<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 1997
REGISTRATION NO. 333-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE SANTA CRUZ OPERATION, INC.
(Exact name of issuer as specified in its charter)
CALIFORNIA 94-2549086
(State of Incorporation) (I.R.S. Employer Identification Number)
400 ENCINAL STREET
SANTA CRUZ, CA 95061
(Address of principal executive offices)
1994 INCENTIVE STOCK OPTION PLAN
1993 DIRECTOR OPTION PLAN
1993 EMPLOYEE STOCK PURCHASE PLAN
(Full title of the plan)
STEVEN M. SABBATH
VICE PRESIDENT, LAW & CORPORATE AFFAIRS AND SECRETARY
THE SANTA CRUZ OPERATION, INC.
400 ENCINAL STREET
SANTA CRUZ, CA 95060
(408) 425-7222
(Name, address, including zip code and telephone number, including area code, of
agent for service)
Copy to:
Barry E. Taylor, Esq.
WILSON SONSINI GOODRICH & ROSATI, P.C.
650 Page Mill Road
Palo Alto, California 94306
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value
- 1994 Incentive Stock Option Plan 3,000,000 shares $4.50(1) $13,500,000(1) $4,901
- 1993 Director Option Plan 200,000 shares $4.50(1) $ 900,000(1) $ 273
- 1993 Employee Stock Purchase Plan 750,000 shares $3.825(2) $ 2,868,750(2) $ 869
TOTAL 3,950,000 SHARES $17,268,750 $5,233
====================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457 solely for purposes of calculating the
registration fee on the basis of the closing price of $ 4.50 per share
reported in the Nasdaq National Market on April 9, 1997 (the "Market
Price").
(2) Estimated pursuant to Rule 457 solely for purposes of calculating the
registration fee on the basis of 85% of the Market Price.
<PAGE>
REGISTRATION STATEMENT ON FORM S-8
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
---------------------------------------
The following documents and information previously filed with the
Securities and Exchange Commission by The Santa Cruz Operation, Inc. (the
"Company") are hereby incorporated by reference in this Registration Statement:
(a) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A dated April 1, 1993, filed pursuant
to Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including any amendment or report filed for the purpose of
updating such description.
(b) The Company's Annual Report on Form 10-K for the year ended September
30, 1996 filed pursuant to Section 13 of the Exchange Act.
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996 filed pursuant to Section 13 of the Exchange Act.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-effective
amendment which indicates that all securities registered have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference in this Registration Statement and to be part hereof
from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
-------------------------
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
--------------------------------------
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
-----------------------------------------
Section 317 of the California General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act"). Further, in accordance with the California General Corporation Law, the
Company's Articles of Incorporation and the Bylaws of the Company provide for
indemnification of certain agents to the maximum extent permitted by the
California General Corporation Law. Persons covered by this
II-1
<PAGE>
indemnification include any current or former directors, officers, employees and
other agents of the Company, as well as persons who serve at the request of the
Company as directors, officers, employees or agents of another enterprise.
In addition, the Company has entered into contractual agreements with each
director and certain officers of the Company designated by the Board to
indemnify such individuals to the full extent permitted by law. These
Agreements also resolve certain procedural and substantive matters that are not
covered, or are covered in less detail, in the Bylaws or by the California
General Corporation Law.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
-----------------------------------
Not applicable.
ITEM 8. EXHIBITS.
--------
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------
4.1 1994 Incentive Stock Option Plan.
4.2 1993 Director Option Plan.
4.3 1993 Employee Stock Purchase Plan.
5.1 Opinion of counsel as to legality of securities being registered.
23.1 Consent of counsel (contained in Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP (see page II-6).
24.1 Power of Attorney (see page II-4).
II-2
<PAGE>
ITEM 9. UNDERTAKINGS.
------------
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distri bution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Cruz, State of California, on this 8th day of
April, 1997.
THE SANTA CRUZ OPERATION, INC.
/s/ STEVEN M. SABBATH
----------------------------------------------
Steven M. Sabbath, Esq.
Vice President, Law and Corporate Affairs, and
Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Alok Mohan and Steven M. Sabbath,
and each of them acting individually, as his attorney-in-fact, each with full
power of substitution, for him in any and all capacities, to sign any and all
amendments to this Registration Statement on Form S-8, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities on April 8, 1997:
Signature Title
--------- -----
/s/ ALOK MOHAN President, Chief Executive Officer and Director
- ---------------------------- (Principal Executive Officer)
(Alok Mohan)
/s/ JOHN LUHTALA Senior Vice President and Chief
- ---------------------------- Financing Officer, (Principal Financial
(John Luhtala) Officer and Principal Accounting Officer)
/s/ DOUGLAS L. MICHELS Executive Vice President, Chief Technical
- ---------------------------- Officer and Director
(Douglas L. Michels)
/s/ NINIAN EADIE Director
- ----------------------------
(Ninian Eadie)
/s/ JEAN-FRANCOIS HEITZ Director
- ----------------------------
(Jean-Francois Heitz)
/s/ RONALD LACHMAN Director
- ----------------------------
(Ronald Lachman)
/s/ ROBERT M. MCCLURE Director
- ----------------------------
(Robert M. McClure)
/s/ R. DUFF THOMPSON Director
- ----------------------------
(R. Duff Thompson)
/s/ ENZO TORRESI Director
- ----------------------------
(Enzo Torresi)
/s/ GILBERT P. WILLIAMSON Director
- ----------------------------
(Gilbert P. Williamson)
II-5
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of
The Santa Cruz Operation, Inc.:
We consent to incorporation by reference in the registration statement dated
April 9, 1997, on Form S-8 of The Santa Cruz Operation, Inc. of our reports
dated October 25, 1996, relating to the consolidated balance sheets of The Santa
Cruz Operation, Inc. and subsidiaries as of September 30, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the three-year period ended September 30, 1996
and the related schedule, which reports appear or are incorporated by reference
in the September 30, 1996, annual report on Form 10-K of The Santa Cruz
Operation, Inc.
