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EXHIBIT 10.43
THIS SECURED PROMISSORY NOTE AND THE SHARES ISSUABLE UPON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS (COLLECTIVELY, THE "ACTS"), AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED OR DISPOSED OF EXCEPT PURSUANT TO REGISTRATION
UNDER SUCH ACTS OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL, OR
OTHER EVIDENCE REASONABLY SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE PROMISSORY NOTE
$7,000,000.00 Santa Cruz, California December __, 2000
FOR VALUE RECEIVED, the undersigned, The Santa Cruz Operation, Inc., a
California corporation ("Borrower"), promises to pay to the order of Caldera
Systems, Inc. ("Lender"), the sum of Seven Million Dollars ($7,000,000.00), with
interest from the date of advancement on the unpaid balance hereof from time to
time remaining unpaid at a rate of 10% per annum, compounded annually until
maturity, in the form of, at the election of the Lender, (i) cancellation of the
cash purchase price to be paid by Lender to Borrower pursuant to the terms of
that certain Agreement and Plan of Reorganization, dated August 1, 2000 (the
"Reorganization Agreement") at the Effective Time (as defined in the
Reorganization Agreement); (ii) lawful money of the United States of America; or
(iii) equity securities of the Borrower as provided in numbered paragraph 1,
herein below, both principal and interest being payable at the address
designated in numbered paragraph 14 below or at such other place as Lender may,
from time to time, designate in writing. If Lender shall make no such election
prior to the Maturity Date (as hereafter defined), Borrower shall make such
payment in lawful money of the United States of America. No later than three (3)
business days prior to the Maturity Date, Lender shall notify Borrower of the
form of payment as aforesaid other than in lawful money of the United States of
America that it shall elect, and if Lender shall not so notify Borrower or shall
change such election after making it and prior to the Maturity Date, Borrower
may make all payments hereunder without additional interest or any penalty no
later than two business days after Lender's final election as aforesaid.
The principal of this Note shall mature and the principal and interest
shall be due and payable on the earliest to occur of (i) the Effective Time (as
defined in the Reorganization Agreement) or (ii) the date of termination of the
Reorganization Agreement (in either case, the "Maturity Date"). All accrued and
unpaid interest shall be payable at the maturity of the principal of this Note.
Payment of this Note is secured by a Security Agreement executed on
this date by Borrower and covering all of the assets of Borrower. If action is
instituted to collect this note, the Borrower promises to pay all costs and
expenses, including reasonable attorneys' fees,
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incurred in connection with such actions. Payment of this Note is subject to the
terms of an Intercreditor Agreement executed on this date by Borrower, Lender
and The Canopy Group, Inc.
All past due principal and accrued interest on this Note shall bear
interest from maturity until paid at the lesser of (i) the rate of 10% per annum
or (ii) the highest rate for which Borrower may legally contract under
applicable law. All payments on past due principal and accrued interest
hereunder shall be payable in lawful money of the United States of America which
shall be legal tender for public and private debts at the time of payments.
1. Conversion; Right of Offset and Reduction.
If payment of all amounts due hereunder is not made on or before the
Maturity Date, Lender, at its sole option and upon 30 days notice to Borrower,
may convert all of the outstanding principal and unpaid interest accrued to that
date into Common Stock of the Borrower at a price equal to the closing price of
the Borrower's Common Stock on the day of funding.
In no event shall Lender convert, in aggregate, amounts owed under this
Note into a number of shares that, when combined with (i) shares converted by
The Canopy Group, Inc. ("Canopy") pursuant to that certain Loan Agreement and
Secured Convertible Promissory Note by and between Canopy and Borrower dated on
even date herewith (collectively, the "Canopy Loan Agreements"), and (ii) shares
purchased pursuant to the warrant granted by Borrower to Canopy dated on even
date herewith, or the Additional Warrants (as defined in the Loan Agreements),
exceeds 19% of the total outstanding shares of Borrower's Common Stock at the
time of such issuance.
2. Prepayments. This Note may be prepaid by Borrower in whole or in part without
the consent of the holder and without prepayment penalty of any kind.
