**Exhibit10.3**

 
|                                                              | Notice of Grant of  Stock Option for Executive Officers |
|--------------------------------------------------------------|---------------------------------------------------------|
|    355 S 520 W Suite 100, Lindon,  Utah 84042 |                                                    |

 

|   | **Option Number:** |
|--------|--------------------|
|   | **Plan:**          |
|   | **ID:**            |

 

Notice is hereby given of the followingoption grant (the “Option”) to purchase shares of the Common Stock of The SCOGroup, Inc. (the “Corporation”):

 
| **Optionee:**                              | ** ** | **Grant Date:**December 8, 2004                                                                             |
|--------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|
|                                       |       |                                                                                                             |
| **Exercise Price**:  $4.85 per share (USD) | ** ** | **Number of Option Shares:**             shares |
|                                       |       |                                                                                                             |
| **Type of Option:**Non-Qualified  Option   | ** ** | **Total Option Price**:  $             (USD)    |

 

# **V E S T I N G**

#  

| **Vesting Commencement Date:** |   | December 8, 2004                                                           |
|--------------------------------|--------|---------------------------------------------------------------------------------|
| **Expiration Date:**           |   | December 7, 2014 *or upon earlier  termination of the Option*.             |
| **Date Exercisable:**          |   | December 8, 2005 *(Date on which the Option  Shares first become vested.)* |

 
| **Vesting  Schedule:** |       |          |       |                   |
|------------------------|------------|---------------|------------|------------------------|
|                   |       |          |       |                   |   |   |
| **Shares**             | ** ** | **Vest Type** | ** ** | **Full Vest**          | ** ** | **Expiration** |
|                   |       | One Year      |       | December 8,  2005 |   | December 7,  2014 |
|                   |       | Monthly       |       | December 8,  2008 |   | December 7,  2014 |

 

Vesting Schedule:  The Option Shares shall be unvested.  Subject to accelerated vesting in connectionwith a Corporate Transaction pursuant to Section 6 of the ExecutiveOfficer Stock Option Agreement, Optionee shall acquire a vested interest withrespect to  (i) twenty-five (25%) of theOption Shares upon Optionee’s completion of one (1) year of Service measuredfrom the Vesting Commencement Date and (ii) the balance of the Option Shares inequal successive monthly installments upon Optionee’s completion of each of thenext thirty-six (36) months of Service measured from  the Vesting Commencement Date.  In no event shall any additional OptionShares vest after Optionee’s cessation of Service.

 

 

Optioneeunderstands and agrees that the Option is granted subject to and in accordancewith the terms of THE SCO GROUP 2004OMNIBUS STOCK INCENTIVE PLAN* (the “Plan”). Optionee further agrees to be bound by the terms of the Plan and theterms of the Option as set forth in the Executive Officer Stock OptionAgreement*.  Optionee understands thatany Option Shares purchased under the Option will be subject to the terms setforth in the Executive Officer Stock Option Agreement, whether said options arepurchased electronically or in person*.

 

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*Documentsavailable on The SCO Group Intranet.

 

No Employment or Service Contract.  Nothing in this Notice or in the Plan shallconfer upon Optionee any right to continue in Service for any period ofspecific duration or interfere with or otherwise restrict in any way the rightsof the Corporation (or any Parent or Subsidiary employing or retainingOptionee) or of Optionee, which rights are hereby expressly reserved by each,to terminate Optionee’s Service at any time for any reason, with or withoutcause.

 

Definitions.  All capitalized terms in this Notice shallhave the meaning assigned to them in this Notice or in the Executive OfficerStock Option Agreement.

 

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By your signature and the signature below of the Corporation’srepresentative below, you and the Corporation agree that this option is grantedunder and governed by the terms and conditions of The SCO Group, Inc. 2004 OmnibusStock Incentive Plan and the Executive Officer Stock Option Agreement, both ofwhich are made a part of this document.

