinion of Caldera and Newco's Counsel. SCO shall have
received from Brobeck, Phleger & Harrison LLP, counsel to Caldera and Newco, an
opinion in the form of Exhibit 6.5 attached hereto, with such assumptions and
qualifications as are customary for such opinions.
6.6 Stockholder Approval. The principal terms of this Agreement,
the Merger and the SCO Transaction shall have been approved and adopted by the
Caldera stockholders and the principal terms of this Agreement and the SCO
Transaction shall have been approved and adopted by the SCO stockholders, in
accordance with California law and its Articles of Incorporation and Bylaws.
6.7 Tax Opinion. SCO shall have received an opinion in form and
substance satisfactory to SCO , from its counsel, to the effect that the SCO
Transaction will be treated as a transfer of property to Newco by the
Contributing Companies governed by Section 351 of the Internal Revenue Code. In
rendering such opinion, counsel shall be entitled to rely on representations of
the parties and of Caldera stockholders as reasonably requested by counsel in
connection with such tax opinion, and the opinion may contain such assumptions
and qualifications as are customary for such opinions. The parties agree to
cooperate with counsel by providing the representations referred to above and
Caldera shall use its best efforts to obtain the requested stockholder
representations.
6.8 Designees to the Board of Directors of Newco. The Board of
Directors of Newco shall have taken appropriate action to elect Doug Michels and
another individual designated by SCO to the Board of Directors of Newco,
effective upon the Effective Time.
6.9 Nasdaq Listing. The Newco Common Stock to be issued in the
Merger and in the SCO Transaction shall have been approved for quotation on the
Nasdaq Stock Market, subject to notice of issuance.
6.10 HSR Act. All waiting periods (and any extensions thereof)
under the HSR Act applicable to transactions contemplated hereby shall have
expired or shall have been terminated.
6.11 Ancillary Agreements. Caldera and Newco shall have executed
and delivered counterparts of each of the Ancillary Agreements to which they are
a party.
6.12 Delivery of Newco Shares. Newco shall have delivered the
First SCO Certificate to SCO.
7. Conditions Precedent to Obligations of Caldera and Newco.
The obligations of Caldera, Merger Sub and Newco hereunder are
subject to the fulfillment or satisfaction on or before the Closing of each of
the following conditions (any one or more of which may be waived by Caldera on
behalf of all such parties, but only in a writing signed by Caldera):
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7.1 Accuracy of Representations and Warranties. The
representations and warranties of SCO contained in this Agreement (i) shall have
been true and correct as of the date of this Agreement and (ii) shall be true
and correct as of the Closing Date with the same force and effect as if they had
been made on the Closing Date, except (A) in each case and in the aggregate as
does not constitute a Material Adverse Effect on the Group Business and (B) for
those representations and warranties that address matters only as of a
particular date (which shall remain true and correct as of such particular
date), and Caldera shall receive a certificate to such effect executed on behalf
of SCO by a duly authorized officer of SCO.
7.2 Covenants. SCO and the Contributing Companies shall have
performed and complied in all material respects with all of its respective
covenants in this Agreement required to be complied with prior to the Effective
Time; and Caldera shall receive a certificate to such effect signed on behalf of
SCO by a duly authorized officer of SCO.
7.3 Compliance with Law. There shall be no order, decree or
ruling by any court or governmental agency which would prohibit or render
illegal the transactions contemplated by this Agreement.
7.4 Consents. There shall have been obtained on or before the
Effective Time all permits, consents and authorizations as set forth on Section
7.4 of the SCO Disclosure Letter, where the failure to obtain same has resulted,
or reasonably would be expected to result, in a Material Adverse Effect on the
Group Business.
7.5 Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop-order or proceedings
seeking a stop-order and the Prospectus/Proxy Statement shall at the Effective
Time not be subject to any proceedings seeking a stop-order commenced or overtly
threatened by the SEC.
7.6 Opinion of Counsel to SCO. Caldera shall have received from
Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to SCO and
the Contributing Companies, an opinion in the form of Exhibit 7.6 attached
hereto, with such assumptions and qualifications as are customary for such
opinions.
7.7 Caldera Stockholder Approval. The principal terms of this
Agreement, the Merger and the SCO Transaction shall have been approved and
adopted by the Caldera stockholders and the principal terms of this Agreement
and the SCO Transaction (including the contribution and transfer of the
Contributed Assets) shall have been approved and adopted by the SCO Stockholders
each in accordance with Delaware Law and their respective Certificates of
Incorporation and Bylaws.
7.8 Tax Opinion. Caldera and Newco shall have received an opinion
in form and substance satisfactory to them from their counsel, to the effect
that the Merger will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368 of the Internal Revenue Code.
In rendering such opinion, counsel shall be entitled to rely on representations
of the parties and of Caldera stockholders as reasonably requested by counsel in
connection with such tax opinion, and the opinion may contain such assumptions
and qualifications as are customary for such opinions. The parties agree to
cooperate with counsel by
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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);
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(f) by Caldera or SCO, if the Merger and the SCO
Transaction shall not have been consummated on or before the Final Date for any
reason, provided that, the right to terminate this Agreement under this Section
8.1(f) shall not be available to any party whose wrongful action or failure to
act or whose breach of this Agreement or any Ancillary Document, is the cause of
such non-consummation;
(g) by Caldera or SCO, if a permanent injunction or other
order by any federal or state court would make illegal or otherwise restrain or
prohibit the consummation of the Merger and/or the SCO Transaction shall have
been issued and shall have become final and nonappealable;
(h) by Caldera or SCO, if the stockholders of SCO do not
approve the SCO Transaction at a duly convened SCO Stockholders Meeting or any
adjournment thereof by reason of the failure to obtain the required vote (a "SCO
Stockholder Rejection"); provided, that the right to terminate this Agreement
under this Subsection (h) shall not be available to SCO where the failure to
obtain SCO stockholder approval shall have been caused by any breach of this
Agreement or any Ancillary Document by SCO;
(i) by Caldera, if (a) the Board of Directors of SCO shall
have withdrawn (or modified in a manner adverse to the SCO Stockholder Approval
or the consummation of the SCO Transaction) its approval or recommendation of
the SCO Transaction or this Agreement, (b) SCO shall have failed to include in
the Proxy Statement/Prospectus the recommendation of the Board of Directors of
SCO in favor of approval of the SCO Transaction or this Agreement, (c) the Board
of Directors of SCO shall have recommended any SCO Alternative Proposal, which
meets the criteria of 4.14(b)(i)-(v), or (d) the Board of Directors of SCO shall
have resolved to do any of the foregoing (collectively, a "Change in SCO Board
Recommendation");
(j) by Caldera or SCO at any time prior to the SCO
Stockholder Approval, if the Board of Directors of SCO shall have recommended or
accepted a SCO Alternative Proposal provided that SCO is not in breach of
Section 4.14;
(k) by Caldera or SCO, if the stockholders of Caldera do
not approve the SCO Transaction at a duly convened Caldera Stockholders Meeting
or any adjournment thereof by reason of the failure to obtain the required vote;
provided, that the right to terminate this Agreement under this Subsection (k)
shall not be available to Caldera where the failure to obtain Caldera
Stockholder Approval shall have been caused by any breach of this Agreement or
any Ancillary Document by Caldera; or
(l) by SCO, if (a) the Board of Directors of Caldera shall
have withdrawn (or modified in a manner adverse to the Caldera Stockholder
Approval) its approval or recommendation of the SCO Transaction, the Merger or
this Agreement, (b) Caldera shall have failed to include in the Proxy
Statement/Prospectus the recommendation of the Board of Directors of Caldera in
favor of approval of the SCO Transaction, the Merger or this Agreement, (c) the
Board of Directors of SCO shall have resolved to do any of the foregoing.