3. Default; Remedies. The entire unpaid balance of this Note shall be
immediately due and payable at the option of the holder hereof upon the
occurrence of an Event of Default. For the purposes of this Agreement, an Event
of Default shall have occurred if (i) the Borrower shall have materially failed
to perform any covenant or other obligation hereunder, and such failure shall
have continued for twenty (20) days after Borrower shall have received notice
thereof, (ii) the Borrower shall commence a voluntary case or other proceeding
seeking liquidation or other reorganization with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or shall
make a general assignment for the benefit of creditors, or shall fail generally
to pay its debts as they become due; or (iii) an involuntary case or other
proceeding shall be commenced against the Borrower seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar now or hereafter in effect or seeking
the appointment of a trustee, liquidator, receiver, custodian or other similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a period of
90 consecutive days.
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4. No Waiver; Cumulative Rights. No delay on the part of the holder of this Note
in the exercise of any power or right under this Note or under any other
instrument executed pursuant hereto shall operate as a waiver thereof, nor shall
a single or partial exercise of any power or right preclude other or further
exercise thereof or the exercise of any other power or right.
5. Registration Rights. Upon conversion of this Note into Common Stock of
Borrower pursuant to the terms of Section 1 above, Lender shall have the rights
provided in this Section 5 with respect to Registrable Securities, as defined
below.
5.1 As used in this Note, the following terms shall have the following
meanings:
(a) "Affiliate" shall mean, with respect to any Person (as defined
below), any other Person controlling, controlled by or under direct or indirect
common control with such Person (for the purposes of this definition "control,"
when used with respect to any specified Person, shall mean the power to direct
the management and policies of such person, directly or indirectly, whether
through ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the
foregoing).
(b) "Business Day" shall mean a day Monday through Friday on which
banks are generally open for business in New York.
(c) "Holders" shall mean the Lender or any person to whom the
rights under this Section 5 have been transferred in accordance with Section 5.9
hereof.
(d) "Person" shall mean any person, individual, corporation,
limited liability Borrower, partnership, trust or other nongovernmental entity
or any governmental agency, court, authority or other body (whether foreign,
federal, state, local or otherwise).
(e) The terms "register," "registered" and "registration" refer to
the registration effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of the effectiveness of
such registration statement.
(f) "Registrable Securities" shall mean (i) the shares of Common
Stock issuable upon conversion of this Note pursuant to Section 1 above; (ii)
any shares of Common Stock issued as (or issuable upon the conversion of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to or in replacement of such Common Stock; provided,
however, that securities shall only be treated as Registrable Securities if and
only for so long as they (A) have not been disposed of pursuant to a
registration statement declared effective by the Commission, (B) have not been
sold in a transaction exempt from the registration and prospectus delivery
requirements of the Act so that all transfer restrictions and restrictive
legends with respect thereto are removed upon the consummation of such sale, (C)
are held by a Holder or a permitted transferee pursuant to Section 5.9, or (D)
have not been sold or are not available for sale in transactions pursuant to
Rule 144(k) promulgated under the Act.
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(g) "Registration Expenses" shall mean all reasonable expenses
incurred by the Borrower in complying with Section 5.2 hereof, including,
without limitation, all registration, qualification and filing fees, reasonable
printing expenses, fees and expenses of counsel for the Borrower, blue sky fees
and expenses and the reasonable expense of any special audits incident to or
required by any such registration (but excluding the fees of legal counsel for
any Holder).
(h) "Registration Statement" shall have the meaning ascribed to
such term in Section 5.2.
(i) "Registration Period" shall have the meaning ascribed to such
term in Section 5.4.
(j) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and expenses of legal counsel for any Holder.
5.2 No later than thirty (30) days after the date of conversion as set
forth in numbered paragraph 1, herein above (the "Filing Date"), the Borrower
shall file a "shelf" registration statement on the appropriate form (the
"Registration Statement") with the Commission and use its best efforts to effect
the registration, qualifications or compliances (including, without limitation,
the execution of any required undertaking to file post-effective amendments,
appropriate qualifications or exemptions under applicable blue sky or other
state securities laws and appropriate compliance with applicable securities
laws, requirements or regulations) of the Registrable Securities prior to the
date which as soon as is reasonably practical thereafter.
