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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
Of The Securities Exchange Act Of 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential for Use of the Commission Only (as permitted by Rule
14c-5(d)(2)
[X] Definitive Information Statement
CALDERA SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14cB5(g) and 0B11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0B11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0B11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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CALDERA SYSTEMS, INC.
240 West Center Street
Orem, Utah 84057
----------------------------
INFORMATION STATEMENT
----------------------------
This Information Statement is being furnished by Caldera Systems, Inc.,
a Delaware corporation (the "COMPANY"), to the holders of the Company's common
stock, $.001 par value (the "COMMON STOCK") as of July 14, 2000 in connection
with a proposal to amend the Caldera Systems, Inc. 1999 Omnibus Stock Incentive
Plan (the "1999 INCENTIVE PLAN").
On July 14, 2000, the board of directors of the Company (the "BOARD")
approved, subject to shareholder approval, an amendment to the 1999 Incentive
Plan (the "PLAN AMENDMENT") to (i) increase the number of shares of Common Stock
subject to the 1999 Incentive Plan from 4,105,238 shares to 6,405,238 shares,
(ii) to provide that, as of November 1 of each year, the number of shares
subject to the Plan shall increase by 3% of the total number of shares of Common
Stock outstanding on October 31st of such year, and (iii) to provide that,
notwithstanding a greater increase in the number of shares subject to the 1999
Incentive Plan, the number of shares that may be issued upon the exercise of
Incentive Stock Options under the 1999 Incentive Plan shall in no event exceed
6,405,238 shares, increased by 100,000 shares on November 1 of each year between
2000 and 2008. On the same date, the holders of 27,440,640 shares of the Common
Stock, constituting 70.3% of the issued and outstanding stock of the Company,
delivered to the Company a written consent (the "CONSENT") approving the
adoption of the Plan Amendment. This Information Statement is intended to serve
as notice of adoption of the Plan Amendment by nonunanimous written consent, as
contemplated by Section 228 of the Delaware General Corporation Law (the
"DGCL").
The Common Stock is traded on the Nasdaq National Market under the
symbol "CALD". The closing price of a share of Common Stock, as reported by the
Nasdaq National Market on July 27, 2000, was $7.50 per share.
This Information Statement is first being mailed to shareholders of the
Company on or about August 1, 2000. The Company will bear all costs and expenses
related to this Information Statement. Arrangements will be made with brokerage
firms and other custodians, nominees and fiduciaries representing beneficial
owners of shares of the Common Stock for the forwarding of solicitation material
to such beneficial owners, and the Company will reimburse such brokerage firms
and other custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred by them in doing so.
WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
OTHER THAN DULY AUTHORIZED OFFICERS OF THE COMPANY, NO PERSON IS AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED
HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THE DELIVERY OF THIS
INFORMATION STATEMENT SHALL NOT UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF, OR THAT THE INFORMATION CONTAINED OR INCORPORATED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE. THIS INFORMATION STATEMENT IS DATED AS OF
AUGUST 1, 2000.
---------------------
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OF THE COMPANY.
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GENERAL
This Information Statement is being furnished by Caldera Systems, Inc.
to the holders of the Company's Common Stock in connection with a proposal to
amend the Caldera Systems, Inc. 1999 Omnibus Stock Incentive Plan to increase
the number of shares of Common Stock subject thereto. This Information
Statement, which is being sent to all record holders of the Common Stock as of
July14, 2000 (the "RECORD DATE"), and is intended to serve as notice of adoption
of the Plan Amendment by nonunanimous written consent, as contemplated by
Section 228 of the DGCL.
The principal executive offices of the Company are located at 240 West
Center Street, Orem, Utah, 84057, and the Company's telephone number is (801)
765-4999.
INFORMATION REGARDING THE CONSENT AND SHAREHOLDERS
RECORD DATE AND SHAREHOLDER INFORMATION
Under the DGCL, the record date for shareholders entitled to receive
notice of the Consent is July 14, 2000. At the close of business on the Record
Date, there were 39,036,847 shares of Common Stock issued and outstanding, held
by approximately 115 holders of record. Each share of outstanding Common Stock
on the Record Date is entitled to cast one vote on each matter submitted to the
shareholders for a vote (whether by written consent or at a meeting).
REQUIREMENTS FOR NONUNANIMOUS CONSENT
Pursuant to Section 228 of the DGCL, approval of the Plan Amendment by
nonunanimous written consent of the shareholders of the Company is permitted if
a written consent, setting forth the action proposed to be taken, is delivered
to the Company by the holders of outstanding voting shares having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted, provided that prompt notice of the action taken is given to all
shareholders who have not signed the Consent and who, had action on the Plan
Amendment been taken at a meeting, would have been entitled to notice of such
meeting. This Information Statement, which is being sent to all record holders
of the Common Stock as of the Record Date, is intended to serve as such notice
required under Section 228 of the DGCL.
REQUIRED CONSENT FOR APPROVAL OF THE PLAN AMENDMENT
Under the DGCL and governing Company documents, the approval of a
majority of the issued and outstanding shares of Common Stock is sufficient to
approve the Plan Amendment. Because the entities signing the Consent held a
majority of the issued and outstanding Common Stock as of the Record Date, the
execution and delivery of the Consent to the Company constitutes sufficient
shareholder action to approve the Plan Amendment. No additional approval by the
remaining holders of the Common Stock is required or requested with respect
thereto.