As used herein, the "Final Date" shall be February 28, 2001; and
except that if a temporary, preliminary or permanent injunction or other order
by any Federal or state court
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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.
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.
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(b) SCO and Caldera acknowledge that the agreements
contained in this Section 8.4 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, neither SCO
nor Caldera would enter into this Agreement; accordingly, if either Caldera or
SCO fail to timely pay the amounts due pursuant to this Section 8.4, and, in
order to obtain such payment, the other party commences a suit which results in
a judgment against SCO or Caldera, as the case may be for the amounts set forth
in this Section 8.4 and such judgment is not set aside or reversed, such party
shall pay the other party's reasonable costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest on the
amounts set forth in this Section 8.4 at the prime rate as published in The Wall
Street Journal on the date such payment was required to be made.
9. Survival of Representations.
9.1 Survival of Representations. Except as otherwise expressly
provided herein, all representations, warranties and covenants of the parties
contained in this Agreement will remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the parties to this
Agreement, until the second anniversary of the Effective Time, whereupon such
representations, warranties and covenants will expire (except for covenants and
other provisions hereof that by its express terms survive for a longer period);
provided however that all representations and warranties and covenants relating
to Tax matters shall survive for the period of the applicable statute of
limitations.
10. Escrow and Indemnification.
10.1 Escrow Fund. In accordance with Section 1.3(b) hereof,
Caldera shall deliver to the Escrow Agent Shares of Newco Common Stock equal to
an aggregate of ten percent (10%) of the SCO Percentage Interest (the "Escrow
Fund"). The Escrow Fund shall be held by the Escrow Agent for a period of one
year from the Effective Time pursuant to the terms set forth in the Escrow
Agreement. The Escrow Fund shall be available to compensate Caldera Surviving
Corporation and Newco pursuant to the Indemnification obligations of SCO.
10.2 Indemnification by SCO. SCO agrees, notwithstanding any
provision of Section 1.4 hereof to the contrary, to indemnify Newco and Caldera
against, and to hold Newco and Caldera harmless from, all Loss arising out of
any of the following (even if included in the Assumed Liabilities as otherwise
being or allegedly being a Liability of one of the Contributed Companies or of
the Contributed Subsidiaries):
(a) any of the Excluded Liabilities, except as may be
provided in Section 12;
(b) any demand, claim, debt, suit, cause of action,
arbitration, investigation or other proceeding made or asserted by any
Contributing Company or any stockholder, creditor, or Affiliate of any
Contributing Company or by any receiver or trustee in bankruptcy of any
Contributing Company of the property or assets of any Contributing Company,
asserting that the transfer of the Contributed Stock and Contributed Assets to
Newco hereunder constitutes a fraudulent conveyance, fraudulent transfer or a
preference under any applicable foreign, state or federal law, including but not
limited to the United States Bankruptcy
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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
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written response (the "Response Notice") in which SCO: (i) agrees that the full
Claimed Amount is to be paid to the Indemnitee; (ii) agrees that a part, but not
all, of the Claimed Amount is to be paid to the Indemnitee; or (iii) indicates
that no part of the Claimed Amount is to be paid to the Indemnitee. Any part of
the Claimed Amount that SCO does not agree should be paid to the Indemnitee
shall be the "Contested Amount." If a Response Notice is not delivered to
Caldera within such twenty (20) business day period, then SCO shall be deemed to
have agreed that the full Claimed Amount is to be paid to the Indemnitee.
(c) Payment of Claimed Amount. If SCO delivers a Response
Notice agreeing that some or all of the Claimed Amount is to be paid to the
Indemnitee (the "Agreed Amount"), SCO shall pay the Indemnitee in cash, within
twenty (20) business days from the date of the Response Notice, any portion of
the Agreed Amount that is not satisfied by delivery of Escrow Shares pursuant to
the terms of the Escrow Agreement. Such payment shall be deemed to be made in
full satisfaction of the claim described in such Claim Notice, provided,
however, that if such claim involves ongoing Losses, then such payment shall be
deemed to be made in full satisfaction only of the Losses incurred as of the
date specified in such Claim Notice.
(d) Settlement. If SCO delivers a Response Notice
indicating that there is a Contested Amount, SCO and the Indemnitee shall
attempt in good faith for a period of thirty (30) days from the date of the
Response Notice to resolve the dispute related to the Contested Amount. If the
Indemnitee and SCO resolve such dispute, such resolution shall be binding on SCO
and all of the Indemnitees and a settlement agreement shall be signed by the
Indemnitee and SCO containing the terms of such resolution.
(e) Third Party Claims.
(i) Within fifteen (15) days after receipt of
notice of commencement of any action by any third party evidenced by service of
process or other legal pleading, or with reasonable promptness after the
assertion in writing of any claim by a third party, Caldera shall give SCO
written notice thereof together with a copy of such claim, process or other
legal pleading, and SCO shall have the right to undertake the defense, thereof
through a legal representative of SCO's own choosing.
(ii) In the event that SCO, by the thirtieth day
after receipt of notice of any such claim (or, if earlier, by the tenth day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not elect to defend against such claim, Caldera (upon further notice to
SCO) will have the right to undertake the defense, compromise or settlement of
such claim on behalf of and for the account and risk of SCO subject to the right
of SCO to assume the defense of such claims at any time prior to settlement,
compromise or final determination thereof. The reasonable costs of defense of
any third party action or claim by Caldera shall be paid from the Escrow Shares.
(iii) Notwithstanding Sections 11.5(e)(i) and (ii),
Caldera shall have the right to retain control of the defense of any third party
action or claim described in Section 11.5(e)(i) which involves potential Losses
in excess of the value of the Escrow Shares remaining in the Escrow Account or
could reasonably be expected to materially affect Caldera's
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on-going operations. In such event, SCO shall have the right to be present at
the negotiation, defense and settlement of such action or claim. Caldera shall
not agree to any settlement of any such action or claim without the consent of
SCO, which shall not be unreasonably withheld.
(f) Satisfaction. In the event SCO incurs liability for
Losses which is not satisfied by delivery of shares from the Escrow Fund, SCO
may elect to pay the amount due either in cash or by delivering shares of Newco
Common Stock. For this purpose, the Newco Common Stock will be valued at the
average closing price of the Caldera Common Stock for the ten days following the
public announcement of this Agreement, as adjusted for stock splits, stock
dividends, changes in the Caldera Ratio and other recapitalizations.