5.3 All Registration Expenses incurred in connection with any
registration, qualification, exemption or compliance pursuant to Section 5.2
shall be borne by the Borrower.
5.4 In the case of the registration, qualification, exemption or
compliance effected by the Borrower pursuant to this Agreement, the Borrower
shall, upon reasonable request, inform each Holder as to the status of such
registration, qualification, exemption and compliance. At its expense the
Borrower shall:
(a) use its commercially reasonable efforts to keep such
registration, and any qualification, exemption or compliance under state
securities laws which the Borrower determines to obtain, continuously effective
until the Holders have completed the distribution described in the registration
statement relating thereto. The period of time during which the Borrower is
required hereunder to keep the Registration Statement effective is referred to
herein as "the Registration Period." Notwithstanding the foregoing, at the
Borrower's election, the Borrower may cease to keep such registration,
qualification, exemption or compliance effective with respect to any Registrable
Securities, and the registration rights of a Holder shall expire, at such time
as they are no longer, by reason of Rule 144 promulgated under the Act (or other
exemption from registration acceptable to the Borrower) required to register for
the sale thereof; and
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(b) advise the Holders:
(i) when the Registration Statement or any amendment thereto
has been filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included therein or
for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for such purpose;
(iv) of the receipt by the Borrower of any notification with
respect to the suspension of the qualification of the Registrable Securities
included therein for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of
any changes in the Registration Statement or the prospectus so that, as of such
date, the statements therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to make the statements
therein (in the case of the prospectus, in the light of the circumstances under
which they were made) not misleading;
(c) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of any Registration Statement at the earliest
possible time;
(d) furnish to each Holder upon request, without charge, at least
one copy of such Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits (including those incorporated by reference) in
the form filed with the Commission;
(e) during the Registration Period, deliver to each Holder,
without charge, as many copies of the prospectus included in such Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
request; and the Borrower consents to the use, consistent with the provisions
hereof, of the prospectus or any amendment or supplement thereto by each of the
selling Holders of Registrable Securities in connection with the offering and
sale of the Registrable Securities covered by the prospectus or any amendment or
supplement thereto;
(f) prior to any public offering of Registrable Securities
pursuant to any Registration Statement, register or qualify or obtain an
exemption for offer and sale under the securities or blue sky laws of such
jurisdictions as any such Holders reasonably request in writing, provided that
the Borrower shall not for any such purpose be required to qualify
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generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in any
such jurisdiction, and do any and all other acts or things reasonably necessary
or advisable to enable the offer and sale in such jurisdictions of the
Registrable Securities covered by such Registration Statement;
(g) cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to any Registration Statement free of any restrictive legends
to the extent not required at such time and in such denominations and registered
in such names as Holders may request at least three (3) business days prior to
sales of Registrable Securities pursuant to such Registration Statement;
(h) upon the occurrence of any event contemplated by Section
5.4(b)(v) above, the Borrower shall promptly prepare a post-effective amendment
to the Registration Statement or a supplement to the related prospectus, or file
any other required document so that, as thereafter delivered to purchasers of
the Registrable Securities included therein, the prospectus will not include any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
5.5 The Holders shall have no right to take any action to restrain,
enjoin or otherwise delay any registration pursuant to Section 5.2 hereof as a
result of any controversy that may arise with respect to the interpretation or
implementation of this Agreement.
5.6 (a) To the extent permitted by law, the Borrower shall indemnify
each Holder and each person controlling such Holder within the meaning of
Section 15 of the Act, with respect to which any registration, qualification or
compliance has been effected pursuant to this Agreement, against all claims,
losses, damages and liabilities (or action in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened
(subject to Section 5.6(c) below), arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus or offering circular, or any amendment or
supplement thereof, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which they were made,
and will reimburse each Holder and each person controlling such Holder, for
reasonable legal and other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action as
incurred; provided that the Borrower will not be liable in any such case to the
extent that any untrue statement or omission or allegation thereof is made in
reliance upon and in conformity with written information furnished to the
Borrower by or on behalf of such Holder and stated to be specifically for use in
preparation of such registration statement, prospectus or offering circular;
and, provided further, that the Borrower will not be liable in any such case
where the claim, loss, damage or liability arises out of or is related to the
failure of the Holder to comply with the covenants and agreements contained in
this Agreement respecting sales of Registrable Securities, and except that the
foregoing indemnity agreement is subject to the condition that, insofar as it
relates to any such untrue statement or alleged untrue statement or omission or
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alleged omission made in the preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the Commission at the time the
registration statement becomes effective or in the amended prospectus filed with
the Commission pursuant to Rule 424(b) or in the prospectus subject to
completion and term sheet under Rule 434 of the Act, which together meet the
requirements of Section 10(a) of the Act (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any such Holder or any
such controlling person, if a copy of the Final Prospectus furnished by the
Borrower to the Holder for delivery was not furnished to the person or entity
asserting the loss, liability, claim or damage at or prior to the time such
furnishing is required by the Act and the Final Prospectus would have cured the
defect giving rise to such loss, liability, claim or damage.
