eWeek has a report on what may be some reasons SCO is late in its SEC filing:"According to SCO sources, the company's continuing inability to file its reports stems from stock-option questions related to the ongoing litigation involving the former management of its parent company, The Canopy Group.
"There may be other, related causes, though.
"'These are lingering issues left from last CFO [chief financial officer], and the new CFO is making sure that the t's are crossed and i's are dotted,' said Dion Cornett, managing director of Decatur Jones Equity Partners LLC, an equity research firm that focuses on SMBs (small to midsized businesses).
"Bert Young, the new CFO, joined SCO last April. He replaced Bob Bench, who was then named vice president of corporate development until he retired later in 2004." So, now we have heard three possible reasons for the failure to file in the last week or so: it's questions about the 2000 stock equity plan, or it's about the Canopy litigation (or a combination of the two), or it's something related to Robert Bench or the change in CFOs at SCO. We're already covering the Canopy litigation, so today I went hunting for the Caldera 2000 Stock Equity Plan. I also thought it would be worthwhile to go through the Groklaw Archives to retrieve whatever I could find on Robert Bench. It may not be relevant, but as the story unfolds, at least it will all be collected in one place. It is certainly interesting in its own right.
First, on Robert Bench, I found his maiden appearance, with Ransom Love, on the 2000 Q4 earnings conference call, filed as a form 425 on
12/07/2000, at which they announced the purchase of two of Santa Cruz' divisions, the Server Software Division and the Professional Services Division, and that Bench had just joined what was then called Caldera International, Inc. Here's what Love and Bench had to say about why they bought the two divisions: RANSOM LOVE:
I welcome everyone to the Caldera Systems fourth quarter and fiscal
year 2000 call today, and thank you for joining us.
While the company has continued its activities across several fronts,
including product development and education curriculum offerings, the primary
focus of
management has been the consummation of the acquisition announced early in the
fourth quarter. As I'm sure you're aware, Caldera Systems and The Santa Cruz
Operation have reached a definitive agreement whereby Caldera will acquire SCO's
Server Software Division and Professional Services Division. This matter is now
in the S.E.C. process. We expect the S.E.C. will complete their final review
before the end of the year. Optimistically, we are then expecting to send out
proxy materials by early January, 2001. We anticipate that shareholders will
approve the acquisition, thereby allowing us to consummate the acquisition
during the latter part of February, 2001.
I will reiterate that this acquisition is literally an
industry-changing event, vaulting Caldera into a global distribution presence
through more than 22,000 partners worldwide. With the acquisition, Caldera
International will have the largest reseller channel with UNIX/Linux skills in
the industry.
We have been briefing SCO customers, partners, and channel partners
worldwide, and have had excellent feedback and response. We have recently begun
a global 40-city tour and have experienced record attendance consistently in
every city visited thus far.
As we have briefed SCO customers such as McDonald's, BMW, and Deutch
Bahn, they enthusiastically endorse the technology base, and have agreed to
maintain their commitment to Caldera International. This education process with
customers and partners insures that Caldera International will acquire vibrant
and dynamic SCO divisions as we carry long-existing relationships with us into
the future. Although we are currently bearing the cost burden of this affiliate
education process as a stand-alone entity and the benefits of our efforts may
first be felt by the SCO Divisions, the results will ultimately accrue to the
Linux operations as well since synergies will mount for the combined group.
In addition, the response from our strategic partners has been
outstanding. As a result of the acquisition, Compaq has indicated that Caldera
International (which is the new combined company following the acquisition) will
be its premier Linux/UNIX provider. Although both Caldera and SCO had
independent relationships with Compaq prior to the acquisition announcement, the
combination of the two companies is viewed as positive--even synergistic--by
Compaq and indeed strengthens the overall relationship. Since the acquisition
announcement, we have concluded a transaction that will make Caldera Linux
available on the full Proliant server line. The current plan is to formally
announce preload availability in January, 2001. Separately, Caldera will
promote/sell advanced clustering solutions that have been jointly developed by
both Caldera and SCO. Compaq and Caldera are engaging in joint sales
opportunities worldwide, and our future as partners looks bright.
Caldera and SCO have already begun to join forces to produce
industry-evolving products. Caldera has been collaborating on the development of
the Linux kernel personality with the current SCO engineers in order to allow
Linux applications to run on a UNIX kernel. Oracle has run its full suite of
Linux certification tests and found it to be 100 percent compatible with Linux.
Caldera International expects to be able to release a
platform that is Linux Standard Base and UNIX 98 compliant in the first quarter
of 2001. We will be the only alternative platform that scales from the client to
the enterprise on high volume hardware. The utilization of the Linux and Unix
platforms in concert provides users with robustness and scalability unavailable
elsewhere in the industry. . . . A change in our management team has occurred with the recent addition
of Bob Bench as our Chief Financial Officer. Bob has over 27 years experience in
various senior executive positions including President, Chief Financial Officer,
and Chief Operating Officer. His business background includes IT services,
Computer Software, Computer Hardware, Semiconductors, Investment Banking, and an
international assignment in Business Development. With the wealth of experience
he brings, we are understandably happy to welcome him to Caldera Systems.
I'll now turn the call over to Bob to discuss in more detail our
financial performance.
BOB BENCH:
[gives results] Two strategic initiatives will impact revenues as we transition the
company:
(1). Currently, most of our software revenue is coming from retail
sales. Strategically, we are moving to a more economical model of Business to
Business including corporate and OEM partnerships and strategic alliances. We
foresee this impacting our revenues for the next several quarters as retail
sales drop more rapidly than the ramp up of corporate sales. Corporate sales are
growing as we anticipated and we expect corporate and OEM sales to surpass
retail sales by the end of the second quarter of fiscal year 2001 returning us
to consecutive quarterly revenue growth trend.
(2). Our focused attention on completing the acquisition of the two SCO
Divisions will also impact revenues since the magnitude of the transaction
itself demands a commensurate proportion of the time and resources of
management.
