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 


 


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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.


 


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(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.


 


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(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.


 


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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.


 


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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.


 


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(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 


 


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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.


 


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(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