Series B Preferred Stock Purchase Agreement - Caldera Systems Inc.


                       PREFERRED STOCK PURCHASE AGREEMENT

                              CALDERA SYSTEMS, INC.

                            SERIES B PREFERRED STOCK
                               PURCHASE AGREEMENT

        THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (this 'Agreement') is
made as of the 30TH day of December, 1999, by and between Caldera Systems, Inc.,
a Utah corporation (the 'Company'), and each of the persons listed on Schedule A
hereto, each of which is herein referred to as an 'Investor'.

THE PARTIES HEREBY AGREE AS FOLLOWS:

1. PURCHASE AND SALE OF STOCK.

        1.1 SALE AND ISSUANCE OF SERIES B PREFERRED STOCK.

        (a) The Company has adopted and filed with the Department of Commerce,
        Division of Corporations of the State of Utah Amended Articles of
        Incorporation in the form attached hereto as Exhibit A (the 'Amended
        Articles').

        (b) Subject to the terms and conditions of this Agreement, each Investor
        agrees, severally and not jointly, to purchase at the Closing and the
        Company agrees to sell and issue to each Investor, severally and not
        jointly, at the Closing that number of shares of the Company's Series B
        Preferred Stock set forth opposite each Investor's name on Schedule A
        hereto at a purchase price of $6.00 per share. The Series B Preferred
        Stock will have the rights, preferences, privileges and restrictions set
        forth in the Amended Articles. The sale of the Series B Preferred Stock
        to each Investor shall constitute a separate sale hereunder.

        1.2 CLOSING.

        (a) The purchase and sale of the Series B Preferred Stock shall take
        place at the offices of Parr Waddoups Brown Gee & Loveless, at 10:00
        a.m. on December 30, 1999, or at such other time and place as the
        Company and Investors shall mutually agree, either orally or in writing
        (which time and place are designated as the 'Closing').

        (b) At the Closing, the Company shall deliver to each Investor a
        certificate representing the shares of Series B Preferred Stock that
        such Investor is purchasing against payment of the purchase price
        therefor by check, wire transfer or such other form of payment as shall
        be mutually agreed upon by such Investor and the Company.

        1.3 SUBSEQUENT SALE OF SERIES B PREFERRED STOCK.

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                If less than all of the authorized number of shares of Series B
        Preferred Stock are sold at the Closing, then, subject to the terms and
        conditions of this Agreement, the Company may sell, on or before January
        10, 2000, up to the balance of the authorized but unissued Series B
        Preferred Stock to such persons as the Board of Directors of the Company
        may determine at the same price per share as the Series B Preferred
        Stock purchased and sold at the Closing. Any such sale shall be made
        upon the same terms and conditions as those contained herein, and such
        persons or entities shall become parties to this Agreement and all
        Ancillary Agreements, and shall have the rights and obligations of an
        Investor hereunder and thereunder.

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND ITS SUBSIDIARIES.

        Each of the Company and its Subsidiaries hereby represents and warrants
to each Investor that as of the date of this Agreement, except as set forth on a
Schedule of Exceptions attached hereto, specifically identifying the relevant
subparagraph(s) hereof, which exceptions shall be deemed to be representations
and warranties as if made hereunder:

        2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION.

                The Company is a corporation duly organized, validly existing,
        and in good standing under the laws of the State of Utah, has all
        requisite corporate power and authority to own and operate its
        properties and assets and to carry on its business as now conducted and
        as presently proposed to be conducted, to execute and deliver this
        Agreement, and any other agreement to which the Company is a party, the
        execution and delivery of which is contemplated hereby (the 'Ancillary
        Agreements'), to issue and sell the Series B Preferred Stock and the
        Common Stock issuable upon conversion thereof, and to carry out the
        provisions of this Agreement, the Amended Articles and any Ancillary
        Agreement. The Company is duly qualified and is authorized to transact
        business and is in good standing as a foreign corporation in each
        jurisdiction in which the failure to so qualify would have a material
        adverse effect on its business, properties, prospects or financial
        condition.

        2.2 AUTHORIZATION.

                All corporate action on the part of the Company, its officers,
        directors and stockholders necessary for the authorization, execution
        and delivery of this Agreement, and any Ancillary Agreement, the
        performance of all obligations of the Company hereunder and thereunder
        at the Closing and the authorization, issuance (or reservation for
        issuance), sale and delivery of the Series B Preferred Stock being sold
        hereunder and the Common Stock issuable upon conversion thereof has been
        taken or will be taken prior to the Closing, and this Agreement, and any
        Ancillary Agreement, when executed and delivered, will constitute valid
        and legally binding obligations of the Company, enforceable in
        accordance with their respective terms except (i) (as limited by
        applicable bankruptcy, insolvency, reorganization, moratorium and other
        laws of general application affecting enforcement of creditors' rights
        generally, and (ii) as limited by laws relating to the availability of
        specific performance, injunctive relief or other equitable remedies. The
        sale of the Series B Preferred Stock is not and the subsequent
        conversion of the Series B Preferred Stock into Common Stock will not be
        subject to any preemptive rights or rights of first refusal that have
        not been properly waived or complied with.

        2.3 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.


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                The Series B Preferred Stock that is being purchased by the
        Investors hereunder, when issued, sold and delivered in accordance with
        the terms of this Agreement for the consideration expressed herein, will
        be duly and validly issued, fully paid and non-assessable, and will be
        free of restrictions on transfer other than restrictions on transfer
        under this Agreement and under applicable state and federal securities
        laws. The Common Stock issuable upon conversion of the Series B
        Preferred Stock being purchased under this Agreement has been duly and
        validly reserved for issuance and, upon issuance in accordance with the
        terms of the Amended Articles, will be duly and validly issued, fully
        paid and non-assessable, and will be free of restrictions on transfer
        other than restrictions on transfer under this Agreement and under
        applicable state and federal securities laws.

        2.4 GOVERNMENTAL CONSENTS

                No consent, approval, qualification, order or authorization of,
        or filing with, any local, state or federal governmental authority is
        required on the part of the Company or any of its Subsidiaries in
        connection with the Company's valid execution, delivery or performance
        of this Agreement, the offer, sale or issuance of the Series B Preferred
        Stock by the Company or the issuance of Common Stock upon conversion of
        the Series B Preferred Stock, except (i) the filing of the Amended
        Articles with the Department of Commerce, Division of Corporations,
        State of Utah, and (ii) such filings as have been made prior to the
        Closing, except any notices of sale required to be filed with the
        Securities and Exchange Commission under Regulation D of the Securities
        Act of 1933, as amended (the 'Securities Act'), or such post-closing
        filings as may be required under applicable state securities laws, which
        will be timely filed within the applicable periods therefor.

        2.5 CAPITALIZATION AND VOTING RIGHTS.

                The authorized capital of the Company consists, or will consist
        immediately prior to the Closing, of:

        (a) Preferred Stock. 25,000,000 shares of Preferred Stock, no par value,
        of which 6,596,146 shares have been designated Series A Preferred Stock,
        all of which are issued and outstanding, and 5,000,000 shares have been
        designated Series B Preferred Stock, up to all of which may be sold
        pursuant to this Agreement. The rights, privileges and preferences of
        the Series A and Series B Preferred Stock are as stated in the Amended
        Articles.

        (b) Common Stock. 75,000,000 shares of common stock, no par value
        ('Common Stock'), of which 26,744,050 shares are issued and outstanding.

        (c) The outstanding shares of Series A Preferred Stock and Common Stock
        are owned by the stockholders and in the numbers specified in Exhibit B
        hereto.

        (d) The outstanding shares of Series A Preferred Stock and Common Stock
        have been duly authorized and validly issued, are fully paid and
        non-assessable, and were issued in accordance with the registration or
        qualification provisions of the Securities Act and any relevant state
        securities laws or pursuant to valid exemptions therefrom. The shares of
        Series B Preferred Stock issuable pursuant to this Agreement have been
        duly authorized and, upon issuance in compliance with the terms of this
        Agreement following receipt of the consideration required hereby, will
        be validly issued and is fully paid and non-assessable. The Common Stock
        issuable upon the conversion of the Series B Preferred Stock purchased
        under this Agreement has been duly and

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        validly reserved for issuance and, when issued in accordance with the
        Amended Articles, will be validly issued, fully paid and non-assessable.