11. Employee Matters.
11.1 Right to Offer Employment.
(a) Employees. Schedule 11.1 of the SCO Disclosure Letter
contains a preliminary list (the "Preliminary List") of each Contributed Company
employee or consultant and each other employee or consultant of SCO or the Group
Business who works in, or provides services in connection with or is assigned to
the Group Business or any of the Group Assets (each a "Potential Employee").
Within five (5) days after the date hereof, SCO shall deliver to Newco a final
list of the Potential Employees (the "Final List"), which list shall identify
those Potential Employees who are active employees of the Group Business as of
that date, including those on vacation, sick leave, maternity or parental leave,
disability leave, family leave or personal leave of absence, who work full or
part time, and which shall separately identify those employees who are on a
workers' compensation-related or disability leave or long-term sick leave. The
Final List shall contain, with respect to each Potential Employee, a true and
accurate list of all locations at which Potential Employees are working as of
such date, together with the date of hire, location of employment, years of
employment or service, current annual base salary or base wage, and of all other
compensation arrangements for such Potential Employees, including bonuses,
commissions or other compensation arrangements or benefit plans whether oral or
written, contractual or discretionary. Within sixteen (16) days of receipt of
the Final List, Caldera shall deliver to SCO a list that identifies: (i) those
Potential Employees of the Group Business to whom it shall make offers of
employment and (ii) those Potential Employees of the Contributed Companies that
it expects to retain, each pursuant to Section 11.1(e) (the "Designated
Employees"). For purposes of this Agreement, "Employees" means only those
Designated Employees given offers of employment or retained by Newco pursuant to
Section 11.1(e). For a period of two years from the Closing Date, neither Newco,
any of its subsidiaries nor their employees (including former employees of SCO)
may employ, make offers of employment to or otherwise solicit any employees of
SCO as of the date hereof who are not Designated Employees.
(b) The parties acknowledge and agree that in those
jurisdictions in which the EC Directive 77/187 (the Acquired Rights Directive)
(the "Employment Regulations") apply, the contracts of employment of the
Designated Employees designated as "Employees" pursuant to Section 11.1(e) will
have effect from the Effective Time (which shall be the "time of transfer" for
the purposes of the Employment Regulations) as if originally made between Newco
and each such Employee. If any contract of employment is not disclosed by SCO in
the Final List or any
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other contract of employment of any employee other than an Employee is in effect
as if originally made between Newco and the employee concerned as a result of
the Employment Regulations: (i) Newco may, upon becoming aware of any such
contract, terminate it forthwith; and (ii) SCO and each Group Business shall
indemnify and hold harmless Newco against any costs, claims, liabilities and
expenses of any nature (including legal expenses on an indemnity basis) arising
out of such termination and against sums payable to or on behalf of such
employee in respect of his employment whether arising before or after the
Closing.
(c) Newco shall credit Employees with their then current
accrued vacation with SCO or the Contributed Companies. All other emoluments and
outgoings (including and without limitation, wages, salaries, bonuses,
commissions, withholding taxes, social security contributions, pension
contributions) and other costs and expenses of, and all other obligations in
respect of, the Employees in respect of the period to, and including, the
Closing shall be discharged by SCO and any relevant Group Business. SCO and each
Group Business shall indemnify and keep indemnified Newco against all
liabilities arising from any failure by SCO and any Group Business so to
discharge.
(d) SCO and each Group Business shall indemnify and hold
harmless Newco from and against all losses, costs, claims, demands, actions,
fines, penalties, awards, liabilities and expenses (including legal expenses on
an indemnity basis) (i) which are attributable to any act, omission, breach or
default by SCO or any Group Business prior to the Closing in respect of any of
the obligations of SCO or any Group Business (in either case, whether arising
under common law, statute, custom or otherwise) to or in relation to any of its
employees or former employees (including but not limited to any liability
arising out of the termination or dismissal of any Potential Employee or former
employee and which Newco may incur or suffer as a result of succeeding to SCO or
any Group Business as the employer of any Potential Employee); or (ii) in
connection or as a result of any claim or demand by a Potential Employee on the
grounds that the Potential Employee has suffered any loss, harm or damage in
relation to pension rights caused by the transactions set forth in this
Agreement (including without limitation the calculation of any transfer value of
accrued rights on transfer) to the Potential Employees; or (iii) in connection
or as a result of any claim or demand by a Potential Employee that the identity
of Newco is to the Potential Employee's detriment, whether or not such claim or
claims arises or arise prior to, on or after the Closing.
(e) Offers of Employment. Effective at the Effective Time,
Newco shall offer to employ any of the Designated Employees of the Group
Business (other than Designated Employees of the Contributed Companies) subject
to Newco's standard terms, conditions and policies of employment and the terms
of this Agreement, and shall offer such Designated Employees as it determines,
in its sole discretion, to hire (i) salary consistent with the salary earned by
such Potential Employees prior to the Effective Time but only to the extent such
salary is not in excess of industry norms (taking into account the geographic
location of the Employees); and (ii) participation in incentive compensation
arrangements consistent with the incentive compensation arrangements of
employees of Caldera in comparable positions. This Section 11.1(b) shall not be
construed to create any third party beneficiary rights or any other rights of
any kind in any Designated Employee and no Designated Employee shall have any
cause of action as a third party beneficiary. Such offers of employment that
will be extended by
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Newco to Employees will be on the same basis of time commitment (full or part
time) as such Employee was employed immediately prior to the Effective Time. In
addition, SCO shall cause the termination of any Potential Employees of the
Contributed Companies who are not Designated Employees prior to the Effective
Time. Unless the parties otherwise agree, on the date of the Closing, SCO shall
notify each Employee who accepts an offer of employment extended by Newco as of
the Effective Time, in a writing reasonably satisfactory to Newco, that such
Employee's employment with SCO or any of its direct or indirect subsidiaries is
then terminated. For a period of two years from the Closing Date, neither SCO
nor any of its subsidiaries nor any of its employees may employ, make offers of
employment to or otherwise solicit any of the employees of Newco or any of its
subsidiaries as of the date hereof or any of the Designated Employees.
(f) Severance. SCO shall be responsible for any and all
severance that may become due as a result of the transaction contemplated by
this Agreement for all employees except for those Employees hired by Newco
pursuant to Section 11.1(b); provided, however, that if Caldera does not make a
reasonable offer of employment to a Designated Employee then Caldera shall be
responsible for any and all severance that may become due as a result of the
transaction or the termination of such employee.
11.2 Termination of Employment.
(a) SCO agrees to comply with the provisions of the WARN
Act and any other federal, state, provincial or local or foreign statute or
regulation or EU Directive regulation regarding termination of employment, plant
closing or layoffs and to perform all obligations required of SCO with respect
to the cessation of any operations of the Group Business or any other business
of SCO or its subsidiaries, or the termination, re-assignment, re-location or
change in position as terms and conditions of employment of any Employee (or
other employee of them) who does not accept Newco's offer of employment.