Both of these initiatives are strategic decisions we have made to
position Caldera as the leading provider of e-based computing solutions.
So, their primary excitement, as expressed at the time, was getting the sales channel, not the code, or as Ransom Love put it, the purchase was "vaulting Caldera into a global distribution presence
through more than 22,000 partners worldwide." That might answer SCO's repeated question, what did they get for their money, if they didn't get the copyright. They surely did get something of real value, and so they said at the time. There were two agreements with Santa Cruz, but this first one unequivocably did not include copyright, as you can see in this Security Agreement filed with the SEC as an attachment to an S-4A on 12/18/2000, between Caldera and Santa Cruz, where Santa Cruz lists as its collateral, its copyrights, among other items.
Later, after Caldera changed its name to SCO, and the insiders began selling shares, there were questions about insider trading. Here's SCO's press release of August 2004 on insider trading: The SCO Group Comments on Insider Transactions
LINDON, Utah, Aug 14, 2003 -- The SCO Group, Inc. (Nasdaq: SCOX) encourages its directors and executive officers to sell the stock held by them through plans designed to qualify for the protections provided by Rule 10b5-1 under the Securities Exchange Act of 1934.
The 10b5-1 plans provide for future sales of stock, at predetermined times and in amounts and under conditions specified in the plans, without subsequent instructions from the participants. These plans have been adopted by the following individuals: Robert Bench, CFO; Jeff Hunsaker, Sr. VP Marketing; Reg Broughton, Sr. VP International Sales; and Michael Olson, VP Finance/Controller. These plans have been implemented primarily for the purpose of providing liquidity to the participants to meet sizable personal tax liabilities resulting from the vesting of restricted stock awards.
During the three months ended July 31, 2003, individuals selling under approved 10b5-1 plans sold 88,000 shares of the Company's common stock. Two other executive officers sold 29,616 shares during the same three-month period in Company approved open trading windows. For the upcoming three-month period to end on October 31, 2003, the above-referenced executive officers may sell up to 141,000 shares of the Company's common stock under current 10b5-1 plans if the conditions of the various plans are met. No other directors or executive officers have implemented a 10b5-1 trading plan to sell shares of the Company's stock during the next three months.
Our directors and executive officers beneficially hold approximately 6,005,000 shares and options to acquire an additional 2,016,000 shares. During SCO's August 14, 2003 teleconference, Darl McBride and Robert Bench spoke about insider trades.
1 Here's the question and answer, from Groklaw's transcript: Operator: And due to time constraints we have time for one more question, and we'll go to Matthew Aslett from ComputerWire. Please go ahead.
Aslett: Hi there.
McBride: Hi Matthew.
Aslett: Hi there I actually have two questions if that's OK -- not too cheeky. The second one, which I suspect will be the longer answer, is: I wonder if you could explain more the thinking behind the press release that was put out today about some of the trading that's been done by executives in terms of recommending or encouraging directors and executives to continue with what they've been doing.. . .
McBride: With respect to the trading side of it, I'd like to make one statement on the whole issue around the insider shares that are being sold. And that is that I've been a shareholder in the company since early 2000. I have a lot of shares that are available for selling right now. I haven't sold a single share, OK. I don't have any plans in place to sell any stock right now. You know, the point here that we have of selling going on is that article out there today I thought did a good job explaining why, you know, some of the selling has happened. Bob, maybe you could step through some of those issues.
Bench: Good. Thanks. Well Matthew, a very good question and as I think our directors and also the executive officers feel a lot of stewardship to shareholders, and so we appreciate shareholders who question what's going on. Just a little background: as part of the company's drive to profitability over the past two years, all the executives have taken substantial cuts in salary. When Darl came on board a year ago, as part of these executives' remuneration plans, he wanted to make sure that executives' objectives were very much aligned to the interests of the shareholders. And so several of these executives were awarded restricted stock that vests periodically over several years. And each time that stock vests and the awards vest it triggers a tax event for these individuals and there's really no other way for them to pay those taxes without selling a portion of those vested shares. So that's what's happening. As you can see from our press release this morning, the amount of insider sales are very, very small in relationship to the stock owned by insiders. I think it's less than one and a half percent. So a total of 117 thousand shares last quarter. Just to put in perspective, that's a very small percent of the 8 million shares owned. So it certainly isn't ... couldn't be considered unloading stock. But we appreciate that and what these plans are, Matthew, they're put in place for a long period of time in fact to give the public a good view of what management is doing, and that's why we issued this press release this morning. And we will do this each quarter so that you as public and the shareholders can see exactly what is happening with the executives. But if you look at these executives' holdings, you'll see it's a very small portion of their holdings that they are selling, and for the most part it's to take care of liabilities that they had to pay.
Here are all of Robert Bench's stock sales I found from 2001 to 2004, up until his announcing his retirement. Here's an interesting S3, filed February 3, 2003, one month before Caldera filed its lawsuit against IBM, wherein Caldera announces Morgan Keegan and John Wall are selling their Caldera shares, and says Morgan Keegan got the shares " in exchange for investment banking services rendered to us. Except for these transactions and the ownership of the shares as set forth below by the Selling Stockholders, the Selling Stockholders have not had a material relationship with us in the past three years": "SELLING STOCKHOLDERS
"The following table provides information, as of the date of this prospectus, concerning the selling stockholders. This information has been provided by the selling stockholders. We are not a party to any agreement, arrangement, or understanding regarding the sale of any of the shares, other than agreements requiring us to file and seek the effectiveness of the registration statement of which this prospectus forms a part. The agreement with Mr. Wall prohibits Mr. Wall from selling shares in excess of the volume limitations of 144(e)(1) of the Securities Act of 1933 that would be applicable if Mr. Wall were selling these shares pursuant to Rule 144. Neither of the selling stockholders will own more than 1% of our outstanding stock subsequent to the sale of the securities subject to this prospectus. We sold the shares of our common stock included in this prospectus to Mr. Wall in exchange for a promissory note that was payable to Mr. Wall and that is now payable to us. The shares of common stock being offered by Morgan Keegan & Co., Inc. pursuant to this prospectus were issued upon the exercise of warrants received by Morgan Keegan & Co., Inc. in exchange for investment banking services rendered to us. Except for these transactions and the ownership of the shares as set forth below by the Selling Stockholders, the Selling Stockholders have not had a material relationship with us in the past three years." And it seems MTI filed a Schedule 13G regarding its investment in Caldera back in July of 2002. There is a bit more on the relationship between MTI and Caldera in this filing, Caldera Systems, Inc.'s S1 filed 1/10/2000: MTI
In July 1999, MTI, a company which at the time was 50 percent owned by
Canopy, agreed to purchase 5,333,333 shares of common stock for $6,000,000 of
which $3,000,000 was paid at closing and $3,000,000 was payable through an
interest bearing note receivable. Subsequent to October 31, 1999, the Company
agreed to forego the interest component of the note receivable in exchange for
an acceleration of the payment terms (see Note 5). A director of the Company is
the chairman of the board of MTI. Additionally, another Company director is the
current president and chief executive officer of MTI.
