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As Filed with the Securities and Exchange Commission on November 13, 2000
Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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THE SANTA CRUZ OPERATION, INC.
(Exact Name of Registrant as Specified in Its Charter)
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CALIFORNIA 94-2549086
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
425 ENCINAL STREET
SANTA CRUZ, CA 95060-1900
(831) 425-7222
(Address, Including Zip Code, and Telephone Number, Including Area
Code, of Registrant's Principal Executive Offices)
STEVEN M. SABBATH
SENIOR VICE PRESIDENT, LAW & CORPORATE AFFAIRS AND SECRETARY
THE SANTA CRUZ OPERATION, INC.
425 ENCINAL STREET
SANTA CRUZ, CA 95060
(831) 425-7222
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
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Copies to:
MICHAEL J. DANAHER, ESQ.
WILSON SONSINI GOODRICH & ROSATI P.C.
650 PAGE MILL ROAD
PALO ALTO, CA 94304
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are offered pursuant
to dividend or interest reinvestment plans, check the following box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
<TABLE>
<CAPTION>
<S><C>
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED AMOUNT TO BE REGISTERED PRICE PER SECURITY (1) OFFERING PRICE (1) REGISTRATION FEE
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Common stock, no par value... 4,257,500 $4.1094 $17,495,770.50 $4,618.88
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Total........................... 4,257,500 $4.1094 $17,495,770.50 $4.618.88
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</TABLE>
(1) The price of $4.1094 per share, which was the average of the high and low
prices of the Registrant's common stock on the Nasdaq National Market on
November 9, 2000, is set forth solely for the purposes of calculating the
registration fee in accordance with Rule 457(c) of the Securities Act of
1933, as amended.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the securities act of 1933, as amended, or until the registration statement
shall become effective on such date as the sec acting pursuant to said section
8(a) may determine.
================================================================================
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED NOVEMBER 13, 2000
4,257,500 SHARES
THE SANTA CRUZ OPERATION, INC.
COMMON STOCK
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The shares offered in this prospectus involve a high degree of risk. See
"Risk Factors" beginning on page 6 of this prospectus for information that you
should consider before purchasing these securities.
SCO's common stock is quoted on the Nasdaq National Market System under
the symbol "SCOC". On November 9, 2000, the average for the high and low price
of SCO's common stock on the Nasdaq was $4.1094 per share.
The selling shareholders, who acquired these shares in a private
placement transaction dated September 11, 2000, may offer and sell these shares
from time to time.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is __________________
<PAGE>
TABLE OF CONTENTS
PAGE
Summary.................................................................... 4
Risk Factors............................................................... 6
Use of Proceeds............................................................ 11
Selling Shareholders....................................................... 11
Plan of Distribution....................................................... 12
Legal Matters.............................................................. 12
Experts.................................................................... 12
Where You Can Find Additional Information.................................. 13
Information Incorporated by Reference...................................... 13
Indemnification of Officers and Directors.................................. 14
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In this prospectus, "SCO," "we," "us," and "our" refer to The Santa Cruz
Operation, Inc. and its subsidiaries.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding us and the common stock being sold in this offering,
including "Risk Factors" and in the detailed documents incorporated by reference
in this prospectus.
Founded in 1979, SCO went public on the Nasdaq Stock Exchange (Nasdaq:
SCOC) in 1993. SCO is a global developer and provider of server software for
networked business computing and Tarantella web-enabling software that enables
customers to deliver both new and existing applications to any Java technology
enabled client. SCO is the world's leading provider of UNIX server operating
systems, and creator of the award-winning Tarantella software, which provides
users with instant web-browser access to applications running on a wide range of
networked servers, including mainframes, minicomputers, Windows NT, and UNIX
System servers. SCO also provides a full range of Professional Consulting and
Engineering Services. SCO Professional Services are available for SCO
OpenServer, UnixWare, Tarantella, Linux and Open Source systems. SCO has 20
years of experience developing UNIX system, open system, and open source
software. Headquartered in Santa Cruz, California, SCO has sales representatives
in more than 80 countries. SCO's products are sold and distributed worldwide by
more than 15,000 resellers, distributors, systems integrators and computer
manufacturers.
SCO has entered into an agreement to sell its server software and
professional services divisions to Caldera Systems, Inc. The sale is subject to
shareholder approval and other conditions.
TARANTELLA SOFTWARE DIVISION
Tarantella, SCO's web enabling software, serves the enterprise computing
market. Tarantella enables customers to deliver both new and existing
applications to any Java technology-enabled client. These applications include
Windows, UNIX system, and mainframe applications. The clients can be palmtop
devices, Web TV, a mobile phone, a network computer, a character terminal or a
PC. Tarantella software provides centralized deployment and management of
server-based applications. It is designed for IT professionals who need to
provide users with instant access to applications and services.
