-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PzrzjPD/T8F3wBNJ7n0OXCQipYycgkSB4Iynu77n1bj23bZVUobNC3mMExcnKuON AxK26z+yHmoZpwD+IEnEYw== /in/edgar/work/0001012870-00-004914/0001012870-00-004914.txt : 20000927 0001012870-00-004914.hdr.sgml : 20000927 ACCESSION NUMBER: 0001012870-00-004914 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000911 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000922 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANTA CRUZ OPERATION INC CENTRAL INDEX KEY: 0000851560 STANDARD INDUSTRIAL CLASSIFICATION: [7372 ] IRS NUMBER: 942549086 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-21484 FILM NUMBER: 727565 BUSINESS ADDRESS: STREET 1: 425 ENCINAL STREET STREET 2: PO BOX 1900 CITY: SANTA CRUZ STATE: CA ZIP: 95060 BUSINESS PHONE: 4084277172 8-K 1 0001.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 September 11, 2000 ------------------ Date of Report (Date of earliest event reported) THE SANTA CRUZ OPERATION, INC. ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 0-21484 94-2549086 - ------------------------------ ---------------------- -------------------- (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification No.) 425 Encinal Street Santa Cruz, California 95061 (Address of principal executive offices) (831) 425-7222 ---------------------------------------- (Registrant's telephone number, including area code) Item 5. Other Events. Pursuant to the Common Stock and Warrant Purchase Agreement (the "Agreement") dated September 11, 2000, by and among The Santa Cruz Operation, Inc. ("SCO"), and certain Investors as set forth in Exhibit "A" of the Agreement (the "Investors"), SCO sold and the Investors purchased 409,375 units at $32.00 per unit. Each Unit consists of eight (8) shares of the common stock of SCO and a warrant to purchase either 2 additional shares of SCO common stock at $4.00 per share, or 1 share of the common stock of Caldera, Inc. held by SCO at $8.00 per share. The warrants for the Caldera shares can be exercised only if the Agreement and Plan of Reorganization (the "Merger Agreement"), dated August 1, 2000, by and among Caldera, Caldera Holding, Inc., a new Delaware corporation formed solely for the purpose of the transactions contemplated in the Merger Agreement ("Newco"), and SCO is consummated. If the Merger Agreement does not close, for any reason, or is terminated by the parties thereto, then the exercise price of the warrants for SCO's Common Stock shall be the lesser of $4.00 per share, or 90% of the closing price of the Company's Common Stock on the first trading day following the announcement that the Merger Agreement shall not be consummated. For every purchase of 2 shares of common stock of SCO, the number of shares of Common Stock of Caldera, Inc. that the Investor may purchase under the warrant shall be reduced by one 1. For every purchase of 1 share of common stock of Caldera, Inc., the number of shares of common stock of SCO that the Investor may purchase under the warrant shall be reduced by two 2. Pursuant to the Agreement, SCO has an obligation to file a registration statement for the registration of the shares and warrants within 60 days from the date of the Agreement. Furthermore, under the Merger Agreement, Caldera, Inc. has an obligation to file a registration statement for the Caldera shares that are the consideration for the Merger Agreement. Notwithstanding the foregoing, in the event that within 90 days from the Closing of the Merger Agreement, the Caldera shares held by Company purchasable under this Warrant have not been registered with the SEC for sale in a public offering, then Holder's exercise price shall decrease by 1/8th of a point (12.5 cents) each month until either the registration of the shares becomes effective, or twelve months elapse. Further, in the event that within 90 days from the Closing of the Agreement, the Company shares purchasable under the warrant have not been registered with the SEC for sale in a public offering, then Holder's exercise price shall decrease by 1/16th of a point (6.25 cents) each month until either the registration of the shares becomes effective, or twelve months elapse. In addition, SCO shall pay to Security Research Associates, Inc., the placement agent for the above referenced private placement, 2.5% of the gross proceeds of the transaction, (a total of $327,500.00) and a two year warrant to purchase 5% of the underlying shares of the common stock of SCO being sold (a total of 163,750 shares) with an exercise price of $4.00, or if the Merger Agreement does not close, for any reason, or is terminated by the parties thereto, then the exercise price of the warrant shall be the lesser of $4.00 per share, or 90% of the closing price of the -2- Company's Common Stock on the first trading day following the announcement that the Merger Agreement shall not be consummated. The foregoing description of the Agreement and the transactions contemplated thereby do not purport to be complete and are qualified in their entirety by reference to the Agreement, the Warrant, and the Registration Rights Agreement, copies of which are filed as exhibits hereto. Item 7. Exhibits. (c) Exhibits. Exhibit 10.1. Common Stock and Warrant Purchase Agreement. Exhibit 10.2. Registration Rights Agreement. -3- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE SANTA CRUZ OPERATION, INC. Date: September 22, 2000 By: /s/ Steven M. Sabbath ---------------------------------------------- Steven M. Sabbath Senior Vice President, Law & Corporate Affairs -4- INDEX TO EXHIBITS FILED WITH THE CURRENT REPORT ON FORM 8-K DATED SEPTEMBER 11, 2000 Exhibit Description - ------- ----------- 10.1 Common Stock and Warrant Purchase Agreement dated September 11, 2000 by and among The Santa Cruz Operation, Inc. and the Investors. 10.2 Registration Rights Agreement dated September 11, 2000 by and among The Santa Cruz Operation, Inc. and the Investors. -5- EX-10.1 2 0002.txt COMMON STOCK AND WARRANT PURCHASE AGREEMENT EXHIBIT 10.1 The Santa Cruz Operation, Inc. ___________________________________________________________________ COMMON STOCK AND WARRANT PURCHASE AGREEMENT ___________________________________________________________________ COMMON STOCK AND WARRANT PURCHASE AGREEMENT THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement") is made as of September 11, 2000 by and among The Santa Cruz Operation, Inc., a California corporation (the "Company"), and the investor identified on the Investor Schedule which is attached hereto as Exhibit A (each an "Investor," --------- collectively the "Investors"). R E C I T A L S: --------------- A. The Company desires to sell shares of its common stock, as well as warrants to purchase additional shares of its common stock, and/or the common stock of Caldera, Inc. held by Company, (hereinafter "Shares and Warrants") to the Investors and the Investors desire to purchase such Shares and Warrants on the terms and subject to the conditions set forth in this Agreement and the Stock Purchase Warrant, the form of which is attached hereto as Exhibit B. --------- THE PARTIES AGREE AS FOLLOWS: 1. Purchase and Sale of Common Stock and Warrants. ---------------------------------------------- 1.1 Sale and Issuance of Common Stock and Warrants. The Company shall ---------------------------------------------- sell to each Investor and each such Investor shall purchase from the Company the number of Shares and Warrants as set forth opposite the name of such Investor in column two (2) of Exhibit A in exchange for the total purchase price set forth --------- in column three (3) of Exhibit A. --------- 1.2 Escrow. Company shall deliver to the escrow agent, Wells Fargo Bank, ------ National Association, Corporate Trust Services, (hereinafter "Escrow Agent") (i) certificates representing the Shares, and (ii) executed Stock Purchase Warrants representing the Warrants to be purchased by the Investors as set forth in Exhibit A. Investors shall deposit the purchase price, via check or wire transfer to the Escrow Agent, as set forth in Exhibit A. The Closing shall be subject to receipt of the foregoing by the Escrow Agent. The Escrow Agent shall hold the share certificates, Warrants and purchase price in an escrow account until the parties have executed the Agreement, the Registration Rights Agreement, and the Escrow Agent has received an authorization from the Company instructing the Escrow Agent to release the purchase price to the Company, and the certificates and warrants to the Investors. The parties hereby acknowledge that Escrow Agent is acting only as an escrow agent in connection with this Agreement, and has not endorsed, recommended or guaranteed the value of the stock and warrants purchased in connection with this Agreement. 1.3 Registration Rights. At the Closing, the parties will enter into a ------------------- Registration Rights Agreement, the form of which is attached hereto as Exhibit ------- C. - - 1.4 Closing. The purchase and sale of the Shares and Warrants shall take ------- place upon the execution and delivery of this Agreement, the Registration Rights Agreement, and the authorization by Company authorizing the escrow agent to release the purchase price to the Company and the shares and Warrants to the Investors. (the "Closing"). It is anticipated that the Closing shall occur on or about September 8, 2000, with a termination date of September 15, 2000. In the event the Investors have not placed in escrow an aggregate sum of not less than $10,000,000, on or before September 15, 2000, the Company and Security Research Associates, Inc. (the "Placement Agent"), may, in their discretion, terminate this transaction and cause the Escrow Agent to return any funds received to the applicable Investors. Consequently, there is no minimum amount to be raised in the offering. 