<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 11, 1998
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)
<TABLE>
<S> <C>
CALIFORNIA 94-2549086
(State of Incorporation) (I.R.S. Employer Identification Number)
</TABLE>
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 2,000,000 shares $ 6.25 (1) $12,500,000(1) $3,688
- 1993 Director Option Plan 200,000 shares $ 6.25 (1) $ 1,250,000(1) $ 369
- 1993 Employee Stock Purchase Plan 750,000 shares $5.3125 (2) $ 3,984,375(2) $1,175
TOTAL 2,950,000 SHARES $17,734,375 $5,232
============================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457 solely for purposes of calculating the
registration fee on the basis of the closing price of $6.25 per share
reported in the Nasdaq National Market on May 6, 1998 (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 Company's Annual Report on Form 10-K for the year ended September
30, 1997 filed pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997 filed pursuant to Section 13 of the Exchange Act.
(c) The Company's Current Report on Form 8-K dated January 7, 1998, as
amended, filed pursuant to Section 13 of the Exchange Act.
(d) 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 Exchange Act, including any amendment or report filed
for the purpose of updating such description.
(e) The description of the Company's Preferred Share Purchase Rights
contained in the Company's Registration Statement on Form 8-A filed September
17, 1997 pursuant to Section 12(g) 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
II-1
<PAGE>
indemnification of certain agents to the maximum extent permitted by the
California General Corporation Law. Persons covered by this 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, as amended.
4.2 1993 Director Option Plan, as amended.
4.3 1993 Employee Stock Purchase Plan, as amended.
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 distribution 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 11th day of
May, 1998.
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 May 11, 1998:
Signature Title
--------- -----
/s/ ALOK MOHAN President, Chief Executive
----------------------------- Officer and Director
(Alok Mohan) (Principal Executive Officer)
/s/ JOHN LUHTALA Senior Vice President and Chief
----------------------------- Financing Officer,
(John Luhtala) (Principal Financial 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/ GLENN RICART Director
-----------------------------
(Glenn Ricart)
/s/ R. DUFF THOMPSON Director
-----------------------------
(R. Duff Thompson)
/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 herein by reference of our report dated October 22,
1997, relating to the consolidated balance sheets of The Santa Cruz Operation,
Inc. and subsidiaries as of September 30, 1997 and 1996, 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, 1997, which
reports appear or are incorporated by reference in the September 30, 1997,
annual report on Form 10-K of The Santa Cruz Operation, Inc.
KPMG PEAT MARWICK LLP
Mountain View, California
May 4, 1998
II-6
<PAGE>
THE SANTA CRUZ OPERATION, INC.
REGISTRATION STATEMENT ON FORM S-8
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- -------------------------------------------------- ------------
4.1 1994 Incentive Stock Option Plan, as amended......
4.2 1993 Director Option Plan, as amended.............
4.3 1993 Employee Stock Purchase Plan, as amended.....
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)
<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 1997)
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
<PAGE>
Page 2
the Incentive Stock Option shall automatically be converted into a
Nonstatutory Stock Option on the ninety-first (91st) 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.
------
<PAGE>
Page 3
(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.
(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 15,013,665 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
<PAGE>
Page 4
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.
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;
<PAGE>
Page 5
(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 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, Directors 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)
<PAGE>
Page 6
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 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
<PAGE>
Page 7
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.
(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.
<PAGE>
Page 8
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.
(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
<PAGE>
Page 9
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.
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
<PAGE>
Page 10
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, 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
<PAGE>
Page 11
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.
(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
<PAGE>
Page 12
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.
(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,
<PAGE>
Page 13
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.
<PAGE>
EXHIBIT 4.2
THE SANTA CRUZ OPERATION, INC.
1993 DIRECTOR OPTION PLAN
(AS AMENDED NOVEMBER 1997)
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
<PAGE>
Page 2
(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 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 950,000 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.
<PAGE>
Page 3
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 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
<PAGE>
Page 4
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
(1/20/th/) 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 five
years 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.
(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
<PAGE>
Page 5
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 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
<PAGE>
Page 6
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 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
-------------------------
<PAGE>
Page 7
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 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
<PAGE>
Page 8
(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
(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
<PAGE>
Page 9
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 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.
<PAGE>
EXHIBIT 4.3
THE SANTA CRUZ OPERATION, INC.
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED NOVEMBER 1997)
The following constitute the provisions of the Employee Stock Purchase Plan of
The Santa Cruz Operation, Inc.
1. PURPOSE.
- -- --------
a) 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 ninety (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
<PAGE>
Page 2
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.
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 February 1 and terminating on
the last Trading Day in the period ending the following July 31, or
commencing on the first Trading Day on or after August 1 and terminating on
the last Trading Day in the period ending the following January 31, during
which an option granted pursuant to the Plan may be exercised. 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
<PAGE>
Page 3
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.
- -- -----------------
a) The Plan shall be implemented by consecutive Offering Periods with a new
Offering Period commencing on the first Trading Day on or after February 1
and August 1 each year, or on such other date as the Board shall determine,
and continuing thereafter until terminated in accordance with Section 19
hereof. 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.
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
<PAGE>
Page 4
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 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.
- -- ---------------
a) 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 "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.
- -- ------------------
a) 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.
- -- --------
a) 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.
<PAGE>
Page 5
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 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.
- --- --------
a) 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 3,250,000 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.
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.
<PAGE>
Page 6
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.
- --- ---------------
a) 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.
- --- ------------
a) 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.
17. REPORTS.
- --- -------
a) Individual accounts will be maintained for each participant in the Plan.
Statements of account will be given
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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.
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Page 8
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
- --- ------------------------------------------
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 orits 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
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Page 9
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 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.
- --- -------
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.
- --- ----------------------------------
a) 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.
b) 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.
- --- ------------
a) 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.
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Page 10
23. ADDITIONAL RESTRICTIONS OF RULE 16B-3.
- --- -------------------------------------
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.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI]
May 11, 1998
The Santa Cruz Operation, Inc.
400 Encinal Street
Santa Cruz, CA 95061
RE: REGISTRATION STATEMENT ON FORM S-8
----------------------------------
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 May 11, 1998 (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of 2,950,000 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 2,000,000 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
/s/ WILSON SONSINI GOODRICH & ROSATI