Tarantella software uses standard protocols and Internet standards.
Tarantella software continually monitors and optimizes performance and provides
a single access point for all of a user's applications. Tarantella software
dramatically lowers the total cost of ownership by supporting hardware and
software already in use, by eliminating the cost of installing software on
clients, and by providing centralized system administration. With Tarantella
software, organizations can move their current applications onto the network
without rewriting code or disrupting their current operations.
PENDING SALE OF SERVER SOFTWARE AND PROFESSIONAL SERVICES DIVISIONS
On August 1, 2000, SCO entered into an agreement with Caldera Systems,
Inc. in which Caldera Systems, Inc. will acquire SCO's Server Software and
Professional Services Divisions. Caldera Systems, Inc. will form a new holding
company, Caldera International, Inc., to acquire assets from SCO's Server
Software and Professional Services Divisions, including the divisions'
employees, products and channel resources. Caldera International, Inc. will have
exclusive distribution rights for the SCO OpenServer product line. SCO will
receive a 28% ownership interest in Caldera International, Inc., which is
estimated to be an aggregate of approximately 17.54 million shares of Caldera
stock (including approximately 1.5 million shares reserved for employee options
assumed by Caldera International, Inc. for options currently held by SCO
employees joining Caldera International, Inc.), and $7.0 million in cash. In
conjunction with the acquisition, The Canopy Group, Inc., a major stockholder of
Caldera Systems, Inc., has agreed to loan $18.0 million to SCO. The terms of
this loan are still to be negotiated but both parties have agreed the terms will
be reasonable and customary. Further, Caldera Systems, Inc. has agreed to loan
$7.0 million to SCO in the form of a short-term note repayable at the
consummation of the transaction between SCO and Caldera Systems, Inc. SCO will
retain the SCO OpenServer revenue stream and intellectual properties.
The boards of directors of both companies have unanimously approved the
acquisition. Completion of the acquisition is subject to the approval of the
stockholders of Caldera Systems, Inc. and The Santa Cruz Operation, Inc., as
well as certain other closing conditions. The companies anticipate closing the
transaction during the second quarter of fiscal 2001.
4
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The proposed sale would significantly alter SCO's ongoing operations.
Upon completion of the sale, SCO's revenues will be derived from only two
product lines--Tarantella products, which have only been recently introduced by
SCO, and OpenServer products, which are mature products to be distributed on
SCO's behalf by Caldera International, Inc. Following the close of the
transaction, a significant portion of SCO's assets will consist of the shares it
holds in Caldera International, Inc., the value of which may be subject to
significant fluctuations.
SCO's principal offices are located at 425 Encinal Street, Santa Cruz,
California, 95060. SCO's telephone number at this location is (831) 425-7222.
SCO's world wide web site is located at www.scoinc.com.
This prospectus contains trademarks of SCO, including The Santa Cruz
Operation, SCO, Unixware, SCO OpenServer, and Tarantella. This prospectus may
contain trademarks of others.
5
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RISK FACTORS
You should carefully consider the following risks before making an
investment decision. The risks described below are not the only ones we face.
Any of the following risks could seriously harm SCO's business, financial
condition and operating results. As a result, these risks could cause the
decline of the trading price of SCO's common stock, and you may lose all or part
of the value of your investment. You should also refer to the other information
set forth in this prospectus.
CURRENT RISKS FOR SCO
CERTAIN OF SCO'S REVENUE SOURCES HAVE DECLINED DRAMATICALLY DURING FISCAL
YEAR 2000 AND WILL LIKELY CONTINUE TO DECLINE.
SCO has experienced declining revenues in its OpenServer and client
integration devices, or CID, products during fiscal year 2000, which are likely
to continue. Y2K significantly affected SCO's revenues in fiscal year 2000. SCO
saw a significant number of customers upgrading or replacing server software in
anticipation of Y2K in the middle of 1999. By the first quarter of fiscal 2000,
customers had completed their upgrades or replacements, and customer orders for
server products slowed dramatically. OpenServer product sales further suffered
in fiscal 2000 due to customer migration from the OpenServer products to the
newly released UnixWare 7 server products, as well as the products of SCO
competitors. In fiscal 1999, OpenServer revenues were $131 million; for the
first 9 months of 2000, OpenServer revenues were only $52 million. SCO
anticipates that this trend of declining revenues will continue, and the decline
may be larger than anticipated.
