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The Caldera-Santa Cruz Deal - The 2001 Registration Statement
Monday, June 19 2006 @ 03:05 AM EDT

I came across a 2001 SEC filing by Caldera I think we should have in Groklaw's collection. It's too long to reproduce in full, but I'll put a link to it in our Contracts page. It's the Registration Statement, Form S-4, as filed with the SEC on March 26, 2001. I've been reading and rereading it for hours, trying to figure out how that deal was structured. I still don't get it. In fact, I'm more confused than when I started, and I'm even starting to wonder if the parties back then were similarly confused.

The Agreement and Plan of Reorganization by and between Caldera Systems, Inc., Caldera Holding, Inc., and Santa Cruz Operation, Inc. dated August 1, 2000 states that after the deal, the parties needed to get their shareholders to agree, and this registration statement is memorializing that part of the process, and part of the filing is letters to the shareholders of each company.

I've never been able to understand why they did it as a reorganization instead of an asset purchase, but this document indicates there were tax benefits to doing it that way. What I still have trouble with is figuring out where the Santa Cruz divisions' assets ended up. What I discovered, though, is that the S-4 has a long exhibit index, and I'll bet if we could read all the exhibits, we could finally figure it all out.

The registration statement was filed by Caldera International, Inc., which is I gather the mother ship company formed by the deal, and you find a letter to the Caldera Systems, Inc. shareholders, asking them to bless the "reorganization":

Dear Caldera Systems Stockholders:

I am writing to you today about our proposed combination with the server and professional services groups of The Santa Cruz Operation, Inc. The combination will create a combined company to offer comprehensive business solutions based on both the Linux and UNIX platforms.

In the combination, each share of Caldera Systems common stock will be exchanged for one share of common stock of a new entity, Caldera International, Inc.

That makes it sound simple. Caldera Systems, Inc. would merge with two of Santa Cruz's divisions to form a new combination company, Caldera International, Inc. What I can't get clear is who merged with what when? Where exactly did the Santa Cruz assets go? To Caldera Systems, Inc.? Or to Caldera International, Inc.? Here's how the Reorganization Agreement explains it, with my very perplexed thoughts in blue:

THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is entered into as of August 1, 2000, by and among Caldera Systems, Inc., a Delaware corporation including for all purposes Caldera Surviving Corporation, ("Caldera"), Caldera Holding, Inc., a Delaware corporation ("Newco") and The Santa Cruz Operation, Inc., a California corporation ("SCO")
[So it's a three-party deal, old SCO, Caldera Systems, Inc. and Newco, Caldera Holding, Inc.]
RECITALS

A. The parties intend that, subject to the terms and conditions of this Agreement, (i) a new Delaware corporation referred to herein as Newco has been formed by Caldera solely for the purpose of the transactions contemplated hereunder;