        (e) Except for (i) the Series A Preferred Stock and Series B Preferred
        Stock and the rights of the holders thereof, (ii) the rights of the
        Investors and other parties pursuant to this Agreement and the Ancillary
        Agreements, (iii) currently outstanding and non-expired options to
        purchase 5,288,882 shares of Common Stock granted to present or former
        employees and directors of the Company pursuant to the Company's 1998
        Stock Option Plan and 1999 Omnibus Stock Incentive Plan (collectively,
        the 'Option Plans'), and (iv) rights that have been duly waived with
        respect to the transactions contemplated by the Agreements, (A) there
        are no subscriptions, preemptive rights, options, convertible
        securities, warrants, conversion privileges or other rights (or
        agreements for any such rights, contingent or otherwise) outstanding to
        purchase or otherwise obtain any of the Company's capital stock, (B) the
        Company has no obligation (contingent or otherwise) to issue
        subscriptions, preemptive rights, options, convertible securities,
        warrants, conversion privileges or other rights or to issue or
        distribute to holders of any shares of its capital stock any evidences
        of indebtedness or assets of the Company, and (C) the Company has no
        obligation (contingent or otherwise) to purchase, redeem, or otherwise
        acquire any shares of its capital stock or any interest therein or to
        pay any dividend or make any distribution in respect thereof. In
        addition to the aforementioned options, the Company has reserved an
        additional 1,380,731 shares of its Common Stock for purchase upon
        exercise of options to be granted in the future under the Option Plans.
        No stock plan, stock purchase, stock option or other agreement or
        understanding between the Company and any holder of any equity
        securities of the Company or rights to purchase equity securities of the
        Company provides for acceleration or other changes in the vesting
        provisions or other terms of such securities, as the result of any
        merger, sale of stock or assets, change in control or other similar
        transaction by the Company except at the discretion of the Board of
        Directors. The Company is not a party or subject to any agreement or
        understanding, and, to the best of the Company's knowledge after due
        inquiry, there is no agreement or understanding between any persons that
        affects or relates to the voting or giving of written consents with
        respect to any security or the voting by a director of the Company. For
        purposes of this Agreement, 'due inquiry' shall mean inquiry of the
        officers and directors of the Company and those management-level
        employees of the Company who have responsibility for the area of
        inquiry.

        2.6 SUBSIDIARIES.

                The Company does not own or control, directly or indirectly, any
        interest in any other corporation, partnership, limited liability
        company, association or other business entity. The Company is not a
        participant in any joint venture, partnership or similar arrangement.

        2.7 CONTRACTS AND OTHER COMMITMENTS.

        Neither the Company nor any of its Subsidiaries has and or is bound by
        any contract, agreement, lease, commitment, or proposed transaction,
        judgment, order, writ or decree, written or oral, absolute or
        contingent, other than (i) contracts for the purchase of supplies and
        services that were entered into in the ordinary course of business and
        that do not involve more than $50,000 in the aggregate from any
        individual vendor or supplier, and do not extend for more than one (1)
        year beyond the date hereof, (ii) sales contracts entered into in the
        ordinary course of business, and (iii) contracts terminable at will by
        the Company on no more than thirty (30) days' notice without cost or
        liability to the Company or such Subsidiary and that do not involve any
        employment or consulting arrangement and are not material to the conduct
        of the Company's or such

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        Subsidiary's business. For the purpose of this paragraph, employment and
        consulting contracts and license agreements and any other agreements
        relating to the Company's or any Subsidiary's acquisition or disposition
        of Intellectual Property (other than standard end-user license
        agreements) shall not be considered to be contracts entered into in the
        ordinary course of business.

        2.8 RELATED-PARTY TRANSACTIONS.

                No employee, officer, stockholder or director of the Company or
        any of its Subsidiaries or member of his or her immediate family is
        indebted to the Company, nor is the Company or any Subsidiary indebted
        (or committed to make loans or extend or guarantee credit) to any of
        them, other than (i) for payment of salary for services rendered, (ii)
        reimbursement for reasonable expenses incurred on behalf of the Company
        or such Subsidiary, and (iii) for other standard employee benefits made
        generally available to all employees (including stock option agreements
        outstanding under any stock option plan approved by the Board of
        Directors of the Company or such Subsidiary). To the best of the
        Company's or such Subsidiary's knowledge after due inquiry, none of such
        persons has any direct or indirect ownership interest in any firm or
        corporation with which the Company or such Subsidiary is affiliated or
        with which the Company or such Subsidiary has a business relationship,
        or any firm or corporation that competes with the Company or such
        Subsidiary, except that employees, stockholders, officers or directors
        of the Company or such Subsidiary and members of their immediate
        families may own stock in publicly-traded companies that may compete
        with the Company or such Subsidiary. To the best of the Company's or
        such Subsidiary's knowledge after due inquiry, no officer, director or
        stockholder or any member of their immediate families is, directly or
        indirectly, interested in any material contract with the Company or such
        Subsidiary (other than such contracts as relate to any such person's
        ownership of capital stock or other securities of the Company or such
        Subsidiary).

        2.9 REGISTRATION RIGHTS.

                Except as set forth in the Investor Rights Agreement (as defined
        below), the Company is presently not under any obligation and has not
        granted any rights to register under the Securities Act any of its
        presently outstanding securities or any of its securities that may
        subsequently be issued.

        2.10 PERMITS.

                Each of the Company and its Subsidiaries has all franchises,
        permits, licenses, and any similar authority necessary for the conduct
        of its business as now being conducted by it, the lack of which could
        materially and adversely affect the business, properties, prospects or
        financial condition of the Company or any such Subsidiary, and believes
        it can obtain, without undue burden or expense, any similar authority
        for the conduct of its business as presently planned to be conducted.
        Neither the Company nor any Subsidiary is in default in any material
        respect under any of such franchises, permits, licenses or other similar
        authority.




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        2.11 COMPLIANCE WITH OTHER INSTRUMENTS.

                Neither the Company nor any Subsidiary is in violation or
        default in any material respect of any provision of its Amended Articles
        or Bylaws or organization documents or in any material respect of any
        provision of any mortgage, indenture, agreement, instrument or contract
        to which it is a party or by which it is bound or, to the best of its
        knowledge after due inquiry, of any federal or state judgment, order,
        writ, decree, statute, rule, regulation or restriction applicable to the
        Company or such Subsidiary. The execution, delivery and performance by
        the Company of this Agreement and any Ancillary Agreement, and the
        consummation of the transactions contemplated hereby and thereby, will
        not result in any such violation or be in material conflict with or
        constitute, with or without the passage of time or giving of notice,
        either a material default under any such provision or any event that
        results in the creation of any material lien, charge or encumbrance upon
        any assets of the Company or any of its Subsidiaries or the suspension,
        revocation, impairment, forfeiture, or non-renewal of any material
        permit, license, authorization, or approval applicable to the Company or
        any of its Subsidiaries, their respective business or operations, or any
        of their respective assets or properties.

        2.12 LITIGATION.

                There is no action, suit, proceeding or investigation pending
        or, to the best of the Company's or any of its Subsidiary's knowledge
        after due inquiry, currently threatened against the Company or any of
        its Subsidiary's that questions the validity of this Agreement, any
        Ancillary Agreement or the right of the Company to enter into such
        agreements, or to consummate the transactions contemplated hereby or
        thereby, or that might result, either individually or in the aggregate,
        in any material adverse change in the assets, business, properties,
        prospects, or financial condition of the Company or any of its
        Subsidiaries, or in any material change in the current equity ownership
        of the Company or any of its Subsidiaries. The foregoing includes,
        without limitation, any action, suit, proceeding, or investigation
        pending or currently threatened involving the prior employment of any of
        the Company's or any of its Subsidiaries' employees, their use in
        connection with the Company's or such Subsidiary's business of any
        information or techniques allegedly proprietary to any of their former
        employers, their obligations under any agreements with prior employers,
        or negotiations by the Company or such Subsidiary with potential backers
        of, or investors in, the Company such Subsidiary or its proposed
        business. Neither the Company nor any of its Subsidiaries is a party to
        or, to the best of its knowledge after due inquiry, named in or subject
        to any order, writ, injunction, judgment or decree of any court,
        government agency or instrumentality. There is no action, suit,
        proceeding or investigation by the Company or any of its Subsidiaries
        currently pending or that the Company or any of its Subsidiaries
        currently intends to initiate.