Similarly, SCO experienced declines in its CID products during fiscal
2000. In fiscal 1999, CID revenues were $7.8 million; for the first 9 months of
2000, CID revenues were only $3.9 million. CID products are legacy products,
which were the precursor to the new Tarantella technology. The CID product line
has not been emphasized by SCO and revenues have, therefore, been declining as
anticipated. However, it is possible that CID product sales will decline more
quickly than expected and that SCO will, therefore, realize lower revenue, which
yields relatively high profit margins, than anticipated. Furthermore, while the
Tarantella product line may offset some of the decline, there can be no
assurance that the increase in Tarantella revenues will compensate for such
declines.
THE PROPOSED SALE BY SCO OF THE ASSETS OF THE SERVER AND PROFESSIONAL
SERVICES DIVISIONS, WHICH TRADITIONALLY COMPRISE A LARGE PERCENTAGE OF
SCO'S REVENUES, MAY RESULT IN SIGNIFICANT HARM TO SCO'S BUSINESS.
Historically, revenues generated by the server business and professional
services have been a significant portion of SCO's total revenues. The sale of
the server and professional services groups, while also significantly reducing
headcount and operating expenses, will lead to a dramatic decline in SCO's
revenues. For the nine months ended June 30, 2000, revenues generated by these
two divisions were 48.4% of SCO's total revenues. For fiscal years 1999 and
1998, revenues generated by these 2 divisions were 34.4% and 33.3% of total
revenues, respectively.
Subsequent to the asset sale, Tarantella, Inc., as SCO will then be
called, will derive revenue from two sources, the first being sales of its
Tarantella products, including the CID products, and the second being sales of
the legacy OpenServer products. Tarantella, Inc. may never generate combined
revenues equal to those revenues previously generated by the assets sold to
Caldera. Further, Tarantella, Inc. may never achieve profitability.
SCO AND ITS PRODUCTS ARE SUBJECT TO COMPETITION AND TECHNOLOGICAL CHANGE,
AND SCO'S BUSINESS MAY BE HARMED BY COMPETITIVE PRESSURE AND FAILURE TO
ADAPT TO TECHNOLOGICAL CHANGES.
SCO's future operating results may be affected by various uncertain
trends and factors which are beyond SCO's control. These include adverse changes
in general economic conditions and rapid or unexpected changes in the
technologies affecting SCO's products. The process of developing new high
technology products is complex and uncertain and requires accurate anticipation
of customer needs and technological trends, including but not limited to
relationships with partners, suppliers and competitors. The industry has become
increasingly competitive and, accordingly, SCO's results may also be adversely
affected by the actions of existing or future competitors, including the
development of new technologies, the introduction of new products, and the
reduction of prices by such competitors to gain or retain market share. SCO's
results of operations could be adversely affected if it were required to lower
its prices significantly.
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THE PRICE OF SCO'S COMMON STOCK MAY BE VOLATILE, AND THE VALUE OF YOUR
INVESTMENT COULD DECLINE.
The trading price of SCO's common stock has been and could in the future
be subject to significant fluctuations in response to variations in quarterly
operating results, developments in the software industry, general economic
conditions, changes in securities analysts' recommendations regarding SCO's
securities and other factors. The stock market in general, and the market for
shares of technology companies in particular, have experienced extreme price
fluctuations, which have often been unrelated to the operating performance of
the affected companies. In addition, factors such as new product introductions
by SCO or its competitors may have a significant impact on the market price of
SCO's common stock. Furthermore, quarter-to-quarter fluctuations in SCO's
results of operations caused by changes in customer demand may have a
significant impact on the market price of SCO's stock. These conditions, as well
as factors which generally affect the market for stocks of high technology
companies, could cause the price of SCO's stock to fluctuate substantially over
short periods.
SCO DEPENDS ON CERTAIN KEY PERSONNEL, AND THE LOSS OF KEY PERSONNEL MAY
HARM SCO'S BUSINESS.
SCO's continued success depends to a significant extent on senior
management and other key employees. None of these individuals is subject to a
long-term employment contract or a non-competition agreement. Competition for
qualified people in the software industry is intense. The loss of one or more
key employees or SCO's inability to attract and retain other key employees could
have a material adverse effect on SCO.
SCO HOLDS INVESTMENTS IN THIRD PARTIES, AND IS EXPOSED TO FLUCTUATIONS IN
THE MARKET VALUES OF ITS PORTFOLIO OF INVESTMENTS.
SCO's equity investments, which represent a significant portion of its
assets, are subject to fluctuations in market value. This risk will increase
significantly after the consummation of the transaction with Caldera because SCO
will acquire a large number of shares of Caldera International, Inc. common
stock. SCO also maintains investment portfolio holdings of various issuers,
types and maturities. These securities are generally classified as available for
sale and consequently, are recorded on the balance sheet at fair value with
unrealized gains or losses reported as a separate component of accumulated other
comprehensive income, net of tax. Part of this portfolio includes minority
equity investments in several publicly traded companies, the values of which are
subject to market price volatility. SCO has also invested in several privately
held companies, many of which can still be considered in the startup or
development stages. These investments are inherently risky as the market for the
technologies or products they have under development are typically in the early
stages and may never materialize. SCO could lose its entire initial investment
in these companies. SCO typically does not attempt to reduce or eliminate its
market exposure pertaining to these equity securities.
RISKS RELATING TO THE TARANTELLA BUSINESS
THE TARANTELLA BUSINESS IS IN ITS EARLY STAGES, AND THERE IS NO GUARANTEE
THAT TARANTELLA WILL SURVIVE AS A COMPANY.
The Tarantella products are still in the early stages of the product
life-cycle. Furthermore, the market in which Tarantella products are sold is a
new market. Therefore, it is difficult to assess the market potential, and the
ability of the Tarantella products to meet the requirements of the market. As a
small company, Tarantella, Inc. may not have credibility with enterprise
customers, which is critical to its success. SCO may not be able to develop the
strategic relationships with customers, suppliers and that like that are
necessary for SCO to succeed.
TARANTELLA FACES SUBSTANTIAL COMPETITION.
A number of companies, including Citrix, are competitors of Tarantella.
Citrix already has significantly more financial resources and a much greater
presence in the market place. In addition, other companies may develop and offer
competitive products. Such companies may have significantly greater financial
and technical resources, more extensive marketing and distribution capabilities,
larger development staffs and more widely recognized brand and/or product names.
7
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THE TARANTELLA BUSINESS IS EXPECTED TO INCUR SIGNIFICANT OPERATING LOSSES.
The Tarantella organization, historically part of the overall SCO business,
has been structured and staffed for world-wide operations. Even though SCO is in
the process of selling the server software and professional services divisions,
which would reduce the need for global operations, the Tarantella organization
will maintain its global structure. However, Tarantella is in the early stages
of market development, and revenues are still small. As a result, the Tarantella
business will generate significant operating losses until revenues grow to
support the size of the organization or unless expenses are cut.
TARANTELLA MAY NOT GENERATE SIGNIFICANT REVENUES.
Tarantella revenues, while currently growing, are still small compared to
the historical revenues SCO generated from its server software and professional
services business. Revenues generated by the Tarantella division for the 9
months ended June 30, 2000 equaled $8.5 million. Subsequent to the asset sale,
Tarantella, Inc. will benefit from two revenue streams, the first being sales of
its new and existing Tarantella products and the second being sales of the
legacy OpenServer products. However, Tarantella, Inc. may never generate
combined revenues equal to those revenues previously generated by the assets
sold to Caldera.
RISKS RELATING TO THE CALDERA TRANSACTION
SCO MAY BE HARMED IF THE ASSET SALE IS NOT COMPLETED.
SCO has expended considerable management time and incurred significant
costs in negotiating the transaction with Caldera Systems, Inc. These costs will
not be recouped if the combination of the two companies is not completed. If the
combination is not completed, SCO will continue to operate as a separate entity,
despite customers' and employees' expectations. In such event, SCO's reputation
and relationships with customers and employees could be damaged significantly.
In certain circumstances, if the combination is not completed, either party
could be required to pay significant break-up fees.
SCO'S ASSET SALE TO CALDERA SYSTEMS, INC. MAY NOT BE APPROVED BY THE
REGULATORY AGENCIES AND/OR SCO'S SHAREHOLDERS.
SCO's pending transaction with Caldera Systems, Inc. is not yet complete.
Completion of the Caldera transaction is subject to several conditions,
including the approval of the Caldera transaction by the SCO shareholders.
Although Doug Michels, who holds approximately 10% of SCO's outstanding common
stock has signed a voting agreement to vote in favor of the asset sale at the
shareholder's meeting, there is no guarantee that the rest of the SCO
shareholders will likewise vote in favor of the asset sale. If the Caldera
transaction does not close in the timeframe anticipated, or if it is not
completed at all, SCO's future operating results will be harmed, and the price
of SCO's common stock could decline.
COMBINATION OF THE TWO COMPANIES WILL BE DIFFICULT.
Caldera International, Inc. may experience difficulty in integrating the
assets and the employees acquired from SCO. SCO, therefore, cannot assure you
that the combination will create positive results for Caldera International,
Inc., in which SCO will be a 28% shareholder. The successful combination will
require substantial effort from each company, including the integration and
coordination of the sales and marketing efforts. The diversion of the attention
of management, and any difficulties encountered in the transition process,
including problems associated with the integration of management information and
reporting systems, could harm the business and operating results of Caldera
International, Inc., and could cause the price of its common stock to decline.
FOLLOWING THE COMBINATION, SCO WILL BE LARGELY DEPENDENT UPON CALDERA
INTERNATIONAL, INC. TO SUPPORT, MARKET AND SELL THE LEGACY OPENSERVER
PRODUCTS. IF CALDERA INTERNATIONAL, INC. FAILS TO DO SO ADEQUATELY, A
SIGNIFICANT SOURCE OF TARANTELLA'S REVENUES WILL DIMINISH.
Under the Sales Representative and Support Agreement and the OpenServer
Research and Development Agreement to be entered into in connection with the
combination, SCO will have outsourced the management of the
8
<PAGE>
OpenServer business to Caldera International, Inc., including research and
development, marketing, and sales and support. If Caldera International, Inc.
fails to provide adequate engineering support or fails to adequately market and
sell the products, Tarantella, Inc. may suffer shortfalls in revenue and may be
unable to either locate a third party to take over such tasks from Caldera
International, Inc. or to resume operation of the business in-house.
FOLLOWING THE COMBINATION, SCO WILL HOLD AS A MAJOR ASSET A SIGNIFICANT
PORTION OF CALDERA INTERNATIONAL, INC. THE VALUE OF SCO'S INVESTMENT IN
CALDERA INTERNATIONAL, INC. COULD BE REDUCED IF CALDERA INTERNATIONAL,
INC. DOES NOT SUCCEED.
SCO will be exposed to equity price risk regarding the marketable portion
of equity securities it will hold in Caldera International, Inc. upon completion
of the asset sale. SCO will be exposed to fluctuations in the market values of
the common stock of Caldera International, Inc. SCO could lose its entire
investment in Caldera International, Inc.
SCO's investment in Caldera International, Inc. is risky because Caldera
International, Inc.'s integrated product offerings may not be accepted. Caldera
International, Inc.'s business model is based on an expectation that it can
create and develop demand for combined Linux and UNIX-based servers and
applications. There is no current market for combined Linux and UNIX-based
servers and applications. At present, non-Linux based operating systems are
favored by the business community. In order for Caldera International, Inc.'s
product offering to be accepted, Caldera International, Inc. will have to
broaden awareness of its brand; maintain its current, and develop new, strategic
relationships with technology partners and solution providers; continue to
develop and upgrade product offerings tailored for business; and respond
effectively to competitive pressures. If Caldera International, Inc. is unable
to execute its strategy, it may not be successful, and the value of SCO's
investment in Caldera International, Inc. could be reduced.
Caldera International, Inc. will face many difficulties in managing a
larger company, which will create many new challenges for the existing
management of Caldera. Caldera International, Inc.'s workforce will be
approximately four times its current size upon completion of the transaction.
Key personnel have little experience managing this type of growth, and the
growth is likely to strain the management control systems and resources of
Caldera International, Inc. Caldera International, Inc. will need to continue to
improve its reporting systems and procedures to manage its employees and obtain
additional facilities. If Caldera International, Inc. fails in these efforts, it
could reduce Caldera International, Inc.'s revenue, and the value of SCO's
investment in Caldera International, Inc. could be reduced.
SCO's investment in Caldera International, Inc. is risky because Caldera
International, Inc. may never be profitable. Caldera has not been profitable.
The server and professional services divisions have not been profitable and
their revenues are declining. If the revenue of Caldera International, Inc.
declines or grows at a slower rate than anticipated, or if Caldera
International, Inc. is unable to efficiently reduce operating expenses, it may
not achieve or sustain profitability or generate positive cash flow. In this
case, the value of SCO's investment in Caldera International, Inc. could be
reduced.
Caldera International, Inc. will face intense competition, and if it
fails to succeed in the face of such competition, the value of SCO's investment
in Caldera International, Inc. could be reduced. Many of Caldera International,
Inc.'s competitors have greater financial and technical resources, more
extensive marketing and distribution capabilities, larger development staffs and
more widely recognized brand and products. Also, due to the open-source nature
of Linux, anyone can freely download Linux and many Linux applications and
modify and redistribute them with few restrictions. Solution providers upon whom
Caldera currently depends for the distribution of its products could instead
create their own Linux solutions to provide to their customers. Also,
established companies and other institutions could easily produce competing
versions of Linux. If Caldera International, Inc. does not stay ahead of its
competition, SCO's investment in Caldera International, Inc. could be reduced.
SCO's investment in Caldera International, Inc. is risky because Caldera
International, Inc. will have significant foreign operations, including
development facilities, personnel and customer support operations, which are
subject to inherent risks, such as potential loss of technology through piracy,
misappropriation, or more lenient laws regarding intellectual property
protection; imposition of government controls, including trade restrictions;
fluctuation in currency exchange rates and economic instability; longer payment
cycles for sales in foreign jurisdictions; difficulties in staffing and managing
foreign operations; seasonal reductions in business activity in the summer
months in European and other countries; and political unrest, particularly in
areas that Caldera International, Inc. will have facilities. In addition,
Caldera International, Inc.'s international sales will be denominated in the
local currency, creating risk of foreign currency translation gains and losses
that could harm Caldera International, Inc.'s financial results. In this case,
the value of SCO's investment in Caldera International, Inc. could be reduced.
9
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including the documents incorporated by reference
herein, contains forward-looking statements that involve risks and
uncertainties. The statements contained in this Prospectus or incorporated by
reference herein that are not purely historical are forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act, including without limitation statements regarding SCO's
expectations, beliefs, intentions or strategies regarding the future. All
forward-looking statements included in this document or incorporated by
reference herein are based on information available to SCO on the date hereof,
and SCO assumes no obligation to update any such forward-looking statements.
SCO's actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth in "Risk Factors" and elsewhere in this Prospectus.
10
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USE OF PROCEEDS
SCO will not receive any proceeds from the sale of common stock by the
selling shareholders.
SELLING SHAREHOLDERS
This prospectus refers to the entities or individuals listed below and
any family member, trust or trust instrument to whom they may rightfully
transfer their shares as "selling shareholders." The following table sets forth
certain information as of September 11, 2000 with respect to each selling
shareholder:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY PERCENTAGE OF
OWNED PRIOR TO THE OUTSTANDING
NAME OF SELLING SHAREHOLDER OFFERING SHARES
--------------------------- ----------------- ----------------
<S> <C> <C>
Barnett & Co............................................................. 1,562,500(1) 4%
Roy L. Rogers TTEE UDT 9/28/89 FBO Roy & Ruth Rogers Unitrust............ 156,250(2) *
Roy Rogers TTEE UDT 1/21/81 FBO Rogers Family Trust...................... 156,250(3) *
Prism Partners 1 LP...................................................... 600,000(4) 1.5%
Prism Partners 2 Offshore Fund........................................... 300,000(5) *
Prism Partners Offshore Fund............................................. 100,000(6) *
Lagunitas Partners....................................................... 281,250(7) *
Gruber & McBaine International........................................... 62,500(8) *
Jon Gruber............................................................... 62,500(9) *
The Fuller Foundation.................................................... 156,250(10) *
Willow Creek Capital Partners............................................ 250,000(11) *
Willow Creek Offshore.................................................... 250,000(12) *
Clarion Partners, LP..................................................... 106,250(13) *
Clarion Offshore Funds................................................... 50,000(14) *
Brian G. Swift and Suzanne B. Swift, TTEES UTD 3/13/91 FBO Brian and
Suzanne Swift 1991 Living Trust....................................... 150,000(15) *
Robert McDonald.......................................................... 6,875(16) *
Kristi Smith............................................................. 6,875(17) *
</TABLE>
--------------
* Less than 1%
(1) Includes 312,500 shares of common stock issuable upon the exercise of
warrants.
(2) Includes 31,250 shares of common stock issuable upon the exercise of
warrants.
(3) Includes 31,250 shares of common stock issuable upon the exercise of
warrants.
(4) Includes 120,000 shares of common stock issuable upon the exercise of
warrants.
(5) Includes 60,000 shares of common stock issuable upon the exercise of
warrants.
(6) Includes 20,000 shares of common stock issuable upon the exercise of
warrants.
(7) Includes 56,250 shares of common stock issuable upon the exercise of
warrants.
(8) Includes 12,500 shares of common stock issuable upon the exercise of
warrants.
(9) Includes 12,500 shares of common stock issuable upon the exercise of
warrants.
(10) Includes 31,250 shares of common stock issuable upon the exercise of
warrants.
(11) Includes 50,000 shares of common stock issuable upon the exercise of
warrants.
(12) Includes 50,000 shares of common stock issuable upon the exercise of
warrants.
(13) Includes 21,250 shares of common stock issuable upon the exercise of
warrants.
(14) Includes 10,000 shares of common stock issuable upon the exercise of
warrants.
(15) Includes 150,000 shares of common stock issuable upon the exercise of
warrants.
(16) Includes 6,875 shares of common stock issuable upon the exercise of
warrants.
(17) Includes 6,875 shares of common stock issuable upon the exercise of
warrants.
11
<PAGE>
PLAN OF DISTRIBUTION
The selling shareholders may sell the shares separately or together, from
time to time on the over-the-counter market at prices and on terms prevailing at
the time of any such sale. Any such sale may be made:
o In broker's transactions through broker-dealers acting as agents;
o In transactions directly with market makers; or
o In privately negotiated transactions where no broker or other
third party (other than the purchaser) is involved.
The selling shareholders will pay:
o Selling commissions or brokerage fees, if any;
o All applicable transfer taxes; and
o All fees and costs of counsel, if any, incurred in connection with
the sale.
During such times as the selling shareholders may be attempting to sell
shares registered hereunder, they will:
(1) not engage in any stabilization activity in connection with
any of SCO's securities;
(2) furnish copies of this prospectus, as supplemented or
amended to each person to whom shares may be offered; and
(3) not bid for or purchase any of SCO's securities other than
as permitted under the Exchange Act.
The selling shareholders, and any other persons who participate in the
sale of the shares, may be deemed to be "Underwriters" as defined in the
Securities Act. Any commissions paid or any discounts or concessions allowed to
any such persons, and any profits received on resale of the shares, may be
deemed to be underwriting discounts and commissions under the Securities Act.
With regard to the shares, SCO has agreed to maintain the effectiveness
of this registration statement until September 11, 2002, or until the
distribution described hereunder has become effective.
SCO will bear all costs, expenses and fees in connection with the
registration of shares. The selling shareholders will bear all commissions and
discounts, if any, attributable to the sale of the shares. SCO agreed to
indemnify the selling shareholders against certain liabilities under the
Securities Act. The selling shareholders have agreed to indemnify us against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for SCO
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California.
EXPERTS
The consolidated financial statements and schedule of The Santa Cruz
Operation, Inc. and subsidiaries for the year ended September 30, 1997, have
been incorporated by reference herein and in the registration statement in
reliance upon the reports of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The consolidated financial statements incorporated in this Registration
Statement by reference to the Annual Report on Form 10-K/A for the year ended
September 30, 1999, have been incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
12
<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
SCO is subject to the informational requirements of the Exchange Act, and
in accordance therewith files or filed, as the case may be, reports, proxy
statements and other information with the Securities & Exchange Commission (the
"Commission"). Such reports, proxy statements and other information filed with
the Commission by SCO can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at 500 West Madison
Street, Room 1400, Chicago, Illinois 60661 and at 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, Washington, D.C.
20549, at prescribed rates, or on the World Wide Web at http://www.sec.gov.
Copies of other materials concerning SCO can be inspected at the offices of the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by SCO with the Commission (File No.
0-21484) pursuant to the Exchange Act are incorporated by reference in this
Prospectus:
1. SCO's Annual Report on Form 10-K/A for the year ended September
30, 1999, as amended, filed pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
2. SCO's Current Report on Form 8-K dated August 11, 2000;
3. SCO's Current Report on Form 8-K dated September 22, 2000;
4. SCO's Quarterly Report on Form 10-Q for the quarter ended December
31, 1999 filed pursuant to Section 13 of the Exchange Act;
5. SCO's Quarterly Report on Form 10-Q for the quarter ended March
31, 2000 filed pursuant to Section 13 of the Exchange Act;
6. SCO's Quarterly Report on Form 10-Q/A for the quarter ended June
30, 2000, as amended, filed pursuant to Section 13 of the Exchange
Act;
7. The description of SCO's common stock contained in its
Registration Statement on Form 8-A filed on April 1, 1993,
including any amendments or reports filed for the purpose of
updating such description.
8. The description of SCO's Preferred Share Purchase Rights contained
in its Registration Statement on Form 8-A filed on September 18,
1997 pursuant to Section 12(g) of the Exchange Act and as
subsequently amended by the Form 8-A/A filed on March 3, 1999.
All documents filed by SCO pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus but prior to the
termination of the offering to which this Prospectus relates shall be deemed to
be incorporated by reference in this Prospectus and to be part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, in its unmodified form, to constitute a part of this
Prospectus.
Upon written or oral request, SCO will provide without charge to each
person to whom a copy of this Prospectus is delivered a copy of any of the
documents incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
such documents). Requests for such documents should be submitted to Lynn
Schroeder, at the principal executive offices of SCO in writing at The Santa
Cruz Operation, Inc., 425 Encinal Street, Santa Cruz, CA 95060-1900 or by
telephone at (831) 425-7222.