PROPOSAL APPROVED BY THE CONSENT: THE PLAN AMENDMENT
AMENDMENT TO THE 1999 OMNIBUS STOCK INCENTIVE PLAN
On July 14, 2000, the Board approved, subject to shareholder approval,
the Plan Amendment. The text of the Plan Amendment is set forth on Appendix A
hereto.
The purpose of the Plan Amendment is to an amend to the 1999 Incentive
Plan is to (i) increase the number of shares of Common Stock subject to the 1999
Incentive Plan from 4,105,238 shares to 6,405,238 shares, (ii) to provide that,
as of November 1 of each year, the number of shares subject to the 1999
Incentive Plan shall increase by 3% of the total number of shares of Common
Stock outstanding on October 31st of such year, and (iii) to provide that,
notwithstanding a greater increase in the number of shares subject to the 1999
Incentive Plan, the number of shares that
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may be issued upon the exercise of Incentive Stock Options under the 1999
Incentive Plan shall in no event exceed 6,405,238 shares, increased by 100,000
shares on November 1 of each year between 2000 and 2008.
On July 14, 2000, the holders of 27,440,640 shares of the Common Stock,
constituting 70.3% of the issued outstanding stock of the Company, delivered to
the Company the Consent approving the adoption of the Plan Amendment. Under the
DGCL and governing Company documents, the approval by written consent of a
majority of the issued and outstanding shares of Common Stock is sufficient to
approve the Plan Amendment. Because the entities signing the Consent held a
majority of the issued and outstanding Common Stock as of the Record Date, the
execution and delivery of the Consent to the Company constitutes sufficient
shareholder action to adopt the Plan Amendment. No additional approval by the
remaining holders of the Common Stock is required or requested with respect
thereto. Accordingly, subject to the Company's delivery of this Information
Statement to record holders of the Common Stock that did not sign the Consent
and the expiration of any applicable waiting period set forth in governing SEC
rules, the Plan Amendment has been approved and is effective.
DESCRIPTION OF THE 1999 INCENTIVE PLAN, AS AMENDED
The following description of the 1999 Incentive Plan does not purport to
be complete and is qualified in its entirety by reference to the full text
thereof. Capitalized terms used herein will, unless otherwise defined, have the
meanings assigned to them in the text of the 1999 Incentive Plan.
GENERAL
The 1999 Incentive Plan is intended to promote the interests of the
Company and its shareholders by providing, officers, other employees, directors
and others who are expected to contribute to the success of the Company with
appropriate incentives and rewards to encourage them to enter into and continue
in the employ of the Company and to acquire a proprietary interest in the
long-term success of the Company, thereby aligning their interests more closely
to the interests of the Company's shareholders.
The 1999 Incentive Plan is not a qualified retirement plan under Section
401 of the Internal Revenue Code of 1986, as amended (the "CODE"), nor is it
subject to the Employee Retirement Income Security Act of 1974, as amendment.
The 1999 Incentive Plan is intended to qualify as a stock incentive plan
under Section 422 of the Code. The 1999 Incentive Plan is also intended to
provide performance-based compensation so as to be eligible for compliance with
Section 162(m) of the Code. Both Section 422 of the Code and Section 162(m) of
the Code require shareholder approval of the 1999 Incentive Plan and all
material amendments thereto. The Board conditioned its approval of the Plan
Amendment and sought shareholder approval in order to satisfy the requirements
of such Code sections.
The 1999 Incentive Plan is also intended to comply with the requirements
of Rule 16b-3 ("RULE 16B-3") promulgated under the Securities Exchange Act of
1934, as amended.
SUMMARY OF TERMS
As amended by the Plan Amendment, the 1999 Incentive Plan authorizes the
grant of incentive awards with respect to an aggregate of 6,405,238 shares of
Common Stock, subject to an automatic increase, as of November 1 of each year,
by 3% of the total number of shares of Common Stock outstanding on October 31st
of such year. (Notwithstanding a greater increase in the number of shares
subject to the 1999 Incentive Plan, the number of shares that may be issued upon
the exercise of Incentive Stock Options under the 1999 Incentive Plan shall in
no event exceed 6,405,238 shares, increased by 100,000 shares on November 1 of
each year between 2000 and 2008). Shares issued under the 1999 Incentive Plan
may be authorized and unissued shares, treasury shares or shares acquired by the
Company for purposes of the 1999 Incentive Plan. Generally, shares subject to an
award that remains unissued upon expiration or cancellation of the award will be
available for other awards under the 1999 Incentive Plan. In the event that the
Compensation Committee of the Board (the "COMMITTEE") determines that any
dividend or other distribution, stock split, recapitalization, reorganization,
merger or other similar corporate transaction or event affects the Common Stock
such that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of participants under the 1999 Incentive Plan, then
the Committee will make such equitable changes or adjustments as it deems
necessary to the
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aggregate number of shares available under the 1999 Incentive Plan, the number
of shares subject to each outstanding award and the exercise price of each
outstanding option or Stock Appreciation Right.
Awards under the 1999 Incentive Plan may be made in the form of (i)
Incentive Stock Options, (ii) Non-Qualified Stock Options, (iii) Stock
Appreciation Rights, (iv) Restricted Stock, (v) Phantom Stock and (vi) Stock
Bonuses. Awards may be granted to such, officers, employees, directors and
others expected to contribute to the long-term success of the Company and its
subsidiaries as the Committee shall, in its discretion, select.
