**EXHIBIT 10.34**

 

**THESCO GROUP, INC**

 

**2004 OMNIBUS STOCK INCENTIVE PLAN**

 

1.                                       Establishment and Purpose.

 

There is hereby adoptedthe SCO Group, Inc. 2004 Omnibus Stock Incentive Plan (the “Plan”).  The Plan shall be in addition to (but exceptas provided in Section 3(a) below shall not supplant or be construed to amendor terminate) The SCO Group, Inc. 2002 Omnibus Stock Incentive Plan and the1999 Omnibus Stock Incentive Plan.  ThePlan is intended to promote the interests of the Company and the stockholders ofthe Company by providing officers, other employees of the Company, directorswho are not employees of the Company, consultants and other persons who areexpected to make a long-term contribution to the success of the Company withappropriate incentives and rewards to encourage them to enter into and continuein the employ of the Company and/or to acquire a proprietary interest in thelong-term success of the Company, thereby aligning their interest more closelyto the interest of stockholders.

 

2.                                       Definitions.

 

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

 

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

 

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

 

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

 

(d)                                 “Changein 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 securitiesunder an employee benefit plan of the Company or any corporation owned,directly or indirectly, by the stockholders of the Company in substantially thesame 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), directlyor indirectly, of securities of the Company representing 50% or more of thecombined voting power of the Company’s then outstanding securities;

 

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

 

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

 

(iii)                               thestockholders of the Company approve a merger or consolidation of the Companywith any other corporation, other than (A) a merger or consolidation that wouldresult in the voting securities of the Company outstanding immediately priorthereto continuing to represent (either by remaining outstanding or by beingconverted into voting securities of the surviving entity) more than 50% of thecombined voting power of the voting securities of the Company or such survivingentity outstanding immediately after such merger or consolidation or (B) amerger 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 thenoutstanding securities; or

 

(iv)                              thestockholders of the Company approve a plan of complete liquidation of theCompany or an agreement for the sale or disposition by the Company of all orsubstantially 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 morepersons each of whom is an “outside director” within the meaning of Section162(m) of the Code and a “Non-Employee Director” within the meaning of Rule 16b-3under the Exchange Act (or who satisfies any other criteria for administeringemployee benefit plans as may be specified by the Securities and Exchange Commissionin order for transactions under such plan to be exempt from the provisions ofSection 16(b) of the Exchange Act), and an “Independent Director” underapplicable NASD rules.

 

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

 

(h)                                 “CommonStock” 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 aParticipant for a disability benefit under the long-term disability planmaintained by the Company or a Subsidiary of the Company and applicable to suchParticipant; or (ii) when used in connection with the exercise of an IncentiveStock Option following termination of employment, disability within the meaningof Section 22(e)(3) of the Code.

 

(j)                                     “EffectiveDate” shall mean the date upon which this Plan is adopted by the Board ofDirectors.

 

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

 

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

 

(m)                               “ExerciseDate” shall mean the date on which a Participant may exercise an IncentiveAward.

 

(n)                                 “FairMarket Value” of a share of Common Stock, as of a date of determination, shallmean (i) the closing sales price per share of Common Stock on the nationalsecurities exchange on which such stock is principally traded for the lastpreceding date on which there was a sale 

 

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of such stock on such exchange, or (ii) ifthe shares of Common Stock are not listed or admitted to trading on any suchexchange, the closing price as reported by the Nasdaq Stock Market for the lastpreceding 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 forthe shares of Common Stock as reported by the National Association ofSecurities Dealers, Inc. Automated Quotations System for the last precedingdate on which there was a sale of such stock in such market, or (iv) if theshares of Common Stock are not then listed on a national securities exchange ortraded in an over-the-counter market, such value as determined by the Committeein good faith.

 

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

 

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

 

(q)                                 “IssueDate” shall mean the date established by the Company on which certificatesrepresenting shares of Restricted Stock shall be issued by the Company pursuantto the terms of Section 10(e) of the Plan.

 

(r)                                    “Non-QualifiedStock 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 toSection 7 of the Plan.

 

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

 

(u)                                 “PhantomStock” shall mean the right, granted pursuant to Section 11 of the Plan, toreceive 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 totime.

