EXHIBIT 10.3

 

CONFIDENTIAL STOCK OPTION GRANT INFORMATION

 

Congratulations!  The Compensation Committee of the Board of Directors of The
SCO Group has approved the grant of an option for you to purchase 1,000 shares
of The SCO Group at a purchase price of $4.85 (USD).

 

Following this letter is your Notice of Grant for the stock option granted to
you. Please review the following Notice of Grant as well as the attached Stock
Option Agreement carefully. Your Notice of Grant reflects the details about your
option granted to purchase SCO stock for this particular grant.  This notice
states the grant date, the number of shares granted, the option price, the
vesting schedule, and the expiration date.  You have thirty (30) days from
receipt of this letter to notify SCO of any issues regarding the terms and
conditions of your Grant; otherwise you are deemed to agree with them by the
eventual exercise of your options.

 

To deliver this legal document to you as quickly as possible, we are
distributing your Notice of Grant electronically.  Please print this message and
the other attached documents for your records. 

 

You will be receiving an e-mail from E*TRADE in the near future, which will
inform you of your User ID and Password, as well as general information about
E*TRADE’s services.  You will have an account automatically set up for you on
E*TRADE’s Optionslink at www.optionslink.com and a brokerage account with
E*TRADE at www.etrade.com.   The Optionslink account is for SCO transactions
only, while the brokerage account may be used for any other market transactions.

 

These options are granted under and governed by the terms of The SCO Group 1998
Stock Option Plan as well as the Stock Option Agreement (incorporated into this
form). These documents are available for your reference on the SCO intranet.

 

If you have further questions about specific details of your Notice of Grant,
you may contact me.

 

 

Sincerely,

Compensation Manager

 

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*If you are unable to view a legible copy of this document due to system
constraints, a hard copy of your Notice of Grant is available upon request.

 

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Notice of Grant of Stock Options

355 S 520 W Suite 100, Lindon, Utah 84042

 

 

 

 

 

 

Option Number:  002157

 

Plan:  1998

 

 

 

ID:  400999

Riverton, UT 84065 United States

 

 

 

 

 

Notice is hereby given of the following option grant (the “Option”) to purchase
shares of the Common Stock of The SCO Group (the “Corporation”):

 

Optionee:

 

Grant Date: December 8, 2004

 

Exercise Price: $4.85 per share (USD)

 

Number of Option Shares: 1,000 shares

 

Type of Option:  Non-Qualified Option

 

Total Option Price: $4,850.00   (USD)

 

V E S T I N G

 

Vesting Commencement Date:

 

October 1, 2004

 

Expiration Date:

 

December 7, 2014 or upon earlier termination of the Option.

 

Date Exercisable:

 

October 1, 2005 (Date on which the Option Shares first become vested.)

 

 

Vesting Schedule:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

Vest Type

 

Full Vest

 

Expiration

 

250

 

On Vest Date

 

October 1, 2005

 

December 7, 2014

 

750

 

Monthly

 

October 1, 2008

 

December 7, 2014

 

 

Vesting Schedule:  The Option Shares shall be unvested.  Optionee shall acquire
a vested interest with respect to (i) twenty-five (25%) of the Option Shares
upon Optionee’s completion of one (1) year of Service measured from the Vesting
Commencement Date and (ii) the balance of the Option Shares in equal successive
monthly installments upon Optionee’s completion of each of the next thirty-six
(36) months of Service measured from the Vesting Commencement Date.  In no event
shall any additional Option Shares vest after Optionee’s cessation of Service.

 

Optionee understands and agrees that the Option is granted subject to and in
accordance with the terms of THE SCO GROUP 1998 STOCK OPTION PLAN*, (the
“Plan”).  Optionee further agrees to be bound by the terms of the Plan and the
terms of the Option as set forth in the Stock Option Agreement*.  Optionee
understands that any Option Shares purchased under the Option will be subject to
the terms set forth in the Stock Purchase Agreement, whether said options are
purchased electronically or in person*.

 

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*Documents available on The SCO Group Intranet.