The Company is using certain computer equipment provided by MTI without
charge. The equipment is valued at approximately $105,000. Sales to MTI amounted
to $2,985 during the year ended October 31, 1999.
This 10-K/A for the fiscal year ended October 31, 2002, includes the info that Robert Bench was granted some restricted stock in 2002:
"Mr. Bench was granted a restricted stock award of 145,000 shares in July 2002. The restrictions will lapse over a 24-month period and dividends will not be paid on the restricted stock. As of October 31, 2002, the value of the restricted shares was $189,950." The Caldera 2000 Stock Equity Plan was filed with the SEC as Exhibit 10-3 with their 10-K for the year ended Oct. 31, 2002, they say ("Caldera 2000 Employee Stock Purchase Plan, as amended (incorporated by reference to Exhibit 10.9 to Caldera's Registration Statement on Form S-4 (File No. 333-45936))."). That would be for Caldera International, Inc. I haven't yet found it though, so perhaps they filed it as a paper document. Perhaps one of you can locate it. There is some information about the 1998, 1999, and 2000 stock equity plans in this S-1/A filing for Caldera Systems, Inc., filed on 03/14/2000: "The 2000 Employee Stock Purchase Plan was adopted by the board of directors
on February 15, 2000 and was approved by our stockholders on March 1, 2000. The
plan will become effective immediately upon the execution of the underwriting
agreement for this offering. The plan is designed to allow eligible employees of
Caldera Systems, Inc. and its participating subsidiaries to purchase shares of
our common stock, at semi-annual intervals, through their periodic payroll
deductions. . . . "A participant may contribute up to 10% of his or her cash earnings through
payroll deductions and the accumulated payroll deductions will be applied to the
purchase of shares on the participant's behalf on each semi-annual purchase date
(the last business day in April and October each year). The purchase price per
share will be 85% of the lower of the fair market value of our common stock on
the participant's entry date into the offering period or the fair market value
on the semi-annual purchase date.
"The board may at any time amend or modify the plan. The plan will terminate
no later than the last business day in April 2010."
It is listed on the aforementioned 10K/A too, but again, it isn't availble that I could find digitally. However, the terms are enumerated in that 10K/A for the fiscal year ended October 31, 2002, which also mentions MTI, Bench, Ralph Yarro, Darcy Mott, and Canopy. Here are some excerpts:
***********************
2000 EMPLOYEE STOCK PURCHASE PLAN
The 2000 Employee Stock Purchase Plan was adopted by the Company's Board of Directors on February 15, 2000, and was approved by its stockholders on
March 1, 2000. The plan became effective on March 20, 2000. The plan is designed to allow eligible employees of the Company and its participating subsidiaries to purchase shares of its
common stock, at semi-annual intervals, through their periodic payroll deductions.
For
the year ended October 31, 2002, the executives named in the summary compensation table had the following purchases under the Employee Stock Purchase Plan.
Name
|
|
Shares Acquired
|
|
Weighted Average
Purchase Price
|
| Darl C. McBride, President and Chief Executive Officer(1) |
|
— |
|
$ |
0.00 |
Ransom H. Love, Former President and Chief Executive Officer(2) |
|
873 |
|
$ |
1.69 |
Robert K. Bench, Chief Financial Officer |
|
4,766 |
|
$ |
1.78 |
Opinder Bawa, Sr. Vice President, Technology |
|
— |
|
$ |
0.00 |
M. Sean Wilson, Sr. Vice President, Solutions Group |
|
— |
|
$ |
0.00 |
Chris Sontag, Sr. Vice President, Operating Systems Group |
|
— |
|
$ |
0.00 |
All current executive officers as a group (5 persons) |
|
5,639 |
|
$ |
1.76 |
All employees, including current officers who are not executive officers, as a group |
|
152,498 |
|
$ |
1.67 |
(1) Mr. Love
served as the Company's President and Chief Executive Officer until June 2002.
(2)Mr. Love
served as the Company's President and Chief Executive Officer until June 2002.
8
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
It is the duty of the compensation committee to review and determine the salaries and bonuses of executive officers of the Company, including the Chief Executive
Officer, and to establish the general compensation policies for such individuals. The compensation committee also has the sole and exclusive authority to make discretionary option grants to the
Company's executive officers under the 1999 and the 2002 Omnibus Stock Incentive Plans.
The
compensation committee believes that the compensation programs for the Company's executive officers should reflect the Company's performance and the value created for its
stockholders. In addition, the compensation programs should support the short-term and long-term strategic goals and values of the Company and should reward individual
contribution to the Company's success. The Company is engaged in a very competitive industry, and the Company's success depends upon its ability to attract and retain qualified executives through
competitive compensation packages.
General Compensation Policy. The compensation committee's policy is to provide the Company's executive officers with compensation
opportunities that are based upon their personal performance, the financial performance of the Company and their contribution to that performance and that are competitive enough to attract and retain
highly skilled individuals. Each executive officer's compensation package is comprised of three elements: (i) base salary that is competitive with the market and reflects individual
performance; (ii) quarterly performance awards tied to performance of agreed-upon corporate objectives, and certain financial performance metrics of the Company, including but not
limited to consolidated revenue, gross margin, net operating income and net income; and (iii) long-term stock-based incentive awards designed to strengthen the mutuality of
interests between the executive officers and its stockholders. As an officer's level of responsibility increases, a greater proportion of his or her total compensation will be tied to the Company's
financial performance and stock price appreciation rather than base salary.
Factors. The principal factors that were taken into account in establishing each executive officer's compensation package for the 2002
fiscal year are described below. However, the compensation committee has reserved the ability to exercise its discretion in applying entirely different factors, such as different measures of financial
performance, for future fiscal years.
Base Salary.The base salary levels for the executive officers were established for the 2002 fiscal year on the basis of the following
factors: personal performance and experience, the estimated salary levels in effect for similar positions at a select group of companies within and outside the Company's industry with which the
Company competes for executive talent, and internal comparability considerations. The compensation committee made its decision as to the appropriate market level of base salary for each executive
officer on the basis of its understanding of the salary levels in effect for similar positions at those companies with which the Company competes for executive talent. Base salaries are reviewed on an
annual basis, and adjustments will be made in accordance with the factors indicated above. During fiscal year 2002, all executive officers of the Company took salary reductions in an effort to
continue to control costs and to move towards the Company's goal to achieve profitability in fiscal year 2003.
Quarterly Performance Awards. Each executive officer (other than the Chief Executive Officer whose quarterly performance awards are
described below in CEO compensation) may also earn a quarterly performance award on the basis of: (i) performance of agreed upon objectives between the executive officer and the Chief Executive
Officer prior to the start of each quarter; and (ii) achievement by the Company of certain financial goals as approved by the Board of Directors and executive management. Prior to the payment
of any quarterly performance award, the achievement of the financials goals must be attained in any given quarter. During fiscal year 2002 no quarterly performance awards were paid.
9
Equity Incentives.Equity incentives to the executive officers were provided through stock option grants and restricted stock awards under
the 1999 Omnibus Stock Incentive Plan. The grants and awards are designed to align the interests of each executive officer with those of the stockholders and provide each individual with a significant
incentive to manage the Company from the perspective of an owner with an equity stake in the business. Each grant allows the individual to acquire shares of the Company's common stock at a fixed price
per share (the market price of the grant date) over a specified period of time (up to 10 years). The shares subject to each option vest in installments over a 48-month period,
contingent upon the executive officer's continued employment with the Company. Accordingly, the option will provide a return to the executive officer only if the executive officer remains employed by
the Company during the applicable vesting period, and then only if the market price of the underlying shares appreciates over the option term. Restricted stock awards allow the individual to receive
shares of the Company's common stock with restrictions lapsing over a 24-month period.
The
number of shares subject to each option grant or restricted stock award will be set at a level intended to create a meaningful opportunity for stock ownership based on the officer's
current position with the Company, the base salary associated with the position, the size of comparable awards made to individuals in similar positions within the industry, the individual's potential
for increased responsibility and promotion over the option term, and the individual's personal performance in recent periods. The compensation committee will also take into account the executive
officer's existing holdings of the Company's common stock and the number of vested and unvested options held by that individual in order to maintain an appropriate level of equity incentive. However,
the compensation committee does not intend to adhere to any specific guidelines as to the relative option holdings of the Company's executive officers.
CEO Compensation.In setting the total compensation payable to the Company's Chief Executive Officer for the 2002 fiscal year, the
compensation committee sought to make that compensation competitive, while at the same time assuring that a significant percentage of compensation was tied to the Company's performance. The
compensation committee reviewed industry compensation surveys for chief executive officers of comparable software companies to determine an appropriate compensation level. During fiscal year 2002, the
Company hired Darl McBride, a seasoned technology veteran, to succeed Ransom Love as the Company's Chief Executive Officer. During fiscal year 2002, the base salary for Darl McBride was $250,000, and
later reduced to $230,000 as a result of salary cuts in the Americas. Mr. McBride was also eligible to receive a quarterly performance award for reaching financial targets. The primary goals
established for Mr. McBride included the successful attainment of revenue, and net income targets as established in his offer letter. These targets have been set very aggressively and will
allow for Mr. McBride to earn from 20 percent to 300 percent of his quarterly base salary as a quarterly performance award based on attainment. During fiscal year 2002,
Mr. McBride did not receive any quarterly performance award payments.
In
recognition of the leadership and guidance Mr. McBride brings to the Company, he was granted 600,000 options to purchase shares under the Company's 1999 Omnibus Stock Incentive
Plan. Of the options granted to Mr. McBride, 400,000 options vest 25 percent after one year with the remaining 75 percent vesting at 1/36th per month thereafter,
until fully vested. Of the remaining 200,000 stock options granted to Mr. McBride, 50,000 options will vest one year from the date of the Company's first profitable quarter (as long as that
profitable quarter is before Q4 of fiscal year 2003) and the remaining 150,000 options will vest one year from the date the Company achieves four consecutive quarters of profitability (as long as the
fourth quarter is before Q4 of fiscal year 2004).
Compliance With Internal Revenue Code Section 162(m).Section 162(m) of the Internal Revenue Code disallows a tax deduction
to publicly-held companies for compensation paid to certain of their executive officers, to the extent that compensation exceeds $1 million per covered officer in any fiscal year.
The limitation applies only to compensation which is not considered to be performance-based.
10
Non-performance based compensation paid to the Company's executive officers for the 2002 fiscal year did not exceed the $1 million limit per officer, and the compensation committee
does not anticipate that the non-performance based compensation to be paid to the Company's executive officers for fiscal year 2003 will exceed that limit. The Company's 1999, and if
approved 2002 Omnibus Stock Incentive Plans have been structured so that any compensation deemed paid in connection with the exercise of option grants made under that plan with an exercise price equal
to the fair market value of the options shares on the grant date will qualify as performance-based compensation which will not be subject to the $1 million limitation. Because it is unlikely
that the cash compensation payable to any of the Company's executive officers in the foreseeable future will approach the $1 million limit, the compensation committee has decided at this time
not to take any action to limit or restructure the elements of cash compensation payable to the Company's executive officers. The compensation committee will reconsider this decision should the
individual cash compensation of any executive officer ever approach the $1 million level.
It
is the opinion of the compensation committee that the executive compensation policies and plans provide the necessary total remuneration program to properly align the Company's
performance and
the interest of its stockholders through the use of competitive and equitable executive compensation in a balanced and reasonable manner, for both the short and long-term. . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of November 30, 2002, the number of shares of the common stock held of record or beneficially by each person who held of
record, or who had the right to acquire shares within 60 days, or was known by us to own beneficially, more than 5% of the Company's stock, and the name and holdings of each director and named
executive officer and of all executive officers and directors as a group.
Name of Person or Group
|
|
Number of Shares
Beneficially Owned
|
|
Percent of
Class
|
|
| Principal Stockholders: |
|
|
|
|
|
The Canopy Group, Inc.
333 South 520 West, Suite 300
Lindon, Utah 84042 |
|
5,318,494 |
|
46.2 |
% |
John R. Wall
18807 Northeast 103rd Street
Redmond, Washington 98052 |
|
800,000 |
|
6.9 |
% |
Named Executive Officers And Directors: |
|
|
|
|
|
Ralph J. Yarro, III |
|
5,388,669(1 |
) |
46.8 |
% |
Steve Cakebread |
|
42,292(2 |
) |
* |
|
Edward E. Iacobucci |
|
57,500(3 |
) |
* |
|
Darcy Mott |
|
5,318,831(4 |
) |
46.2 |
% |
R. Duff Thompson |
|
22,500(5 |
) |
* |
|
Thomas P. Raimondi, Jr. |
|
47,500(6 |
) |
* |
|
Darl C. McBride |
|
0(7 |
) |
* |
|
Robert K. Bench |
|
281,855(8 |
) |
2.4 |
% |
Sean Wilson |
|
0(9 |
) |
* |
|
Chris Sontag |
|
0(10 |
) |
* |
|
Opinder Bawa |
|
20,833(11 |
) |
* |
|
All Officers and Directors as a Group (11 Persons) |
|
5,835,591(12 |
) |
50.7 |
% |
(1) Consists
of options to purchase 60,000 shares of common stock, 10,000 shares acquired through an open-market purchase, 175 shares of common stock, and 5,318,494 shares of
common stock held by The Canopy Group. Mr. Yarro is the President and Chief Executive Officer of The Canopy Group. Mr. Yarro disclaims beneficial ownership of the shares held by The
Canopy Group except to the extent of his pecuniary interest therein.
(2) Consists
of options to purchase 42,292 shares of common stock.
(3) Consists
of options to purchase 47,500 shares of common stock and 10,000 shares acquired through an open-market purchase.
(4) Consists
of 337 shares of common stock held by Mr. Mott and 5,318,494 shares of common stock held by The Canopy Group. Mr. Mott is the Vice President, Treasurer and
Chief Financial Officer of The Canopy Group. Mr. Mott disclaims beneficial ownership of the shares held by The Canopy
12
Group
except to the extent of his pecuniary interest therein. Does not include options to purchase 45,000 shares of common stock granted to Mr. Mott in June 2002.
(5) Consists
of options to purchase 22,500 shares of common stock.
(6) Consists
of options to purchase 47,500 shares of common stock.
(7) Does
not include options to purchase 600,000 shares of common stock granted to Mr. McBride in June 2002.
(8) Consists
of 165,000 shares of restricted common stock, options to purchase 24,895 shares of common stock, 5,460 shares acquired through the Company's Employee Stock Purchase Program
and 86,500 shares acquired in open-market purchases.
(9) Does
not include options to purchase 110,000 shares of common stock granted to Mr. Wilson in July 2002.
(10) Does
not include options to purchase 110,000 shares of common stock granted to Mr. Sontag in October 2002.
(11) Consists
of 15,000 shares of restricted common stock and options to acquire 5,833 shares of common stock. Does not include options to purchase 90,000 shares of common stock granted
to Mr. Bawa in July 2002.
(12) See
notes (1) through (11) as applicable.
EQUITY COMPENSATION PLANS
The Company maintains the 1998 Stock Option Plan, and 1999 Omnibus Stock Incentive Plan, the 2002 Omnibus Stock Incentive Plan, and the 2000 Employee Stock
Purchase Plan. The following is a discussion of the material provisions of the 2002 Omnibus Stock Incentive Plan:
General
The 2002 Plan is intended to promote the interests of the Company and its stockholders by providing directors, officers, employees and other persons, including
outside consultants, who are expected to make a long-term contribution to the success of the Company, with appropriate incentives and rewards to encourage them to enter into and continue
in the employ of the Company and to acquire a proprietary interest in the long-term success of the Company, thereby aligning their interests more closely to the interests of the Company's
stockholders.
Shares Covered by the 2002 Plan
The 2002 Plan, if approved, would authorize the grant of incentive awards with respect to an aggregate of 1,500,000 shares of common stock, and such number will
automatically increase, as of November 1 of each year beginning in 2001, by 3 percent of the total number of shares of common stock outstanding on the previous October 31st.
Shares
issued pursuant to the 2002 Plan may be authorized and unissued shares, treasury shares or shares acquired by the Company for purposes of the 2002 Plan. Generally, shares subject
to an incentive award that remain unissued upon expiration, cancellation, surrender, exchange, or termination of the incentive award will be available for other incentive awards under the 2002 Plan.
Administration
The 2002 Plan is administered by the Compensation Committee, which currently consists of Messrs. Thompson, Iacobucci, Raimondi, and Cakebread, all of whom
are non-employee directors of
13
the Company. Members of the committee serve at the pleasure of the Board. The Committee is authorized, among other things, to do the following:
•to
construe, interpret and implement the provisions of the 2002 Plan;
•to
select the persons to whom incentive awards will be granted;
•to
determine when incentive awards will be granted;
•to
determine the terms and conditions of such incentive awards;
•to
establish the performance criteria under which incentive awards will be granted;
•to
determine when and under what circumstances an incentive award can be settled, canceled, forfeited, exchanged, or surrendered;
• to
make rules with respect to the 2002 Plan;
• to
determine the terms and provisions of award agreements, which are required to accompany and evidence any incentive award under the 2002 Plan (the terms of
which are accepted by any Participant through the act of accepting the incentive award); and
• to
make all other determinations deemed necessary or advisable for the administration of the 2002 Plan.
Awards Under the 2002 Plan
The 2002 Plan permits the award of stock options, stock appreciation rights, restricted stock, phantom stock rights, and stock bonuses. Stock options many have an
exercise price equal to, less than, or greater than the fair market value of the common stock on the date of grant, except that the exercise price of incentive stock options must be equal or greater
than the fair market value of the common stock as of the date of grant.
Amendment or Termination of the 2002 Plan
The board may suspend, revise, terminate or amend the 2002 Plan at any time; provided, however, that stockholder
approval must be obtained if and to the extent that the Board deems it appropriate to satisfy Section 162(m) of the Code, Section 422 of the Code or the rules of any stock exchange on
which the common stock is listed. No action under the 2002 Plan may, without the consent of the Participant, reduce the Participant's rights under any outstanding award.
14
The
following table provides information about equity awards under each of the Company's Equity Compensation Plans:
Plan Category
|
|
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
|
|
Weighted-average
exercise price of
outstanding
options, warrants
and rights
|
|
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column a)
|
|
| Equity compensation plans approved by security holders |
|
2,974,600 |
|
$ |
4.99 |
|
1,128,257 |
(1)(2) |
| Equity compensation plans not approved by security holders |
|
1,291,054 |
|
$ |
0.84 |
|
189,289 |
(1) |
| |
|
|
|
|
|
|
|
|
| Total |
|
4,265,654 |
|
$ |
3.73 |
|
1,317,546 |
|
| |
|
|
|
|
|
|
|
|
(1) The
1999 and 2002 Plans incorporates an evergreen formula pursuant to which on each November 1, the aggregate number of shares reserved for issuance under the 1999 and 2002
Plans will increase by a number of shares equal to three percent of the outstanding shares on the day preceding (October 31). The ESPP incorporates an evergreen formula pursuant to which on
November 1 of each year the aggregate number of shares reserved for issuance under the ESPP will increase by a number of shares equal to one percent of the outstanding shares on the day
preceding (October 31).
(2) Of
these shares, 531,781 shares remain available for purchase under the ESPP.
Item 13. Certain Relationships and Related Transactions
Other than the transactions described below, during fiscal year 2002 there has not been, nor is there currently proposed, any transaction or series of similar
transactions to which the Company was or will be a party:
•in
which the amount exceeds $60,000; and
•in
which any director, executive officer, holder of more than 5% of our common stock or any member of their immediate family had or will have a direct or
indirect material interest.
The Canopy Group
During fiscal year 2002, the Company entered into an operating lease agreement with The Canopy Group for office space for its headquarters in Utah that continues
through December 2007. The Company pays Canopy approximately $46,000 per month for this office space. . . .
MTI Technology, Inc.
During the third quarter of fiscal year 2002, the Company purchased 1,189,000 shares of its outstanding common stock from MTI Technology, Inc. ("MTI") for
$1,070,000, or $0.90 per share, which represented a premium from the quoted market price. As of October 31, 2002, MTI did not hold an equity ownership interest in the Company.
Vista.com and John R. Wall
During the fourth quarter of fiscal year 2002, the Company entered into a license agreement with Community IQ.com d/b/a Vista.com ("Vista"). Under the agreement,
the Company acquired an exclusive license from Vista to sell and market Vista's web services solutions for the small business market. The Company prepaid $100,000 of royalties under the license
agreement and also advanced another $250,000 to Vista in connection with a right to purchase 3,312,737 shares of Vista's Series C convertible preferred stock for $500,000. Additionally, the
Company acquired a $1,000,000 convertible note receivable payable by Vista from John R. Wall, Vista's founder, in exchange for 800,000 shares of the Company's common stock with an estimated fair
market value of $900,000 and $100,000 in cash. The $1,000,000 note receivable is due on August 15, 2003, bears interest at 8 percent payable at maturity and is convertible at the
Company's option into a 20 percent fully diluted interest in Vista.
PART IV.
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Exhibit Number
|
|
Description
|
2.1 |
|
Agreement and Plan of Reorganization by and among Caldera Systems, Inc., Caldera International, Inc. ("Registrant") and The Santa Cruz Operation, Inc., and related amendments (incorporated by reference to Exhibit 2.1 to Caldera's
Registration Statement on Form S-4 (File No. 333-45936)). |
3.1 |
|
Amended and Restated Certificate of Incorporation of Caldera International, Inc. (incorporated by reference to Exhibit 3.1 to Caldera's Registration Statement on Form S-4 (File No. 333-45936)). |
3.2 |
|
Amended and Restated Bylaws of Caldera International Inc. (incorporated by reference to Exhibit 3.2 to Caldera's Registration Statement on Form S-4 (File No. 333-45936)). |
4.1 |
|
Form of certificate of common stock (incorporated by reference to Exhibit 4.1 to Caldera's Registration Statement on Form S-4 (File No. 333-45936)). |
10.1 |
|
Caldera 1998 Stock Option Plan (incorporated by reference to Exhibit 10.3 to Caldera's Registration Statement on Form S-1 (File No. 333-94351)). |
10.2 |
|
Caldera 1999 Omnibus Stock Incentive Plan, as amended (incorporated by reference to Exhibits 10.3 through 10.4 to Caldera's Registration Statement on Form S-4 (File No. 333-45936)). |
10.3 |
|
Caldera 2000 Employee Stock Purchase Plan, as amended (incorporated by reference to Exhibit 10.9 to Caldera's Registration Statement on Form S-4 (File No. 333-45936)). |
10.4 |
|
GNU General Public License (incorporated by reference to Exhibit 10.14 to the Registrant's Registration Statement on Form S-1 (File No. 333-94351)). |
10.5 |
|
Form of Indemnification Agreement by and between Caldera and its executive officers and directors (incorporated by reference to Exhibit 10.24 to Caldera's Registration Statement on Form S-1 (File No. 333-94351)). |
|
|
|
16
10.6 |
|
Master Lease dated March 30, 2000, between Caldera and 106th South Business Park, L.C. (incorporated by reference to Exhibit 10.4 to Caldera's quarterly report on Form 10-Q for the quarter ended April 30,
2000). |
10.7 |
|
Form of Senior Executive Severance Agreement (incorporated by reference to Exhibit 10.31 to Caldera's Registration Statement on Form S-4 (File No. 333-45936)). |
10.8 |
|
Form of Secured Convertible Promissory Note issued by The Santa Cruz Operation, Inc. to Caldera Systems, Inc. (incorporated by reference to Exhibit 10.43 to Caldera's Registration Statement on Form S-4 (File
No. 333-45936)). |
10.9 |
|
Form of Security Agreement between The Santa Cruz Operation, Inc., as debtor, and Caldera Systems, Inc., as secured party (incorporated by reference to Exhibit 10.44 to Caldera's Registration Statement on Form S-4 (File
No. 333-45936)). |
10.10 |
|
Form of Intercreditor Agreement among The Canopy Group, Inc., The Santa Cruz Operation, Inc. and Caldera Systems, Inc. (incorporated by reference to Exhibit 10.45 to Caldera's Registration Statement on Form S-4 (File
No. 333-45936)).
|
10.11 |
|
Form of Loan Agreement between The Canopy Group, Inc., The Santa Cruz Operation, Inc. and Caldera Systems, Inc. (incorporated by reference to Exhibit 10.46 to Caldera's Registration Statement on Form S-4 (File
No. 333-45936)). |
10.12 |
|
Form of Security Agreement between The Canopy Group, Inc. and The Santa Cruz Operation, Inc. (incorporated by reference to Exhibit 10.47 to Caldera's Registration Statement on Form S-4 (File No. 333-45936)). |
10.13 |
|
Form of Secured Convertible Promissory Note issued by The Santa Cruz Operation, Inc. to The Canopy Group, Inc. (incorporated by reference to Exhibit 10.48 to Caldera's Registration Statement on Form S-4 (File
No. 333-45936)). |
10.14 |
|
Form of Secured Promissory Note to be issued by Caldera International, Inc. to The Santa Cruz Operation, Inc. (incorporated by reference to Exhibit 10.49 to Caldera's Registration Statement on Form S-4 (File
No. 333-45936)). |
10.15 |
|
Form of Security Agreement between Caldera International, Inc., as debtor, and The Santa Cruz Operation, Inc., as secured party (incorporated by reference to Exhibit 10.50 to Caldera's Registration Statement on Form S-4 (File
No. 333-45936)). |
10.16 |
|
Severance Agreement between Ransom H. Love and Caldera International, Inc. (filed with the Company's Annual Report on Form 10-K on January 29, 2003) |
10.17 |
|
Caldera 2002 Omnibus Stock Incentive Plan |
21.1 |
|
Subsidiaries of the Registrant (filed with the Company's Annual Report on Form 10-K on January 29, 2003) |
23.1 |
|
Consent of KPMG LLP, Independent Auditors (filed with the Company's Annual Report on Form 10-K on January 29, 2003) |
23.2 |
|
Consent of Arthur Andersen, Independent Public Accountants (filed with the Company's Annual Report on Form 10-K on January 29, 2003) |
99.1 |
|
Section 906 Certifications |
1
Way back in the early days of Groklaw, I reported the following on Robert Bench's stock sales plan: Darl McBride says that SCO's CFO, Robert Bench, submitted a sales plan in January "months before legal action was contemplated", presumably as proof that there is no connection between the stock sales and the lawsuit:"Chief Financial Officer Robert Bench began the selling by SCO insiders, four days after SCO filed the suit against IBM. Bench is selling to help pay a $150,000 tax bill, McBride said. Under the Sarbanes-Oxley law, companies are no longer able to loan executives money to pay taxes or other expenses. "Bench submitted a sale plan in January, months before any legal action against IBM was contemplated, McBride said. His agreement called for the sales to begin on March 8. He planned to sell 5,000 shares a month for the next 12 months, according to the plan." Now, I'm no stock expert, but as for SCO not "contemplating" any legal action in January, here are some news stories from January of 2003 that I believe indicate that they were contemplating legal action in that month. All emphasis added by me. It was on January 10 that the story first broke, in an article entitled, "SCO Threatens to Press IP Claims on Linux", by Maureen O'Gara: "Informed sources, who would only talk on the guarantee of anonymity, say SCO has been proposing to charge users $96 per CPU for a so-called one-time System 5 for Linux software license to protect their systems from SCO-enforced patent issues if they ante up as soon as demand is made. . . ."Sources say the scheme, which pretty much sounds like a protection racket - we won't sue if you pay -- isn't engraved in stone but an undated weeks-old draft SCO press release that details the plan and was read to us has been quietly making the
rounds. At press time, we got word that a major player, believed to be
IBM, thought it had dissuaded SCO from going through with the idea.
"A usually reliable source swears a SCO executive told him that
SCO has hired the redoubtable David Boies, who prosecuted the Microsoft
antitrust case for the Justice Department, to press infringement claims
not against users but against the other Linux distributions."
EWeek mentioned the January date too, in a story published later: "The company in January hired high-profile attorney David Boies and his law firm to investigate whether Windows, Mac OS X, Linux and versions of BSD
infringed on the Unix intellectual property it owned." They
hired an attorney regarding infringement of IP, but they were not
contemplating litigation at all? Here is another: "Rumors escaping the Lindon, Utah-based company as early as mid-January had suggested the company may be gearing up to sue one or more of its competing Linux distributors, such as Red Hat, in the near future. The speculation intensified when SCOsource, the
intellectual property-licensing wing of the company, was announced
during LinuxWorld in late January. In part, that announcement
acknowledge the retaining of star attorney David Boies by SCOsource for
research and protection of SCO's patents,' providing many observers of
an ominous feeling about what SCO was up to." Stephen
Shankland, in an
article entitled "SCO fees may hit some Linux users", wrote this on
January 14: "The company, which is seeking untapped revenue
from customers who migrated from SCO Unix to Linux but are still using
SCO Unix software components, plans to detail its efforts in the coming
weeks or months. SCO Chief Executive Darl McBride created an
organization last fall 'to formalize the licensing of our intellectual
property,' according to a company presentation seen by News.com and
according to sources close to SCO. "'SCO is concerned about
violations of our software license copyrights. SCO pays royalties on
software, and we're asking companies/customers to do the same,'
according to the October presentation. . . . "Chris Sontag, hired
in October as senior vice president of SCO's Operating Systems division,
leads the intellectual property organization, sources said. Earlier in
his career, Sontag led marketing and product development for Novell, a
once-powerful operating system seller with ties to SCO. . .
. "'Our Unix IP is a significant asset. And for several months,
we have been holding internal discussions, exploring a wide range of
possible strategies concerning this asset,' the company said in a
statement Monday. SCO hasn't decided how exactly to collect more Unix
revenue, the company added. . . ." Here's their press release back in January, on the 22nd: "The SCO(R) Group (SCO) (Nasdaq: SCOX), a leading provider of Linux and UNIX business software solutions, today announced that it has created a new business division to manage the licensing of its UNIX intellectual property. . . . "Appointment of Boies, Schiller and Flexner "As part of SCO's plans
to protect its intellectual property, the company has retained David
Boies of the law firm Boies, Schiller and Flexner for research and
protection of SCO's patents, copyrights and other intellectual
property." On January 30, LWN.net reported an interview with a
SCO spokesman: "Rumors have been circulating for a few weeks: SCO, it is said, has hired a fancy law firm and will be pursuing
intellectual property claims against Linux users and distributors. . .
. "What will SCO do if it finds something? As might be
expected, the company is not willing to say much: 'If we found
unlicensed use of our intellectual property in a product like Linux, any
action we would take would have to be based on the scope, source and
impact of the violation. We do not feel we can rule out any particular
response without impairing our fiduciary responsibility to our
stockholders to protect their property. Certainly our first choice in
helping to resolve this issue would not to be heavy handed in our
response.'" On January 23, 2003, Internet News had a "Are Linux Users Infringing on SCO's Property?": "'Anybody that does not have intellectual property issues related to SCO can sleep well at night, but for anyone violating our IP we are going to be more
aggressive enforcing our rights than we have in the past,' Chris Sontag,
SCO senior vice president for operating systems, told internetnews.com .
. . ."Still, the move had been hinted at earlier, prompting some
observers of the Linux scene to wonder whether SCO wasn't simply fishing
for financial settlements from companies looking to avoid a lawsuit. . .
. "SCO's chief executive, McBride, has played it somewhat coy, acknowledging that Boies was hired (Boies is known for taking on
Microsoft on behalf of the Justice Department in its antitrust case, and
for defending Napster) but telling the media only that he was 'not
prepared to answer' what course of action the company was going to be
taking." Not answering is not the same as not contemplating. In March, Peter Galli wrote in eWeek that
discussions had been going on with SCO and IBM since early December.
But in January they still were not "contemplating" legal action? I don't
think that word means what he thinks it means. Here's what McBride said
back then: "McBride said the bottom line was that SCO owned the source code to Unix and the right to that operating system. IBM had taken AIX and made it available to the Linux community in an unlawful
way. "'IBM has been happily giving part of the AIX code away to the Linux community, but the problem is that they don't own the AIX
code,' he said. 'And so it's a huge problem for us. We have been talking
to IBM in this regard since early December and have reached an impasse. This was thus the only way forward for us.' . . . "While McBride
said SCO expects much of the $10 million in licensing revenue to be
raised amicably, it was willing to litigate in order to enforce its IP
and other rights." When they announced the establishement of SCOsource, they said this, on January 22: "'The most substantial intellectual property in UNIX comes from SCO,' said Chris Sontag, Senior Vice President for Operating Systems and SCOsource, The SCO Group. 'While Linux is an Open Source product, it shares philosophy,
architecture and APIs with UNIX. Starting today, SCO's libraries will be
available to third-party application developers, OS vendors, hardware
providers, services vendors, and end-users. SCO will help customers
legitimately combine Linux and UNIX technology to run thousands of UNIX
applications. SCOsource plans to create other new licensing programs to
make our rich inventory of UNIX System technology available to the
market.'"As part of SCO's plans to protect its intellectual
property, the company has retained David Boies of the law firm Boies,
Schiller and Flexner for research and protection of SCO's
patents, copyrights and other intellectual property." UPDATE: An anonymous reader adds this paragraph from Business Week article from February of 2004, placing the date McBride began contemplating action to claim Linux code as SCO's back in July of 2002: In June, 2002, when Darl McBride was getting ready to take over as chief executive at struggling Caldera International Inc. in Lindon, Utah -- later renamed SCO Group Inc. -- he mused that claiming ownership of some of the underlying code in the popular Linux computer operating system could keep the company afloat. Even though Caldera's revenues were declining, it was losing $5 million per quarter, and its stock had slid below the $1 NASDAQ delisting price, the reaction of outgoing CEO Ransom Love was instantaneous. "Don't do it," Love says he told McBride. "You don't want to take on the entire Linux community."
|