(b) In the United States, SCO shall (i) provide
continuation health care coverage to all employees of the Group Business and
their qualified beneficiaries who incur a qualifying event prior to the
Effective Time, who are not given offers of employment by Newco or who do not
accept Newco's offer of employment pursuant to Section 11.1(b) in accordance
with the continuation health care coverage requirements of COBRA and (ii)
provide COBRA continuation coverage to any former employee of the Contributed
Company Group who was previously employed in the Group Business (collectively,
the "Former Employees") and its qualified beneficiaries to whom, at the
Effective Time, such continuation coverage was being provided or to whom SCO was
under an obligation to provide such continuation coverage at the election of
such Former Employee or qualified beneficiary.
11.3 Cooperation. SCO, Caldera and Newco agree, for themselves
and its affected subsidiaries, to cooperate fully with respect to the actions
which are necessary or reasonably desirable to accomplish the transactions
contemplated hereunder, including, without limitation, the provision of records
and information as each may reasonably request and in order to meet the
notification and consultation requirements of the Acquired Rights Directive in
accordance with the relevant regulations or laws adopting such directive in all
relevant
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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
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Letter or the Group Financial Statements and is either (A) in respect of any
taxable period that ends prior to the Closing Date or in respect of any taxable
period that includes, but does not end on the Closing Date, the portion of such
period ending on the Closing Date or (B) with respect to an excess loss account
in the stock of any Contributed Company or from a deferred intercompany
transaction (including any such transaction resulting from a distribution or
deemed distribution of Newco Common Stock by any Contributing Company) entered
into on or prior to the Closing Date and is triggered as a result of the
Contributed Company Group ceasing to be affiliated with SCO; (iii) under Subpart
F of the Code attributable to transactions undertaken by SCO or any of its
affiliates before or after the Effective Time; or (iv) as a result of a breach
of any representation, warranty, covenant or agreement made herein by SCO.
(b) Notwithstanding anything contained in this Section
12.3(b), SCO shall not be obligated to indemnify Newco for any Tax (including,
without limitation, any obligation to contribute to the payment of a Tax
determined on a consolidated basis with respect to a group of corporations that
includes or included SCO) by reason of an election or deemed election (including
any protective election) with respect to transactions described in this
Agreement made or filed post-Closing by Newco or any member of the Contributed
Companies under Section 338 of the Internal Revenue Code. Further, no Section
338 election shall be made with respect to any of the transactions described in
this Agreement.
(c) Except to the extent otherwise provided in this
Section 12.3(c), Newco shall timely pay and indemnify and save SCO and its
Affiliates harmless from any liability for, or arising out of or based upon or
relating to any Tax (including, without limitation, any obligation to contribute
to the payment of a Tax determined on a consolidated basis with respect to a
group of corporations that includes or included SCO) (i) relating to the income,
business, assets, property or operations of the Group Business by Newco and its
Affiliates or any member of the Contributed Company Group in respect of all
taxable periods beginning after the Closing Date, or, in the case of any taxable
period that includes but does not end on the Closing Date, the portion of such
period commencing on the day following the Closing Date; (ii) to the extent such
liability for Tax is reflected in the Group Financial Statements or the SCO
Disclosure Letter and such liability is for Tax relating to the income,
business, assets, property or operations of the Group Business or of any member
of the Contributed Company Group; (iii) under Subpart F of the Code attributable
to transactions undertaken by Newco or Caldera or any of their Affiliates after
the Effective Time; or (iv) as a result of a breach of any representation,
warranty, covenant or agreement made herein by Newco, Caldera or Merger Sub.
(d) If, as a result of any action, suit, investigation,
audit, claim, assessment or amended Tax Return, there is any change after the
Closing Date in an item of income, gain, loss, deduction or credit that results
in an increase in a Tax liability for which SCO would otherwise be liable
pursuant to paragraph (a) of this Section 12.3, and such change results in a
decrease in the Tax liability of Newco or any Affiliate or successor thereof for
any taxable year or period beginning after the Closing Date or for the portion
of any Straddle Period beginning after the Closing Date (assuming for purposes
of this sentence that Newco and its Affiliates are liable for income tax at the
highest applicable corporate federal, state, local and/or foreign rates), SCO
shall not be liable pursuant to such paragraph (a) with respect to such increase
to the extent of such decrease. If, as a result of any action, suit,
investigation, audit,
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claim, assessment or amended Tax Return, there is any change after the Closing
Date in an increase in an item of income, gain, loss, deduction, or credit that
results in an increase in a Tax liability for which Newco would otherwise be
liable pursuant to paragraph (c) of this Section 12.3, and such change results
in a decrease in the Tax liability of SCO or any Affiliate or successor thereof
(other than Newco) for any taxable year or period ending on or before the
Closing Date or for the portion of any Straddle Period ending on the Closing
date (other than by reason of a carryback of losses or deductions), Newco shall
not be liable pursuant to such paragraph (c) with respect to such increase to
the extent of such decrease.
(e) For purposes of this Section 12.3, it shall be assumed
that SCO and its Affiliates are liable for income tax at the highest applicable
corporate federal, state, local and/or foreign rates, without reduction on
account of net operating losses or other tax attributes.
12.4 Other Tax Matters.
(a) SCO, Newco and Caldera will cooperate fully with each
other in connection with the preparation of all returns and reports of Taxes,
information returns, and all audit examinations of, or claims or assertions
against, any member of the Contributed Company Group, in each case including but
not limited to the furnishing or making available of records, books of account
or other materials and appropriate personnel necessary or helpful to the defense
against the assertions of any taxing authority. SCO shall, within ninety days
after the Effective Time, deliver to Newco a schedule listing the tax basis of
each of the Contributed Stock and Assets, along with copies of supporting
calculations, information and records.
(b) Except as provided in Section 12.4(c), in the event
and to the extent that SCO or any member of an affiliated group of corporations
(as defined in Section 1504 of the Internal Revenue Code or otherwise) of which
SCO is a member (other than any member of the Contributed Company Group)
receives a refund or credit of Taxes for any taxable period that ends prior to
the Effective Time or in respect of any period that includes, but does not end
on, the Effective Time, the portion of such period ending on the Effective Time
(the "Pre-Closing Period") which is attributable to the carry back of losses,
credits or similar items from any Tax return of any member of the Contributed
Company Group, and in any case, in respect of any taxable period that begins
after the Effective Time or in respect of any period that includes, but does not
end on the Effective Time, the portion of such period commencing on the day
following the Effective Time (the "Post-Closing Period"), SCO shall pay to
Newco, net of any additional Tax payable by SCO or its Affiliates by reason of
such carryback, the amount of such refund or credit (including any interest
received thereon) or Tax reduction. In the event that any refund or credit of
Taxes or Tax reductions for which a payment has been made pursuant to this
Section 12.4(b) subsequently is reduced or disallowed, the Contributed Companies
and Newco shall indemnify and hold harmless SCO and its Affiliates for any Tax
liability, including interest and penalties, assessed by reason of such
reduction or disallowance.