KPMG PEAT MARWICK LLP
San Jose, California
April 8, 1997
II-6
<PAGE>
THE SANTA CRUZ OPERATION, INC.
REGISTRATION STATEMENT ON FORM S-8
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C> <C>
4.1 1994 Incentive Stock Option Plan ...................................
4.2 1993 Director Option Plan ..........................................
4.3 1993 Employee Stock Purchase Plan ..................................
5.1 Opinion of counsel as to legality of securities being registered ...
23.1 Consent of Counsel (contained in Exhibit 5.1) ......................
23.2 Consent of KPMG Peat Marwick LLP (see page II-6) ...................
24.1 Power of Attorney (see page II-4) ..................................
</TABLE>
<PAGE>
Exhibit 4.1
1994 INCENTIVE STOCK OPTION PLAN
A RESTATEMENT OF THE 1984 INCENTIVE STOCK OPTION PLAN
EFFECTIVE OCTOBER 28, 1993
(Amended as of November 1996)
1. Purposes of the Plan. The purposes of this Stock Option Plan are:
--------------------
to attract and retain the best available personnel for positions of
substantial responsibility,
to provide additional incentive to Employees and Consultants, and
to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant. Stock
Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as shall
-------------
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option plans under state corporate and securities laws
and the Code.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a Committee appointed by the Board in
---------
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means The Santa Cruz Operation, Inc., a California
-------
corporation.
(h) "Consultant" means any person, including an advisor, engaged by
----------
the Company or a Parent or Subsidiary to render services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(i) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship is not interrupted or terminated by the
Company, any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Company, including sick leave, military leave, or any
other personal leave; provided, however, that for purposes of Incentive Stock
Options, any such leave may not exceed ninety (90) days, unless reemployment
upon the expiration of such leave is guaranteed by contract (including certain
Company policies) or statute or, if reemployment is not so guaranteed,
Continuous Status as an Employee or Consultant shall not be considered
interrupted, but the Incentive Stock Option shall automatically be converted
into a Nonstatutory Stock Option on the ninety-first (91st)
<PAGE>
day of such leave; or (ii) transfers between locations of the Company or between
the Company, its Parent, its Subsidiaries or its successor.
(j) "Director" means a member of the Board.
--------
(k) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a Share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written notice evidencing certain terms
---------------
and conditions of an individual Option or Stock Purchase Right grant. The
Notice of Grant is part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
------
(t) "Option Agreement" means a written agreement between the Company
----------------
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
2
<PAGE>
(u) "Option Exchange Program" means a program whereby outstanding
-----------------------
options are surrendered in exchange for options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option or
--------------
Stock Purchase Right.
(w) "Optionee" means an Employee or Consultant who holds an
--------
outstanding Option or Stock Purchase Right.
(x) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1994 Incentive Stock Option Plan.
----
(z) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of Stock Purchase Rights under Section 11 below.
(aa) "Restricted Stock Purchase Agreement" means a written agreement
-----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(bb) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
----------
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(cc) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
(dd) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ee) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 13,013,665 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock. However, should the Company reacquire
Shares which were issued pursuant to the exercise of an Option or Stock Purchase
Right, such Shares shall not become available for future grant under the Plan.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
--------
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
3
<PAGE>
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3, the
------------------------------
Plan may be administered by different bodies with respect to Directors, Officers
who are not Directors, and Employees who are neither Directors nor Officers.
(ii) Administration With Respect to Directors and Officers Subject to
----------------------------------------------------------------
Section 16(b). With respect to Option or Stock Purchase Right grants made to
- -------------
Employees who are also Officers or Directors subject to Section 16(b) of the
Exchange Act, the Plan shall be administered by (A) the Board, if the Board may
administer the Plan in compliance with the rules governing a plan intended to
qualify as a discretionary plan under Rule 16b-3, or (B) a committee designated
by the Board to administer the Plan, which committee shall be constituted to
comply with the rules governing a plan intended to qualify as a discretionary
plan under Rule 16b-3. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members, remove members (with or without cause) and substitute new
members, fill vacancies (however caused), and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the rules governing a plan intended to qualify as a discretionary
plan under Rule 16b-3.
(iii) Administration With Respect to Other Persons. With respect to
--------------------------------------------
Option or Stock Purchase Right grants made to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a committee designated by the Board, which committee shall
be constituted to satisfy Applicable Laws. Once appointed, such Committee shall
serve in its designated capacity until otherwise directed by the Board. The
Board may increase the size of the Committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom Options and
Stock Purchase Rights may be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or times when
Options or Stock Purchase Rights may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the shares of Common Stock
4
<PAGE>
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vii) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan);
(xi) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to determine the terms and restrictions applicable to
Options and Stock Purchase Rights and any Restricted Stock; and
(xiv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
-----------
be granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. If otherwise eligible, an Employee or Consultant who has
been granted an Option or Stock Purchase Right may be granted additional Options
or Stock Purchase Rights.
6. Limitations.
-----------
(a) Each Option shall be designated in the Notice of Grant as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value:
(i) of Shares subject to an Optionee's incentive stock options
granted by the Company, any Parent or Subsidiary, which (ii)
become exercisable for the first time during any calendar year
(under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 6(a), incentive stock options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time of grant.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
employment or consulting relationship with
5
<PAGE>
the Company, nor shall they interfere in any way with the Optionee's right or
the Company's right to terminate such employment or consulting relationship at
any time, with or without cause.
(c) The following limitations shall apply to grants of Options and
Stock Purchase Rights to Officers:
(i) no Officer shall be granted in any fiscal year of the Company,
Options and Stock Purchase Rights to purchase more than the number of shares
issuable under the Plan; and
(ii) over the remaining term of the Plan, no Officer shall be granted
Options and Stock Purchase Rights to purchase more than the number of shares
issuable under the Plan.