13
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The fees and expenses incurred by SCO in connection with the offering are
payable by SCO and, other than filing fees, are estimated as follows:
Securities and Exchange Commission Registration Fee........... $ 4,618.88
Legal Fees and Expenses....................................... $ 25,000.00
Accounting Fees............................................... $ 20,000.00
Miscellaneous................................................. $ 0.00
Total......................................................... $ 49,618.88
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
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 liability (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act"). Further, SCO's Article of Incorporation and Bylaws provide for
indemnification of certain agents to the maximum extent permitted by the
California General Corporation Law. Persons covered by the indemnification
include any current or former directors, officer, employees and other agents of
SCO, as well as persons who serve at the request of SCO as directors, officers,
employees or agents of another enterprise.
In addition, SCO has entered into contractual agreements with each
director and certain officers of SCO 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.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed 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 SCO of expenses incurred or
paid by a director, officer or controlling person of SCO 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, SCO
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.
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
EXHIBIT
NUMBER DESCRIPTION
-------- ------------
2.1 (1) Common Stock and Warrant Purchase Agreement, dated September
11, 2000, by and among The Santa Cruz Operation, Inc., California
corporation and the selling shareholders set forth herein above
2.2 (1) Common Stock Warrant dated September 11, 2000
2.3 (1) Registration Rights Agreement, dated September 11, 2000, by
and among The Santa Cruz Operation, Inc., and the selling
shareholders set forth herein above
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation as to the legality of the securities being registered
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers, LLP, Independent Accountants
23.3 Consent of KPMG Independent Auditors
24.1 Power of Attorney (See the signature page of this
Registration Statement).
--------------
(1) Incorporated by reference to an exhibit to SCO's Current Report on 8-K as
filed with the Commission on September 22, 2000.
14
<PAGE>
ITEM 17. UNDERTAKINGS.
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: (i) to include any
prospectus required by section 10(a)(3) of the Securities Act; (ii) to reflect
in the prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (Section 230.424(b) of this chapter) if, in
the aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and (iii) 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; provided, however, that (i) and
(ii) do not apply if the Registration Statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective amendment
by (i) and (ii) is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference 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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) 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.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 15 above, 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 liabilities (other than the payment of
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
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus 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.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Cruz, State of California on this 8th day of
November, 2000.
THE SANTA CRUZ OPERATION, INC.
By:/s/ Steve M. Sabbath
-------------------------------------------
Steven M. Sabbath, Esq.
Senior Vice President, Law & Corporate
Affairs and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Douglas L. Michels and Steven M. Sabbath,
and each of them acting individually, as his attorney-in-fact, with the power of
substitution, for him in any and all capacities, to sign any and all amendment
to this Registration Statement on Form S-3, 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 substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on November 8, 2000.
SIGNATURE TITLE
/s/ Douglas L. Michels Chief Executive Officer and Director
--------------------------------- (Principal Executive Officer)
Douglas L. Michels
/s/ Randy Bresee Senior Vice President and Chief Financial
--------------------------------- Officer (Principal Financial Officer and
Randy Bresee Principal Accounting Officer)
/s/ Alok Mohan Chairman, Board of Directors
---------------------------------
Alok Mohan
/s/ Ninian Eadie Director
---------------------------------
Ninian Eadie
/s/ Ronald Lachman Director
---------------------------------
Ronald Lachman
16
<PAGE>
/s/ Robert L. McClure Director
---------------------------------
Robert L. McClure
/s/ R. Duff Thompson Director
---------------------------------
R. Duff Thompsom
/s/ Gilbert P. Williamson Director
---------------------------------
Gilbert P. Williamson
17
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -------------
2.1 (1) Common Stock and Warrant Purchase Agreement, dated September
11, 2000, by and among The Santa Cruz Operation, Inc.,
California corporation and the selling shareholders set
forth herein above
2.2 (1) Common Stock Warrant dated September 11, 2000
2.3 (1) Registration Rights Agreement, dated September 11, 2000, by
and among The Santa Cruz Operation, Inc., and the selling
shareholders set forth herein above
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation as to the legality of the securities being
registered
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers, LLP, Independent
Accountants
23.3 Consent of KPMG Independent Auditors
24.1 Power of Attorney (See the signature page of this
Registration Statement)
--------------
(1) Incorporated by reference to an exhibit to SCO's Current Report on 8-K as
filed with the Commission on September 22, 2000.
18