 

 
| OPTIONEE: | THE SCO GROUP, INC. |
|-----------|---------------------|
|      |                |   |   |
|      |                |   |   |
|      |                | By: |   |   |
|      |                | Name:: |   |   |
|      |                | Title: |   |   |
| Address:  |                |   |   |   |
|      |                |   |   |   |
|      |                |   |   |   |
|           |                     |  |  |  |  |  |

 

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**THE SCOGROUP, INC.**

 

**EXECUTIVEOFFICER STOCK OPTION AGREEMENT**

 

**RECITALS**

 

The Board has adopted the Plan for thepurpose of retaining the services of selected Employees, non-employee membersof the Board or the board of directors of any Parent or Subsidiary andconsultants who provide services to the Corporation (or any Parent orSubsidiary).

 

**A.**                                    Optionee is torender valuable services to the Corporation (or a Parent or Subsidiary), andthis Agreement is executed pursuant to, and is intended to carry out thepurposes of, the Plan in connection with the Corporation’s grant of an optionto Optionee.

 

**B.**                                    All capitalizedterms in this Agreement shall have the meaning assigned to them in the attachedAppendix or the Plan.

 

NOW, THEREFORE, it is hereby agreed asfollows:

 

**1.****                                      Grantof Option**.  The Corporationhereby grants to Optionee, as of the Grant Date, an option to purchase up tothe number of Option Shares specified in the Grant Notice.  The Option Shares shall be purchasable fromtime to time during the option term specified in Paragraph 2 below at theExercise Price.

 

**2.****                                      OptionTerm**.  This option shall have aterm of ten (10) years measured from the Grant Date and shall accordinglyexpire at the close of business on the Expiration Date, unless soonerterminated in accordance with Paragraph 5 or 6 below.

 

**3.****                                      LimitedTransferability**.  This optionshall be neither transferable nor assignable by Optionee other than by will orby the laws of descent and distribution following Optionee’s death and may beexercised, during Optionee’s lifetime, only by Optionee.  Notwithstanding the foregoing, this optionmay be assigned in accordance with the terms of a Domestic RelationsOrder.  If so assigned, the assignedoption shall be exercisable only by the person or persons who acquire aproprietary interest in the option pursuant to such Domestic RelationsOrder.  The terms applicable to theassigned option (or portion thereof) shall be the same as those in effect forthis option immediately prior to such assignment and shall be set forth in suchdocuments issued to the assignee as the Plan Administrator may deemappropriate.

 

**4.****                                      Datesof Exercise**.  This option shallbecome exercisable for the Option Shares in one or more installments asspecified in the Grant Notice.  As theoption becomes exercisable for such installments, those installments shallaccumulate and the option shall remain exercisable for the accumulatedinstallments until the Expiration Date or sooner termination of the option termunder Paragraph 5 or 6.

 

**5.****                                      Cessationof Service**.  The option termspecified in Paragraph 2 shall terminate (and this option shall cease to beoutstanding) prior to the Expiration Date should any of the followingprovisions become applicable:

 

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

 

(b)                                 ShouldOptionee cease to remain in Service for Cause, then the optionee shall have theright to exercise this option for a period of thirty (30) days of suchcessation of  Service.

 

(c)                                  ShouldOptionee die while this option is outstanding, then the personal representativeof Optionee’s estate or the person or persons to whom the option is transferredpursuant to Optionee’s will or in accordance with the laws of descent anddistribution 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)                                 ShouldOptionee cease Service by reason of Disability while this option isoutstanding, then Optionee shall have the right to exercise this option for aperiod of twelve (12) months following the date of such cessation of Service.

 

(e)                                  Duringthe limited period of post-Service exercisability, this option may not beexercised in the aggregate for more than the number of vested Option Shares forwhich the option is exercisable at the time of Optionee’s cessation ofService.  This option shall terminate andcease to be outstanding for any vested shares for which this option has notbeen exercised upon the earlier of the following:  (i) expiration of the applicable post-Serviceexercise period, (ii) upon the termination of the option as a result of aCorporate Transaction, or (iii) upon the expiration of the option term.  To the extent Optionee is not vested in theOption Shares at the time of Optionee’s cessation of Service, this option shallimmediately terminate and cease to be outstanding with respect to thoseshares.  Notwithstanding anything to thecontrary contained in this Agreement, in no event shall this option beexercisable at any time after the Expiration Date.

 

**6.****                                      CorporateTransaction**.

 

(a)                                  Asset forth in the Grant Notice, in the event of a Corporate Transaction, if theOptionee remains in service with the Company when a Corporate Transactionoccurs, all Option Shares that would have become vested upon continued Serviceshall immediately vest in full and become exercisable notwithstanding anyprovision to the contrary of such grant and shall remain exercisable until itexpires or terminates in accordance with its terms.

 

(b)                                 Notwithstandinganything herein to the contrary, to the extent that any payment or benefitprovided for herein is required to be paid or vested at any earlier date underthe terms of any plan, agreement or arrangement, such plan, agreement orarrangement shall control.

 

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

 

**7.****                                      Adjustmentin Option Shares**.  Should anychange be made to the Common Stock by reason of any stock split, stockdividend, recapitalization, combination of shares, exchange of shares or otherchange affecting the outstanding Common Stock as a class without theCorporation’s receipt of consideration, appropriate adjustments shall be madeto (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 adilution or enlargement of benefits hereunder.

 

**8.****                                      ShareholderRights**.  The holder of this optionshall not have any shareholder rights with respect to the Option Shares untilsuch person shall have exercised the option, paid the Exercise Price and becomea holder of record of the purchased shares.

 

**9.****                                      Mannerof Exercising Option**.

 

(a)                                  Inorder to exercise this option with respect to all or any part of the OptionShares for which this option is at the time exercisable, Optionee (or any otherperson or persons exercising the option) must take the following actions:

 

(i)                                     Execute anddeliver to the Corporation a Purchase Agreement for the Option Shares for whichthe option is exercised.

 

(ii)                                  Pay the aggregateExercise Price for the purchased shares in cash or check made payable to theCorporation.

 

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

 

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

 

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

 

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(b)                                 Assoon as practical after the Exercise Date, the Corporation shall issue to or onbehalf of Optionee (or any other person or persons exercising this option) acertificate for the purchased Option Shares, with the appropriate legendsaffixed thereto.

 

(c)                                  Inno 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 theOptions Shares for which this option is at the time exercisable electronicallyby utilizing E*TRADE’s Optionslink.  Allfunds to be paid for the exercise or funds to be received after the sale ofsuch shares will be transacted between the Optionee and E*TRADE.

 

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

 

**11**.                               **Compliance with Laws and Regulations**.

 

(a)                                  The exercise of thisoption and the issuance of the Option Shares upon such exercise shall besubject to compliance by the Corporation and Optionee with all applicablerequirements of law relating thereto and with all applicable regulations of theStock Exchange  on which the Common Stockmay be listed for trading at the time of such exercise and issuance.

 

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

 

**12.****                               Successorsand Assigns**.  Except to theextent otherwise provided in Paragraphs 3 and 6, the provisions of this Agreementshall inure to the benefit of, and be binding upon, the Corporation and itssuccessors and assigns and Optionee, Optionee’s assigns and the legalrepresentatives, heirs and legatees of Optionee’s estate.

 

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

 

**14.****                               Construction**.  This Agreement and the option evidencedhereby are made and granted pursuant to the Plan and are in all respectslimited by and subject to the terms of the Plan.  All decisions of the Plan Administrator withrespect to any question or issue arising under the Plan or this Agreement shallbe conclusive and binding on all persons having an interest in this option.

 

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

 

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**APPENDIX**

 

The following definitions shall be in effectunder the Agreement:

 

A.                                   Agreementshall mean this Executive Officer Stock Option Agreement.

 

B.                                     Board shallmean the Corporation’s Board of Directors.

 

C.                                     Cause shallmean any of the following:  (i) Optionee’smaterial breach of any employee, confidentiality, or other employment relatedagreement with the Corporation, (ii) Optionee’s violation of the Corporation’spolicies or procedures set forth in the Corporation’s Policies and ProcedureManual, as amended from time to time, or (iii) Optionee’s conviction of orentrance of a plea of *nolo contendere*to a felony or to any other crime punishable by incarceration.

 

D.                                    Code shallmean the Internal Revenue Code of 1986, as amended.

 

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

 

F.                                      Common Stockshall mean the Corporation’s common stock.

 

G.                                     CorporateTransaction (i) shall have the meaning of the term “Change in Control” asdefined in the Change in Control Agreement dated December 10, 2004 betweenthe Corporation and the Optionee, as such may be amended from time to time and(ii) shall include the declaration by the Corporation’s board of directors ofthe payment of a dividend to the common stockholders of the Corporation as aresult of the Corporation entering into a cash settlement in its litigationwith IBM.

 

H.                                    Corporationshall mean The SCO Group, Inc., a Delaware corporation.

 

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

 

J.                                        DomesticRelations Order shall mean any judgment, decree or order (includingapproval of a property settlement agreement) which provides or otherwiseconveys, pursuant to applicable State domestic relations laws (includingcommunity property laws), marital property rights to any spouse or former spouseof Optionee.

 

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

 

L.                                      Exercise Dateshall mean the date on which the option shall have been exercised in accordancewith Paragraph 9 of the Agreement.

 

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

 

N.                                    Expiration Dateshall mean the date on which the option expires as specified in the GrantNotice.

 

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O.                                    Fair MarketValue per share of Common Stock on any relevant date shall be determined inaccordance with the following provisions:

 

(i)                                     Ifthe Common Stock is at the time quoted on the NASDAQ National Market, then theFair Market Value shall be the closing selling price per share of Common Stockon the date in question, as the price is reported by the National Association ofSecurities Dealers on the NASDAQ National Market or any successor system.  If there is no closing selling price for theCommon Stock on the date in question, then the Fair Market Value shall be theclosing selling price on the last preceding date for which such quotationexists.

 

(ii)                                  Ifthe Common Stock is at the time listed on any Stock Exchange other than theNASDAQ National Market, then the Fair Market Value shall be the closing sellingprice per share of Common Stock on the date in question on the Stock Exchangedetermined by the Plan Administrator to be the primary market for the CommonStock, as such price is officially listed or quoted in the composite tape oftransactions on such exchange.  If thereis no closing selling price for the Common Stock on the date in question, thenthe Fair Market Value shall be the closing selling price on the last precedingdate for which such quotation exists.

 

(iii)                               Ifthe Common Stock is at the time neither listed nor quoted on any StockExchange, then the Fair Market Value shall be determined by the PlanAdministrator after taking into account such factors as the Plan Administratorshall deem appropriate.

 

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

 

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

 

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

 

S.                                      Non-QualifiedStock Option shall mean an option not intended to satisfy the requirementsof IRS Code Section 422.

 

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

 

U.                                    Optioneeshall mean the person to whom the option is granted as specified in the GrantNotice.

 

V.                                     Parentshall mean any corporation (other than the Corporation) in an unbroken chain ofcorporations ending with the Corporation, provided each corporation in theunbroken chain (other than the Corporation) owns, at the time of thedetermination, stock possessing fifty percent (50%) or more of the totalcombined voting power of all classes of stock in one of the other corporationsin such chain.

 

W.                                Plan shall meanthe Corporation’s 2004 Omnibus StockIncentive Plan.

 

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

 

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

 

Z.                                     Stock Exchangeshall mean the NASDAQ National Market, or, if the Common Stock is not quoted on the NASDAQ National Market, on suchother securities exchange or market system on which the Common Stock is thenlisted or quoted.

 

AA.                         Subsidiary shall meanany corporation (other than the Corporation) in an unbroken chain ofcorporations beginning with the Corporation, provided each corporation (otherthan the last corporation) in the unbroken

 

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chain owns, at the time of the determination, stock possessing fiftypercent (50%) or more of the total combined voting power of all classes ofstock in one of the other corporations in such chain.

 

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