The foregoing limitations set forth in this Section 6(c) are intended to
satisfy the requirements applicable to Options and Stock Purchase Rights
intended to qualify as "performance-based compensation" (within the meaning of
Section 162(m) of the Code). In the event the Administrator determines that
such limitations are not required to qualify Options and Stock Purchase Rights
as performance-based compensation, the Administrator may modify or eliminate
such limitations.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
------------
effective upon its adoption by the Board of Directors on October 28,1993,
subject to its approval by the shareholders of the Company as described in
Section 19 of the Plan. It shall continue in effect for a term of ten (10)
years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Notice
--------------
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant or
such shorter term as may be provided in the Notice of Grant.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
6
<PAGE>
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares; or
(v) delivery of Optionee's promissory note (the "Note") in the
form attached hereto as Exhibit C, in the amount of the aggregate Exercise Price
of the Exercised Shares together with the execution and delivery by the Optionee
of the Security Agreement attached hereto as Exhibit B. The Note shall bear
interest at a rate no less than the "applicable federal rate" prescribed under
the Code and its regulations at time of purchase, and shall be secured by a
pledge of the Shares purchased by the Note pursuant to the Security Agreement.
(iv) any combination of the foregoing methods of payment; or
(v) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 13 of the
Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
7
<PAGE>
(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event that an Optionee's Continuous Status as an Employee or Consultant
terminates (but not in the event of a change of status from Employee to
Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the ninety-first (91st)
day following such change of status) or from Consultant to Employee), other than
upon the Optionee's death or Disability, the Optionee may exercise his or her
Option, but only within such period of time as is determined by the
Administrator, and only to the extent that the Optionee was entitled to exercise
it at the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant). In the case of an
Incentive Stock Option, the Administrator shall determine such period of time
(in no event to exceed three (3) months from the date of termination) when the
Option is granted. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) Disability of Optionee. Notwithstanding the provisions of Section
----------------------
10(b) above, in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant as a result of his total and permanent disability (as
defined in Section 22(e)(3) of the Code), Optionee may, but only within such
period of time as is determined by the Administrator, of at least six (6) months
(with such period of time in the case of an Incentive Stock Option not exceeding
twelve (12) months) from the date of such termination (but in no event later
than the expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that Optionee was not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
-----------------
(i) during the term of the Option who is at the time of his or her
death an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant of the
Option, the Option may be exercised by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance until the
term of the option, or such shorter period as is set forth in the option
agreement, expires, and the Option shall be treated for exercise purposes as if
the Optionee had continued living and had remained in Continuous Status as an
Employee or Consultant for six (6) months after the date of death; or
(ii) after the termination of an Optionee's Continuous Status as an
Employee or Consultant, the Option may be exercised by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance until the term of the option, or such shorter period as is set forth
in the option agreement, expires, and the Option shall be treated for exercise
purposes as if the Optionee had continued living and had remained in Continuous
Status as an Employee or Consultant through the date of Optionee's death; and
(iii) if an Option is not exercised within the time specified
herein, the Option shall terminate.
(e) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
8
<PAGE>
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing, by means of a Notice of Grant, of the terms, conditions and
restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid, and the time within
which the offeree must accept such offer, which shall in no event exceed six (6)
months from the date upon which the Administrator made the determination to
grant the Stock Purchase Right. The offer shall be accepted by execution of a
Restricted Stock Purchase Agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. An Option
--------------------------------------------------------
or Stock Purchase Right may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset
----------------------------------------------------------------------
Sale or Change of Control.
-------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
9
<PAGE>
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option or Stock
Purchase Right has not been previously exercised, it will terminate immediately
prior to the consummation of such proposed action. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option or
Stock Purchase Right shall terminate as of a date fixed by the Board and give
each Optionee the right to exercise his or her Option or Stock Purchase Right as
to all or any part of the Optioned Stock, including Shares as to which the
Option or Stock Purchase Right would not otherwise be exercisable.
(c) Merger or Asset Sale. Subject to the provisions of paragraph (d)
--------------------
hereof, in the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option and Stock Purchase Right shall be assumed or an equivalent
option or right shall be substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation does not agree to assume the Option or Stock Purchase Right or to
substitute an equivalent option or right, the Administrator shall, in lieu of
such assumption or substitution, provide for the Optionee to have the right to
exercise the Option or Stock Purchase Right as to all or a portion of the
Optioned Stock, including Shares as to which it would not otherwise be
exercisable. If the Administrator makes an Option or Stock Purchase Right
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee that the Option or
Stock Purchase Right shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the Option or Stock Purchase Right will
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets was not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
(d) Change in Control. In the event of a "Change in Control" of the
-----------------
Company, as defined in paragraph (e) below, then the following acceleration and
valuation provisions shall apply:
(i) Except as otherwise determined by the Administrator, in its
discretion, prior to or after the occurrence of a Change in Control, any Options
and Stock Purchase Rights outstanding on the date such Change in Control is
determined to have occurred that are not yet exercisable and vested on such date
shall become fully exercisable and vested;
(ii) Except as otherwise determined by the Administrator, in its
discretion, prior to or after the occurrence of a Change in Control, all
outstanding Options and Stock Purchase Rights, to the extent they are
exercisable and vested (including Options and Stock Purchase Rights that shall
become exercisable and vested pursuant to subparagraph (i) above), shall be
terminated in exchange for a cash payment equal to the Change in Control Price,
(reduced by the exercise price applicable to such Options or Stock Purchase
Rights). These cash proceeds shall be paid to the Optionee or, in the event of
death of an Optionee prior to payment, to the estate of the Optionee or to a
person who acquired the right to exercise the Option or Stock Purchase Right by
bequest or inheritance.
10
<PAGE>
(e) Definition of "Change in Control". For purposes of this Section
---------------------------------
13, a "Change in Control" means the happening of any of the following:
(i) When any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, a Subsidiary or a Company
employee benefit plan, including any trustee of such plan acting as trustee) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing more
than twenty-five percent (25%) of the combined voting power of the Company's
then outstanding securities entitled to vote generally in the election of
directors; or
(ii) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least seventy-five percent
(75%) of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve an agreement for the
sale or disposition by the Company of all or substantially all the Company's
assets; or
(iii) A change in the composition of the Board of Directors of the
Company occurring within a two-year period, as a result of which fewer than a
majority of the directors are Incumbent Directors. "Incumbent Directors" shall
mean directors who either (A) are directors of the Company as of the date the
Plan is approved by the stockholders, or (B) are elected, or nominated for
election, to the Board of Directors of the Company with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company).