(b) Each Holder will severally, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Borrower, each of
its directors and officers, each underwriter of the Registrable Securities and
each person who controls the Borrower within the meaning of Section 15 of the
Act, against all claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 5.6(c) below), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, and will reimburse the Borrower, such
directors and officers, each underwriter of the Registrable Securities and each
person controlling the Borrower for reasonable legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action as incurred, in each case to the
extent, but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Borrower by or on behalf of the Holder and stated
to be specifically for use in preparation of such registration statement,
prospectus or offering circular; provided that the indemnity shall not apply to
the extent that such claim, loss, damage or liability results from the fact that
a current copy of the prospectus was not made available to the Holder and such
current copy of the prospectus would have cured the defect giving rise to such
loss, claim, damage or liability. Notwithstanding the foregoing, in no event
shall a Holder be liable for any such claims, losses, damages or liabilities in
excess of the proceeds received by such Holder in the offering, except in the
event of fraud by such Holder.
(c) Each party entitled to indemnification under this Section 5.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
Indemnified Party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall
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not relieve the Indemnifying Party of its obligations under this Agreement,
unless such failure is materially prejudicial to the Indemnifying Party in
defending such claim or litigation. An Indemnifying Party shall not be liable
for any settlement of an action or claim effected without its written consent
(which consent will not be unreasonably withheld).
(d) If the indemnification provided for in this Section 5.6 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
5.7 (a) Each Holder agrees that, upon receipt of any notice from the
Borrower of the happening of any event requiring the preparation of a supplement
or amendment to a prospectus relating to Registrable Securities so that, as
thereafter delivered to the Holders, such prospectus shall not contain an 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 not misleading, each
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to the registration statement contemplated by Section 5.2 until its receipt of
copies of the supplemented or amended prospectus from the Borrower and, if so
directed by the Borrower, each Holder shall deliver to the Borrower all copies,
other than permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
(b) Each Holder shall suspend, upon request of the Borrower, any
disposition of Registrable Securities pursuant to the Registration Statement and
prospectus contemplated by Section 5.2 during (i) any period not to exceed two
60-day periods within any one 12-month period the Borrower requires in
connection with a primary underwritten offering of equity securities and (ii)
any period, not to exceed one 45-day period per circumstance or development,
when the Borrower determines in good faith that offers and sales pursuant
thereto should not be made by reason of the presence of material undisclosed
circumstances or developments with respect to which the disclosure that would be
required in such a prospectus is premature, would have an adverse effect on the
Borrower or is otherwise inadvisable.
(c) As a condition to the inclusion of its Registrable Securities,
each Holder shall furnish to the Borrower such information regarding such Holder
and the distribution proposed by such Holder as the Borrower may request in
writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article V.
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(d) Each Holder hereby covenants with the Borrower (i) not to make
any sale of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Act to be satisfied, and (ii) if such
Registrable Securities are to be sold by any method or in any transaction other
than on a national securities exchange, Nasdaq National Market, Nasdaq SmallCap
Market or in the over-the-counter market, in privately negotiated transactions,
or in a combination of such methods, to notify the Borrower at least five (5)
business days prior to the date on which the Holder first offers to sell any
such Registrable Securities.