The 1999 Incentive Plan is administered by the Committee, which consists
of two or more persons each of whom is an "outside director" within the meaning
of Section 162(m) of the Code and a non-employee director within the meaning of
Rule 16b-3. The Committee is authorized, among other things, to construe,
interpret and implement the provisions of the 1999 Incentive Plan, to select the
persons to whom awards will be granted, to determine the terms and conditions of
such awards and to make all other determinations deemed necessary or advisable
for the administration of the 1999 Incentive Plan.
AWARDS UNDER THE PLAN
Stock Options. The Committee determines, and sets forth in the
applicable award agreement, whether an Option is an Incentive Stock Option or a
Non-Qualified Stock Option, the vesting schedule of each Option, and the
expiration date of each Option; provided, however, no Incentive Stock Option
shall be exercisable more than 10 years after the date of grant. The purchase
price per share payable upon the exercise of an Option is established by the
Committee, but the option exercise price shall in no event be less than the fair
market value of a share of Common Stock on the date the Option is granted.
Unless the applicable award agreement provides otherwise, an Option becomes
cumulatively exercisable as to 25 percent of the shares covered thereby on each
of the first, second, third and fourth anniversaries of the date of grant. Only
individuals who are employees of the Company or any subsidiary of the Company as
of the date of the grant are eligible to receive Incentive Stock Options.
The option exercise price is payable (i) in cash, by certified check,
bank cashier's check or wire transfer, (ii) subject to any restrictions imposed
by securities laws, by delivering instructions to a broker to deliver promptly
to the Company the amount of sale or loan proceeds to pay the full amount of the
option exercise price, (iii) by delivering shares of Common Stock owned by the
participant with appropriate stock powers, (iv) by electing to have the Company
retain shares of Common Stock which would otherwise be issued on the exercise of
the Option, (v) any combination of the foregoing forms or (vi) by such other
payment method as the Committee may prescribe.
Stock Appreciation Rights. Stock Appreciation Rights may be granted in
connection with all or any part of, or independently of, any Option granted
under the 1999 Incentive Plan. A Stock Appreciation Right granted independently
of any Option will be subject to the same vesting rules as described above for
Options. A Stock Appreciation Right granted in tandem with any stock Option will
be exercisable only when and to the extent the Option to which it relates is
exercisable. The grantee of a Stock Appreciation Right has the right to
surrender the Stock Appreciation Right and receive from the Company, in cash, an
amount equal to the excess of the fair market value of a share of Common Stock
over the exercise price of the Stock Appreciation Right for each share of Common
Stock in respect of which such Stock Appreciation Right is being exercised.
Restricted Stock. The Committee may grant restricted shares of Common
Stock to such persons, in such amounts, and subject to such terms and conditions
(including the attainment of performance goals) as the Committee shall determine
in its discretion. Awards of Restricted Stock granted to Executive Officers of
the Company are contingent on the attainment by the Company or a subsidiary of
the Company, if applicable, of one or more pre-established performance goals
(the "PERFORMANCE GOALS") established by the Committee. The Performance Goals
may be based on the attainment by the Company (and/or its subsidiaries, if
applicable) of any one or more of the following criteria: (i) a specified
percentage return on total shareholder equity of the Company; (ii) a specified
percentage increase in earnings per share from continuing operations of Common
Stock; (iii) a specified percentage increase in net income of the Company; and
(iv) a specified percentage increase in profit before taxation of the Company.
Phantom Stock. The Committee may grant shares of Phantom Stock to such
persons, in such amounts, and subject to such terms and conditions (including
the attainment of performance goals) as the Committee shall determine in its
discretion. If the requirements specified by the Committee are met, the grantee
of such an award will receive a cash
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payment equal to the fair market value of the shares covered thereby plus the
dividends that would have been paid on such shares had they actually been
outstanding following the grant date. Awards of Phantom Stock granted to
Executive Officers of the Company may are contingent on the attainment by the
Company or a subsidiary of the Company, if applicable, of any one or more of the
Performance Goals noted above.
Stock Bonus. The Committee may grant bonuses comprised of shares of
Common Stock free of restrictions to such persons, in such amounts, as the
Committee shall determine in its discretion
The Board may suspend, discontinue, revise, terminate or amend the 1999
Incentive Plan at any time; provided, however, that shareholder approval must be
obtained if and to the extent that the Board deems it appropriate to satisfy
Section 162(m) of the Code, Section 422 of the Code, and any applicable rules of
the Nasdaq National Market.
CONDITIONS TO ISSUANCE OF COMMON STOCK
The Company may, but is under no obligation to, effect the registration
pursuant to the Securities Act of any interests in the 1999 Incentive Plan or
any shares of Common Stock to be issued under the 1999 Incentive Plan or to
effect similar compliance under any state laws. Moreover, the Company is not be
obligated to cause to be issued or delivered any certificates evidencing shares
of Common Stock pursuant to the 1999 Incentive Plan unless and until the Company
is advised by its counsel that the issuance and delivery of such certificates is
in compliance with all applicable laws and regulations of any governmental
authority and the requirements of any securities exchange on which shares of
Common Stock are traded. The Committee may require, as a condition of the
issuance and delivery of certificates evidencing shares of Common Stock pursuant
to the terms hereof and of the applicable award agreement, that the recipient of
such shares make such covenants, agreements and representations, and that such
certificates bear such legends, as the Committee, in its sole discretion, deems
necessary or desirable.