        2.13 RETURNS AND COMPLAINTS.

                Neither the Company nor any of its Subsidiaries has received any
        customer complaints concerning alleged defects in its products (or the
        design thereof) that, if true, would materially adversely affect the
        operations or financial condition of the Company or any of its
        Subsidiaries.




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        2.14 DISCLOSURE.

                The Company has provided each Investor with all the information
        reasonably available to it without undue expense that such Investor has
        requested for deciding whether to purchase the Series B Preferred Stock
        and all information that the Company believes is reasonably necessary to
        enable such Investor to make such decision. To the best of the Company's
        and each of its Subsidiaries' knowledge after due inquiry, neither this
        Agreement nor any other agreements, written statements or certificates
        made or delivered in connection herewith contains any untrue statement
        of a material fact or omits to state a material fact necessary to make
        the statements herein or therein not misleading.

        2.15 CONFIDENTIAL OFFERING MEMORANDUM.

                The Confidential Offering Memorandum issued on November 12, 1999
        previously delivered to each Investor (the 'Memorandum') was prepared in
        good faith by the Company and does not, to the best of the Company's and
        each of its Subsidiaries' knowledge after due inquiry, contain any
        untrue statement of a material fact nor does it omit to state a material
        fact necessary to make the statements therein not misleading, except
        that with respect to assumptions, projections and expressions of opinion
        or predictions contained in the Memorandum, the Company represents only
        that such assumptions, projections, expressions of opinion and
        predictions were made in good faith and that the Company believes there
        is a reasonable basis therefor.

        2.16 OFFERING.

                Subject, in part, to the truth and accuracy of each Investor's
        representations set forth in this Agreement, the offer, sale and
        issuance of the Series B Preferred Stock as contemplated by this
        Agreement are exempt from the registration requirements of the
        Securities Act, and neither the Company, any of its Subsidiaries, nor
        any authorized agent acting on its behalf will take any action hereafter
        that would cause the loss of such exemption.

        2.17 TITLE TO PROPERTY AND ASSETS; LEASES.

                Except (i) as reflected in the Financial Statements (defined in
        paragraph 2.18), (ii) for liens for current taxes not yet delinquent,
        (iii) for liens imposed by law and incurred in the ordinary course of
        business for obligations not past due to carriers, warehousemen,
        laborers, materialmen and the like, (iv) for liens in respect of pledges
        or deposits under workers' compensation laws or similar legislation or
        (v) for minor defects in title, none of which, individually or in the
        aggregate, materially interferes with the use of such property, each of
        the Company and its Subsidiaries has good and marketable title to its
        property and assets free and clear of all mortgages, liens, claims and
        encumbrances. With respect to the property and assets it leases, each of
        the Company and its Subsidiaries is in compliance with such leases and,
        to the best of its knowledge after due inquiry, holds a valid leasehold
        interest free of any liens, claims or encumbrances, subject to clauses
        (i)-(v) above.

        2.18 FINANCIAL STATEMENTS.

                The Company has delivered to each Investor its audited financial
        statements (balance sheet and profit and loss statement, statement of
        stockholders' equity and statement of cash flows,




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        including notes thereto) at October 31, 1999 and for the fiscal year
        then ended (the 'Financial Statements'). Financial Statements have been
        prepared in accordance with generally accepted accounting principles
        applied on a consistent basis throughout the periods indicated. The
        Financial Statements fairly present the financial condition and
        operating results of the Company as of the dates, and for the periods,
        indicated therein. Except as set forth in the Financial Statements,
        neither the Company nor any of its Subsidiaries has any material
        liabilities, contingent or otherwise, other than (i) liabilities
        incurred in the ordinary course of business subsequent to October 31,
        1999 and (ii) obligations under contracts and commitments incurred in
        the ordinary course of business and not required under generally
        accepted accounting principles to be reflected in the Financial
        Statements, which in both cases, individually or in the aggregate, are
        not material to the financial condition or operating results of the
        Company or any of its Subsidiaries. Except as disclosed in the Financial
        Statements, neither the Company nor any of its Subsidiaries is a
        guarantor or indemnitor of any indebtedness of any other person, firm or
        corporation. The Company and each of its Subsidiaries maintains and will
        continue to maintain a standard system of accounting established and
        administered in accordance with generally accepted accounting
        principles.

        2.19 CHANGES.

        Since October 31, 1999, there has not been any event or condition of any
        type that has materially and adversely affected the business, properties
        or financial condition of the Company or any of its Subsidiaries.

        2.20 INTELLECTUAL PROPERTY. To the best of the Company's and its
Subsidiaries' knowledge after due inquiry, the Company, its Subsidiaries and
their products have not infringed and do not infringe the copyrights of any
third party. To the best of the Company's and its Subsidiaries' knowledge after
due inquiry, neither the Company nor its Subsidiaries has misappropriated or is
misappropriating any trade secrets or proprietary confidential information of
any third party, and the products of the Company and its Subsidiaries do not
include or embody any trade secret or proprietary confidential information
misappropriated by the Company or its Subsidiaries from any third party. To the
best of the Company's and its Subsidiaries' knowledge after due inquiry, each of
the Company and its Subsidiaries and their respective products have not
infringed and do not infringe any patents, trademarks, service marks, or trade
names of any third party. Each item of Intellectual Property owned by or
licensed to the Company and its Subsidiaries immediately prior to the Closing
hereunder will be owned by or licensed to the Company and the Subsidiary on
identical terms and conditions immediately subsequent to the Closing hereunder
(i.e., identical to any applicable terms and conditions immediately prior to the
Closing).

                (i) To the best of the Company's and its Subsidiaries' knowledge
        after due inquiry, none of the Company or its Subsidiaries or their
        directors and officers (and employees with responsibility for
        Intellectual Property matters) has ever received any charge, complaint,
        claim, demand, or notice alleging any such infringement,
        misappropriation, or violation by the Company or its Subsidiaries of
        Intellectual Property (including any claim that the Company and its
        Subsidiaries must license or refrain from using any Intellectual
        Property rights of any third party). To the best of the Company's and
        its Subsidiaries' knowledge after due inquiry and the directors and
        officers (and employees with responsibility for Intellectual Property
        matters) of the Company and its Subsidiaries, no third party has
        infringed, misappropriated, or otherwise violated any Intellectual
        Property rights of the Company and its Subsidiaries.

                (ii) The Schedule of Exceptions identifies (a) each patent which
        has been issued or assigned to the Company or any of its Subsidiaries,
        (b) each pending patent application which has



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        been filed by or for the Company or any of its Subsidiaries, (c) each
        trademark or service mark registration issued or assigned to the Company
        or any of its Subsidiaries, (d) each pending trademark or service mark
        application which has been filed by or for the Company or any its
        Subsidiaries, (e) each copyright registration issued or assigned to the
        Company or any of its Subsidiaries, (f) each pending copyright
        application which has been filed by or for the Company or any of its
        Subsidiaries, and (g) each license which the Company and its
        Subsidiaries has granted to any third party with respect to any of the
        Company's Intellectual Property excluding licenses to end users of
        Company products granted in the ordinary course of business. The Company
        has delivered to the Investors correct and complete copies of all such
        patents, registrations, applications, and licenses (as amended to date).
        The Schedule of Exceptions also identifies each trade name and each
        unregistered trademark or service mark owned or claimed by any of the
        Company and its Subsidiaries in connection with any of their businesses.
        With respect to each patent, application, and registration (each an
        'item') identified in the Schedule of Exceptions:

                        (B) the Company and its Subsidiaries possess all right,
                title, and interest in and to the item, free and clear of any
                Security Interest, license, lien or other encumbrance;

                        (C) to the best of the Company's and its Subsidiaries'
                knowledge after due inquiry, the item is not subject to any
                outstanding injunction, judgment, order, decree, ruling, or
                charge;

                        (D) to the best of the Company's or its Subsidiaries'
                knowledge after due inquiry, no action, suit, proceeding,
                hearing, investigation, charge, complaint, claim, or demand is
                pending or, to the best of the Company's or its Subsidiaries'
                knowledge after due inquiry, the directors and officers (and
                employees with responsibility for Intellectual Property matters)
                of the Company and its Subsidiaries, is threatened which
                challenges the legality, validity, enforceability, use, or
                ownership of the item; and

                        (E) none of the Company and its Subsidiaries has ever
                agreed to indemnify any Person for or against any interference,
                infringement, misappropriation, or other conflict with respect
                to the item.