(c) In the event that an indemnified party receives a
refund or credit relating to Taxes for which the other party is required to
indemnify the first party pursuant to Section 12.3 of this Agreement (including,
but not limited to VAT refunds), such indemnified party agrees to pay to the
indemnifying party the amount of such refund or credit (including any interest
received thereon). In the event that any refund or credit of Taxes for which a
payment
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has been made pursuant to this Section 12.4(c) subsequently is reduced or
disallowed, the indemnifying party shall indemnify and hold harmless the
indemnified party for any Tax liability, including interest and penalties,
assessed by reason of such reduction or disallowance.
(d) If any claim for Tax relating to the Group Business or
the Contributed Company Group is asserted against SCO or any Affiliate for any
Pre-Closing Period, SCO shall promptly notify Newco in writing of such fact. SCO
and its duly appointed representatives shall have the sole right to negotiate,
resolve, settle or contest any such claim for Tax; provided, however, that they
shall deal fairly and in good faith with respect to any claim for Tax which
would require a payment by Newco to SCO or its Affiliates under Section 12.3(c)
or this Section 12.4 and provided further, that with respect to any claim which
would require a payment by Newco or have a Material Adverse Effect on the Group
Business, no settlement will be agreed to without Newco's prior written consent.
Such consent shall not be unreasonably withheld. Newco shall bear the legal and
accounting costs and expenses incurred in contesting a matter for which it has
withheld its consent. If any claim for Tax relating to the Contributed Company
Group for any Post-Closing Period comes to the attention of SCO, SCO will notify
Newco promptly of such claims and will cooperate fully with Newco and the
Contributed Company Group in the resolution of such claim. A failure to promptly
notify pursuant to this Section 12.4(d) shall not preclude another party's
indemnification obligation.
(e) SCO shall prepare any Tax returns (including any
amendments thereto) of the members of the Contributed Company Group for all
taxable periods that end, with respect to the Contributed Company Group, on or
before the Effective Time (including any short period ending on the Effective
Time) and which are due either before or after the Effective Time and shall
deliver to Newco for signing by the appropriate party and filing, any Tax
returns of the members of the Contributed Company Group (including any
amendments thereto) with respect to any such period that have not been filed
prior to the Effective Time. SCO shall deliver any such tax return or the
portion thereof relating to the Group Business to Newco at least fifteen days
prior to the date such tax return is due to be filed (taking into account any
applicable extensions). SCO shall report for federal income tax purposes the
operations of the Group Business and the Contributed Company Group for any short
period ending on the Effective Time, and shall be responsible for the filing of,
the consolidated tax returns of SCO's consolidated group which will include the
income of the Group Business and the Contributed Company Group through the
Effective Time and Newco will pay to SCO any amounts relating to such tax
returns required by Section 12.3(c) prior to the filing of such tax returns. In
order appropriately to apportion any taxes relating to a period that includes
(but that would not, but for this Section 12.4(e) end on the Effective Time),
the parties hereto will, to the extent permitted by applicable law, elect with
the relevant taxing authority to treat for all purposes the Effective Time as
the last day of a taxable period of any member of the Contributed Company Group.
SCO shall, in respect of such returns, and Newco and the Contributed Company
Group for returns with respect to the Post-Closing Period shall determine the
income, gain, expenses, losses, deductions and credits of the Group Business and
the Contributed Company Group in a manner (i) consistent with prior practice and
actual operations in a manner that apportions such income, gain, expenses, loss,
deductions and credits equitably from period to period and (ii) consistent with
prior years.
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(f) The provisions of this Section 12 with respect to the
consolidated groups or consolidated returns that include SCO or its Affiliates
other than a Contributed Company shall apply mutatis mutandis with respect to
combined or unitary groups or returns thereof.
(g) Newco and SCO shall make (or indemnify the payor
against) payments of estimated taxes (including amounts due with extensions) for
which they are responsible under this Agreement in a timely manner. A payment or
indemnity obligation under this Section 12 which is not made or satisfied when
due shall accrue interest at the rate applicable to late payments of the
pertinent Tax. Notwithstanding anything in this Section 12 to the contrary, a
party shall not have to bear the cost of a Tax liability more than once (e.g., a
payment of an estimated tax shall be credited against any payment due when the
return is filed).
(h) Except as provided in paragraph 12.4(e), for purposes
of allocating a Tax for which a party is otherwise responsible under Section
12.3 or this Section 12.4, the portion of those Taxes that are attributable to
the operations of the Group Business or of any member of the Contributed Company
Group for a relevant period (the "Interim Period") shall be (i) in the case of a
Tax that is not based on a net income, the total amount of such Tax for the
Interim Period in question multiplied by a fraction, the numerator of which is
the number of days in the Interim Period and the denominator of which is the
total number of days in such period, and (ii) in the case of a Tax that is based
on net income, the Tax that is due shall be an amount as equitably determined by
the parties based upon a hypothetical closing of the books.
(i) If Newco, a Contributed Company or any of its
respective Affiliates receive any notice of the assertion of any Tax liability
relating to a member of the Contributed Company Group for which SCO may be
liable under this Agreement, Newco shall give prompt written notice thereof to
SCO.
(j) After the Closing, Newco and the Contributed Companies
will provide reasonable access to all relevant Newco and Contributed Company
Group books, records, agreements and memoranda, and provide such assistance to
SCO as SCO and its Affiliates shall reasonably request, with respect to any
federal, foreign, state, provincial or local Tax matters pertaining to the
members of the Contributed Company Group for taxable periods or transactions on
or prior to the Effective Time. Newco will notify SCO prior to disposition of
such Tax records, if such disposition will take place within ten years after the
Effective Time. After the Closing, the parties will provide reasonable access to
all relevant SCO and Contributed Companies' books, records, agreements,
memoranda and tax returns, and provide copies of such information and such
assistance to the other party as it shall reasonably request, with respect to
any federal, foreign, state, provincial or local Tax matters pertaining to the
Contributed Assets and the Contributed Company Group for taxable periods or
transactions on or prior to the Effective Time.
(k) Notwithstanding anything in this Agreement to the
contrary, SCO and Newco covenant and agree (unless there has been a final
determination as defined in Section 1313(a) of the Code or any other event which
conclusively establishes a contrary position) for all Tax purposes, including
all Tax Returns and any Tax examinations, proceedings or controversies, to (and
to cause any Affiliate or successor to its assets or businesses to) take
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each of the positions set forth below (and not to take any position inconsistent
therewith) and to use good faith and reasonable best efforts to defend such
positions:
(i) The Merger (A) will qualify as a tax-free
reorganization described in Section 368(a) of the Code and (B) when taken
together with the SCO Transaction, will qualify as a tax free transfer of the
stock of Caldera to Newco governed by Section 351(a) of the Code.
(ii) The SCO Transaction will, when taken together
with the Merger, qualify as a transfer of the Contributed Stock and Contributed
Assets to Newco governed by Section 351 of the Code.
