EXHIBIT 10.7


 


CONFIDENTIAL STOCK OPTION GRANT INFORMATION


 


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


 


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


 


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


 


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


 


These options are granted under and governed by the terms of The SCO
Group 1999 Omnibus Stock Incentive Plan
as well as the Stock Option Agreement (incorporated into this form). These
documents are available for your reference on the SCO intranet.


 


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


 


 


Sincerely,


Compensation Manager


 










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


 





















 


	
  

  	
   

  	
  Notice of Grant of Stock Options

  
	
  355 S 520 W Suite 100, Lindon, Utah 84042

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Option Number:  002157

  
	
   

  	
  Plan:  1999

  
	
   

  	
   

  	
   

  	
  ID:  400999

  
	
  Riverton,
  UT 84065 United States

  	
   

  	
   

  
	
   

  	
   

  	
   

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

  
	
   

  
	
  Optionee:

  	
   

  	
  Grant Date: December
  8, 2004

  
	
   

  
	
  Exercise Price: $4.85 per share (USD)

  	
   

  	
  Number of Option Shares: 1,000 shares

  
	
   

  
	
  Type of Option:  Non-Qualified Option

  	
   

  	
  Total Option Price:
  $4,850.00   (USD)

  



 


V E S T I N G


 


	
  Vesting Commencement Date:

  	
   

  	
  October 1, 2004

  	
   

  
	
  Expiration Date:

  	
   

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

  	
   

  
	
  Date Exercisable:

  	
   

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

  	
   

  



 


	
  Vesting Schedule:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Shares

  	
   

  	
  Vest Type

  	
   

  	
  Full Vest

  	
   

  	
  Expiration

  	
   

  
	
  250

  	
   

  	
  On Vest Date

  	
   

  	
  October 1, 2005

  	
   

  	
  December 7, 2014

  	
   

  
	
  750

  	
   

  	
  Monthly

  	
   

  	
  October 1, 2008

  	
   

  	
  December 7, 2014

  	
   

  



 


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


 


Optionee
understands and agrees that the Option is granted subject to and in accordance
with the terms of THE SCO GROUP 1999
OMNIBUS STOCK INCENTIVE PLAN*, (the “Plan”). 
Optionee further agrees to be bound by the terms of the Plan and the
terms of the Option as set forth in the Stock Option Agreement*.  Optionee understands that any Option Shares
purchased under the Option will be subject to the terms set forth in the Stock
Purchase Agreement, whether said options are purchased electronically or in
person*.


 










*Documents available on The SCO
Group Intranet.


 


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


 


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


 


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THE SCO GROUP


 


STOCK
OPTION AGREEMENT


 


RECITALS


 


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


 


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


 


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


 


NOW, THEREFORE, it is hereby agreed as
follows:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


6.                                      Special
Termination of Option.


 


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


 


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


 


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


 


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


 


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


 


9.                                      Manner
of Exercising Option.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


11.                               Compliance with Laws and Regulations.


 


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


 


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


 


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


 


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


 


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


 


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


 


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APPENDIX


 


The following definitions shall be in effect
under the Agreement:


 


A.                                   Agreement
shall mean this Stock Option Agreement.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


W.                                Plan
shall mean the Corporation’s 1999 Omnibus
Stock Incentive Plan.


 


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


 


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


 


Z.                                     Stock
Exchange shall mean NASDAQ.


 


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