                (ii.) The Schedule of Exceptions identifies each item of
        Intellectual Property that any third party owns and licenses to any of
        the Company and its Subsidiaries, excluding licenses to commercially
        available software products (e.g., Windows, Microsoft Office, etc.) used
        by any of the Company and its Subsidiaries as an end user. The Company
        has delivered to the Investors correct and complete copies of all
        agreements applicable to such licenses (as amended to date). The term
        'license' is intended to include 'sublicense.' With respect to each such
        license and agreement required to be identified in the Schedule of
        Exceptions, to the best of the Company's or its Subsidiaries' knowledge
        after due inquiry;

                        (A) The license and agreement are legal, valid, binding,
                enforceable, and in full force and effect;

                        (B) The license and agreement will continue to be legal,
                valid, binding, enforceable, and in full force and effect on
                identical terms on the day immediately following the Closing;


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                        (C) no party to the agreement is in breach or default,
                and no event has occurred which with notice or lapse of time
                would constitute a breach or default or permit termination,
                modification, or acceleration thereunder;

                        (D) no party to the agreement has repudiated any
                provision thereof;

                        (E) the license is not subject to any outstanding
                injunction, judgment, order, decree, ruling, or charge; and

                        (F) no action, suit, proceeding, hearing, investigation,
                charge, complaint, claim, or demand is pending or is threatened
                which challenges the legality, validity, or enforceability of
                the license or agreement.

                (iii.) To the best of the Company's and its Subsidiaries'
        knowledge after due inquiry and to the knowledge after due inquiry of
        the directors and officers (and employees with responsibility for
        Intellectual Property matters) of the Company and its Subsidiaries,
        neither the Company nor any of its Subsidiaries will infringe,
        misappropriate, or otherwise violate any Intellectual Property rights of
        third parties as a result of the continued operation of its businesses
        as presently conducted and as presently proposed to be conducted.

        Notwithstanding anything herein to the contrary, to the extent any
representation or warranty, in whole or in part, contained in this Agreement may
be deemed to be breached because of infringement of any Intellectual Property,
such representation or warranty shall be read as if it contained the following
qualification: 'To the best of the Company's and its Subsidiaries' knowledge
after due inquiry'. For purposes of this paragraph, the term 'infringement' is
intended to include the infringement, misappropriation and/or violation of
Intellectual Property.

        2.21 YEAR 2000 PROBLEM. To the best of the Company's and its
Subsidiaries' knowledge after due inquiry, the Year 2000 Readiness Disclosure as
currently published by the Company on its web site is accurate. A copy of this
Year 2000 Readiness Disclosure is included the Schedule of Exceptions.

        2.22 MANUFACTURING AND MARKETING RIGHTS.

                Except as set forth on the Schedule of Exceptions, neither the
        Company nor any of its Subsidiaries has granted rights to manufacture,
        produce, assemble, license, market or sell its products to any other
        person and is not bound by any agreement that affects the Company's or
        such Subsidiary's exclusive right to develop, manufacture, assemble,
        distribute, market or sell its products.




                                       10
   11



        2.23 EMPLOYEES; EMPLOYEE COMPENSATION.

                To the best of the Company's and its Subsidiary's knowledge
        after due inquiry, the relationships between the Company and its
        Subsidiaries and their respective employees are good and no labor
        dispute or claims are pending or threatened. None of the Company's or
        any of its Subsidiary's employees belongs to any union or collective
        bargaining unit. To the best of the Company's and its Subsidiaries'
        knowledge after due inquiry, the Company and each of its Subsidiaries
        has complied in all material respects with all applicable state and
        federal laws related to employment. To the best of the Company's and it
        Subsidiary's knowledge after due inquiry, no employee of the Company or
        any such Subsidiary is or will be in violation of any judgment, decree
        or order, or any term of any employment contract, patent disclosure
        agreement, or other contract or agreement relating to the relationship
        of any such employee with the Company, any of its Subsidiaries, or any
        other party because of the nature of the business conducted or presently
        proposed to be conducted by the Company or any of its Subsidiaries or to
        the use by the employee of his or her best efforts with respect to such
        business. Except for agreements entered into pursuant to the Option
        Plans and the Company's 401k plan, the Company is not a party to or
        bound by any currently effective employment contract, deferred
        compensation agreement, incentive plan, profit sharing plan, retirement
        agreement or other employee compensation agreement. Neither the Company
        nor any of its Subsidiaries is aware that any officer or key employee,
        or that any group of key employees, intends to terminate their
        employment with the Company or any of its Subsidiaries, nor does the
        Company or any of its Subsidiaries have a present intention to terminate
        the employment of any of the foregoing. Subject to general principles
        related to wrongful termination of employees, the employment of each
        officer and employee of the Company and each of its Subsidiaries is
        terminable at the will of the Company or such Subsidiary, as applicable.

        2.24 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS.

                Except as set forth on the Schedule of Exceptions, all of the
        current employees and all of the officers of the Company and each of its
        Subsidiaries has executed an Employee Inventions and Confidentiality
        Agreement in the forms attached hereto on Exhibit C. No current or
        former employee or officer has excluded works or inventions made prior
        to his or her employment with the Company or any of its Subsidiaries
        from his or her assignment of inventions pursuant to such employee's
        Employee Inventions and Confidentiality Agreement. Copies of all
        contracts with independent contractors engaged to develop or create
        computer programs, works of authorship or intellectual property for the
        Company or its Subsidiaries are identified on the Schedule of
        Exceptions.

        2.25 TAX RETURNS, PAYMENTS, AND ELECTIONS.

                The Company and each of its Subsidiaries has timely filed all
        tax returns and reports (federal, state and local) as required by law.
        These returns and reports are true and correct in all material respects.
        The Company and each of its Subsidiaries has paid all taxes and other
        assessments due, except those contested by it in good faith. Neither the
        Company nor any of its Subsidiaries has elected pursuant to the Internal
        Revenue Code of 1986, as amended ('Code'), to be treated as an S
        corporation or a collapsible corporation pursuant to Section 1362(a) or
        Section 341(f) of the Code, nor has it made any other elections pursuant
        to the Code (other than elections that relate solely to methods of
        accounting, depreciation or amortization) that would have a material
        effect on the business, properties, prospects or financial condition of
        the Company or any




                                       11
   12



        of its Subsidiaries. Neither the Company nor any of its Subsidiaries has
        ever had any tax deficiency proposed or assessed against it and has not
        executed any waiver of any statute of limitations on the assessment or
        collection of any tax or governmental charge. None of the Company's or
        any Subsidiary's income tax returns (federal or otherwise) and none of
        its state income or franchise tax or sales or use tax returns has ever
        been audited by governmental authorities. The Company and each of its
        Subsidiaries has made adequate provisions on its books of account for
        all taxes, assessments and governmental charges with respect to its
        business, properties and operations for such period. The Company and
        each of its Subsidiaries has withheld or collected from each payment
        made to each of its employees, the amount of all taxes, including, but
        not limited to, federal income taxes, Federal Insurance Contribution Act
        taxes and Federal Unemployment Tax Act taxes required to be withheld or
        collected therefrom, and has paid the same to the proper tax receiving
        officers or authorized depositaries.

