**EXHIBIT 10.7**

 

CONFIDENTIAL STOCK OPTION GRANT INFORMATION

 

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

 

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

 

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

 

You will be receiving an e-mail from E*TRADE in the near future, whichwill inform you of your User ID and Password, as well as general informationabout E*TRADE’s services.  You will havean account automatically set up for you on E*TRADE’s Optionslink atwww.optionslink.com and a brokerage account with E*TRADE atwww.etrade.com.   The Optionslink accountis for SCO transactions only, while the brokerage account may be used for anyother market transactions.

 

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

 

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

 

 

Sincerely,

Compensation Manager

 

----

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

 

----

 
|                                                                                                                                                                       |                           | 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 withrespect to (i) twenty-five (25%) of the Option Shares upon Optionee’scompletion of one (1) year of Service measured from the Vesting CommencementDate and (ii) the balance of the Option Shares in equal successive monthlyinstallments upon Optionee’s completion of each of the next thirty-six (36) monthsof 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 1999OMNIBUS 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 Stock Option Agreement*.  Optionee understands that any Option Sharespurchased under the Option will be subject to the terms set forth in the StockPurchase Agreement, whether said options are purchased electronically or inperson*.

 

----

*Documents available on The SCOGroup 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 of specificduration or interfere with or otherwise restrict in any way the rights of theCorporation (or any Parent or Subsidiary employing or retaining Optionee) or ofOptionee, which rights are hereby expressly reserved by each, to terminateOptionee’s Service at any time for any reason, with or without cause.

 

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

 

2

----

 

**THE SCO GROUP**

 

**STOCKOPTION 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.**                                    Optioneeis 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 thepurposes of, the Plan in connection with the Corporation’s grant of an optionto Optionee.

 

**B.**                                    Allcapitalized terms in this Agreement shall have the meaning assigned to them inthe attached Appendix 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 oftwelve (12) months following the date of Optionee’s death.

 

3

----

 

(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.****                                      SpecialTermination of Option**.

 

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

 

(b)                                 Ifthis option is assumed in connection with a Corporate Transaction, then thisoption shall be appropriately adjusted, immediately after such CorporateTransaction, to apply to the number and class of securities which would havebeen issuable to Optionee in consummation of such Corporate Transaction had theoption been exercised immediately prior to such Corporate Transaction, andappropriate adjustments shall also be made to the Exercise Price, providedthe aggregate Exercise Price shall remain the same.

 

(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 thisoption shall not have any shareholder rights with respect to the Option Sharesuntil such person shall have exercised the option, paid the Exercise Price andbecome a 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)                                     Executeand deliver to the Corporation a Purchase Agreement for the Option Shares forwhich the option is exercised.

 

(ii)                                  Paythe aggregate Exercise Price for the purchased shares in cash or check madepayable to the Corporation.

 

(iii)                               Furnishto the Corporation appropriate documentation that the person or personsexercising the option (if other than Optionee) have the right to exercise thisoption.

 

(iv)                              Executeand deliver to the Corporation such written representations as may be requestedby the Corporation in order for it to comply with the applicable requirementsof Federal and state securities laws.

 

(v)                                 Makeappropriate arrangements with the Corporation (or Parent or Subsidiaryemploying or retaining Optionee) for the satisfaction of all Federal, state andlocal income and employment tax withholding requirements applicable to theoption exercise.

 

4

----

 

(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) a certificatefor the purchased Option Shares, with the appropriate legends affixed thereto.

 

(c)                                  Inno event may this option be exercised for any fractional shares.

 

(d)                                 Inthe alternative, Optionee may exercise this option with respect to all or anypart of the Options Shares for which this option is at the time exercisableelectronically by utilizing E*TRADE’s Optionslink.  All funds to be paid for the exercise orfunds to be received after the sale of such shares will be transacted betweenthe 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)                                  Theexercise of this option and the issuance of the Option Shares upon suchexercise shall be subject to compliance by the Corporation and Optionee withall applicable requirements of law relating thereto and with all applicableregulations 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 suchexercise and issuance.

 

(b)                                 Theinability of the Corporation to obtain approval from any regulatory body havingauthority deemed by the Corporation to be necessary to the lawful issuance andsale of any Common Stock pursuant to this option shall relieve the Corporationof any liability with respect to the non-issuance or sale of the Common Stockas to which 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 thisAgreement shall inure to the benefit of, and be binding upon, the Corporationand its successors 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.

 

5

----

 

**APPENDIX**

 

The following definitions shall be in effectunder the Agreement:

 

A.                                   Agreementshall mean this Stock Option Agreement.

 

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

 

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

 

D.                                    Codeshall mean 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.                                      CommonStock shall mean the Corporation’s common stock.

 

G.                                     CorporateTransaction shall mean either of the following shareholder-approvedtransactions to which the Corporation is a party:

 

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

 

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

 

H.                                    Corporationshall mean The SCO Group, 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 anymedically determinable physical or mental impairment and shall be determined bythe Plan Administrator on the basis of such medical evidence as the PlanAdministrator deems 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 formerspouse of 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.                                      ExerciseDate shall mean the date on which the option shall have been exercised inaccordance with Paragraph 9 of the Agreement.

 

M.                                 ExercisePrice shall mean the exercise price per share as specified in the GrantNotice.

 

N.                                    ExpirationDate shall mean the date on which the option expires as specified in theGrant Notice.

 

A-1

----

 

O.                                    FairMarket Value per share of Common Stock on any relevant date shall bedetermined in accordance with the following provisions:

 

(i)                                     Ifthe Common Stock is at the time traded 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 Associationof Securities Dealers on the NASDAQ National Market or any successorsystem.  If there is no closing sellingprice for the Common Stock on the date in question, then the Fair Market Valueshall be the closing selling price on the last preceding date for which suchquotation exists.

 

(ii)                                  Ifthe Common Stock is at the time listed on any Stock Exchange, then the FairMarket Value shall be the closing selling price per share of Common Stock onthe date in question on the Stock Exchange determined by the Plan Administratorto be the primary market for the Common Stock, as such price is officiallyquoted in the composite tape of transactions on such exchange.  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.

 

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

 

P.                                      GrantDate shall mean the date of grant of the option as specified in the GrantNotice.

 

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

 

R.                                     1934Act shall 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.                                     OptionShares shall mean the number of shares of Common Stock subject to theoption.

 

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.                                Planshall mean the Corporation’s 1999 OmnibusStock Incentive 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.                                     StockExchange shall mean NASDAQ.

 

AA.                         Subsidiaryshall mean any corporation (other than the Corporation) in an unbroken chain ofcorporations beginning with the Corporation, provided each corporation (otherthan the last corporation) in the unbroken chain 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.

 

----