PLAN BENEFITS
The Company cannot now determine the exact number of Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Phantom Stock and Stock Bonuses to be granted in the future to any of its
officers, directors or employees. The following table sets forth the number of
stock options granted to the Chief Executive Officer of the Company, the other
executive officers of the Company whose aggregate compensation exceeded $100,000
during the Company's last fiscal year, all current executive officers as a
group, all current directors who are not executive officers as a group, each
person who received or is to receive five percent of the Options available under
the 1999 Incentive Plan, and all employees other than executive officers as a
group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING
OPTIONS GRANTED TO DATE
UNDER THE 1999 INCENTIVE
NAME OF INDIVIDUAL OR GROUP PLAN
------------------------
<S> <C>
Ransom H. Love, Chief Executive Officer(1) 379,752
Drew A. Spencer, Chief Technology Officer 67,813
All current executive officers as a group 1,001,257
All current outside directors as a group 450,000
All employees other than executive officers as a group 2,145,506
</TABLE>
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(1) Ransom H. Love has received in excess of 5% of the Options available
for grant under the 1999 Incentive Plan.
INTEREST OF CERTAIN PERSON IN THE PLAN AMENDMENT
In considering the Board's approval of the Plan Amendment, shareholders
should be aware that members of the Board and officers of the Company may be
among those who are granted Options under the 1999 Incentive Plan and that, as
illustrated in the table above, officers and directors of the Company have to
date been granted an aggregate of 1,451,257 Options under the 1999 Incentive
Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
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The following discussion is a brief summary of the principal United
States Federal income tax consequences relating to awards under the 1999
Incentive Plan. This discussion is based on currently existing provisions of the
Code existing and proposed Treasury Regulations promulgated thereunder and
current administrative rulings and court decisions, all of which are subject to
change. Any such change, which may or may not be retroactive, could alter the
tax consequences to shareholders described herein. Shareholders should be aware
that this discussion does not deal with all United States Federal income tax
considerations that may be relevant to an individual shareholder granted awards
pursuant to the 1999 Incentive Plan. ACCORDINGLY, SHAREHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES RELATING TO
AWARDS UNDER THE 1999 INCENTIVE PLAN.
Non-Qualified Stock Options. Generally, an optionee will not recognize
any taxable income upon the grant of a Non-Qualified Stock Option. The Company
will not be entitled to a tax deduction with respect to the grant of a
Non-Qualified Stock Option. Upon exercise of a Non-Qualified Stock Option, the
excess of the fair market value of the Common Stock on the exercise date over
the option exercise price will be taxable as compensation income to the optionee
and will be subject to applicable withholding taxes. The Company will generally
be entitled to a tax deduction at such time in the amount of such compensation
income. The optionee's tax basis for the Common Stock received pursuant to the
exercise of a Non-Qualified Stock Option will equal the sum of the compensation
income recognized and the exercise price.
In the event of a sale of Common Stock received upon the exercise of a
Non-Qualified Stock Option, any appreciation or depreciation after the exercise
date generally will be taxed as capital gain or loss and will be long-term
capital gain or loss if the holding period for such Common Stock is more than
one year.
Incentive Stock Options. An optionee will not recognize any taxable
income at the time of grant or timely exercise of an Incentive Stock Option and
the Company will not be entitled to a tax deduction with respect to such grant
or exercise. Exercise of an Incentive Stock Option may, however, give rise to
taxable compensation income subject to applicable withholding taxes, and a tax
deduction to the Company, if the optionee subsequently engages in a
"disqualifying disposition," as described below.
A sale or exchange by an optionee of shares acquired upon the exercise
of an Incentive Stock Option more than one year after the transfer of the shares
to such optionee and more than two years after the date of grant of the
Incentive Stock Option will result in any difference between the net sale
proceeds and the exercise price being treated a long-term capital gain (or loss)
to the optionee. If such sale or exchange takes place within two years after the
date of grant of the Incentive Stock Option or within one year from the date of
transfer of the Incentive Stock Option shares to the optionee, such sale or
exchange will generally constitute a "disqualifying disposition" of such shares
that will have the following results: any excess of (i) the lesser of (a) the
fair market value of the shares at the time of exercise of the Incentive Stock
Option and (b) the amount realized on such disqualifying disposition of the
shares over (ii) the option exercise price of such shares, will be ordinary
income to the optionee, subject to applicable reporting requirements, and the
Company will be entitled to a tax deduction in the amount of such income. Any
further gain generally will qualify as capital gain and will not result in any
deduction by the Company.
Restricted Stock. A grantee will not recognize any income upon the
receipt of Restricted Stock unless the holder elects under Section 83(b) of the
Code, within thirty days of such receipt, to recognize ordinary income in an
amount equal to the fair market value of the Restricted Stock at the time of
receipt. If the election is made, the holder will not be allowed a deduction for
amounts subsequently required to be returned to the Company. If the election is
not made, the holder will generally recognize ordinary income, on the date that
the restrictions to which the Restricted Stock are subject are removed, in an
amount equal to the Fair market value of such shares on such date, less any
amount paid for the shares. At that time the holder will recognize ordinary
income, subject to applicable reporting and withholding requirements, and the
Company generally will be entitled to a deduction in the same amount.
Generally, upon a sale or other disposition of Restricted Stock with
respect to which the holder has recognized ordinary income (i.e., a Section
83(b) election was previously made or the restrictions were previously removed),
the holder will recognize capital gain or loss in an amount equal to the
difference between the amount realized on such sale or other disposition and the
holder's basis in such shares. Such gain or loss will be long-term capital gain
or loss if the holding period for such shares is more than one year.