        2.26 INSURANCE.

                The Schedule of Exceptions contains a description of each
        insurance policy maintained by the Company and its Subsidiaries with
        respect to its properties, assets and businesses, and each such policy
        is in full force and effect as of the Closing. Neither the Company nor
        any Subsidiary is in default with respect to its obligations under any
        insurance policy maintained by it, and neither the Company nor any
        Subsidiary has been denied insurance coverage. Except as set forth on
        the Schedule of Exceptions, the Company and its Subsidiaries do not have
        any self-insurance or co-insurance programs, and the reserves set forth
        on the Latest Balance Sheet are adequate to cover all anticipated
        liabilities with respect to any such self-insurance or co-insurance
        programs.

        2.27 ENVIRONMENTAL AND SAFETY LAWS.

                Neither the Company nor any of its Subsidiaries is in violation
        of any applicable statute, law or regulation relating to the environment
        or occupational health and safety, and no material expenditures are or
        will be required in order to comply with any such existing statute, law
        or regulation.

        2.28 MINUTE BOOKS.

                A true, correct and complete copy of the minute book of the
        Company and each of its Subsidiaries have been delivered to the
        Investors. Such copy contains minutes of all meetings of directors and
        stockholders and all actions by written consent without a meeting by the
        directors and stockholders since the date of incorporation or
        organization and accurately reflects all actions by the directors (and
        any committee of directors) and stockholders with respect to all
        transactions referred to in such minutes in all material respects.


                                       12


   13
        2.29 SMALL BUSINESS MATTERS.

                The Company, together with its 'affiliates' (as that term is
        defined in Title 13, Code of Federal Regulations, Section 121.103), is a
        'small business concern' within the meaning of the Small Business
        Investment Act of 1958 and the regulations thereunder, including Title
        13, Code of Federal Regulations, Section 121.103. The information
        regarding the Company and its affiliates set forth in the Small Business
        Administration ('SBA') Form 480, Form 652 and Part A of Form 1031
        delivered at the Closing is accurate and complete. Copies of such forms
        shall have been completed and executed by the Company and delivered at
        the Closing, together with a written statement of the Company regarding
        its planned use of the proceeds from the sale of the Series B Preferred
        Stock. The Company does not presently engage in, and it shall not
        hereafter engage in, any activities, nor shall the Company use directly
        or indirectly the proceeds from the sale of the Series B Preferred Stock
        hereunder for any purpose, for which a Small Business Investment Company
        is prohibited from providing funds by the Small Business Investment Act
        of 1958 and the regulations thereunder (including Title 13, Code of
        Federal Regulations, Section 107.720).

        2.30 QUALIFIED SMALL BUSINESS.

                The Company represents and warrants to the Purchasers that, the
        Company should qualify as a 'qualified small business' within the
        meaning of Section 1202(d) of the Code as of the date hereof, and the
        Series B Preferred Stock sold hereunder is being acquired at its
        original issue in exchange for cash. The Company further represents and
        warrants that, as of the date hereof, it meets the 'active business
        requirement' of Section 1202(e) of the Code, and it has made no
        'significant redemptions' within the meaning of Section 1202(c)(3)(B) of
        the Code.

3.      REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR.

        Each Investor, severally, and not jointly, hereby represents and
warrants to the Company that:

        3.1 AUTHORIZATION.

                Such Investor has full power and authority to enter into this
        Agreement, and that this Agreement, when executed and delivered, will
        constitute a valid and legally binding obligation of such Investor,
        enforceable in accordance with their respective terms except (i) (as
        limited by applicable bankruptcy, insolvency, reorganization, moratorium
        and other laws of general application affecting enforcement of
        creditors' rights generally, and (ii) as limited by laws relating to the
        availability of specific performance, injunctive relief or other
        equitable remedies.

        3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT.

                This Agreement is made with each Investor in reliance upon such
        Investor's representation to the Company, which by such Investor's
        execution of this Agreement such Investor hereby confirms, that the
        Series B Preferred Stock to be purchased by such Investor and the Common
        Stock issuable upon conversion thereof (collectively, 'Securities') will
        be acquired for investment for such Investor's own account, not as
        nominee or agent, and not with a view to the resale or distribution of
        any part thereof, and that such Investor has no present intention of
        selling, granting any participation in or otherwise distributing the
        same. By executing this Agreement, each Investor further represents that
        such Investor does not have any contract, undertaking, agreement or
        arrangement with any person to sell, transfer or grant participations to
        such person or to any third person, with respect to any of the
        Securities.


                                       13


   14
        3.3 RELIANCE UPON INVESTORS' REPRESENTATIONS.

                Each Investor understands that the Series B Preferred Stock is
        not, and any Common Stock acquired on conversion thereof at the time of
        issuance may not be, registered under the Securities Act on the ground
        that the sale provided for in this Agreement and the issuance of
        securities hereunder is exempt from registration under the Securities
        Act pursuant to Section 4(2) thereof, and that the Company's reliance on
        such exemption is predicated on the Investors' representations set forth
        herein. Each Investor realizes that the basis for the exemption may not
        be present if, notwithstanding such representations, the Investor has in
        mind merely acquiring shares of the Series B Preferred Stock for a fixed
        or determinable period in the future, or for a market rise, or for sale
        if the market does not rise. No Investor has any such intention.

        3.4 RECEIPT OF INFORMATION.

                Each Investor believes such Investor has received all the
        information such Investor considers necessary or appropriate for
        deciding whether to purchase the Series B Preferred Stock. Each Investor
        further represents that such Investor has had an opportunity to ask
        questions and receive answers from the Company regarding the terms and
        conditions of the offering of the Series B Preferred Stock and the
        business, properties, prospects and financial condition of the Company
        and to obtain additional information (to the extent the Company
        possessed such information or could acquire it without unreasonable
        effort or expense) necessary to verify the accuracy of any information
        furnished to such Investor or to which such Investor had access. The
        foregoing, however, does not limit or modify the representations and
        warranties of the Company in Section 2 of this Agreement or the right of
        the Investors to rely thereon.

        3.5 INVESTMENT EXPERIENCE.

                Each Investor represents that such Investor is experienced in
        evaluating and investing in private placement transactions of securities
        of companies in a similar stage of development and acknowledges that
        such Investor is able to fend for himself, herself or itself, can bear
        the economic risk of such Investor's investment, and has such knowledge
        and experience in financial and business matters that such Investor is
        capable of evaluating the merits and risks of the investment in the
        Series B Preferred Stock. If other than an individual, Investor also
        represents such Investor either (a) has not been organized for the
        purpose of acquiring the Series B Preferred Stock or (b) has equity
        owners that are all Accredited Investors. The foregoing, however, does
        not limit or modify the representations and warranties of the Company in
        Section 2 of this Agreement or the right of the Investors to rely
        thereon.

        3.6 ACCREDITED INVESTOR.

(a)            The term 'Accredited Investor' as used herein refers to:

                    (i) A person or entity who is a director or executive
               officer of the Company;

                    (ii) Any bank as defined in Section 3(a)(2) of the
               Securities Act, or any savings and loan association or other
               institution as defined in Section 3(a)(5)(A) of the Securities
               Act whether acting in its individual or fiduciary capacity; any
               broker or dealer registered pursuant to Section 15 of the
               Securities Exchange Act of 1934; any insurance company as defined
               in Section 2(13) of the Securities Act; any investment company
               registered under


                                       14


   15
               the Investment Company Act of 1940 or a business development
               company as defined in Section 2(a)(48) of that Act; any Small
               Business Investment Company licensed by the U.S. Small Business
               Administration under Section 301(c) or (d) of the Small Business
               Investment Act of 1958; any plan established and maintained by a
               state, its political subdivisions, or any agency or
               instrumentality of a state or its political subdivisions, for the
               benefit of its employees, if such plan has total assets in excess
               of $5,000,000; any employee benefit plan within the meaning of
               Title I of the Employee Retirement Income Security Act of 1974,
               if the investment decision is made by a plan fiduciary, as
               defined in Section 3(21) of such Act, which is either a bank,
               savings and loan association, insurance company, or registered
               investment adviser, or if the employee benefit plan has total
               assets in excess of $5,000,000 or, if a self-directed plan, with
               investment decisions made solely by persons that are accredited
               investors;

                    (iii) Any private business development company as defined in
               Section 202(a)(22) of the Investment Advisers Act of 1940;

                    (iv) Any organization described in Section 501(c)(3) of the
               Internal Revenue Code, corporation, Massachusetts or similar
               business trust or partnership, not formed for the specific
               purpose of acquiring the securities offered, with total assets in
               excess of $5,000,000;

                    (v) Any natural person whose individual net worth, or joint
               net worth with that person's spouse, at the time of the purchase
               exceeds $1,000,000;

                    (vi) Any natural person who had an individual income in
               excess of $200,000 in each of the two most recent years or joint
               income with that person's spouse in excess of $300,000 in each of
               those years and has a reasonable expectation of reaching the same
               income level in the current year;

                    (vii) Any trust, with total assets in excess of $5,000,000,
               not formed for the specific purpose of acquiring the securities
               offered, whose purchase is directed by a person who has such
               knowledge and experience in financial and business matters that
               he or she is capable of evaluating the merits and risks of the
               prospective investment; or

                    (viii) Any entity in which all of the equity owners are
               accredited investors.