[So, Newco has already been set up prior to the deal, and Caldera Holding, Inc. is Newco. ]
(ii) a newly formed, wholly owned subsidiary of Newco ("Merger Sub") will be merged with and into Caldera, with Caldera being the surviving corporation of such merger (the "Merger"),
[So my understanding is that they formed, prior to the deal or part of it, a newly formed subsidiary -- not a subsidiary of Caldera Systems, Inc., but of Newco, Caldera Holdings, Inc. -- and this subsidiary of Newco, Caldera Holding, Inc., was to be merged with and into Caldera Systems, Inc., which "Caldera" has been defined as meaning, with Caldera Systems, Inc. being the surviving corporation of that merger. So far, so good, even if I don't see why it was necessary to do it that way.]
and all outstanding Caldera securities will be converted, on a share for share basis, into Newco securities having identical rights, preferences and privileges, with Newco assuming any and all outstanding options and other rights to purchase shares of capital stock of Caldera (with all such Newco securities issued to former Caldera security holders initially representing the Caldera Percentage Interest in Newco), all on the terms set out in this Agreement and in the Certificate of Merger substantially in the form of Exhibit A hereto (the "Certificate of Merger") and the applicable provisions of Delaware Law;
[This is where I get confused. If Caldera Holding, Inc. is Newco, and they said so in the intro, then what is Caldera International, Inc.? That's who was going to be issuing stock, not the now defunct Caldera Holding, Inc. The definition of Newco seems to be morphing. Is Newco Caldera Holding, Inc. before the deal and Caldera International, Inc. after it? It appears that way.]
(iii) SCO and certain of its subsidiaries as herein specified will contribute to Newco,
[ Do you see why it matters, which entity is Newco? It says that Santa Cruz would contribute to Newco. When? Is it being contributed to Caldera Holding, Inc., the original Newco, which ends up a subsidiary of Caldera International, Inc.? Or did Santa Cruz contribute to Caldera International, Inc.? If Newco has now morphed into Caldera International, Inc., it's a valid question. So... um, where is oldSCO putting its assets? If you make oldSCO a quarter, and a penny be Caldera Systems, Inc., and a nickle be Caldera Holding, Inc., and a dime be Caldera International, Inc., see if you can make a deal and keep it all straight. Then try with both Caldera International and Caldera Holding being the same coin. ]
all on the terms herein specified, all of the Contributed Stock of the Contributed Companies (with each of the Contributed Companies thereby becoming a wholly owned subsidiary of Newco)
[ Each of the contributed companies from SCO becaome a wholly owned subsidiary of Newco? They don't become part of Newco? And which entity is Newco?]
and the Contributed Assets in consideration for the issuance by Newco to SCO of shares of Common Stock of Newco, $0.001 par value ("Newco Common Stock"), and (iv) Newco will assume all options to acquire common
[Here, it has to mean Newco is Caldera International Inc., but if so, why not simply say so in the Reorganization Agreement instead of calling Newco Caldera Holding, Inc.?]
stock of SCO held by the Employees (other than David McCrabb, Jack Moyer and Jim Wilt) hired or retained by Caldera (the "Optionees") and such options will be converted into options to purchase Newco Common Stock ("Newco Options") as set forth herein, which Newco Common Stock issued to SCO and Newco Options will represent in the aggregate a fully diluted equity interest in Newco equal to the difference between 100% and the Caldera Percentage Interest. The transactions described in subpart (iii) and (iv) of the foregoing sentence are collectively the "SCO Transaction."...

1. Plan of Reorganization.

1.1 The Organization of Newco and Merger Sub.

Caldera has formed Newco under the laws of the State of Delaware for the purposes of the

[Again, we see that Newco has already been formed. It's not the result of some merger later in the deal. It exists as Caldera Holding, Inc. as the parties enter the deal.]
transactions contemplated by the Merger and in accordance with the terms of this Agreement. Newco currently has no outstanding securities and has conducted no business and, prior to the Effective Time, will not issue any securities, will conduct no business or operations, will have no assets and will enter into no agreements nor incur any obligations or Liabilities, except as required or contemplated by this Agreement or necessary to perform its obligations hereunder. As soon as practicable after the date hereof, Newco shall form the Merger Sub as a wholly owned subsidiary, which will conduct no business prior to
[Is this the combo of Caldera Holding, Inc. and Caldera Systems, Inc.? If not, what is it?]
Closing except as expressly contemplated hereunder.

1.2 The Merger. At the Closing, subject to the terms and conditions of this Agreement, Caldera will execute and deliver and will file with the Secretary of State of the State of Delaware in accordance with relevant provisions of the Delaware Law, a Certificate of Merger providing for the Merger of Merger Sub with and into Caldera, with Caldera being the surviving corporation upon the effectiveness of the Merger and thereby becoming a wholly owned subsidiary of Newco, pursuant to this Agreement, the Certificate of Merger and in accordance with applicable provisions of the Delaware Law.

So, where is Caldera International, Inc. in this picture? Is it now Newco? If so, then Caldera Systems, Inc. is a subsididary of it, and where are the two oldSCO division asssets? Where in that shuffle did SCO's assets go? I see that Caldera Holding, Inc. started out as "Newco," and that it says that Santa Cruz is donating its assets to Newco, and that what it donates will become a subsidiary of Newco. Try to do that with your coins:

SCO and certain of its subsidiaries as herein specified will contribute to Newco, all on the terms herein specified, all of the Contributed Stock of the Contributed Companies (with each of the Contributed Companies thereby becoming a wholly owned subsidiary of Newco)

Wait a sec. What is that last part saying? "...(with each of the Contributed Companies thereby becoming a wholly owned subsidiary of Newco)..." ? Each? But Caldera merged with Newco (Caldera Holding, Inc.) also, with it surviving, it said. Or am I getting confused again? It's like trying to find your way out of a maze. Can you unravel this heap of spaghetti from the statement?