(f) Change in Control Price. For purposes of this Section 13, "Change
-----------------------
in Control Price" shall be, as determined by the Board, (i) the highest Fair
Market Value of a Share within the 60 day period immediately preceding the date
of determination of the Change in Control Price by the Board (the "60-Day
Period"), or (ii) the highest price paid or offered per Share, as determined by
the Board, in any bona fide transaction or bona fide offer related to the Change
in Control of the Company, at any time within the 60-Day Period, or (iii) some
lower price as the Board, in its discretion, determines to be a reasonable
estimate of the fair market value of a Share.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
-------------
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such shareholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.
11
<PAGE>
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
16. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, Applicable Laws, and the requirements of any stock
exchange or quotation system upon which the Shares may then be listed or quoted,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. Liability of Company.
--------------------
(a) Inability to Obtain Authority. The inability of the Company to
-----------------------------
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered
--------------------------------
by an Option or Stock Purchase Right exceeds, as of the date of grant, the
number of Shares which may be issued under the Plan without additional
shareholder approval, such Option or Stock Purchase Right shall be void with
respect to such excess Optioned Stock, unless shareholder approval of an
amendment sufficiently increasing the number of Shares subject to the Plan is
timely obtained in accordance with Section 15(b) of the Plan.
18. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
12
<PAGE>
EXHIBIT 4.2
THE SANTA CRUZ OPERATION, INC.
1993 DIRECTOR OPTION PLAN
(AS AMENDED NOVEMBER 1996)
1. Purposes of the Director Plan. The purposes of this 1993 Director Option
-----------------------------
Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be "non-statutory stock options."
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the Common Stock of the Company.
------------
(d) "Company" shall mean The Santa Cruz Operation, Inc., a California
-------
corporation.
(e) "Continuous Status as a Director" shall mean the absence of any
-------------------------------
interruption or termination of service as a Director.
(f) "Director" shall mean a member of the Board.
--------
(g) "Director Plan" shall mean this 1993 Director Option Plan.
-------------
(h) "Employee" shall mean any person, including officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(j) "Fair Market Value" shall mean, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a Share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common
<PAGE>
Stock) on the last market trading day prior to the day of determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the date of determination, as reported in The
Wall Street Journal or such other Source as the Board deems reliable, or;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board.
(k) "Option" shall mean a stock option granted pursuant to the Director
------
Plan.
(l) "Optioned Stock" shall mean the Common Stock subject to an Option.
--------------
(m) "Optionee" shall mean an Outside Director who receives an Option.
--------
(n) "Outside Director" shall mean a Director who is not an Employee.
----------------
(o) "Parent" shall mean a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(p) "Share" shall mean a share of the Common Stock, as adjusted in
-----
accordance with Section 10 of the Director Plan.
(q) "Subsidiary" shall mean a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Director Plan. Subject to the provisions of Section
----------------------------------
10 of the Director Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Director Plan is 750,000 Shares (the "Pool") of
Common Stock. The Shares may be authorized but unissued, or reacquired Common
Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Director Plan shall have been terminated, become available for
future grant under the Director Plan.
4. Administration of and Grants of Options under the Director Plan.
---------------------------------------------------------------
(a) Administrator. Except as otherwise required herein, the Director Plan
-------------
shall be administered by the Board.
(b) Procedure for Grants. To the extent required to comply with Rule 16b-
--------------------
3(c) (ii) promulgated under the Exchange Act, the provisions set forth in this
Section 4(b) shall not be amended more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. To such extent, all grants of
Options to Outside
2
<PAGE>
Directors under this Director Plan shall be automatic and non-discretionary and
shall be made strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each new Outside Director who first becomes and Outside Director
on or after June 1, 1994 (other than an Outside Director who was previously a
Director) shall automatically be granted an Option to purchase forty thousand
(40,000) Shares upon the date on which such person first becomes and Outside
Director, whether through election by the shareholders of the Company or
appointment by the Board to fill a vacancy (the "Initial Grant"). Each Outside
Director who first became an Outside Director prior to June 1, 1994, shall be
granted and Option to purchase twenty thousand (20,000) Shares on June 1, 1994
(the "Supplemental Grant").
(iii) Each Outside Director who remains in Continuous Status as an
Outside Director shall on the first day of each fiscal year of the Company
automatically be granted an Option to purchase six thousand (6,000) Shares (the
"Annual Grant").
(iv) Each Outside Director who is serving as an Outside Director on
June 1, 1994, shall be granted on such date an Option (the Prorated Annual
Grant") to purchase two thousand (2,000) Shares. The Prorated Annual Grant
shall be exercisable in full on October 1, 1994.
(v) An Outside Director may elect to receive cash compensation in
lieu of the Annual Grant or the Prorated Annual Grant. Each Outside Director who
makes such an election shall receive cash compensation per Board meeting payable
at a rate determined by the Board.
(iv) The terms of each Option granted hereunder shall be as follows:
(A) The term of the Option shall be ten (10) years.
(B) Except as the Board otherwise determines and except as set
forth in Section 8 hereof, the Option shall be exercisable only while the
Outside Director remains a Director.
(C) The June 1, 1994, amendments to this Section 4(b) shall be
subject to shareholder approval to the extent required by Section 11(a) below,
and no such portion of any Option shall be exercisable prior to such shareholder
approval.
(D) The Initial Grant and the Supplemental Grant shall become
exercisable in installments cumulatively with respect to one-twentieth (1/20th)
of the Optioned Stock every three months after the date of grant, so that one
hundred percent (100%) of the Optioned Stock shall be exercisable one year after
the date of grant.
(F) The per Share exercise price for Optioned Stock shall be 100%
of the Fair Market Value on the date of grant.