               As used in this Paragraph 3.6(a), the term 'net worth' means the
        excess of total assets over total liabilities. For the purpose of
        determining a person's net worth, the principal residence owned by an
        individual should be valued at fair market value, including the cost of
        improvements, net of current encumbrances. As used in this Paragraph
        3.6(a), 'income' means actual economic income, which may differ from
        adjusted gross income for income tax purposes. Accordingly, each
        Investor should consider whether such Investor should add any or all of
        the following items to such Investor's adjusted gross income for income
        tax purposes in order to reflect more accurately such Investor's actual
        economic income: any amounts attributable to tax-exempt income received,
        losses claimed as a limited partner in any limited partnership,
        deductions claimed for depletion, contributions to an IRA or Keogh
        retirement plan and alimony payments.


   16
        (a)         Each Investor as to such Investor, severally and not
                    jointly, further represents to the Company that except as
                    otherwise disclosed to the Company, in writing, prior to
                    such Investor's execution hereof, such Investor is either:

                    (i) an Accredited Investor; or

                    (ii) not an Accredited Investor and neither such Investor
               nor any beneficiary of any trust or any investment client for
               whose account such Investor is purchasing is a citizen or
               resident of the United States or any state, territory or
               possession thereof, including, but not limited to, any estate of
               any such person, or any corporation, partnership, trust or other
               entity created or existing under the laws thereof, or any entity
               controlled or owned by any of the foregoing (a 'U.S. Person').

        3.7 RESTRICTED SECURITIES.

               Each Investor understands that the Series B Preferred Stock (and
        any Common Stock issued on conversion thereof) may not be sold,
        transferred or otherwise disposed of without registration under the
        Securities Act or an exemption therefrom, and that in the absence of an
        effective registration statement covering the Securities (or the Common
        Stock issued on conversion thereof) or an available exemption from
        registration under the Securities Act, the Series B Preferred Stock (and
        any Common Stock issued on conversion thereof) must be held
        indefinitely. In particular, each Investor is aware that the Series B
        Preferred Stock (and any Common Stock issued on conversion thereof) may
        not be sold pursuant to Rule 144 promulgated under the Securities Act
        unless all of the conditions of that Rule are met. Among the conditions
        for use of Rule 144 may be the availability of current information to
        the public about the Company. Such information is not now available and
        the Company has no present plans to make such information available.

        3.8 LEGENDS.

               To the extent applicable, each certificate or other document
        evidencing any of the Series B Preferred Stock or any Common Stock
        issued upon conversion thereof shall be endorsed with the legends
        substantially in the form set forth below:

        (a)         The following legend under the Securities Act:

        'THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
        SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
        ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
        SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR
        OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
        REGISTRATION IS NOT REQUIRED.'

        (b)         Any legend imposed or required by the Company's Bylaws
                    or applicable state securities laws.

4. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING.


                                       16


   17
        4.1 The obligations of each Investor under subparagraph 1.1(b) of this
Agreement are subject to the fulfillment on or before the Closing of each of the
following conditions, the waiver of which shall not be effective against any
Investor who does not consent in writing thereto:

        4.2 REPRESENTATIONS AND WARRANTIES.

                The representations and warranties of the Company and its
        Subsidiaries contained in Section 2 shall be true on and as of the
        Closing with the same effect as though such representations and
        warranties had been made on and as of the date of the Closing.

        4.3 PERFORMANCE.

                The Company and its Subsidiaries shall have performed and
        complied with all agreements, obligations and conditions contained in
        this Agreement that are required to be performed or complied with by it
        on or before the Closing.

        4.4 COMPLIANCE CERTIFICATE.

                The President of the Company shall deliver to each Investor at
        the Closing a certificate certifying that the conditions specified in
        paragraphs 4.1 through 4.6, inclusive, have been fulfilled.

        4.5 QUALIFICATIONS.

                All authorizations, approvals or permits, if any, of any
        governmental authority or regulatory body of the United States or of any
        state that are required in connection with the lawful issuance and sale
        of the Series B Preferred Stock pursuant to this Agreement shall be duly
        obtained and effective as of the Closing.

        4.6 PROCEEDINGS AND DOCUMENTS; CERTIFICATE OF DESIGNATIONS.

                All corporate and other proceedings in connection with the
        transactions contemplated at the Closing and all documents incident
        thereto shall be reasonably satisfactory in form and substance to the
        Investors' special counsel, which shall have received all such
        counterpart original and certified or other copies of such documents as
        it may reasonably request. The Company shall have delivered to the
        Investors evidence of filing of the Amended Articles with the Department
        of Commerce, Division of Corporations of the State of Utah.

        4.7 OPINION OF COMPANY COUNSEL.

                Each Investor shall have received from Parr Waddoups Brown Gee & Loveless, counsel for the Company, an opinion, dated the date of the
        Closing, in form and substance satisfactory to special counsel to the
        Investors, as to the matters set forth in Exhibit D hereto.

        4.8 INVESTOR RIGHTS AGREEMENT.

                The Company and the Investors and the other parties thereto
        shall have entered into an amended and restated investor rights
        agreement in form and substance as set forth in Exhibit E


   18
        hereto (the 'Investor Rights Agreement'), and the Investor Rights
        Agreement shall be in full force and effect as of the Closing.

        4.9 VOTING AGREEMENT.

                The Company and the Investors and the other parties thereto
        shall have entered into a voting agreement in form and substance as set
        forth in Exhibit F hereto (the 'Voting Agreement'), and the Voting
        Agreement shall be in full force and effect as of the Closing.

5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.

        The obligations of the Company to each Investor under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions by that Investor:

        5.1 REPRESENTATIONS AND WARRANTIES.

                The representations and warranties of each Investor contained in
        Section 3 shall be true on and as of the Closing with the same effect as
        though such representations and warranties had been made on and as of
        the date of the Closing.

        5.2 QUALIFICATIONS.

                All authorizations, approvals or permits, if any, of any
        governmental authority or regulatory body of the United States or of any
        state that are required in connection with the lawful issuance and sale
        of the Stock pursuant to this Agreement shall be duly obtained and
        effective as of the Closing.

6. POST-CLOSING COVENANTS OF THE COMPANY.

        6.1 SMALL BUSINESS CONCERN DOCUMENTS.

                The Company shall execute and deliver to each Investor who
        requests them the following documents:

        (a)     Within 75 days after the Closing and at the end of each month
        thereafter until all of the proceeds from the financing hereunder have
        been used by the Company, the Company shall deliver to Investor which is
        an SBIC ('SBIC Holder') a written statement certified by the Company's
        president or chief financial officer describing in reasonable detail the
        use of the proceeds of the financing hereunder by the Company. In
        addition to any other rights granted hereunder, the Company shall grant
        the SBIC Holder and the SBA access to the Company's records for the
        purpose of verifying the use of such proceeds.

        (b)     Promptly after the end of each fiscal year (but in any event
        prior to February 28 of each year), the Company shall deliver to the
        SBIC Holder a written assessment of the economic impact of the SBIC
        Holder's investment in the Company, specifying the full-time equivalent
        jobs created or retained in connection with the investment, the impact
        of the investment on the businesses of the Company in terms of expanded
        revenue and taxes and other economic benefits resulting from


   19
        the investment (including, but not limited to, technology development or
        commercialization, minority business development, urban or rural
        business development and expansion of exports).