(e) Each Holder acknowledges and agrees that the Registrable
Securities sold pursuant to the Registration Statement described in this Section
are not transferable on the books of the Borrower unless the stock certificate
submitted to the transfer agent evidencing such Registrable Securities is
accompanied by a certificate reasonably satisfactory to the Borrower to the
effect that (i) the Registrable Securities have been sold in accordance with
such Registration Statement and (ii) the requirement of delivering a current
prospectus has been satisfied.
(f) Each Holder agrees not to take any action with respect to any
distribution deemed to be made pursuant to such registration statement which
would constitute a violation of Regulation M under the Exchange Act or any other
applicable rule, regulation or law.
(g) At the end of the period during which the Borrower is
obligated to keep the Registration Statement current and effective as described
above, the Holders of Registrable Securities included in the Registration
Statement shall discontinue sales of shares pursuant to such Registration
Statement upon receipt of notice from the Borrower of its intention to remove
from registration the shares covered by such Registration Statement which remain
unsold, and such Holders shall notify the Borrower of the number of shares
registered which remain unsold immediately upon receipt of such notice from the
Borrower.
5.8 With a view to making available to the Holders the benefits of
certain rules and regulations of the Commission which at any time permit the
sale of the Registrable Securities to the public without registration, the
Borrower shall use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Act, at all times;
(b) file with the Commission in a timely manner all reports and
other documents required of the Borrower under the Exchange Act; and
(c) so long as a Holder owns any unregistered Registrable
Securities, furnish to such Holder, upon any reasonable request, a written
statement by the Borrower as to its compliance with Rule 144 under the Act, and
of the Exchange Act, a copy of the most recent annual or quarterly report of the
Borrower, and such other reports and documents of the
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Borrower as such Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
5.9 The rights to cause the Borrower to register Registrable Securities
granted to the Holders by the Borrower under Section 5.1 may be assigned in full
by a Holder in connection with a transfer by such Holder of at least 250,000
shares of its Registrable Securities, provided, however, that (i) such transfer
may otherwise be effected in accordance with applicable securities laws; (ii)
such Holder gives prior written notice to the Borrower; and (iii) such
transferee agrees to comply with the terms and provisions of this Note, and such
transfer is otherwise in compliance with this Note. Except as specifically
permitted by this Section 5.9, the rights of a Holder with respect to
Registrable Securities as set out herein shall not be transferable to any other
Person, and any attempted transfer shall cause all rights of such Holder therein
to be forfeited.
5.10 With the written consent of the Borrower and the Holders holding
at least a majority of the Registrable Securities that are then outstanding, any
provision of this Article V may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) or amended. Upon the effectuation of each such
waiver or amendment, the Borrower shall promptly give written notice thereof to
the Holders, if any, who have not previously received notice thereof or
consented thereto in writing.
5.11 Except to the extent any delay is due to the failure of a Holder
to reasonably cooperate in providing to the Borrower such information as shall
be reasonably requested by the Borrower for use in the Registration Statement,
in the event that the Registration Statement is not filed by the date that is 30
days following the Maturity Date, the Borrower shall, for no additional
consideration, pay to each Holder as liquidated damages and not as a penalty an
amount in cash equal to one percent (1%) of the outstanding principal amount
then owed to such Holder hereunder for each 15 day period in which the
Registration Statement remains unfiled; provided, however, that in no event
shall the amount of liquidated damages payable by the Borrower to any Holder
pursuant to this Section 5.11 exceed ten percent (10%) of the amount invested by
such Holder.
6. Waiver. Borrower and all endorsers, sureties and guarantors of this Note
waive demand, presentment, protest, notice of dishonor, notice of nonpayment,
notice of intention to accelerate, notice of acceleration, notice of protest and
any and all lack of diligence or delay in collection or the filing of suit
hereon which may occur, and agree to all extensions and partial payments, before
or after maturity, without prejudice to the holder hereof.
7. Collection Costs. In the event that, upon an Event of Default, any amount
under this Note is collected in whole or in part through suit, arbitration or
mediation, then and in any such case there shall be added to the unpaid
principal balance hereof all costs of collection, (including, but not limited
to, reasonable attorneys' fees and expenses) whether or not suit is filed.
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8. Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of California.