3
<PAGE>
(vii) In the event that any Option granted under the Director Plan
would cause the number of Shares subject to outstanding Options plus the number
of Shares previously purchased under Options to exceed the Pool, then such
Option shall be granted only to the extent of the available Shares. No further
grants shall be made until such time, if any, as additional Shares become
available for grant under the Director Plan through action of the shareholders
to increase the number of Shares which may be issued under the Director Plan or
through cancellation or expiration of Options previously granted hereunder.
(c) Powers of the Board. Subject to the provisions and restrictions of
-------------------
the Director Plan, the Board shall have the authority, in its discretion: (i)
to determine, upon review of relevant information and in accordance with Section
2(j) of the Director Plan, the Fair Market Value of the Common Stock; (ii) to
interpret the Director Plan; (iii) to prescribe, amend and rescind rules and
regulations relating to the Director Plan; (iv) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the grant
of an Option previously granted hereunder; and (v) to make all other
determinations deemed necessary or advisable for the administration of the
Director Plan.
(d) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final.
5. Eligibility. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof.
The Director Plan shall not confer upon any Optionee any right with respect
to continuation of service as a Director or nomination to serve as a Director,
nor shall it interfere in any way with any rights which the Director or the
Company may have to terminate his or her directorship at any time.
6. Term of Director Plan. The Director Plan shall become effective upon the
---------------------
earlier to occur of its adoption by the Board or its approval by the
shareholders of the Company as described in Section 16 of the Director Plan. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 11 of the Director Plan.
7. Form of Consideration. The consideration to be paid for the Shares to be
---------------------
issued upon exercise of an Option, including the method of payment, shall be
determined by the Board and may consist entirely of (i) cash, (ii) check, (iii)
promissory note, (iv) other shares which (x) in the case of Share acquired upon
exercise of an Option, have been owned by the Optionee for more than six (6)
months on the date of surrender, and (y) have a Fair Market Value on the date of
surrender not greater than the aggregate exercise price of the Shares as to
which said Option shall be exercised, (v) delivery of a properly executed
exercise notice together with such other documentation as the Board and the
broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, (vi) any combination of the foregoing methods of payment, or
(vii) such other consideration and method of payment for the issuance of
4
<PAGE>
Shares to the extent permitted under applicable law.
8. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
-----------------------------------------------
hereunder shall be exercisable at such times as are set forth in Section 4(b)
hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Director Plan in accordance with Section 16 hereof
has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7(b) of the Director Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 10 of the Director Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Director Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.
(b) Rule 16b-3. Options granted to Outside Directors must comply with the
----------
applicable provisions of Rule 16b-3 promulgated under the Exchange Act or any
successor thereto and shall contain such additional conditions or restrictions
as may be required thereunder to qualify for the maximum exemption from Section
16 of the Exchange Act with respect to Director Plan transactions.
(c) Termination of Continuous Status as a Director.
----------------------------------------------
(i) With respect to Options granted prior to June 1, 1994, such
Options shall be exercisable following the termination of an Optionee's
Continuous Status as a Director as follows:
(A) Termination of Optionee. In the event an Optionee's
-----------------------
Continuous Status as a Director terminates (other than upon the Optionee's death
or total and permanent disability, as defined in Section 22(e) (3) of the Code),
the Optionee may exercise his or her Option, but only within three (3) months
from the date of such termination, and only to the extent that the Optionee was
entitled to exercise it at the date of such termination (but in no event later
than the expiration of its ten (10) year term). To the extent that the Optionee
was not entitled to exercise an Option at the date of such termination, and to
the extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the
5
<PAGE>
Option shall terminate.
(B) Disability of Optionee. In the event Optionee's
----------------------
Continuous Status as a Director terminates as a result of total and permanent
disability (as defined in Section 22(e) (3) of the Code), the Optionee may
exercise his or her Option, but only within twelve (12) months from the date of
such termination, and only to the extent that the Optionee was entitled to
exercise it at the date of such termination (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option at the date of termination, or if he or she does
not exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
(C) Death of Optionee. In the event of an Optionee's death,
-----------------
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it at the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option at the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
(ii) With respect to Options granted on or after June 1, 1994,
such Options shall be exercisable following the termination of an Optionee's
Continuous Status as a Director as follows: In the event an Optionee's
Continuous Status as a Director terminates for any reason (including the
Optionee's death or disability) the Optionee may exercise his or her Option, but
only within twelve (12) months from the date of such termination, and only to
the extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option at
the date of such termination, and to the extent that the Optionee (or the
Optionee's estate or a person who acquired the right to exercise such Option, as
applicable) does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset Sale
---------------------------------------------------------------------------
or Change of Control.
- --------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Director Plan but as to which no Options
have yet been granted or which have been returned to the Director Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or
6
<PAGE>
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of considerate." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class shall affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
--------------------------
or liquidation of the Company, to the extent that an Option has not been
previously exercised, it will terminate immediately prior to the consummation of
such proposed action. The Board may, in the exercise of its sole discretion in
such instances, declare that any Option shall terminate as of a date fixed by
the Board and give each Optionee the right to exercise his or her Option as to
all or any part of the Optioned Stock, including Shares as to which the Option
would not otherwise be exercisable.
(c) Change in Control. In the event of a "Change in Control" of the
-----------------
Company, as defined in paragraph (d) below, then the following acceleration and
valuation provisions shall apply:
(i) Immediately prior to the occurrence of a Change in Control, any
Options outstanding on the date such Change in Control is determined to have
occurred that are not yet exercisable and vested on such date shall become fully
exercisable and vested;
(d) Definition of "Change in Control". For purposes of this Section 10, a
---------------------------------
"Change in Control" means the occurrence of any of the following:
(i) When any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, a Subsidiary or a Company
employee benefit plan, including any trustee of such plan acting as trustee)
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the Company's then
outstanding securities entitled to vote generally in the election of directors;
or
(ii) The merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or
(iii) The sale or disposition by the Company of all or substantially
all the Company's assets; or
7
<PAGE>
(iv) A Change in the composition of the Board of Directors of the
Company, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either (A)
are directors of the Company as of the date the Plan is approved by the
shareholders, or (B) are elected, or nominated for election, to the Board of
Directors of the Company with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).