        6.2 REGULATORY COMPLIANCE COOPERATION.

        (a)     In the event that the SBIC Holder determines that it has a
        Regulatory Problem (as defined below), the Company shall take all such
        actions as are reasonably requested by the SBIC Holder in order to (a)
        effectuate and facilitate any transfer by the SBIC Holder of any
        securities of the Company then held by the SBIC Holder, (b) permit the
        SBIC Holder (or any Affiliate of the SBIC Holder) to exchange all or any
        portion of the Series B Preferred Stock then held by the SBIC Holder on
        a share-for-share basis for shares of a class of non-voting common stock
        of the Company, which non-voting common stock shall be identical in all
        respects to such Series B Preferred Stock, except that such common stock
        shall be non-voting and shall be convertible into Common Stock on such
        terms as are requested by the SBIC Holder in light of regulatory
        considerations then prevailing, (c) continue and preserve the respective
        allocation of the voting interests with respect to the Company provided
        for in the Amended Articles with respect to the SBIC Holder's ownership
        of the Company's Series B Preferred Stock and underlying Common Stock,
        and (d) amend this Agreement, the Amended Articles and other related
        agreements to effectuate and reflect the foregoing. Such actions may
        include, but shall not necessarily be limited to:

                    (i) entering into such additional agreements as are
                requested by the SBIC Holder to permit any person(s) and/or
                entities designated by the SBIC Holder to exercise any voting
                power which is relinquished by the SBIC Holder upon any exchange
                of Common Stock for non-voting stock of the Company; and

                    (ii) entering into such additional agreements, adopting such
                amendments to the Amended Articles and Bylaws of the Company and
                taking such additional actions as are reasonably requested by
                the SBIC Holder in order to effectuate the intent of the
                foregoing.

        (a)     For purposes of this Agreement, a 'Regulatory Problem' means any
        set of facts or circumstances wherein it has been asserted by any
        governmental regulatory agency (or the SBIC Holder believes that there
        is a substantial risk of such assertion) that the SBIC Holder and its
        Affiliates are not entitled to hold, or exercise any significant right
        with respect to, the Series B Preferred Stock or the Common Stock.

        6.3 FINANCIAL STATEMENTS AND OTHER INFORMATION.

               The Company shall deliver to Investor:

        (a)     as soon as available, but in any event within 45 days after the
        end of each quarterly accounting period in each fiscal year, unaudited
        statements of income and cash flows of the Company for such quarterly
        period and for the period from the beginning of the fiscal year to the
        end of such quarter, and unaudited balance sheets of the Company as of
        the end of such quarterly period, setting forth in each case comparisons
        to the Company's annual budget and to the corresponding period in the
        preceding fiscal year, and all such statements shall be prepared in
        accordance with generally accepted accounting principles, consistently
        applied, subject to the absence of footnote disclosures and to normal
        year-end adjustments for recurring accruals, and shall be certified by
        the Company's chief financial officer;


   20
        (b)     within 90 days after the end of each fiscal year, audited
        statements of income and cash flows of the Company for such fiscal year,
        and audited balance sheets of the Company as of the end of such fiscal
        year, setting forth in each case comparisons to the Company's annual
        budget and to the preceding fiscal year, all prepared in accordance with
        generally accepted accounting principles, consistently applied, and
        accompanied by, with respect to the consolidated portions of such
        statements, an opinion containing no exceptions or qualifications
        (except for qualifications regarding specified contingent liabilities)
        of an independent accounting firm of recognized national standing;

        (c)     promptly upon receipt thereof, any additional reports,
        management letters or other detailed information concerning significant
        aspects of the Company's operations or financial affairs given to the
        Company by its independent accountants (and not otherwise contained in
        other materials provided hereunder);

        (d)     at least 5 days but not more than 90 days prior to the beginning
        of each fiscal year, an annual business plan prepared on a monthly basis
        for the Company for such fiscal year (displaying anticipated statements
        of income and cash flows and balance sheets), and promptly upon
        preparation thereof any other significant business plans prepared by the
        Company and any revisions of such annual or other business plans;

        (e)     prompt notification of any matter or matters which would
        reasonably be expected to, individually or in the aggregate, have a
        material adverse effect on the financial condition, operating results,
        business, assets, operations, employee relations or customer or supplier
        relations of the Company (a 'Material Adverse Effect');

        (f)     within ten days after transmission thereof, copies of all
        financial statements, proxy statements, reports and any other general
        written communications which the company sends to its shareholders and
        copies of all registration statements and all regular, special or
        periodic reports which it files, or any of its officers or directors
        file with respect to the Company, with the SEC or with any securities
        exchange on which any of its securities are then listed, and copies of
        all press releases and other statements made available generally by the
        Company to the public concerning material developments in the Company's
        business; and

        (g)     with reasonable promptness, such other information and financial
        data concerning the Company as any person entitled to receive
        information under this Section 6.8 may reasonably request.

                Each of the financial statements referred to in subparagraphs
        (a) and (b) shall be true and correct in all material respects as of the
        dates and for the periods stated therein, subject in the case of the
        unaudited financial statements to changes resulting from normal year-end
        adjustments for recurring accruals (none of which would, alone or in the
        aggregate, be materially adverse to the financial condition, operating
        results, business, assets, operations, business prospects, employee
        relations or customer or supplier relations of the Company).

        6.4 INSPECTION OF PROPERTY.

               The Company shall permit each Investor, upon reasonable notice
and during normal business hours and at such other times as any such holder may
reasonably request, to (i) visit and inspect any of the properties of the
Company, (ii) examine the corporate and financial records of the Company


   21
and make copies thereof or extracts therefrom, and (iii) discuss the affairs,
finances and accounts of any such corporations with the directors, officers and
key employees of the Company. Notwithstanding anything to the contrary contained
herein, the terms and provisions of this paragraph Section 6.5 shall terminate
automatically and be of no further force and effect upon the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement filed under the Securities Act covering the offer and sale of Common
Stock for the account of the Company at a price per share equal to or greater
than $8.00 and in which the aggregate public offering price (before deduction of
underwriters' discounts and qualifications) equals or exceeds $25,000,000 (a
'Qualified Public Offering').

        6.5 ATTENDANCE AT BOARD MEETINGS.

               The Company shall deliver to each Investor which, together with
its affiliates and or permitted transferees, holds at least 500,000 shares of
the Series B Preferred Stock (a 'Representative Holder') written notice of each
meeting of its board of directors and each committee thereof at least three
business days prior to the date of each such meeting, and the Company shall
permit a representative of each such Representative Holder to attend as an
observer all meetings of its board of directors and all committees thereof;
provided that in the case of telephonic meetings conducted in accordance with
the bylaws and the Company and applicable law, each such Representative Holder
need receive only actual notice thereof at least 48 hours prior to any such
meeting, and each such Representative Holder's representative shall be given the
opportunity to listen to such telephonic meetings. Each representative shall be
entitled to receive all written materials and other information (including,
without limitation, copies of meeting minutes) given to directors in connection
with such meetings substantially at the same time such materials and information
are given to the directors; provided, however, that the Company reserves the
right to exclude such representative from access to any material or portion
thereof if the Company believes upon advice of counsel that such exclusion is
reasonably necessary to preserve the Company's attorney-client privilege. If the
Company proposes to take any action by written consent in lieu of a meeting of
its board of directors or of any committee thereof, the Company shall give
written notice thereof to each such Representative Holder promptly after the
effective date of such consent describing in reasonable detail the nature and
substance of such action. The Company shall pay the reasonable out-of-pocket
expenses of each representative incurred in connection with attending any such
board and committee meetings which are held outside of the State of Utah.
Notwithstanding anything to the contrary contained herein, the terms and
provisions of this paragraph Section 6.5 shall terminate automatically and be of
no further force and effect upon the consummation of a Qualified Public
Offering.