In the combination, each share of Caldera Systems common stock will be exchanged for one share of common stock of a new entity, Caldera International, Inc. SCO will receive 16 million shares of Caldera International common stock (representing approximately 25.3% of Caldera International on a fully diluted basis), $23 million in cash (of which $7 million was advanced to SCO on January 26, 2001) and a non-interest bearing promissory note in the amount of $8 million that will be paid in quarterly installments of $2 million beginning the fifth quarter after the combination is completed. In addition, if the OpenServer line of business of the server and professional services groups generates revenues in excess of specified thresholds during the three-year period following the completion of the combination, SCO will have earn-out rights entitling it to receive 45% of these excess revenues. Based on a price per share of $1.50, the closing price of a share of Caldera Systems common stock on March 22, 2001, the last full trading day for which closing prices were available at the time of printing this joint proxy statement/prospectus, and not including any future payments SCO may be entitled to receive from its earn-out rights, the estimated value of the consideration to be paid for the server and professional services groups would be approximately $55 million. SCO employees who join Caldera International will receive options to purchase approximately 1.8 million shares of common stock of Caldera International (representing approximately 2.8% of Caldera International on a fully diluted basis). In the combination, Caldera Systems will become a subsidiary of Caldera International. Please refer to page 68 for further discussion of the types and amounts of consideration to be paid to SCO in the combination. The combination is described more fully in the accompanying joint proxy statement/prospectus.

The best I can make out, Caldera International, Inc. is the name of the new company, but what is its relationship with oldSCO's assets? Here's the statement's shareholder letter from Santa Cruz:

Dear Shareholder of The Santa Cruz Operation:

We invite you to attend a special meeting of the shareholders of The Santa Cruz Operation, Inc. ("SCO") to be held at 425 Encinal Street, Santa Cruz, California at 10:00 a.m. local time, on May 4, 2001. At the special meeting, we will ask you to consider a proposal to approve and adopt the agreement and plan of reorganization that we entered into with Caldera Systems, Inc. and Caldera International, Inc. on August 1, 2000 and amended on September 13, 2000, December 12, 2000 and February 9, 2001, and a proposal to change our corporate name to "Tarantella, Inc."

Under the agreement and plan of reorganization, Caldera Systems, Inc. will acquire the assets of our server and our professional services groups. A new company, Caldera International, Inc., will be formed, combining the assets of Caldera Systems with the assets acquired from SCO. After the combination is completed, we will continue to operate our Tarantella business, and accordingly, have decided to change our corporate name. Under the proposed transaction, SCO will receive 16 million shares of Caldera International (representing approximately 25.3% of Caldera International on a fully diluted basis), $23 million in cash (of which $7 million was received on January 26, 2001) and a non-interest bearing promissory note in the amount of $8 million that will be received in quarterly installments of $2 million beginning the fifth quarter after the combination is completed. In addition, if the OpenServer line of business of the server and professional services groups generates revenues in excess of specified thresholds during the three-year period following the completion of the combination SCO will have earn-out rights entitling it to receive 45% of these excess revenues. Based on a price per share of $1.50, the closing price of a share of Caldera Systems common stock on March 22, 2001, the last full trading day for which closing prices were available at the time of printing this joint proxy statement/prospectus, and not including any future payments SCO may be entitled to receive from its earn-out rights, the estimated value of the consideration to be paid for the server and professional services groups would be approximately $55 million. SCO employees who join Caldera International will receive options to purchase approximately 1.8 million shares of common stock of Caldera International (representing approximately 2.8% of Caldera International on a fully diluted basis). Please refer to page 68 for further discussion of the types and amounts of consideration to be received by SCO in the combination.

That seems to indicate that Caldera Systems, Inc. would acquire the oldSCO assets, and together the combined assets would form a new company, Caldera International, Inc. This seems to equate Caldera Holding, Inc. with Caldera International, Inc., because it says that it entered into an agreement with Caldera Systems, Inc. and Caldera International, Inc. But the Reorganization Agreement says the three parties were Caldera Systems, Inc., Caldera Holding, Inc., and Santa Cruz Operation. So is Caldera Holding, Inc. the same thing as Caldera International, Inc.? Not at the time of the agreement, surely, unless I'm missing something, which is certainly possible. So if I am understanding the steps, it's the three parties form a reorganization agreement, whereby oldSCO would contribute assets to Caldera Systems, Inc., which has already set up Caldera Holding, Inc, which is eventually to become the new company, Caldera International, Inc., made up of the assets of oldSCO and Caldera Systems, Inc., except that the combination will be a subsidiary? How'm I doing? Santa Cruz's 10K back at the time seems confused:

In August, 2000, SCO and Caldera Systems, Inc., (Nasdaq: CALD), entered into an agreement in which Caldera Systems would acquire assets from the SCO Server Software and Professional Services Divisions. The agreement is subject to the approval of regulatory agencies and The Santa Cruz Operation, Inc. and Caldera Systems, Inc. stockholders, and is expected to close in January 2001. SCO will receive 28.6% ownership interest of Caldera, Inc., which is estimated to be an aggregate of approximately 18.4 million shares of Caldera stock and $7 million in cash. SCO will retain its Tarantella Division, and the SCO OpenServer revenue stream and intellectual properties.

SCO got ownership interest in Caldera, Inc.? That doesn't seem right. The problem is, when you say Caldera, what exactly do you mean? Caldera Systems, Inc.? Caldera Holding, Inc.? Caldera International, Inc.? Caldera, Inc. was the entity that sued Microsoft, no? Surely oldSCO didn't own part of that, did it? In short, no one back then seemed to be very good at making things clear, and not just on the issue of intellectual property. Did anyone back then actually know what was being transferred? Did they clearly communicate it to each other? And look at this segment of the letter to Caldera shareholders, in the S-4:

Q: WHAT IS "NEW CALDERA"?

A: New Caldera is what we call the combined company after the combination in this joint proxy statement/prospectus. The entity will be named Caldera International, Inc., and it will become the parent company of Caldera Systems. New Caldera will also directly own the server and professional services groups contributed by SCO.

Doesn't that seem to indicate that Caldera Systems, Inc. is one entity and the SCO assets become another? In Novell's Answer to SCO's Second Amended Complaint with Counterclaims, in the counterclaims section, it says it went like this:

29. On August 1, 2000, Santa Cruz entered into an agreement with Caldera Systems, under which Caldera Systems acquired Santa Cruz's Server Software and Professional Services divisions. With the acquisition, Caldera Systems planned to add Santa Cruz's UNIX server solutions and services to its Linux business.

30. On May 7, 2001, pursuant to an amendment to the agreement between Santa Cruz and Caldera Systems, Caldera International ("Caldera") was formed as a holding company to own Caldera Systems, including the assets, liabilities and operations of Santa Cruz's Server Software and Professional Services divisions.

I don't think that matches the date here, where Caldera International, Inc. is filing a document with the SEC in March of 2001, presumably prior to its formation in May. I can't explain it. I just see it. Maybe the exhibits will help us figure this all out. The registration statement has some exhibits attached that you can read, mostly consents from accountants, and one that is listed as having been filed previously, Exhibit 21.1, "Subsidiaries of the Registrant", but it doesn't tell us where to find it. There is also a lengthy Exhibit Index, which enumerates various corporate forms and documents. If I were working on this case, that's what I'd be looking at. Of course the "reorganization agreement" is there. Here are some other exhibits that struck my eye as being interesting:

**5.1 Opinion of Brobeck Phleger & Harrison, LLP. **8.1 Tax Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.

**8.2 Tax Opinion of Brobeck Phleger & Harrison, LLP.

10.1 Conversion Agreement, dated December 30, 1999, between Caldera, The Canopy Group, Inc. and MTI Technology Corporation (incorporated by reference to Exhibit 10.1 to Caldera's Registration Statement on Form S-1 (File No. 333-94351)).

10.2 Form of Series B Preferred Stock Purchase Agreement between the Registrant and the Series B investors (incorporated by reference to Exhibit 10.2 to Caldera's Registration Statement on Form S-1 (File No. 333-94351)).....

10.13 Asset Purchase and Sale Agreement, dated September 1, 1998, between Caldera, Inc., a Utah corporation and Caldera (incorporated by reference to Exhibit 10.8 to Caldera's Registration Statement on Form S-1 (File No. 333-94351)).

10.14 Amended and Restated Asset Purchase Agreement, dated as of September 1, 1998, between Caldera, Inc., a Utah corporation, and Caldera (incorporated by reference to Exhibit 10.9 to Caldera's Registration Statement on Form S-1 (File No. 333-94351)).

10.15 Stock Purchase Agreement, dated January 27, 1999, by and among Caldera, the Canopy Group, Inc. and MTI Technology Corporation (incorporated by reference to Exhibit 10.10 to Caldera's Registration Statement on Form S-1 (File No. 333-94351)).

10.16 Stock Purchase Agreement, dated January 6, 2000, between Caldera and Lineo, Inc. (incorporated by reference to Exhibit 10.11 to Caldera's Registration Statement on Form S-1 (File No. 333-94351))....

10.23 Lease Agreement, dated September 1, 1998, between Caldera and Caldera, Inc., a Utah corporation (incorporated by reference to Exhibit 10.19 to Caldera's Registration Statement on Form S-1 (File No. 333-94351))....

**10.35 Form of Stockholder Agreement, among the Registrant, Caldera, The Santa Cruz Operation, Inc., MTI Technology Corporation and The Canopy Group, Inc.

**10.36 Form of Sales Representative and Support Agreement, between the Registrant and The Santa Cruz Operation, Inc.

**10.37 Form of Open Server Research & Development Agreement between the registrant and The Santa Cruz Operation, Inc.

**10.38 OEM Distribution Agreement, dated June 27, 2000, between Caldera and The Santa Cruz Operation, Inc.

**10.39 Agreement for Linux Professional Consulting Services between The Santa Cruz Operation, Inc. and Caldera Systems, Inc.

**10.40 Strategic Business Agreement between The Santa Cruz Operation, Inc. and Caldera Systems, Inc.

**10.41 Stock Purchase and Sale Agreement between The Canopy Group, Inc., Caldera Systems, Inc. and Metrowerks Holding, Inc.

**10.42 Stockholder Agreement between Lineo, Inc., Bryan Sparks, Dry Canyon Holding Company LLC and Metrowerks Holdings, Inc.

**10.43 Warrant Purchase Agreement between Lineo, Inc. and Metrowerks Holdings, Inc.

Of course, if you're really working on a case, somebody reads every single one. And you don't have to do so much digging, because you can just subpoena all the records. The reorganization agreement in paragraph 2.4, for instance, details that SCO delivered to Caldera all its SEC filings from 1995 onward and it tells us that SCO provided a very complete Disclosure Letter, so you can just get the documents by subpoena, and if there is something you don't understand, you can just ask at a deposition. It's fun. It's like working on a jigsaw puzzle. The puzzle to solve here is, which Caldera are we talking about at any given point? Caldera? Caldera, Inc.? Caldera Holdings? Caldera Systems, Inc.? Caldera International, Inc.? And what exactly was the purpose of each? For example, the document tells us this is part of what would occur if the deal went through:

THE COMBINATION

Caldera, New Caldera and SCO have entered into a reorganization agreement that provides for the following transactions:

- New Caldera will purchase the server and professional services groups from SCO ....

- Caldera will merge with a subsidiary of New Caldera and as a result will become a wholly-owned subsidiary of New Caldera.

Who is who in this picture? "A subsidiary" of New Caldera, meaning Caldera International, Inc. would merge with Caldera Systems, Inc.? But Caldera International would be purchasing the two divisions from Santa Cruz? Then what? I confess, I don't know, and I surely would love to read all those exhibits to try to solve the puzzle. The reason it might matter is, if the assets went to Caldera International, Inc., and not to Caldera Systems, Inc., I think the wrong entity is suing the world. And what exactly is the relationship of MetroWerks, Lineo and MTI with Caldera-whichever? I'm sure by the list alone you can see that if you had all those documents, you'd have a much clearer picture of what the deal with Santa Cruz was about.

The Caldera Systems, Inc. directors at the time were Ransom H. Love, Ralph J. Yarro III, Steve Cakebread, Edward Iacobucci, Raymond J. Noorda, and Thomas P. Raimondi, Jr. There are the usual Canopy-of-the-day liberal terms for stock options, bonuses, and incentives like phantom stock, and promises of indemnification everywhere. It also has an interesting "Intellectual Property" section that indicates that as far back as 2000, there was a dispute about the trademarks UNIXWARE and OPENSERVER between Santa Cruz Operation and X/OPEN. Here's how the paragraphs read:

INTELLECTUAL PROPERTY

The success of the server group largely depends on the ability to protect trademarks, trade secrets, and certain proprietary technology. To accomplish this, the group relies on a combination of trademark and copyright laws and trade secrets. Both the server and professional services groups also require their employees and consultants to sign confidentiality and nondisclosure agreements.

SCO also owns the trademark rights to "OPENSERVER" and "UNIXWARE" in the United States and other jurisdictions. On or around May 23, 2000, SCO was made aware that X/Open (the owner of the UNIX trademark) filed a cancellation action against SCO's UnixWare trademark registration in Japan. On July 4, 2000, SCO, through its trademark counsel in Japan, Tani & Abe, submitted arguments to the Japanese Patent Office in response to the cancellation. On October 10, 2000, the Japanese Patent Office rendered its decision that SCO's UnixWare trademark registration should be maintained. On or around May 23, 2000, SCO was made aware that a joint opposition action had been filed by X/Open (the owner of the UNIX trademark) and Novell against our European Community Trademark Application. The parties requested and received an extension to the cooling off period, which was extended to November 17, 2000. X/Open has been granted the opportunity to submit further facts, evidence or arguments in support of the opposition on or before January 17, 2001. SCO must submit, through its trademark counsel in the UK, Clifford Chance, its observations in reply on or before March 17, 2001, which period may be extended to ensure that SCO has at least two full months to respond to any new material submitted by X/Open. The parties requested and received an additional extension to the cooling off period, which was extended to March 17, 2001.

Do you remember what SCO Group told the USPTO about the UNIX trademark when it was trying (it failed) to get the trademark UNIX SYSTEM LABORATORIES?

Because UNIX SYSTEM LABORATORIES is now part of the Applicant, this trademark should be sent on to publication. In 1992, Novell purchased UNIX SYSTEM LABORATORIES and all of the UNIX assets, including all trademarks owned by UNIX SYSTEM LABORATORIES. In 1995, The Santa Cruz Operation, Inc. purchased all of the UNIX assets from Novell. As part of the transaction, Novell assigned the UNIX and UNIXWARE trademarks to The Santa Cruz Operation. In 2001, The Santa Cruz Operation completed the sale of, inter alia, the UNIXWARE technologies to Caldera Systems, Inc. Caldera subsequently changed its name to The SCO Group. Because of this, the mark should be allowed to go on to publication.

Did they know better? If they read their own Registration Statement, they certainly would have had a clue. Of course, we know how it all came out, but it may explain the odd wording of the IP clause in the Reorganization Agreement:

2.15 Intellectual Property.

(a) The Contributed Companies and, insofar as it relates to the Group Business, the Contributing Companies own, or have the right to use, sell or license such Intellectual Property Rights as are necessary or required for the Conduct of the Group Business (such Intellectual Property Rights being hereinafter collectively referred to as the "SCO IP Rights") and such ownership or rights to use, sell or license are reasonably sufficient for the Conduct of the Group Business, except for any failure to own or have the right to use, sell or license that would not have a Material Adverse Effect on the Group Business.

Just a little muddy, don't you think? The agreement goes on to state, "(e) To SCO's Knowledge, no third party is infringing or misappropriating any of the SCO IP Rights." I can't put all that together, but at least the registration statement mentions the dispute. But bottom line is, SCO Group had to know, I think, from all this that its USPTO trademark application was, to put it kindly, inaccurate. At a bare minimum, it knew that the UNIX trademark belonged to X/OPEN.

Finally, the registration statement includes a great deal of financial information, as well as a timeline on how the deal was put together. Reasons why the two entities wished to combine are outlined, and then each company's reasons for wanting the deal are listed. Caldera's list answers SCO's oft-asked question of what the company paid all that money for:

In addition to the joint reasons discussed above, the board of directors of each company also considered separate reasons for approving the combination, which are summarized below.

Caldera's reasons for the combination

The Caldera board of directors believes that the following are additional reasons for stockholders of Caldera to vote "FOR" approval and adoption of the combination:

- The server and professional services groups have a comprehensive, international, multi-tiered distribution channel, including several joint venture, value added resellers and original equipment manufacturers. These could provide New Caldera with significant additional opportunities to market its Linux offerings domestically and internationally;

- The server and professional services groups have an extensive international infrastructure that could accelerate New Caldera's ability to market Linux technologies in foreign markets;

- The server and professional services groups own and have rights to several technologies that, if ported for use on a Linux platform, could significantly expand Caldera's Linux product offerings; and

- New Caldera would have significantly higher revenue than Caldera. New Caldera's pro forma net revenue was $143.5 million for fiscal 2000. We believe these revenue streams could provide greater flexibility for purposes of financing operations of New Caldera.

Interesting, isn't it? They wanted the distribution channel and the international infrastructure, something Caldera lacked, and as for the code, it wanted it to port the technology to Linux, to "significantly expand" Caldera's Linux product offerings.


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