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                                                                   EXHIBIT 10.10

                            STOCK PURCHASE AGREEMENT

                                      AMONG

                           MTI TECHNOLOGY CORPORATION,
                             a Delaware corporation

                             CALDERA SYSTEMS, INC.,
                               a Utah corporation

                                       AND

                             THE CANOPY GROUP, INC.,
                               a Utah corporation

                            Dated as of July 27, 1999

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                                TABLE OF CONTENTS

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1.      DEFINITIONS .......................................................  1

2.      PURCHASE AND SALE OF COMPANY SHARES AND SHAREHOLDER SHARES ........  4
        2.1     Basic Transaction..........................................  4
        2.2     Purchase Price.............................................  4
        2.3     The Closing................................................  5
        2.4     Deliveries at the Closing..................................  5

3.      REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION .........  5
        3.1     Representations and Warranties of the Company..............  5
        3.2     Representations and Warranties of the Shareholder..........  16
        3.3     Representations and Warranties of the Buyer................  17

4.      PRE-CLOSING COVENANTS .............................................  18
        4.1     General ...................................................  18
        4.2     Notices and Consents.......................................  18
        4.3     Operation of Business......................................  18
        4.4     Preservation of Business...................................  18
        4.5     Full Access................................................  19
        4.6     Notice of Developments.....................................  19
        4.7     Exclusivity ...............................................  19

5.      POST-CLOSING COVENANTS ............................................  19
        5.1     General ...................................................  19
        5.2     Consultation...............................................  19
        5.3     Records....................................................  20
        5.4     Observer Rights............................................  20
        5.5     Legends....................................................  20
        5.6     Distribution and License Agreement.........................  21

6.      CONDITIONS TO OBLIGATION TO CLOSE..................................  21
        6.1     Conditions to Obligation of the Buyer......................  21
        6.2     Conditions to Obligation of the Company and Shareholder....  22

7.      REMEDIES FOR BREACHES OF THIS AGREEMENT............................  23
        7.1     Survival of Representations and Warranties.................  23
        7.2     Indemnification Provisions for Benefit of the Buyer........  23
        7.3     Indemnification Provisions for Benefit of the Company and
                Shareholder................................................  24
        7.4     Matters Involving Third Parties............................  24
        7.5     Determination of Adverse Consequences......................  25
        7.6     Recoupment Against Purchase Price..........................  26
        7.7     Other Indemnification Provisions...........................  26
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8.      TAX MATTERS........................................................  27
        8.1     Certain Taxes..............................................  27

9.      TERMINATION........................................................  27
        9.1     Termination of Agreement...................................  27
        9.2     Effect of Termination......................................  27

10.     MISCELLANEOUS .....................................................  28
        10.1    Press Releases and Public Announcements....................  28
        10.2    No Third-Party Beneficiaries...............................  28
        10.3    Entire Agreement...........................................  28
        10.4    Succession and Assignment..................................  28
        10.5    Counterparts...............................................  28
        10.6    Headings...................................................  28
        10.7    Notices....................................................  28
        10.8    Governing Law..............................................  29
        10.9    Amendments and Waivers.....................................  29
        10.10   Severability...............................................  30
        10.11   Expenses...................................................  30
        10.12   Construction...............................................  30
        10.13   Incorporation of Exhibits, Annexes, and Schedules..........  30
        10.14   Specific Performance.......................................  30
        10.15   Submission to Jurisdiction.................................  30
        10.16   Confidentiality............................................  31
        10.17   California Corporate State Securities Law..................  31
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Exhibit "A" -- Historical Financial Statements

Exhibit "B" -- Form of Opinion of Counsel to the Company

Exhibit "C" -- Form of Investors Rights Agreement

Exhibit "D" -- Distribution and License Agreement

Annex I -- Disclosure Schedule of Exceptions to the Company and its Subsidiaries
              Representations and Warranties Concerning the Transaction

Annex II -- Exceptions to the Shareholder's Representations and Warranties
               Concerning the Transaction

Annex III -- Exceptions to the Buyer's Representations and Warranties Concerning
                the Transaction

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                            STOCK PURCHASE AGREEMENT

      Agreement entered into as of July 27, 1999, by and among MTI Technology
Corporation, a Delaware corporation (the "Buyer"), Caldera Systems, Inc., a Utah
corporation (the "Company"), and The Canopy Group, Inc., a Utah corporation (the
"Shareholder"). The Buyer, the Company and the Shareholder are referred to
collectively herein as the "Parties."

      A. The Company has 50,000,000 shares of authorized common stock,
16,000,000 of which are issued and outstanding.

      B. The Shareholder owns sixteen million (16,000,000) shares of the
outstanding capital stock of the Company.

      C. Buyer desires to acquire an aggregate of 25% of the issued and
outstanding capital stock of the Company, calculated immediately following the
closing of the transactions contemplated hereunder.

      Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.

      1 . Definitions.

            "Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.

            "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.

            "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.

            "Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a) or any similar group defined under a similar provision of
state, local or foreign law.

            "Applicable Rate" means the prime rate of interest publicly
announced from time to time by The Wall Street Journal plus 1% per annum.

            "Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.

            "Buyer" has the meaning set forth in the preface above.

            "Closing" has the meaning set forth in Section 2.3 below.

            "Closing Date" has the meaning set forth in Section 2.3 below.

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            "Code" means the Internal Revenue Code of 1986, as amended.

            "Company" has the meaning set forth in the preface above.

            "Company Share" means any of the 5,333,333 shares of Common Stock,
no par value, of the Company that the Buyer is purchasing from the Company as
contemplated in this Agreement.

            "Confidential Information" has the meaning set forth in Section
10.16 below.

            "Deductible" has the meaning set forth in Section 7.2 below.

            "Deferred Intercompany Transaction" has the meaning set forth in
Reg. Section 1.1502-13.

            "Disclosure Schedule" has the meaning set forth in Section 3.1
below.

            "Distribution and License Agreement" shall mean the reciprocal
Distribution and License Agreement identified in Sections 5.6 and 6.1(k) below.

            "Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.

            "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).

            "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(l).

            "Environmental, Health, and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and as
now or hereafter in effect.

            "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.

            "Excess Loss Account" has the meaning set forth in Reg. Section
1.1502-19.

            "Fiduciary" has the meaning set forth in ERISA Section 3(21).

            "Financial Statement" has the meaning set forth in Section 3.1(h)
below.

            "Final Distribution" has the meaning set forth in Section 2.2 below.

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            "GAAP" means United States generally accepted accounting principles
as in effect from time to time.

            "Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.

            "Indemnified Party" has the meaning set forth in Section 7.4 below.

            "Indemnifying Party" has the meaning set forth in Section 7.4 below.

            "Informed Party" has the meaning set forth in Section 10.16 below.

            "Informing Party" has the meaning set forth in Section 10.16
below.

            "Initial Distribution" has the meaning set forth in Section 2.2
below.

            "Intellectual Property" means (a) patent rights, patent
applications, and patents, and reissuances, continuations,
continuations-in-part, divisions, extensions, and reexaminations thereof, (b)
trademarks, service marks, and trade names, and applications to register
trademarks or service marks, and registrations of trademarks and service marks,
(c) copyrights, and all applications to register copyrights, and all
registrations of copyrights, and renewals thereof, (d) trade secrets and other
proprietary rights, and (e) any other intellectual property.

            "Investors Rights Agreement" means an Investors Rights Agreement
between the Company, the Shareholder and Buyer substantially in the form of
Exhibit "C."

            "Knowledge" means actual knowledge after reasonable investigation;
provided, however, that there is no obligation to conduct intellectual property
searches or other intellectual property investigations outside the Company and
its subsidiaries.

            "Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.

            "Millennial Dates" has the meaning set forth in Section 3.1(m)(vi)
below.

            "Most Recent Balance Sheet" means the balance sheet at June 23,
1999.

            "Multiemployer Plan" has the meaning set forth in ERISA Section
3(37).

            "Ordinary Course of Business" means the ordinary course of business
consistent with past or current custom and practice.

            "Party" has the meaning set forth in the preface above.

            "PBGC" means the Pension Benefit Guaranty Corporation.

            "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).

            "Products" has the meaning set forth in Section 3.1(m)(vi) below.

            "Purchase Price" has the meaning set forth in Section 2.2 below.

            "Reduction Notice" has the meaning set forth in Section 7.6(a)
below.

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            "Reduction Disputing Notice" has the meaning set forth in Section
7.6(b) below.

            "Reportable Event" has the meaning set forth in ERISA Section 4043.

            "Securities Act" means the Securities Act of 1933, as amended.

            "Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.

            "Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.

            "Subsidiary" means any corporation or other entity with respect to
which a specified Person (or a Subsidiary thereof) owns a majority of the common
stock or has the power to vote or direct the voting of sufficient securities to
elect a majority of the directors or similar governing body (e.g. managers).

            "Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.

            "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.

            "Third Party Claim" has the meaning set forth in Section 7.4 below.

            "Transactional Agreements" means this Agreement and the Investors
Rights Agreement.

            "Year 2000 Compliant" has the meaning set forth in Section
3.1(m)(vi) below.

      2. Purchase and Sale of Company Shares and Shareholder Shares.

            2.1 Basic Transaction.

            On and subject to the terms and conditions of this Agreement, the
Buyer agrees to purchase from the Company, and the Company agrees to sell to the
Buyer, an aggregate of 5,333,333 Company Shares for the consideration specified
below in this Section 2.

            2.2 Purchase Price.

            The Buyer agrees to pay to the Company an aggregate of Six Million
Dollars ($6,000,000) in consideration for the Company Shares (the "Purchase
Price"). The Purchase Price shall be delivered by the Buyer to the Company in
three distributions. The Buyer shall deliver

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Three Million Dollars ($3,000,000) to the Company at the Closing (hereinafter
the "Initial Distribution"). On the later of (a) the resolution of any pending
recoupment pursuant to Section 7.6 or (b) six (6) months after the Closing, the
Buyer shall deliver to the Company One Million Five Hundred Thousand Dollars
($1,500,000), plus interest accrued thereon at the Applicable Rate, and less any
amounts due Buyer under Section 7 (hereinafter the "Second Distribution"). On
the later of (y) the resolution of any pending recoupment pursuant to Section
7.6 or (z) twelve (12) months after the Closing, the Buyer shall deliver to the
Company One Million Five Hundred Thousand Dollars ($1,500,000), plus interest
accrued thereon at the Applicable Rate, and less any amounts due Buyer under
Section 7, to the Company (hereinafter the "Final Distribution").

            2.3 The Closing.

            The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Morrison & Foerster LLP at 19900
MacArthur Boulevard, Irvine, California, commencing at 9:00 a.m. local time on
the later of August 6, 1999 or the second business day following the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing itself) or
such other date as the Buyer and the Company may mutually determine (the
"Closing Date").

            2.4 Deliveries at the Closing.

            At the Closing, (i) the Company will deliver to the Buyer the
various certificates, instruments, and documents referred to in Section 6.1
below, (ii) the Buyer will deliver to the Company the various certificates,
instruments, and documents referred to in Section 6.2 below, (iii) the Company
will deliver to the Buyer stock certificates representing all of the Company
Shares, and (iv) the Buyer will deliver to the Company the consideration
specified in Section 2.2 above.

      3. Representations and Warranties Concerning the Transaction.

            3.1 Representations and Warranties of the Company and its
Subsidiaries.

            The Company represents and warrants to the Buyer that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3), except as set forth in the disclosure
schedule delivered by the Company to the Buyer on the date hereof and initialed
by the Parties (the "Disclosure Schedule"), attached hereto as Annex I. Nothing
in the Disclosure Schedule shall be deemed adequate to disclose an exception to
a representation or warranty made herein, however, unless the Disclosure
Schedule identifies the exception and the relevant facts with reasonable detail.
Without limiting the generality of the foregoing, the mere listing (or inclusion
of a copy) of a document or other item shall not be deemed adequate to disclose
an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Section
3.

                  (a) Organization, Qualification and Corporate Power. Each of
the Company and its Subsidiaries is a corporation duly organized, validly
existing, and in good

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standing under the laws of the jurisdiction of its incorporation. Each of the
Company and its Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required (except for any such jurisdiction in which the failure to be so
qualified, individually or in the aggregate, would not have a material adverse
effect on the Company or any of its Subsidiaries). Each of the Company and its
Subsidiaries has full corporate power and authority and all licenses, permits,
and authorizations necessary to carry on the businesses in which it is engaged
and in which it presently proposes to engage and to own and use the properties
owned and used by it, except for any such licenses, permits and authorizations,
the failure of which to obtain, individually or in the aggregate, would not have
a material adverse effect on the Company or any of its Subsidiaries. The Company
has delivered to the Buyer correct and complete copies of the charter and bylaws
of each of the Company and its Subsidiaries (as amended to date). The minute
books (containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock certificate
books, and the stock record books of each of the Company and its Subsidiaries
are correct and complete. None of the Company or any of its Subsidiaries is in
default under or in violation of any provision of its charter or bylaws.

                  (b) Authorization of Transaction. The Company has full
corporate power and authority to execute and deliver this Agreement, the
Investors Rights Agreement and the Distribution and License Agreement and to
perform its obligations hereunder and thereunder. Each of the Transactional
Agreements constitutes the valid and legally binding obligation of the Company,
enforceable in accordance with their respective terms and conditions. Except for
filings that may be required by applicable state securities laws, the Company
need not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by the Transactional Agreements.

                  (c) Noncontravention. Neither the execution and the delivery
of the Transactional Agreements, nor the consummation of the transactions
contemplated hereby and thereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which any of the
Company and its Subsidiaries is subject or any provision of the charter or
bylaws of any of the Company and its Subsidiaries, or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which any of the Company or any of its Subsidiaries is a
party or by which it is bound or to which any of their respective assets are
subject (or result in the imposition of any Security Interest upon any of their
respective assets).

                  (d) Brokers' Fees. The Company has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.

                  (e) Company Shares. The Company Shares have been duly and
validly authorized and at the Closing will be duly and validly issued,
nonassessable and fully paid, free and clear of any restrictions on transfer
(other than any restrictions under the Securities Act and state securities
laws), Taxes, Security Interests, options, warrants, purchase rights,
contracts,

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commitments, equities, claims, and demands, except as provided in the Investors
Rights Agreement.

                  (f) Title to Assets. The Company and its Subsidiaries have
good and marketable title to, or a valid leasehold or license interest in, or
other right to use, the properties and assets used by them, located on their
premises, or shown on the Most Recent Balance Sheet or acquired after the date
thereof, free and clear of all Security Interests, except for properties and
assets disposed of in the Ordinary Course of Business since the date of the Most
Recent Balance Sheet. This subsection (f) shall not apply to Intellectual
Property or any infringement, misappropriation or violation of Intellectual
Property. Any warranty of the Company concerning Intellectual Property is
limited to subsections (m) and (p) below.

                  (g) Subsidiaries. Section 3.1(g) of the Disclosure Schedule
sets forth for each Subsidiary of the Company (i) its name and jurisdiction of
incorporation or organization, (ii) the number of shares of authorized capital
stock of each class of its capital stock, (iii) the number of issued and
outstanding shares of each class of its capital stock, the names of the holders
thereof, and the number of shares held by each such holder, and (iv) the number
of shares of its capital stock held in treasury. All of the issued and
outstanding shares of capital stock of each Subsidiary of the Company have been
duly authorized and are validly issued, fully paid, and nonassessable. The
Company or its Subsidiary holds of record and owns beneficially the number of
shares of each Subsidiary of the Company as set forth in Section 3.1(g) of the
Disclosure Schedule, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments
equities, claims, and demands. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require any of the Company
and its Subsidiaries to sell, transfer, or otherwise dispose of any capital
stock of any of its Subsidiaries or that could require any Subsidiary of the
Company to issue, sell, or otherwise cause to become outstanding any of its own
capital stock. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of any Subsidiary
of the Company. None of the Company and its Subsidiaries controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which is not a
Subsidiary of the Company.

                  (h) Financial Statements. Attached hereto as Exhibit "A" are
the following financial statements (collectively the "Financial Statements"):
(i) unaudited consolidated monthly income statement for November 1998 through
April 1999, and the individual monthly statements for such quarter, for the
Company and its Subsidiaries; (ii) unaudited balance sheets as of June 23, 1999
for the Company and its Subsidiaries; and (iii) the Company's Business Plan
covering operations from November 1, 1999 through October 31, 2001. The
Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, and except as to the projection and Business Plan, present
fairly the financial condition of the Company and its Subsidiaries as of such
dates and the results of operations of the Company and its Subsidiaries for such
periods, are correct and complete, and are consistent with the books and records
of the Company and its Subsidiaries (which books and records are correct and
complete), subject to normal year-end adjustments (which

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will not be material individually or in the aggregate) and lack footnotes and
other presentation items.

                  (i) Events Subsequent to Most Recent Balance Sheet. Since the
date of the Most Recent Balance Sheet, there has not been any adverse change in
the business, financial condition, operations, results of operations, or future
prospects of any of the Company and its Subsidiaries. Without limiting the
generality of the foregoing, since that date:

                        (i) none of the Company or its Subsidiaries has sold,
      leased, transferred, or assigned any of its assets, tangible or
      intangible, other than in the Ordinary Course of Business and in the
      reasonable business judgment of the Company for a fair consideration;

                        (ii) none of the Company or its Subsidiaries has entered
      into any agreement, contract, lease, or license (or series of related
      agreements, contracts, leases, and licenses) either involving more than
      $100,000 or outside the Ordinary Course of Business;

                        (iii) no party (including any of the Company and its
      Subsidiaries) has accelerated, terminated, modified, or cancelled any
      agreement, contract, lease, or license (or series of related agreements,
      contracts, leases, and licenses) involving more than $100,000 to which any
      of the Company and its Subsidiaries is a party or by which any of them is
      bound;

                        (iv) none of the Company or its Subsidiaries has imposed
      any Security Interest upon any of its assets, tangible or intangible;

                        (v) none of the Company or its Subsidiaries has made any
      capital expenditure (or series of related capital expenditures) either
      involving more than $100,000 or outside the Ordinary Course of Business;

                        (vi) none of the Company or its Subsidiaries has made
      any capital investment in, any loan to, or any acquisition of the
      securities or assets of, any other Person (or series of related capital
      investments, loans, and acquisitions) either involving more than $100,000
      or outside the Ordinary Course of Business;

                        (vii) none of the Company or its Subsidiaries has issued
      any note, bond, or other debt security or created, incurred, assumed, or
      guaranteed any indebtedness for borrowed money or capitalized lease
      obligation either involving more than $250,000 singly or $1,000,000 in the
      aggregate;

                        (viii) none of the Company or its Subsidiaries has
      delayed or postponed the payment of accounts payable and other Liabilities
      outside the Ordinary Course of Business;

                        (ix) none of the Company or its Subsidiaries has
      cancelled, compromised, waived, or released any right or claim (or series
      of related rights and claims) either involving more than $100,000 or
      outside the Ordinary Course of Business;

                        (x) except as set forth in Section 3.1(i)(x) of the
      Disclosure Schedule, none of the Company or its Subsidiaries has granted
      any license or sublicense of any rights under or with respect to any
      Intellectual Property;

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                        (xi) there has been no change made or authorized in the
      charter or bylaws of any of the Company and its Subsidiaries;

                        (xii) none of the Company or its Subsidiaries has
      experienced any material damage, destruction, or loss (whether or not
      covered by insurance) to its property;

                        (xiii) none of the Company or its Subsidiaries has made
      any loan to, or entered into any other transaction with, any of its
      directors, officers, and employees outside the Ordinary Course of
      Business;

                        (xiv) except as set forth on Section 3.1(i)(xiv) of the
      Disclosure Schedule, none of the Company or its Subsidiaries has entered
      into any employment contract or collective bargaining agreement, written
      or oral, or modified the terms of any existing such contract or agreement;

                        (xv) none of the Company or its Subsidiaries has granted
      any increase in the base compensation of any of its directors, officers,
      and employees outside the Ordinary Course of Business;

                        (xvi) none of the Company or its Subsidiaries has
      adopted, amended, modified, or terminated any bonus, profit-sharing,
      incentive, severance, or other plan, contract, or commitment for the
      benefit of any of its directors, officers, and employees (or taken any
      such action with respect to any other Employee Benefit Plan);

                        (xvii) none of the Company or its Subsidiaries has made
      any other change in employment terms for any of its directors, officers,
      and employees outside the Ordinary Course of Business;

                        (xviii) none of the Company or its Subsidiaries has made
      or pledged to make any charitable or other capital contribution outside
      the Ordinary Course of Business;

                        (xix) there has not been any other occurrence, event,
      incident, action, failure to act, or transaction outside the Ordinary
      Course of Business involving any of the Company and its Subsidiaries; and

                        (xx) none of the Company or its Subsidiaries has
      committed to any of the foregoing.

                  (j) Undisclosed Liabilities. None of the Company or its
Subsidiaries has any Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any Liability), except for (i)
Liabilities set forth on the face of the Most Recent Balance Sheet (rather than
in any notes thereto) and (ii) Liabilities which have arisen after the date of
the Most Recent Balance Sheet in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law).

                  (k) Legal Compliance. Each of the Company, its Subsidiaries,
and their respective predecessors and Affiliates, has complied with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder)

                                       9
<PAGE>   14
of federal, state, local, and foreign governments (and all agencies thereof),
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any of them
alleging any failure so to comply.

                  (1) Tax Matters. The Company and its Subsidiaries have filed
all Tax Returns that each was required to file. All such Tax Returns were
correct and complete in all respects. All Taxes owed by the Company and any of
its Subsidiaries (whether or not shown on any Tax Return) have been paid.
Neither of the Company nor any of its Subsidiaries currently is the beneficiary
of any extension of time within which to file any Tax Return. No claim has ever
been made by an authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that the Company or such Subsidiary is or
may be subject to taxation by that jurisdiction. There are no Security Interests
on any of the assets of the Company or any of its Subsidiaries imposed by any
tax authority.

                        (i) Each of the Company and its Subsidiaries has
      withheld and paid all Taxes required to have been withheld and paid in
      connection with amounts paid or owing to any employee, independent
      contractor, creditor, stockholder, or other third party.

                        (ii) Neither the Company nor any director or officer (or
      employee responsible for Tax matters) of any of the Company and its
      Subsidiaries expects any authority to assess any additional Taxes for any
      period for which Tax Returns have been filed. There is no dispute or claim
      concerning any Tax Liability of any of the Company and its Subsidiaries
      either (A) claimed or raised by any authority in writing or (B) as to
      which any of the Shareholder, the Company and the directors and officers
      (and employees responsible for Tax matters) of the Company and its
      Subsidiaries has Knowledge based upon personal contact with any agent of
      such authority.

                        (iii) The Company has not waived any statute of
      limitations in respect of Taxes or agreed to any extension of time with
      respect to a Tax assessment or deficiency.

                        (iv) Neither of the Company nor any of its Subsidiaries
      has filed a consent under Code Section 341(f) concerning collapsible
      corporations. Neither of the Company nor any of its Subsidiaries has made
      any payments, is obligated to make any payments, or is a party to any
      agreement that under certain circumstances could obligate it to make any
      payments that will not be deductible under Code Sections 162(m) or 280G.
      Neither of the Company nor any of its Subsidiaries has been a United
      States real property holding corporation within the meaning of Code
      Section 897(c)(2) during the applicable period specified in Code Section
      897(c)(1)(A)(ii). The Company and each of its Subsidiaries has disclosed
      on its federal income Tax Returns all positions taken therein that could
      give rise to a substantial understatement of federal income Tax within the
      meaning of Code Section 6662. Neither of the Company nor any of its
      Subsidiaries is a party to any Tax allocation or sharing agreement.
      Neither of the Company nor any of its Subsidiaries (A) has been a member
      of an Affiliated Group filing a consolidated federal income Tax Return
      (other than a group the common parent of which was the Shareholder) and
      (B) does not have any Liability for the Taxes of any Person (other than
      the Company or any of its Subsidiaries) under Reg. Section 1.1502-6 (or
      any similar provision of state, local, or

                                       10
<PAGE>   15
      foreign law), as a transferee or successor, by contract, or otherwise. The
      Company and each of its Subsidiaries is in compliance with the terms and
      conditions of any applicable Tax exemptions, agreements or orders of any
      government to which it may be subject or which it may have claimed, and
      the transaction contemplated by this Agreement will not have any adverse
      effect on such compliance.

                        (v) The unpaid Taxes of the Company and its Subsidiaries
      (A) did not, as of the date of the Most Recent Balance Sheet, exceed the
      reserve for Tax Liability (rather than any reserve for deferred Taxes
      established to reflect timing differences between book and Tax income) set
      forth on the face of the Most Recent Balance Sheet (rather than in any
      notes thereto) and (B) do not exceed that reserve as adjusted for the
      passage of time through the Closing Date in accordance with the past
      custom and practice of the Company and its Subsidiaries in filing their
      Tax Returns.

                  (m) Intellectual Property. The Company, its Subsidiaries and
their products have not infringed and do not infringe the copyrights of any
third party. 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
Knowledge of the Company, 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) 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
      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 Knowledge of the Company and its
      Subsidiaries 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) Section 3.1(m) of the Disclosure Schedule
      identifies (a) each patent which has been issued or assigned to the
      Company and its Subsidiaries, (b) each pending patent application which
      has been filed by or for the Company and its Subsidiaries, (c) each
      trademark or service mark registration issued or assigned to the Company
      and its Subsidiaries, (d) each pending trademark or service mark
      application which has been filed by or for the Company and its
      Subsidiaries, (e) each copyright registration issued or assigned to the
      Company and its Subsidiaries, (f) each pending copyright application which
      has been filed by or for the Company and 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

                                       11
<PAGE>   16
      granted in the Ordinary Course of Business. The Company has delivered to
      the Buyer correct and complete copies of all such patents, registrations,
      applications, and licenses (as amended to date). Section 3.1(m) of the
      Disclosure Schedule also identifies each trade name and each unregistered
      trademark or service mark used 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 Section
      3.1(m) of the Disclosure Schedule:

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

                              (B) the item is not subject to any outstanding
            injunction, judgment, order, decree, ruling, or charge;

                              (C) no action, suit, proceeding, hearing,
            investigation, charge, complaint, claim, or demand is pending or, to
            the Knowledge of any of the Company, 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

                              (D) 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.

                        (iii) Section 3.1(m) of the Disclosure Schedule
      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 Buyer 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 Section
      3.1(m) of the Disclosure Schedule, to the Knowledge of the Company:

                              (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;

                              (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;

                                       12
<PAGE>   17
                              (F) the license is not subject to any outstanding
            injunction, judgment, order, decree, ruling, or charge; and

                              (G) 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.

                        (iv) To the Knowledge of any of the Company and 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.

                        (v) To the Knowledge of the Company, 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 in
      Section 3.1(m) of the Disclosure Schedule. The Company makes no other
      representation or warranty concerning any Year 2000 issue.

                        (vi) Notwithstanding anything in this Agreement to the
      contrary, this subsection (m) and subsection (p) below are the sole,
      exclusive and entire representation and warranty of the Company concerning
      Intellectual Property or any infringement, misappropriation or violation
      of Intellectual Property. No other representation or warranty in this
      Agreement shall be construed as applying to Intellectual Property or any
      infringement, misappropriation or violation of Intellectual Property.

                  (n) Tangible Assets. The Company and its Subsidiaries own or
lease all buildings, machinery, equipment, and other tangible assets necessary
for the conduct of their business as presently conducted and as presently
proposed to be conducted.

                  (o) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of any of the Company and its Subsidiaries outside
the Ordinary Course of Business.

                  (p) Litigation. Section 3.1(p) of the Disclosure Schedule sets
forth each instance in which any of the Company and its Subsidiaries (i) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or, to the Knowledge of any of the Company, the
directors and officers (and employees with responsibility for litigation
matters) of the Company and its Subsidiaries, is threatened to be made a party
to any action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the actions, suits,
proceedings, hearings, and investigations set forth in Section 3.1(p) of the
Disclosure Schedule alone or in the aggregate could result in any adverse change
in the business, financial condition, operations, results of operations, or
future prospects of any of the Company and its Subsidiaries. None of the Company
the directors and officers (and employees with responsibility for litigation
matters) of the Company and its Subsidiaries has any reason to believe that any
such action, suit, proceeding, hearing, or investigation may be brought or
threatened against any of the Company and its Subsidiaries.

                                       13
<PAGE>   18
                  (q) Employees. To the Knowledge of the Company, the directors
and officers (and employees with responsibility for employment matters) of the
Company and its Subsidiaries, no executive, key employee, or group of employees
has any plans to terminate employment with any of the Company and its
Subsidiaries. None of the Company and its Subsidiaries is a party to or bound by
any collective bargaining agreement, nor has any of them experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. None of the Company and its Subsidiaries has committed any
unfair labor practice. None of the directors and officers (and employees with
responsibility for employment matters) of the Company and its Subsidiaries has
any Knowledge of any organizational effort presently being made or threatened by
or on behalf of any labor union with respect to employees of any of the Company
and its Subsidiaries.

                  (r) Guaranties. None of the Company or its Subsidiaries is a
guarantor or otherwise is liable for any Liability or obligation (including
indebtedness) of any other Person.

                  (s) Certain Business Relationships with the Company and Its
Subsidiaries. None of the Company's Affiliates has been involved in any business
arrangement or relationship with any of the Company or its Subsidiaries within
the past twelve (12) months, and none of the Company's Affiliates owns any
asset, tangible or intangible, which is used in the business of any of the
Company or its Subsidiaries.

                  (t) Capitalization, Etc.

                        (i) The authorized capital stock of the Company consists
      of 50,000,000 shares of common stock, no par value, 16,000,000 shares of
      which have been issued and are outstanding, 4,000,000 shares of which have
      been reserved for issuance pursuant to the Company's employee stock option
      plan and 1,000,000 additional shares of which are contemplated to be
      reserved for issuance pursuant to the Company's employee stock option
      plan.

                        (ii) All of the Company's outstanding shares of Common
      Stock (i) have been duly authorized and validly issued, (ii) are fully
      paid and nonassessable, and (iii) have been issued in compliance with all
      applicable securities laws and other applicable legal requirements.

                        (iii) Except as set forth in Section 3.1(t) of the
      Disclosure Schedule, there are no:

                              (A) outstanding derivative securities;

                              (B) contracts, agreements or other arrangements
            under which the Company is or may become obligated to sell or
            otherwise issue any shares of its capital stock or any derivative
            securities; or

                              (C) conditions or circumstances that would
            directly or indirectly give rise to or provide a basis for the
            assertion of a claim by any Person to the effect that such Person is
            entitled to acquire or receive any shares of capital stock or other
            securities of the Company.

                                       14
<PAGE>   19
                        (iv) The Company has never repurchased, redeemed or
      otherwise reacquired (and has not agreed, committed or offered (in writing
      or otherwise) to reacquire) any shares of its capital stock or any
      derivative securities.

                  (u) Real Property; Leases. The Company does not own any real
property or any interest in real property, except for the leaseholds created
under the real property leases identified in Section 3.1(u) of the Disclosure
Schedule. Section 3.1(u) of the Disclosure Schedule accurately and completely
describes the premises covered by said leases and the facilities located on such
premises. The Company enjoys peaceful and undisturbed possession of such
premises. All leases to which the Company is a party are valid, binding and
enforceable in accordance with their respective terms and are in full force and
effect; there are no material existing defaults by the Company or the other
party thereunder, and no event of default has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute a material default thereunder.

                  (v) Environmental Matters. The Company is in compliance with
all applicable Environmental Health and Safety Requirements. The Company has not
received any notice or other communication (in writing or otherwise) that
alleges that the Company is not in compliance with any Environmental Health and
Safety Requirements and to the Company's Knowledge there are no circumstances
that are reasonably likely to prevent or interfere with the Company's compliance
with any Environmental Health and Safety Requirements in the future.

                  (w) Sale of Products; Performance of Services. To the
Knowledge of the Company, no distributor, customer, end-user, consumer or other
Person has ever asserted or threatened to assert any material claim against the
Company (i) under or based upon any warranty provided by or on behalf of the
Company, or (ii) relating to any product sold by the Company or any services
performed by the Company. No event has occurred, and no condition or
circumstance exists, that could (with or without notice or lapse of time)
directly or indirectly give rise to or serve as a basis for the assertion of any
such claim.

                  (x) Full Disclosure.

                        (i) None of the representations and warranties of the
      Company in this Agreement (including the Disclosure Schedule) contains or
      will contain as of the Closing Date any untrue statement of material fact
      or omits or will omit as of the Closing Date to state any fact necessary
      to make any of the representations, warranties or statements contained
      therein not misleading. To the extent such representations permit omission
      of items otherwise required to be discussed because they are not material
      or do not or would not have Adverse Consequences, such omissions in the
      aggregate will not as of the Closing Date and do not have Adverse
      Consequences.

                        (ii) As of the date of this Agreement, the Company has
      provided the Buyer with full and complete access to all of the Company's
      records and other documents and data requested by it.

                        (iii) There is no fact within the Knowledge of the
      Company or its directors, officers or employees (other than publicly known
      facts or facts within the Knowledge of Buyer) that have Adverse
      Consequences.

                                       15
<PAGE>   20
                        (iv) All of the written information set forth in the
      Disclosure Schedule, and all other information regarding the Company and
      its business, condition, assets, liabilities, operation, financial
      performance, net income and prospects that has been furnished to Buyer or
      any of its representatives by or on behalf of Company or any of the
      Company's representatives, is accurate and complete in all material
      respects. The Company acknowledges and agrees that although Buyer may
      tender certain assistance to Company in the preparation of the Disclosure
      Schedule, the provision of such assistance shall not be deemed to
      constitute an admission by Buyer of the accuracy of the same or any basis
      for any modification of any covenant, representation or warranty of
      Company and Buyer contained in this Agreement.

                  (y) Customers and Suppliers. As of the date hereof, no
customer that individually accounted for more than five percent (5%) of the
Company's gross revenues during the 12-month period preceding the date hereof
has notified the Company that it will stop, or decrease the rate of, buying
services or products of the Company, or has at any time on or after December 31,
1998 decreased materially its purchase of the products of the Company. As of the
date hereof, no supplier of the Company has notified the Company that it will
stop, or decrease the rate of, supplying materials, products or services to the
Company. The Company has not knowingly breached any contract with, or engaged in
any fraudulent conduct with respect to, any customer or supplier of the Company.

                  (z) Inventories. The inventories of the Company that are
reflected in the Financial Statements consist of items that are usable or
salable in the Ordinary Course of Business and do not include below-standard
quality, damaged, defective or obsolete items the value of which has not been
fully written down or with respect to which adequate reserves have not been
provided, adjusted for operations and transactions through the Closing in
accordance with the past custom and practice of the Company.

                  (aa) Financial Projections. The Company's business plan as
heretofore provided to Buyer has been prepared by the Company based on the
Company's good faith estimates (based on reasonable investigation) of the
projected financial performance of the Company following the Closing and certain
assumptions set forth therein, which assumptions the Company believes are
reasonable. The Company has concluded after reasonable investigation that the
assumptions and conclusions of the Company's business plan constitute reasonable
estimates of the Company's actual performance. However, such estimates and
projections are not guaranteed or warranted.

            3.2 Representations and Warranties of the Shareholder.

            The Shareholder represents and warrants to the Buyer that the
statements contained in this Section 3.2 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 3.2) with respect to itself, except as
set forth in Annex II attached hereto.

                  (a) Authorization of Transaction. The Shareholder has full
power and authority to execute and deliver this Agreement and the Investors
Rights Agreement, and to perform its obligations hereunder and thereunder. Each
of the Transactional Agreements

                                       16
<PAGE>   21
constitutes the valid and legally binding obligation of the Shareholder,
enforceable in accordance with their respective terms and conditions. The
Shareholder need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by the Transactional
Agreements.

                  (b) Noncontravention. Neither the execution and the delivery
of the Transactional Agreements, nor the consummation of the transactions
contemplated hereby and thereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Shareholder is subject or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Shareholder is a party or by which it is bound or to which any of its assets
is subject.

                  (c) Company Representations. To Shareholder's Knowledge and
subject to the matters described in the Disclosure Schedule, the representations
and warranties of the Company in Section 3.1 are true and correct in all
material respects.

            3.3 Representations and Warranties of the Buyer.

            The Buyer represents and warrants to the Company and the Shareholder
that the statements contained in this Section 3.3 are correct and complete as of
the date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this Section 3.3), except as set forth in
Annex III attached hereto.

                  (a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.

                  (b) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and the Investors Rights Agreement and to perform its obligations
hereunder and thereunder. This Agreement and the Investors Rights Agreement
constitute the valid and legally binding obligation of the Buyer, enforceable in
accordance with their respective terms and conditions. The Buyer need not give
any notice to, make any filing with, or obtain any authorization, consent or
approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement or the Investors Rights Agreement.

                  (c) Noncontravention. Neither the execution and the delivery
of this Agreement or the Investors Rights Agreement, nor the consummation of the
transactions contemplated hereby and thereby, will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
the Buyer is subject or any provision of its charter or bylaws or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject.

                                       17
<PAGE>   22
                  (d) Brokers' Fees. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Company could become
liable or obligated.

                  (e) Investment. The Buyer (i) understands that the Company
Shares have not been, and will not be, registered under the Securities Act, or
under any state securities laws, and are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public offering,
(ii) is a sophisticated investor with knowledge and experience in business and
financial matters, (iii) has received certain information concerning the Company
and has had the opportunity to obtain additional information as desired in order
to evaluate the merits and the risks inherent in holding the Company Shares,
(iv) is able to bear the economic risk and lack of liquidity inherent in holding
the Company Shares, and (v) is an Accredited Investor who is acquiring the
Company Shares for investment purposes, for its own account, not as a nominee or
agent and not with a view to the resale or distribution of any part thereof, and
it has no present intention of selling, granting any participation in, or
otherwise distributing the same.

      4. Pre-Closing Covenants.

            The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.

            4.1 General.

            Each of the Parties will use its best efforts to take all action and
to do all things necessary, proper, or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 6
below).

            4.2 Notices and Consents.

            The Company and its Subsidiaries will give any notices to third
parties and use its best efforts to obtain any third party consents, that the
Buyer may reasonably request in connection with the matters referred to in
Section 3.1 above. Each of the Parties will give any notices to, make any
filings with, and use its best efforts to obtain any authorizations, consents,
and approvals of governments and governmental agencies in connection with the
matters referred to in Section 3.1(b), Section 3.2(a) and Section 3.3(b) above.

            4.3 Operation of Business.

            The Company and its Subsidiaries will not engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, the Company will not
(a) declare, set aside, or pay any dividend or make any distribution with
respect to its capital stock or redeem, purchase, or otherwise acquire any of
its capital stock, or (b) otherwise engage in any practice, take any action, or
enter into any transaction of the sort described in Section 3.1(i) above.

            4.4 Preservation of Business.

            The Company and its Subsidiaries will keep their business and
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.

                                       18
<PAGE>   23
            4.5 Full Access.

            The Company and its Subsidiaries will permit representatives of the
Buyer to have fall access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Company and its
Subsidiaries, to all premises, properties, personnel, books, records (including
Tax records), contracts, and documents of or pertaining to each of the Company
and its Subsidiaries. Information disclosed by the Company and its Subsidiaries
to the Buyer or learned by the Buyer or its representatives from the access
provided under this Section 4.5 shall be subject to Section 10.16.

            4.6 Notice of Developments.

            The Company and Shareholder will give prompt written notice to the
Buyer of any material adverse development causing a breach of any of the
representations and warranties in Section 3.1 and Section 3.2 above. Each Party
will give prompt written notice to the others of any material adverse
development causing a breach of any of his or its own representations and
warranties in Section 3 above. No disclosure by any Party pursuant to this
Section 4.6, however, shall be deemed to amend or supplement Annex I, Annex II,
or Annex III or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.

            4.7 Exclusivity.

            None of the Company or Shareholder will (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of control of a majority of any capital stock or other voting
securities, or any substantial portion of the assets, of the Company and its
Subsidiaries (including any acquisition structured as a merger, consolidation,
or share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. Shareholder will not vote the Shareholder Shares in favor
of any such acquisition structured as a merger, consolidation, or share
exchange. The Company and Shareholder will notify the Buyer immediately if any
Person makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing. This Section 4.7 shall terminate 60 days from the date of this
Agreement.

      5. Post-Closing Covenants.

            5.1 General.

            In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other Party may reasonably request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Section 7 below).

            5.2 Consultation.

            Buyer shall be entitled to reasonably consult with and advise
management of the Company on significant business issues, including management's
proposed annual operating plans, and management will meet with Buyer from time
to time at the Company's facilities at Buyer's expense at mutually agreeable
times for such consultation and advice and to review

                                       19
<PAGE>   24
progress in achieving said plans. The Company has no obligation to comply with
any advice or directions from Buyer. Information disclosed to Buyer pursuant to
this Section 5.2 will be subject to Section 10.16. The rights set forth in
this Section 5.2 shall terminate upon the earlier of the following: (i) if at
any time the Buyer ceases to own and control at least ten percent (10%) of the
issued and outstanding capital stock of the Company; (ii) the closing of any
initial public offering of the capital stock of the Company pursuant to an
effective registration statement under the Securities Act; or (iii) the date the
Company becomes subject to the reporting requirements of the Securities Exchange
Act.

            5.3 Records.

            Buyer may examine the books and records of the Company and inspect
its facilities and may request information at reasonable times and intervals
concerning the general status of the Company's financial condition and
operations, provided that access to confidential or proprietary information and
facilities need not be provided. Information disclosed to or learned by the
Buyer pursuant to this Section 5.3 is subject to Section 10.16. The rights set
forth in this Section 5.3 shall terminate upon the earlier of the following: (i)
if at any time the Buyer ceases to own and control at least ten percent (10%)
of the issued and outstanding capital stock of the Company; (ii) the closing of
an initial public offering of the capital stock of the Company pursuant to an
effective registration statement under the Securities Act; or (iii) the date the
Company becomes subject to the reporting requirements of the Securities Exchange
Act.

            5.4 Observer Rights

            If Buyer is not represented on the Company's Board of Directors by
an affiliate of Buyer, the Company shall give a representative of Buyer copies
of all notices, minutes, consents and other material that the Company provides
to its directors and the Company shall invite a representative of Buyer to
attend all meetings of the Board of Directors in a non-voting observer capacity,
except that Buyer may be excluded from access to any material or meeting or
portion thereof if the Company believes, in good faith, that such exclusion is
reasonably necessary to preserve the attorney-client privilege, to protect
highly confidential or proprietary information, to protect the interests of the
Company or for other similar reasons. Upon reasonable notice and at a scheduled
meeting of the Board of Directors or such other time, if any, as the Board of
Directors may determine in its sole discretion, such representative may address,
subject to reasonable limitations, the Board of Directors with respect to
Buyer's concerns regarding significant business issues facing the Company.
Information disclosed to or learned by the Buyer pursuant to this Section 5.4 is
subject to Section 10.16. The rights set forth in this Section 5.4 shall
terminate upon the earlier of the following: (i) if at any time the Buyer ceases
to own and control at least ten percent (10%) of the issued and outstanding
capital stock of the Company; (ii) the closing of an initial public offering of
the capital stock of the Company pursuant to an effective registration statement
under the Securities Act; or (iii) the date the Company becomes subject to the
reporting requirements of the Securities Exchange Act.

            5.5 Legends.

            To the extent applicable, each certificate or other document
evidencing any of the Company Shares shall be endorsed with the legend set forth
below, and Buyer covenants that, except for the transfer of shares pursuant to
Rule 144, the removal of the legend set forth in this

                                       20
<PAGE>   25
Section 5.5 pursuant to Rule 144, the transfer or the distributions to any
Affiliate, and to the extent such restrictions are waived by the Company, Buyer
shall not transfer the shares represented by any such certificate without
complying with the restrictions on transfer described in the legends endorsed on
such certificate:

            "THE SECURITIES REPRESENTED BY TIES CERTIFICATE HAVE NOT BEEN
            REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS
            AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND
            SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT
            PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE COMPANY IS
            PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
            REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE SECURITIES
            LAWS IS NOT REQUIRED."

            5.6 Distribution and License Agreement.

            The Company and Buyer shall enter into a reciprocal Distribution and
License Agreement in the form attached hereto as Exhibit "D".

            5.7 Further Actions. The Company shall, within 90 days after the
Closing Date, provide to Buyer evidence of the Company's ownership of its
Subsidiaries to Buyer's reasonable satisfaction.

      6. Conditions to Obligation to Close.

            6.1 Conditions to Obligation of the Buyer.

            The obligation of the Buyer to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the
following conditions:

                  (a) each of the representations and warranties set forth in
Sections 3.1 and 3.2 above that is qualified by materiality shall be true and
correct at and as of the Closing Date, and each of the representations and
warranties set forth in Sections 3.1 and 3.2 above that is not so qualified
shall be true and correct in all material respects at and as of the Closing
Date;

                  (b) the Company and Shareholder shall have performed and
complied with all of their covenants hereunder in all material respects through
the Closing;

                  (c) the Company and its Subsidiaries shall have procured all
of the third party consents specified in Section 3.1 above;

                  (d) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (iii) affect adversely the right of the Buyer
to own the Company Shares, or (iv) affect adversely the right of any of the
Company and its Subsidiaries to own its assets and to operate its businesses
(and no such injunction, judgment, order, decree, ruling, or charge shall be in
effect);

                                       21
<PAGE>   26
                  (e) the Company Shares that are being purchased by the Buyer,
when issued, sold and delivered in accordance with the terms of this Agreement
for the consideration expressed herein, will be duly and validly issued,
nonassessable and free from rights of first refusal or other restrictions.

                  (f) the Company shall have delivered to the Buyer a
certificate to the effect that the conditions specified above in Section
6.1(a)-(e) are satisfied in all respects;

                  (g) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the Parties, including the Company's Subsidiaries, shall have
received all other authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3.1(b), Section 3.2(a), and Section
3.3(b) above;

                  (h) the Buyer shall have received from counsel to the Company
an opinion in form and substance as set forth in Exhibit "B" attached hereto,
addressed to the Buyer, and dated as of the Closing Date;

                  (i) the Buyer shall have obtained on terms and conditions
satisfactory to it all of the financing it needs in order to consummate the
transactions contemplated hereby;

                  (j) the Company and Shareholder shall have entered into and
delivered an Investors Rights Agreement substantially in the form attached as
Exhibit "C";

                  (k) the Company and the Buyer shall have entered into and
delivered the Distribution and License Agreement substantially in the form
attached as Exhibit "D"; and

                  (l) all actions to be taken by the Company and Shareholder in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and substance to
the Buyer.

            The Buyer may waive any condition specified in this Section 6.1.

            6.2 Conditions to Obligation of the Company and Shareholder.

            The obligation of the Company and Shareholder to consummate the
transactions to be performed by them in connection with the Closing is subject
to satisfaction of the following conditions:

                  (a) the representations and warranties set forth in Section
3.3 above shall be true and correct in all material respects at and as of the
Closing Date;

                  (b) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;

                  (c) no action, suit, or proceeding shall be pending wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement
or (ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);

                                       22
<PAGE>   27
                  (d) the Buyer shall have delivered to the Company a
certificate to the effect that each of the conditions specified above in Section
6.2(a)-(c) is satisfied in all respects;

                  (e) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the Parties, including the Company's Subsidiaries, shall have
received all other authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3.1(b), Section 3.2(a), and Section
3.3(b) above; and

                  (f) the Company and the Buyer shall have entered into and
delivered the Distribution and License Agreement substantially in the form
attached as Exhibit "D";

                  (g) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Company and Shareholder.

            The Company and Shareholder may waive any condition specified in
this Section 6.2.

      7. Remedies for Breaches of this Agreement.

            7.1 Survival of Representations and Warranties.

      All of the representations and warranties of the Parties contained in
Sections 3.1(a) through (e) and 3.3 of this Agreement shall survive the Closing
hereunder (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of Closing) and
continue in full force and effect forever thereafter. The representations and
warranties of the Company contained in Section 3.1(1) (with respect to taxes)
shall survive the Closing hereunder and shall continue in full force and effect
thereafter, as they relate to any taxable year of the Company, until sixty (60)
days after the expiration of the statute of limitations applicable to the making
of adjustments or assessments by any taxing authority as the same may be
extended by the Company. All of the other representations, warranties and
covenants of the Parties contained in this Agreement shall survive the Closing
hereunder (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of Closing) and
continue in full force and effect thereafter until two years from the Closing
Date. Except as otherwise provided in the first sentence of this Section 7.1,
after said survival period, all representations and warranties shall terminate,
and no party shall have any Liability or obligation with respect to any
representation or warranty under this Agreement, provided that once notice of
any claim has been timely given, additional related claims arising out of
substantially the same circumstances may be made at any time prior to the
resolution of such claim (by means of a final, non-appealable judgment of a
court of competent jurisdiction, a binding arbitration decision or a settlement
approved by the parties involved) even if such resolution occurs after the
expiration or termination date, if any, prescribed for such representation or
warranty in this Section 7.1.

            7.2 Indemnification Provisions for Benefit of the Buyer.

                  (a) In the event that (i) the Company breaches any of its
representations, warranties, and covenants contained herein, then the Company
agrees to indemnify the Buyer from and against any Adverse Consequences the
Buyer may suffer through and after the date of the claim

                                       23
<PAGE>   28
for indemnification (including any Adverse Consequences the Buyer may suffer
after the end of any applicable survival period) resulting from, arising out of
or caused by such breach by the Company of any of its representations,
warranties or covenants made herein, or (ii) the Shareholder breaches any of its
representations, warranties, and covenants contained herein, then the
Shareholder agrees to indemnify the Buyer from and against any Adverse
Consequences the Buyer may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Buyer may suffer after
the end of any applicable survival period) resulting from, arising out of or
caused by such breach by the Shareholder of any of its representations,
warranties or covenants made herein.

                  (b) In the event that a third party asserts any claim against
the Company alleging that the Company has violated the Intellectual Property
rights of such third party based on acts that occurred during the two year
period following the Closing Date, then the Company agrees to indemnify the
Buyer from and against any Adverse Consequences the Buyer may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences the Buyer may suffer after the end of any applicable survival
period) resulting from, arising out of or caused by such third party claim.

                  (c) Notwithstanding the foregoing provisions of this Section
7.2, no indemnification shall be payable by the Company or the Shareholder with
respect to any claim for breach of any representation, warranty or covenant made
herein or claim by any third party until the total of such claims for
indemnification shall exceed US$75,000 (the "Deductible"), in which event the
Buyer shall be entitled to recover the amount of such claims in excess of the
Deductible; and provided, further, that the aggregate liability of either the
Company or the Shareholder for indemnification payable hereunder shall not
exceed the amount of (i) the Purchase Price, plus (ii) reasonable attorneys'
fees and expenses incurred by the Buyer in seeking indemnification under this
Section 7.

            7.3 Indemnification Provisions for Benefit of the Company and
Shareholder.

            In the event the Buyer breaches any of its representations,
warranties, and covenants contained herein, then the Buyer agrees to indemnify
each of the Company and Shareholder from and against the entirety of any Adverse
Consequences they may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences they may suffer after the
end of any applicable survival period) resulting from, arising out of or caused
by the breach; provided, however, that no indemnification shall be payable by
the Buyer with respect to any claim for breach of any representation, warranty
or covenant made herein until the total of such claims for indemnification shall
exceed US$75,000, in which event the Company and the Shareholder, as the case
may be, shall be entitled to recover the amount of such claims in excess of the
Deductible; and provided, further, that the aggregate liability of the Buyer for
indemnification payable hereunder shall not exceed $1 million, except for any
breach of Buyer's obligation to pay the Purchase Price under Section 2.

            7.4 Matters Involving Third Parties.

                  (a) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 7, then the

                                       24
<PAGE>   29
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.

                  (b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, or caused by the Third Party Claim, (ii) the Indemnifying
Party provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief, (iv) settlement of,
or an adverse judgment with respect to, the Third Party Claim is not, in the
good faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice materially adverse to the continuing business interests of
the Indemnified Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.

                  (c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.4(b) above, (A)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably).

                  (d) In the event any of the conditions in Section 7.4(b) above
is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (iii) the Indemnifying Parties
will remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of or caused by the Third Party Claim to the
fullest extent provided in this Section 7.

            7.5 Determination of Adverse Consequences.

            The Parties shall take into account the time cost of money (using
the Applicable Rate as the discount rate) in determining Adverse Consequences
for purposes of this Section 7.

                                       25
<PAGE>   30
            7.6 Recoupment Against Purchase Price.

                  (a) The Buyer shall have the option of recouping all or any
part of any Adverse Consequences it may suffer (in lieu of seeking any
indemnification to which it is entitled under this Section 7) at any time or
from time to time by providing the Company with at least thirty (30) days'
notice (a "Reduction Notice") of Buyer's intent to reduce the amount of Purchase
Price due to the Company in the Second Distribution and the Final Distribution,
together with all documentation and information reasonably necessary to
substantiate Buyer's Adverse Consequences and Buyer's claim for satisfaction of
such Adverse Consequences.

                  (b) On or prior to the thirtieth (30th) day following the
delivery of a Reduction Notice, the Company may deliver to Buyer a written
statement (a "Reduction Disputing Notice") setting forth with reasonable
specificity any disagreement with any of the amounts contained in the Reduction
Notice which could affect the necessity or amount of any reduction of the
portion of the Purchase Price due to the Company in the Second Distribution and
the Final Distribution. The sole basis for any disagreement with a Reduction
Notice shall be either (i) that the Adverse Consequences claimed by Buyer do not
give rise to a claim for indemnification under this Section 7 or (ii) that there
has been an arithmetical error in adding the Adverse Consequences. If the
Company does not submit a Reduction Disputing Notice on or prior to such
thirtieth (30th) day, then the portion of the Purchase Price due to the Company
in the Second Distribution and the Final Distribution shall be deemed to have
been reduced for purposes of this Agreement in the amount set forth in the
Reduction Notice. If the Company does submit a Reduction Disputing Notice on or
prior to such thirtieth (30th) day, any amounts contained in such Reduction
Notice which are not disputed by the Reduction Disputing Notice shall be deemed
to have been finally determined for purposes of this Agreement.

                  (c) For a period of sixty (60) days, Buyer and the Company
shall attempt to resolve in good faith any dispute or disagreement between a
Reduction Notice and a Reduction Disputing Notice. Amounts contained on a
Reduction Notice and resolved by such attempts shall be deemed to have been
finally determined for purposes of this Agreement. After such sixty (60) day
period, either party may commence legal proceedings to resolve any such dispute.

            7.7 Exclusive Remedy for Non-Intentional Violations.

            The foregoing indemnification provisions shall be the sole and
exclusive remedy for claims relating to any breach of the representations,
warranties and covenants made herein by the respective Parties with respect to
the transactions contemplated herein. Notwithstanding the foregoing limitation,
in the case of any intentional or knowing breach of the representations,
warranties or covenants made by the respective Parties herein or intentionally
fraudulent or tortious conduct ("Intentional Violations"), the indemnification
provisions herein are in addition to, and not in derogation of, any statutory,
equitable or common law remedy (including without limitation any such remedy
arising under Environmental, Health and Safety Requirements) any Party may have
with respect to the Buyer, the Company, its Subsidiaries or the transactions
contemplated by this Agreement.

                                       26
<PAGE>   31
      8. Tax Matters.

            8.1 Certain Taxes.

            All transfer, documentary, sales, use, stamp, registration and other
such Taxes and fees (including any penalties and interest) incurred in
connection with the sale of the Company Shares under this Agreement (including
any gains tax or transfer tax imposed in state or subdivision), shall be paid by
the Company when due, and the Company will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, Buyer will, and will cause its affiliates to, join
in the execution of any such Tax Returns and other documentation.

      9. Termination.

            9.1 Termination of Agreement.

            Certain of the Parties may terminate this Agreement as provided
below:

                  (a) the Buyer and the Company may terminate this Agreement by
mutual written consent at any time prior to the Closing;

                  (b) the Buyer may terminate this Agreement by giving written
notice to the Company prior to the Closing if the Buyer is not satisfied with
the results of its continuing business, legal, environmental, and accounting due
diligence regarding the Company and its Subsidiaries;

                  (c) the Buyer may terminate this Agreement by giving written
notice to the Company at any time prior to the Closing (i) in the event any of
the Company or the Shareholder has breached any material representation,
warranty, or covenant contained in this Agreement in any material respect, the
Buyer has notified the Company or the Shareholder of the breach, and the breach
has continued without cure for a period of 30 days after the notice of breach or
(ii) if the Closing shall not have occurred on or before August 31, 1999, by
reason of the failure of any condition precedent under Section 6.1 hereof
(unless the failure results primarily from the Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement); and

                  (d) the Company may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (i) in the event the Buyer
has breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, the Company has notified the Buyer of
the breach, and the breach has continued without cure for a period of 30 days
after the notice of breach or (ii) if the Closing shall not have occurred on or
before August 31, 1999, by reason of the failure of any condition precedent
under Section 6.2 hereof (unless the failure results primarily from any of the
Company or the Shareholder themselves breaching any representation, warranty, or
covenant contained in this Agreement).

            9.2 Effect of Termination.

            If any Party terminates this Agreement pursuant to Section 9.1
above, all rights and obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).

                                       27
<PAGE>   32
      10. Miscellaneous.

            10.1 Press Releases and Public Announcements.

            No Party shall issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of the Buyer and the Company; provided, however, that any Party
may make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Parties prior to making the
disclosure).

            10.2 No Third-Party Beneficiaries.

            This Agreement shall not confer any rights or remedies upon any
Person other than the Parties and their respective successors and permitted
assigns.

            10.3 Entire Agreement.

            This Agreement (including the documents referred to herein)
constitutes the entire agreement among the Parties and supersedes any prior
understandings, agreements, or representations by or among the Parties, written
or oral, to the extent they related in any way to the subject matter hereof.

            10.4 Succession and Assignment.

            This Agreement shall be binding upon and inure to the benefit of the
Parties named herein and their respective successors and permitted assigns. No
Party may assign either this Agreement or any of his or its rights, interests,
or obligations hereunder without the prior written approval of the Buyer, the
Company and the Shareholder; provided, however, that the Buyer may (a) assign
any or all of its rights and interests hereunder to one or more of its
Affiliates, (b) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder), and
(c) assign any or all of its rights and interests hereunder in connection with
any merger or sale of all or substantially all of its assets or capital stock.
After the Closing and without any prior approval of any other Party, this
Agreement may be assigned by any Party to any successor to its business or to
any purchaser or transferee of substantially all of its assets; provided,
however, that such assignment shall not be deemed to relieve the assigning Party
of any of its obligations hereunder.

            10.5 Counterparts.

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

            10.6 Headings.

            The Section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.

            10.7 Notices.

            All notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed

                                       28
<PAGE>   33
duly given if (and then two business days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:

             If to the Company:                   Copy to:
             Caldera Systems, Inc.                Parsons, Behle & Latimer
             240 West Center Street               1 South Main Street
             Orem, Utah 84057                     Suite 1800
             Attn: Ransom Love, President &       Salt Lake City, Utah 84145
                   Chief Executive Officer        Attn: Brent Christensen, Esq.

             If to the Shareholder:               Copy to:
             The Canopy Group, Inc.               Parsons, Behle & Latimer
             240 West Center Street               1 South Main Street
             Orem, Utah 84057                     Suite 1800
             Attn: Ray Noorda and Ralph Yarro     Salt Lake City, Utah 84145
                                                  Attn: Brent Christensen, Esq.

             If to the Buyer:                     Copy to:
             MTI Technology Corporation           Morrison & Foerster LLP
             4905 East La Palma Avenue            19900 MacArthur Boulevard
             Anaheim, California 92807            Irvine, California 92612
             Attn: Chief Financial Officer        Attn: Tamara Powell Tate, Esq.

Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.

            10.8 Governing Law.

            This agreement is to be construed in accordance with and governed by
the internal laws of the State of California (as permitted by Section 1646.5 of
the California Civil Code or any similar successor provision) without giving
effect to any choice of law rule that would cause the application of the laws of
any jurisdiction other than the internal laws of the State of California to the
rights and duties of the parties.

            10.9 Amendments and Waivers.

            No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by the Buyer, the company and the
Shareholder. No waiver by any Party of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.

                                       29
<PAGE>   34
            10.10 Severability.

            Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.

            10.11 Expenses.

            Each of the Parties will bear its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.

            10.12 Construction.

            The Parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.

            10.13 Incorporation of Exhibits, Annexes, and Schedules.

            The Exhibits, Annexes, and Schedules identified in this Agreement
are incorporated herein by reference and made a part hereof. However, the
Distribution and License Agreement shall be deemed a separate and complete
agreement and shall exist and be governed independent of this Agreement.

            10.14 Specific Performance.

            Each of the Parties acknowledges and agrees that the other Parties
would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the other Parties
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 10.15 below), in addition to
any other remedy to which they may be entitled, at law or in equity.

            10.15 Submission to Jurisdiction.

            Each of the Parties submits to the jurisdiction of any state or
federal court sitting in Orange County, California, in any action or proceeding
arising out of or relating to this Agreement

                                       30
<PAGE>   35
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each Party also agrees not to bring any action
or proceeding arising out of or relating to this Agreement in any other court.
Each of the Parties waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto. Any
Party may make service on any other Party by sending or delivering a copy of the
process to the Party to be served at the address and in the manner provided for
the giving of notices in Section 10.7 above.

            10.16 Confidentiality.

            Each of the Parties and their respective representatives and
employees shall keep strictly confidential and shall not disclose or use for any
purpose other than this Agreement, any and all confidential and proprietary
information ("Confidential Information") disclosed by any of the Parties (an
"Informing Party") to any other Party (an "Informed Party") or learned by the
Informed Party from the premises, properties, personnel, books, records
(including Tax records), contracts, and documents to which it is given access.
Each Party shall limit disclosure of Confidential Information to its
representatives, financial advisors and employees on a need to know basis. The
term "Confidential Information" does not include information which (i) is or
becomes generally available to the public other than as a result of a disclosure
by the Informed Party or its representatives, (ii) was available to the Informed
Party on a non-confidential basis prior to its disclosure to the Informed Party
by the Informing Party or its representatives, or (iii) becomes available to the
Informed Party on a non-confidential basis from a source other than the
Informing Party or its representatives, provided, however, that such source is
not bound by a confidentiality agreement with the Informing Party or its
representatives. Each of the Parties shall ensure that its representatives and
employees comply with this Section 10.16.

            10.17 California Corporate State Securities Law.

            THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT
HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA OR UTAH AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT
OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION
IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY
SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF
ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

                                       31
<PAGE>   36
      IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.

                     MTI TECHNOLOGY CORPORATION, a Delaware
                     corporation

                     By:  /s/ DALE R. BORD
                         ------------------------------------
                     Title: Chief Financial Officer

                     CALDERA SYSTEMS, INC., a Utah corporation

                     By: /s/ RANSOM H. LOVE
                        -------------------------------------
                     Title: President & CEO

                    THE CANOPY GROUP, INC., a Utah corporation

                     By: /s/ RALPH YARRO
                        -------------------------------------
                     Title: President & CEO

                                       32<PAGE>   1
                                                                   EXHIBIT 10.11

                        STOCK PURCHASE AND SALE AGREEMENT

      THIS STOCK PURCHASE AND SALE AGREEMENT (this "Agreement") is made and
entered into as of this 6th day of January, 2000 by and between Lineo, Inc., a
Utah corporation ("Lineo"), and Caldera Systems, Inc., a Utah corporation
("Caldera Systems").

      WHEREAS, Lineo and Caldera Systems have agreed in principle to provide
each other with certain marketing and other services pursuant to a strategic
alliance agreement, and Lineo and Caldera Systems each wishes to purchase from
the other shares of common stock;

      NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:

SECTION 1.  PURCHASE AND SALE OF SHARES

1.1   PURCHASE OF LINEO STOCK.

      Upon the terms and subject to the conditions herein, in reliance on the
representations and warranties set forth in Sections 2 and 4 hereof, Caldera
Systems hereby purchases from Lineo, and Lineo hereby issues and sells to
Caldera Systems 3,238,437 shares of the Common Stock of Lineo, representing
16.75% of the issued and outstanding shares of capital stock of Lineo on a
fully-diluted basis as of the date hereof (the "Lineo Shares").

1.2   PURCHASE OF CALDERA SYSTEMS STOCK.

      Upon the terms and subject to the conditions herein, in reliance on the
representations and warranties set forth in Sections 3 and 4 hereof, Lineo
hereby purchases from Caldera Systems, and Caldera Systems hereby issues and
sells to Lineo, 1,250,000 shares of the Common Stock of Caldera Systems,
representing 3.35% of the issued and outstanding shares of capital stock of
Caldera Systems on a fully-diluted basis as of the date hereof (the "Caldera
Systems Shares").

1.3   CLOSING.

      The closing of the purchases and sales of the Lineo Shares and the Caldera
Systems Shares contemplated by Sections 1.1 and 1.2 above (the "Closing") shall
take place at 10:00 a.m. on the date hereof, or at such other time and date as
the parties hereto mutually agree (the "Closing Date").

SECTION 2.  REPRESENTATIONS AND WARRANTIES OF LINEO

      In order to induce Caldera Systems to enter into this Agreement, Lineo
represents and warrants to Caldera Systems the following, except as set forth on
a Schedule of Exceptions furnished by Lineo to Caldera Systems (the "Lineo
Schedule of Exceptions"), specifically identifying the relevant subparagraph(s)
hereof, which exceptions shall be deemed to be representations and warranties as
if made hereunder:

2.1   ORGANIZATION AND CORPORATE POWER.

      Lineo is a corporation duly organized and validly existing under the laws
of the State of Utah, and is qualified to do business as a foreign corporation
in each jurisdiction in which the failure to be so qualified would have a
material adverse effect on its assets, liabilities, financial condition,
business, or results of

<PAGE>   2
operations (a "Material Adverse Effect"). Lineo has all required corporate power
and corporate authority to carry on its business as presently conducted, to
enter into and perform this Agreement and the agreements contemplated hereby to
which it is a party and to carry out the transactions contemplated hereby and
thereby, including the issuance of the Lineo Shares. Lineo is not in material
violation of any term of its Articles of Incorporation (the "Lineo Articles of
Incorporation"), or Bylaws (the "Lineo Bylaws").

2.2   AUTHORIZATION AND NON-CONTRAVENTION.

      The execution, delivery and performance by Lineo of this Agreement and
each other agreement, document and instrument to be executed and delivered by
Lineo pursuant to or as contemplated by this Agreement, including, without
limitation, the issuance and delivery of the Lineo Shares, have been duly
authorized, by all necessary corporate action on behalf of Lineo. This Agreement
and each such other agreement, document, and instrument, when executed and
delivered, will constitute valid and binding obligations of Lineo, enforceable
in accordance with their respective terms, except as may be limited by
applicable law and public policy and subject to (i) applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) general principles
of equity and/or laws relating to the availability of specific performance,
injunctive relief or other equitable remedies, whether such enforceability is
considered in a proceeding in equity or at law. The execution and delivery by
Lineo of this Agreement and each other agreement, document and instrument to be
executed and delivered by Lineo pursuant hereto or as contemplated hereby and
the performance by Lineo of the transactions contemplated hereby and thereby,
including, without limitation, the offer, sale, issuance and delivery of the
Lineo Shares, do not and will not: (A) violate, conflict with or result in a
default (whether after the giving of notice, lapse of time or both) under any
material contract, mortgage, indenture, contract, instrument or obligation to
which Lineo is a party or by which it or its assets are bound, or any provision
of the Lineo Articles of Incorporation or Lineo Bylaws, or cause the creation of
any material lien, charge or encumbrance upon any of the assets of Lineo; (B) to
Lineo's knowledge, violate or result in a violation of, or constitute a default
under, any provision of any material law, regulation or rule, or any judgment,
order, writ, decree or statute of, or any restriction imposed by, any court or
governmental agency applicable to Lineo; (C) require from Lineo any notice to,
declaration or filing with, or consent or approval of any governmental authority
or third party other than such filings as have been made prior to the Closing
and/or as may be required to secure an exemption from qualification of the offer
and sale of the Lineo Shares under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities and blue sky laws; or (D)
accelerate any obligation under, or give rise to a right of termination,
suspension, revocation or impairment of, any material agreement, permit, license
or authorization applicable to any of Lineo's, operations, assets or properties,
or by which Lineo is bound.

2.3   CAPITALIZATION.

      As of the Closing, the authorized capital stock of Lineo will consist of
100,000,000 shares of Common Stock, of which 18,000,000 shares will be issued
and outstanding. As of the Closing, other than the shares described in the
preceding sentence and options to purchase 1,333,950 shares of the common stock
of Lineo granted to employees and members of the Board of Directors of Lineo
pursuant to Lineo's Stock Option Plan, Lineo has not issued any warrants,
options, rights (including, without limitation, conversion or preemptive rights
and rights of first refusal), proxy or stockholder agreements or agreements of
any kind for the purchase or acquisition from Lineo of any shares of capital
stock or other securities, including, without limitation, any securities
convertible into or exercisable or exchangeable for such shares or any warrants,
options or other rights to acquire any such convertible securities. As of the
Closing, and after giving effect to the transactions contemplated hereby, all of
the outstanding shares of capital stock of Lineo and each of its Subsidiaries
will have been duly and validly authorized and issued, fully paid and
nonassessable and not subject to any preemptive rights and will have been
offered, issued, sold and delivered

<PAGE>   3
in compliance with applicable federal and state securities laws. There are no
preemptive rights, rights of first refusal, put or call rights or obligations or
anti-dilution rights with respect to the issuance, sale or redemption of Lineo's
capital stock or other securities. Lineo is not a party or subject to any
agreement or understanding, and, to the best of Lineo's knowledge, 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 Lineo.

2.4   VALID ISSUANCE OF LINEO SHARES.

      The Lineo Shares, 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.

2.5   SUBSIDIARIES.

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

2.6   CONTRACTS AND OTHER COMMITMENTS.

      Lineo has not and/or is not bound by any contract, agreement, lease,
commitment, or proposed transaction, judgment, order, writ or decree, written or
oral, absolute or contingent, other than contracts entered into in the ordinary
course of business. For the purpose of this paragraph, employment and consulting
contracts and license agreements and any other agreements relating to Lineo'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.

2.7   RELATED-PARTY TRANSACTIONS.

      No employee, officer, stockholder or director of Lineo or member of his or
her immediate family is indebted to Lineo, nor is Lineo 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 Lineo, 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 Lineo or such Subsidiary). To the best of Lineo's knowledge, none
of such persons has any direct or indirect ownership interest in any firm or
corporation with which Lineo is affiliated or with which Lineo has a business
relationship, or any firm or corporation that competes with Lineo, except that
employees, stockholders, officers or directors of Lineo and members of their
immediate families may own stock in publicly-traded companies that may compete
with Lineo. To the best of Lineo's, no officer, director or stockholder or any
member of their immediate families is, directly or indirectly, interested in any
material contract with Lineo (other than such contracts as relate to any such
person's ownership of capital stock or other securities of Lineo).

<PAGE>   4

2.8   REGISTRATION RIGHTS.

      Lineo 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.

2.9   PERMITS.

      Lineo 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 Lineo, 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. Lineo is not in default in any material
respect under any of such franchises, permits, licenses or other similar
authority.

2.10  LITIGATION.

      There is no action, suit, proceeding or investigation pending or, to the
best of Lineo's knowledge, currently threatened against Lineo that questions the
validity of this Agreement, or the right of Lineo to enter into this Agreement,
or to consummate the transactions contemplated hereby, 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 Lineo, or in
any material change in the current equity ownership of Lineo.

2.11  RETURNS AND COMPLAINTS.

      Lineo has not 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 Lineo.

2.12  DISCLOSURE.

      Lineo has provided Caldera Systems with all the information reasonably
available to it without undue expense that Caldera Systems has requested for
deciding whether to purchase the Lineo Shares and all information that Lineo
believes is reasonably necessary to enable Caldera Systems to make such
decision.

2.13  OFFERING.

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

2.14  TITLE TO PROPERTY AND ASSETS; LEASES.

      Except (i) as reflected in the Lineo Financial Statements (defined in
paragraph 2.15), (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, Lineo 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, Lineo is in compliance

<PAGE>   5

with such leases and, to the best of its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances, subject to clauses (i)-(v)
above.

2.15  FINANCIAL STATEMENTS.

      Lineo has made available to Caldera Systems its unaudited trial balance
sheet (which includes assets and liabilities, ending balances, revenues and
expenses, and the balance of stockholders' equity) at October 31, 1999 for the
fiscal year then ended (the "Lineo Financial Statements"). The Lineo Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated. The
Lineo Financial Statements fairly present the financial condition and operating
results of Lineo as of the dates, and for the periods, indicated therein. Except
as set forth in the Lineo Financial Statements, Lineo has no 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 Lineo Financial Statements, which in both cases, individually or in the
aggregate, are not material to the financial condition or operating results of
Lineo. Except as disclosed in the Lineo Financial Statements, Lineo is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. Lineo maintains and will continue to maintain a standard system of
accounting established and administered in accordance with generally accepted
accounting principles.

2.16  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 Lineo or any of its Subsidiaries.

2.17  INTELLECTUAL PROPERTY.

      To the best of Lineo's knowledge, Lineo, and its products have not
infringed and do not infringe the copyrights of any third party. To the best of
Lineo's knowledge, Lineo has not misappropriated and is not misappropriating any
trade secrets or proprietary confidential information of any third party, and
the products of Lineo do not include or embody any trade secret or proprietary
confidential information misappropriated by Lineo from any third party. To the
best of Lineo's knowledge, Lineo and its 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 Lineo
immediately prior to the Closing hereunder will be owned by or licensed to Lineo
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 Lineo's knowledge, none of Lineo and its
      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 Lineo of Intellectual Property (including any claim that Lineo must
      license or refrain from using any Intellectual Property rights of any
      third party). To the best of Lineo's knowledge and the knowledge of
      directors and officers (and employees with responsibility for Intellectual
      Property matters) of Lineo, no third party has infringed, misappropriated,
      or otherwise violated any Intellectual Property rights of Lineo.

            (ii) Within thirty days of the date of Closing, Lineo will provide
      to Caldera Systems a schedule (the "IP Schedule") identifying (a) each
      patent which has been issued or assigned to Lineo,

<PAGE>   6

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

                  (A) Lineo possess all right, title, and interest in and to the
            IP item, free and clear of any mortgage, lien, claim, license, or
            other encumbrance;

                  (B) to the best of Lineo's knowledge, the IP item is not
            subject to any outstanding injunction, judgment, order, decree,
            ruling, or charge;

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

                  (D) Lineo has never agreed to indemnify any Person for or
            against any interference, infringement, misappropriation, or other
            conflict with respect to the IP item.

            (iii) The Lineo IP Schedule will identify each item of Intellectual
      Property that any third party owns and licenses to Lineo, excluding
      licenses to commercially available software products (e.g., Windows,
      Microsoft Office, etc.) used by Lineo as an end user. Lineo will deliver
      with the IP Schedule to Caldera Systems 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 Lineo IP Schedule,
      to the best of Lineo's knowledge;

                  the  license  and  agreement  are  legal,  valid,   binding,
enforceable, and in full force and effect;

                  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;

                  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;

                  no party  to the  agreement  has  repudiated  any  provision
thereof;

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

<PAGE>   7

                  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.

            (iv) To the best of Lineo's knowledge and to the knowledge of the
      directors and officers (and employees with responsibility for Intellectual
      Property matters) of Lineo, Lineo will not 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.

2.18  MANUFACTURING AND MARKETING RIGHTS.

      Except as set forth on the Lineo Schedule of Exceptions, Lineo has not
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
Lineo's exclusive right to develop, manufacture, assemble, distribute, market or
sell its products.

2.19  EMPLOYEES; EMPLOYEE COMPENSATION.

      To the best of Lineo's knowledge, the relationships between Lineo and its
employees are good and no labor dispute or claims are pending or threatened.
None of Lineo's employees belongs to any union or collective bargaining unit. To
the best of Lineo's knowledge, Lineo has complied in all material respects with
all applicable state and federal laws related to employment. To the best of
Lineo's knowledge, no employee of Lineo 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 Lineo, or any other party because of the
nature of the business conducted or presently proposed to be conducted by Lineo
or to the use by the employee of his or her best efforts with respect to such
business. Lineo 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. Lineo is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with Lineo, nor does Lineo 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 Lineo is terminable at the will of Lineo.

<PAGE>   8

2.20  TAX RETURNS, PAYMENTS, AND ELECTIONS.

      Lineo 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. Lineo has paid all taxes and other assessments due, except
those contested by it in good faith. Lineo has not 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 Lineo. Lineo has never 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 Lineo'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. Lineo 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.
Lineo 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.

2.21  ENVIRONMENTAL AND SAFETY LAWS.

      Lineo is not 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.

SECTION 3.  REPRESENTATIONS AND WARRANTIES OF CALDERA SYSTEMS

      In order to induce Lineo to enter into this Agreement, Caldera Systems
represents and warrants to Lineo the following, except as set forth on a
Schedule of Exceptions furnished by Caldera Systems to Lineo (the "Caldera
Systems Schedule of Exceptions"), specifically identifying the relevant
subparagraph(s) hereof, which exceptions shall be deemed to be representations
and warranties as if made hereunder:

3.1   ORGANIZATION AND CORPORATE POWER.

      Each of Caldera Systems and its Subsidiaries is a corporation duly
organized and validly existing under the laws of the State of Utah, and is
qualified to own and operate its properties and assets, to do business as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a Material Adverse Effect. Each of Caldera Systems and its
Subsidiaries has all required corporate power and corporate authority to carry
on its business as presently conducted, to enter into and perform this Agreement
and the agreements contemplated hereby to which it is a party and to carry out
the transactions contemplated hereby and thereby, including the issuance of the
Caldera Systems Shares. Caldera Systems is not in material violation of any term
of its Articles of Incorporation, as amended as of the date hereof (the "Caldera
Systems Articles of Incorporation"), or Bylaws, as amended as of the date hereof
(the "Caldera Systems Bylaws").

<PAGE>   9

3.2   AUTHORIZATION AND NON-CONTRAVENTION.

      The execution, delivery and performance by Caldera Systems of this
Agreement and each other agreement, document and instrument to be executed and
delivered by Caldera Systems pursuant to or as contemplated by this Agreement,
including, without limitation, the issuance and delivery of the Caldera Systems
Shares, have been duly authorized, or will be duly authorized prior to the
Closing, by all necessary corporate action on behalf of Caldera Systems. This
Agreement and each such other agreement, document, and instrument, when executed
and delivered, will constitute valid and binding obligations of Caldera Systems,
enforceable in accordance with their respective terms, except as may be limited
by applicable law and public policy and subject to (i) applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) general principles
of equity and/or laws relating to the availability of specific performance,
injunctive relief or other equitable remedies, whether such enforceability is
considered in a proceeding in equity or at law. The execution and delivery by
Caldera Systems of this Agreement and each other agreement, document and
instrument to be executed and delivered by Caldera Systems pursuant hereto or as
contemplated hereby and the performance by Caldera Systems of the transactions
contemplated hereby and thereby, including, without limitation, the offer, sale,
issuance and delivery of the Caldera Systems Shares, do not and will not: (A)
violate, conflict with or result in a default (whether after the giving of
notice, lapse of time or both) under any material contract, mortgage, indenture,
contract, instrument or obligation to which Caldera Systems or any of its
Subsidiaries is a party or by which it or its assets are bound, or any provision
of the Caldera Systems Articles of Incorporation or Caldera Systems Bylaws, or
cause the creation of any material lien, charge or encumbrance upon any of the
assets of Caldera Systems or any of its Subsidiaries; (B) to Caldera Systems's
knowledge, violate or result in a violation of, or constitute a default under,
any provision of any material law, regulation or rule, or any judgment, order,
writ, decree or statute of, or any restriction imposed by, any court or
governmental agency applicable to Caldera Systems or any of its Subsidiaries;
(C) require from Caldera Systems any notice to, declaration or filing with, or
consent or approval of any governmental authority or third party other than such
filings as have been made prior to the Closing and/or as may be required to
secure an exemption from qualification of the offer and sale of the Caldera
Systems Shares under the Securities Act, and applicable state securities and
blue sky laws; or (D) accelerate any obligation under, or give rise to a right
of termination, suspension, revocation or impairment of, any material agreement,
permit, license or authorization applicable to any of Caldera Systems's, or any
of its Subsidiaries', business, operations, assets or properties, to which
Caldera Systems, or any of its Subsidiaries, is a party or by which Caldera
Systems is bound.

3.3   CAPITALIZATION.

      As of the Closing, without giving effect to the transactions contemplated
hereby, the authorized capital stock of Caldera Systems will consist of
75,000,000 shares of common stock, of which 20,144,904 shares will be issued and
outstanding and 25,000,000 shares of preferred stock 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,
all of which are isssued and outstanding. As of the Closing, other than the
shares described in the preceding sentence, (ii) the conversion privileges of
the Series A Preferred Stock and the Series B Preferred Stock of Caldera, and
(iii) currently outstanding options to purchase 5,288,882 shares of the common
stock of Caldera granted to employees and members of the Board of Directors of
Caldera pursuant to Caldera's 1998 Stock Option Plan and 1999 Omnibus Stock
Incentive Plan, Caldera Systems has not issued any warrants, options, rights
(including, without limitation, conversion or preemptive rights and rights of
first refusal), proxy or stockholder agreements or agreements of any kind for
the purchase or acquisition from Caldera Systems, or any of its Subsidiaries, of
any shares of its, or any of its Subsidiaries', capital stock or other
securities, including, without limitation, any securities convertible into or
exercisable or exchangeable for such shares or any warrants, options or other
rights to acquire any

<PAGE>   10

such convertible securities. As of the Closing, and after giving effect to the
transactions contemplated hereby, all of the outstanding shares of capital stock
of Caldera Systems and each of its Subsidiaries will have been duly and validly
authorized and issued, fully paid and nonassessable and not subject to any
preemptive rights and will have been offered, issued, sold and delivered in
compliance with applicable federal and state securities laws. Except as set
forth in the Caldera Systems Articles of Incorporation and in that certain
Amended and Restated Investor Rights Agreement, dated as of December 30, 1999,
among Caldera Systems and the shareholders of Caldera Systems who are party
thereto (the "Caldera Systems Investor Rights Agreement"), there are no
preemptive rights, rights of first refusal, put or call rights or obligations or
anti-dilution rights with respect to the issuance, sale or redemption of Caldera
Systems's capital stock or other securities. Caldera Systems is not a party or
subject to any agreement or understanding, and, to the best of Caldera Systems's
knowledge, 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 Caldera Systems.

3.4   VALID ISSUANCE OF CALDERA SYSTEMS SHARES.

      The Caldera Systems Shares, 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.

3.5   SUBSIDIARIES.

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

3.6   CONTRACTS AND OTHER COMMITMENTS.

      Neither Caldera Systems 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
contracts entered into in the ordinary course of business. For the purpose of
this paragraph, employment and consulting contracts and license agreements and
any other agreements relating to Caldera Systems's or any of its 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.

3.7   RELATED-PARTY TRANSACTIONS.

      No employee, officer, stockholder or director of Caldera Systems or any of
its Subsidiaries or member of his or her immediate family is indebted to Caldera
Systems, nor is Caldera Systems 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 Caldera Systems 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 Caldera Systems or such Subsidiary). To the best of
Caldera Systems's or such Subsidiary's knowledge, none of such persons has any
direct or indirect ownership interest in any firm or corporation with which
Caldera Systems or such Subsidiary is affiliated or with which Caldera Systems
or such Subsidiary has a business relationship, or any firm or corporation that
competes with Caldera Systems or such Subsidiary, except that employees,
stockholders, officers or directors of Caldera

<PAGE>   11

Systems or such Subsidiary and members of their immediate families may own stock
in publicly-traded companies that may compete with Caldera Systems or such
Subsidiary. To the best of Caldera Systems's or such Subsidiary's knowledge, no
officer, director or stockholder or any member of their immediate families is,
directly or indirectly, interested in any material contract with Caldera Systems
or such Subsidiary (other than such contracts as relate to any such person's
ownership of capital stock or other securities of Caldera Systems or such
Subsidiary).

3.8   REGISTRATION RIGHTS.

      Except as set forth in the Caldera Systems Investor Rights Agreement,
Caldera Systems 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.

3.9   PERMITS.

      Each of Caldera Systems 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 Caldera
Systems 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 Caldera Systems nor any Subsidiary is in
default in any material respect under any of such franchises, permits, licenses
or other similar authority.

3.10  LITIGATION.

      There is no action, suit, proceeding or investigation pending or, to the
best of Caldera Systems's or any of its Subsidiary's knowledge, currently
threatened against Caldera Systems or any of its Subsidiary's that questions the
validity of this Agreement, or the right of Caldera Systems to enter into this
Agreement, or to consummate the transactions contemplated hereby, 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
Caldera Systems or any of its Subsidiaries, or in any material change in the
current equity ownership of Caldera Systems or any of its Subsidiaries.

3.11  RETURNS AND COMPLAINTS.

      Neither Caldera Systems 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 Caldera Systems or any of its Subsidiaries.

3.12  DISCLOSURE.

      Caldera Systems has provided Lineo with all the information reasonably
available to it without undue expense that Lineo has requested for deciding
whether to purchase the Caldera Systems Shares and all information that Caldera
Systems believes is reasonably necessary to enable Lineo to make such decision.

<PAGE>   12

3.13  OFFERING.

      Subject, in part, to the truth and accuracy of Lineo's representations set
forth in this Agreement, the offer, sale and issuance of the Caldera Systems
Shares as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act, and neither Caldera Systems, 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.

3.14  TITLE TO PROPERTY AND ASSETS; LEASES.

      Except (i) as reflected in the Caldera Systems Financial Statements
(defined in paragraph 3.15), (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 Caldera Systems 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 Caldera Systems and its Subsidiaries is in compliance
with such leases and, to the best of its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances, subject to clauses (i)-(v)
above.

3.15  FINANCIAL STATEMENTS.

      Caldera Systems has delivered to Lineo its audited financial statements
(balance sheet and profit and loss statement, statement of stockholders' equity
and statement of cash flows, including notes thereto) at October 31, 1999 and
for the fiscal year then ended (the "Caldera Systems Financial Statements"). The
Caldera Systems Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated. The Caldera Systems Financial Statements
fairly present the financial condition and operating results of Caldera Systems
as of the dates, and for the periods, indicated therein. Except as set forth in
the Caldera Systems Financial Statements, neither Caldera Systems 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 Caldera Systems Financial
Statements, which in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of Caldera Systems or
any of its Subsidiaries. Except as disclosed in the Caldera Systems Financial
Statements, neither Caldera Systems nor any of its Subsidiaries is a guarantor
or indemnitor of any indebtedness of any other person, firm or corporation.
Caldera Systems 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.

3.16  CHANGES.

      Since October, 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 Caldera Systems or any of its Subsidiaries.

<PAGE>   13

3.17  INTELLECTUAL PROPERTY.

      To the best of Caldera Systems's and its Subsidiaries' knowledge, Caldera
Systems, its Subsidiaries and their products have not infringed and do not
infringe the copyrights of any third party. To the best of Caldera Systems's and
its Subsidiaries' knowledge, neither Caldera Systems nor its Subsidiaries has
misappropriated or is misappropriating any trade secrets or proprietary
confidential information of any third party, and the products of Caldera Systems
and its Subsidiaries do not include or embody any trade secret or proprietary
confidential information misappropriated by Caldera Systems or its Subsidiaries
from any third party. To the best of Caldera Systems's and its Subsidiaries'
knowledge, each of Caldera Systems 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 Caldera Systems and its Subsidiaries immediately prior
to the Closing hereunder will be owned by or licensed to Caldera Systems 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 Caldera Systems's and its Subsidiaries'
      knowledge, none of Caldera Systems 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 Caldera
      Systems or its Subsidiaries of Intellectual Property (including any claim
      that Caldera Systems and its Subsidiaries must license or refrain from
      using any Intellectual Property rights of any third party). To the best of
      Caldera Systems's and its Subsidiaries' knowledge and the knowledge of
      directors and officers (and employees with responsibility for Intellectual
      Property matters) of Caldera Systems and its Subsidiaries, no third party
      has infringed, misappropriated, or otherwise violated any Intellectual
      Property rights of Caldera Systems and its Subsidiaries.

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

                  (A) Caldera Systems and its Subsidiaries possess all right,
            title, and interest in and to the IP item, free and clear of any
            mortgage, lien, claim, license, or other encumbrance;

                  (B) to the best of Caldera Systems's and its Subsidiaries'
            knowledge, the IP item is not subject to any outstanding injunction,
            judgment, order, decree, ruling, or charge;

<PAGE>   14

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

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

            (iii) The Caldera Systems Schedule of Exceptions identifies each
      item of Intellectual Property that any third party owns and licenses to
      any of Caldera Systems and its Subsidiaries, excluding licenses to
      commercially available software products (e.g., Windows, Microsoft Office,
      etc.) used by any of Caldera Systems and its Subsidiaries as an end user.
      Caldera Systems has delivered to Lineo 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 Caldera Systems
      Schedule of Exceptions, to the best of Caldera Systems's or its
      Subsidiaries' knowledge;

                  the license and agreement are legal, valid, binding,
enforceable, and in full force and effect;

                  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;

                  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;

                  no party to the agreement has repudiated any provision
thereof;

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

                  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.

            (iv) To the best of Caldera Systems's and its Subsidiaries'
      knowledge and to the knowledge of the directors and officers (and
      employees with responsibility for Intellectual Property matters) of
      Caldera Systems and its Subsidiaries, neither Caldera Systems 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.

3.18  MANUFACTURING AND MARKETING RIGHTS.

      Except as set forth on the Caldera Systems Schedule of Exceptions, neither
Caldera Systems nor any of its Subsidiaries has granted rights to manufacture,
produce, assemble, license, market or sell its products

<PAGE>   15

to any other person and is not bound by any agreement that affects Caldera
Systems's or such Subsidiary's exclusive right to develop, manufacture,
assemble, distribute, market or sell its products.

3.19  EMPLOYEES; EMPLOYEE COMPENSATION.

      To the best of Caldera Systems's and its Subsidiary's knowledge, the
relationships between Caldera Systems and its Subsidiaries and their respective
employees are good and no labor dispute or claims are pending or threatened.
None of Caldera Systems's or any of its Subsidiary's employees belongs to any
union or collective bargaining unit. To the best of Caldera Systems's and its
Subsidiaries' knowledge, Caldera Systems 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 Caldera Systems's and it Subsidiary's
knowledge, no employee of Caldera Systems 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 Caldera Systems, any of its
Subsidiaries, or any other party because of the nature of the business conducted
or presently proposed to be conducted by Caldera Systems or any of its
Subsidiaries or to the use by the employee of his or her best efforts with
respect to such business. Caldera Systems 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 Caldera Systems 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 Caldera Systems or any of its
Subsidiaries, nor does Caldera Systems 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 Caldera Systems and each of its Subsidiaries is
terminable at the will of Caldera Systems or such Subsidiary, as applicable.

<PAGE>   16

3.20  TAX RETURNS, PAYMENTS, AND ELECTIONS.

      Caldera Systems 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. Caldera Systems and
each of its Subsidiaries has paid all taxes and other assessments due, except
those contested by it in good faith. Neither Caldera Systems nor any of its
Subsidiaries has elected pursuant to the 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 Caldera Systems or any of its Subsidiaries.
Neither Caldera Systems 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 Caldera Systems'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.
Caldera Systems 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. Caldera
Systems 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.

3.21  ENVIRONMENTAL AND SAFETY LAWS.

            Neither Caldera Systems 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.

<PAGE>   17

SECTION 4.  ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE PARTIES

      (a) Each party purchasing securities hereunder represents to the other
that (i) it has such knowledge and experience in financial and business matters
and in private placement transactions of securities of companies in a similar
stage of development as the other party that it is capable of evaluating the
merits and risks of the investment contemplated by such purchasing party under
this Agreement and making an informed investment decision with respect thereto,
(ii) it is able to bear the economic risk of such investment and can afford to
sustain a substantial loss on such investment, (iii) it is an "accredited
investor" as such term is defined in Rule 501 under the Securities Act, (iv) it
is purchasing the securities purchased by it hereunder for its own account, for
investment only and not with a view to, or any present intention of, effecting a
resale ordistribution of or selling or granting any participation in such
securities or any part thereof, (v) it realizes that the basis for any exemption
pursuant to which the securities such party is purchasing hereunder have been
issued may not be present if, notwithstanding the representations made by such
party hereunder, such party has in mind merely acquiring the securities is is
purchasing hereunder for a fixed or determinable period in the future, or for a
market rise, or for sale if the market does not rise and (vi) it 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 such securities. Each party acknowledges that the securities
purchased by it hereunder have not been registered under the Securities Act or
the securities laws of any state or other jurisdiction in reliance on an
exemption from registration thereunder and reliance on such exemption by the
issuer of such securities is predicated on the representations and warranties
set forth in this Agreement. Furthermore, each party purchasing securities
hereunder acknowledges that such securities cannot be disposed of unless they
are subsequently registered under the Securities Act and any applicable state
laws or an exemption from such registration is available.

      (b) Each party understands that the securities have not been registered
under the Securities Act, that there is no public market for the securities, and
that it must bear the economic risk of investment for an indefinite period of
time. In particular, such party is aware that the securities purchased by it
hereunder 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 issuer of such securities. Such information is not now available and
such issuer has no present plans to make such information available.

      (c) Each party represents that there are no claims for investment banking
fees, brokerage commissions, finder's fees or similar compensation (exclusive of
professional fees to lawyers and accountants) in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of such party. Such party (the "Indemnifying
Party") agrees to indemnify and to hold harmless the other 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 Indemnifying Party or any of its officers, partners, employees or
representatives is responsible.

      (d) Each party believes it has received all the information it considers
necessary or appropriate for deciding whether to purchase the securities
purchased by it hereunder. Such party further represents that it has had an
opportunity to ask questions and receive answers from the party issuing such
securities regarding the terms and conditions of the offering of such securities
and the business, properties, prospects and financial condition of such issuer
and to obtain additional information (to the extent such issuer possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to such party or
to which such party had access. The foregoing, however, does not limit or modify
the representations and warranties of such issuer in Section 2 or 3, as
applicable, of this Agreement or the right of such party to rely thereon.

<PAGE>   18

SECTION 5.  CONDITIONS TO CLOSING

5.1   CONDITIONS OF CALDERA SYSTEMS'S OBLIGATIONS AT CLOSING.

      The obligations of Caldera Systems under 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 Caldera Systems unless it
consents in writing thereto:

      (a)   REPRESENTATIONS AND WARRANTIES.

            The representations and warranties of Lineo 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.

      (b)   PERFORMANCE.

            Lineo 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.

      (c)   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 L:ineo Shares pursuant to this Agreement shall be duly obtained and
      effective as of the Closing.

      (d)   PROCEEDINGS AND DOCUMENTS.

            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 Caldera
      Systems's counsel, which shall have received all such counterpart original
      and certified or other copies of such documents as it may reasonably
      request.

5.2   CONDITIONS OF LINEO'S OBLIGATIONS AT CLOSING.

      The obligations of Lineo under 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 Lineo unless it consents in
writing thereto:

      (a)   REPRESENTATIONS AND WARRANTIES.

            The representations and warranties of Caldera Systems and its
      Subsidiaries 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.

      (b)   PERFORMANCE.

<PAGE>   19

            Caldera Systems 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.

      (c)   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 Caldera Systems Shares pursuant to this Agreement shall be duly
      obtained and effective as of the Closing.

      (d)   PROCEEDINGS AND DOCUMENTS.

            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 Lineo's
      counsel, which shall have received all such counterpart original and
      certified or other copies of such documents as it may reasonably request.

SECTION 6.  POST-CLOSING COVENANTS OF CALDERA SYSTEMS

6.1   FINANCIAL STATEMENTS.

            Caldera Systems shall deliver to Lineo:

            (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 Caldera Systems 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 Caldera Systems as of the
      end of such quarterly period, setting forth in each case comparisons 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 Caldera Systems's chief financial
      officer;

            (b) within 90 days after the end of each fiscal year, audited
      statements of income and cash flows of Caldera Systems for such fiscal
      year, and audited balance sheets of Caldera Systems as of the end of such
      fiscal year, setting forth in each case comparisons 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; and

            (c) 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 Caldera Systems.

      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

<PAGE>   20
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 Caldera Systems).

      6.2   CURRENT PUBLIC INFORMATION.

            At all times after Caldera Systems has filed a registration
statement with the Securities and Exchange Commission pursuant to the
requirements of either the Securities Act or the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), Caldera Systems shall file all reports
required to be filed by it under the Securities Act and the 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 Caldera Systems Shares may reasonably
request, all to the extent required to enable such holders to sell Securities
pursuant to 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.
Upon request, Caldera Systems shall deliver to any holder of Caldera Systems
Shares a written statement as to whether it has complied with such requirements.

SECTION 7.  POST-CLOSING COVENANTS OF LINEO

      7.1   FINANCIAL STATEMENTS.

            Lineo shall deliver to Caldera Systems:

            (a) audited financial statements for Lineo for the fiscal year ended
      October 31, 1999 including balance sheet, profit and loss statement,
      statement of stockholders' equity and statement of cash flows (including
      notes thereto) which Lineo expects to be completed by January 31, 2000;

            (b) 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 Lineo 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 Lineo as of the end of such
      quarterly period, setting forth in each case comparisons 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 Lineo's chief financial officer;

            (c) within 90 days after the end of each fiscal year, audited
      statements of income and cash flows of Lineo for such fiscal year, and
      audited balance sheets of Lineo as of the end of such fiscal year, setting
      forth in each case comparisons 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; and

            (d) 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 Lineo.

<PAGE>   21

      Each of the financial statements referred to in subparagraphs (a), (b) and
(c) 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
Lineo).

      7.2   CURRENT PUBLIC INFORMATION.

            At all times after Lineo has filed a registration statement with the
Securities and Exchange Commission pursuant to the requirements of either the
Securities Act or the Exchange Act, Lineo shall file all reports required to be
filed by it under the Securities Act and the 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 Lineo Shares may reasonably request, all to the extent
required to enable such holders to sell Securities pursuant to 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. Upon request, Lineo shall
deliver to any holder of Lineo Shares a written statement as to whether it has
complied with such requirements.

      7.3   LINEO IP SCHEDULE.

            Lineo shall deliver the IP Schedule to Caldera Systems within thirty
days of the date of this Agreement.

SECTION 8.  GENERAL

8.1   AMENDMENTS, WAIVERS AND CONSENTS.

      For the purposes of this Agreement and all agreements executed pursuant
hereto, no course of dealing between or among any of the parties hereto and no
delay on the part of any party hereto in exercising any rights hereunder or
thereunder shall operate as a waiver of the rights hereof and thereof. No
covenant or other provision hereof may be waived otherwise than by a written
instrument signed by the party or parties so waiving such covenant or other
provision. No amendment to this Agreement may be made without the written
consent of all of the parties hereto.

8.2   LEGEND ON SECURITIES.

      The parties acknowledge and agree that the following legend shall be typed
on each certificate evidencing any of the securities issued hereunder held at
any time by a party:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE SKY LAWS
AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
ASSIGNED EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES
AND BLUE SKY LAWS RELATING TO THE DISPOSITION OF SECURITIES, PROVIDED THAT AN
OPINION OF COUNSEL TO SUCH EFFECT IS PROVIDED TO

<PAGE>   22

THE ISSUER OF SUCH SECURITIES, IN FORM SATISFACTORY TO SUCH ISSUER, IN
CONNECTION THEREWITH.

8.3   GOVERNING LAW.

      This Agreement shall be deemed to be a contract made under, and shall be
construed in accordance with, the laws of the State of Utah, as applied to
agreements among Utah residents entered into and to be performed entirely within
Utah, without giving effect to conflict of laws principles thereof.

8.4   SECTION HEADINGS.

      The descriptive headings in this Agreement have been inserted for
convenience only and shall not be deemed to limit or otherwise affect the
construction or interpretation of any provision thereof or hereof.

8.5   COUNTERPARTS.

      This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be taken to be an original; but such
counterparts shall together constitute but one and the same document.

8.6   ENTIRE AGREEMENT.

      This Agreement, including the exhibits, documents and instruments referred
to herein or therein, constitutes the entire agreement, and supersedes all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.

8.7   SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS

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

8.8   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
securities issued hereunder). 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.

8.9   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 at
the address set forth below, 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:

                  If to Caldera Systems:  Caldera Systems, Inc.

<PAGE>   23

                                          240 West Center Street
                                          Orem, Utah 84057
                                          Attention:  President

                  If to Lineo:            Lineo, Inc.
                                          383 South 520 West
                                          Lindon, Utah 84042
                                          Attention:  Chief Financial Officer

All such notices and other written communications shall be effective on the date
of mailing, confirmed facsimile transfer or delivery.

8.10  ATTORNEYS' FEES.

      If any action at law or in equity is necessary to enforce or interpret the
terms of this Agreement, 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.

8.11  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.

SECTION 9   DEFINITIONS

      For the purposes of this Agreement, each of the following terms shall have
the meaning set forth opposite such term below:

      "knowledge" of a person shall mean actual knowledge of such person after
(i) with respect to representations, warranties and statements made by or with
respect to Caldera Systems, inquiry of the officers and directors of Caldera
Systems and those management-level employees of Caldera Systems who have
responsibility for the area of inquiry and (ii) with respect to representations,
warranties and statements made by or with respect to Lineo, inquiry of the
officers and directors of Lineo and those management-level employees of Lineo
who have responsibility for the area of inquiry.

      "Intellectual Property" shall mean (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service marks, trade
dress, logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith, (c) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith, (d) all mask
works and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g)

<PAGE>   24

all other proprietary rights, and (h) all copies and tangible embodiments
thereof (in whatever form or medium).

      "Subsidiary" shall mean any corporation with respect to which a specified
party (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors. "Subsidiaries" shall mean, for purposes of this Agreement,
each Subsidiary of a party, collectively and individually.

<PAGE>   25
      IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.

                                     Lineo, Inc.,
                                     a Utah corporation

                                    By: /s/ BRYAN SPARKS
                                        ----------------------------------------
                                        Bryan Sparks, President and CEO

                                     Caldera Systems, Inc.,
                                     a Utah corporation

                                     By: /s/ RANSOM LOVE
                                        ----------------------------------------
                                       Ransom Love, President and CEO

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