        6.6 CURRENT PUBLIC INFORMATION.

               At all times after the Company has filed a registration statement
with the Securities and Exchange Commission pursuant to the requirements of
either the Securities Act or the Securities Exchange Act, the Company shall file
all reports required to be filed by it under the Securities Act and the
Securities Exchange Act and the rules and regulations adopted by the Securities
and Exchange Commission thereunder and shall take such further action with
respect to the provision of information as any holder or holders of Securities
may reasonably request, all to the extent required to enable such holders to
sell Securities pursuant to (i) Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission, or (ii) a registration statement on Form S-2 or S-3 or any
similar registration form hereafter adopted by the Securities and Exchange
Commission. Upon request, the Company shall deliver to any holder of Securities
a written statement as to whether it has complied with such requirements.


   22
        6.7 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS.

                The Company and each of its Subsidiaries shall their use their
        collective best efforts to cause all of the current employees and all of
        the officers of the Company and each of its Subsidiaries to execute an
        Employee Inventions and Confidentiality Agreement in the forms attached
        hereto on Exhibit C within thirty (30) days after the Closing.

7 MISCELLANEOUS.

        7.1 ENTIRE AGREEMENT.

                This Agreement and the documents referred to herein constitute
        the entire agreement among the parties and no party shall be liable or
        bound to any other party in any manner by any warranties,
        representations or covenants, except as specifically set forth herein or
        therein.

        7.2 SURVIVAL OF WARRANTIES.

                The warranties, representations and covenants of the Company and
        the Investors contained in or made pursuant to this Agreement shall
        survive the execution and delivery of this Agreement and the Closing.

        7.3 SUCCESSORS AND ASSIGNS.

                Except as otherwise provided herein, the terms and conditions of
        this Agreement shall inure to the benefit of and be binding upon the
        respective successors and assigns of the parties (including permitted
        transferees of any shares of Series B Preferred Stock sold hereunder or
        any Common Stock issued upon conversion thereof). Nothing in this
        Agreement, express or implied, is intended to confer upon any party
        other than the parties hereto or their respective successors and assigns
        any rights, remedies, obligations or liabilities under or by reason of
        this Agreement, except as expressly provided in this Agreement.

        7.4 GOVERNING LAW.

                This Agreement shall be governed by and construed under the laws
        of the State of Utah as applied to agreements among Utah residents
        entered into and to be performed entirely within Utah.

        7.5 COUNTERPARTS.

                This Agreement may be executed in two or more counterparts, each
        of which shall be deemed an original, but all of which together shall
        constitute one and the same instrument.

        7.6 TITLES AND SUBTITLES.

                The titles and subtitles used in this Agreement are used for
        convenience only and are not to be considered in construing or
        interpreting this Agreement.


   23
        7.7 NOTICES.

                Unless otherwise provided, all notices and other communications
        required or permitted under this Agreement shall be in writing and shall
        be mailed by United States first-class mail, postage prepaid, sent by
        facsimile or delivered personally by hand or by a nationally recognized
        courier addressed to the party to be notified at the address or
        facsimile number indicated for such person on Schedule A hereto, or at
        such other address or facsimile number as such party may designate by
        ten (10) days' advance written notice to the other parties hereto. All
        such notices and other written communications shall be effective on the
        date of mailing, confirmed facsimile transfer or delivery.

        7.8 FINDER'S FEES.

                Each party represents that it neither is nor will be obligated
        for any finder's fee or commission in connection with this transaction.

                Each Investor, severally and not jointly, agrees to indemnify
        and to hold harmless the Company from any liability for any commission
        or compensation in the nature of a finder's fee (and the cost and
        expenses of defending against such liability or asserted liability) for
        which such Investor or any of its officers, partners, employees or
        representatives is responsible.

                The Company agrees to indemnify and hold harmless each Investor
        from any liability for any commission or compensation in the nature of a
        finder's fee (and the costs and expenses of defending against such
        liability or asserted liability) for which the Company or any of its
        officers, employees or representatives is responsible.

        7.9 EXPENSES.

        (a) At the Closing, the Company shall reimburse the Investors for their
reasonable out-of-pocket fees and expenses incurred in connection with the
investigation, negotiation and documentation of the transactions contemplated
hereby (including, without limitation, attorneys' and accountants' fees) not to
exceed in the aggregate $150,000.00.

        (b) The Company shall pay its own out-of-pocket expenses and all stamp
and other taxes which may be payable in respect of the execution and delivery of
this Agreement, the Ancillary Agreements, or the issuance, delivery or
acquisition of the Series B Preferred Stock.

        (c) The Company further agrees to reimburse the Investors on demand for
the Investors' reasonable out-of-pocket fees and expenses incurred in connection
with any amendment to or waiver of any provision of this Agreement necessitated
by the breach of any provision of this Agreement by the Company or enforcement
of this Agreement by the Investors (subject to the terms and provisions of
Section 7.10 below).

        7.10 ATTORNEYS' FEES.

                If any action at law or in equity is necessary to enforce or
        interpret the terms of this Agreement, any Ancillary Agreement or the
        Amended Articles, the prevailing party shall be entitled to be
        reimbursed by the non-prevailing party for reasonable attorneys' fees,
        costs and disbursements, in addition to any other relief to which such
        party may be entitled.


   24
        7.11 AMENDMENTS AND WAIVERS.

                Any term of this Agreement may be amended and the observance of
        any term of this Agreement may be waived (either generally or in a
        particular instance and either retroactively or prospectively), only
        with the written consent of the Company and the holders of more than 50%
        of the Common Stock not previously sold to the public that is issued or
        issuable upon conversion of the Series B Preferred Stock. Any amendment
        or waiver effected in accordance with this paragraph shall be binding
        upon each holder of any securities purchased under this Agreement at the
        time outstanding (including securities into which such securities have
        been converted), each future holder of all such securities, and the
        Company.

        7.12 SEVERABILITY.

                If one or more provisions of this Agreement are held to be
        unenforceable under applicable law, such provision shall be excluded
        from this Agreement and the balance of the Agreement shall be
        interpreted as if such provision were so excluded and shall be
        enforceable in accordance with its terms.

                                    * * * * *

   25
     IN WITNESS WHEREOF, the parties have executed this Series B Preferred Stock
Purchase Agreement as of the date first above written.

                                   CALDERA SYSTEMS, INC., A UTAH CORPORATION


                                   By: /s/ RANSOM H. LOVE
                                       -------------------------------------
                                         Name:    Ransom H. Love
                                         Title:   President


                                   CHICAGO VENTURE PARTNERS, L.P.

                                   By:  Chicago Venture Management, L.L.C.
                                   Its: General Partner

                                   By:  CVM, Inc.
                                   Its: Manager

                                   By:
                                       -------------------------------------
                                         Name:    John Fife
                                         Title:   President


                                   CHICAGO VENTURE PARTNERS B, L.L.C.

                                   By:  Burlington Investments, Inc.
                                   Its: Manager

                                   By:
                                       -------------------------------------
                                         Name:    John Fife
                                         Title:   President


                                   EGAN MANAGED-CAPITAL, L.P.

                                   By:  EMC Partners, L.P.
                                   Its: General Partner

                                   By:
                                       -------------------------------------
                                         Name:    Michael H. Shanahan
                                         Title:   General Partner

   26
                                        ENSIGN PEAK ADVISORS, INC.



                                        By:
                                           -------------------------------
                                           Name:  F. James Cowan
                                           Title: Senior Vice President





                                        THE SANTA CRUZ OPERATION, INC.



                                        By:
                                           -------------------------------
                                           Name:  Jenny Twaddle
                                           Title: Acting CFO and
                                                  Corporate Controller





                                        SUN MICROSYSTEMS, INC.



                                        By:
                                           -------------------------------
                                           Name:
                                           Title:






                                        NOVELL, INC.



                                        By:
                                           -------------------------------
                                           Name:
                                           Title:





                                        CITRIX SYSTEMS, INC.



                                        By:
                                           -------------------------------
                                           Name:
                                           Title:
   27
                                ARISTA CAPITAL PARTNERS, L.P.

                                By:  Arista Capital Management, L.L.C.
                                Its: General Partner

                                By:
                                     -------------------------------------
                                     Name:
                                     Title:


                                BAYVIEW

                                By:
                                     -------------------------------------
                                     Name:
                                     Title:


                                FIC

                                By:
                                     -------------------------------------
                                     Name:
                                     Title: