EXHIBIT 10.34

 

THE SCO GROUP, INC

 

2004 OMNIBUS STOCK INCENTIVE PLAN

 

1.                                       Establishment and Purpose.

 

There is hereby adopted the SCO Group, Inc. 2004 Omnibus Stock Incentive Plan
(the “Plan”).  The Plan shall be in addition to (but except as provided in
Section 3(a) below shall not supplant or be construed to amend or terminate) The
SCO Group, Inc. 2002 Omnibus Stock Incentive Plan and the 1999 Omnibus Stock
Incentive Plan.  The Plan is intended to promote the interests of the Company
and the stockholders of the Company by providing officers, other employees of
the Company, directors who are not employees of the Company, consultants and
other persons who are expected to make a long-term contribution to the success
of the Company with appropriate incentives and rewards to encourage them to
enter into and continue in the employ of the Company and/or to acquire a
proprietary interest in the long-term success of the Company, thereby aligning
their interest more closely to the interest of stockholders.

 

2.                                       Definitions.

 

As used in the Plan, the following definitions apply to the terms indicated
below:

 

(a)                                  “Award Agreement” shall mean the written
agreement between the Company and a Participant evidencing an Incentive Award.

 

(b)                                 “Board of Directors” shall mean the Board of
Directors of the Company.

 

(c)                                  “Cause,” when used in connection with the
termination of a Participant’s employment by the Company, shall mean (i) the
willful and continued failure by the Participant substantially to perform his
duties and obligations to the Company (other than any such failure resulting
from his incapacity due to physical or mental illness) or (ii) the willful
engaging by the Participant in misconduct that is materially injurious to the
Company.  For purposes of this Section 2(c), no act, or failure to act, on a
Participant’s part shall be considered “willful” unless done, or omitted to be
done, by the Participant in bad faith and without reasonable belief that his
action or omission was in the best interest of the Company.  The Committee shall
determine whether a termination of employment is for Cause.

 

(d)                                 “Change in Control” shall mean any of the
following occurrences:

 

(i)                                     any “person,” as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company’s then outstanding securities;

 

(ii)                                  during any period of not more than two
consecutive years (not including any period prior to the adoption of the Plan),
individuals who at the beginning of such period constitute the Board of
Directors and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in clause (i), (iii) or (iv) of this Section 2(d)) whose election by the Board
of Directors or nomination for election was approved by a vote of at least
two-thirds

 

--------------------------------------------------------------------------------

 

(2/3) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof;

 

(iii)                               the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than
(A) a merger or consolidation that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
“person” (as herein above defined) acquires more than 50% of the combined voting
power of the Company’s then outstanding securities; or

 

(iv)                              the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company’s assets.

 

(e)                                  “Code” shall mean the Internal Revenue Code
of 1986, as amended from time to time.

 

(f)                                    “Committee” shall mean the Compensation
Committee of the Board of Directors.  The Committee shall consist of three or
more persons each of whom is an “outside director” within the meaning of Section
162(m) of the Code and a “Non-Employee Director” within the meaning of Rule
16b-3 under the Exchange Act (or who satisfies any other criteria for
administering employee benefit plans as may be specified by the Securities and
Exchange Commission in order for transactions under such plan to be exempt from
the provisions of Section 16(b) of the Exchange Act), and an “Independent
Director” under applicable NASD rules.

 

(g)                                 “Company” shall mean The SCO Group, Inc., a
Delaware corporation.

 

(h)                                 “Common Stock” shall mean the common stock
of the Company, $0.001 par value per share.

 

(i)                                     “Disability” shall mean: (i) any
physical or mental condition that would qualify a Participant for a disability
benefit under the long-term disability plan maintained by the Company or a
Subsidiary of the Company and applicable to such Participant; or (ii) when used
in connection with the exercise of an Incentive Stock Option following
termination of employment, disability within the meaning of Section 22(e)(3) of
the Code.

 

(j)                                     “Effective Date” shall mean the date
upon which this Plan is adopted by the Board of Directors.

 

(k)                                  “Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended from time to time.

 

(l)                                     “Executive Officer” shall have the
meaning set forth in Rule 3b-7 promulgated under the Exchange Act.

 

(m)                               “Exercise Date” shall mean the date on which a
Participant may exercise an Incentive Award.

 

(n)                                 “Fair Market Value” of a share of Common
Stock, as of a date of determination, shall mean (i) the closing sales price per
share of Common Stock on the national securities exchange on which such stock is
principally traded for the last preceding date on which there was a sale

 

2

--------------------------------------------------------------------------------

 

of such stock on such exchange, or (ii) if the shares of Common Stock are not
listed or admitted to trading on any such exchange, the closing price as
reported by the Nasdaq Stock Market for the last preceding date on which there
was a sale of such stock on such exchange, or (iii) if the shares of Common
Stock are not then listed on the Nasdaq Stock Market, the average of the highest
reported bid and lowest reported asked prices for the shares of Common Stock as
reported by the National Association of Securities Dealers, Inc. Automated
Quotations System for the last preceding date on which there was a sale of such
stock in such market, or (iv) if the shares of Common Stock are not then listed
on a national securities exchange or traded in an over-the-counter market, such
value as determined by the Committee in good faith.

 

(o)                                 “Incentive Award” shall mean an Option,
Tandem SAR, Stand-Alone SAR, Restricted Stock grant, Restricted Stock Unit
grant, Phantom Stock grant or Stock Bonus granted pursuant to the terms of the
Plan.

 

(p)                                 “Incentive Stock Option” shall mean an
Option that is an “incentive stock option” within the meaning of Section 422 of
the Code.

 

(q)                                 “Issue Date” shall mean the date established
by the Company on which certificates representing shares of Restricted Stock
shall be issued by the Company pursuant to the terms of Section 10(e) of the
Plan.

 

(r)                                    “Non-Qualified Stock Option” shall mean
an Option that is not an Incentive Stock Option.

 

(s)                                  “Option” shall mean an option to purchase
shares of Common Stock granted pursuant to Section 7 of the Plan.

 

(t)                                    “Participant” means any person who is
both eligible to receive an Incentive Award pursuant to the Plan (as set forth
in Section 5 of the Plan) and to whom an Incentive Award is granted pursuant to
the Plan, and, upon his or her death, his or her successors, heirs, executors
and administrators, as the case may be.

 

(u)                                 “Phantom Stock” shall mean the right,
granted pursuant to Section 11 of the Plan, to receive in cash the Fair Market
Value of a share of Common Stock.

 

(v)                                 “Plan” shall mean this 2004 Omnibus Stock
Incentive Plan, as amended from time to time.

 

(w)                               “Reference Value” shall mean, with respect to
Stand-Alone SARs, the greater of the Fair Market Value or the value given by the
Compensation Committee on the date of grant.

 

(x)                                   “Restricted Stock” shall mean a share of
Common Stock that is granted pursuant to the terms of Section 10 of the Plan and
that is subject to the restrictions set forth in Section 10 of the Plan.

 

(y)                                 “Restricted Stock Unit” shall mean any unit
granted under Section 10 of the Plan evidencing the right to receive a share of
Common Stock (or a cash payment equal to the Fair Market Value of a share of
Common Stock) at some future date.

 

(z)                                   “Rule 16b-3” shall mean Rule 16b-3
promulgated under the Exchange Act.

 

(aa)                            “Section 162(m)” shall mean Section 162(m) of
the Code and the regulations promulgated thereunder.

 

(ab)                           “Securities Act” shall mean the Securities Act of
1933, as amended from time to time.

 

3

--------------------------------------------------------------------------------

 

(ac)                            “Stand-Alone SAR” shall mean a stock
appreciation right granted pursuant to Section 9 of the Plan that is not related
to any Option.

 

(ad)                           “Stock Bonus” shall mean a bonus payable in
shares of Common Stock granted pursuant to Section 12 of the Plan.

 

(ae)                            “Subsidiary” shall mean a “subsidiary
corporation” within the meaning of Section 424(f) of the Code.

 

(af)                              “Tandem SAR” shall mean a stock appreciation
right granted pursuant to Section 8 of the Plan that is related to an Option.

 

(ag)                           “Termination of employment,” or words of similar
import, in the Plan shall be deemed, (i) when applied to non-employee directors,
to mean “termination of service as a director,” and (ii) when applied to
employees, including employee-directors, to mean “termination of service as an
employee and, if applicable, as a director.”    Reference to “termination of
employment,” or words of similar import, in the Plan shall not be deemed to
apply to persons who were not employees or a director of the Company or a
Subsidiary of the Company.

 

(ah)                           “Vesting Date” shall mean the date established by
the Committee on which an Incentive Award may vest.

 

3.                                       Stock Subject to the Plan.

 

(a)                                  Shares Available for Awards.

 

The maximum number of shares of Common Stock reserved for issuance under the
Plan shall be 1,500,000 shares (subject to adjustment as provided under Section
3(c) of the Plan).  The total number of shares reserved for issuance hereunder
may be authorized but unissued Common Stock or authorized and issued Common
Stock held in the Company’s treasury or acquired by the Company for the purposes
of the Plan.  The Committee may direct that any stock certificate evidencing
shares of Common Stock issued pursuant to the Plan shall bear a legend setting
forth such restrictions on transferability as may apply to such shares pursuant
to the Plan.  The grant of a Tandem SAR shall not reduce the number of shares of
Common Stock with respect to which Incentive Awards may be granted pursuant to
the Plan.  Upon the exercise of any Tandem SAR, the related Option shall be
canceled to the extent of the number of shares of Common Stock as to which the
Tandem SAR is exercised and, notwithstanding the foregoing, such number of
shares shall no longer be available for Incentive Awards under the Plan. 
Subject to adjustment under Section 3(c) of the Plan, the maximum number of
shares of Common Stock that may be issued under the Plan shall be increased as
of November 1 each year, beginning November 1, 2005, by three percent (3%) of
the total number of shares of Common Stock that are issued and outstanding on
the immediately preceding October 31st.  Any provision herein to the contrary
notwithstanding, the maximum number of shares of Common Stock that may issued
pursuant to Incentive Stock Options granted hereunder shall not exceed
1,500,000, subject to adjustment under Section 3(c) of the Plan.

 

4

--------------------------------------------------------------------------------

 

(b)                                 Individual Limitation.

 

The total number of shares of Common Stock subject to Incentive Awards
(including Incentive Awards payable in cash but denominated as shares of Common
Stock, i.e., Stand-Alone SARs and Phantom Stock), awarded to any employee during
any tax year of the Company, shall not exceed 400,000 shares.  Determinations
under the preceding sentence shall be made in a manner that is consistent with
Section 162(m) of the Code.

 

(c)                                  Adjustment for Change in Capitalization.

 

In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Common Stock, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Common Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems necessary or appropriate to any or
all of (i) the number and kind of shares of stock that may thereafter be issued
in connection with Incentive Awards, (ii) the number and kind of shares of stock
issued or issuable in respect of outstanding Incentive Awards, and (iii) the
exercise price, grant price, or purchase price relating to any Incentive Award;
provided that, with respect to Incentive Stock Options, such adjustment shall be
made in accordance with Section 424 of the Code.

 

(d)                                 Re-Use of Shares.

 

The following shares of Common Stock shall again become available for Incentive
Awards:  any shares subject to an Incentive Award that remain unissued upon the
cancellation, surrender, exchange or termination of such award for any reason
whatsoever; any shares of Restricted Stock forfeited; any shares in respect of
which a stock appreciation right is settled for cash; any shares tendered to the
Company to pay the exercise price of any Options; and any shares tendered to the
Company for the payment of taxes; provided, however, any shares acquired by the
Company pursuant to the immediately preceding clause shall not apply to
Incentive Stock Options.

 

4.                                       Administration of the Plan.

 

The Plan shall be administered by the Committee.  The Committee shall have the
authority in its sole discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Incentive Awards; to determine the persons to
whom and the time or times at which Incentive Awards shall be granted; to
determine the type and number of Incentive Awards to be granted, the number of
shares of Common Stock to which an Award may relate and the terms, conditions,
restrictions and performance criteria relating to any Incentive Award; to
determine whether, to what extent, and under what circumstances an Incentive
Award may be settled, canceled, forfeited, exchanged, or surrendered; to subject
shares of Common Stock to which an Award may relate to rights of repurchase or
rights of refusal in favor of the Company under the circumstances and upon the
terms set forth in an Award Agreement; to make adjustments in the performance
goals in recognition of unusual or non-recurring events affecting the Company or
the financial statements of the Company (to the extent in accordance with
Section 162(m)of the Code, if applicable), or in response to changes in
applicable laws, regulations, or accounting principles; to construe and
interpret the Plan and any Incentive Award; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of Award Agreements; and to make all other determinations deemed
necessary or advisable for the administration of the Plan.

 

5

--------------------------------------------------------------------------------

 

The Committee may, in its absolute discretion, without amendment to the Plan,
(i) accelerate the date on which any Tandem SAR, Stand-Alone SAR, Option or
shares of Phantom Stock granted under the Plan becomes exercisable, waive or
amend the operation of Plan provisions respecting exercise after termination of
employment or otherwise adjust any of the terms of such Tandem SAR, Stand-Alone
SAR, Option or shares of Phantom Stock, and (ii) accelerate the Vesting Date or
Issue Date, or waive any condition imposed hereunder, with respect to any share
of Restricted Stock, Restricted Stock Unit or Phantom Stock or otherwise adjust
any of the terms applicable to such share.

 

No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, if, in either case, such action, omission or
determination was taken or made by such member, director or employee in good
faith and in a manner such member, director or employee reasonably believed to
be in or not opposed to the best interests of the Company.

 

5.                                       Eligibility.

 

The persons who shall be eligible to receive Incentive Awards pursuant to the
Plan shall be all employees and directors of the Company and its Subsidiaries,
consultants and such other persons whom the Committee determines are expected to
make a contribution to the Company; provided, however, that no Incentive Awards
shall be granted to any “officers” or “directors” of the Company or its
Subsidiaries (within the meaning of the rules of Nasdaq Stock Market or any
other securities exchange on which Company shares are traded) unless and until
the stockholders of the Company formally approve the Plan at a duly called
stockholders meeting.  Notwithstanding any other provision of the Plan to the
contrary, Incentive Stock Options may be granted only to employees of the
Company or its Subsidiaries.  Subject to the foregoing, the Committee may grant
Incentive Awards to any, all or none of such eligible persons at any time, from
time to time, during the term of the Plan.

 

6.                                       Awards Under the Plan; Award Agreement.

 

The Committee may grant Options, Tandem SARs, Stand-Alone SARs, shares of
Restricted Stock, Restricted Stock Units, shares of Phantom Stock and Stock
Bonuses, in such amounts and with such terms and conditions as the Committee
shall determine, subject to the provisions of the Plan.

 

Each Incentive Award granted under the Plan (except an unconditional Stock
Bonus) shall be evidenced by an Award Agreement that shall contain such
provisions as the Committee may in its sole discretion deem necessary or
desirable.  By accepting an Incentive Award, a Participant thereby agrees that
the award shall be subject to all of the terms and provisions of the Plan and
the applicable Award Agreement.

 

Notwithstanding the foregoing, unless modified or amended by the Compensation
Committee, upon the conclusion of each regular meeting of the Company’s
stockholders held in the year 2004 or thereafter, each non-employee director who
will continue to serve as a member of the Board of Directors thereafter, shall
automatically receive an Option to purchase 15,000 shares of Common Stock.  The
Options granted under this Section 6 shall become exercisable in full on the
first anniversary of the date of grant.  A non-employee director who was
previously an employee shall be eligible to receive grants of Options under this
Section 6.

 

6

--------------------------------------------------------------------------------

 

7.                                       Options.

 

(a)                                  Identification of Options.

 

Each Option shall be clearly identified in the applicable Award Agreement as
either an Incentive Stock Option or a Non-Qualified Stock Option.

 

(b)                                 Exercise Price.

 

Each Award Agreement with respect to an Option shall set forth the amount (the
“Option Exercise Price”) payable by the grantee to the Company upon exercise of
the Option.  The Option Exercise Price per share shall be set by the Committee
in its discretion on a case by case basis, but in the case of an Incentive Stock
Option shall not be less than the Fair Market Value of a share of Common Stock
on the date of grant.

 

(c)                                  Term and Exercise of Options.

 

(1)                                  Unless the applicable Award Agreement
provides otherwise, an Option shall become cumulatively exercisable as to 25% of
the shares covered thereby on the first anniversary of the date of grant and
vest 1/36th per month thereafter.  The Committee shall determine the expiration
date of each Option; provided, however, that no Incentive Stock Option shall be
exercisable more than 10 years after the date of grant.  Unless the applicable
Award Agreement provides otherwise, no Option shall be exercisable prior to the
first anniversary of the date of grant.

 

(2)                                  An Option shall be exercised by delivering
notice to the Company’s principal office, to the attention of its Secretary, no
less than one business day in advance of the effective date of the proposed
exercise.  An Option may also be exercised electronically by notifying the
Company’s agent, pursuant to the methods then in use by that agent.  Such notice
shall specify the number of shares of Common Stock with respect to which the
Option is being exercised and the effective date of the proposed exercise and
shall be signed by the Participant or other person then having the right to
exercise the Option.  Such notice may be withdrawn at any time prior to the
close of business on the business day immediately preceding the effective date
of the proposed exercise.  The Committee shall determine the time or times at
which an Option may be exercised in whole or in part and the method or methods
by which and the form or forms in which payment of the Option Exercise Price may
be made or deemed made, including, without limitation: (i) in cash, by certified
check, bank cashier’s check or wire transfer; (ii) by delivering a properly
executed exercise notice to the Company together with a copy of irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds to pay the full amount of the Option Exercise Price, (iii) by
delivering shares of Common Stock owned by the Participant for at lease six
months with appropriate stock powers; or (iv) any combination of the foregoing
forms.  In determining the number of shares of Common Stock necessary to be
delivered to or retained by the Company, such shares shall be valued at their
Fair Market Value as of the exercise date.

 

(3)                                  Certificates for shares of Common Stock
purchased upon the exercise of an Option shall be issued in the name of the
Participant or other person entitled to receive such shares, and delivered to
the Participant or such other person as soon as practicable following the
effective date on which the Option is exercised.  In the event of an exercise by
way of electronic means, no actual certificates need be issued.

 

7

--------------------------------------------------------------------------------

 

(d)                                 Limitations on Incentive Stock Options.

 

(1)                                  To the extent that the aggregate Fair
Market Value of shares of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a Participant during any calendar
year under the Plan and any other stock option plan of the Company (or any
Subsidiary of the Company) shall exceed $100,000, or such higher value as may be
permitted under Section 422 of the Code, such Options shall be treated as
Non-Qualified Stock Options.  Such Fair Market Value shall be determined as of
the date on which each such Incentive Stock Option is granted.

 

(2)                                  No Incentive Stock Option may be granted to
an individual if, at the time of the grant, such individual owns, taking into
account Section 424(d) of the Code, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company unless (i) the
exercise price per share of such Incentive Stock Option is at least 110% of the
Fair Market Value of a share of Common Stock at the time such Incentive Stock
Option is granted and (ii) such Incentive Stock Option is not exercisable after
the expiration of five years from the date such Incentive Stock Option is
granted.

 

(e)                                  Effect of Termination of Employment.

 

(1)                                  Unless the applicable Award Agreement
provides otherwise, in the event that the employment of a Participant with the
Company or a Subsidiary of the Company shall terminate for any reason other than
death, Disability or Cause, (i) Options granted to such Participant, to the
extent that they are exercisable at the time of such termination, shall remain
exercisable until the date that is three months (or 120 days in the case of a
Non-Qualified Stock Option) after such termination, on which date they shall
expire, and (ii) Options granted to such Participant, to the extent that they
were not exercisable at the time of such termination, shall expire at the close
of business on the date of such termination.  Notwithstanding the foregoing, no
Option shall be exercisable after the expiration of its term.

 

(2)                                  Unless the applicable Award Agreement
provides otherwise, in the event that the employment of a Participant with the
Company or a Subsidiary of the Company shall terminate on account of the
Disability or death of the Participant (i) Options granted to such Participant,
to the extent that they were exercisable at the time of such termination, shall
remain exercisable until the first anniversary of such termination, on which
date they shall expire, and (ii) Options granted to such Participant, to the
extent that they were not exercisable at the time of such termination, shall
expire at the close of business on the date of such termination. 
Notwithstanding the foregoing, no Option shall be exercisable after the
expiration of its term.

 

(3)                                  Unless an applicable Award Agreement
provides otherwise, if a Participant’s employment with the Company or a
Subsidiary of the Company is terminated for Cause, Options granted to the
Participant, to the extent they are then exercisable, shall remain exercisable
for 30 days following the date of termination of employment, on which date they
shall expire.  Notwithstanding the foregoing, no Option shall be exercisable
after expiration of its term.

 

(f)                                    Effect of Change in Control.

 

Upon the occurrence of a Change in Control, Options granted to a Participant, to
the extent that they were exercisable at the time of a Change in Control, shall
remain exercisable until their expiration notwithstanding the provisions of
Section 7(e) of

 

8

--------------------------------------------------------------------------------

 

the Plan.  Notwithstanding the foregoing, no Option shall be exercisable after
the expiration of its term.  Any vested, exercisable Options outstanding at the
time of a Change in Control shall be cashed out, converted to options of the
acquiring entity, assumed by the acquiring entity or otherwise disposed of in
the manner provided in any stockholder-approved agreement or plan governing or
providing for such Change in Control (“Change in Control Agreement”); provided
that any such cash-out, conversion, assumption or disposition of the Options
shall not deprive the Option holder of the inherent value of his Options,
measured solely by the excess of the Fair Market Value of the underlying Option
shares immediately prior to the Change in Control over the Option Exercise
Price, without the holder’s consent.  In the absence of such governing
provisions in a Change in Control Agreement, the Committee in its sole
discretion may on a case by case basis require any vested, exercisable Options
that remain outstanding upon a Change in Control to be cashed out and terminated
in exchange for a lump sum cash payment, shares of the acquiring entity or a
combination thereof equal in value to the fair market value of the Option,
measured in the manner described above, immediately prior to the Change in
Control. Any non-vested Options shall terminate upon a Change in Control unless:
(A) otherwise provided in the Change in Control Agreement or in a written
agreement, such as a severance agreement, between the Company and the
Participant; or (B) the Committee in its sole discretion on a case by case basis
elects in writing to waive termination.

 

8.                                       Tandem SARs.

 

The Committee may grant in connection with any Option granted hereunder one or
more Tandem SARs relating to a number of shares of Common Stock less than or
equal to the number of shares of Common Stock subject to the related Option.  A
Tandem SAR may be granted at the same time as, or, in the case of a
Non-Qualified Stock Option, subsequent to the time that, its related Option is
granted.

 

(a)                                  Benefit Upon Exercise.

 

The exercise of a Tandem SAR with respect to any number of shares of Common
Stock shall entitle the Participant to a cash payment, for each such share,
equal to the excess of (i) the Fair Market Value of a share of Common Stock on
the exercise date over (ii) the Option Exercise Price per share of the related
Option.  Such payment shall be made as soon as practicable after the effective
date of such exercise.

 

(b)                                 Term and Exercise of Tandem SAR.

 

(1)                                  A Tandem SAR shall be exercisable only if
and to the extent that its related Option is exercisable.

 

(2)                                  The exercise of a Tandem SAR with respect
to a number of shares of Common Stock shall cause the immediate and automatic
cancellation of its related Option with respect to an equal number of shares. 
The exercise of an Option, or the cancellation, termination or expiration of an
Option (other than pursuant to this Section 8(b)(2)), with respect to a number
of shares of Common Stock shall cause the automatic and immediate cancellation
of any related Tandem SARs to the extent that the number of shares of Common
Stock remaining subject to such Option is less than the number of shares then
subject to such Tandem SAR.  Such Tandem SARs shall be canceled in the order in
which they become exercisable.

 

9

--------------------------------------------------------------------------------

 

(3)                                  No Tandem SAR shall be assignable or
transferable otherwise than together with its related Option, and any such
transfer or assignment will be subject to the provisions of Section 20 of the
Plan.

 

(4)                                  A Tandem SAR shall be exercisable by
delivering notice to the Company’s principal office, to the attention of its
Secretary, no less than one business day in advance of the effective date of the
proposed exercise.  A Tandem SAR may also be exercised electronically by
notifying the Company’s agent, pursuant to the methods then in use by that
agent.  Such notice shall specify the number of shares of Common Stock with
respect to which the Tandem SAR is being exercised and the effective date of the
proposed exercise and shall be signed by the Participant or other person then
having the right to exercise the Option to which the Tandem SAR is related. 
Such notice may be withdrawn at any time prior to the close of business on the
business day immediately preceding the effective date of the proposed exercise.

 

9.                                       Stand-Alone SARs.

 

(a)                                  Benefit Upon Exercise.

 

The exercise of a Stand-Alone SAR with respect to any number of shares of Common
Stock shall entitle the Participant to a cash payment, for each such share,
equal to the excess of (i) the Fair Market Value of a share of Common Stock on
the exercise date over (ii) the Reference Value of the Stand-Alone SAR.  Such
payments shall be made as soon as practicable after the effective date of such
exercise.

 

(b)                                 Term and Exercise of Stand-Alone SARs.

 

(1)                                  Unless the applicable Award Agreement
provides otherwise, a Stand-Alone SAR shall become cumulatively exercisable as
to 25% of the shares covered thereby on the first anniversary of the date of
grant and vest 1/36th per month thereafter.  The Committee shall determine the
expiration date of each Stand-Alone SAR.  Unless the applicable Award Agreement
provides otherwise, no Stand-Alone SAR shall be exercisable prior to the first
anniversary of the date of grant.

 

(2)                                  A Stand-Alone SAR shall be exercised by
delivering notice to the Company’s principal office, to the attention of its
Secretary, no less than one business day in advance of the effective date of the
proposed exercise.  A Stand-Alone SAR may also be exercised electronically by
notifying the Company’s agent, pursuant to the methods then in use by that
agent.  Such notice shall specify the number of shares of Common Stock with
respect to which the Stand-Alone SAR is being exercised, and the effective date
of the proposed exercise, and shall be signed by the Participant.  The
Participant may withdraw such notice at any time prior to the close of business
on the business day immediately preceding the effective date of the proposed
exercise.

 

(c)                                  Effect of Termination of Employment.

 

The provisions set forth in Section 7(e) of the Plan with respect to the
exercise of Options following termination of employment shall apply as well to
the exercise of Stand-Alone SARs.

 

(d)                                 Effect of Change in Control.

 

Upon the occurrence of a Change in Control, (i) Stand-Alone SARs granted under
the Plan, to the extent exercisable at the time of a Change of Control, shall
remain

 

10

--------------------------------------------------------------------------------

 

exercisable until their expiration notwithstanding the provisions of Section
7(e) of the Plan that are incorporated into this Section 9, and (ii) Stand-Alone
SARs not exercisable at the time of a Change in Control shall expire at the
close of business on the date of such Change in Control.  Any vested,
exercisable Stand-Alone SARs shall, upon a Change in Control, be cashed out,
converted, assumed or otherwise disposed of in the same manner as applies to
Options under Section 7(f) of the Plan.

 

10.                                 Restricted Stock and Restricted Stock Units.

 

(a)                                  Issue Date and Vesting Date.

 

At the time of the grant of shares of Restricted Stock, the Committee shall
establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates with
respect to such shares, or in the case of Restricted Stock Units, a Vesting Date
or Vesting Dates.  The Committee may divide such shares or units into classes
and assign a different Issue Date and/or Vesting Date, as applicable, for each
class.  If the grantee is employed by the Company or a Subsidiary of the Company
on an Issue Date (which may be the date of grant), the specified number of
shares of Restricted Stock shall be issued in accordance with the provisions of
Section 10(e) of the Plan.  Provided that all conditions to the vesting of a
share of Restricted Stock imposed pursuant to Section 10(b) of the plan are
satisfied, and except as provided in Section 10(g) of the Plan, upon the
occurrence of the Vesting Date with respect to a share of Restricted Stock, such
share shall vest and the restrictions of Section 10(c) of the Plan shall lapse.

 

(b)                                 Conditions to Vesting.

 

At the time of the grant of shares of Restricted Stock or Restricted Stock
Units, the Committee may impose such restrictions or conditions to the vesting
of such shares as it, in its absolute discretion, deems appropriate.

 

(c)                                  Restrictions on Transfer Prior to Vesting.

 

Prior to the vesting of a share of Restricted Stock or a Restricted Stock Unit,
no transfer of a Participant’s rights with respect to such share, whether
voluntary or involuntary, by operation of law or otherwise, shall be permitted. 
Immediately upon any attempt to transfer such rights, such share or units, and
all of the rights related thereto, shall be forfeited by the Participant.

 

(d)                                 Dividends on Restricted Stock.

 

The Committee in its discretion may require that any dividends paid on shares of
Restricted Stock shall be held in escrow until all restrictions on such shares
have lapsed.

 

(e)                                  Issuance of Certificates.

 

(1)                                  Reasonably promptly after the Issue Date
with respect to shares of Restricted Stock, the Company shall cause to be issued
a stock certificate, registered in the name of the Participant to whom such
shares were granted, evidencing such shares; provided, that the Company shall
not cause such a stock certificate to be issued unless it has received a stock
power duly endorsed in blank with respect to such shares.  Each such stock
certificate shall bear the following legend: The transferability of this
certificate and the shares of stock represented hereby are subject to the
restrictions, terms and conditions (including forfeiture provisions and
restrictions against transfer) contained in the 2004 Omnibus Stock Incentive
Plan of The SCO Group, Inc. and an Award Agreement entered

 

11

--------------------------------------------------------------------------------

 

into between the registered owner of such shares and The SCO Group, Inc.  A copy
of such Plan and Award Agreement is on file in the office of the Secretary of
The SCO Group, Inc., 320 South 520 West, Suite 100, Lindon, Utah 84042.  Such
legend shall not be removed until such shares vest pursuant to the terms of the
applicable Award Agreement.

 

(2)                                  Each certificate issued pursuant to this
Section 10(e), together with the stock powers relating to the shares of
Restricted Stock evidenced by such certificate, shall be held by the Company
unless the Committee determines otherwise.

 

(f)                                    Consequences of Vesting.

 

Upon the vesting of a share of Restricted Stock or a Restricted Stock Unit
pursuant to the terms of the applicable Award Agreement, the restrictions of
Section 10(c) of the Plan shall lapse, except as otherwise provided in the Award
Agreement.  Reasonably promptly after a share of Restricted Stock vests, the
Company shall cause to be delivered to the Participant to whom such shares were
granted, a certificate evidencing such share, free of the legend set forth in
Section 10(e) of the Plan, together with any dividends held in escrow pursuant
to Section 10(d) of the Plan.

 

(g)                                 Effect of Termination of Employment.

 

(1)                                  Subject to such other provision as the
Committee may set forth in the applicable Award Agreement, and to the
Committee’s amendment authority pursuant to Section 4 of the Plan, upon the
termination of a Participant’s employment by the Company or any Subsidiary of
the Company for any reason other than Cause, any and all shares of Restricted
Stock or Restricted Stock Units that have not vested shall be immediately
forfeited by the Participant and transferred to the Company, provided that if
the Committee, in its sole discretion and within 30 days after such termination
of employment notifies the Participant in writing of its decision not to
terminate the Participant’s rights in such shares or units, then the Participant
shall continue to be the owner of such shares or such units subject to such
continuing restrictions as the Committee may prescribe in such notice.  If
shares of Restricted Stock are forfeited in accordance with the provisions of
this Section 10, the Company shall also have the right to require the return of
all dividends paid on such shares, whether by termination of any escrow
arrangement under which such dividends are held or otherwise.

 

(2)                                  In the event of the termination of a
Participant’s employment for Cause, all shares of Restricted Stock or Restricted
Stock Units granted to such Participant that have not vested as of the date of
such termination shall immediately be returned to the Company, together with any
dividends paid on such shares of Restricted Stock.

 

(h)                                 Effect of Change in Control.

 

Upon the occurrence of a Change in Control, all outstanding shares of Restricted
Stock or Restricted Stock Units that have not theretofore vested shall
immediately expire and be cancelled.

 

(i)                                     Special Provisions Regarding Restricted
Stock Awards.

 

The Committee may designate on a case-by-case basis whether Restricted Stock or
Restricted Stock Unit awards are intended to be “performance based compensation”
within the meaning of Code Section 162(m).  The grant of Restricted Stock or
Restricted Stock Units so designated shall be based on the attainment by the
Company (or a Subsidiary or division of the Company if applicable) of
performance

 

12

--------------------------------------------------------------------------------

 

goals pre-established by the Committee, based on one or more of the following
criteria:  (i) the attainment of a specified percentage return on total
stockholder equity of the Company; (ii) the attainment of a specified percentage
increase in earnings per share of Common Stock; (iii) the attainment of a
specified percentage increase in net income of the Company; and (iv) the
attainment of a specified percentage increase in profit before taxation of the
Company (or a Subsidiary or division of the Company if applicable).  Attainment
of any such performance criteria shall be determined in accordance with
generally accepted accounting principles as in effect from time to time.  Such
shares shall vest only after the attainment of such performance measures have
been certified by the Committee.

 

11.                                 Phantom Stock.

 

(a)                                  Vesting Date.

 

At the time of the grant of shares of Phantom Stock, the Committee shall
establish a Vesting Date or Vesting Dates with respect to such shares.  The
Committee may divide such shares into classes and assign a different Vesting
Date for each class.  Provided that all conditions to the vesting of a share of
Phantom Stock imposed pursuant to Section 11(c) of the Plan are satisfied, and
except as provided in Section 11(d) of the Plan, upon the occurrence of the
Vesting Date with respect to a share of Phantom Stock, such share shall vest.

 

(b)                                 Benefit Upon Vesting.

 

Upon the vesting of a share of Phantom Stock, the Participant shall be entitled
to receive in cash, within 30 days of the date on which such share vests, an
amount equal to the sum of (i) the Fair Market Value of a share of Common Stock
on the date on which such share of Phantom Stock vests and (ii) the aggregate
amount of cash dividends paid with respect to a share of Common Stock during the
period commencing on the date on which the share of Phantom Stock was granted
and terminating on the date on which such share vests.

 

(c)                                  Conditions to Vesting.

 

At the time of the grant of shares of Phantom Stock, the Committee may impose
such restrictions or conditions to the vesting of such shares as it, in its
absolute discretion, deems appropriate.

 

(d)                                 Effect of Termination of Employment.

 

(1)                                  Subject to such other provisions as the
Committee may set forth in the applicable Award Agreement, and to the
Committee’s amendment authority pursuant to Section 4 of the Plan, shares of
Phantom Stock that have not vested, together with any dividends credited on such
shares, shall be forfeited upon the Participant’s termination of employment for
any reason other than Cause.

 

(2)                                  In the event of the termination of a
Participant’s employment for Cause, all shares of Phantom Stock granted to such
Participant that have not vested as of the date of such termination shall
immediately be forfeited, together with any dividends credited on such shares.

 

(e)                                  Effect of Change in Control.

 

Upon the occurrence of a Change in Control, all outstanding shares of Phantom
Stock that have not theretofore vested shall immediately expire and be
cancelled.

 

13

--------------------------------------------------------------------------------

 

(f)                                    Special Provisions Regarding Phantom
Stock Awards.

 

The Committee may designate on a case by case basis whether Phantom Stock awards
are intended to be “performance based compensation” within the meaning of Code
Section162 (m).  The grant of Phantom Stock so designated shall be based on the
attainment by the Company (or a Subsidiary or division of the Company if
applicable) of performance goals pre-established by the Committee, based on one
or more of the following criteria:  (i) the attainment of a specified percentage
return on total stockholder equity of the Company; (ii) the attainment of a
specified percentage increase in earnings per share of Common Stock; (iii) the
attainment of a specified percentage increase in net income of the Company; and
(iv) the attainment of a specified percentage increase in profit before taxation
of the Company (or a Subsidiary or division of the Company if applicable). 
Attainment of any such performance criteria shall be determined in accordance
with generally accepted accounting principles as in effect from time to time. 
Such shares shall be released from restrictions only after the attainment of
such performance measures have been certified by the Committee.

 

12.                                 Stock Bonuses.

 

In the event that the Committee grants a Stock Bonus, a certificate for the
shares of Common Stock comprising such Stock Bonus shall be issued in the name
of the Participant to whom such grant was made and delivered to such Participant
as soon as practicable after the date on which such Stock Bonus is payable.

 

13.                                 Rights as a Stockholder.

 

No person shall have any rights as a stockholder with respect to any shares of
Common Stock covered by or relating to any Incentive Award until the date of
issuance of a stock certificate with respect to such shares.  Except as
otherwise expressly provided in Section 3(c) of the Plan, no adjustment to any
Incentive Award shall be made for dividends or other rights for which the record
date occurs prior to the date such stock certificate is issued.

 

14.                                 No Special Employment Rights; No Right to
Incentive Award.

 

Nothing contained in the Plan or any Award Agreement shall confer upon any
Participant any right with respect to the continuation of employment by the
Company or any Subsidiary of the Company or interfere in any way with the right
of the Company or any Subsidiary of the Company, subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Participant.  The
Committee’s granting of an Incentive Award to a Participant at any time shall
neither require the Committee to grant any other Incentive Award to such
Participant or other person at any time or preclude the Committee from making
subsequent grants to such Participant or any other person.

 

15.                                 Securities Matters.

 

(a)                                  The Company shall be under no obligation to
effect the registration pursuant to the Securities Act of any interests in the
Plan or any shares of Common Stock to be issued hereunder or to effect similar
compliance under any state laws.  Notwithstanding anything herein to the
contrary, the Company shall not be obligated to cause to be issued or delivered
any certificates evidencing shares of Common Stock pursuant to the Plan unless
and until the Company is advised by its counsel that the issuance and delivery
of such certificates is in compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities exchange on which
shares of Common Stock are traded.  The Committee may require, as a condition of
the issuance and delivery of certificates evidencing shares of Common Stock
pursuant to the terms hereof and of the applicable

 

14

--------------------------------------------------------------------------------

 

Award Agreement, that the recipient of such shares make such covenants,
agreements and representations, and that such certificates bear such legends, as
the Committee, in its sole discretion, deems necessary or desirable.

 

(b)                                 The transfer of any shares of Common Stock
hereunder shall be effective only at such time as counsel to the Company shall
have determined that the issuance and delivery of such shares is in compliance
with all applicable laws, regulations of governmental authority and the
requirements of any securities exchange on which shares of Common Stock are
traded. The Committee may, in its sole discretion, defer the effectiveness of
any transfer of shares of Common Stock hereunder in order to allow the issuance
of such shares to be made pursuant to registration or an exemption from
registration or other methods for compliance available under federal or state
securities laws.  The Committee shall inform the Participant in writing of its
decision to defer the effectiveness of a transfer.  During the period of such
deferral in connection with the exercise of an Option, the Participant may, by
written notice, withdraw such exercise and obtain the refund of any amount paid
with respect thereto.

 

16.                                 Withholding Taxes.

 

Whenever cash is to be paid pursuant to an Incentive Award, the Company (or its
agent) shall have the right to deduct there from an amount sufficient to satisfy
any federal, state and local withholding tax requirements related thereto. 
Whenever shares of Common Stock are to be delivered pursuant to an Incentive
Award, the Company (or its agent) shall have the right to require the
Participant to remit to the Company in cash an amount sufficient to satisfy any
federal, state and local withholding tax requirements related thereto.  With the
approval of the Committee, a Participant may satisfy the foregoing requirement
by electing to have the Company (or its agent) withhold from delivery shares of
Common Stock having a fair market value equal to the amount of tax to be
withheld.  Such shares shall be valued at their Fair Market Value on the date on
which the amount of tax to be withheld is determined.  Such a withholding
election may be made with respect to all or any portion of the shares to be
delivered pursuant to an Incentive Award.

 

17.                                 Notification of Election Under Section 83(b)
of the Code.

 

If any Participant shall, in connection with the acquisition of shares of Common
Stock under the Plan, make the election permitted under Section 83(b) of the
Code (i.e., an election to include in gross income in the year of transfer the
amounts specified in Section 83(b)), such Participant shall notify the Company
of such election within 10 days of filing notice of the election with the
Internal Revenue Service, in addition to any filing and a notification required
pursuant to regulation issued under the authority of Code Section 83(b).

 

18.                                 Notification Upon Disqualifying Disposition
Under Section 421(b) of the Code.

 

Each Award Agreement with respect to an Incentive Stock Option shall require the
Participant to notify the Company of any disposition of shares of Common Stock
issued pursuant to the exercise of such Option under the circumstances described
in Section 421(b) of the Code (relating to certain “disqualifying
dispositions”), within 10 days of such disposition.

 

15

--------------------------------------------------------------------------------

 

19.                                 Amendment or Termination of the Plan.

 

The Board of Directors may, at any time, suspend or terminate the Plan or revise
or amend it in any respect whatsoever; provided, however, that stockholder
approval shall be required if and to the extent the Board of Directors
determines that such approval is appropriate for purposes of satisfying Section
162(m) or 422 of the Code or to the extent such approval is required by the
rules of any stock exchange on which the Common Stock is listed.  Nothing herein
shall restrict the Committee’s ability to exercise its discretionary authority
pursuant to Section 4 of the Plan, which discretion may be exercised without
amendment to the Plan.  No action hereunder may, without the consent of a
Participant, reduce the Participant’s rights under any outstanding Incentive
Award.

 

20.                                 Transfers Upon Death; Non-Assignability.

 

Upon the death of a Participant, outstanding Incentive Awards granted to such
Participant may be exercised only by the executor or administrator of the
Participant’s estate or by a person who shall have acquired the right to such
exercise by will or by the laws of descent and distribution.  No transfer of an
Incentive Award by will or the laws of descent and distribution shall be
effective to bind the Company unless the Committee shall have been furnished
with (a) written notice thereof and with a copy of the will and/or such evidence
as the Committee may deem necessary to establish the validity of the transfer
and (b) an agreement by the transferee to comply with all the terms and
conditions of the Incentive Award that are or would have been applicable to the
Participant and to be bound by the acknowledgments made by the Participant in
connection with the grant of the Incentive Award.

 

During a Participant’s lifetime, the Committee may permit the transfer,
assignment or other encumbrance of an outstanding Option (other than an
Incentive Stock Option) or outstanding shares of Restricted Stock or Restricted
Stock Units.  Notwithstanding the foregoing, subject to any conditions as the
Committee may prescribe, a Participant may, upon providing written notice to the
Secretary of the Company, elect to transfer any or all Options (other than an
Incentive Stock Option) granted to such Participant pursuant to the Plan to
members of his or her immediate family, including, but not limited to, children,
grandchildren and spouse or to trusts for the benefit of such immediate family
members or to partnerships in which such family members are the only partners;
provided, however, that no such transfer by any Participant may be made in
exchange for consideration.

 

21.                                 Expenses and Receipts.

 

The expenses of the Plan shall be paid by the Company.  Any proceeds received by
the Company in connection with any Incentive Award will be used for general
corporate purposes.

 

22.                                 Failure to Comply.

 

In addition to the remedies of the Company elsewhere provided for herein,
failure by a Participant (or beneficiary or transferee) to comply with any of
the terms and conditions of the Plan or the applicable Award Agreement, unless
such failure is remedied by such Participant (or beneficiary or transferee)
within 10 days after notice of such failure by the Committee, shall be grounds
for the cancellation and forfeiture of such Incentive Award, in whole or in
part, as the Committee, in its absolute discretion, may determine.

 

16

--------------------------------------------------------------------------------

 

23.                                 Effective Date and Term of Plan.

 

The Plan became effective on the Effective Date, but the Plan (and any grants of
Incentive Awards made prior to stockholder approval of the Plan) shall be
subject to the requisite approval of the stockholders of the Company.  In the
absence of such approval, within 12 months after the Effective Date such
Incentive Awards shall be null and void.  Unless earlier terminated by the Board
of Directors, the right to grant Incentive Awards under the Plan will terminate
on the tenth anniversary of the Effective Date or the date on which the
stockholders approved the Plan, if earlier.  Incentive Awards outstanding at
Plan termination will remain in effect according to their terms and the
provisions of the Plan.

 

24.                                 Applicable Law.

 

Except to the extent preempted by any applicable federal law, the Plan will be
construed and administered in accordance with the laws of the State of Delaware,
without reference to the principles of conflicts of law.

 

25.                                 Participant Rights.

 

No eligible person shall have any claim to be granted any Incentive Award under
the Plan, and there is no obligation for uniformity of treatment for
Participants.

 

26.                                 Unfunded Status of Awards.

 

The Plan is intended to constitute an “unfunded” plan for incentive and deferred
compensation.  With respect to any payments not yet made to a Participant
pursuant to an Incentive Award, nothing contained in the Plan or any Award
Agreement shall give any such Participant any rights that are greater than those
of a general creditor of the Company.

 

27.                                 No Fractional Shares.

 

No fractional shares of Common Stock shall be issued or delivered pursuant to
the Plan.  The Committee shall determine whether cash, other Incentive Awards,
or other property shall be issued or paid in lieu of such fractional shares or
whether such fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.

 

28.                                 Beneficiary.

 

A Participant may file with the Committee a written designation of a beneficiary
on such form as may be prescribed by the Committee and may, from time to time,
amend or revoke such designation.  If no designated beneficiary survives the
Participant, the executor or administrator of the Participant’s estate shall be
deemed to be the Participant’s beneficiary.

 

29.                                 Interpretation.

 

The Plan is designed and intended to comply with Rule 16b-3, Section 422 of the
Code and Section 162(m) of the Code, and all provisions hereof shall be
construed in a manner to so comply.

 

17

--------------------------------------------------------------------------------