SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) - August 17, 1998
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UNISTAR FINANCIAL SERVICE CORP.
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(Exact name of registrant as specified in its charter)
Delaware 2-93426-D 87-0419568
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
Incorporation)
4635 McEwen Road, Dallas Texas 75244
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code - (972) 702-0800
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Caldera, Inc., 9 1/2 Casimir Street, Toronto, Ontario, Canada M5T 2P6
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(Former Name or Former Address, if changed since last report)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
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At a Special Meeting of Stockholders (the "Meeting") of
Caldera, Inc., a Delaware corporation (the "Corporation"), held
on August 17, 1998, the stockholders approved (i) a Stock
Purchase Agreement, dated as of July 7, 1998 (the "Purchase
Agreement"), by and among the Corporation, Marc A. Sparks
("Sparks"), F. Jeffrey Nelson ("Nelson") and Nicole Clayton Caver
("Caver"), pursuant to which the Corporation purchased all of the
issued and outstanding shares of common stock of International
Fidelity Holding Corporation, a Texas insurance holding
corporation ("IFHC"), in exchange for 19,777,000 shares of common
stock, $.01 par value per share ("Common Stock"), of the
Corporation on a post-Reverse Stock Split basis, as defined
below, (ii) an amendment to the Certificate of Incorporation
authorizing a one-for-fifteen reverse stock split of the
Corporation's outstanding Common Stock (the "Reverse Stock
Split") and (iii) an amendment to the Certificate of
Incorporation to change the name of the Corporation to Unistar
Financial Service Corp. See Item 5 of this Report for the other
proposals approved at the Meeting. Following the closing of the
Purchase Agreement on August 17, 1998, IFHC became a wholly-owned
subsidiary of the Corporation and the Corporation, through its
sole ownership of IFHC, controls IFHC's insurance subsidiary,
International Surety and Casualty Company, a Texas property and
casualty insurance corporation ("ISCC").
Effective upon the closing of the Purchase Agreement,
Sparks, Nelson and Caver, the sole shareholders of IFHC, became
the beneficial owners of an aggregate 19,777,000 of the
20,000,000 outstanding and issued shares of Common Stock, which
shares constitute 98.9% of the outstanding and issued shares of
Common Stock. In addition, Sparks and Nelson are the sole
shareholders of U.S. Fidelity Holding Corp. (U.S. Fidelity"),
which after the Reverse Stock Split would own 53,333 shares of
the Corporation's Common Stock.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
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Pursuant to the Purchase Agreement, the Corporation acquired
IFHC and control of ISCC, IFHC's insurance subsidiary. IFHC is
the sole shareholder of ISCC which is a property and casualty
insurance business which reinsures a portfolio of nonstandard
auto insurance generated through licensed agents that have
business relationships with U.S. Fidelity, an affiliated company.
For additional information about IFHC, reference is made to the
Corporation's Proxy Statement for a Special Meeting of
Stockholders which is exhibit 99.2 to this Report.
The Corporation's Board of Directors considered many factors
in determining to enter into the Purchase Agreement including:
(1) for several years prior to the closing of the Purchase
Agreement the Corporation was a "shell" corporation with no
active business, the necessity for the Corporation to find a
viable business opportunity which could bring in recurring
revenues and provide working capital; (2) the backgrounds of IFHC
management; and (3) the industry growth and plans of IFHC
management for the growth of the insurance and related finance
service businesses. Neither the Corporation nor IFHC retained
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<PAGE>
separate financial advisors, nor had either sought a fairness
opinion from a financial advisor with respect to the transactions
effected pursuant to the Purchase Agreement. The Corporation had
entered into the Purchase Agreement because its Board of
Directors believed that based on many factors, including those
enumerated above, it was in the best interests of the Corporation
and its shareholders.
ITEM 5. OTHER EVENTS.
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At the Meeting, the stockholders also approved the following
proposals: (1) election of Sparks, Nelson, Morris Belzberg,
Brent Brown, Paul Caver, Douglas Gerrard, Patrick Rastiello,
James G. Leach and Kerry Sebree as members of the Board of
Directors to serve until the next annual meeting or until their
successors are elected and qualified (for information about these
persons, see Proposal No. 2 Election of Directors in the Proxy
Statement which is Exhibit 99.2 to this Report); and (2) approval
of the Corporation's 1998 Stock Option Plan, which reserved
1,000,000 shares of Common Stock for issuance thereunder on a
post-Reverse Stock Split basis. The name change of the
Corporation to Unistar Financial Service Corp. and the Reverse
Stock Split were effected by filing a Certificate of Amendment to
the Certificate of Incorporation on August 17, 1998 with the
Secretary of State of Delaware.
As of August 18, 1998, the Common Stock of the Corporation
became traded on the OTC Bulletin Board under the symbol "UNSF".
Letters of transmittal are being sent to each stockholder of
record of the Common Stock as of August 18, 1998 requesting that
they exchange their current stock certificates for post-Reverse
Stock Split shares of Common Stock in the name of Unistar
Financial Service Corp.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
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AND EXHIBITS.
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(a) Financial Statements of Business Acquired. The
required financial statements will be timely filed as
an amendment to this Current Report.
(b) Pro Forma Financial Information. The required
financial information will be timely filed as an
amendment to this Current Report.
(c) Exhibits.
2.1 Stock Purchase Agreement, dated as of July 7,
1998, by and among Caldera, Inc., Marc A.
Sparks, F. Jeffrey Nelson and Nicole Clayton
Caver.
3.1 Certificate of Amendment to the Certificate
of Incorporation, filed with the Secretary of
State of Delaware on August 17, 1998.
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<PAGE>
10.1 1998 Stock Option Plan.
99.1 Proxy Statement for a Special Meeting of
Stockholders, August 17, 1998.
99.2 Press release, dated August 18, 1998.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
UNISTAR FINANCIAL SERVICE CORP.
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(Registrant)
By: /s/ Marc A. Sparks
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Marc A. Sparks,
Chairman and Chief
Executive Officer
Date: August 31, 1998
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<PAGE>
Exhibit Index
Number Exhibit
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2.1 Stock Purchase Agreement, dated as of July 7, 1998, by
and among Caldera, Inc., Marc A. Sparks, F. Jeffrey
Nelson and Nicole Clayton Caver.
3.1 Certificate of Amendment to the Certificate of
Incorporation, filed with the Secretary of State of
Delaware on August 17, 1998.
10.1 1998 Stock Option Plan.
99.1 Proxy Statement for a Special Meeting of Stockholders,
August 17, 1998.
99.2 Press Release dated August 18, 1998.
STOCK PURCHASE AGREEMENT
by and among
CALDERA, Inc.,
a Delaware Corporation
MARC A. SPARKS
F. JEFFREY NELSON
and
NICOLE CLAYTON CAVER
DATED AS OF JULY 7, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS
1.01 Definitions . . . . . . . . . . . . . . . . . . . 1
ARTICLE II.
BASIC TRANSACTION
2.01 Purchase and Sale of IFHC Shares . . . . . . . . . 4
ARTICLE III.
CLOSING AND CLOSING DATE
3.01 Closing . . . . . . . . . . . . . . . . . . . . . . 4
3.02 Closing Date . . . . . . . . . . . . . . . . . . . 4
3.03 Deliveries at the Closing . . . . . . . . . . . . . 4
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
4.01 Due Organization; Foreign Qualification . . . . . . 5
4.02 Due Authorization; Enforceability . . . . . . . . . 5
4.03 Non-Contravention; Consents and Approvals . . . . . 6
4.04 Capitalization; Rights, Warrants, Options . . . . . 6
4.05 Financial Statements; Undisclosed Liabilities;
Other Documents . . . . . . . . . . . . . . . . . . 7
4.06 No Material Adverse Effects or Changes . . . . . . 8
4.07 Title . . . . . . . . . . . . . . . . . . . . . . . 8
4.08 Intellectual Property . . . . . . . . . . . . . . . 9
4.09 Insurance Compliance . . . . . . . . . . . . . . . 9
4.10 Rating . . . . . . . . . . . . . . . . . . . . . . 10
4.11 Employment Matters . . . . . . . . . . . . . . . . 11
4.12 Tax Returns and Audits . . . . . . . . . . . . . . 11
4.13 Litigation . . . . . . . . . . . . . . . . . . . . 11
4.14 Compliance with Applicable Laws . . . . . . . . . . 11
4.15 Contracts; No Defaults. . . . . . . . . . . . . . . 12
4.16 Fees of Brokers, Finders and Financial Advisors . . 12
4.17 Books and Records . . . . . . . . . . . . . . . . . 12
4.18 Related Party Transactions . . . . . . . . . . . . 12
4.19 Due Diligence. . . . . . . . . . . . . . . . . . . 13
4.20 Investment . . . . . . . . . . . . . . . . . . . . 13
4.21 General Representation and Warranty . . . . . . . . 13
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF CALDERA
5.01 Due Organization; Foreign Qualification . . . . . . 13
5.02 Due Authorization; Enforceability . . . . . . . . . 14
5.03 Non-Contravention; Consents and Approvals . . . . . 14
5.04 Capitalization . . . . . . . . . . . . . . . . . . 15
5.05 Financial Statements . . . . . . . . . . . . . . . 15
5.06 Commission Filings . . . . . . . . . . . . . . . . 16
5.07 No Material Adverse Effects or Changes . . . . . . 16
5.08 Tax Returns and Audits . . . . . . . . . . . . . . 16
5.09 Litigation . . . . . . . . . . . . . . . . . . . . 16
5.10 Compliance with Applicable Laws . . . . . . . . . 17
5.11 Fees of Brokers, Finders and Investment Bankers . 17
5.12 General Representation of Warranty . . . . . . . . 17
ARTICLE VI.
COVENANTS
6.01 Implementing Agreement . . . . . . . . . . . . . . 17
6.02 Access to Information and Facilities . . . . . . . 17
6.03 Confidentiality . . . . . . . . . . . . . . . . . . 17
6.04 Preservation of Business . . . . . . . . . . . . . 18
6.05 Consents and Approvals . . . . . . . . . . . . . . 19
6.06 Caldera Stockholder Approval . . . . . . . . . . . 19
6.07 Publicity . . . . . . . . . . . . . . . . . . . . . 19
6.08 Fees and Expenses . . . . . . . . . . . . . . . . . 20
6.09 Periodic Reports . . . . . . . . . . . . . . . . . 20
ARTICLE VII.
CONDITIONS PRECEDENT TO THE CONSUMMATION OF THE MERGER
7.01 Actions or Proceedings . . . . . . . . . . . . . . 20
7.02 Approval of Merger . . . . . . . . . . . . . . . . 20
ARTICLE VIII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF CALDERA
8.01 Warranties True as of Closing Date . . . . . . . . 20
8.02 Compliance With Agreements and Covenants . . . . . 21
8.03 Sellers' Certificate . . . . . . . . . . . . . . . 21
8.04 Consents and Approvals . . . . . . . . . . . . . . 21
8.05 Good Standing Certificates . . . . . . . . . . . . 21
8.06 Other Closing Documents . . . . . . . . . . . . . . 21
ARTICLE IX.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
9.01 Warranties True as of Closing Date . . . . . . . . 21
9.02 Compliance with Agreements and Covenants . . . . . 21
9.03 Caldera Certificate . . . . . . . . . . . . . . . . 22
9.04 Secretary's Certificate . . . . . . . . . . . . . . 22
9.05 Good Standing Certificate . . . . . . . . . . . . . 22
9.06 Consents and Approvals . . . . . . . . . . . . . . 22
9.07 Other Closing Documents. . . . . . . . . . . . . . 22
ARTICLE X.
TERMINATION
10.01 Termination . . . . . . . . . . . . . . . . . . . 22
10.02 Effect of Termination and Abandonment . . . . . . 23
ARTICLE XI.
MISCELLANEOUS
11.01 Amendment . . . . . . . . . . . . . . . . . . . . 23
11.02 No Survival of Representations, Warranties, Covenants
and Agreements . . . . . . . . . . . . . . . . . . 23
11.03 Notices . . . . . . . . . . . . . . . . . . . . . 23
11.04 Waivers . . . . . . . . . . . . . . . . . . . . . 24
11.05 Interpretation . . . . . . . . . . . . . . . . . . 24
11.06 Applicable Law . . . . . . . . . . . . . . . . . . 24
11.07 Assignment . . . . . . . . . . . . . . . . . . . . 24
11.08 No Third Party Beneficiaries . . . . . . . . . . . 25
11.09 Enforcement of the Agreement. . . . . . . . . . . 25
11.10 Further Assurances . . . . . . . . . . . . . . . . 25
11.11 Severability . . . . . . . . . . . . . . . . . . . 25
11.12 Remedies Cumulative . . . . . . . . . . . . . . . 25
11.13 Entire Understanding . . . . . . . . . . . . . . . 25
11.14 Waiver of Jury Trial . . . . . . . . . . . . . . . 25
11.15 Counterparts . . . . . . . . . . . . . . . . . . . 25
<PAGE>
LIST OF SCHEDULES
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Number Description
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4.01 Due Organization; Foreign Qualification
4.03 Non-Contravention; Consents and Approvals
4.04 IFHC Options, Warrants, Rights, Convertible
Securities
4.06 No Material Adverse Effects or Changes
4.07 Real Property Leases
4.08 Intellectual Property
4.09 Insurance
4.11 Employment Matters
4.13 Litigation
4.14 Compliance with Applicable Laws
4.15 Contracts; No Defaults
4.17 Books and Records
4.18 Related Party Transactions
5.07 Caldera Contracts
<PAGE>
STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of July 7, 1998, by and
among CALDERA, INC., a Delaware corporation ("Caldera"), NICOLE
CLAYTON CAVER ("Caver"), F. JEFFREY NELSON ("Nelson") and MARC A.
SPARKS ("Sparks") (Caver, Nelson and Sparks collectively, the
"Sellers" and sometimes individually a "Seller").
W I T N E S E T H :
WHEREAS, the Sellers own all of the issued and
outstanding capital stock of International Fidelity Holding
Corp., a Texas corporation ("IFHC");
WHEREAS, the Sellers desire to sell their
shares of IFHC capital stock (the "IFHC Shares") to Caldera, and
Caldera desires to purchase their IFHC Shares, in exchange for
shares of Caldera Common Stock, subject to a recapitalization of
Caldera as provided for herein, all pursuant to approval by the
stockholders of Caldera;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter contained, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I.
DEFINITIONS
1.01 Definitions. For purposes of this
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Agreement, the following terms shall have the meanings set forth
in this Section 1.01:
"Actuarial Analyses" has the meaning set forth
in Section 4.09(d) hereof.
"Agreement" means this Stock Purchase
Agreement, as the same may be amended from time to time in
accordance with the terms hereof.
"Caldera" has the meaning set forth in the
caption to this Agreement.
"Caldera Common Stock" has the meaning set
forth in Section 2.01 hereof.
"Caldera Material Adverse Effect" means an
effect on or circumstance involving the business, operations,
assets, liabilities, results of operations, cash flows or
condition (financial or otherwise) of Caldera which is materially
adverse to Caldera.
"Caldera Shares" has the meaning set forth in
Section 2.01 hereof.
"Caldera Stockholders Meeting" has the meaning
set forth in Section 6.06 hereof.
"Caver" has the meaning set forth in the
caption to this Agreement.
"Closing" has the meaning set forth in Section
3.01 hereof.
"Closing Date" has the meaning set forth in
Section 3.02 hereof.
"Code" means the Internal Revenue Code of 1986,
as amended.
"Commission" means the U.S. Securities and
Exchange Commission.
"Companies Permits" has the meaning set forth
in Section 4.14 hereof.
"Companies" means IFHC and ISCC collectively.
"Contract" means any written or oral agreement,
deed, contract, license, guaranty or other understanding of any
nature to which an Entity is a party or by which its properties
or assets are bound.
"Entity" means any corporation, general
partnership, limited partnership, limited liability company,
trust company, joint venture or other enterprise or association.
"ERISA" means the Employee Retirement Security
Act of 1974, as amended.
"Exchange Act" means the Securities Exchange
Act of 1934, as amended.
"GAAP" means United States generally accepted
accounting principles as in effect on the date of this Agreement.
"Governmental Authority" means any government
or any agency, bureau, board, commission, court, department,
political subdivision, tribunal or other instrumentality of any
government, whether federal, state or local, domestic or foreign.
"IFHC" has the meaning set forth in the first
preamble to this Agreement.
"IFHC Financial Statements" has the meaning set
forth in Section 4.05(a) hereof.
"IFHC Interim Financials" has the meaning set
forth in Section 4.05(b) hereof.
"IFHC Material Adverse Effect" means an effect
on or circumstance involving the business, operations, assets,
liabilities, results of operations, cash flows or condition
(financial or otherwise) of IFHC or ISCC which is materially
adverse to IFHC taken as a whole.
"IFHC Shares" has the meaning set forth in the
second preamble to this Agreement.
"Intellectual Property" has the meaning set
forth in Section 4.08 hereof.
"ISCC" has the meaning set forth in Section
4.01 hereof.
"ISCC Shares" has the meaning set forth in
Section 4.04 hereof.
"Law" means any constitutional provision,
statute, law, rule, regulation, decree, injunction, judgment,
order or ruling of any Governmental Authority.
"Loss" means liabilities, losses, costs,
claims, damages (including consequential damages), penalties and
expenses (including attorneys' fees and expenses and costs of
investigation and litigation).
"Nelson" has the meaning set forth in the
caption to this Agreement.
"Reinsurance Agreements" has the meaning set
forth in Section 4.09(b) hereof.
"Reverse Stock Split" has the meaning set forth
in Section 6.06 hereof.
"SAP" has the meaning set forth in Section
4.09(a) hereof.
"SAP Statements" has the meaning set forth in
Section 4.09(a) hereof.
"Securities Act" means the Securities Act of
1933, as amended.
"SEC Documents" means the Caldera Form 10-KSB
for the fiscal year ended December 31, 1997 and Form 10-QSB for
the fiscal quarter ended March 31, 1998.
"Seller" or "Sellers" has the meaning set forth
in the caption to this Agreement.
"Sparks" has the meaning set forth in the
caption to this Agreement.
"Taxes" means all taxes, assessments and
governmental charges imposed by any federal, state, local or
foreign government, taxing authority, subdivision or agency
thereof, including, but not limited to, any withholding, payroll,
employment, custom, duty, sales, any other governmental fee or
assessment, and penalties, in addition to any liability to a
third party for such amounts.
ARTICLE II.
BASIC TRANSACTION
2.01 Purchase and Sale of IFHC Shares. On
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the terms and subject to the conditions set forth in this
Agreement, at the Closing, Caldera shall purchase from the
Sellers, and the Sellers shall sell, transfer, assign, convey and
deliver to Caldera, all right, title and interest in the IFHC
Shares in exchange for 19,777,000 shares of Common Stock, $.01
par value (the "Caldera Common Stock") of Caldera, after the
Reverse Stock Split in accordance with Section 6.06 hereof (the
"Caldera Shares").
ARTICLE III.
CLOSING AND CLOSING DATE
3.01 Closing. Subject to the provisions of
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ARTICLE X hereof, the consummation of the transactions
contemplated by this Agreement (the "Closing") will take place at
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the office of International Fidelity Holding Corp., at 4635
McEwen Drive, Dallas, Texas at 10:00 a.m. local time on the first
business day after the satisfaction or waiver of all of the
closing conditions set forth in Sections 7 and 8 hereof or at
such other place or on such other date as Caldera and the Sellers
may agree.
3.02 Closing Date. The date on which the
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Closing actually takes place is referred to in this Agreement as
the "Closing Date."
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3.03 Deliveries at the Closing. At the
-------------------------
Closing, (a) the Sellers will deliver to Caldera the various
certificates, instruments and document referred to in ARTICLE
VIII hereof, (b) Caldera will deliver to the Sellers the various
certificates, instruments and documents referred to in ARTICLE IX
hereof, 3.04 the Sellers will deliver to Caldera stock
certificates representing the IFHC Shares, endorsed in blank or
accompanied by duly executed assignment documents, and 3.05
Caldera will deliver to the Sellers stock certificates
representing the Caldera Shares in the amounts as set forth on
Schedule 4.04 annexed hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby represent and warrant to
Caldera as follows (with all representations and warranties being
joint and several, except those in Sections 4.02, 4.03, 4.19 and
4.20 shall just be several):
4.01 Due Organization; Foreign Qualification.
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IFHC and its wholly-owed subsidiary International Surety &
Casualty Corporation, a Texas corporation ("ISCC"), each is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Texas, with all requisite
corporate power and authority to own, lease and operate its
respective properties and to carry on its respective business as
they are now being owned, leased, operated and conducted. IFHC
and ISCC each is qualified to do business and is in good standing
as a foreign corporation in every jurisdiction where the nature
of the properties owned, leased or operated by it and the
business transacted by it require such qualification. The
jurisdictions in which IFHC and ISCC are qualified to do business
are set forth on Schedule 4.01. IFHC has no direct or indirect
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subsidiaries, either wholly or partially owned, other than ISCC,
and ISCC has no direct or indirect subsidiaries, either wholly or
partially owned. Neither IFHC nor ISCC holds any voting or
management interest in any Entity other than IFHC's interest in
ISCC.
4.02 Due Authorization; Enforceability. Each
---------------------------------
of the Sellers has full power and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby,
and has duly and validly executed and delivered this Agreement.
This Agreement constitutes the legal, valid and binding
obligation of each Seller, enforceable in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization or other laws from time to time in effect which
affect creditors' rights generally and by general principles of
equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
4.03 Non-Contravention; Consents and
-------------------------------
Approvals. (a) Except to the extent set forth on Schedule 4.03,
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the execution and delivery of this Agreement by the Sellers does
not, and the performance by the Sellers of their respective
obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a
violation or breach of, constitute (with or without notice or
lapse of time or both) a default under, result in or give to any
person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the
creation or imposition of any lien upon any of the assets or
properties of any of the Sellers, IFHC or ISCC under any of the
terms, conditions or provisions of (i) the Certificate of
Incorporation or By-Laws of IFHC and ISCC, or (ii) (x) any Law of
any Governmental Authority applicable to the Sellers, IFHC or
ISCC or any of their respective assets or properties (including
the IFHC shares), or (y) any contract, agreement or commitment to
which the Sellers, IFHC or ISCC or by which the Sellers, IFHC or
ISCC or any of their respective assets or properties are bound is
a party, excluding from the foregoing clauses (x) and (y)
conflicts, violations, breaches, defaults, terminations,
modifications, accelerations and creations and impositions of
liens which would not have an IFHC Material Adverse Effect or
result in the inability of the Sellers to consummate the
transactions contemplated by this Agreement.
(b) Except for the consent of the Commissioner
of Insurance of the State of Texas, no consent, approval, order
or authorization of, or registration, declaration or filing with
any Governmental Entity is required by the Sellers, IFHC or ISCC
in connection with the execution and delivery of this Agreement
or the consummation by the Sellers of the transactions
contemplated hereby.
4.04 Capitalization; Rights, Warrants,
---------------------------------
Options. (a) The authorized capital stock of IFHC consists of
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1,000,000 shares of Common Stock and no shares of Preferred
Stock. On the date hereof, there are issued and outstanding
153,000 shares of ISCC Common Stock and [no shares of Preferred
Stock]. All of the issued and outstanding IFHC Shares are
validly issued, fully paid and nonassessable and the issuance
thereof was not subject to preemptive rights. Schedule 4.04 is a
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true and complete list of each ISCC shareholder, which indicates
as of the date hereof, the number of shares of IFHC Common Stock
held by each such IFHC shareholder.
(b) There are no shares of IFHC Common Stock
or other equity securities (whether or not such securities have
voting rights) of IFHC issued or outstanding or any
subscriptions, options, warrants, calls, rights, convertible
securities or other agreements or commitments of any character
obligating IFHC to issue, transfer or sell any shares of capital
stock or other securities (whether or not such securities have
voting rights) of IFHC. There are no outstanding contractual
obligations of IFHC which relate to the purchase, sale, issuance,
repurchase, redemption, acquisition, transfer, disposition,
holding or voting of any shares of capital stock or other
securities of ISCC.
(c) The authorized capital stock of ISCC
consists of 2,000,000 shares of Common Stock, $1.00 par value, of
which 1,000,000 shares (the "ISCC Shares") are issued and
outstanding, and owned of record and beneficially by IFHC. There
are no shares of ISCC Common Stock or other equity securities
(whether or not such securities have voting rights) of ISCC
issued or outstanding or any subscriptions, options, warrants,
calls, rights, convertible securities or other agreements or
commitments of any character obligating ISCC to issue, transfer
or sell any shares of capital stock or other securities (whether
or not such securities have voting rights) of ISCC. There are no
outstanding contractual obligations of ISCC which relate to the
purchase, sale, issuance, repurchase, redemption, acquisition,
transfer, disposition, holding or voting of any shares of capital
stock or other securities of ISCC.
4.05 Financial Statements; Undisclosed
---------------------------------
Liabilities; Other Documents. (a) For purposes of this
----------------------------
Agreement, "IFHC Financial Statements" shall mean the audited
consolidated financial statements of IFHC for the years ended
December 31, 1997 and 1996 (the "Audited IFHC Financial
Statements") and unaudited consolidated financial statements of
IFHC for the quarters ended March 31, 1998 and 1997 (the
"Unaudited IFHC Financial Statements") (including all notes
thereto), consisting of the balance sheets at such dates and the
related statements of income, shareholders' equity and cash flows
for the periods then ended. The IFHC Financial Statements have
been prepared in accordance with generally accepted accounting
principles consistently applied (except as may be indicated
therein or in the notes thereto) and present fairly the financial
position of the Companies as at the dates thereof and the results
of operations and cash flows of the Companies for the period
covered thereby (subject, in case of the Unaudited IFHC Financial
Statements, to normal, recurring year-end audit adjustments), and
are substantially in accordance with the financial books and
records of IFHC and ISCC.
(b) Neither IFHC nor ISCC has any
liabilities or obligations of any nature, whether accrued,
absolute, contingent, determined, determinable or otherwise,
which individually or in the aggregate, nor any existing
condition, situation or set of circumstances which, could be
reasonably expected to have an IFHC Material Adverse Effect
except (i) as set forth on or reflected in the IFHC Financial
Statements as of and for the period ended March 31, 1998 (the
"IFHC Interim Financials"), (ii) liabilities and obligations
incurred by the Companies since March 31, 1998 in the ordinary
and usual course of their business, or (iii) in accordance with
day to day surety and insurance lawsuits pertaining to claims.
4.06 No Material Adverse Effects or Changes.
--------------------------------------
Except as contemplated by this Agreement, since March 31, 1998,
neither IFHC nor ISCC has suffered any damage, destruction or
Loss to any of its respective assets or properties (whether or
not covered by insurance) which is having or could reasonably be
expected to have an IFHC Material Adverse Effect. Except as
disclosed in the Interim Financials or on Schedule 4.06 since
-------------
March 31, 1998, IFHC has not nor has permitted or caused ISCC to
have:
(a) declared, set aside or paid any dividend
or other distribution in respect of its capital stock;
(b) made any direct or indirect redemption,
purchase or other acquisition of any shares of its capital stock
or made any payment to any of its shareholders (in their capacity
as shareholders);
(c) made any amendment to any material term
of any of its outstanding securities;
(d) issued or sold any shares of its capital
stock or any options, warrants or other rights to purchase any
such shares or any securities convertible into or exchangeable
for such shares or taken any action to reclassify or recapitalize
or split up its capital stock;
(e) incurred any debt, guaranteed any
indebtedness or forgiven any material or guaranteed any
indebtedness, or mortgaged, pledged or subjected to any lien,
lease, security interest, encumbrance or other restriction, any
of its material properties or assets except in the ordinary and
usual course of its business and consistent with past practice;
(f) had any change in any method of
accounting or accounting practice, except for any such change
required by reason of a concurrent change in GAAP; or
(g) made any arrangement, agreement or
undertaking to do any of the foregoing.
4.07 Title.
-----
(a) Personal Property. Except for
-----------------
properties and assets which have been sold or otherwise disposed
of in the ordinary course of business since March 31, 1998, ISCC
has good, valid, marketable, legal and beneficial title to all of
the properties and assets reflected in the Interim Financials,
free and clear of all liens, security interests, mortgages,
pledges, restrictions, or other encumbrances of any nature
whatsoever, whether absolute, legal, equitable, accrued,
contingent or otherwise. There are no outstanding options,
warrants, commitments, agreements or any other rights of any
character, entitling any person or entity to acquire any interest
in all, or any part of such properties and assets.
(b) Real Property Leases. Schedule 4.07
-------------------- -------------
sets forth a complete and correct list of all real property
leases to which IFHC or ISCC is a party, whether as lessor or
lessee. All leases listed on such Schedule are valid and
subsisting and in full force and effect, and all rent and other
payments now due have been paid. IFHC or ISCC enjoys and is in
peaceful and undisturbed possession under each lease so listed in
which it is a lessee. Neither of the Companies has received any
notice of, and to the knowledge of the Sellers, there does not
exist, any event of default or event, occurrence or act which,
with the giving of notice or the lapse of time or both, would
become a default under any such lease and, neither of the
Companies has violated any of the terms or conditions under any
such lease in any material respect.
4.08 Intellectual Property. Schedule 4.08
--------------------- -------------
sets forth a complete and correct list of all of the trademarks,
tradenames, service marks, and patents, material to the Companies
(including any registrations of or pending applications for any
of the foregoing) ("Intellectual Property") used by the Companies
in the conduct of their business. All of such Intellectual
Property is owned by the Companies free and clear of all liens,
and is not subject to any license, royalty or other agreement.
None of such Intellectual Property has been or is the subject of
any pending or, to the Sellers' knowledge, threatened litigation
or claim of infringement. No license or royalty agreement to
which either of the Companies is a party is in breach or default
by any party thereto except where such breach or default would
not have an IFHC Material Adverse Effect or is the subject of any
notice of termination given or, to the Sellers' knowledge,
threatened.
4.09 Insurance Compliance. (a) The annual
--------------------
statutory financial statements of ISCC for the years ended
December 31, 1997 and 1996 and the quarterly statutory financial
statements of ISCC for the three month period ended March 31,
1998 (the "SAP Statements"), have been furnished to Caldera. The
SAP Statements have been timely filed with all insurance
regulatory authorities required under applicable insurance laws,
rules and regulations. Each such SAP Statement was in compliance
in all material respects with applicable insurance laws, rules
and regulations when filed, was prepared in all material respects
in accordance with statutory accounting practices prescribed or
permitted by the Texas Insurance Commission ("SAP"), applied on a
consistent basis throughout the specified period and in the
immediately prior comparable period, except as noted therein, and
each presents fairly in all material respects the admitted and
non-admitted assets, liabilities and surplus and results of
operations of ISCC at the respective dates and for the respective
periods covered thereby, in conformity with SAP.
(b) The Sellers have no reason to believe
that any material amount recoverable pursuant to any material
reinsurance, coinsurance, excess insurance, ceding of insurance,
assumption of insurance or indemnification with respect to
insurance or similar material arrangements applicable to ISCC or
its properties or assets (collectively, "Reinsurance Agreements")
is not fully collectible in due course. ISCC is entitled to take
full credit in its SAP Statements pursuant to applicable
insurance laws, rules and regulations for such reinsurance,
coinsurance or excess insurance ceded pursuant to any such
Reinsurance Agreement.
(c) Each material reserve and other material
liability of ISCC reflected in, or included with, the SAP
Statements was determined in accordance with generally accepted
actuarial standards consistently applied throughout the specified
period and the immediately preceding period, was based on actual
assumptions that were in accordance with or more conservative
than those called for in relevant policy and contract provisions,
is fairly stated in accordance with sound actuarial principles
and is in compliance with the requirements of applicable
insurance laws, rules and regulations. Except as may be affected
by deviations from investment assumptions, such reserves and
liabilities were adequate in the aggregate to cover the total
amount of all reasonably anticipated liabilities of ISCC under
all outstanding insurance policies, funding agreements,
Reinsurance Agreements and annuity, coinsurance and other similar
arrangements as of the respective dates of such SAP Statements.
Such investment assumptions were reasonable as of such respective
dates. The admitted assets of ISCC as determined under
applicable insurance laws, rules and regulations are in an amount
at least equal to the sum of all such reserves and liabilities
and the minimum statutory capital and surplus as required by such
laws, rules and regulations.
(d) The Sellers have delivered to Caldera a
true and complete copy of any actuarial reports prepared by
independent actuaries with respect to ISCC in the last 12 months,
and all attachments, addenda, supplements and modifications
thereto (the "Actuarial Analyses"). To the knowledge of the
Sellers, the policy information and experience data furnished by
ISCC to its independent actuaries in connection with the
preparation of the Actuarial Analyses were accurate in all
material respects, except insofar as any inaccuracy shall not
have materially affected the accuracy of the Actuarial Analyses.
4.10 Rating. ISCC has a not received any
------
rating, review or accreditation from any recognized rating
institution, service or agency which rates or accredits insurance
companies.
4.11 Employment Matters. Schedule 4.11 sets
------------------ -------------
forth a complete and correct list of all full-time and part-time
employees of the Companies, including the position, salary, date
of hire and any arrangements with such employees, written or
oral. Except to the extent set forth on Schedule 4.11, neither
-------------
of the Companies maintains any employee benefit plan of any kind
for any of its directors, officers, consultants, employees or
former employees, whether or not such plan subject to ERISA.
4.12 Tax Returns and Audits. Each of the
----------------------
Companies has duly filed all federal, state, local and foreign
tax returns, reports and forms required to be filed by it, and
has duly paid (except for Taxes being contested in good faith) or
made adequate provisions of its books in accordance with GAAP for
the payment of all Taxes which have been incurred or are due and
payable, and it will on or before the Closing make adequate
provision on its books in accordance with GAAP for all Taxes
payable for any period through the Closing Date for which no
return is required to be filed prior to the Closing Date. The
federal and state income tax returns of the Companies have never
been examined by the Internal Revenue Service or state taxing
authority, respectively, nor has either of the Companies granted
or given any extensions or waivers of the statute of limitations
with respect to any such federal and state income tax returns.
The Sellers are not aware of any basis for the assertion of any
deficiency against either of the Companies for Taxes, which, if
adversely determined, would have an IFHC Material Adverse Effect.
4.13 Litigation. Except as set forth on
----------
Schedule 4.13, there are no actions, suits, arbitrations,
-------------
regulatory proceedings or other litigation, proceedings or
governmental investigations pending or, to the Sellers'
knowledge, threatened against or affecting either of the
Companies any of its respective officers or directors in their
capacity as such, or any of its respective property or business.
Neither of the Companies is subject to any order, judgment,
decree, injunction, stipulation or consent order of or with any
court or other Governmental Authority, other than orders of
general applicability.
4.14 Compliance with Applicable Laws.
-------------------------------
(a) Schedule 4.14 sets forth a complete and
-------------
correct list of all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Authorities which either
of the Companies holds which are required in the operation of its
business (the "Companies Permits"). The Companies are in
compliance with the terms of the Companies Permits, except where
the failure so to comply would not have an IFHC Material Adverse
Effect. To the knowledge of the Sellers, neither of the
Companies is in violation of any law, ordinance or regulation of
any Governmental Authority, including insurance and labor laws
and regulations, except for possible violations (excluding
violations under the relevant insurance laws) which individually
and in the aggregate do not, and, insofar as reasonably can be
foreseen the Sellers, will not in the future have an IFHC
Material Adverse Effect. Each of the Companies has conducted and
now is conducting its business and operation in compliance with
all applicable domestic and foreign laws, rules, regulations,
judgments and court or administrative orders, permits and
approvals (including, without limitation, state insurance
departments).
4.15 Contracts; No Defaults. Schedule 4.15
---------------------- -------------
sets forth a complete and correct list of all Contracts to which
either of the Companies is a party or by which it or any of its
assets or properties is bound and which provide for payment(s) or
services of not less than $25,000. Neither of the Companies nor,
to the knowledge of the Sellers, any other party thereto is in
breach or violation of, or in default in the performance or
observance of any term or provision of, and no event has occurred
or by reason of the transactions contemplated herein, would occur
which, with notice or lapse of time or both, could be reasonably
expected to result in a default under, any Contract to which
either of the Companies is a party or by which it or any of its
assets or properties is bound. Neither of the Companies is
required to give any notice to any party subject to any of the
Contracts regarding this Agreement or the transactions
contemplated hereby.
4.16 Fees of Brokers, Finders and Financial
--------------------------------------
Advisors. Neither the Sellers nor either of the Companies has
--------
employed any broker, finder or investment banker or incurred any
liability for any brokerage or investment banking fees,
commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
4.17 Books and Records. Each of the
-----------------
Companies has maintained and preserved complete and accurate
books and records for its material transactions. The minute
books of the Companies include complete and correct minutes of
all meetings of its directors, committees and shareholders. The
IFHC and ISCC Certificates of Incorporation and By-laws
previously delivered to Caldera are current and complete. At the
Closing Date, all of those books and records will be in the
possession of IFHC. Schedule 4.17 sets forth a complete and
-------------
correct list of (i) all officers and directors of ISCC and (ii)
the name and address of each bank, trust company or other
financial institution in which IFHC or ISCC has an account and
the names of all persons authorized to draw thereon as well as
all powers of attorney granted by IFHC or ISCC.
4.18 Related Party Transactions. Schedule
-------------------------- --------
4.18 sets forth a complete and correct list of all transactions,
----
loans, claims, or agreements between or involving either of the
Companies and an officer, director, employee, consultant or
stockholder of either of the Companies (or an affiliate of any
such Person) since January 1, 1997 (excluding employment
agreements included on another Schedule to this Agreement and
benefits given to all employees of the Companies). All
transactions and agreements listed on Schedule 4.18 were on terms
-------------
to the Companies no less favorable than what they would have had
with unrelated third parties.
4.19 Due Diligence. Each of the Sellers has
-------------
undertaken all due diligence of Caldera regarding the business
and corporate affairs of Caldera which he or she believes is
appropriate for this transaction, including review of the Caldera
SEC Filings. In evaluating the suitability of the transaction
contemplated by this Agreement, the Sellers have not relied upon
any representations or other information (whether verbal or
written), other than as contained in this Agreement or in any
documents or written responses to questions furnished to the
Sellers by Caldera.
4.20 Investment. Each Seller is acquiring
----------
his or her portion of the Caldera Shares for his or her own
account, and not with a view to distribution thereof. Each
Seller is aware that the Caldera Shares will not be registered
under the Securities Act, is an "accredited investor," as such
term is defined in Regulation D of the Securities Act and aware
of the restrictions under the Securities Act of the sale or other
transfer of the Caldera Shares.
4.21 General Representation and Warranty.
-----------------------------------
Neither this Agreement nor any schedule attached hereto or other
documents and written information furnished by or on behalf of
the Sellers regarding the Sellers or the Companies to Caldera in
connection with this Agreement contains any untrue statement of
material fact or omits to state any material fact necessary to
make the statements contained herein or therein not misleading.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF CALDERA
Caldera hereby represents and warrants to the
Sellers as follows:
5.01 Due Organization; Foreign Qualification.
---------------------------------------
Caldera is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with all
requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being
conducted. Caldera is qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the
nature of the properties owned, leased or operated by it and the
business transacted by it require such qualification.
5.02 Due Authorization; Enforceability.
---------------------------------
Caldera has full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance by Caldera of this
Agreement has been duly and validly authorized and approved by
the Board of Directors of Caldera, and no other actions or
proceedings on the part of Caldera are necessary to authorize
this Agreement other than approval of the Caldera Stockholders as
set forth in Section 6.06 hereof. Subject to obtaining the
necessary approval of the Caldera Stockholders, this Agreement
constitutes legal, valid and binding obligations of Caldera,
enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization or
other laws from time to time in effect which affect creditors'
rights generally and by general principles of equity (regardless
of whether such enforceability is considered in a proceeding in
equity or at law).
5.03 Non-Contravention; Consents and
-------------------------------
Approvals. (a) The execution and delivery of this Agreement by
---------
Caldera does not, and the performance by Caldera of its
obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a
violation or breach of, constitute (with or without notice or
lapse of time or both) a default under, result in or give to any
person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the
creation or imposition of any lien upon any of the assets or
properties of Caldera under, any of the terms, conditions or
provisions of (i) the Certificate of Incorporation or Bylaws
Caldera, or (ii) subject to the taking of the actions described
in paragraph (b) of this Section, (x) any Laws of any
Governmental Authority, or (y) any contract, agreement or
commitment to which Caldera is a party or by which Caldera or any
of its assets or properties is bound, excluding from the
foregoing clauses (x) and (y) conflicts, violations, breaches,
defaults, terminations, modifications, accelerations and
creations and impositions of liens which would not have a Caldera
Material Adverse Effect or result in the inability of Caldera to
consummate the transactions contemplated by this Agreement.
(b) No consent, approval, order or
authorization of, or registration, declaration or filing with any
Governmental Authority is required by Caldera in connection with
the execution and delivery of this Agreement or the consummation
by Caldera of the transactions contemplated hereby, the failure
to obtain which would have a Caldera Material Adverse Effect or
result in the inability of Caldera to consummate the transactions
contemplated hereby, except for the filing of a Certificate of
Amendment to its Certificate of Incorporation with the Secretary
of State of Delaware.
5.04 Capitalization. (a) The authorized
--------------
capital stock of Caldera consists of 5,000,000 shares of
Preferred Stock, $.01 par value per share, none of which is
issued or outstanding, and 50,000,000 shares of Common Stock,
$.01 par value per share, of which 3,345,000 shares are issued
and outstanding. All of the issued and outstanding shares of
Caldera Common Stock are, and the Caldera Shares to be issued to
the Sellers will be, validly issued, fully paid and nonassessable
and the issuances of the Caldera Shares will not be subject to
preemptive rights.
(b) Except for the outstanding shares of
Caldera Common Stock and the Caldera Shares to be issued pursuant
to this Agreement, there are no other equity securities (whether
or not such securities have voting rights) of Caldera issued or
outstanding or any subscriptions, options, warrants, calls,
rights, convertible securities or other agreements or commitments
of any character obligating Caldera to issue, transfer or sell
any shares of capital stock or other securities (whether or not
such securities have voting rights) of Caldera. There are no
outstanding contractual obligations of Caldera which relate to
the purchase, sale, issuance, repurchase, redemption,
acquisition, transfer, disposition, holding or voting of any
shares of capital stock or other securities of Caldera other than
the Caldera Shares.
5.05 Financial Statements. (a) For purposes
--------------------
of this Agreement, "Caldera Financial Statements" shall mean the
audited financial statements of Caldera for the years ended
December 31, 1996 and 1997 and the unaudited financial statements
of Caldera for the quarter ended March 31, 1998 (including all
notes thereto) which are included in the SEC Documents consisting
of the balance sheets at such dates and the related statements of
operations, stockholders' equity and cash flows for the periods
then ended. The Caldera Financial Statements have been prepared
in accordance with GAAP consistently applied (except as may be
indicated therein or the notes thereto) and present fairly the
financial position of Caldera as at the dates thereof and the
results of operations and cash flows of Caldera for the periods
covered thereby (subject, in case of the unaudited financial
statements to, normal, recurring year-end audit adjustments), and
are substantially in accordance with the financial books and
records of Caldera.
(b) There are no liabilities of Caldera of
any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could
reasonably be expected to result in such a liability other than
(i) liabilities reflected or reserved against in the Caldera
Financial Statements, (ii) liabilities incurred after March 31,
1998 in the ordinary course of business consistent with past
practice, which individually or in the aggregate, would not have
a Caldera Material Adverse Effect, and (iii) liabilities under
this Agreement or disclosed pursuant to this Agreement.
5.06 Commission Filings. Caldera is subject
------------------
to filing periodic reports with the Commission pursuant to
Section 15(d) of the Exchange Act. Since January 1, 1996 Caldera
has filed all forms, reports and other documents that it was
required to file with the Commission pursuant to Section 15(d) of
the Exchange Act, all of which complied when filed, in all
material respects, with all applicable requirements of the
Exchange Act. Caldera has heretofore delivered to the Sellers
complete and correct copies of the SEC Documents.
5.07 No Material Adverse Effects or Changes.
--------------------------------------
Except as set forth in the SEC Documents, since January 1, 1997,
Caldera has had no significant operations or business activities.
Except as disclosed in the SEC Documents, or as contemplated by
this Agreement, since March 31, 1998 Caldera has not suffered any
material adverse change involving its business, operations,
assets, liabilities, results of operations, cash flows or
condition (financial or otherwise) which would have a Caldera
Material Adverse Effect. Caldera is not a party to any Contract,
except to the extent set forth on Schedule 5.07.
-------------
5.08 Tax Returns and Audits. Caldera has duly filed
----------------------
all federal, state, local and foreign tax returns, reports and
forms required to be filed by it, except where the failure to so
file would not have an Caldera Material Adverse Effect. Caldera
has duly paid (except for Taxes being contested in good faith) or
made adequate provisions on their books in accordance with GAAP
for the payment of all Taxes which have accrued or are due and
payable, and Caldera will on or before the Closing Date make
adequate provision on its books in accordance with GAAP for all
Taxes payable for any period through the Closing Date for which
no return is required to be filed prior to such date. Since
January 1, 1996, the federal and state income tax returns of
Caldera have not been examined by the Internal Revenue Service or
state taxing authority, respectively, nor has Caldera granted or
given any extensions or waivers of the statute of limitations
with respect to any such federal and state income tax returns.
Caldera is not aware of any basis for the assertion of any
deficiency against Caldera for Taxes, which, if adversely
determined, would have a Caldera Material Adverse Effect.
5.09 Litigation. There are no actions, suits,
----------
arbitrations, regulatory proceedings or other litigation,
proceedings or governmental investigations pending or, to
Caldera's knowledge, threatened against or affecting Caldera or
any of its officers or directors in their capacity as such, or
any of its respective properties or businesses. Caldera is not
subject to any Law with any Governmental Authority, other than
orders of general applicability. There are no pending or, to
Caldera's knowledge, threatened claims against any director,
officer, employee or agent of Caldera or any other Person which
could give rise to any claim for indemnification against Caldera.
5.10 Compliance with Applicable Laws. To Caldera's
-------------------------------
knowledge, Caldera is not in violation of any Law of any
Governmental Authority, except for possible violations which
individually and in the aggregate do not, and, insofar as
reasonably can be foreseen by Caldera, will not in the future
have a Caldera Material Adverse Effect.
5.11 Fees of Brokers, Finders and Investment Bankers.
-----------------------------------------------
Neither Caldera nor any officer, director, or employee of Caldera
has employed any broker, finder or investment banker or incurred
any liability for any brokerage or investment banking fees,
commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
5.12 General Representation of Warranty. Neither this
----------------------------------
Agreement nor any schedule attached hereto or other documents and
written information furnished by Caldera to the Sellers in
connection with this Agreement contains any untrue statement of
material fact or omits to state any material fact necessary to
make the statements contained herein or therein not misleading.
ARTICLE VI.
COVENANTS
6.01 Implementing Agreement. Subject to the terms and
----------------------
conditions hereof, each party hereto shall use its best efforts
to take all action required of it to fulfill its obligations
under the terms of this Agreement and to facilitate the
consummation of the transactions contemplated hereby.
6.02 Access to Information and Facilities. From and
------------------------------------
after the date of this Agreement, the Sellers shall cause Caldera
and its representatives to obtain access during normal business
hours and upon reasonable notice to all of the facilities,
properties, books, Contracts and records of the Companies, shall
cause officers and employees of the Companies to be available to
Caldera or its representatives, and shall furnish with any and
all information concerning the Companies, which Caldera or its
representatives reasonably request. Caldera shall provide to the
Sellers access to information regarding Caldera similar to that
which is to be afforded to Caldera in this Section.
6.03 Confidentiality. Except as otherwise required by
---------------
Law or in the performance of obligations under this Agreement,
any nonpublic information received by a party or its advisors,
agents or representatives from the other party shall be kept
confidential and shall not be used or disclosed for any purpose
other than in furtherance of the transactions contemplated by
this Agreement. The obligation of confidentiality shall not
extend to information which: (a) is or becomes generally
available to the public other than as a result of a disclosure by
a party in violation of this Agreement; (b) was in the lawful
possession of a party prior to its receipt from the other party;
or (c) becomes available to a party on a nonconfidential basis
from a source other than a party to this Agreement, provided such
source is not known to be in violation of a confidentiality
agreement. Upon termination of this Agreement without
consummation of the transactions contemplated herein, each party
shall, upon request, promptly return or destroy any confidential
information received from the other party. The covenants of the
parties contained in this Section 6.03 shall survive any
------------
termination of this Agreement but shall terminate at the Closing,
if it occurs.
6.04 Preservation of Business. (a) From the date of
------------------------
this Agreement until the Closing Date, the Companies and Caldera
shall operate only in the ordinary and usual course of business
consistent with past practice, and shall use reasonable
commercial efforts to (a) preserve intact their respective
business organizations, (b) with respect to the Companies,
preserve the good will and advantageous relationships with
customers, suppliers, independent contractors, agents, employees
and other persons material to the operation of their respective
business, and (c) not permit any action or omission which would
cause any of the representations or warranties contained herein
to become inaccurate or any of the covenants to be breached in
any material respect.
(b) The Sellers further covenant that prior to the
Closing, neither of the Companies shall, without the prior
written consent of Caldera (which shall not be unreasonably
withheld):
(i) take any action, incur any obligation or
enter into or authorize any contract or transaction other
than in the ordinary course of business;
(ii) make any changes in its accounting systems,
policies, principles or practices except as may be required
by applicable law or GAAP;
(iii) authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options,
warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise)
any shares of its capital stock or any other securities, or
amend any of the terms of any such securities;
(iv) split, combine or reclassify any shares of
its capital stock, declare, set aside or pay any dividend or
other distribution (whether in cash, stock or property or
any combination thereof) in respect of its capital stock, or
redeem or otherwise acquire any of its securities;
(v) make any borrowings, incur any debt (other
than trade payables in the ordinary course of business), or
assume, guarantee, endorse or otherwise become liable
(whether directly, contingently or otherwise) for the
obligations of any other person in an aggregate principal
amount exceeding $25,000, or make any unscheduled payment or
repayment of principal in respect of any long term debt.
(vi) make any new loans, advances or capital
contributions to, or new investments in, any other person,
other than in connection with travel and expense
reimbursement of employees in the ordinary course of
business;
(vii) enter into, adopt, amend in any material
respect or terminate any contract, agreement, lease,
commitment or arrangement;
(viii) acquire, lease or encumber any assets
outside the ordinary course of business; or
(ix) enter into any agreement, understanding or
commitment with respect to any of the foregoing actions.
6.05 Consents and Approvals. Subject to the terms and
----------------------
conditions provided herein, each of the parties hereto shall use
reasonable commercial efforts to obtain all consents, approvals,
certificates and other documents required in connection with the
performance by it of this Agreement and the consummation of the
transactions contemplated hereby. As soon as practicable after
the date hereof, each of the parties hereto shall make all
filings, applications, statements and reports to all Governmental
Authorities and other Entities which are required to be made
prior to the Closing Date pursuant to any applicable Law or
Contract in connection with this Agreement and the transactions
contemplated hereby.
6.06 Caldera Stockholder Approval. As soon as
----------------------------
practicable after the date hereof, Caldera shall convene a
special stockholders meeting (the "Caldera Stockholder Meeting")
to consider and vote upon (i) approval of this Agreement, (ii) a
one-for-fifteen reverse stock split of the outstanding shares of
Caldera Common Stock (the "Reverse Stock Split"), (iii) a change
in its corporate name to Unistar Financial Service Corp., (iv)
the election of seven persons as directors, which persons must be
reasonably acceptable to the Sellers, and (v) the authorization
of a stock option plan.
6.07 Publicity. Prior to issuing any public
---------
announcement or statement with respect to the entry into this
Agreement or the transactions contemplated hereby and prior to
making any filing with Governmental Authority, Caldera and the
Sellers will, subject to their respective legal obligations,
consult with each other and will allow each other to review the
contents of any such public announcement or statement and any
such filing.
6.08 Fees and Expenses. The Sellers shall cause the
-----------------
Companies to pay all fees and expenses of the Companies and of
Caldera incurred in connection with the transactions contemplated
herein, including, but not limited to, filing, printing, due
diligence expenses, mailing, transfer agent, attorneys and
accounting fees.
6.09 Periodic Reports. Until the Closing Date, Caldera
----------------
shall furnish to the Sellers all filings made by Caldera with the
Commission and shall solicit comments with respect thereto, in
each case at least two business days (or as soon prior thereto as
is practicable) prior to the time of such filings and the time of
such mailings of reports which refer to the Companies or this
Agreement.
ARTICLE VII.
CONDITIONS PRECEDENT TO THE CONSUMMATION OF THE MERGER
The respective obligations of each party to consummate
the purchase and sale of the IFHC Shares are subject to the
fulfillment at or before the Closing of each of the following
conditions:
7.01 Actions or Proceedings. No preliminary or
----------------------
permanent injunction or other order by any federal or state court
preventing consummation of the purchase and sale of the IFHC
Shares shall have been issued and shall be continuing in effect,
and the transactions contemplated herein shall not be prohibited
under any applicable federal or state law or regulation.
7.02 Approval of Merger. The Caldera stockholders
------------------
shall have approved this Agreement and the other items specified
in Section 6.06 hereof at the Caldera Stockholders Meeting.
ARTICLE VIII.
CONDITIONS PRECEDENT TO OBLIGATIONS
OF CALDERA
The obligations of Caldera to consummate the
transactions contemplated herein are subject to the fulfillment
at or before the Closing of each of the following conditions:
8.01 Warranties True as of Closing Date. The
----------------------------------
representations and warranties of the Sellers contained herein
shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as though made on
and as of the Closing Date.
8.02 Compliance With Agreements and Covenants. The
----------------------------------------
Sellers and the Companies shall have performed and complied with
in all material respects all of their covenants, obligations and
agreements contained in this Agreement to be performed and
complied with by them on or prior to the Closing Date.
8.03 Sellers' Certificate. The Sellers and the Chief
--------------------
Executive Officer of the Companies each shall have delivered to
Caldera a certificate, dated the Closing Date, certifying that
each of the conditions specified in Section 8.01 and Section 8.02
------------ ------------
hereof are satisfied in all respects.
8.04 Consents and Approvals. Caldera shall have
----------------------
received written evidence reasonably satisfactory to it that all
consents and approvals required on behalf of the Sellers and the
Companies for the consummation of the transactions contemplated
hereby have been obtained, and all required filings have been
made.
8.05 Good Standing Certificates. The Sellers shall
--------------------------
have delivered to Caldera at the Closing certificates of good
standing and tax status from the State of Texas, as to IFHC and
ISCC, which certificates shall be dated a date not more than five
(5) business days prior to the Closing Date.
8.06 Other Closing Documents. Caldera shall have
-----------------------
received such other agreements and instruments as Caldera shall
reasonably request, in each case in form and substance reasonably
satisfactory to Caldera.
ARTICLE IX.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to consummate the
transaction are subject to the satisfaction or waiver by Caldera
of the following conditions precedent on or before the Closing:
9.01 Warranties True as of Closing Date. The
----------------------------------
representations and warranties of Caldera contained herein shall
be true and correct in all material respects on and as of the
Closing Date with the same force and effect as though made by
Caldera on and as of the Closing Date.
9.02 Compliance with Agreements and Covenants. Caldera
----------------------------------------
shall have performed and complied with in all material respects
all of its covenants, obligations and agreements contained in
this Agreement, to be performed and complied with by it on or
prior to the Closing Date.
9.03 Caldera Certificate. An executive officer of
-------------------
Caldera shall have delivered to the Sellers a certificate, dated
the Closing Date, certifying that each of the conditions
specified in Section 9.01 and Section 9.02 hereof are satisfied
------------ ------------
in all respects.
9.04 Secretary's Certificate. Caldera shall have
-----------------------
delivered to the Sellers a certificate of the duly authorized
Secretary of Caldera, dated the Closing Date, certifying
resolutions of the Caldera Board of Directors and stockholders
authorizing the execution, delivery and performance of this
Agreement, and the other transactions on behalf of Caldera, as
contemplated herein.
9.05 Good Standing Certificate. Caldera shall have
-------------------------
delivered to the Sellers at the Closing (a) a certificate of
good standing from the State of Delaware as to Caldera, (b) a
certified Certificate of Amendment to its Certificate of
Incorporation setting forth the amendments adopted at the Caldera
Stockholders Meeting, which certificates shall be dated a date
not more than five business days prior to the Closing Date.
9.06 Consents and Approvals. The Sellers shall have
----------------------
received written evidence reasonably satisfactory to them that
all consents and approvals required for the consummation of the
transactions contemplated hereby by Caldera have been obtained,
and all required filings have been made.
9.07 Other Closing Documents. The Sellers shall have
-----------------------
received such other agreements and instruments as the Sellers
shall reasonably request, in each case in form and substance
reasonably satisfactory to the Sellers.
ARTICLE X.
TERMINATION
10.01 Termination. This Agreement may be
-----------
terminated and the purchase and sale of the IFHC Shares may be
abandoned at any time prior to the Closing Date, whether before
or after approval at the Caldera Stockholders Meeting:
(a) by mutual written consent of the Sellers and the
Board of Directors of Caldera;
(b) by either Caldera or the Sellers, by written
notice to the other, if (i) the Closing Date shall not have
occurred on or before September 30, 1998 or (ii) any Governmental
Authority shall have issued an order, judgment or decree (other
than a temporary restraining order) restraining, enjoining or
otherwise prohibiting the sale of the IFHC Shares and such order,
judgment or decree shall have become final and non-appealable;
provided, however, that the right to terminate this Agreement (X)
under clause (i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur
on or before such date or (Y) under clause (ii) shall not be
available to any party unless such party shall have used all
reasonable efforts to remove such order, judgment or decree.
10.02 Effect of Termination and Abandonment. In
-------------------------------------
the event of termination of this Agreement and abandonment of the
purchase and sale of the IFHC Shares pursuant to this ARTICLE X,
---------
no party hereto (or any of its directors, officers or
stockholders) shall have any liability or further obligation to
any other party to this Agreement other than the obligations of
Section 6.03 hereof, except that nothing herein shall relieve
------------
any party from liability for any willful breach of this Agreement.
ARTICLE XI.
MISCELLANEOUS
11.01 Amendment. This Agreement may be amended,
---------
modified, supplemented or terminated (in accordance with Article
X), but only by a writing executed by Caldera and the Sellers.
11.02 No Survival of Representations, Warranties,
------------------------------------------
Covenants and Agreements. None of the representations,
------------------------
warranties, covenants and agreements contained in this Agreement
or in any instrument delivered in connection herewith shall
survive the Closing.
11.03 Notices. Any notice, request, instruction or
-------
other document to be given hereunder by a party hereto shall be
in writing and shall be deemed to have been given, (i) when
received if given in person, (ii) on the date of transmission if
sent by telex, facsimile or other wire transmission or (iii)
three business days after being deposited in the U.S. mail,
certified or registered mail, postage prepaid:
(a) If to the Sellers:
c/o Marc A. Sparks
International Fidelity Holding Corp.
4635 McEwen Road
Dallas, Texas 75244
Facsimile No.: (972) 934-1225
with a copy to:
(b) If to Caldera:
Caldera, Inc.
9-1/2 Casimir Street
Toronto, Ontario Canada M5T 2PS
Attention: Ronald Mann, Secretary
Facsimile No: (416) 603-9186
with a copy to:
Thelen Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Bruce A. Rich, Esq.
Facsimile No.: (212) 603-2001
or to such other individual or address as a party hereto may
designate for itself by notice given as herein provided.
11.04 Waivers. The failure of a party hereto at any
-------
time or times to require performance of any provision hereof
shall in no manner affect its right at a later time to enforce
the same. No waiver by a party of any condition or of any breach
of any term, covenant, representation or warranty contained in
this Agreement shall be effective unless in writing, and no
waiver in any one or more instances shall be deemed to be a
further or continuing waiver of any such condition or breach in
other instances or a waiver of any other condition or breach of
any other term, covenant, representation or warranty.
11.05 Interpretation. The headings preceding the text
--------------
of ARTICLES and Sections included in this Agreement and the
headings to Schedules attached to this Agreement are for
convenience only and shall not be deemed part of this Agreement
or be given any effect in interpreting this Agreement. The use
of the masculine, feminine or neuter gender herein shall not
limit any provision of this Agreement.
11.06 Applicable Law. This Agreement shall be
--------------
governed by and construed and enforced in accordance with the
internal laws of the State of Delaware without giving effect to
the principles of conflicts of law thereof.
11.07 Assignment. This Agreement shall be binding
----------
upon and inure to the benefit of the parties hereto and their
respective successors, assigns, heirs and administrators;
provided, however, that no assignment of any rights or
obligations shall be made by any party without the prior written
consent of the other parties hereto.
11.08 No Third Party Beneficiaries. This Agreement is
----------------------------
solely for the benefit of the parties hereto and, to the extent
provided herein, and their respective directors, officers,
employees, agents and representatives, and no provision of this
Agreement shall be deemed to confer upon third parties any
remedy, claim, liability, reimbursement, cause of action or other
right.
11.09 Enforcement of the Agreement. The parties
----------------------------
hereto agree that irreparable damage would result in the event
that any provision of this Agreement is not performed in
accordance with specific terms or is otherwise breached. It is
accordingly agreed that the parties hereto will be entitled to
equitable relief including an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof.
11.10 Further Assurances. Upon the request of
------------------
Caldera, each of the Sellers will on and after the Closing Date
execute and deliver to Caldera such other documents, releases,
assignments and other instruments as may be required to
effectuate completely the transactions contemplated by this
Agreement.
11.11 Severability. If any provision of this
------------
Agreement shall be held invalid, illegal or unenforceable, the
validity, legality or enforceability of the other provisions
hereof shall not be affected thereby, and there shall be deemed
substituted for the provision at issue a valid, legal and
enforceable provision as similar as possible to the provision at
issue.
11.12 Remedies Cumulative. The remedies provided in
-------------------
this Agreement shall be cumulative and shall not preclude the
assertion or exercise of any other rights or remedies available
by law, in equity or otherwise.
11.13 Entire Understanding. This Agreement sets forth
--------------------
the entire agreement and understanding of the parties hereto and
supersedes all prior agreements, arrangements and understandings
among the parties hereto, including the Letter of Intent, dated
May 26, 1998.
11.14 Waiver of Jury Trial. Each party hereto waives
--------------------
the right to a trial by jury in any dispute in connection with
the transactions contemplated by this Agreement, and agrees to
take any and all action necessary or appropriate to effect such
waiver.
11.15 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered on the date first above
written.
CALDERA, INC.
By:
--------------------------------
Name:
Title:
-----------------------------------
MARC A. SPARKS
-----------------------------------
F. JEFFREY NELSON
-----------------------------------
NICOLE CLAYTON CAVER
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
CALDERA, INC.
(PURSUANT TO SECTION 242 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE)
Caldera, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the "DGCL"), DOES
HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation by
-----
unanimous consent duly adopted resolutions setting forth proposed
amendments (the "Amendments") to the Certificate of Incorporation
of the Corporation, declaring the Amendments to be advisable and
calling for the submission of the Amendments to the stockholders
of the Corporation at a special meeting of the stockholders held
upon notice in accordance with Section 222 of the DGCL, and
stating that the Amendments will be effective only after adoption
thereof by the affirmative vote of a majority of the issued and
outstanding shares of Common Stock of the Corporation.
SECOND: Thereafter, pursuant to a resolution of the
------
Board of Directors of the Corporation, the Amendments were
submitted to the holders of the issued and outstanding shares of
Common Stock of the Corporation, and such holders voted for the
adoption of the following resolutions to amend the Certificate of
Incorporation of the Corporation:
RESOLVED, that, subject to stockholder approval
and effective on the date and at the time a Certificate
of Amendment to the Certificate of Incorporation of the
Corporation is filed with the Secretary of State of
Delaware (the "Effective Date"), the Certificate of
Incorporation of the Corporation is amended by deleting
in its entirety the present Article 1 and substituting
in lieu thereof the following Article 1:
1. The name of the Corporation shall be Unistar
Financial Service Corp. (hereinafter referred to as the
"Corporation");
RESOLVED, that, on the Effective Date, each share of
the Corporation's Common Stock, $.01 par value, issued and
outstanding immediately prior to the Effective Date (the
"Old Common Stock"), shall automatically and without any
action on the part of the holder thereof be reclassified as
and changed, pursuant to a one-for-fifteen reverse stock
split of the Corporation's Common Stock, $.01 par value (the
"New Common Stock"), subject to the treatment of fractional
share interests as described below. Each holder of a
certificate or certificates which immediately prior to the
Effective Date represented outstanding shares of the Old
Common Stock (the "Old Certificates," whether one or more)
representing the number of whole shares of the New Common
Stock into which and for which the shares of the Old Common
Stock formerly represented by such Old Certificates so
surrendered, are reclassified under the terms hereof. From
and after the Effective Date, Old Certificates shall
represent only the right to receive new certificates (the
"New Certificates") pursuant to the provisions hereof. No
certificates or scrip representing fractional share
interests in New Common Stock will be issued, and no such
fractional share interest will entitle the holder thereof to
vote, or to any rights of a stockholder of the Corporation.
Any fraction of a share of New Common Stock to which the
holder would otherwise be entitled will be adjusted upward
or downward to the nearest whole share. If more than one Old
Certificate shall be surrendered at one time for the account
of the same stockholder, the number of full shares of the
New Common Stock for which New Certificates shall be issued
shall be computed on the basis of the aggregate number of
shares represented by the Old Certificates so surrendered.
In the event that the Corporation's Transfer Agent
determines that a holder of the Old Certificates has not
tendered all his certificates for exchange, the Transfer
Agent shall carry forward any fractional share until all
certificates of that holder have been presented for exchange
such that payment for fractional shares to any one person
shall not exceed the value of one share. If any New
Certificate is to be issued in a name other than that in
which the Old Certificates surrendered for exchange are
issued, the Old Certificates so surrendered shall be
properly endorsed and otherwise in proper form for transfer,
and the person or persons requesting such exchange shall
affix any requisite stock transfer tax stamp to the Old
Certificates surrendered, to provide funds for their
purchase, or establish to the satisfaction of the Transfer
Agent that such taxes are not payable. From and after the
Effective Date the amount of capital represented by the
shares of the New Common Stock into which and for which the
shares of the Old Common Stock are classified under the
terms hereof shall be the same as the amount of capital
represented by the shares of Old Common Stock so
reclassified, until thereafter reduced or increased in
accordance with applicable law. As a result of this
Amendment, the authorized stock of the Corporation shall not
change and thereafter shall remain 55,000,000 shares in
aggregate, comprised of 50,000,000 shares of Common Stock,
$.01 par value per share, and 5,000,000 shares of preferred
stock, $.01 par value, until thereafter reduced or increased
in accordance with applicable law.
THIRD: The Amendments were duly adopted in
-----
accordance with the provisions of Sections 141 and 242 of the
DGCL.
IN WITNESS WHEREOF, Caldera, Inc. has caused this
Certificate of Amendment of Certificate of Incorporation of the
Corporation, to be signed by Ronald K. Mann, its President on
this 17th day of August, 1998.
By: /s/ Ronald K. Mann
------------------------------------
Ronald K. Mann, President
UNISTAR FINANCIAL SERVICES CORPORATION
1998 STOCK OPTION PLAN
1. Purpose. This 1998 Stock Option Plan (the "Plan")
-------
of Unistar Financial Services Corp., a Delaware corporation (the
"Company"), is intended to provide incentives to certain
directors, officers, employees and other persons who perform
services for or on behalf of the Company and any subsidiaries of
the Company (collectively, the "Subsidiaries") by providing them
with opportunities to purchase capital stock in the Company
pursuant to options granted hereunder which qualify as "incentive
stock options" under Section 422(b) of the Internal Revenue Code
of 1986, as amended (the "Code") ("ISO" or "ISOs") or which do
not qualify as ISOs ("Non-Qualified Option" or "Non-Qualified
Options"). Both ISOs and Non-Qualified Options are referred to
hereinafter individually as an "Option" and collectively as
"Options," and persons to whom Options are granted are referred
to hereinafter individually as an "Optionee" and collectively as
"Optionees." As used herein, the term "Subsidiary" means
"subsidiary corporation" as that term is defined in Section
424(f) of the Code.
2. Administration of the Plan. The Plan shall be
--------------------------
administered by the Compensation Committee of the Board of
Directors of the Company (the "Committee"), each member of which
shall be a "disinterested person" within the meaning of Rule 16b-
3 or any successor provision ("Rule 16b-3") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The
Committee shall consist of two members. Subject to the terms of
the Plan, the Committee shall have the authority to (i) determine
the employees of the Company and Subsidiaries (from among the
class of employees eligible under Section 4 hereof to receive
ISOs) to whom ISOs may be granted; (ii) determine the number of
shares which may be issued under each Option; (iii) determine the
time or times at which Options may be granted; (iv) determine the
exercise price of shares subject to each Option, which price
shall not be less than the minimum exercise prices as specified
in Section 6; (v) determine (subject to Sections 7 and 9) the
time or times when each Option shall become exercisable and the
duration of the exercise period; (vi) determine whether
restrictions are to be imposed on shares subject to Options and
the nature of such restrictions, if any, and (vi) interpret the
Plan and prescribe and rescind rules and regulations relating to
it. If the Committee determines to issue a Non-Qualified Option,
it shall take whatever actions it deems necessary, under Section
422 of the Code and the regulations promulgated thereunder, to
ensure that such Option is not treated as an ISO. The
interpretation and construction by the Committee of any
provisions of the Plan or of any Option granted under it shall be
final. The Committee may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem best. No
member of the Committee or of the Board of Directors of the
Company shall be liable for any action or determination made in
good faith with respect to the Plan or any Option granted under
it.
3. Stock. The stock delivered under this Plan shall
-----
be the Company's Common Stock, $.01 par value per share (the
"Common Stock"), either authorized and unissued, treasury stock
or shares purchased on the open market. The aggregate number of
shares which may be issued pursuant to the Plan is 1,000,000
subject to adjustment as provided in Section 13. If any Option
granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any
reason to be exercisable in whole or in part, the unpurchased
shares subject to such Option shall again be available for grants
of Options under the Plan.
4. Eligible Employees and Others. ISOs may be
-----------------------------
granted to any employee of the Company. Those officers and
directors of the Company who are not employees may not be granted
ISOs under the Plan. Non-Qualified Options may be granted to any
employee, officer or director (whether or not also an employee)
of the Company or other person who performs services for the
Company or is deemed to be in a position to perform such services
in the future. The Board may take into consideration a
recipient's individual circumstances in determining whether to
grant an ISO or a Non-Qualified Option. Granting of any Option
to any person shall neither entitle that person to, nor
disqualify him from, participation in any other Option grant.
5. Term of Plan; Granting of Options. The term of
---------------------------------
the Plan will commence on the date of approval of the Plan by the
Company's Board of Directors, subject to approval by stockholders
within one year of adoption, and terminate on the day immediately
preceding the tenth anniversary of said adoption, except as to
options outstanding on that date and subject to earlier
termination as provided in Sections 9 and 10 hereof. Options may
be granted under the Plan at any time during the term of the
Plan. The date of grant of an Option under the Plan shall be the
date specified by the Committee at the time it grants the Option;
provided, however, that such date shall not be prior to the date
on which the Committee acts to approve the grant.
6. Minimum Exercise Price; ISO Limitations.
---------------------------------------
6.01 Price for Non-Qualified Options. The
-------------------------------
exercise price per share for each Non-Qualified Option granted
under the Plan shall not be less than seventy-five percent (75%)
of the fair market value of the Common Stock on the date of grant
of the Option, and in no event shall be less than the minimum
legal consideration required therefor under the laws of the State
of Delaware or the laws of any jurisdiction in which the Company
or its successors in interest may be organized.
6.02 Price for ISOs. The exercise price per share
--------------
for each ISO granted under the Plan shall not be less than the
fair market value per share of Common Stock on the date of such
grant. In the case of an ISO to be granted to an employee owning
stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or
any Subsidiary (a "10% Employee"), the price per share for such
ISO shall not be less than one hundred ten percent (110%) of the
fair market value per share of Common Stock on the date of grant.
For purposes of determining stock ownership under this Section,
the rules of Section 424(d) of the Code shall apply.
6.03 $100,000 Annual Limitation on ISO Vesting.
-----------------------------------------
To the extent that, in the aggregate under this Plan and all
incentive stock option plans of the Company and any Subsidiary,
ISOs become exercisable for the first time by an employee during
any calendar year with respect to stock having a fair market
value (determined at the time the ISOs were granted) in excess of
$100,000, such excess amount of stock shall be deemed to have
been granted as a Non-Qualified Option, and not as an ISO.
6.04 Determination of Fair Market Value. If at
----------------------------------
the time an Option is granted under the Plan, the Company's
Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or
quotes discussed in this sentence are available prior to the date
such Option is granted and shall mean (i) the mean (on that date)
of the high and low prices of the Common Stock on the principal
national securities exchange on which the Common Stock is traded,
if the Common Stock is then traded on a national securities
exchange; (ii) the last reported sale price (on that date) of the
Common Stock on the NASDAQ National Market or Small-Cap Market
(or other interdealer quotation system), if the Common Stock is
not then traded on a national securities exchange; or (iii) the
closing bid price (or average of bid prices) last quoted (on that
date) by the OTC Electronic Bulletin Board or other established
quotation service for over-the-counter securities, if the Common
Stock is not reported on the NASDAQ National Market or Small-Cap
Market. However, if the Common Stock is not publicly traded at
the time an Option is granted under the Plan, the "fair market
value" shall be deemed to be the fair value of the Common Stock
as determined by the Committee in good faith after taking into
consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common
Stock in private transactions negotiated at arm's length.
7. Option Duration. Subject to earlier termination
---------------
as provided in Sections 9 and 10, each Option shall expire on the
date specified by the Committee, but not more than (i) ten (10)
years from the date of grant in the case of Non-Qualified
Options, (ii) ten (10) years from the date of grant in the case
of ISOs generally, and (iii) five (5) years from the date of
grant in the case of ISOs granted to a 10% Employee, as
determined under Section 6.02. Subject to earlier termination as
provided in Sections 9 and 10, the term of each ISO shall be the
term set forth in the original instrument granting such ISO,
except with respect to any part of such ISO that is converted
into a Non-Qualified Option pursuant to Section 16.
8. Exercise of Option. Subject to the provisions of
------------------
Sections 9 through 12, each Option granted under the Plan shall
be exercisable as follows:
8.01 Vesting. The Option shall either be fully
-------
exercisable on the date of grant or shall become exercisable
thereafter in such installments as the Committee may specify,
provided that an Option granted to a director or executive
officer of the Company may not vest earlier than six (6) months
from the date of grant.
8.02 Full Vesting of Installments. Once an
----------------------------
installment becomes exercisable it shall remain exercisable until
expiration or termination of the Option, unless otherwise
specified by the Committee.
8.03 Partial Exercise. Each Option or installment
----------------
may be exercised at any time or from time to time, in whole or in
part, for up to the total number of shares with respect to which
it is then exercisable.
8.04 Acceleration of Vesting. The Committee shall
-----------------------
have the right to accelerate the date of exercise of any
installment of any Option, provided that the Committee shall not,
without the consent of an Optionee, accelerate the exercise date
of any installment of any Option granted to any employee as an
ISO if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described
in Section 6.03.
9. Termination of Employment. If an Optionee ceases
-------------------------
his employment with, or service by, the Company and all
Subsidiaries (other than by reason of death or disability as
defined in Section 10 or by the Company or any Subsidiary for
cause), no further installments of his Options shall become
exercisable, and his Options shall terminate after the passage of
three (3) months from the date of termination of his employment
or service with respect to ISOs and twelve (12) months from such
termination of employment or service with respect to Qualified
Options, but in no event later than on their specified expiration
dates, during which period he shall have the right to exercise
any Options exercisable by him on the date of termination of
employment or service, subject to exercise for such other periods
as determined by the Committee at the time of grant. Options
held by an Optionee whose termination of employment or service is
for cause shall terminate upon such termination. For purposes of
this Section 9 only, employment or service shall be considered as
continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or
governmental service). A bona fide leave of absence with the
written approval of the Committee shall not be considered an
interruption of employment or service under this Section 9,
provided that such written approval contractually obligates the
Company or any Subsidiary to continue the employment or service
of the Optionee after the approved period of absence. Options
granted under the Plan shall not be affected by any change of
employment or service within or among the Company and
Subsidiaries, so long as the Optionee continues to be an employee
of or consultant to the Company or any Subsidiary. Nothing in
the Plan shall be deemed to give any Optionee the right to be
retained in employment or other service by the Company or any
Subsidiary for any period of time.
10. Death; Disability.
-----------------
10.01 Death. If an Optionee ceases his
-----
employment with or service by the Company and all Subsidiaries by
reason of his death, any Option may be exercised, to the extent
of the number of shares with respect to which he could have
exercised it on the date of his death, by his estate, personal
representative or beneficiary who has acquired the Option by will
or by the laws of descent and distribution at any time within one
(1) year from the date of the Optionee's death or such later date
as fixed by the Committee, but in no event later than on their
specified expiration dates.
10.02 Disability. If an Optionee ceases his
----------
employment with or service by the Company and all Subsidiaries by
reason of his disability, he shall have the right to exercise any
Option held by him on the date of termination of employment, to
the extent of the number of shares with respect to which he could
have exercised it on that date, at any time prior to one (1) year
from the date of the termination of the Optionee's employment or
service or such later date as fixed by the Committee as to Non-
Qualified Options, but in no event later than on their specified
expiration dates. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code or successor statute.
11. Assignability. No Option shall be assignable or
-------------
transferable by the Optionee except by (i) will or by the laws of
descent and distribution or (ii) with respect to Non-Qualified
Options, to a spouse or lineal descendant or lineal ascendant of
the Optionee ("Permitted Assignee"), and are exercisable during
the lifetime of the Optionee only by the Optionee or by the
Optionee's guardian or legal representative or Permitted
Assignee.
12. Terms and Conditions of Options. Options shall be
-------------------------------
evidenced instruments (which need not be identical) in such forms
as the Committee may from time to time approve (the "Option
Agreements"). The Option Agreements shall conform to the terms
and conditions set forth in Sections 6 through 11 hereof and may
contain such other provisions as the Committee deems advisable
which are not inconsistent with the Plan, including restrictions
applicable to shares of Common Stock issuable upon the exercise
of Options. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one
or more officers of the Company to execute and deliver the Option
Agreements. The proper officers of the Company are authorized
and directed to take any and all action necessary or advisable
from time to time to carry out the terms of the Option
Agreements.
13. Adjustments. Upon the occurrence of any of the
-----------
following events, an Optionee's rights with respect to Options
granted to him hereunder shall be adjusted as hereinafter
provided, unless otherwise specifically provided in the written
agreement between the Optionee and the Company relating to such
Option:
13.01 Stock Dividends and Stock Splits. If
--------------------------------
the shares of Common Stock shall be subdivided or combined into a
smaller or greater number of shares or if the Company shall issue
any shares of Common Stock as a stock dividend on its outstanding
Common Stock, the number of shares of Common Stock deliverable
upon the exercise of Options shall be appropriately decreased or
increased proportionately, and appropriate adjustments shall be
made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
13.02 Consolidations or Mergers. If the
-------------------------
Company is to be consolidated with or acquired by another entity
in a merger, sale of all or substantially all of the Company's
assets or otherwise (an "Acquisition"), the Committee or the
board of directors of any entity assuming the obligations of the
Company hereunder (the "Successor Board"), shall, as to
outstanding Options, either (i) make appropriate provision for
the continuation of such Options by substituting on an equitable
basis for the shares then subject to such Options the
consideration payable with respect to the outstanding shares of
Common Stock in connection with the Acquisition; (ii) upon
written notice to the Optionees, provide that all Options must be
exercised, to the extent then exercisable, within a specified
number of days of the date of such notice, at the end of which
period the Options shall terminate; or (iii) terminate all
Options in exchange for a cash payment equal to the excess of the
fair market value of the shares subject to such Options (to the
extent then exercisable) over the exercise price thereof.
13.03 Recapitalization or Reorganization. In
----------------------------------
the event of a recapitalization or reorganization of the Company
(other than a transaction described in Section 13.02 above)
pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of
Common Stock, an Optionee upon exercising an Option shall be
entitled to receive for the purchase price paid upon such
exercise the securities he would have received if he had
exercised his Option prior to such recapitalization or
reorganization.
13.04 Change in Control. In the event of a
-----------------
change in control of the Company, all Options under the Plan
shall vest 100% and shall be immediately exercisable. For
purposes of this Plan, a "change in control" shall mean any of
the following events: (a) the Company receives a report on
Schedule 13D filed with the Securities and Exchange Commission
pursuant to Section 13(d) of the Exchange Act disclosing that any
person, group, corporation or other entity is the beneficial
owner, directly or indirectly, of twenty percent (20%) or more of
the outstanding Common Stock of the Company; (b) any person (as
such term is defined in Section 13(d) of the Exchange Act),
group, corporation or other entity other than the Company or any
Subsidiary, purchases shares pursuant to a tender offer or
exchange offer to acquire any Common Stock of the Company for
cash, securities or any other consideration, provided that after
consummation of the offer, the person, group, corporation or
other entity in question is the beneficial owner (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of twenty percent (20%) or more of the outstanding
Common Stock of the Company (calculated as provided in paragraph
(d) of Rule 13d-3 under the Exchange Act in the case of rights to
acquire common stock); or (c) the stockholders of the Company
approve (i) any consolidation or merger of the Company in which
the Company is not the continuing or surviving corporation or
pursuant to which shares of Common Stock would be converted into
cash, securities or other property, or (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets
of the Company.
13.05 Modification of ISOs. Notwithstanding
--------------------
the foregoing, any adjustments made pursuant to Section 13.01,
13.02, 13.03 or 13.04 with respect to ISOs shall be made only
after the Committee, after consulting with counsel for the
Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section
424 of the Code) or would cause any adverse tax consequences for
the holders of such ISOs. If the Committee determines that such
adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such
adjustments.
13.06 Dissolution or Liquidation. In the
--------------------------
event of the proposed dissolution or liquidation of the Company,
each Option will terminate immediately prior to the consummation
of such proposed action or at such other time and subject to such
other conditions as shall be determined by the Committee.
13.07 Issuances of Securities. Except as
-----------------------
expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of
shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of
the Company.
13.08 Fractional Shares. No fractional shares
-----------------
shall be issued under the Plan and the Optionee shall receive
from the Company cash in lieu of such fractional shares.
13.09 Adjustments. Upon the happening of any
-----------
of the events described in Section 13.01, 13.02, 13.03 or 13.04
above, the class and aggregate number of shares set forth in
Section 3 hereof that are subject to Options which previously
have been or subsequently may be granted under the Plan shall
also be appropriately adjusted to reflect the events described in
such subparagraphs. The Committee or the Successor Board shall
determine the specific adjustments to be made under this Section
13 and, subject to Section 2 hereof, its determination shall be
conclusive.
14. Means of Exercising Options. An Option (or any
---------------------------
installment or portion of an installment thereof) shall be
exercised by giving written notice to the Company at its
principal office address. The notice shall identify the Option
being exercised and specify the number of shares as to which such
Option is being exercised, accompanied by full payment of the
purchase price therefor either: (a) in United States dollars in
cash or by check; (b) at the discretion of the Committee, through
delivery of shares of Common Stock having a fair market value
equal as of the date of the exercise to the cash exercise price
of the Option; or (c) at the discretion of the Committee, by any
combination of (a) or (b) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by
means of the methods set forth in clause (b) of the preceding
sentence, such discretion shall be exercised in writing at the
time of the grant of the ISO in question. An Optionee shall not
have the rights of a stockholder with respect to the shares
covered by his Option until the date of issuance of a stock
certificate to him for such shares. Except as expressly provided
above in Section 13 with respect to changes in capitalization and
stock dividends, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such
stock certificate is issued.
15. Termination or Amendment of Plan. The Committee
--------------------------------
may terminate or amend the Plan in any respect at any time;
however, without the approval of the Company's stockholders
obtained within twelve (12) months before or after the Committee
adopts a resolution authorizing any such termination or
amendment, the Committee may not: (a) materially modify the
requirements as to eligibility to participate in the Plan; (b)
materially increase the benefits under the Plan; (c) extend the
period during which Options under the Plan may be granted; (d)
modify the Plan or the terms of the Options in such a way that
members of the Committee lose their status as "disinterested
persons" under Rule 16b-3 of the Exchange Act; or (e) modify the
provisions of Section 6.02 regarding the exercise price at which
shares may be offered pursuant to ISOs (except by adjustment
pursuant to Section 13). Except as otherwise provided in this
Section 15, in no event may action of the Committee or
stockholders alter or impair the rights of an Optionee, without
his consent, under any Option previously granted to him.
16. Notice to Company of Disqualifying Disposition.
----------------------------------------------
By accepting an ISO granted under the Plan, each Optionee agrees
to notify the Company in writing immediately after making a
Disqualifying Disposition, as described in Sections 421, 422 and
424 of the Code and regulations thereunder, of any stock acquired
under the Plan (or stock received in a transaction described in
Section 424(b) or 424(c)(1)(B) of the Code, relating to
distributions of stock with respect to stock acquired under the
Plan and certain tax-free exchanges of stock acquired under the
Plan for other stock or securities). A Disqualifying Disposition
(with certain exceptions) is generally any disposition within two
(2) years of the date the ISO was granted or within one (1) year
of the date the ISO was exercised, whichever period ends later.
With respect to stock held jointly with right of survivorship, a
termination of such joint tenancy may constitute a Disqualifying
Disposition. This Section 16 shall be made binding upon the
Optionee and upon any transferee of stock described in this
Section to whom Section 424(c)(4)(B) of the Code applies.
17. Withholding of Additional Income Taxes. Upon the
--------------------------------------
exercise of a Non-Qualified Option or the making of a
Disqualifying Disposition (as defined in Section 16), the Company
may withhold taxes in respect of amounts that constitute
compensation includible in gross income, whenever the Company
determines that such withholding is required. The Committee in
its discretion may condition the exercise of an Option on the
Optionee's making satisfactory arrangement for such withholding.
In addition to tax withholding, government regulations may impose
reporting or other obligations on the Company with respect to the
Plan. For example, the Company may be required to send tax
information statements to employees and former employees that
exercise ISOs.
18. Governing Law, Construction. The validity and
---------------------------
construction of the Plan and the agreements evidencing Options
shall be governed by the laws of the State of Delaware, or the
laws of any jurisdiction in which the Company or its successors
in interest may be organized, without giving effect to conflicts
of law. In construing this Plan, the singular shall include the
plural and the masculine gender shall include the feminine and
neuter, unless the context otherwise requires.
CALDERA, INC.
9 1/2 CASIMIR STREET
TORONTO, ONTARIO
CANADA MT5 2P6
July 24, 1998
Dear Stockholder:
You are cordially invited to attend the Special Meeting of
Stockholders (the "Meeting") of Caldera, Inc. (the "Company") to
be held at the offices of International Fidelity Holding Corp.,
4635 McEwen Road, Dallas, Texas, on August 17, 1998 at 10:00
a.m., local time.
At the Meeting you will be asked to consider and vote upon five
proposals which relate to the Company recommencing an active
business. You will be asked to approve a Stock Purchase
Agreement (the "Purchase Agreement") described in the
accompanying Proxy Statement, pursuant to which the Company will
purchase all of the issued and outstanding shares of Common Stock
of International Fidelity Holding Corp., a Texas Insurance
Holding Corporation ("IFHC"), IFHC will become a wholly-owned
subsidiary of the Company, and, through its sole ownership of
IFHC, the Company will control IFHC's insurance subsidiary,
International Surety & Casualty Company, a Texas property and
casualty insurance corporation ("ISCC").
The closing of the Purchase Agreement is conditioned upon
stockholder approval of the four other proposals to be voted upon
at the Meeting: election of directors; two proposals to approve
amendments to the Company's Certificate of Incorporation which
would: (i) change the corporate name to Unistar Financial Service
Corp. and (ii) reduce the number of issued and outstanding shares
of Common Stock through a one-for-fifteen reverse split of the
outstanding shares of Common Stock; and adoption of the 1998
Stock Option Plan.
YOUR VOTE IS IMPORTANT. The Board encourages you to be
represented in person or by proxy at this important Meeting,
regardless of the number of shares you own. Whether or not you
plan to attend the Meeting, please complete, sign, date and
return the enclosed proxy card promptly. This action will not
limit your right to vote in person at the Meeting if you wish to
do so.
Sincerely,
Ronald K. Mann
Secretary
<PAGE>
CALDERA, INC.
9 1/2 CASIMIR STREET
TORONTO, ONTARIO
CANADA MT5 2P6
________________________________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
________________________________________
To the Stockholders of Caldera, Inc.
Notice is hereby given that a Special Meeting of the Stockholders
(together with any adjournments or postponements thereof, the
"Meeting") of Caldera, Inc., a Delaware corporation (the
"Company"), will be held at the offices of International Fidelity
Holding Corp., 4635 McEwen Road, Dallas, Texas on August 17, 1998
at 10:00 a.m., local time, for the following purposes, as more
fully described in the accompanying Proxy Statement:
1. To approve the Stock Purchase Agreement, dated as of
July 7, 1998 (the "Purchase Agreement"), by and among
the Company and Marc A. Sparks, F. Jeffrey Nelson, and
Nicole Clayton Caver, the sole stockholders of
International Fidelity Holding Corp., a Texas Insurance
Holding Corporation ("IFHC"), whereby the Company will
purchase the outstanding shares of IFHC.;
2. To elect nine (9) directors to the Board of Directors;
3. To approve an amendment to the Company's Certificate of
Incorporation (the "Caldera Charter") to change the
corporate name to Unistar Financial Service Corp.;
4. To approve an amendment to the Caldera Charter
authorizing a one-for-fifteen reverse split of the
outstanding shares of the Company's Common Stock, $.01
par value (the "Common Stock");
5. To approve the adoption of the 1998 Stock Option Plan
which would have 1,000,000 shares of Common Stock
reserved for issuance thereunder (on a post
reverse stock split basis); and
6. To transact such other business as may properly come
before the Meeting.
The approval of and closing the Purchase Agreement is subject to
stockholder approval of the other proposals to be considered at
the Meeting.
Stockholders of record of the Common Stock at the close of
business on July 24, 1998, which is the record date for the
Meeting, are entitled to receive notice of and to vote at the
Meeting and at any adjournment thereof. A Proxy and a Proxy
Statement are enclosed.
<PAGE>
Stockholders do not have appraisal or similar rights of
dissenters with respect to any of the matters to be acted upon at
the Meeting.
All stockholders are cordially invited to attend the Meeting in
person. Whether or not you plan to attend the Meeting, please
complete, sign, date and return the enclosed Proxy, which is
solicited by the Board of Directors, to ensure that your shares
are represented at the Meeting. Stockholders who attend the
Meeting may revoke their proxies and vote their shares in person.
By Order of the Board of Directors
Ronald K. Mann
Secretary
Toronto, Canada
July 24, 1998
THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
<PAGE>
TABLE OF CONTENTS
Page No.
--------
MEETING, VOTING AND PROXIES . . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . 1
Voting Securities . . . . . . . . . . . . . . . . . . . 1
Proxy Solicitation . . . . . . . . . . . . . . . . . . . 2
SECURITY OWNERSHIP . . . . . . . . . . . . . . . . . . . . . 2
Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . 2
PROPOSAL NO. 1
APPROVAL OF THE PURCHASE AGREEMENT . . . . . . . . . . . . . 4
Background of and Reasons for the Purchase Agreement . . 4
Terms of the ISCC Acquisition . . . . . . . . . . . . . 4
Reasons for the ISCC Acquisition; Recommendation of the
Board of Directors . . . . . . . . . . . . . . . . . . . 5
Listing of Common Stock . . . . . . . . . . . . . . . . 5
CERTAIN INFORMATION CONCERNING IFHC . . . . . . . . . . . . . 6
PROPOSAL NO. 2
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . 8
Nominees . . . . . . . . . . . . . . . . . . . . . . . . 8
Certain Relationships and Related Transactions . . . . . 11
PROPOSALS NOS. 3-4
CHARTER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . 12
Proposal No. 3 - Change the Corporate Name . . . . . . . 12
Proposal No. 4 - Reduce the Number of Issued and
Outstanding Shares of Common Stock . . . . . . . . . . . 12
PROPOSAL NO. 5
ADOPTION OF THE 1998 STOCK OPTION PLAN . . . . . . . . . . . 13
General . . . . . . . . . . . . . . . . . . . . . . . . 13
Federal Income Tax Aspects . . . . . . . . . . . . . . . 15
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 16
-i-
<PAGE>
CALDERA, INC.
PROXY STATEMENT
FOR A SPECIAL MEETING OF STOCKHOLDERS
August 17, 1998
MEETING, VOTING AND PROXIES
GENERAL
This Proxy Statement is being furnished in connection with
the solicitation of proxies by the Board of Directors of Caldera,
Inc., a Delaware corporation (the "Company"), for use at a
Special Meeting of Stockholders (the "Meeting") and every
adjournment thereof. The Meeting will be held at the place and
time and for the purposes set forth in the accompanying Notice of
Special Meeting to Stockholders.
The primary item to be acted upon at the Meeting is the
approval of a Stock Purchase Agreement, dated as of July 7, 1998
(the "Purchase Agreement"), by and among the Company and the
sole stockholders of International Fidelity Holding Corp., a
Texas corporation ("IFHC"), whereby IFHC will become a wholly-
owned subsidiary of the Company, and the Company will control
IFHC's insurance subsidiary, International Surety & Casualty
Company, a Texas Property & Casualty Insurance Corporation
("ISCC"). Assuming stockholder approval of the Purchase
Agreement, the closing of the Purchase Agreement is conditioned
upon, among other things, stockholder approval of two amendments
(the "Charter Proposals") to the Company's Certificate of
Incorporation, the election of management's slate of directors
and the 1998 Stock Option Plan (the "Option Plan").
This Proxy Statement and the accompanying form of proxy are
first being mailed to stockholders on or about July 24, 1998.
VOTING SECURITIES
Record Date. Only holders of shares of Common Stock, $.01
-----------
par value (the "Common Stock") of the Company, of record at the
close of business on July 24, 1998 (the "Record Date") are
entitled to notice of and to vote at the Meeting. As of the
close of business on the Record Date, 3,345,000 shares of Common
Stock were issued and outstanding and entitled to vote at the
Meeting, and each such share is entitled to one vote. No other
class of voting securities of the Company was outstanding as of
the Record Date.
Voting Rights. The presence, in person or by proxy, of the
-------------
holders of shares representing one-third of the outstanding
shares of Common Stock on the Record Date will constitute a
quorum.
Directors are elected by a plurality of the votes cast.
With regard to the election of directors, votes may be cast in
favor or withheld; votes that are withheld will be excluded
entirely from the vote and will have no effect.
1
<PAGE>
The approval of the two Charter Proposals requires the
approval of a majority of the outstanding shares. The
affirmative vote of a majority of the shares present in person or
represented by proxy at the Meeting and voting on the proposal is
required to approve the Purchase Agreement and the adoption of
the Option Plan. Abstentions will have the effect of a negative
vote on the foregoing proposals.
Shares represented by broker non-votes will be counted for
purposes of determining whether there is a quorum at the Meeting.
Under applicable Delaware law, broker non-votes will have no
effect on the outcome of the election of directors or proposals
that require a majority of the shares present in person or by
proxy and entitled to vote on the matter involved, however they
would have the effect of a negative vote on proposals that
require a majority of the outstanding shares, such as approval of
the Charter Proposals.
Proxies. All shares of Common Stock which are represented
-------
by a properly executed proxy received prior to or at the Meeting
will, unless such proxies have been revoked, be voted in
accordance with the instructions indicated in such proxies. If
no instructions are indicated on a properly executed proxy, such
shares will be voted as follows FOR the election of the
management slate of directors and for each of the other proposals
listed on the enclosed proxy card. A stockholder may revoke a
proxy at any time prior to the Meeting by delivering to the
Secretary of the Company a notice of revocation bearing a later
date, by a duly executed proxy bearing a later date or by
attending such meeting and voting in person.
The Meeting may be adjourned to another date and/or place
for any proper purpose (including, without limitations, for the
purpose of soliciting additional proxies).
Board of Directors Recommendations. The Company's Board of
----------------------------------
Directors unanimously adopted resolutions approving the Purchase
Agreement, the Charter Proposals and the Option Plan, and
unanimously recommends that stockholders vote FOR those proposals
and the management slate of directors to be considered at the
Meeting.
PROXY SOLICITATION
In addition to soliciting proxies by mail, proxies may also
be solicited by the Company and its directors and officers (who
will receive no additional compensation therefor in addition to
their regular salaries and fees) by telephone, telegram,
facsimile transmission and other electronic communication methods
or in person. All expenses of soliciting proxies from
stockholders will be borne by IFHC, as provided for in the
Purchase Agreement.
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of the Record Date the
beneficial ownership of (i) each person (including any "group" as
that term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended) who is known by the Company to be the
beneficial owner of more than 5% of the Common Stock (ii) by each
nominee for director and (iii) by all officers and directors as a
group:
2
<PAGE>
Beneficial Owner
Name and Address of Holder Nature (1) Amount % of Class
----------------------------------------------------------------
U.S. Fidelity Holding Corp Direct 800,000 23.9%
c/o Marc A. Sparks & Jeffrey
Nelson
4635 McEwen Road
Dallas, Texas 75244
Julius Karosen and Hannah Direct 400,000 12.0%
Karosen Trust
10108 Empyrean Way, #204
Los Angeles, California 90067
Robert K. Bench Direct 215,000 6.4%
1889 North 1500 East Indirect(3) 73,000 2.2%
Provo, Utah 84604
Beneficial Owner
Name and Address of Nominee Nature (1) Amount % of Class
----------------------------------------------------------------
Marc A. Sparks (2) Indirect 800,000 23.9%
F. Jeffrey Nelson (2) Indirect 800,000 23.9%
Morris Belzberg -0- -0- 0
Brent Brown -0- -0- 0
Paul Caver (4) -0- -0- 0
Douglas Gerrard -0- -0- 0
James G. Leach -0- -0- 0
Patrick Rastiello -0- -0- 0
Kerry A. Sebree -0- -0- 0
All Officers and Directors -0- -0- 0
as a Group (3 persons)
(1) All shares owned directly are owned beneficially and of
record.
(2) Mr. Nelson and Mr. Sparks are owners of U.S. Fidelity
Holding Corp., and may be deemed to indirectly own the
Company's shares directly owned by U.S. Fidelity Holding
Corp. Excludes shares Mr. Sparks and Mr. Nelson would
receive as stockholders of IFHC upon the closing of the
Purchase Agreement.
(3) Consists of 23,000 shares owned of record by Mr. Bench's
wife, Mary Bench, and 50,000 shares owned of record by
Little Hollow Farms, a family partnership.
(4) Excludes shares his wife would receive as a stockholder of
IFHC upon the closing of the Purchase Agreement. [He
disclaims beneficial ownership of any shares of IFHC owned
by his wife.]
3
<PAGE>
PROPOSAL NO. 1
APPROVAL OF THE PURCHASE AGREEMENT
The description of the Purchase Agreement set forth in this
Section does not purport to be complete and is qualified in its
entirety by reference to the Purchase Agreement. A stockholder
may obtain a copy of the Purchase Agreement upon written request
to the Company.
BACKGROUND OF AND REASONS FOR THE PURCHASE AGREEMENT
The Company is a "shell" corporation with no active business
activities other than searching for and evaluating potential
business opportunities and acquisitions. The acquisition of ISCC
(the "ISCC Acquisition") by means of acquiring its parent
company, IFHC, through the Purchase Agreement, is the first step
for the Company, under its proposed new name, Unistar Financial
Service Corp., to become a financial service holding company of
an integrated network of insurance providers and insurance-
related service providers.
The ISCC Acquisition will give the Company a property and
casualty insurance business which will provide primarily
reinsurance of automobile insurance products written or
administered through U.S. Fidelity Holding Corp.
TERMS OF THE ISCC ACQUISITION
The ISCC Acquisition will take place immediately after
approval by the stockholders, and the fulfillment or waiver of
other conditions to the closing (the "Closing Date"). Upon the
Closing Date, the Company will issue an aggregate of 19,777,000
shares of its Common Stock for the IFHC Shares to Marc A. Sparks,
F. Jeffrey Nelson and Nicole Clayton Caver, who are the sole
stockholders of IFHC.
Assuming approval of the Purchase Agreement, the Charter
Proposals and the other matters at the Meeting, on the Closing
Date, the capitalization of the Company, would be as follows:
Outstanding
-----------
Preferred Stock, $.01 par value,
5,000,000 shares authorized -0-
Common Stock, $.01 par value,
50,000,000 shares authorized 20,000,000(1)(2)
--------------------------
(1) Consists of: (a) 223,000 shares held by those persons who
were stockholders immediately prior to the Closing Date and
giving effect to the reverse-stock split; and (b) 19,777,000
shares issued pursuant to the Purchase Agreement to the
prior holders of IFHC Common Stock.
(2) Excludes 1,000,000 shares reserved for issuance under the
Option Plan (assuming stockholder approval).
4
<PAGE>
One condition to the closing of the Purchase Agreement is
the consent of the Texas Insurance Commissioner because ISCC, the
subsidiary of IFHC, is regulated and licensed as a property and
casualty insurance company in the state of Texas.
REASONS FOR THE ISCC ACQUISITION; RECOMMENDATION OF THE BOARD OF
DIRECTORS
In July 1998, the Company's Board of Directors authorized
the Purchase Agreement and the Charter Proposals and recommended
their approval by stockholders for the following reasons:
(i) The necessity for the Company to find a viable
business opportunity which could bring in
recurring revenues and provide working capital;\
(ii) The backgrounds of IFHC management; and
(iii) The industry growth and the plans of IFHC
management for the growth of the insurance and
related financial service businesses.
Neither the Company nor IFHC has retained separate financial
advisors, nor has either sought a fairness opinion from a
financial advisor with respect to the terms of the ISCC
Acquisition. Two principals of IFHC are the sole stockholders of
U.S. Fidelity Holding Corp., the owner of 23.9% of the
outstanding common stock of the Company. They also designated
Scott Griffith and Michael Nixon to serve as directors of the
Company.
Accompanying this Proxy Statement are the Company's Form 10-
KSB for the year ended December 31, 1997 and Form 10-QSB for the
fiscal quarter ended March 31, 1998 which contain current
financial information on the Company.
INTERNATIONAL SURETY & CASUALTY COMPANY STATUTORY FINANCIAL
HIGHLIGHTS AS OF MARCH 31, 1998
Total Assets $5,168,568.
Total Policyholder Surplus 2,752,954.
Total Cash on Hand 1,301,755.
Total Liabilities 1,687,357.
Unearned Premiums 1,352,081.
Net Reinsurance Premiums Written 1,270,381.
The Purchase Agreement provides that IFHC will pay all fees
and expenses incurred by both parties in connection with the
Purchase Agreement and the Meeting.
LISTING OF COMMON STOCK
There has been no public trading market for the Common Stock
for over seven years. After the Closing Date the Company will
use its reasonable best efforts to cause all outstanding shares
of Common Stock to be listed for trading on the Chicago Stock
Exchange (the "CSE"), American Stock Exchange (the "ASE") or
Nasdaq Small-Cap System if the Company would meet the listing
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requirements of such exchange or System. There are no assurances
that the Company will meet the qualifications of and/or be
accepted by the CSE, ASE or Nasdaq. In the event that the Common
Stock is not accepted for trading by the CSE, ASE or Nasdaq, the
Company would seek to have the Common Stock included on the OTC
Bulletin Board. No estimate is given as to the price range for
the Common Stock should it become publicly traded.
CERTAIN INFORMATION CONCERNING IFHC
BUSINESS OF IFHC
Salient Facts
. Organized under the laws of the State of Texas
. Incorporated: November 5, 1982
. Statutory Home Office: 4635 McEwen Road,
Dallas, Texas 75244
. Domiciled in: Texas
. NAIC Company Code: 43443
. Regulated by: Texas Department of Insurance, Austin, Texas
Overview
INTERNATIONAL FIDELITY HOLDING CORPORATION is a Texas-based
insurance holding corporation founded, owned and operated by Marc
A. Sparks, F. Jeffrey Nelson and Nicole Clayton Caver. IFHC
consists of a Texas-licensed and admitted property and casualty
insurance company known as IFHC, to assume insurance risk and
facilitate the significant auto insurance industry.
The mission of IFHC is to pursue excellence and to forge a solid
publicly trading financial service holding corporation., To
deliver the very best results to our shareholders, agents and
customers, and to maintain the highest standards, while
empowering each team member to grow as partners in our success.
ISCC primarily underwrites and reinsures a portfolio of
nonstandard auto insurance generated through an affiliated
company known as U.S. Fidelity Holding Corp. ("U.S. Fidelity")
U.S. Fidelity and its subsidiaries are engaged in producing
and underwriting non-standard auto insurance products, generated
through its captive agencies and through its carefully appointed
agency force. To date, the underwriting of auto insurance
policies has been limited to the state of Texas, where attractive
risks are possible due to the flexible underwriting guidelines
dictated and regulated by the Texas Department of Insurance.
ISCC is currently planning to expand into the states of
California and Florida which, along with Texas, are some of the
most lucrative non-standard auto insurance markets in North
America.
Through an affiliated transaction, IFHC's management (Marc
A. Sparks and F. Jeffrey Nelson) also controls U.S. Fidelity.
U.S. Fidelity's ownership of and significant participation on
virtually every aspect of the insurance distribution pipeline
(reinsurance, wholesale and retail distribution, premium
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financing, claims, auto collision repair and auto appraisal)
enables it to retain the majority of the overall insurance
revenue stream. This vertical integration, combined with
experienced staff, modern facilities, and state-of-the-art
software and management information systems, provide ISCC and
U.S. Fidelity with a solid infrastructure that enables ISCC and
U.S. Fidelity to accommodate the objectives of achieving maximum
return on insurance premiums. ISCC currently receives a 10%
retrocession of this reinsurance revenue stream from the panel of
A and A+ rated (A.M. Best) reinsurer that support U.S. Fidelity's
auto insurance products. The 1998/1999 Reinsurance panel
includes:
A.M. Best Rating
1. Kemper Reinsurance Company A
2. Trenwick America Reinsurance Corporation A+
3. Odyssey Reinsurance Corporation (formerly A-
Prudential)
4. Underwriters Reinsurance A+
5. Everest Reinsurance Company A+
6. Signet Star Reinsurance Company A
7. American Re-Insurance Company A
8. St. Paul Re A+
9. Folksamerica Reinsurance Company A
10. SAFR Reinsurance Corporation A-
11. Sidney Reinsurance Corporation A-
U.S. Fidelity's wholly-owned subsidiaries and affiliates
include Great Southern General Agency, First Choice Underwriters,
Advanced Underwriters, and Peak Underwriters-managing general
agencies, Eagle Premium Finance Company, Eagle Claims Corp. - an
auto insurance claims company, an auto appraisal firm, a
multitude of retail auto insurance agencies, and auto collision
repair centers.
ISCC was originally organized for the purposes of
underwriting credit property insurance to complement credit life
and credit accident and health insurance written by its former
parent. ISCC has not written or reinsured credit property
insurance since December 1993. It reinsured 100% of its
remaining liabilities in 1993 and remained dormant for all of
1994. ISCC remained inactive until November 1995, at which time
it commenced writing contract surety bonds through an affiliated
managing general agency, Great Southern General Agency (owned by
U.S. Fidelity).
ISCC is under the direction of its Chairman, Marc A. Sparks,
and its President, F. Jeffrey Nelson.
PROPERTIES. ISCC currently operates its business out of a shared
30,000 square foot facility with U.S. Fidelity, National Auto
Appraisal Services, and Auto Insurance Agencies. ISCC leases a
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portion of the property from 4635 Partners Ltd. (also an
affiliate of Marc Sparks and Jeff Nelson) for an aggregate of
$12,000 per year.
EMPLOYEES. As of July 1998, ISCC had a staff of five full time
employees. The affiliated insurance related companies have a
staff of approximately 80 full-time employees.
DIRECTORS AND OFFICERS
The following table lists the names, ages, positions, and
periods of service with ISCC of its present directors and
executive officers:
HAS SERVED
AS DIRECTOR
NAME AGE TITLE SINCE
--------------------------------------------------------------
Marc A. Sparks 41 Chairman, CEO, 3/19/96
Sec/Treas
F. Jeffrey Nelson 42 President and 4/25/83
Director
Nicole C. Caver 25 Vice President 11/3/97
Patricia C. Hayes 33 Vice President 3/19/96
Kerry A. Sebree 35 Vice President 11/3/97
Sammy D. Nelson 65 Vice President 4/25/83
Margaret Jo Nelson 63 Vice President 4/25/83
PROPOSAL NO. 2
ELECTION OF DIRECTORS
As of the Meeting, the number of directors will be increased
to seven persons, and the seven persons listed below, who are
designees of IFHC, will be management's nominees. The Board of
Directors presently consists of Scott Griffith, Ronald Mann and
Michael Nixon, none of whom is a nominee for re-election. The
Company has no reason to believe that any of the nominees will be
unable to serve as a director. However, in the event that any of
the nominees should become unable to serve as a director, the
persons named in the proxy have advised that they will vote for
the election of such person or persons as shall be designated by
management of IFHC.
NOMINEES
The following sets forth information about each nominee
for election to the Board of Directors.
MARC SPARKS (age 41), has founded, owned and operated
several insurance related corporations. Mr. Sparks has had
extensive experience in the insurance, surety bonding, premium
finance, and investment banking fields. For the last several
years, Mr. Sparks has owned and managed property and casualty
insurance companies, multi-location insurance agencies, a
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nationally recognized surety bonding agency, and a managing
general agency's for surety and insurance. Mr. Sparks is a
founder of International Fidelity Holding Corp., U.S. Fidelity
Holding Corp., International Surety & Casualty Company, Great
Southern General Agency, Inc., First Choice Underwriters, Inc.,
Peak Underwriters, Inc., Advanced Underwriters, Inc., Eagle
Underwriters, Inc., Eagle Premium Finance company, and Eagle
Claims Corp. Mr. Sparks is the Chairman and Chief Executive
Officer of IFHC. He is the Chief Executive Officer and
Secretary/Treasurer of ISCC and the President of Great Southern
General Agency, Inc., Eagle Premium Finance Company, Eagle Claims
Corp and Advanced Underwriters. He is licensed by the Texas
Department of Insurance as a Managing General Agent (MGA), Local
Recording Agent (LRA Broker), Surplus Lines Agent, and he holds a
Texas Premium Finance license. Mr. Sparks is certified (Form A
approved) by the Texas Department of Insurance to own and operate
Texas property and casualty insurance companies.
F. JEFFREY NELSON (age 42), has been in the insurance
business since 1978. He has been involved in all aspects of life
insurance and property and casualty insurance companies.
Specialty lines for which Mr. Nelson has extensive experience
include reinsurance, credit insurance, accident and health
insurance, property insurance, collateral protection insurance,
livestock mortality and construction surety bonds. Mr. Nelson is
a co-founder of International Fidelity Holding Corp. and U.S.
Fidelity Holding Corp. Currently, Mr. Nelson is President of
IFHC and U.S. Fidelity. He is responsible for overseeing day-to-
day activities of each holding company and subsidiary for which
he is an officer. Mr. Nelson's emphasis is on the financial
performance and management of profit and loss and balance sheet
activities. A substantial amount of his time is spent in
reinsurance negotiations and management to achieve the greatest
financial protection for the company and its policyholders. Mr.
Nelson also directs and participates in corporate management
activities such as legal regulatory matters, general litigation
activities, claim settlements and management of corporate
finance. He is the liaison to industry associations and oversees
cash flow management.
MORRIS BELZBERG (age 68), has been Chairman Emeritus of
Budget Rent a Car Corporation since 1991. During his 35-year
tenure at Budget, Mr. Belzberg held the titles of Chief Executive
Officer, Chairman of the Board, and Chairman of the Executive
Committee. Although semi-retired, Mr. Belzberg continues to
assist Budget with its market strength and budgetary goals.
BRENT BROWN (age 49), is a Director of the legal firm of
Abernathy, Roeder, Boyd & Joplin since 1998 and from 1988 to 1998
he was a partner with the law firm of Bracewell & Patterson. Mr.
Brown is admitted to the Bar in the states of Texas and Missouri,
and specializes in the areas of corporate and insurance law and
litigation.
J. PAUL CAVER (age 30), has been a Vice President of IFHC
and ISCC since 1998. He previously practiced corporate law with
Haynes and Boone, LLP, specializing in securities offerings and
mergers and acquisitions. Mr. Caver has also practiced
accounting in both industry and Big Six positions. He is
licensed to practice law and public accounting in the State of
Texas. He is the husband of Nicole Caver, a shareholder of IFHC.
DOUGLAS GERRARD (age 38), is the president, sole director
and shareholder of Deere Park Capital Management, an investment
management firm organized in 1996 to provide asset management
services principally in equity securities investments. Mr.
Gerrard began his career in 1984 at Harris-Field, a proprietary
options trading firm in Chicago. In 1986, he moved to Discount
Corp. of New York where he was appointed head currency trader,
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responsible for pricing and risk management of the firm's entire
portfolio. In 1988, he joined Cooper-Neff and Associates and
worked in their quantitative option risk management department.
In late 1989, he formed Checker Trading, a joint venture with
Continental Bank and Trust Company of Chicago and First Options
of Chicago (a division of Spear, Leeds and Kellogg) where he
served as managing partner and risk manager. In 1991, he formed
another joint venture with Rosenthal Collins Group to pursue his
proprietary trading strategies in the futures, futures options
and equity markets. During his years of involvement in the
futures and futures options industry, he has held roles at
Chicago Mercantile Exchange, serving on the Exchange's Board of
Directors, as Foreign Currency Chairman, Arbitration Chairman,
and on several long-term strategic planning committees.
JAMES G. LEACH (age 50), is currently General Counsel and
Vice Chairman of U.S. Fidelity Holding Corp. He was previously
Senior Vice President and Counsel for the American Safety
Casualty Insurance Group and its subsidiary insurance companies
and service companies. He was with American Safety from 1989 to
1998 and served that company's parent as General Counsel and
reinsurance intermediary. He holds degrees in Physics,
Economics, and M.B.A. in Finance and Accounting, and M.I. in
Insurance, and a J.D. He holds a CPCU and CLU designation, and
is a licensed Insurance Agent and Broker in several states. Mr.
Leach is a General Securities Principal with series 7, 63 and 24
licenses.
PATRICK RASTIELLO (age 44) is currently Vice President at
Aon Re Worldwide and is responsible for production and marketing
of all lines of insurance and reinsurance business. His
experience in the reinsurance and insurance fields is extensive,
as Vice President of American International Underwriters - London
(for American International Group) from 1978 to 1985, as Senior
Vice President in charge of all worldwide broker treaty
underwriting operations for US International Reinsurance Company
from 1985 - 1989, as Vice President of Treaty Underwriting with
Folksamerica Reinsurance Company from 1989 - 1994, and as a Vice
President of Minet Re Intermediaries, which was acquired by Aon
Corporation in 1997.
KERRY SEBREE (age 35), has been a Vice President of IFHC and
ISCC since 1997. He has a background in insurance operations,
sales and marketing, as well as an understanding of all facets of
managing a business enterprise. He has had substantial
experience in the auto insurance industry as an owner of a multi-
location retail auto insurance agency and through his extensive
involvement in premium finance business development. Mr.
Sebree's primary responsibility with IFHC and U.S. Fidelity is to
manage and balance underwriting, processing and claims as well as
to identify and evaluate quality acquisition candidates and
formulate and negotiate company acquisitions.
Directors are elected by stockholders at each annual meeting
or, in the case of a vacancy, are appointed by the directors then
in office, to serve until the next annual meeting or until their
successors are elected and qualified.
It is intended that if the nominees are elected directors,
they would establish an Executive Committee, an Audit Committee
and a Compensation/Option Committee. The Executive Committee
would exercise all the powers and authority of the Board of
Directors in the management and affairs of the Company between
meetings of the Company's Board, to the extent permitted by law.
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The Audit Committee would review with the Company's
independent accountants the scope and timing of the accountants'
audit services and any other services they are asked to perform,
their report on the Company's financial statements following
completion of their audit and the Company's policies and
procedures with respect to internal accounting and financial
controls. In addition, the Audit Committee would review the
independence of the independent public accountants and will make
annual recommendations to the Board of Directors for the
appointment of independent public accountants for the ensuing
year.
The Compensation/Option Committee would review and recommend
to the Board of Directors the compensation and benefits of all
officers of the Company, would review general policy matters
relating to compensation and benefits of employees of the
Company, and would administer the Option Plan, assuming
stockholder approval thereof.
Assuming election of the management slate of directors and
the approval of the other proposals at the Meeting, it is
intended that the new Board of Directors would elect Mr. Sparks
as Chairman, Chief Executive Officer, Secretary and Treasurer;
Mr. Nelson as President, Vice Chairman and Chief Financial
Officer; Mr. Gerrard as Vice Chairman; Mr. Leach as Vice
Chairman; and Mr. Sebree as Chief Operating Officer. The
Company's officers will be elected by the new Board of Directors
immediately following the closing of the Purchase Agreement.
It is anticipated that each outside Director will be paid a
nominal Director's Fee of $1,000 per Director's meeting along
with a reimbursement of travel and accommodation expenses. See
proposal No.5 in this Proxy Statement for information regarding a
proposed Option Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Marc A. Sparks and F. Jeffrey Nelson are the sole
shareholders of U.S. Fidelity, the principal stockholder of the
Company, and also two of the three shareholders of IFHC. They
plan to cause U.S. Fidelity to vote its 800,000 shares of the
Company's Common Stock in favor of the proposals at the Meeting.
In addition to IFHC and ISCC, Messrs. Sparks and Nelson are
shareholders, managers and or directly affiliated with the
following insurance related companies:
1. U.S. Fidelity Holding Corp. An Insurance Holding
2. Great Southern General Managing General Agency
3. First Choice Underwriters Managing General Agency
4. Peak Underwriters Managing General Agency
5. Advanced Underwriters Managing General Agency
6. Eagle Claims Corp. A Claims Management
7. Eagle Premium Finance Company A Premium Finance
8. National Automobile Appraisal An Auto Appraisal
9. U.S. Fidelity Re A Reinsurance Company
10. Unistar Auto Insurance Agency, A Retail Auto Insurance
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11. Talon Financial Services Ltd. A Reinsurance Brokerage
12. 4635 Partners Ltd. A 30,000 sq. ft. Office
13. Mirror Finishes & Collision of A Collision Repair
14. Estate Paint & Body of Texas, A Collision Repair
15. U.S. Fidelity Insurance A "Grandfathered" MGA
It is intended that the Company, after closing the Purchase
Agreement, will engage in business transactions with the above-
listed related companies. Such transactions would be on terms
similar to those the Company would have with unrelated entities.
PROPOSALS NOS. 3-4
CHARTER PROPOSALS
PROPOSAL NO. 3 - CHANGE THE CORPORATE NAME.
The Board of Directors has decided, at the recommendation of
IFHC and subject to stockholder approval, to amend the Caldera
Charter to change the corporate name from Caldera, Inc. to
Unistar Financial Service Corp. The Board believes that the
proposed name would reflect the broad range of interrelated
financial undertakings to be conducted after the acquisition of
IFHC and ISCC, and certain transactions which may subsequently be
effected.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT
TO THE CALDERA CHARTER TO CHANGE THE CORPORATE NAME OF CALDERA TO
UNISTAR FINANCIAL SERVICE CORP.
PROPOSAL NO. 4 - REDUCE THE NUMBER OF ISSUED AND OUTSTANDING
SHARES OF COMMON STOCK.
The purpose of Proposal No. 4 is to reduce the number of
issued and outstanding shares of Common Stock from 3,334,000 to
223,000 shares through a one-for-fifteen reverse split of the
issued and outstanding shares of Common Stock. As of June 30,
1998, there were 3,345,000 shares of Common Stock outstanding.
