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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