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Other Awards. The grant of a Stock Appreciation Right or Phantom Stock
award will not result in income for the grantee or in a tax deduction for the
Company. Upon the settlement of such a right or award, the grantee will
recognize ordinary income equal to the aggregate value of the payment received,
subject to applicable reporting and withholding requirements, and the Company
generally will be entitled to a tax deduction in the same amount. A Stock Bonus
generally will result in compensation income for the grantee and a tax deduction
for the Company, equal to the Fair market value of the shares of Common Stock
granted.
CERTAIN INFORMATION REGARDING BENEFICIAL OWNERS AND MANAGEMENT
Summary Executive Compensation Table
The following table presents compensation information for the Company's
most recent fiscal year, ended October 31, 1999, paid or accrued by the
Company's Chief Executive Officer and each of its other executive officers whose
salary and bonus for fiscal 1999 was more than $100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- ---------------------------------------
AWARDS PAYOUTS
------------------------ -----------
RESTRICTED SECURITIES
NAME AND STOCK UNDERLYING LTIP
PRINCIPAL POSITION YEAR SALARY ($) BONUS($) AWARD(S)($) OPTIONS(*) PAYOUTS ($)
--------------------- ---- ---------- -------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ransom H. Love, $106,077 -- 560,000
President and CEO
Drew A. Spencer, CTO $105,333 -- 100,000
</TABLE>
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(1) The column for "Other Annual Compensation" has been omitted because
there is no compensation required to be reported in that column. The
aggregate amount of perquisites and other personal benefits provided to
each executive officer listed above is less than the lesser of $50,000
and 10% of his total annual salary and bonus.
Security Ownership of Certain Beneficial Owners and Management
The following table presents information as to the beneficial ownership
of the Company's Common Stock as of August 1, 2000 by:
- Each shareholder known by us to be the beneficial owner of more
than 5% of the Company's Common Stock;
- Each of the Company's directors;
- Each executive officer listed in the Company's summary
compensation table; and
- All directors and executive officers as a group.
Beneficial ownership is determined under the rules of the SEC and
generally includes voting or investment power with respect to securities. Unless
indicated below, to the Company's knowledge, the persons and entities named in
the table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable. Shares
of Common Stock subject to options that are currently exercisable or exercisable
within 60 days of August 1, 2000 are deemed to be outstanding and to be
beneficially owned by the person holding the options for the purpose of
computing the percentage ownership of that person but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP AS OF
AUGUST 1, 2000
-----------------------------------
NUMBER PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER OF SHARES OF CLASS*
------------------------------------------------------------- ------------ -----------
<S> <C> <C>
The Canopy Group, Inc. ...................................... 21,273,974(1) 54.5%
MTI Technology Corporation .................................. 5,333,333(2) 13.7
</TABLE>
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<TABLE>
<S> <C> <C>
Ransom H. Love .............................................. 624,550(3) 1.6
Drew A. Spencer ............................................. 83,907(4) *
Ralph J. Yarro, III ......................................... 75,000(5) *
Dale R. Boyd ................................................ --(6) *
John R. Egan ................................................ 833,333(7) 2.1
Edward E. Iacobucci ......................................... --(8) *
Raymond J. Noorda ........................................... 27,857,307(9) 71.4
Thomas P. Raimondi, Jr ...................................... 50,000(10) *
All 11 directors and executive officers as a group .......... 29,988,149(11) 75.2
</TABLE>
----------
* Less than 1%
(1) The address for The Canopy Group, Inc. is 240 West Center Street, Orem,
Utah 84057.
(2) The address for MTI Technology Corporation is 4905 East La Palma Avenue,
Anaheim, California 92807.
(3) Consists of options to purchase 624,550 shares of Common Stock.
(4) Consists of options to purchase 83,907 shares of Common Stock.
(5) Consists of options to purchase 75,000 shares of Common Stock. Mr. Yarro is
President and Chief Executive Officer of The Canopy Group, Inc.
(6) Does not include options to purchase 100,000 shares of Common Stock granted
to Mr. Boyd in March 2000.
(7) Consists of 833,333 shares of Common Stock held by Egan-Managed Capital,
L.P. Does not include options to purchase 100,000 shares of Common Stock
granted to Mr. Egan in March 2000. Mr. Egan is a managing partner of
Egan-Managed Capital, L.P. Mr. Egan disclaims beneficial ownership of the
shares held by Egan-Managed Capital, L.P., except to the extent of his
pecuniary interest therein.
(8) Does not include options to purchase 100,000 shares of Common Stock granted
to Mr. Iacobucci in March 2000.
(9) Includes 21,273,974 shares of Common Stock held by The Canopy Group, Inc.
("CANOPY"), 5,333,333 shares of Common Stock held by MTI Technology
Corporation ("MTI"), and 1,250,000 shares held by Lineo, INC.("LINEO"). Mr.
Noorda is chairman of the boards of directors of Canopy and MTI, and is a
director of Lineo. Additionally, the Noorda Family Trust, of which Mr.
Noorda and his spouse serve as co-trustees is the controlling shareholder
of Canopy. Canopy holds approximately 45% of the outstanding Common Stock
of MTI. Lineo is majority-owned by Canopy. By virtue of his holding
corporate offices, his stock ownership and his service as co-trustee, all
as described above, Mr. Noorda may be deemed to control Canopy, MTI and
Lineo, and Mr. Noorda may be deemed to possess indirect beneficial
ownership of the Common Stock held by Canopy, MTI and Lineo. Mr. Noorda
disclaims beneficial ownership of such shares. The address for Mr. Noorda
is c/o MTI Technology Corporation, 4905 East La Palma Avenue, Anaheim,
California 92807.
(10) Consists of options to purchase 50,000 shares of Common Stock. Mr. Raimondi
is President and Chief Executive Officer of MTI Technology Corporation. Mr.
Raimondi disclaims beneficial ownership of the shares held by MTI
Technology Corporation.
(11) See notes 3 through 11, as applicable. Includes an additional 464,052
shares issuable upon the exercise of options.
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<PAGE> 10
Option Grants in Last Fiscal Year
The following table presents the grants of stock options under the
Company's 1998 Stock Option Plan during fiscal 1999, ended October 31, 1999, to
each of the Company's executive officers named in the Summary Compensation
Table.
All option grants under the 1998 Stock Option Plan are nonqualified
stock options. Options expire ten years from the date of grant.
The exercise price of each option granted is equal to the fair market
value of a share of Common Stock, as determined by the Board on the date of
grant. In fiscal 1999, the Company granted to its employees options to purchase
a total of 3,106,566 shares of its Common Stock.
Potential realizable values are computed by
- Multiplying the number of shares of Common Stock subject to a
given option by the exercise price per share,
- Assuming that the aggregate option exercise price derived from
that calculation compounds at the annual 5% or 10% rates shown
in the table for the entire 10 year term of the option, and
- Subtracting from that result the aggregate option exercise
price.
The 5% and 10% assumed annual rates of stock price appreciation are
required by rules of the SEC and do not represent the Company's estimate or
projection of future Common Stock prices.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS PRICE APPRECIATION FOR OPTION TERM
----------------------------------------------------------- ----------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES PRICE PER
OPTIONS IN FISCAL SHARE EXPIRATION
NAME GRANTED YEAR ($/SHARE) DATE 0% 5% 10%
--------------- -------- ---------- ----------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ransom H. Love 68,000 18.03% $ 1.00 12/28/2008 -- $ 42,765 $108,374
492,000 $ 1.00 6/3/2009 $ 61,500 $409,593 $943,636
Drew A. Spencer 45,000 3.22% $ 1.00 12/28/2008 -- $ 28,300 $ 71,718
55,000 $ 1.00 6/3/2009 $ 6,875 $ 45,788 $105,488
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and Year End Option Values
None of the Company's executive officers exercised options during the
year ended October 31, 1999. The following table presents the number of shares
of Common Stock subject to vested and unvested stock options held as of October
31, 1999 by each of the Company's executive officers named in the Summary
Compensation Table. Also presented are values of "in-the-money" options, which
represent the positive difference between the exercise price of each outstanding
stock option and the assumed market price of $8.00 per share on October 31,
1999.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES VALUE AT OCTOBER 31, 1999 OCTOBER 31, 1999
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE ($)(1) VESTED UNVESTED VESTED UNVESTED
--------------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ransom H. Love 377,233 182,767 $2,640,631 $1,279,369
Drew A. Spencer 27,083 72,917 $ 189,581 $ 510,419
</TABLE>
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<PAGE> 11
Compensation of Directors
The Company's directors do not receive cash compensation for their
services as directors, although members are reimbursed for expenses in
connection with attendance at board and committee meetings.
In December 1999, the Board granted an option to Thomas P. Raimondi,
Jr., to purchase 100,000 shares of Common Stock at an exercise price $6.00 per
share, which vest over a two-year period. In August 1999, the Board granted
options to Ralph J. Yarro, III to purchase 100,000 shares of Common Stock, which
vest over a four-year period, and in December 1999, the Board granted Mr. Yarro
options to purchase 50,000 shares of Common Stock, which vest over a two-year
period, at a combined average exercise price of $2.67 per share. In March 2000,
the Board granted options to purchase 100,000 shares of Common Stock to each of
Dale R. Boyd, John R. Egan, and Edward Iacobucci at an exercise price of $7.00
per share. In each case, these options vest over a two-year period. The Company
may grant its non-employee directors additional options in the future.
Employment Agreements
The Company has not entered into employment agreements with any of its
executive officers.
Compensation Committee Interlocks and Insider Participation
None of the members of the Committee has at any time been one of the
Company's officers or employees. None of the Company's executive officers
currently serves or in the past year has served as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving on the Board or the Committee.
The Company did not have a compensation committee during fiscal 1999.
Prior to the creation of the Committee, all compensation decisions were made by
the Board, the members of which during fiscal 1999, consisted of Ralph J. Yarro,
III, Raymond J. Noorda, Thomas P. Raimondi, Jr. and Ransom H. Love. Mr. Love,
the only executive officer of the Company serving on the Board during fiscal
1999, did participate in deliberations by the Board regarding the compensation
of executive officers of the Company but did not participate in such
deliberations with respect to his own compensation. The Committee was formed on
April 4, 2000 and currently consists of Ralph J. Yarro, III, Thomas P. Raimondi,
Jr. and John R. Egan.
The transactions described below represent certain transactions
occurring or proposed since November 1, 1998 to which the Company was or will be
a party; and in which any member of the Board who participated in deliberations
with respect to executive officer compensation during fiscal 1999, or a member
of such member's immediate family, had a material interest.
RELATIONSHIP WITH CALDERA, INC.
The Company began operations in 1994 as a business unit comprising
substantially all of the operations of Caldera, Inc. In July 1996, through an
asset purchase, Caldera, Inc. acquired an additional business unit which was not
engaged in developing and marketing Linux software. Caldera, Inc. subsequently
made the strategic determination to separate its two business lines into
separate entities. Therefore, pursuant to an Asset Purchase and Sale Agreement
dated as of September 1, 1998, as amended, by and between Caldera, Inc. and the
Company, Caldera, Inc. sold to the Company certain assets of its Linux software
business unit for $19.9 million, $15.0 million of which was paid in the form of
a cash payment in fiscal year 1999, $36,174 of which was in the form of
assumption of liabilities and $4.9 million of which was in the form of
forgiveness of a note receivable from Caldera, Inc.
On September 1, 1998, the Company entered into a sublease with Caldera,
Inc. for office space in Orem, Utah. The sublease provides for annual rent of
approximately $150,000 and terminates August 31, 2000.
Ralph J. Yarro, III and Raymond J. Noorda were directors of Caldera,
Inc. until Caldera, Inc. was merged into its parent, The Canopy Group, Inc.
("CANOPY"), during fiscal 2000. Until such merger, Caldera, Inc. was
majority-owned by Canopy which holds more than 5% of the Common Stock. The
Noorda Family Trust, of which Mr. Noorda and his spouse are co-trustees, is the
controlling stockholder of Canopy.
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<PAGE> 12
RELATIONSHIP WITH THE CANOPY GROUP, INC.
Effective August 31, 1998, the Company sold 16,000,000 shares of Common
Stock to Canopy for an aggregate purchase price of $21.0 million. Of this
amount, $16.0 million was paid in cash ($519,000 in fiscal year 1998 and $15.5
million - non-interest bearing - in fiscal year 1999), and $4.9 million was in
the form of a note receivable from Caldera, Inc., which Canopy transferred to
the Company.
Effective September 1, 1998, the Company entered into a convertible
promissory note with Canopy. The note, which was secured by all of the Company's
assets, was due on December 31, 1999. The note bore interest at the prime rate,
less 1/2%, and was convertible into shares of Common Stock at $1.00 per share. A
total of $4.8 million was advanced under the note. The principal balance, along
with $455,000 of accrued interest was converted into 5,273,974 shares of Common
Stock on August 19, 1999.
Under a secured promissory note dated as of December 29, 1999, the
Company borrowed $300,000 from Canopy. The note bears interest of 9.5% per annum
and was payable upon demand or on January 14, 2000. The Company paid the note in
full on January 5, 2000.
Canopy holds more than 5% of the outstanding Common Stock. Raymond J.
Noorda and his spouse are co-trustees of the Noorda Family Trust, which is the
controlling stockholder of Canopy.
The Company has adopted a 401(k) plan sponsored by Canopy for the
Company's employees, under which the Company began making matching contributions
on January 1, 2000. Subsequent to the Company's initial public offering of
Common Stock the Company became the sponsor of the 401(k) plan effective as of
January 1, 2000.
Canopy, formerly NFT Ventures, is a venture capital company that invests
primarily in start-up high technology companies that encourage the adoption,
deployment and promotion of Linux. Canopy currently holds equity interests in
companies in the fields of data storage and protection, Linux operating systems,
data satellites, clustering, universal voice messaging, Java and eCommerce.
As a result of an option agreement between Canopy and Ralph J. Yarro,
III, which was subsequently rescinded (the "OPTION AGREEMENT"), the Company
expensed a one-time compensation charge of approximately $372,000 during the
quarter ending April 30, 2000. The Option Agreement allowed Mr. Yarro to
purchase shares of Common Stock directly from Canopy. No shares were purchased
under the Option Agreement. Mr. Yarro is the president and chief executive
officer of Canopy.
RELATIONSHIP WITH MTI TECHNOLOGY CORPORATION
Effective July 27, 1999, the Company sold 5,333,333 shares of Common
Stock to MTI Technology Corporation ("MTI") for an aggregate purchase price of
$6.0 million. Of this amount, $3.0 million was paid at closing, $1.5 million was
to be due at January 1, 2000, and $1.5 million is due at July 1, 2000. The first
$1.5 million was paid early on November 15, 1999 in return for a waiver by the
Company of accrued and future interest on the unpaid portions of the purchase
price. The Company believes that the waiver of interest in consideration for the
acceleration of payment was not more favorable to MTI than the terms the Company
would have been able to negotiate with an unrelated party.
On August 12, 1999, the Company entered into a Distribution and License
Agreement with MTI (the "DISTRIBUTION AGREEMENT"). Under the Distribution
Agreement, MTI includes as available for sale in its price book all of the
Company's products, technology or services that are commercially available for
sale, and the Company sells or licenses, as applicable, to MTI, and allows MTI
to sell, re-sell, license, reproduce, use, distribute, sublicense, have made and
prepare derivatives works of all of the Company's products, technology, or
services that are commercially available. The Distribution Agreement is
terminable by either party on 90 days prior written notice.
The Company uses a computer system provided by MTI without charge. The
computer system is valued at $105,000.
MTI owns more than 5% of the outstanding Common Stock. Canopy holds more
than 45% of the outstanding Common Stock of MTI. The Noorda Family Trust, of
which Raymond J. Noorda and his spouse are co-trustees, is the
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<PAGE> 13
controlling stockholder of Canopy. Mr. Noorda is chairman of the board of
directors of MTI. Thomas P. Raimondi, Jr. is president and chief executive
officer of MTI.
RELATIONSHIP WITH LINEO, INC.
The Company provides Open Linux to Lineo, Inc. ("LINEO") for inclusion
in their embedded Linux products. In January 2000, the Company exchanged
1,250,000 shares of Common Stock with Lineo in return for 3,238,437 shares of
Common Stock of Lineo. On May 11, 2000, Canopy transferred 1,761,563 shares of
Lineo's common stock held by Canopy to the Company. As a result of this
transaction, the Company currently holds a total of 5,000,000 shares of Lineo's
common stock.
Lineo is majority-owned by Canopy. The Noorda Family Trust, of which
Raymond J. Noorda and his spouse are co-trustees, is the controlling stockholder
of Canopy. Mr. Noorda, John R. Egan and Ralph T. Yarro, III are directors of
Lineo.
PREFERRED STOCK TRANSACTIONS
Effective December 30, 1999, the Company entered into a conversion
agreement with Canopy and MTI (the "CONVERSION AGREEMENT"). Under the Conversion
Agreement, the Company issued and exchanged 5,273,974 shares of its Series A
convertible preferred stock for 5,273,974 shares of Common Stock held by Canopy.
The Company also issued and exchanged 1,322,172 shares of its Series A
convertible preferred stock for 1,322,172 shares of Common Stock held by MTI.
From December 31, 1999 through January 10, 2000, the Company issued an
aggregate of 5,000,000 shares of its Series B convertible preferred stock at a
purchase price of $6.00 per share to various investors including Chicago Venture
Partners, Citrix Systems, Inc., Egan Managed-Capital, Novell, Inc., Sun
Microsystems and The Santa Cruz Operation, Inc. All aspects of the Series B
private placement were completed as of January 10, 2000. Under a voting
agreement entered into in connection with the Series B financing (the "VOTING
AGREEMENT"), the holders of the Series A convertible preferred stock and the
holders of the Series B convertible preferred stock agreed to the size of the
Board and the rights of certain of the holders to designate certain individuals
for nomination as directors of the Company. The rights to designate members of
the Board under the Voting Agreement terminated on March 20, 2000. The Company
increased the size of the Board to nine directors pursuant to the Voting
Agreement and all of the parties except Sun Microsystems designated directors.
The Series A convertible preferred stock and the Series B convertible preferred
stock were converted into shares of Common Stock on March 20, 2000.
In connection with the Series B financing, the holders of the Series A
convertible preferred stock and the holders of the Series B convertible
preferred stock also entered into a Second Amended and Restated Investors Rights
Agreement with the Company (the "INVESTORS RIGHTS AGREEMENT"), under which:
- The Company is obligated to provide certain registration rights with
respect to shares of its capital stock held by the other parties to the
Investors Rights Agreement; and
- The Company granted the other parties to the Investors Rights Agreement
a right of first offer with respect to any future issuance and sale of
shares of the Company's capital stock other than shares of Common Stock
to be issued publicly. The right of first offer terminated on March 20,
2000.
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<PAGE> 14
APPENDIX A
AMENDMENT NO. 2
TO
1999 OMNIBUS STOCK INCENTIVE PLAN
This Amendment No. 2 to the 1999 Omnibus Stock Incentive Plan (this
"Amendment") is executed by the undersigned, by and on behalf of Caldera
Systems, Inc., a Delaware corporation (the "Company").
BACKGROUND
The Company has adopted the Caldera Systems, Inc. 1999 Omnibus Stock Incentive
Plan (the "1999 Plan"). The Company desires to amend the 1999 Plan in order to
increase the number of shares of Common Stock reserved for issuance under the
1999 Plan. Capitalized terms used in this Amendment but not defined herein have
the meaning set forth in the 1999 Plan.
AMENDMENT
NOW, THEREFORE, the 1999 Plan is hereby amended as follows:
1. INCREASE IN NUMBER OF SHARES SUBJECT TO THE PLAN AND INDIVIDUAL LIMITATION.
The first sentence of Section 3(a) of the Plan is hereby deleted in its
entirety, and the following is inserted in its stead:
Subject to adjustment under Section 3(c) below, the maximum number
of shares of Common Stock that may be issued under the Plan shall be
6,405,238 shares, increased as of November 1 each year, beginning November
1, 2000, by three percent (3%) of the total number of shares of Common
Stock that are issued and outstanding on the immediately preceding October
31st. Notwithstanding the foregoing, subject to adjustment under Section
3(c) below the number of shares of Common Stock that may be issued upon the
exercise of Incentive Stock Options under the Plan shall in no event exceed
6,405,238 shares, increased as of November 1 each year, beginning November
1, 2000 and continuing through November 1, 2008, by 100,000 shares per year
2. Ratification. Except as specifically modified hereby, the Plan is hereby
ratified and reaffirmed by the Company.
3. Effectiveness. No shares of Common Stock shall be issued or other Incentive
Awards shall be permitted to be exercised in reliance upon this Amendment unless
and until the shareholders have approved this Amendment and any waiting periods
required by governing laws or regulations have passed..
The undersigned, whom is the duly elected Secretary of the Board of
Directors of the Company, hereby certifies that (i) the Board of Directors of
the Company approved this Amendment on July 14, 2000, and (ii) the holders of a
majority of the outstanding shares of Common Stock of the Company delivered to
the Company a written consent approving this Amendment on July 14, 2000.
Caldera Systems, Inc., a Delaware corporation
By: /s/ Richard Rife,
------------------------------------------
Secretary of the Board of Directors
------------------------------------------
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