11. Amendment and Termination of the Director Plan.
----------------------------------------------
(a) Amendment and Termination. Except as set forth in Section 4, the Board
-------------------------
may at any time amend, alter, suspend, or discontinue the Director Plan, but no
amendment, alteration, suspension, or discontinuation shall be made which would
impair the rights of any Optionee under any grant theretofore made, without his
or her consent. In addition, to the extent necessary and desirable to comply
with Rule 16b-3 under the Exchange Act (or any other applicable law or
regulation), the Company shall obtain shareholder approval of any Director Plan
amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or termination
----------------------------------
of the Director Plan shall not affect Options already granted and such Options
shall remain in full force and effect as if this Director Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for all
------------------------
purposes, be the date determined in accordance with Section 4(b) hereof. Notice
of the determination shall be given to each Outside Director to whom an Option
is so granted within a reasonable time after the date of such grant.
13. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
----------------------------------
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
state securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provision of law.
Inability of the Company to obtain authority from any regulatory body
having
8
<PAGE>
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Director Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Director Plan.
15. Option Agreement. Options shall be evidenced by written option agreements
----------------
in such form as the Board shall approve.
16. Shareholder Approval. Continuance of the Director Plan shall be subject to
--------------------
approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option hereunder.
Such shareholder approval shall be obtained in the degree and manner required
under applicable state and federal law.
9
<PAGE>
Exhibit 4.3
THE SANTA CRUZ OPERATION, INC.
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED NOVEMBER 1996)
The following constitute the provisions of the Employee Stock Purchase Plan of
The Santa Cruz Operation, Inc.
1. PURPOSE.
--------
The purpose of the Plan is to provide employees of the Company and its
Designated Subsidiaries with an opportunity to purchase Common Stock of the
Company through accumulated payroll deductions. It is the intention of the
company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions
of the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. DEFINITIONS.
------------
a) "Board" shall mean the Board of Directors of the company.
-----
b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
c) "Common Stock" shall mean the Common Stock of the Company.
------------
d) "Company" shall mean The Santa Cruz Operation, Inc., a California
-------
corporation.
e) "Compensation" shall include all base pay, overtime pay, bonus and
------------
commissions and shall exclude all other amounts.
f) "Designated Subsidiaries" shall mean the Subsidiaries which have been
-----------------------
designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
g) "Employee" shall mean any individual who is a regular employee of the
--------
Company for purposes of tax withholding under the Code whose customary
employment with the Company or any Designated Subsidiary regardless of the
number of hours worked. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is
on sick leave or other leave of absence approved by the Company. Where the
period of leave exceeds 90 days and the individual's right to employment
is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the 91st day of such
leave.
h) "Enrollment Date" shall mean the first day of each Offering Period.
---------------
i) "Exercise Date" shall mean the last day of each Offering Period.
-------------
j) "Fair Market Value" shall mean, as of any date, the value of Common Stock
-----------------
determined as follows:
i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, its Fair Market Value shall be the closing sale price for the
Common Stock (or the mean of the closing bid and asked prices, if no sales were
reported), as quoted on such exchange (or the exchange with the greatest volume
of trading in Common Stock) or system on the date of such determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable, or;
ii) If the Common Stock is quoted on the NASDAQ system (but not on the
National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;
iii) In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by the Board.
<PAGE>
iv) For purposes of the Enrollment Date under the first Offering Period
under the Plan, the Fair Market Value of the Common Stock shall be the Price to
Public as set forth in the final prospectus filed with the Securities and
Exchange commission pursuant to Rule 424 under the Securities Act of 1933, as
amended.
k) "Offering Period" shall mean a period of approximately six (6) months,
---------------
commencing on the first Trading Day on or after July 1 and terminating
on the last Trading Day in the period ending the following December 31,
or commencing on the first Trading Day on or after January 1 and
terminating on the last Trading Day in the period ending the following
June 30, during which an option granted pursuant to the Plan may be
exercised, except that the first Offering Period shall be an extended
Offering Period, commencing on the date on which the Company's
registration statement on Form S-1 is declared effective by the
Securities and Exchange Commission and ending on the last Trading Day in
the period ending December 31, 1993. The duration, commencement and
termination of Offering Periods may be changed pursuant to Section 4 of
this Plan.
l) "Purchase Price" shall mean an amount equal to 85% of the Fair Market
--------------
Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
m) "Reserves" shall mean the number of shares of Common Stock covered by
--------
each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
n) "Subsidiary" shall mean a corporation, domestic or foreign, of which not
----------
less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
o) "Trading Day" shall mean a day on which national stock exchanges and the
-----------
National Association of Securities Dealers Automated Quotation (NASDAQ)
System are open for trading.
3. ELIGIBILITY.
-----------
a) Any Employee (as defined in Section 2(g)), who shall be employed by
the Company on a given Enrollment Date shall be eligible to
participate in the Plan.
b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan
i) to the extent, immediately after the grant, such Employee (or any
other person whose stock would be attributed to such Employee
pursuant to Section 424(d) of the Code) would own capital stock
of the Company and/or hold outstanding options to purchase such
stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or
ii) to the extent his or her rights to purchase stock under all
employee stock purchase plans of the Company and its subsidiaries
to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of
the shares at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
4. OFFERING PERIODS.
----------------
The Plan shall be implemented by consecutive Offering Periods with a new
Offering Period commencing on the first Trading Day on or after July 1 and
January 1 each year, or on such other date as the Board shall determine,
and continuing thereafter until terminated in accordance with Section 19
hereof, except that the first Offering Period shall be an extended Offering
Period, commencing on the date on which the Company's registration
statement on Form S-1 is declared effective by the Securities and Exchange
Commission and ending on the last Trading Day in the period ending December
31, 1993. The Board shall have the power to change the duration,
commencement and termination of Offering Periods with respect to future
offerings without shareholder approval if such change is announced at least
five (5) days prior to the scheduled beginning of the first Offering Period
to be affected thereafter.