(l) SCO and Newco agree to report to the other any
communication from or with the Internal Revenue Service or any other Taxing
Authority which relates in any way to the characterization of the transactions
governed by this Agreement. Each of SCO and Newco will file with its Federal
income tax return for the taxable year in which the Merger and SCO Transaction
occurs (which tax return shall be timely filed) the information required by
Treas. Reg. sec. 1.351-3 and 1.368-3 and to provide each other upon request with
a statement to the effect that such party has complied with this requirement
after filing. SCO, the Contributed Companies, and Newco also will maintain such
permanent records as are required by Treas. Reg. sec. 1.351-3(c) and 1.368-3.
(m) Neither Caldera nor Newco has any plan or intention to
terminate the existence of Newco; to dispose of the assets contributed to Newco,
except in the ordinary course of business or in a contribution to the capital of
a wholly-owned subsidiary of Newco; to reacquire any stock to be issued in the
transactions contemplated by this Agreement; or to take any other action that
would reasonably be expected to cause the Merger and the SCO Transaction not to
be treated as a tax-free exchange under Section 351 of the Code. Neither Caldera
nor Newco knows of any plan or intention of any Caldera Significant Stockholder
to dispose of any Newco shares issued in the transactions contemplated by this
Agreement. SCO knows of no plan or intention to terminate the existence of Newco
or to dispose of the assets contributed to Newco, except in the ordinary course
of business or in a contribution to the capital of a wholly-owned subsidiary of
Newco. SCO has no plan or intention to dispose of any Newco shares issued in the
transactions contemplated by this Agreement, except for distributions of Newco
stock to SCO's shareholders, or to take any other action that would reasonably
be expected to cause the merger and the SCO Transaction not to be treated as an
exchange under Section 351 of the Code.
12.5 Tax Representations. Newco, Caldera and the Caldera
Significant Stockholder covenant and represent that Caldera, Newco and the
Caldera Significant Stockholder shall make such representations and covenants as
their respective counsel shall reasonably request prior to the closing for
purposes of establishing the qualification under Section 351 of the SCO
Transaction and the qualification of the Merger as a Section 368 transaction.
Any such representations shall be considered to be part of this Section 12.5(a).
13. Miscellaneous.
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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
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behalf of each of SCO and Caldera. At any time prior to the Closing, the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only by a writing
signed by the party or parties to be bound thereby. The waiver by a party of any
breach hereof or default in the performance hereof will not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
Delay in exercising any right under this Agreement shall not constitute a waiver
of such right. This Agreement may be amended by the parties hereto at any time
before or after approval of such party's stockholders, but, after such approval,
no amendment will be made which by applicable law requires the further approval
of a party's stockholders without obtaining such further approval.
13.7 Expenses. Except as herein expressly provided to the
contrary in this Agreement or the Ancillary Agreements, each party will bear its
respective fees and expenses incurred with respect to the negotiation,
preparation and performance of this Agreement and the transactions contemplated
hereby.
13.8 Attorneys' Fees. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including, without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
13.9 Notices. All notices and other communications pursuant to
this Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
If to SCO to: The SCO, Inc.
425 Encinal
Santa Cruz, California
Attention: Chief Executive Officer
and Law and Corporate Affairs
Telecopier: (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
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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.
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.
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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.
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"Caldera Assets" are the tangible and intangible, real and
personal assets owned, leased or licensed by Caldera.
"Caldera Balance Sheet" is defined in Section 3.14.
"Caldera Business" is the business of Caldera as carried on
immediately prior to the SCO Transaction, including without limitation Caldera's
business of developing, manufacturing, marketing, licensing, distributing,
using, operating, installing, servicing, supporting, maintaining, repairing or
otherwise using or commercially exploiting all or any aspect of any or all of
the Caldera Products or Caldera Assets.
"Caldera Closing Price" means the average closing price that
Caldera Common Stock for the five day period ending on the trading day prior to
the Closing.
"Caldera Common Stock" is defined in Section 1.2(a).
"Caldera Contracts" means all agreements, contracts,
understandings, arrangements, commitments, mortgages, indentures, leases,
licenses, permits, franchises, instruments, notes, bonds, indemnities,
guarantees, loan agreements, credit agreements, representations, warranties,
deeds, assignments, powers of attorney, certificates, purchase orders, work
orders, insurance policies, benefit plans, covenants, assurances or undertakings
of any nature to which Caldera or the Caldera Subsidiaries are a party.
"Caldera Disclosure Letter" is defined in the preamble of Section
3.
"Caldera Employees" are the employees of Caldera.
"Caldera Employee Plans" is defined in Section 5.16(a).
"Caldera Financial Statements" is defined in Section 3.4(b).
"Caldera Financial Statements Balance Sheet Date" is defined in
Section 3.4(b).
"Caldera Group" is defined in the Preamble of Section 3.
"Caldera IP Rights" is defined in Section 3.15(a).
"Caldera IP Rights Agreements" is defined in Section 3.15(c).
"Caldera's Knowledge" or "Known to Caldera". A particular fact or
other matter shall be deemed to be within "Caldera's Knowledge" or "Known to
Caldera" if any officer of Caldera has current actual knowledge of such fact or
other matter.
"Caldera Options" is defined in Section 1.2(b)(i).
"Caldera Percentage Interest" means 72% of the fully diluted
equity interest in Newco (taking into account all options, warrants and
convertible debentures on an as-converted basis).
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"Caldera Permitted Encumbrance" means Encumbrances (a) as
disclosed as an Encumbrance in the Caldera Disclosure Schedule (b) Encumbrances
for liabilities reflected in the Caldera Financial Statements, (c) liens for
current taxes not yet delinquent, (d) liens imposed by law and incurred in the
ordinary course of business to carriers, warehousemen, laborers, material men
and the like not yet due, (e) immaterial imperfections of title set forth in the
Caldera Disclosure Letter (f) Encumbrances which are not material in amount or
which will not materially interfere with the use of the Caldera Assets for the
Conduct of the Caldera Business.
"Caldera Plans" is defined in Section 1.2(b)(i).
"Caldera Products" means the operating system software and other
products marketed or sold by Caldera and all of software products currently
under development by or for Caldera or for use or sale or license by Caldera (in
each case together with all of the software, products, and other items listed on
Caldera's products price list) and all derivative works, upgrades,
modifications, enhancements and configurations of any of the foregoing and all
software and components included in any configuration of any of the foregoing,
and all development tools, utilities and diagnostics used to develop any of the
foregoing in each case (whether or not ever commercially offered or
price-listed, and whether or not in development).
"Caldera Ratio" is defined in Section 1.2(a).
"Caldera Restrictive Agreements" is defined in Section 3.23.
"Caldera SEC Documents" is defined in Section 3.4(a).
"Caldera Significant Stockholder" means Ray Noorda, The Canopy
Group, Inc. And MTI Technology Corporation.
"Caldera Stock Purchase Plan" is defined in Section 1.2(b)(ii).
"Caldera Stock Purchase Plan Rights" is defined in Section
1.2(b)(ii).
"Caldera Stockholder Approval" is defined in Section 5.20(b).
"Caldera Subsidiary" shall mean any direct or indirect subsidiary
of Caldera listed on Exhibit 13.15G attached hereto.
"Caldera Surviving Corporation" is defined in Section 1.9.
"Delaware Law" means the Delaware General Corporation Law, as in
effect from time to time.