The Board of Directors believes that the smaller
capitalization will facilitate the Purchase Agreement as the
consideration for the Purchase Agreement is shares of Common
Stock. The reduction in the present number of shares is to
reflect the relative valuation to be received by the
stockholders, on one hand, and the IFHC stockholders, on the
other hand, upon the acquisition of the IFHC business and
operations. Another factor was the aggregate number of shares of
Common Stock to be outstanding after the Closing Date (see
"Proposal No. 1 - Approval of The Purchase Agreement Terms of
the ISCC Acquisition") and the possible effect of such number of
shares on a possible trading price for the Common Stock and
meeting the requirements of the Chicago Stock Exchange, American
Stock Exchange or the Nasdaq System for a future listing of the
Common Stock thereon. Other factors considered in determining
the number of shares to be outstanding were the effect on the
ability to raise equity capital and on the issuance for any
future acquisitions.
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Promptly after the effective date of the Charter Amendments,
the Company will appoint American Stock Transfer & Trust Company
as exchange agent (the "Exchange Agent"), which will mail to each
stockholder of record of the Company's Common Stock immediately
prior to the Closing Date a form Letter of Transmittal and
instructions advising of the terms and procedures of exchanging
their current stock certificates for post-split shares of Common
Stock in the name of Unistar Financial Service Corp. No
certificates should be surrendered for exchange until after the
Closing Date and then only pursuant to the Letter of Transmittal
and instructions thereto. Certificates representing post-split
shares of Common Stock shall be delivered as promptly as
practicable after proper delivery of the present certificates and
letters of transmittal to the Exchange Agent.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT
TO THE CALDERA CHARTER TO REDUCE THE NUMBER OF ISSUED AND
OUTSTANDING SHARES OF COMMON STOCK.
PROPOSAL NO. 5
ADOPTION OF THE 1998 STOCK OPTION PLAN
GENERAL
The Board of Directors has determined that the Option Plan
be adopted to provide incentives to directors, officers,
employees and other persons who perform services for or on behalf
of the Company and its subsidiaries by providing them with
opportunities to purchase Common Stock pursuant to options which
qualify as "incentive stock options" ("ISO") under Section 422(b)
of the Internal Revenue Code of 1986, as amended (the "Code"), or
which do not qualify as ISOs ("Non-Qualified Option"). Both the
ISOs and Non-Qualified Options are referred to hereinafter
individually as an "Option" and collectively as "Options."
The essential features of the Option Plan are outlined
below:
Administration of the Option Plan. The Option Plan shall be
---------------------------------
administered by the Compensation and Option Committee of the
Board of Directors (the "Committee") consisting of three members
of the Board of Directors. Subject to the terms of the Option
Plan, the Committee shall have the authority to (i) determine the
employees of the Company to whom stock options may be granted;
(ii) determine the person and the number of shares which may be
issued under each Option; (iii) determine the time or times at
which Options may be granted; (iv) determine the exercise price
of shares subject to each Option; (v) determine the time or times
when each Option shall become exercisable and the duration of the
exercise period; (vi) determine whether restrictions are to be
imposed on shares subject to Options and the nature of such
restrictions, if any, and (vi) interpret the Option Plan and
prescribe and rescind rules and regulations relating to it. If
the Committee determines to issue a Non-Qualified Option, it
shall take whatever actions it deems necessary, under Section 422
of the Code and the regulations promulgated thereunder, to ensure
that such Option is not treated as an ISO. The interpretation
and construction by the Committee of any provisions of the Option
Plan or of any Option granted under it shall be final.
Stock. The stock delivered under the Option Plan shall be
-----
shares of Common Stock of the Company, either authorized and
unissued, treasury stock or shares purchased on the open market.
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An aggregate of 1,000,000 shares of Common Stock may be issued
pursuant to the Option Plan, subject to any adjustment as
provided under the Option Plan. If an Option granted under the
Option Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, the unpurchased shares subject
to such Option shall again be available for grants of Options
under the Option Plan.
Eligible Employees and Others. ISOs and Non-Qualified
-----------------------------
Options may be granted to individuals who are employees of the
Company and its subsidiaries, including officers and directors
who are also employees at the time the Option is granted, and
Non-Qualified Options may be granted to any other persons who
perform services for or on behalf of the Company and its
subsidiaries, affiliates or any entity in which the Company has
an interest, or who are deemed by the Committee to be in a
position to perform such services in the future. Non-Qualified
Options would be granted to Non-Employee Directors.
Term of Option Plan: Granting of Options. The Option Plan
----------------------------------------
will terminate on the day immediately preceding the tenth
anniversary of its adoption, except as to Options outstanding on
that date and subject to earlier termination as provided under
the Option Plan. Options may be granted under the Option Plan at
any time during the term of the Option Plan.
Exercise Price. Price for Non-Qualified Options. The
--------------
exercise price per share for each Non-Qualified Option granted
under the Option Plan shall not be less than 75% of the fair
market value of the Common Stock on the date of grant of the
Option, and in no event shall be less than the minimum legal
consideration required therefor under the laws of the State of
Delaware or the laws of any jurisdiction in which the Company or
its successors in interest may be organized.
Price for ISOs. The exercise price per share for each ISO
granted under the Option Plan shall not be less than (i) the fair
market value per share of Common Stock on the date of such grant
and (ii) one hundred ten percent (110%) of the fair market value
per share of Common Stock on the date of grant in the case of an
ISO to be granted to an employee owning more than ten percent
(10%) of the total combined voting power of all classes of stock
of the Company or any subsidiary (a "10% Employee").
Termination of Employment. If an Optionee ceases his
-------------------------
employment with, or service by, the Company and all subsidiaries
other than by reason of death or disability or by the Company or
any subsidiary for cause, no further unvested installments of his
Options shall become exercisable, and his Options shall terminate
after the passage of one (1) year from the date of termination of
his employment or service (or three (3) months as to ISOs), but
in no event later than on their specified expiration dates,
during which period he shall have the right to exercise for such
other periods as determined by the Committee at the time of
grant. Options held by an Optionee whose termination of
employment or service is for cause shall terminate upon such
termination.
Restrictions on Options. Each Option granted under the
-----------------------
Option Plan will be for a term, and exercisable only in
accordance with option agreements approved by the Committee.
The Option Plan contains provisions which authorize the
Committee, in the event of a sale or merger of all or
substantially all of the Company's assets, or a merger or
consolidation in which the Company is not the surviving
corporation, to take certain action in its discretion. In the
event of such a transaction the Committee may (i) substitute on
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an equitable basis for the shares then subject to such option the
consideration payable with respect to the outstanding shares of
Common Stock in connection with the acquisition; (ii) accelerate
the exercisability of any option to permit its exercise in full
during such period as the Committee may prescribe; or (iii)
terminate all options in exchange for a cash payment equal to the
excess of the fair market value of shares subject to such options
(to the extent then exercisable) over the exercise price thereof.
Under the terms of the Option Plan, if the aggregate fair
market value (determined at the time the ISO is granted) of
Common Stock, exercisable under an ISO for the first time in any
calendar year, exceeds $100,000, such excess amount of stock
shall be deemed to have been granted as a Non-Qualified Option,
and not as an ISO.
The Option Plan provides that shares of Common Stock
acquired upon exercise of options will be paid for (i) in cash or
by check or, at the discretion of the Committee, (ii) through the
delivery of shares of Common Stock with a market value equal to
the option exercise price or (iii) by any combination of (i) and
(ii) above. The ability to pay the exercise price in shares of
Common Stock would, if permitted by the Committee, enable an
optionee to engage in a series of successive stock for stock
exercises of an option (sometimes referred to as "pyramiding")
and thereby fully exercise an option with little or no cash
investment by the optionee.
Assignability. No Option shall be assignable or
-------------
transferable by the Optionee except (i) by will or by the laws of
descent and distribution or (ii) with respect to Non-Qualified
Stock Options, to a spouse or lineal descendant or lineal
ascendant of the Optionee, and are exercisable during the
lifetime of the Optionee only by the Optionee or by the
Optionee's guardian or legal representative or permitted
assignee.
Termination or Amendment of the Option Plan. The Board of
-------------------------------------------
Directors may terminate or amend the Option Plan in any respect
at any time; however, without the approval of the Company's
stockholders obtained within twelve (12) months before or after
the Board of Directors adopts a resolution authorizing any such
termination or amendment, the Board of Directors may not so
terminate or amend the Option Plan if prior stockholder approval
is then required by Section 16(b) of the Exchange Act, applicable
Delaware law or tax law, or the rules of any applicable national
securities exchange or national stock quotation system on which
the Common Stock may then be listed or traded.
FEDERAL INCOME TAX ASPECTS.
The following is a brief summary of the federal income tax
consequences of Options under the Option Plan based upon the
federal income tax laws in effect on the date hereof. This
summary is not intended to be exhaustive and does not describe
state or local tax consequences.
INCENTIVE STOCK OPTIONS. No taxable income is realized by
the Optionee upon the grant or exercise of an ISO. If an
Optionee does not sell the Common Stock received upon the
exercise of an ISO ("ISO Shares") until the later of (a) two
years from the date of grant and (b) within one year from the
date of exercise, when the shares are sold any gain (loss)
realized will be long-term capital gain (loss). In such
circumstances, no deduction will be allowed to the Company for
federal income tax purposes.
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If ISO Shares are disposed of prior to the expiration of the
holding periods described above, the Optionee generally will
realize ordinary income at that time equal to the excess, if any,
of the fair market value of the shares at exercise (or, if less,
the amount realized on the disposition of the shares) over the
price paid for such ISO Shares. The Company will be entitled to
deduct any such recognized amount. Any further gain or loss
realized by the Optionee will be taxed as short-term or long-term
capital gain or loss. Subject to certain exceptions for
disability or death, if an ISO is exercised more than three
months following the termination of the Optionee's employment,
the Option will generally be taxed as a Non-Qualified Option.
Non-Qualified Options. No income is realized by the
Optionee at the time a Non-Qualified Option is granted.
Generally upon exercise of Non-Qualified Option, the Optionee's
will realize ordinary income in an amount equal to the difference
between the price paid for the shares and the fair market value
of the shares on the date of exercise. The Company will be
entitled to a tax deduction in the same amount. Any appreciation
(or depreciation) after date of exercise will be either short-
term or long-term capital gain or loss, depending upon the length
of time that the Optionees have held the shares.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE ADOPTION
OF THE 1998 STOCK OPTION PLAN.
OTHER MATTERS
The Board of Directors does not know, as of the date of
mailing of this Proxy Statement, of any other business to be
brought before the Meeting. The enclosed proxy card authorizes
the voting of shares represented by the proxy on all other
matters that may properly come before the Meeting, and any
adjournment or adjournments thereof. If any such other matters
should come before the Meeting, it is the intention of the proxy
holders to take such action in connection therewith as shall be
in accordance with their best judgment.
August 17, 1998
<PAGE>
PROXY
CALDERA, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Ronald K. Mann and Marc
A. Sparks as Proxies, each with the power to appoint his
substitute, and hereby authorizes them, and each of them, to
represent and vote, as designated below, all the shares of Common
Stock of Caldera, Inc. (the "Company") which the undersigned is
entitled to vote at the Special Meeting of Stockholders to be
held on August 17, 1998, and any adjournments thereof, with all
the powers the undersigned would possess if personally present,
upon the matters noted below:
1. Approval of the Stock Purchase Agreement, dated as of July
7, 1998 (the "Purchase Agreement"), by and among the Company
and Nicole Clayton Caver, F. Jeffrey Nelson, and Marc A.
Sparks, the sole stockholders of International Fidelity
Holding Corp., a Texas Insurance Holding corporation
("IFHC"), whereby the Company will purchase the outstanding
shares of IFHC.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Election of the Board's nominees for Directors.
Nominees: Marc A. Sparks, F. Jeffrey Nelson, Morris
Belzberg, Brent Brown, Paul Caver, Douglas Gerrard, Patrick
Rastiello, James G. Leach and Kerry Sebree.
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as marked to the vote for all
contrary below) nominees listed
below
INSTRUCTION: To withhold authority to vote for any individual
nominee listed above, write that nominee's name in the space
provided below.
_________________________________________________________________
3. Approval of an amendment to the Company's Certificate of
Incorporation to change the corporate name to Unistar
Financial Service Corp.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of an amendment to the Company's Certificate of
Incorporation to authorize a one-for-fifteen reverse split
of the outstanding shares of Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Approval of the adoption of the 1998 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the Meeting.
This proxy, when properly executed, will be voted in the manner
directed by the undersigned stockholder. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR ALL THE ABOVE PROVISIONS.
PLEASE MARK, SIGN, DATE and RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
Please sign exactly as name appears below and mail proxy to:
International Fidelity Holding Corp.
c/o Ron Mann, Caldera, Inc.
4635 McEwen
Dallas, TX 75244
When shares are held by joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full
corporate name by the President or other authorized
officer. If a partnership, please sign in partnership
name by authorized person.
__________________________________
Print Name
__________________________________
Signature
__________________________________
Signature if held jointly
Dated:______________________, 1998
UNISTAR FINANCIAL SERVICE CORP.
-----------------------------------------------------------------
A FINANCIAL SERVICE HOLDING CORP.
NEWS RELEASE
FOR IMMEDIATE RELEASE U.S. FIDELITY HOLDING CORP.
---------------------------
UNISTAR FINANCIAL SERVICE CORP. ACQUIRES INTERNATIONAL SURETY &
CASUALTY COMPANY AND SIGNS LETTER OF INTENT TO ACQUIRE U.S.
FIDELITY HOLDING CORP.
DALLAS, Texas - August 18, 1998 -- Unistar Financial Service Corp.
(Nasdaq: UNSF) has acquired property and casualty insurer
International Surety & Casualty Company, based in Dallas, Texas.
Simultaneously, Unistar has also signed a letter of intent to
acquire International Surety's affiliate, U.S. Fidelity Holding
Corp. for nine times 1999 estimated earnings, or $103 million, in
a stock share exchange. The acquisition includes U.S. Fidelity's
auto insurance subsidiaries, Great Southern General Agency, First
Choice Underwriters, Peak Underwriters, Advanced Underwriters,
Eagle Premium Finance Company, and Eagle Claims Corp.
Marc A. Sparks has been named Chairman and Chief Executive
Officer of Unistar Financial Service Corp., F. Jeffrey Nelson has
been named President and Chief Financial Officer, and Kerry A.
Sebree holds the position of Chief Operating Officer of the
public company. Unistar Financial Service Corp.'s Board has been
elected as follows:
MARC A. SPARKS, Chairman/CEO - Unistar Financial Service Corp.
F. JEFFREY NELSON, President/CFO - Unistar Financial Service
Corp.
MORRIS BELZBERG, Chairman Emeritis, Former Chairman - Budget
Rent a Car
DOUGLAS GERRARD, President - Deere Park Capital Management
KERRY A. SEBREE, Exec. VP/COO - Unistar Financial Service Corp.
PAUL CAVER, Vice President/CFO/General Counsel - Eco
Technologies International, Inc.
J. GEORGE LEA, Sr. Vice President - Unistar Financial
Service Corp.
PATRICK RASTIELLO, Vice President - Aon Re, Inc.
BRENT BROWN, Attorney - Abernathy, Roeder, Robertson, Boyd,
and Joplin, PC
The parent company carries the identifiable logo and name of
"Unistar", while the existing and eventual subsidiaries,
International Surety and U.S. Fidelity, will maintain individual
company identity. Unistar's corporate headquarters will be
maintained at U.S. Fidelity's 30,000 sq. ft. corporate
headquarters in Dallas, Texas.
U.S. Fidelity Chairman, Marc A. Sparks, states, "We are extremely
pleased and excited about becoming a publicly-traded company. By
being public, we have the opportunity to reward our outstanding
staff. The success of our organization is due to a team effort,
from our extraordinarily talented and dedicated team members."
[DIAGRAM OF ORGANIZATIONAL CHART]
Headquartered in Dallas, Texas, U.S. FIDELITY HOLDING CORP. is a
leading fully-integrated insurance holding corporation,
specializing in auto insurance, premium financing and insurance
claims management. U.S. Fidelity Holding Corp.'s wholly-owned
subsidiaries include GREAT SOUTHERN GENERAL AGENCY, FIRST CHOICE
UNDERWRITERS, PEAK UNDERWRITERS, and ADVANCED UNDERWRITERS -
managing general agencies, EAGLE PREMIUM FINANCE COMPANY, EAGLE
CLAIMS CORP. - an auto insurance claims company, and a multitude
of retail auto insurance agencies and auto collision repair
centers. U.S. Fidelity's affiliate, Unistar Financial Service
Corp. is the parent company of INTERNATIONAL SURETY & CASUALTY
COMPANY, a property and casualty insurance company. Additional
information available at: www.usfidelity.com,
www.unistarfinancial.com, or at www. prnewswire.com - Company
News on Call.
The forward-looking statements in this news release involve risks
and uncertainties and are subject to change based on various
factors, including competitive conditions in the insurance
industry, unpredictable developments in loss trends, changes in
loss reserves, market acceptance of new coverages and
enhancements, and changes in levels of general business activity
and economic conditions.
- 30 -
Contact:
Marc A. Sparks, Chairman/CEO
Unistar Financial Service Corp.
(972)702-0800
or
F. Jeffrey Nelson, President
Unistar Financial Service Corp.
(972)702-0800
or
Kerry A. Sebree, Chief Operating Officer
Unistar Financial Service Corp.
(972)702-0800