9. Venue. The parties agree that any dispute regarding the interpretation or
validity of, or otherwise arising out of this Note, shall be subject to the
exclusive jurisdiction of the California State Courts in and for Santa Clara
County, California or, in the event of federal jurisdiction, the United States
District Court for the Northern District of California sitting in Santa Clara
County, California, and each party hereby agrees to submit to the personal and
exclusive jurisdiction and venue of such courts and not to seek the transfer of
any case or proceeding out of such courts.
10. Headings. The headings of the sections of this Note are inserted for
convenience of reference only and shall not be deemed to constitute a part
hereof.
11. Usury. All agreements between Borrower and the holder of this Note, whether
now existing or hereafter arising and whether written or oral, are expressly
limited so that in no contingency or event whatsoever, whether by acceleration
of the maturity of this Note or otherwise, shall the amount paid, or agreed to
be paid, to the holder hereof for the use, forbearance or detention of the money
to be loaned hereunder or otherwise, exceed the maximum amount permissible under
applicable law. If from any circumstances whatsoever fulfillment of any
provision of this Note or of any other document evidencing, securing or
pertaining to the indebtedness evidenced hereby, at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity, and if from any such circumstances the
holder of this Note shall ever receive anything of value as interest or deemed
interest by applicable law under this Note or any other document evidencing,
securing or pertaining to the indebtedness evidenced hereby or otherwise an
amount that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the principal amount
owing under this Note or on account of any other indebtedness of Borrower to the
holder hereof relating to this Note, and not to the payment of interest, or if
such excessive interest exceeds the unpaid balance of principal of this Note and
such other indebtedness, such excess shall be refunded to Borrower. In
determining whether or not the interest paid or payable with respect to any
indebtedness of Borrower to the holder hereof, under any specific contingency,
exceeds the highest lawful rate, Borrower and the holder hereof shall, to the
maximum extent permitted by applicable law, (i) characterize any nonprincipal
payment as an expense, fee or premium rather than as interest, (ii) amortize,
prorate, allocate and spread the total amount of interest throughout the full
term of such indebtedness so that the actual rate of interest on account of such
indebtedness is uniform throughout the term thereof, and/or (iii) allocate
interest between portions of such indebtedness, to the end that no such portion
shall bear interest at a rate greater than that permitted by law. The terms and
provisions of this paragraph shall control and supersede every other conflicting
provision of all agreements between Borrower and the holder hereof.
12. Successors and Assigns. All of the stipulations, promises and agreements in
this Note made by or on behalf of Borrower shall bind the successors and assigns
of Borrower,
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whether so expressed or not, and inure to the benefit of the successors and
assigns of Borrower and Lender. Any assignee of Borrower or Lender shall agree
in writing prior to the effectiveness of such assignment to be bound by the
provisions hereof.
13. Severability. In the event any one or more of the provisions contained in
this Note shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision hereof, and this Note shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
14. Notices. All notices and other communications hereunder shall be in writing
or by telex, telegram or telecopy, and shall be deemed to have been duly made
when delivered in person or sent by telex, telegram, telecopy, same day or
overnight courier, or 72 hours after having been deposited in the United States
first class or registered or certified mail return receipt requested, postage
prepaid, to a party at the address set forth below (which may be changed in
accordance with these notice procedures):
If to Lender:
Caldera Systems, Inc.
240 West Center Street
Orem, Utah 84057
Attention: Chief Executive Officer
Fax: (801) 765-1313
with a copy (which shall not constitute notice) to:
Brobeck, Phleger & Harrison LLP
370 Interlocken Boulevard, Suite 500
Broomfield, Colorado 80021
Attention: John E. Hayes, III
Fax: (303) 410-2199
If to Borrower:
The Santa Cruz Operation, Inc.
425 Encinal
Santa Cruz, California 95061-1900
Attention: Law and Corporate Affairs
Fax: (831) 427-5454
with a copy (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Michael Danaher
Fax: (650) 493-6811
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IN WITNESS WHEREOF, the undersigned has executed this Secured
Convertible Promissory Note on and as of the date first set forth above.
THE SANTA CRUZ OPERATION, INC.
By:
--------------------------------
AGREED AND ACCEPTED:
CALDERA SYSTEMS, INC.
By:
-------------------------------
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