2
<PAGE>
5. PARTICIPATION.
-------------
a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's
payroll office at least ten business days prior to the applicable
Enrollment Date, however, a later date, prior to the applicable
Enrollment Date may be established for all eligible Employees to
enroll in a given Offering Period.
b) Payroll deductions for a participant shall commence on the first
payroll following the enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is
applicable, unless sooner terminated by the participant as provided in
Section 10 hereof.
6. PAYROLL DEDUCTIONS.
------------------
a) At the time a participant files his or her subscription agreement, he
or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount of at least one percent (1%)
and not exceeding ten percent (10%) of the Compensation which he or
she receives on each pay day during the Offering Period, and the
aggregate of such payroll deductions during the Offering Period shall
not exceed ten percent (10%) of the participant's Compensation during
said Offering Period.
b) All payroll deductions made for a participant shall be credited to his
or her account under the Plan and will be withheld in whole
percentages only. A participant may not make any additional payments
into such account.
c) A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing
or filing with the Company a new subscription agreement authorizing a
change in payroll deduction rate. The Board may, in its discretion,
limit the number of participation rate changes during any Offering
Period. The change in rate shall be effective with the first full
payroll period following five (5) business days after the Company's
receipt of the new subscription agreement unless the Company elects to
process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering
Periods unless terminated as provided in Section 10 hereof.
d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to 0% at such time during any
Offering Period which is scheduled to end during the current calendar
year (the "Current Offering Period") that the aggregate of all payroll
deductions which were previously used to purchase stock under the Plan
in a prior Offering Period which ended during that calendar year plus
all payroll deductions accumulated with respect to the Current
Offering Period equal $21,250. Payroll deductions shall recommence at
the rate provided in such participant' s subscription agreement at the
beginning of the first Offering Period which is scheduled to end in
the following calendar year, unless terminated by the participant as
provided in Section 10 hereof.
e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if
any, which arise upon the exercise of the option or the disposition of
the Common Stock. At any time, the Company may, but will not be
obligated to, withhold from the participant's compensation the amount
necessary for the Company to meet applicable withholding obligations,
including any 1994 withholding required to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by the Employee.
7. GRANT OF OPTION.
---------------
On the Enrollment Date of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to
purchase on the Exercise Date of such Offering Period (at the applicable
Purchase Price) up to a number of shares of the Company's Common Stock
determined by dividing such Employee's payroll deductions accumulated prior
to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event
shall an Employee be permitted to purchase during each Offering Period more
than a number of Shares determined by dividing $12,500 by the Fair Market
Value of a share of the Company's Common Stock on the Enrollment Date (the
3
<PAGE>
"Number"), except that for purposes of the first Offering period under the
Plan, the Number shall be calculated by dividing $25,000 by the Fair Market
Value of a share of the Company's Common Stock on the Enrollment Date, and
provided further that all such purchases shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. Exercise of the
option shall occur as provided in Section 8 hereof, unless the participant
has withdrawn pursuant to Section 10 hereof, and shall expire on the last
day of the Offering Period.
8. EXERCISE OF OPTION.
------------------
Unless a participant withdraws from the Plan as provided in Section 10
hereof, his or her option for the purchase of shares will be exercised
automatically on the Exercise Date, and the maximum number of full shares
subject to option shall be purchased for such participant at the applicable
Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase
a full share shall be retained in the participant' s account for the
subsequent Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other moneys left over in
a participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
9. DELIVERY.
--------
As promptly as practicable after each Exercise Date on which a purchase of
shares occurs, the Company shall arrange the delivery to each participant,
as appropriate, of a certificate representing the shares purchased upon
exercise of his or her option.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
-------------------------------------
a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice
to the Company in the form of Exhibit B to this Plan. All of the
participant's payroll deductions credited to his or her account will
be paid to such participant promptly after receipt of notice of
withdrawal and such participant's option for the Offering Period will
be automatically terminated, and no further payroll deductions for the
purchase of shares will be made during the Offering Period. If a
participant withdraws from an Offering Period, payroll deductions will
not resume at the beginning of the succeeding Offering Period unless
the participant delivers to the Company a new subscription agreement.
b) Upon a participant's ceasing to be an Employee (as defined in Section
2(g) hereof ), for any reason, including by virtue of him or her
having failed to remain an Employee of the Company for at least twenty
(20) hours per week during an Offering Period in which the Employee is
a participant, he or she will be deemed to have elected to withdraw
from the Plan and the payroll deduct ions credited to such
participant' s account during the Offering Period but not yet used to
exercise the option will be returned to such participant or, in the
case of his or her death, to the person or persons entitled thereto
under Section 14 hereof, and such participant's option will be
automatically terminated.
c) A participant's withdrawal from an Offering Period will not have any
effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering
Period from which the participant withdraws.
11. INTEREST.
--------
No interest shall accrue on the payroll deductions of a participant in the
Plan.
12. STOCK.
-----
a) The maximum number of shares of the Company's Common Stock which shall
be made available for sale under the Plan shall be 2,500,000 shares,
subject to adjustment upon changes in capitalization of the Company as
provided in Section 18 hereof. If on a given Exercise Date the number
of shares with respect to which options are to be exercised exceeds
the number of shares then available under the Plan, the Company shall
make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it
shall determine to be equitable.
b) The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
4
<PAGE>
c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the
participant and his or her spouse.
13. ADMINISTRATION.
--------------
a) Administrative Body. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or
its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine
eligibility and to adjudicate all disputed claims filed under the
Plan. Every finding, decision and determination made by the Board or
its committee shall, to the full extent permitted by law, be final and
binding upon all parties.
b) Members of the Board who are eligible Employees are permitted to
participate in the Plan, provided that:
i) Members of the Board who are eligible to participate in the Plan
may not vote on any matter affecting the administration of the
Plan or the grant of any option pursuant to the Plan.
ii) If a Committee is established to administer the Plan, no member
of the Board who is eligible to participate in the Plan may be a
member of the Committee.
c) Rule 16b-3 Limitations. Notwithstanding the provisions of Subsection
(a) of this Section 13, in the event that Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or any successor provision ("Rule 16b-3") provides specific
requirements for the administrators of plans of this type, the Plan
shall be only administered by such a body and in such a manner as
shall comply with the applicable requirements of Rule 16b-3. Unless
permitted by Rule 16b-3, no discretion concerning decisions regarding
the Plan shall be afforded to any committee or person that is not
"disinterested" as that term is used in Rule 16b-3.
14. DESIGNATION OF BENEFICIARY.
--------------------------
a) The beneficiary(ies) designated by the participant to take under the
life insurance program of the Company, or a beneficiary chosen by a
participant is written designation to the Company of a beneficiary
shall receive any shares and cash, if any, from the participant's
account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but
prior to delivery to such participant of such shares and cash. In
addition, the same beneficiary(ies) shall receive any cash from the
participant's account under the Plan in the event of such
participant's death prior to exercise of the option.
b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan
who is living at the time of such participant's death, the Company
shall deliver such shares and/or cash to the executor or administrator
of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to
the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.
15. TRANSFERABILITY.
---------------
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive shares under
the Plan may be assigned, transferred, pledged or otherwise disposed of in
any way (other than by will, the laws of descent and distribution or as
provided in Section 14 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds
from an Offering Period in accordance with Section 10 hereof.
16. USE OF FUNDS.
------------
All payroll deductions received or held by the Company under the Plan may
be used by the Company for any corporate purpose, and the Company shall not
be obligated to segregate such payroll deductions.
5
<PAGE>
17. REPORTS.
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Individual accounts will be maintained for each participant in the Plan.
Statements of account will be given to participating Employees at least
annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
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a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves as well as the price per
share of Common Stock covered by each option under the Plan which has
not yet been exercised shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected
without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration".
Such adjustment shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock
subject to an option.
b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Offering Period will terminate
immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.
c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each option under the Plan
shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor
corporation, unless the Board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, to shorten
the Offering Period then in progress by setting a new Exercise Date
(the "New Exercise Date") or to cancel each outstanding right to
purchase and refund all sums collected from participants during the
Offering Period then in progress. If the Board shortens the Offering
Period then in progress in lieu of assumption or substitution in the
event of a merger or sale of assets, the Board shall notify each
participant in writing, at least ten (10) business days prior to the
New Exercise Date, that the Exercise Date for his option has been
changed to the New Exercise Date and that his option will be exercised
automatically on the New Exercise Date, unless prior to such date he
has withdrawn from the Offering Period as provided in Section 10
hereof. For purposes of this paragraph, an option granted under the
Plan shall be deemed to be assumed if, following the sale of assets or
merger, the option confers the right to purchase, for each share of
option stock subject to the option immediately prior to the sale of
assets or merger, the consideration (whether stock, cash or other
securities or property) received in the sale of assets or merger by
holders of Common Stock for each share of Common Stock held on the
effective date of the transaction (and if such holders were offered a
choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock);
provided, however, that if such consideration received in the sale of
assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code),
the Board may, with the consent of the successor corporation and the
participant, provide for the consideration to be received upon
exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock and the sale of
assets or merger.
d) The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as
the price per share of Common Stock covered by each outstanding
option, in the event the Company effects one or more reorganizations,
recapitalization, rights offerings or other increases or reductions of
shares of its outstanding Common Stock, and in the event of the
Company being consolidated with or merged into any other corporation.
19. AMENDMENT OR TERMINATION.
------------------------
a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 18
hereof, no such termination can affect options previously granted,
provided that an Offering Period may be terminated by the Board of
Directors on any Exercise Date if the Board determines that the
termination of the Plan is in the best interests of the Company and
its shareholders. Except as provided in Section 18 hereof, no
amendment may
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make any change in any option theretofore granted which adversely
affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any
successor rule or provision or any other applicable law or
regulation), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.
b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change
the Offering Periods, limit the frequency and/or number of changes in
the amount withheld during an Offering Period, establish the exchange
ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated
by a participant in order to adjust for delays or mistakes in the
Company's processing of properly completed withholding elections,
establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the
purchase of Common Stock for each participant properly correspond with
amounts withheld from the participant's Compensation, and establish
such other limitations or procedures as the Board (or its committee)
determines in its sole discretion advisable which are consistent with
the Plan.
20. NOTICES.
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a) All notices or other communications by a participant to the Company
under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt
thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES.
----------------------------------
Shares shall not be issued with respect to an option unless the exercise of
such option and the issuance and delivery of such shares pursuant thereto
shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon
which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by
any of the aforementioned applicable provisions of law.
22. TERM OF PLAN.
------------
The Plan shall become effective upon the earlier to occur of its adoption
by the Board of Directors or its approval by the shareholders of the
Company. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 19 hereof.
23. ADDITIONAL RESTRICTIONS OF RULE 16b-3.
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a) The terms and conditions of options granted hereunder to, and the
purchase of shares by, persons subject to Section 16 of the Exchange
Act shall comply with the applicable provisions of Rule 16b-3. This
Plan shall be deemed to contain, and such options shall contain, and
the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-
3 to qualify for the maximum exemption from Section 16 of the exchange
Act with respect to Plan transactions.
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EXHIBIT 5.1
April 8, 1997
The Santa Cruz Operation, Inc.
400 Encinal Street
Santa Cruz, CA 95061
RE: REGISTRATION STATEMENT ON FORM S-8
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Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by you
with the Securities and Exchange Commission on or about April 9, 1997 (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of 3,950,000 shares of your Common Stock
(the "Shares"), 200,000 of which are to be issued pursuant to the 1993 Director
Option Plan, 750,000 of which are to be issued pursuant to the 1993 Employee
Stock Purchase Plan and 3,000,000 of which are to be issued pursuant to the 1994
Incentive Stock Option Plan (together, the "Plans"). As your legal counsel, we
have examined the proceedings proposed to be taken in connection with the
issuance and sale of the Shares to be issued under the Plans.
It is our opinion that the Shares, when issued and sold in the manner
referred to in the Plans and pursuant to the agreements which accompany the
Plans, will be legally and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including any Prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