2. Representations and Warranties of the Company to the Investors. Except -------------------------------------------------------------- as set forth on the Schedule of Exceptions attached hereto as Exhibit D, the --------- Company hereby represents and warrants to the Investor that: 2.1 Organization; Good Standing; Qualification and Power. The Company ---------------------------------------------------- is a corporation duly organized, validly existing and in good standing under the laws of the State of California, has all requisite corporate power and authority to execute this Agreement and the Stock Purchase Warrant (collectively, the "Agreements"), and to carry out the transactions contemplated hereby and thereby, to own, lease and operate any and all of its properties, and to carry on its business as now being conducted. 2.2 Capital Structure. The number of shares authorized and outstanding ----------------- as of the date of July 28, 2000, is set forth in the Schedule of Exceptions. No shares of the capital stock of the Company are held by the Company in its treasury. Except as specified in the Schedule of Exceptions, all outstanding shares of the capital stock of the Company on July 28, 2000 are set forth in the Schedule of Exceptions and are validly issued, fully paid and nonassessable and free and clear of any Encumbrances and not subject to preemptive rights under any statute, pursuant to the Certificate of Incorporation or Bylaws, or pursuant to any agreement or document. 2.3 Other. Except as set forth in the Schedule of Exceptions and as ----- contemplated by the Agreements, there are no outstanding warrants, conversion privileges, preemptive rights, or other rights or agreements to purchase or otherwise acquire or issue any equity securities of the Company. 2.4 Authorization. All corporate action on the part of the Company, its ------------- officers, directors and stockholders necessary for the authorization, execution and delivery of, and performance of all obligations under the Agreements, and for the issuance and delivery of the Shares, has been taken. The Agreements constitute legally binding valid obligations of the Company enforceable against the Company in accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. 2.5 Validity of Shares. The Shares, when issued, sold and delivered in ------------------ accordance with the terms and for the consideration expressed in this Agreement, shall be duly and validly issued (including, without limitation, issued in compliance with applicable federal and state securities laws), fully-paid and non-assessable, and free from any liens or encumbrances other than those accepted or imposed by the holders thereof, and the applicable state and federal securities laws restrictions on transfer to which such Shares are subject. 2.6 No Conflict with Other Instruments; Compliance with Laws. The -------------------------------------------------------- execution, delivery and performance of the Agreements will not result in any violation of, be in conflict with, or constitute a default under, with or without the passage of time or the giving of notice: (i) any provision of the Company's Certificate of Incorporation or Bylaws; (ii) any provision of any judgment, decree or order to which the Company is a party or by which it is bound; (iii) any material contract, obligation or commitment to which the Company is a party or by which it is bound; or (iv) to the best of Company's knowledge, any statute, rule or governmental regulation applicable to the Company. To the best of Company's knowledge, the Company is conducting its business in compliance with all statutes, rules, and governmental regulations applicable to the Company where the failure to do so would constitute a material adverse event. 2.7 Agreements; Actions. ------------------- (a) Except as set forth in the Company's SEC filings, there are no agreements, understandings or proposed transactions between the Company and any of its officers, directors, affiliates or any affiliate thereof. (b) Except as set forth in the Schedule of Exceptions, the Company has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred any indebtedness for money borrowed, (iii) incurred any other liabilities other than in the ordinary course of business, (iv) sold, exchanged or otherwise disposed of any of its material assets or rights or (v) agreed to any of the foregoing. (c) Except as set forth in the Schedule of Exceptions, the Company is not a party to and is not bound by any contract, agreement or instrument, or subject to any restriction under its Certificate or Bylaws, which to the knowledge of the Company adversely affects in any material respect its business as now conducted or as proposed to be conducted, its properties or its financial condition. 2.8 Litigation. Except as set forth in the Schedule of Exceptions, ---------- there is no legal action, proceeding or investigation pending or to the best of the Company's knowledge, threatened, that questions the validity of the Agreements, or the right of the Company to enter into the Agreements or to consummate the transactions contemplated hereby and thereby, or that would result, either individually or in the aggregate, in any material adverse event or any change in the current equity ownership of the Company, nor is the Company aware that there is any basis for the foregoing. To the best of the Company's knowledge, there is no judgment, decree or order of any court in effect against the Company and the Company is not in default with respect to any order of any governmental authority to which the Company is a party or by which it is bound. The Company has no present intention to commence litigation against any other party. 2.9 Title to Property and Assets; Leases. Except (a) for liens for ------------------------------------ current taxes not delinquent, (b) for liens imposed by law and incurred in the ordinary course of business for obligations not past due to carriers, warehousemen, laborers, material, men and the like, (c) for minor defects in title, none of which, individually or in the aggregate, materially interferes with the use of such property, or (d) the proposed liens pursuant to the proposed agreements with the Canopy Group, and Caldera Systems, Inc., the Company owns its property and assets free and clear of all mortgages, liens, claims and encumbrances. With respect to the property and assets it leases, the Company is in compliance with such leases and, to the best of its knowledge, holds a valid leasehold interest free of any liens, claims, or encumbrances, subject to clauses (a)-(c) above. 2.10 Patents and Other Proprietary Rights. To the best of the Company's ------------------------------------ knowledge, the Company has sufficient title and ownership or license to use all material patents, trademarks, service marks, trade names, copyrights, trade secrets, information, proprietary rights and processes necessary for its business as now conducted, and as proposed to be conducted, without conflict with or infringement of the rights of others. Except as set forth in the Schedule of Exceptions, the Company has not received any communications alleging, nor is the Company aware of any basis for such allegation, that the Company has violated or, by conducting its business as proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity. The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of such employee's best efforts to promote the interests of the Company or that would conflict with the Company's business as proposed to be conducted. Neither the execution nor delivery of this Agreement, nor the carrying on of the Company's business by the employees of the Company, nor the conduct of the Company's business as now conducted and as proposed to be conducted, will, to the best of the Company's knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees is now obligated. The Company does not believe it is or will be necessary to use any inventions of any of its employees (or persons it currently intends to hire) made prior to their employment by the Company. 2.11 Proprietary Information and Invention Assignments. Each employee of ------------------------------------------------- and consultant to the Company has executed and delivered to the Company a Proprietary Information Agreement, that includes an invention assignment provision. The Company is not aware that any of its employees or consultants are in violation thereof, and the Company will use its best efforts to prevent any such violation. 2.12 No Defaults; Violations or Conflicts. The Company is not in violation ------------------------------------ of any term or provision of its Certificate of Incorporation, Bylaws, or any term or provision of any indebtedness, mortgage, indenture, contract, agreement, or judgment which would constitute a material adverse event. 2.13 Governmental Consents. No consent, approval, order or authorization --------------------- of, or registration, qualification, designation, declaration or filing with, any federal, state, local or provincial governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement. 2.14 Disclosure. The Company has provided the Investors with all the ---------- information that the Investors have requested for deciding whether to acquire the Shares and Warrants, including information regarding the agreement Company entered into with Caldera Systems, Inc. on August 1, 2000, regarding the sale of Company's Server Software and Professional Services Divisions to Caldera Systems, Inc. To the best of the Company's knowledge, no representation or warranty of the Company contained in this Agreement and the exhibits attached hereto, any certificate furnished or to be furnished to Investors at the Closing or the Stock Purchase Warrant (when read together) contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. 2.15 No Conflict of Interest. Except as set forth in Company's SEC filings, ----------------------- the Company is not indebted, directly or indirectly, to any of its officers or directors or to their respective spouses or children, in any amount whatsoever other than in connection with expenses or advances of expenses incurred in the ordinary course of business or relocation expenses of employees. To the Company's knowledge, and except as set forth in Company's SEC filings, none of the Company's officers or directors, or any members of their immediate families, are, directly or indirectly, indebted to the Company (other than in connection with purchases of the Company's stock) or have any direct or indirect ownership interest in any firm or corporation with which the Company in affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company except that officers, directors and/or stockholders of the Company may own stock in (but not exceeding two percent of the outstanding capital stock of) any publicly traded company that may compete with the Company. Except as set forth in Company's SEC filings, to the Company's knowledge, none of the Company's officers or directors or any members of their immediate families are, directly or indirectly, interested in any material contract with the Company. 3. Representations and Warranties of the Investors to the Company. Each -------------------------------------------------------------- Investor represents and warrants to the Company as follows: 3.1 Authorization. When executed and delivered by such Investor, and ------------- assuming execution and delivery by the Company, the Agreements will constitute valid obligations of such Investor, enforceable in accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. 3.2 Each Investor represents and warrants that such Investor has reviewed the Company's 10Q and 8-K SEC filings related to the agreement Company entered into with Caldera Systems, Inc., on August 1, 2000, regarding the sale of the Company's Server Software and Professional Services Divisions to Caldera Systems, Inc., and acknowledges the risks involved with such agreement, including but not limited to (i) the risk that the transaction may not close; (ii) the risk that the transaction may disrupt or is disrupting the efficient functioning of the Company; and (iii) the risk that the Company's cash flow requirements exceed its ability to generate cash in the near term. 4. Securities Laws. --------------- 4.1 Securities Laws Representations and Covenants of Investor. Each --------------------------------------------------------- Investor represents and warrants to the Company as follows: (a) This Agreement is made with such Investor in reliance upon such Investor's representation to the Company, which by such Investor's execution of this Agreement such Investor hereby confirms, that the Shares and the Warrants purchased hereto and to be received by such Investor will be acquired for investment for such Investor's own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, such Investor further represents that such Investor has no contract, undertaking, agreement or arrangement with any person to sell, transfer, or grant participations to such person or to any third person, with respect to any of the Securities. (b) Each such Investor understands and acknowledges that the offering of the Securities pursuant to this Agreement will not be registered under the Securities Act on the grounds that the offering and sale of securities contemplated by this Agreement are exempt from registration pursuant to Section 4(2) of the Securities Act, and that the Company's reliance upon such exemption is predicated upon such Investor's representations set forth in this Agreement. (c) Each such Investor represents that it is an Accredited Investor, as defined under Rule 501(a) of the Securities Exchange Commission Act of 1933, or that it is an Institutional Investor. In addition, each Investor represents that: (i) such Investor has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of such Investor's prospective investment in the Securities; (ii) such Investor has received all the information it has requested from the Company and considers necessary or appropriate for deciding whether to purchase the Securities; (iii) such Investor has the ability to bear the economic risks of such Investor's prospective investment. 4.2 Legends. All certificates for the Shares and Warrants shall bear the ------- following legend: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"). SUCH SECURITIES MAY NOT BE TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR SUCH TRANSFER MAY BE MADE PURSUANT TO RULE 144 OR IN THE OPINION OF COUNSEL FOR THE COMPANY, REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT." 5. Miscellaneous. ------------- 5.1 Entire Agreement; Successors and Assigns. The Agreements constitute ---------------------------------------- the entire agreement between the Company and the Investors relative to the subject matter hereof. Any previous agreement between the Company and the Investors is superseded by this Agreement. Subject to the exceptions specifically set forth in this Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective executors, administrators, heirs, successors and assigns of the parties. 5.2 Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of California. 5.3 Counterparts. This Agreement may be executed in two (2) or more ------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 5.4 Headings. The headings of the sections of this Agreement are for -------- convenience and shall not by themselves determine the interpretation of this Agreement. 5.5 Notices. Any notice required or permitted hereunder shall be given in ------- writing and shall be conclusively deemed effectively given (i) five (5) days after sending by first class U.S. mail postage prepaid, (ii) upon personal delivery, or (iii) two (2) days after the date of sending if sent by commercial overnight courier addressed to the Company as set forth below the Company's name on the signature page of this Agreement, and to an Investor, at such Investor's address as set forth on Exhibit A or at such other address as the Company or --------- such Investor may designate. 5.6 Survival of Warranties. The warranties, representations and covenants ---------------------- of the parties contained in or made pursuant to this Agreement shall survive the Closing, and such warranties, representations and covenants of the Company shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Investors; provided, however, that such representations and warranties need only be accurate as of the Closing. 5.7 Finders Fees. Each of the Company and the Investors will be ------------ responsible for its own costs and expenses related to investment banking or finders fees in connection with the transactions contemplated by this Agreement, including those fees Company shall pay to Securities Research Associates, Inc., in connection with this transaction. 5.8 Severability. If any provision of this Agreement is held to be ------------ unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the full extent possible. 5.9 Delays or Omissions. No delay or omission to exercise any right, power ------------------- or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative. 5.10 Exculpation Among Investors. Each Investor acknowledges that it is not --------------------------- relying upon any person, firm or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each Investor agrees that no Investor nor the respective controlling persons, officers, directors, partners, agents, or employees of any Investor shall be liable to any other Investor for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the purchase of the Shares and Warrants. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. THE COMPANY: The Santa Cruz Operation, Inc. a California corporation 425 Encinal Street Santa Cruz, CA 95061-1900 By:________________________________ Name:______________________________ Title:_____________________________ THE INVESTOR: By:________________________________ Name:______________________________ Title:_____________________________ EXHIBIT A --------- INVESTOR SCHEDULE ----------------- Price per Unit is $32.00. Unit is defined as follows: Upon close of the Agreement and Plan of Reorganization by and among Caldera Systems, Inc., Caldera Holding, Inc., and Company, (hereinafter "Merger Agreement") a Unit will consist of eight (8) shares of Company's common stock and warrants to purchase either (a) one (1) share of Caldera, Inc. common stock held by Company at $8.00 per share, or (b) two (2) shares of Company's common stock at $4.00 per share. If the Merger Agreement does not close, for any reason, or is terminated by the parties thereto, a Unit will consist of eight (8) shares of Company's common stock and warrants to purchase two (2) shares of Company's common stock at the lesser of $4.00 per share, or 90% of the closing price of the Company's Common Stock on the first trading day following the announcement that the Merger Agreement shall not be consummated. Notwithstanding the foregoing, in the event that within 90 days from the Closing of the Merger Agreement, the Caldera shares held by Company purchasable under the Warrant have not been registered, then Investor's exercise price shall decrease by 1/8/th of a point (12.5 cents) each month until either the registration of the shares becomes effective, or twelve months elapse. Further, in the event that within 90 days from the Closing of this Common Stock and Warrant Purchase Agreement, the Company shares purchasable under the Warrant have not been registered, then Investor's exercise price shall decrease by 1/16/th (6.25 cents) each month until the either the registration of the shares becomes effective, or twelve months elapse. The purchase price must be deposited via check or wire transfer to: If by Wire: Wells Fargo Bank, N.A. ABA #091000019 Trust Clearing Account #1038377 For Credit to SCO/SRA Escrow Account #10215800 If by Check: Checks should be payable to SCO, Inc./SRA, Inc. Escrow - Ref: SEI A/C #10215800 Checks should be forwarded to: Wells Fargo Bank, Minnesota, N.A. IPS-MTU Check Processing MAC N9303-122 608 2nd Avenue South Minneapolis, MN 55479 Attn: Greg Maples 612-667-3614 Investor Name, Address, and Number of Units Aggregate Purchase Price - --------------------------- --------------- ------------------------ Taxpayer ID Number - ------------------ Name: Address: Social Security or Taxpayer ID: EXHIBIT B STOCK PURCHASE WARRANT ---------------------- STOCK PURCHASE WARRANT To Purchase Shares of Common Stock of The Santa Cruz Operation, Inc. and/or Caldera, Inc. THIS CERTIFIES that, for value received, ___________________________, The Holder, or Holder's transferee (the "Holder"), is entitled, upon the terms and subject to the conditions set forth herein, at any time on or after the date of this Warrant and on or before, but in no case after, two (2) years from the date of this Warrant (and subject to early termination as provided in Section 9 herein), to subscribe for and purchase, from The Santa Cruz Operation, Inc., a California corporation (the "Company"), shares of the Company's Common Stock, and/or shares of Caldera, Inc.'s Common Stock held by the Company. This Warrant is issued pursuant to a certain Common Stock and Warrant Purchase Agreement (the "Agreement"), attached hereto as Exhibit A and incorporated herein by this reference, dated as of September 11, 2000, by and between the Company and the Investor set forth in Exhibit "A" of the Agreement. 1. Number of Warrant Shares. ------------------------ (a) If the Agreement and Plan of Reorganization between the Company and Caldera Systems, Inc. (the "Merger Agreement") closes, this Warrant entitles the Holder, at Holder's option, to purchase up to [_____] shares of the Common Stock of Company, or up to [_____] shares of the Common Stock of Caldera, Inc. (held by Company), or some combination thereof. For every purchase of two (2) shares of Common Stock of Company, the number of shares of Common Stock of Caldera, Inc. that Holder may purchase under this Warrant shall be reduced by one (1). For every purchase of one (1) share of Common Stock of Caldera, Inc., the number of shares of Common Stock of Company that Holder may purchase under this Warrant shall be reduced by two (2). (b) If the Merger Agreement does not close, this Warrant entitles the Holder to purchase up to [_____] shares of the Common Stock of Company. 2. Exercise Price. -------------- (a) The purchase price is as follows: (i) If the Merger Agreement closes, then; (A) Company's Common Stock. The Exercise Price under ---------------------- this Warrant shall be $4.00 per share. (B) Caldera, Inc.'s Common Stock (held by Company). ----------------------------------------------- The Exercise Price under this Warrant shall be $8.00 per share. (ii) If the Merger Agreement does not close, for any reason, or is terminated by the parties thereto, then the exercise price for Company's Common Stock shall be the lesser of $4.00 per share, or 90% of the closing price of the Company's Common Stock on the first trading day following the announcement that the Merger Agreement shall not be consummated. (iii) Notwithstanding the foregoing, in the event that within 90 days from the Closing of the Merger Agreement, the Caldera shares held by Company purchasable under this Warrant have not been registered with the SEC for sale in a public offering, then Holder's exercise price shall decrease by 1/8th of a point (12.5 cents) each month until either the registration of the shares becomes effective, or twelve months elapse. Further, in the event that within 90 days from the Closing of the Common Stock and Warrant Purchase Agreement, the Company shares purchasable under this Warrant have not been registered with the SEC for sale in a public offering, then Holder's exercise price shall decrease by 1/16th of a point (6.25 cents) each month until either the registration of the shares becomes effective, or twelve months elapse. 3. Exercise of Warrant. The purchase rights represented by this Warrant ------------------- are exercisable by the Holder, in whole or in part, at any time on or after the date of this Warrant and on or before two (2) years from the date of this Warrant (and subject to early termination as provided in Section 9 herein), by the surrender of this Warrant, a Notice of Exercise in the form attached as Exhibit B, and, if no registration statement is then in effect, the Investment Representation Certificate in the form attached as Exhibit D duly executed at the office of the Company in Santa Cruz, California (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of such Holder appearing on the books of the Company), and upon payment of the purchase price of the shares thereby purchased (by cash or by check or bank draft payable to the order of the Company or by cancellation of indebtedness of the Company to the Holder, if any, at the time of exercise in an amount equal to the purchase price of the shares thereby purchased); whereupon the Holder shall be entitled to receive a certificate for the number of shares of Common Stock so purchased. 4. Conversion of Warrant (Cashless Exercise). In lieu of exercising ---------------------------------------- this Warrant as described in Section 3, the registered holder hereof shall have the right to convert this warrant, in whole or in part, by surrender of this Warrant and a Notice of Conversion in the form attached as Exhibit E duly executed at the office of the Company, into shares of Common Stock of the Company, or shares of Common Stock of Caldera held by the Company, as provided in this Section 4. Upon exercise of this conversion right, the holder hereof shall be entitled to receive that number of shares of Common Stock of the Company, or shares of Common Stock of Caldera held by the Company, equal to the quotient obtained by dividing [(A - B)(X)] by (A), where: A = the Fair Market Value (as defined below) of one share of Common Stock on the date of conversion of this Warrant. B = the purchase price for one share of Common Stock under this Warrant. X = the number of shares of Common Stock as to which this Warrant is being converted. If the above calculation results in a negative number, then no shares of Common Stock shall be issued or issuable upon conversion of this Warrant. "Fair Market Value" of a share of Common Stock shall be the average closing price of such stock on the ten (10) trading days immediately preceding the date as of which such value is to be determined. 5. Restrictions on Transfer. ------------------------ (a) Permitted Transfers. This Warrant shall be freely transferable in ------------------- whole or in part, subject to the limitations specified in this Section 5. (b) Investment Representation. The Holder agrees that the ------------------------- Holder will not offer, sell or otherwise dispose of this Warrant or any securities issued on exercise of this Warrant except under circumstances which will not result in a violation of the Securities Act. Unless a registration statement is in effect, then upon exercise of this Warrant, the Holder shall confirm in writing, by executing the form attached as Exhibit D hereto, that the securities purchased thereby are being acquired for investment solely for the Holder's own account and not as a nominee for any other Person, and not with a view toward distribution or resale. (c) Disposition of Warrant or Shares. With respect to any -------------------------------- offer, sale or other disposition of this Warrant or any securities issued upon exercise of this Warrant, the Holder agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of the Holder's counsel, if reasonably requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration under the Securities Act or qualification under any applicable state securities laws of this Warrant or such shares, as the case may be, and indicating whether or not under the Securities Act certificates for this Warrant or such shares, as the case may be, to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to insure compliance with the Securities Act. Each certificate representing this Warrant or the securities thus transferred (except a transfer pursuant to Rule 144) shall bear a legend as to the applicable restrictions on transferability in order to insure compliance with the Securities Act, unless in the aforesaid reasonably satisfactory opinion of counsel for the Holder or the security holder, as the case may be, such legend is not necessary in order to insure compliance with the Securities Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. In the event Holder seeks an opinion from Holder's counsel as to transfer without registration, the Company shall provide such factual information to Holder's counsel as Holder's counsel may reasonably request for the purpose of rendering such opinion and such counsel may rely on the accuracy and completeness of such information in rendering such opinion. (d) Procedure. Subject to the limitations set forth in this --------- Section 5, Holder may transfer the Warrant on the books of the Company by surrendering to the Company: (i) this Warrant; (ii) a written Assignment, in the form attached as Exhibit C, naming the assignee and duly executed by Holder; and (iii) funds sufficient to pay any stock transfer taxes payable upon the making of such transfer. The Company shall thereupon execute and deliver a new Warrant in the name of the assignee specified in such instrument of assignment, and if the Warrant is transferred in part, the Company shall also execute and deliver in the name of the Holder a new Warrant covering the untransferred portion of the Warrant. Upon issuance of the new Warrant or Warrants, the Warrant surrendered for transfer shall be canceled by the Company. (e) Expenses. The Company shall pay all expenses, and other -------- charges payable in connection with the preparation, issue, and delivery of any new Warrant under this Section 5. 6. No Rights as Shareholder. This Warrant does not entitle the Holder to ------------------------ any voting rights or other rights as a shareholder of the Company prior to exercise. 7. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by ------------------------------------------------- the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of this Warrant. 8. Saturdays, Sundays, Holidays, etc. If the last or appointed day for --------------------------------- the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday. 9. Early Termination. This Warrant shall terminate earlier than two (2) ----------------- years from the date of this Warrant if the Agreement is earlier terminated or fails to close. 10. Miscellaneous. This Warrant may be amended and any term of this ------------- Warrant may be waived only by a written instrument signed by the Company and the Holder. This Warrant shall be binding upon any successors or assigns of the Company. This Warrant shall constitute a contract under the laws of the State of California and for all purposes shall be construed in accordance with and governed by the laws of said state applied without reference to conflict of laws principles. Dated: September 11, 2000 COMPANY ___________________________ EXHIBIT A COMMON STOCK AND WARRANT PURCHASE AGREEMENT (See Exhibit 10.1) EXHIBIT B NOTICE OF EXERCISE ------------------ TO: The Santa Cruz Operation, Inc. The undersigned hereby elects to purchase [_______] shares of Common Stock of The Santa Cruz Operation, Inc., and or [________] shares of Common Stock of Caldera, Inc. held by the Santa Cruz Operation, Inc., pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any. (1) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned. (2) The undersigned represents that the aforesaid shares of Common Stock are being acquired for the account of the undersigned for investment. _____________________________ ________________________________ (Date) (Signature) EXHIBIT C ASSIGNMENT ---------- FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto __________ [Name and Address]_______ the rights represented by the foregoing Common Stock Warrant issued by The Santa Cruz Operation, Inc., on [__date__], and appoints ________________ its attorney to transfer said rights on the books of said corporation, with full power of substitution in the premises. _______________________________ Signature guaranteed: Dated: _________________ EXHIBIT D INVESTMENT REPRESENTATION CERTIFICATE ------------------------------------- HOLDER: COMPANY: SECURITY: COMMON STOCK AMOUNT: DATE: In connection with the purchase of the above-listed Securities, the undersigned Holder represents to the Company the following: (a) Holder is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Holder is acquiring these Securities for investment for Holder's own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). Holder represents that such Holder has no contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to any such person or any third person with respect to any of the Securities. (b) Holder acknowledges and understands that the Securities constitute "restricted securities" under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Holder's investment intent as expressed herein. In this connection, Holder understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Holder's representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Holder further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Holder understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company. (c) Holder is familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. The Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of certain conditions of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144, and (4) the timely filing of a Form 144, if applicable. (d) Holder further understands that in the event all of the applicable requirements of or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Holder understands that no assurances can be given that any such other registration exemption will be available in such event. Signature of Holder: ________________________________ Date:___________________________ EXHIBIT E NOTICE OF CONVERSION -------------------- To: The Santa Cruz Operation, Inc. (1) The undersigned hereby elects to convert that portion of the attached Warrant representing the right to purchase [_______] shares of Common Stock of the Company and/or [_______] shares of Common Stock of Caldera held by the Company into such number of shares of Common Stock of the Company or of Caldera (held by the Company) as is determined pursuant to Section 4 of such Warrant, which conversion shall be effected pursuant to the terms of the attached Warrant. (2) Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below: (Name): _______________________________________ (Address): _______________________________________ (3) The undersigned represents that the aforesaid shares of Common Stock of the Company and/or the Common Stock of Caldera held by the Company are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. _________________________________ _____________________________________ (Date) (Signature) EXHIBIT C REGISTRATION RIGHTS AGREEMENT ----------------------------- (See Exhibit 10.2) EXHIBIT D --------- SCHEDULE OF EXCEPTIONS ---------------------- 2.2 Capital Structure. ----------------- As of July 28, 2000, 35,914,424 shares of SCO's Common Stock were issued and outstanding 2.3 Other. ----- As of August 1, 2000, there were 12,302,271 employee and director options outstanding. The Company is in the process of preparing a Form S-8 Registration Statement registering additional shares to be reserved for issuance under the Company's 1994 Incentive Stock Option Plan, 1993 Director Option Plan and 1993 Employee Stock Purchase Plan. 2.7 Agreements; Actions. ------------------- (b) On August 1, 2000, the Company entered into a transaction with Caldera Systems, Inc., under which Caldera intends to purchase Company's Server Software Division and Professional Services Division, both such divisions being approximately 90% of the assets of the Company. In addition, the Company is currently in negotiations with the Canopy Group, and with Caldera to borrow $18,000,000 and $7,000,000 respectively, using its assets as security for the loans. (c) On August 1, 2000, the Company entered into a transaction with Caldera Systems, Inc., under which Caldera intends to purchase Company's Server Software Division and Professional Services Division, both such divisions being approximately 90% of the assets of the Company. EX-10.2 3 0003.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.2 THE SANTA CRUZ OPERATION, INC. REGISTRATION RIGHTS AND STOCK RESTRICTION AGREEMENT This Registration Rights Agreement (the "Agreement") is made effective as of September 11, 2000 (the "Effective Date"), by and among The Santa Cruz Operation, Inc., a California corporation (the "Company"), and the individual and/or entity set forth in the signature block hereto below (the "Investors"). RECITALS -------- A. The Company and the Investors are parties to the Common Stock and Warrant Purchase Agreement dated as of September 11, 2000 (together with the exhibits and schedules thereto, the "Purchase Agreement") and the Stock Warrant Purchase agreement dated as of September 11, 2000 (collectively with the Agreement, the "Transaction Agreements") pursuant to which Investors are purchasing, and the Company is selling, the Common Stock of the Company and Warrants for the purchase of additional shares of the Common Stock of the Company and the Common Stock of Caldera, Inc., held by the Company. All capitalized terms not defined herein shall have the meanings set forth in the Merger Agreement, unless otherwise referred to another agreement. AGREEMENT --------- NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, all parties hereto agree as follows: 1. Certain Definitions. As used in this Agreement, the following terms shall ------------------- have the following respective meanings: "Black-Out Period" means any period during which executive officers and ---------------- directors of the Company are generally prohibited from engaging in trades in the Company's securities pursuant to the Company's Insider Trading Policy, including, without limitation, black-out periods for management related to quarterly reports of financial results of the Company. "Commission" means the Securities and Exchange Commission or any other Federal ---------- agency at the time administering the Securities Act. "Effective Date" shall mean the date on which the Transaction Agreements become -------------- effective. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any ------------ similar Federal rule or statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Family Transfer" means a transfer to a spouse, lineal descendent, or a trust --------------- for the benefit of transferor, spouse or lineal descendent, provided that in the case of each such transfer, the transfer is made in compliance with applicable federal and state securities law and the transferee agrees to be bound by the terms of this Agreement. "Holder" means the Investors, for so long as the Investors hold any Registrable ------ Securities, or any person holding Registrable Securities to whom the rights under this Agreement have been transferred in accordance with Section 9 hereof. "Insider Trading Policy" means the policy adopted by the Company's Board of ---------------------- Directors, as such may be amended from time to time, relating to transactions in the Company's securities by the Company's executive officers and directors. "Permitted Window" means the period during which a Holder entitled to sell ---------------- Registrable Securities pursuant to a registration statement under Section 4 of this Agreement shall be permitted to sell Registrable Securities pursuant to such a registration. Except as otherwise set forth in this Agreement, a Permitted Window shall (i) commence upon the tenth business day following receipt by the Company of a written notice from a Holder to the Company that such Holder intends to sell Shares pursuant to such registration statement, or such earlier date as the Company may agree to (or, if such date falls within a Blackout Period, then upon the termination of such Blackout Period), and shall (ii) terminate upon the commencement of the next occurring Black-Out Period. "Registrable Securities" means the Shares of the Company Common Stock and the ---------------------- shares of Caldera, Inc. Common Stock held by the Company and any Common Stock of the Company issued or issuable in respect thereof upon any conversion, stock split, stock dividend, recapitalization, merger or other reorganization; provided, however, that securities shall only be treated as Registrable - -------- ------- Securities if and so long as they have not been registered or sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction. "Register," "registered" and "registration" refer to a registration effected by -------- ---------- ------------ preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. "Registration Expenses" means all expenses, except as otherwise stated below, --------------------- incurred by the Company in complying with Sections 4 and 5 hereof, including without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company). "Restricted Securities" means the securities of the Company required to bear a --------------------- legend as described in Section 3 hereof. "Securities Act" means the Securities Act of 1933, as amended, or any similar -------------- Federal rule or statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. -2- "Selling Expenses" means all underwriting discounts, selling commissions and ---------------- stock transfer taxes applicable to the securities registered by the Holders and all fees and disbursements of counsel for any Holder. 2. Restrictions on Transferability. ------------------------------- (a) The Registrable Securities and any other securities issued in respect of such securities upon any stock split, stock dividend, recapitalization, merger or other reorganization, shall not be sold, assigned, transferred or pledged except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. (b) Restrictive Legend. Each certificate representing the Shares or any other ------------------- securities issued in respect of such securities upon any stock split, stock dividend, recapitalization, merger or other reorganization shall be stamped or otherwise imprinted with legends restricting the transferability thereof, in substantially the form set forth below: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. SUCH SHARES GENERALLY MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER PURSUANT TO AN AGREEMENT BETWEEN THE HOLDER AND THE COMPANY. Each Holder consents to the Company making a notation on its records and giving instructions to any transfer agent of its capital stock in order to implement the restrictions on transfer established in this Agreement and the Merger Agreement. -3- 3. Notice of Proposed Transfers. The holder of each certificate ---------------------------- representing Restricted Securities by acceptance thereof agrees to comply in all respects with the provisions of this Section 3.Without in any way limiting the immediately preceding sentence or the provisions of Section 2, no sale, assignment, transfer or pledge (other than (i) a sale made pursuant to a registration statement filed under the Securities Act and declared effective by the Commission or (ii) a sale made in accordance with the applicable provisions of Rule 144 and Rule 145) of Restricted Securities shall be made by any holder thereof to any person unless such person shall first agree in writing to be bound by the restrictions of this Agreement, including without limitation this Section 3. Prior to any proposed sale, assignment, transfer or pledge of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the holder thereof shall give written notice to the Company of such holder's intention to effect such transfer, sale, assignment or pledge. Each such notice shall describe the manner and circumstances of the proposed transfer, sale, assignment or pledge in sufficient detail, and, if requested by the Company, the holder shall also provide, at such holder's expense, a written opinion of legal counsel (who shall be, and whose legal opinion shall be, reasonably satisfactory to the Company) addressed to the Company, to the effect that the proposed transfer of the Restricted Securities may be effected without registration under the Securities Act and under applicable state securities laws and regulations. Upon delivery to the Company of such notice and, if required, such opinion, the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms of such notice. The Company agrees that it shall not request such an opinion of counsel with respect to (i) a transfer not involving a change in beneficial ownership, (ii) a transaction involving the distribution without consideration of Restricted Securities by the holder to its constituent equity holders in proportion to their equity holdings in the holder or (iii) a transaction involving the transfer without consideration of Restricted Securities by an individual holder during such holder's lifetime by way of gift or on death by will or intestacy. Each certificate evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to Rule 144, the appropriate restrictive legend set forth in Section 2 above, except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for such holder and counsel for the Company, such legend is not required in order to establish or ensure compliance with any provision of the Securities Act. 4. Registration on Form S-3. ------------------------ (a) Registration. The Company shall use commercially reasonable efforts to ------------ cause a registration statement on Form S-3 covering all Registrable Securities to be filed no later than the sixty (60) days following the date of this Agreement. The Company shall use commercially reasonable efforts to cause such registration statement to become effective, and to keep such registration statement effective until the second anniversary of the date of this Agreement, or such earlier date upon which no Holder holds any Registrable Securities. (b) Limitations on Registration and Sale of Registrable Securities. -------------------------------------------------------------- Notwithstanding anything in this Agreement to the contrary, the Company's obligations and the Holders' rights under this Section 4 are subject to the limitations and qualifications set forth below, which may be waived in writing by the Company. -4- (i) The Holders will sell Registrable Securities pursuant to a registration effected hereunder only during a Permitted Window. (ii) If the Company furnishes to the Holders a certificate signed by the President of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company for a Form S-3 registration to be effected, or a Permitted Window to be in effect, due to (A) the existence of a material development or potential material development involving the Company which the Company would be obligated to disclose in the prospectus contained in the Form S-3 registration statement, which disclosure would in the good faith judgment of the Board of Directors be premature or otherwise inadvisable, (B) the existence of other facts or circumstances as a result of which the prospectus contained or to be contained in the Form S-3 registration statement includes or would include an untrue statement of a material fact or omits or would omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made or then existing or (C) the Company's bona fide intention to effect the filing of a registration statement with the Commission within sixty (60) days of the receipt of a notice from a Holder that it intends to sell Registrable Securities during a Permitted Window, the Company may defer the filing of the Form S-3 registration statement or delay the commencement of a Permitted Window or may effect an early termination of a Permitted Window that has commenced, as the case may be. (iii) The obligations of the Company hereunder are conditioned upon its being eligible to register its securities on Form S-3 at the time any such registration is otherwise required hereunder; provided, however, that if the -------- ------- Company ceases to be eligible to register its securities on Form S-3 at any time during which any Holder would otherwise be entitled to sell Registrable Securities pursuant to a registration in accordance with the terms of this Agreement, the Company shall use its commercially reasonable efforts to become eligible to register its securities on Form S-3 as soon as practicable. (iv) At any time that the Company is obligated under this Agreement to permit the Holders to sell Registrable Securities pursuant to a registration statement on Form S-3, the Company may, instead of maintaining an effective registration statement on Form S-3 for the benefit of the Holders, include such Registrable Securities in a registration effected for the benefit of the Company and/or other selling stockholders. (c) Registration Procedures. In connection with any registration statement ----------------------- made pursuant to Section 4(b)(iv), the Company shall take the actions set forth below. (i) Prior to filing any registration statement, prospectus, amendment or supplement with the Commission in connection with any registration hereunder, the Company shall furnish to one counsel selected by the Holders of a majority of the Registrable Securities copies of such documents. (ii) The Company shall notify each Holder of any stop order issued or threatened by the Commission and will take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. -5- (iii) The Company shall comply with the provisions of the Securities Act with respect to the disposition of all securities covered by a registration statement filed pursuant to this Agreement with respect to the disposition of all Registrable Securities covered by such registration statement in accordance with the intended methods of disposition by the Holders as set forth in such registration statement. (iv) The Company shall furnish to each Holder and each underwriter, if any, of Registrable Securities covered by a registration statement filed pursuant to this Agreement such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto), and the prospectus included in such registration statement (including each preliminary prospectus), in conformity with the requirements of the Securities Act, and such other documents as a selling Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holder. (v) The Company shall use its best efforts to register or qualify the Registrable Securities under the securities or "blue sky" laws of each State of the United States of America as any of the Holders or underwriters, if any, of the Registrable Securities covered by a registration statement filed hereunder reasonably requests, and shall do any and all other acts and things which may be reasonably necessary or advisable to enable each selling Holder and each underwriter, if any, to consummate the disposition in such States of the Registrable Securities owned by such selling Holders; provided that the Company -------- shall not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subsection (v), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction. (vi) The Company shall immediately notify each Holder entitled to sell Registrable Securities during a Permitted Window of the happening of any event which comes to the Company's attention if, as a result of such event, the prospectus included in the registration statement filed under this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Company shall promptly prepare and furnish to each Holder and file with the Commission a supplement or amendment to such prospectus so that such prospectus will no longer contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (vii) The Company shall take all such other reasonable and customary actions as each Holder may reasonably request in order to expedite or facilitate the disposition of the Registrable Securities in accordance with the terms of this Agreement. (viii) The Company shall make available for inspection by the Holders, any underwriter participating in any disposition pursuant to a registration statement filed under this Agreement, and any attorney, accountant or other agent retained by such Holders or underwriters, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, as -6- such person may reasonably request for the purpose of confirming that such registration statement does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided that the Company obtains reasonably satisfactory assurances that such information will be used solely for such purpose and will be held in confidence (except to the extent that it is included in the registration statement). The Company shall cause the officers, directors and employees of the Company and each of its subsidiaries to supply such information and respond to such inquiries as any Holder or underwriter may reasonably request or make for the purpose of confirming that such registration statement does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided that the Company obtains reasonably satisfactory assurances that such information will be used solely for such purpose and will be held in confidence (except to the extent that it is included in the registration statement). (ix) The Company shall otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as reasonably practicable, an earnings statement covering a period (which may begin with the first fiscal quarter ending after the effective date of the registration statement) of at least twelve months after the effective date of the registration statement (as the term "effective date" is defined in Rule 158(c) under the Securities Act), which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder. 5. Company Registration. -------------------- (a) Notice of Registration. If at any time or from time to time, the ---------------------- Company shall determine to register any of its securities for its own account (including, without limitation, all registrations in which other selling shareholders are permitted to participate), other than (i) in connection with the Company's registration on Form S-4, (ii) a registration relating solely to employee benefit plans, or (iii) a registration relating solely to a Commission Rule 145 transaction, (the "Company Registration") the Company will: (A) promptly give to each Holder written notice thereof; and (B) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, the Registrable Securities specified in a written request or requests, made within 20 days after receipt of such written notice from the Company, by any Holder; provided however, that, if the Company is advised by the managing ---------------- underwriters of the offering that market conditions so require the Company may in its sole discretion reduce the number of Registrable Securities of the Holders permitted to be registered to the pro rata portion of the Registrable Securities held by each Holder who gives proper written request. (b) Underwriting. If the registration of which the Company gives ------------ notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders. In -7- such event the right of any Holder to registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. If any Holder, or other holder disapproves of the terms of any such underwriting, he may elect to withdraw therefrom by written notice to the Company and the managing underwriter. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration, and shall not be transferred in a public distribution prior to 90 days after the effective date of the registration statement relating thereto, or such other shorter period of time as the underwriters may require. (c) Right to Terminate Registration. The Company shall have the right ------------------------------- to terminate or withdraw any registration initiated by it prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. 6. Expenses of Registration. All Registration Expenses incurred in connection ------------------------ with the Company's obligations hereunder shall be borne by the Company. All Selling Expenses relating to securities proposed to be registered hereunder and all other registration expenses shall be borne by the Holders of such securities pro rata on the basis of the number of shares proposed to be sold by each of them during the applicable Permitted Window; provided however that if the ---------------- Company pays the Selling Expenses or Registration Expenses of other Investors of the Company in any registration in which the Holders participate, then the Company shall pay the Selling Expenses and Registration Expenses of Holders to the same extent and in pro rata proportion to the Selling Expenses and Registration Expenses paid by the Company with respect to the other Investors. 7. Indemnification. --------------- (a) The Company will indemnify each Holder, each of its officers and directors and partners, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration has been effected pursuant to this Agreement, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act, the Exchange Act, state securities law or any rule or regulation promulgated under the such laws applicable to the Company in connection with any such registration, and the Company will reimburse each such Holder, each of its officers, directors and partners, and each person controlling such Holder, for any legal and any other expenses reasonably incurred, as such expenses are incurred; in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company that the Company will not be liable in any -------- ---- case to the extent that -8- any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder or controlling person, and stated to be specifically for use therein; and provided further, that the ---------------- foregoing indemnity Agreement is subject to the condition that, insofar as it relates to any such untrue statement, alleged untrue statement, omission or alleged omission made in a preliminary prospectus, such indemnity agreement shall not inure to the benefit of any person, if a copy of the final prospectus or an amended or supplemented prospectus, as applicable, was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act, and if the final prospectus or the amended or supplemented prospectus, as applicable, would have cured the defect giving rise to the loss, liability, claim or damage. In no event, however, shall the Company have any indemnification obligation to the extent that the expenses, claims, losses, damages or liabilities as to which indemnification is sought are in connection with an offer or sale made by a person other than the Company in violation of the terms of this Agreement (a "Violation"). (b) Each Holder will, if Registrable Securities held by such Holder are included in the securities as to which a registration hereunder is effected, indemnify the Company, each of its directors and officers, each person who controls the Company within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers and directors and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on (i) a Violation by such Holder or (ii) any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such Holders, such directors, officers or control persons for any legal or any other expenses reasonably incurred, as such expenses are incurred, in connection with investigating or defending any such claim, loss, damage, liability or action, but, in the case of clause (ii) above, only to the extent that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with information furnished to the Company by such Holder. Notwithstanding the foregoing, the liability of each Holder under this subsection 7(b) shall be limited in an amount equal to the initial public offering price of the shares sold by such Holder, unless such liability arises out of or is based on a Violation or willful misconduct by such Holder. (c) Each party entitled to indemnification under this Section 7 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense, and provided further that the failure of any Indemnified Party to give notice as -9- provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement unless the failure to give such notice is materially prejudicial to an Indemnifying Party's ability to defend such action and provided further, that the Indemnifying Party shall not assume the defense for matters as to which there is a conflict of interest or there are separate and different defenses. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party (whose consent shall not be unreasonably withheld), consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. 8. Information by Holder. The Holder or Holders of Registrable Securities --------------------- included in any registration hereunder shall furnish to the Company such information regarding such Holder or Holders, the Registrable Securities held by them and the distribution proposed by such Holder or Holders as the Company may request in writing and as shall be required in connection with any registration referred to in this Agreement. 9. Rule 144 Reporting. With a view to making available the benefits of ------------------ certain rules and regulations of the Commission which may permit the sale of the Restricted Securities to the public without registration the Company agrees to use all reasonable efforts, at any time after the second anniversary of the Effective Date, to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act; (b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) So long as a Holder owns any Restricted Securities, to furnish to the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as the Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing the Holder to sell any such securities without registration. 10. Transfer of Registration Rights. The rights to cause the Company to ------------------------------- register securities granted to Holders under Section 4 may be assigned to a transferee or assignee reasonably acceptable to the Company in connection with any transfer or assignment of Registrable Securities by the Holder, provided that (i) such transfer is otherwise effected in accordance with applicable securities laws and the terms of this Agreement, (ii) such assignee or transferee acquires at least 100,000 shares of Registrable Securities (as adjusted for stock splits, stock dividends, stock combinations and the like), (iii) written notice is promptly given to the Company and (iv) such transferee agrees to be bound by the provisions of this Agreement. Notwithstanding the foregoing, the rights to cause the Company to register securities may be assigned without compliance with item (ii) above to (x) any -10- constituent equity holder of a Holder which is a partnership, limited liability company, or a corporation or (y) a family member or trust for the benefit of a Holder who is an individual, or a trust for the benefit of a family member of such a Holder. 11. Amendment. Except as otherwise provided above, any provision of this --------- Agreement may be amended or the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and each of the Holders. 12. Governing Law. This Agreement shall be governed in all respects by the ------------- laws of the State of California, without regard to conflict of laws provisions. 13. Entire Agreement. This Agreement constitutes the full and entire ---------------- understanding and Agreement among the parties regarding the matters set forth herein. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon the successors, assigns, heirs, executors and administrators of the parties hereto. 14. Notices, etc. All notices and other communications required or permitted ------------ hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by facsimile transmission, by hand or by messenger, addressed: (a) if to a Holder, at such Holder's address as set forth below such Holder's signature on this Agreement, or at such other address as such Holder shall have furnished to the Company. (b) if to the Company, to: The Santa Cruz Operation, Inc. 425 Encinal Street Santa Cruz, CA 96061 Fax: (831) 427-5474 Attn: Law & Corporate Affairs or at such other address as the Company shall have furnished to the Holders. Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally or by facsimile transmission, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid. 15. Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be an original, but all of which together shall constitute one instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first -11- written above. "THE COMPANY" The Santa Cruz Operation, Inc., a California corporation By:________________________________ Title:_____________________________ "THE INVESTOR" By:________________________________ Title:_____________________________ Address:___________________________ ___________________________ -12- -----END PRIVACY-ENHANCED MESSAGE-----