 

No Employment or Service Contract.  Nothing in this Notice or in the Plan shall
confer upon Optionee any right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining Optionee) or of
Optionee, which rights are hereby expressly reserved by each, to terminate
Optionee’s Service at any time for any reason, with or without cause.

 

Definitions.  All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the Stock Option Agreement.

 

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THE SCO GROUP

 

STOCK OPTION AGREEMENT

 

RECITALS

 

The Board has adopted the Plan for the purpose of retaining the services of
selected Employees, non-employee members of the Board or the board of directors
of any Parent or Subsidiary and consultants who provide services to the
Corporation (or any Parent or Subsidiary).

 

A.                                    Optionee is to render valuable services to
the Corporation (or a Parent or Subsidiary), and this Agreement is executed
pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Corporation’s grant of an option to Optionee.

 

B.                                    All capitalized terms in this Agreement
shall have the meaning assigned to them in the attached Appendix or the Plan.

 

NOW, THEREFORE, it is hereby agreed as follows:

 

1.                                      Grant of Option.  The Corporation hereby
grants to Optionee, as of the Grant Date, an option to purchase up to the number
of Option Shares specified in the Grant Notice.  The Option Shares shall be
purchasable from time to time during the option term specified in Paragraph 2
below at the Exercise Price.

 

2.                                      Option Term.  This option shall have a
term of ten (10) years measured from the Grant Date and shall accordingly expire
at the close of business on the Expiration Date, unless sooner terminated in
accordance with Paragraph 5 or 6 below.

 

3.                                      Limited Transferability.  This option
shall be neither transferable nor assignable by Optionee other than by will or
by the laws of descent and distribution following Optionee’s death and may be
exercised, during Optionee’s lifetime, only by Optionee.  Notwithstanding the
foregoing, this option may be assigned in accordance with the terms of a
Domestic Relations Order.  If so assigned, the assigned option shall be
exercisable only by the person or persons who acquire a proprietary interest in
the option pursuant to such Domestic Relations Order.  The terms applicable to
the assigned option (or portion thereof) shall be the same as those in effect
for this option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Plan Administrator may deem
appropriate.

 

4.                                      Dates of Exercise.  This option shall
become exercisable for the Option Shares in one or more installments as
specified in the Grant Notice.  As the option becomes exercisable for such
installments, those installments shall accumulate and the option shall remain
exercisable for the accumulated installments until the Expiration Date or sooner
termination of the option term under Paragraph 5 or 6.

 

5.                                      Cessation of Service.  The option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date should any of the following provisions
become applicable:

 

(a)                                  Should Optionee cease to remain in Service
for any reason (other than Cause, Disability or death) while this option is
outstanding, then Optionee shall have the right to exercise this option for a
period of three (3) months following the date of such cessation of Service.

 

(b)                                 Should Optionee cease to remain in Service
for Cause, then the optionee shall have the right to exercise this option for a
period of thirty (30) days of such cessation of Service.

 

(c)                                  Should Optionee die while this option is
outstanding, then the personal representative of Optionee’s estate or the person
or persons to whom the option is transferred pursuant to Optionee’s will or in
accordance with the laws of descent and distribution shall have the right to
exercise this option for a period of twelve (12) months following the date of
Optionee’s death.

 

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(d)                                 Should Optionee cease Service by reason of
Disability while this option is outstanding, then Optionee shall have the right
to exercise this option for a period of twelve (12) months following the date of
such cessation of Service.

 

(e)                                  During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more than
the number of vested Option Shares for which the option is exercisable at the
time of Optionee’s cessation of Service.  This option shall terminate and cease
to be outstanding for any vested shares for which this option has not been
exercised upon the earlier of the following:  (i) expiration of the applicable
post-Service exercise period, (ii) upon the termination of the option as a
result of a Corporate Transaction, or (iii) upon the expiration of the option
term.  To the extent Optionee is not vested in the Option Shares at the time of
Optionee’s cessation of Service, this option shall immediately terminate and
cease to be outstanding with respect to those shares.  Notwithstanding anything
to the contrary contained in this Agreement, in no event shall this option be
exercisable at any time after the Expiration Date.

 

6.                                      Special Termination of Option. 

 

(a)                                  In the event of a Corporate Transaction,
this option shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation or parent thereof in connection with such
Corporate Transaction.

 

(b)                                 If this option is assumed in connection with
a Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such
Corporate Transaction, and appropriate adjustments shall also be made to the
Exercise Price, provided the aggregate Exercise Price shall remain the same.

 

(c)                                  This Agreement shall not in any way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure assets.

 

7.                                      Adjustment in Option Shares.  Should any
change be made to the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation’s
receipt of consideration, appropriate adjustments shall be made to (i) the total
number and/or class of securities subject to this option and (ii) the Exercise
Price in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder.

 

8.                                      Shareholder Rights.  The holder of this
option shall not have any shareholder rights with respect to the Option Shares
until such person shall have exercised the option, paid the Exercise Price and
become a holder of record of the purchased shares.

 

9.                                      Manner of Exercising Option.

 

(a)                                  In order to exercise this option with
respect to all or any part of the Option Shares for which this option is at the
time exercisable, Optionee (or any other person or persons exercising the
option) must take the following actions:

 

(i)                                     Execute and deliver to the Corporation a
Purchase Agreement for the Option Shares for which the option is exercised.

 

(ii)                                  Pay the aggregate Exercise Price for the
purchased shares in cash or check made payable to the Corporation.

 

(iii)                               Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other than
Optionee) have the right to exercise this option.

 

(iv)                              Execute and deliver to the Corporation such
written representations as may be requested by the Corporation in order for it
to comply with the applicable requirements of Federal and state securities laws.

 

(v)                                 Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all Federal, state and local income and employment tax
withholding requirements applicable to the option exercise.

 

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(b)                                 As soon as practical after the Exercise
Date, the Corporation shall issue to or on behalf of Optionee (or any other
person or persons exercising this option) a certificate for the purchased Option
Shares, with the appropriate legends affixed thereto.

 

(c)                                  In no event may this option be exercised
for any fractional shares.

 

(d)                                 In the alternative, Optionee may exercise
this option with respect to all or any part of the Options Shares for which this
option is at the time exercisable electronically by utilizing E*TRADE’s
Optionslink.  All funds to be paid for the exercise or funds to be received
after the sale of such shares will be transacted between the Optionee and
E*TRADE.

 

10.                               REPURCHASE RIGHTS.  ALL OPTION SHARES ACQUIRED
UPON THE EXERCISE OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE
CORPORATION AND ITS ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE
TERMS SPECIFIED IN THE PURCHASE AGREEMENT.

 

11.                               Compliance with Laws and Regulations.

 

(a)                                  The exercise of this option and the
issuance of the Option Shares upon such exercise shall be subject to compliance
by the Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.

 

(b)                                 The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation to
be necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained.  The Corporation, however, shall use its best efforts to
obtain all such approvals.

 

12.                               Successors and Assigns.  Except to the extent
otherwise provided in Paragraphs 3 and 6, the provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and Optionee, Optionee’s assigns and the legal representatives,
heirs and legatees of Optionee’s estate.

 

13.                               Notices.  Any notice required to be given or
delivered to the Corporation under the terms of this Agreement shall be in
writing and addressed to the Corporation at its Principal corporate offices. 
Any notice required to be given or delivered to Optionee shall be in writing and
addressed to Optionee at the address indicated below Optionee’s signature line
on the Grant Notice.  All notices shall be deemed effective upon personal
delivery or upon deposit in the U. S. mail, postage prepaid and properly
addressed to the party to be notified.

 

14.                               Construction.  This Agreement and the option
evidenced hereby are made and granted pursuant to the Plan and are in all
respects limited by and subject to the terms of the Plan.  All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.

 

15.                               Governing Law.  The interpretation,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Utah without resort to that State’s conflict-of-laws
rules.                                                                                                                                                                                                                                                                                       

 

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APPENDIX

 

The following definitions shall be in effect under the Agreement:

 

A.                                   Agreement shall mean this Stock Option
Agreement.

 

B.                                     Board shall mean the Corporation’s Board
of Directors.

 

C.                                     Cause shall mean any of the following: 
(i) Optionee’s material breach of any employee, confidentiality, or other
employment related agreement with the Corporation, (ii) Optionee’s violation of
the Corporation’s policies or procedures set forth in the Corporation’s Policies
and Procedure Manual, as amended from time to time, or (iii) Optionee’s
conviction of or entrance of a plea of nolo contendere to a felony or to any
other crime punishable by incarceration.

 

D.                                    Code shall mean the Internal Revenue Code
of 1986, as amended.

 

E.                                      Committee shall mean a committee of two
(2) or more Board members appointed by the Board to exercise one or more
administrative functions under the Plan.

 

F.                                      Common Stock shall mean the
Corporation’s common stock.

 

G.                                     Corporate Transaction shall mean either
of the following shareholder-approved transactions to which the Corporation is a
party:

 

(i)                                     a merger or consolidation in which
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation’s outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately prior to
such transaction, or

 

(ii)                                  the sale, transfer or other disposition of
all or substantially all of the Corporation’s assets, or the complete
liquidation or dissolution of the Corporation.

 

H.                                    Corporation shall mean The SCO Group, a
Delaware corporation.

 

I.                                         Disability shall mean the inability
of Optionee to engage in the performance of his duties as an Employee for a
period exceeding three (3) months by reason of any medically determinable
physical or mental impairment and shall be determined by the Plan Administrator
on the basis of such medical evidence as the Plan Administrator deems warranted
under the circumstances

 

J.                                        Domestic Relations Order shall mean
any judgment, decree or order (including approval of a property settlement
agreement) which provides or otherwise conveys, pursuant to applicable State
domestic relations laws (including community property laws), marital property
rights to any spouse or former spouse of Optionee.

 

K.                                    Employee shall mean an individual who is
in the employ of the Corporation (or any Parent or Subsidiary), subject to the
control and direction of the employer entity as to both the work to be performed
and the manner and method of performance.

 

L.                                      Exercise Date shall mean the date on
which the option shall have been exercised in accordance with Paragraph 9 of the
Agreement.

 

M.                                 Exercise Price shall mean the exercise price
per share as specified in the Grant Notice.

 

N.                                    Expiration Date shall mean the date on
which the option expires as specified in the Grant Notice.

 

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O.                                    Fair Market Value per share of Common
Stock on any relevant date shall be determined in accordance with the following
provisions:

 

(i)                                     If the Common Stock is at the time
traded on the NASDAQ National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question, as the
price is reported by the National Association of Securities Dealers on the
NASDAQ National Market or any successor system.  If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which such
quotation exists.

 

(ii)                                  If the Common Stock is at the time listed
on any Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of transactions
on such exchange.  If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.

 

(iii)                               If the Common Stock is at the time neither
listed on any Stock Exchange nor traded on the NASDAQ National Market, then the
Fair Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem appropriate.

 

P.                                      Grant Date shall mean the date of grant
of the option as specified in the Grant Notice.

 

Q.                                    Grant Notice shall mean the Notice of
Grant of Stock Option accompanying the Agreement, pursuant to which Optionee has
been informed of the basic terms of the option evidenced hereby.

 

R.                                     1934 Act shall mean the Securities
Exchange Act of 1934, as amended.

 

S.                                      Non-Qualified Stock Option shall mean an
option not intended to satisfy the requirements of IRS Code Section 422.

 

T.                                     Option Shares shall mean the number of
shares of Common Stock subject to the option.

 

U.                                    Optionee shall mean the person to whom the
option is granted as specified in the Grant Notice.

 

V.                                     Parent shall mean any corporation (other
than the Corporation) in an unbroken chain of corporations ending with the
Corporation, provided each corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

 

W.                                Plan shall mean the Corporation’s 1998 Stock
Option Plan.

 

X.                                    Plan Administrator shall mean either the
Board or a committee of Board members, to the extent the committee is at the
time responsible for the administration of the Plan.

 

Y.                                     Service shall mean the provision of
services to the Corporation (or any Parent or Subsidiary) by a person in the
capacity of an Employee, a non-employee member of the board of directors or a
consultant.

 

Z.                                     Stock Exchange shall mean NASDAQ.

 

AA.                         Subsidiary shall mean any corporation (other than
the Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

 

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