"Disposal," "release," and "threatened release" shall have the
definitions assigned thereto by the CERCLA.
"Dollars" or "$" means U.S. dollars.
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"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).
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"Form S-4" is defined in Section 1.14.
"Form S-8" is defined in Section 1.7.
"Former Employees" is defined in Section 11.2(b).
"GAAP" means United States generally accepted accounting
principles and practices as in effect from time to time and applied consistently
throughout the periods involved.
"Governmental Antitrust Authority" means any federal, state,
local or non-U.S. governmental or quasi-governmental authority charged with the
administration or enforcement of antitrust, competition or merger control laws
or regulations.
"Governmental Permits" means all municipal, state, local, federal
and other governmental franchises, permits, licenses, agreements, waivers and
authorizations from, issued or granted by, any jurisdiction.
"Group Assets" shall mean the Contributed Assets and all
Contributed Company Property, considered collectively.
"Group Benefit Arrangements" is defined in Section 2.8(a).
"Group Business" means the business of SCO and its direct and
indirect subsidiaries with respect to (i) the Group Products, as reflected in
the 2000 Group Balance Sheet, including without limitation the business of
developing, manufacturing, marketing, licensing, distributing, using, operating,
installing, servicing, supporting, maintaining, repairing or otherwise using or
commercially exploiting all or any aspect of any or all of the Group Products or
of any Intangible Assets or Intellectual Property Rights related to any of the
Group Products, and (ii) the professional services division, but excluding the
SCO Retained Business.
"Group Employee Plans" is defined in Section 2.8(a).
"Group Financial Statements" has the meaning given in Section
2.4(c).
"Group Financial Statements Balance Sheet Date" is defined in
Section 2.4(c).
"Group Governmental Permits" means those Governmental Permits
required for the Conduct of the Group Business (including without limitation the
manufacture or sale of the Group Products) that are held by any member of the
Contributed Company Group or held, in whole or in part, primarily by a
Contributing Company and required for the Conduct of the Group Business, or
necessary for the use or operation of any of the Group Assets (including without
limitation the Real Property Assets) or the manufacture or sale of any of the
Group Products, to the extent legally transferable in accordance with this
Agreement.
"Group Permitted Encumbrance" means Encumbrances (a) as disclosed
as an encumbrance in Exhibit 13.15E attached hereto (b) Encumbrances for
Liabilities reflected in the Group Financial Statements, (c) liens for taxes not
yet delinquent, (d) liens imposed by law and incurred in the ordinary course of
business to carriers, warehousemen, laborers, material men and
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the like not yet due and payable, (e) immaterial imperfections of title set
forth in the SCO Disclosure Letter (f) Encumbrances which are not material in
amount or which will not materially interfere with the use of the Group Assets
for the Conduct of the Group Business.
"Group Persons" is defined in Section 5.18(a).
"Group Products" means the operating system software and other
products listed in the Group product list attached hereto as Exhibit 13.15D
marketed or sold by any member of the Contributed Company Group or the
Contributing Companies and all software under development for or licensed by the
Group Business (together with all derivative works, upgrades, modifications,
enhancements and configurations of any of the foregoing now existing or under
development and all software and components included in any configuration of any
of the foregoing, and all development and QA tools, utilities and diagnostics
used to develop any of the foregoing, in each case whether or not ever
commercially offered or price-listed, and whether or not in development).
"Group Restrictive Agreements" is defined in Section 2.23.
"Hazardous Materials" means: (i) any pollutant, contaminant,
toxic, hazardous or noxious substance or waste which is regulated by the laws of
any state, local, provincial, federal or other governmental authority or
jurisdiction, and includes but is not limited to (a) any oil or petroleum
compounds, flammable substances, explosives, radioactive materials, or any other
materials or pollutants which pose a hazard to persons or cause any real
property to be in violation of any Environmental Laws, (b) to the extent so
regulated, asbestos or any asbestos-containing material of any kind or
character, (c) polychlorinated biphenyls, as regulated by the Toxic Substances
Control Act, 15 U.S.C. sec. 2601 et seq., (or equivalent or similar legislation
in other relevant jurisdictions) (d) any material or substances designated as
"hazardous substances" pursuant to (1) Section 311 of the Clean Water Act, 33
U.S.C. sec. 1251 et seq., (or equivalent or similar legislation in other
relevant jurisdictions) or (2) Section 101 of CERCLA, (or equivalent or similar
legislation in other relevant jurisdictions) (e) "chemical substance," "new
chemical substance," or "hazardous chemical substance or mixture" pursuant to
Sections 3, 6 and 7 of the Toxic Substances Control Act, 15 U.S.C. sec. 2601 et
seq., (or equivalent or similar legislation in other relevant jurisdictions) and
(f) any "hazardous waste" pursuant to Section 1004 of the Resource Conservation
and Recovery Act, 42 U.S.C. sec. 6901 et seq. (or equivalent or similar
legislation in other relevant jurisdictions)
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Parties" is defined in Section 5.17(c).
"Indemnitee" is defined in Section 10.5(a).
"Insolvency Action" means, with respect to a person, any or all
of the following: (i) the voluntary or involuntary filing, with respect to such
person, of a petition for relief, or any other effort to seek relief, under any
Insolvency Proceeding; (ii) such person or any of its assets otherwise becoming
the subject of an Insolvency Proceeding; (iii) the formal or informal
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dissolution, liquidation or winding up of such person, or any efforts to
initiate or carry out such dissolution, liquidation or winding up; (iv) the
appointment of (or efforts or attempts to appoint) a receiver, liquidator,
sequestrator, trustee, custodian or other similar officer with respect to such
person or any part of its assets or properties; or (v) any composition of the
indebtedness of such person or any assignment for the benefit of such person's
creditors.
"Insolvency Proceeding" means any or all of the following
actions, events or proceedings: (i) any voluntary or involuntary case, contested
matter or other proceeding under the United States Bankruptcy Code, as amended,
and any successor law or laws thereto; or (ii) any case, action or other
proceeding under any bankruptcy, insolvency, debt reorganization or similar law
(whether now or hereafter in effect) of any state, country or other
jurisdiction.
"Intangible Assets" means, collectively, all intangible assets,
properties and rights required for the development of the Group Products,
constituting software (in both source code and binary code form), technology,
works of authorship, manuals, logbooks, notebooks, user's guides, programmers'
notes, documentation, know-how, trade secrets and training materials (for both
training of customers and of service personnel).
"Intellectual Property Rights" means, collectively, all of the
following worldwide intangible legal rights including those existing or acquired
by ownership, license or other legal operation, whether or not filed, perfected,
registered or recorded and whether now or hereafter existing, filed, issued or
acquired: (i) patents, patent applications, and patent rights, including any and
all continuations, continuations-in-part, divisions, reissues, reexaminations or
extensions thereof; (ii) inventions (whether patentable or not in any country),
invention disclosures, industrial designs, improvements, trade secrets,
proprietary information, know-how, technology and technical data; (iii) rights
associated with works of authorship (including without limitation audiovisual
works), including without limitation copyrights, copyright applications and
copyright registrations, moral rights, database rights, mask work rights, mask
work applications and mask work registrations; (iv) rights in trade secrets
(including without limitation rights in industrial property, customer, vendor
and prospect lists and all associated information or databases and other
confidential or proprietary information), and all rights relating to the
protection of the same including without limitation rights under nondisclosure
agreements; (v) any other proprietary rights in technology, including software,
all source and object code, algorithms, architecture, structure, display
screens, layouts, inventions, development tools and all documentation and media
constituting, describing or relating to the above, including, without
limitation, manuals, memoranda, records, business information, or trade marks,
trade dress or names, anywhere in the world; (vi) any rights analogous to those
set forth in the preceding clauses and any other proprietary rights relating to
intangible property, including without limitation brand names, trademarks,
service marks, domain names, trademark and service mark registrations and
applications therefor, trade names, rights in trade dress and packaging and all
goodwill associated with the same; and (vii) all rights to sue or make any
claims for any past, present or future infringement, misappropriation or
unauthorized use of any of the foregoing rights and the right to all income,
royalties, damages and other payments that are now or may hereafter become due
or payable with respect to any of the foregoing rights, including without
limitation damages for past, present or future infringement, misappropriation or
unauthorized use thereof; and (viii) rights under license agreements for the
foregoing.
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"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
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and its subsidiaries of the actions anticipated by this Agreement and the
Ancillary Agreements to be taken by them on or before the Closing; provided
however that none of the following shall be deemed to be a Material Adverse
Effect on Caldera: (i) changes in market price or trading volume of Caldera
common stock or (b) changes attributable to the public announcement or pendency
of the transactions contemplated hereby.
"Material Adverse Effect on Newco" means any event, change or
effect would have a material adverse effect on the business, tangible and
intangible assets, financial condition, and future operations of Newco and its
subsidiaries, Newco together with its subsidiaries as a whole, after the
Effective Time or prevent in any material respect Newco from taking the actions
anticipated by this Agreement and the Ancillary Agreements to be taken by Newco
and its subsidiaries on and after the Effective Time.
"Material Adverse Effect on the Group Business" means any event,
change or effect which would have a material adverse effect on the business,
tangible and intangible assets, financial condition, and results of operations
of the Group Business, taking such Group Business as a whole, or prevent in any
material respect the performance by SCO and its subsidiaries of the actions
anticipated by this Agreement and the Ancillary Agreements to be taken by them
on or before the Closing; provided however that none of the following shall be
deemed to be a Material Adverse Effect on the Group Business: (i) changes in
market price or trading volume of SCO common stock or (b) changes attributable
to the public announcement or pendency of the transactions contemplated hereby.
"Material Contributed Contracts" is defined in the Preamble of
Section 2.11.
"Material Caldera Contracts" is defined in Section 3.11.
"Merger" is defined in Recital A.
"Merger Sub" is defined in Recital A.
"Multiemployer Plan" is defined in Section 2.8(b).
"Multiple Employer Plan" is defined in Section 2.8(b).
"Newco" means Caldera Holding Inc., a Delaware corporation.
"Newco Common Stock" is defined in Recital A.
"Newco Offer" is defined in Recital A.
"Newco Options" is defined in Recital A.
"Newco Plans" is defined in Section 1.6.
"Newco Rights Agreement" is defined in Section 1.12.
"Nondisclosure Agreement" is defined in Section 4.9.
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"Omitted Balance Sheet Liabilities" is defined in Section
10.1(e).
"Optionees" is defined in Recital A.
"Patent Assignment" is defined in Section 7.15.
"Person" means any individual, partnership, limited liability
company, firm, corporation, association, trust, unincorporated organization or
other entity, as well as any syndicate or group that would be deemed to be a
person under Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended.
"Post-Closing Period" is defined in Section 12.5(b).
"Potential Employee" is defined in Section 11.1.
"Pre-Closing Period" is defined in Section 12.5(b).
"Preliminary List" is defined in Section 11.1(a).
"Prospectus" is defined in Section 5.6.
"Prospectus/Proxy Statement" is defined in Section 1.14.
"Real Property Assets" shall mean all real property assets
required for the Conduct of the Group Business.
"Representing SCO Entities" is defined in the Preamble of Section
2.
"Response Notice" is defined in Section 10.5(b).
"Returns" is defined in Section 12.1.
"SEC" is the Securities and Exchange Commission.
"Securities Act" is the Securities Act of 1933, as amended.
"Shared Contributed Contracts" is defined in Section 4.17.
"Solvent" shall mean, with respect to any person on a particular
date, that on such date (a) the fair value of the property of such person is
greater than the total amount of liabilities, including contingent liabilities,
of such person; (b) the present fair salable value of the assets of such person
is not less than the amount that will be required to pay the probable liability
of such person on its debts as they become absolute and matured; (c) such person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such person's ability to pay as such debts and liabilities
mature; and (d) such person is not engaged in a business or transaction, and is
not about to engage in a business or transaction, for which such person's
property would constitute an unreasonably small capital. The amount of
contingent liabilities (such as litigation, guarantees and pension plan
liabilities) at any time shall be computed as the amount that, in light
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of all the facts and circumstances existing at the time, represents the amount
that can reasonably be expected to become an actual or matured liability.
"Stock Rights" is defined in Section 1.7.
"Stockholder Agreement" is defined in Section 4.18.
"SCO" means The SCO, Inc., a Delaware corporation.
"SCO Alternative Proposal" is defined in Section 4.14(a).
"SCO Closing Price" means the average closing price of SCO Common
Stock for the five day period ending on the trading day prior to the Closing.
"SCO Consolidated Financial Statements" is defined in Section
2.4(b).
"SCO Consolidated Financial Statements Balance Sheet" is defined
in Section 2.4(b).
"SCO Disclosure Letter" is defined in Section 2.
"SCO IP Rights" is defined in Section 2.15(a).
"SCO IP Rights Agreements" is defined in Section 2.15(c).
"SCO's Knowledge" or "Known to SCO." A particular fact or other
matter shall be deemed to be within "SCO's Knowledge" or "Known to SCO" if any
executive officer of SCO or a Contributed Company or any executive officer of
SCO responsible for the Group Business has current actual knowledge of such fact
or other matter after reasonable investigation.
"SCO Options" is defined in Section 1.3(ii).
"SCO Per Share Value" is defined in Section 1.3(a)(ii).
"SCO Percentage Interest" means a fully diluted equity interest
in Newco (taking into account all options, warrants and convertible debentures
on an as-converted basis) equal to 100% less the Caldera Percentage Interest.
"SCO Ratio" is defined in Section 1.3(a)(ii).
"SCO Retained Business" means the business of SCO that does not
constitute the Group Business consisting of the Tarantella business.
"SCO SEC Documents is defined in Section 2.4(a).
"SCO Stockholder Rejection" is defined in Section 8.1(h).
"SCO Transaction" shall have the meaning described in Recital A
hereto.
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"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.
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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/ Ransome Love
---------------------------------------
Ransom Love
President and Chief Executive Officer
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
89