 

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

 

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

 

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

 

(z)                                   “Rule16b-3” shall mean Rule 16b-3 promulgated under the Exchange Act.

 

(aa)                            “Section162(m)” shall mean Section 162(m) of the Code and the regulations promulgatedthereunder.

 

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

 

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

 

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

 

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

 

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

 

(ag)                           “Terminationof 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 adirector,” and (ii) when applied to employees, including employee-directors, tomean “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 personswho were not employees or a director of the Company or a Subsidiary of theCompany.

 

(ah)                           “VestingDate” shall mean the date established by the Committee on which an IncentiveAward may vest.

 

3.                                       StockSubject to the Plan.

 

(a)                                  Shares Available for Awards.

 

The maximum number of shares of Common Stockreserved for issuance under the Plan shall be 1,500,000 shares (subject toadjustment as provided under Section 3(c) of the Plan).  The total number of shares reserved forissuance hereunder may be authorized but unissued Common Stock or authorizedand issued Common Stock held in the Company’s treasury or acquired by theCompany for the purposes of the Plan. The Committee may direct that any stock certificate evidencing shares ofCommon Stock issued pursuant to the Plan shall bear a legend setting forth suchrestrictions on transferability as may apply to such shares pursuant to thePlan.  The grant of a Tandem SAR shallnot reduce the number of shares of Common Stock with respect to which IncentiveAwards may be granted pursuant to the Plan. Upon the exercise of any Tandem SAR, the related Option shall becanceled to the extent of the number of shares of Common Stock as to which theTandem SAR is exercised and, notwithstanding the foregoing, such number ofshares shall no longer be available for Incentive Awards under the Plan.  Subject to adjustment under Section 3(c) ofthe Plan, the maximum number of shares of Common Stock that may be issued underthe 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 thatare issued and outstanding on the immediately preceding October 31st.  Any provision herein to the contrarynotwithstanding, the maximum number of shares of Common Stock that may issuedpursuant to Incentive Stock Options granted hereunder shall not exceed1,500,000, subject to adjustment under Section 3(c) of the Plan.

 

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(b)                                 IndividualLimitation.

 

The total number of shares of Common Stocksubject to Incentive Awards (including Incentive Awards payable in cash butdenominated as shares of Common Stock, i.e., Stand-Alone SARs and PhantomStock), awarded to any employee during any tax year of the Company, shall notexceed 400,000 shares.  Determinationsunder the preceding sentence shall be made in a manner that is consistent withSection 162(m) of the Code.

 

(c)                                  Adjustmentfor Change in Capitalization.

 

In the event that the Committee shalldetermine that any dividend or other distribution (whether in the form of cash,Common Stock, or other property), recapitalization, stock split, reverse stocksplit, 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 toprevent dilution or enlargement of the rights of Participants under the Plan,then the Committee shall make such equitable changes or adjustments as it deemsnecessary or appropriate to any or all of (i) the number and kind of shares ofstock that may thereafter be issued in connection with Incentive Awards, (ii)the number and kind of shares of stock issued or issuable in respect ofoutstanding Incentive Awards, and (iii) the exercise price, grant price, orpurchase price relating to any Incentive Award; provided that, with respect toIncentive Stock Options, such adjustment shall be made in accordance withSection 424 of the Code.

 

(d)                                 Re-Useof Shares.

 

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

 

4.                                       Administrationof the Plan.

 

The Plan shall be administered by theCommittee.  The Committee shall have theauthority in its sole discretion, subject to and not inconsistent with theexpress provisions of the Plan, to administer the Plan and to exercise all thepowers and authorities either specifically granted to it under the Plan ornecessary or advisable in the administration of the Plan, including, withoutlimitation, the authority to grant Incentive Awards; to determine the personsto whom and the time or times at which Incentive Awards shall be granted; todetermine the type and number of Incentive Awards to be granted, the number ofshares of Common Stock to which an Award may relate and the terms, conditions,restrictions and performance criteria relating to any Incentive Award; todetermine whether, to what extent, and under what circumstances an IncentiveAward may be settled, canceled, forfeited, exchanged, or surrendered; tosubject shares of Common Stock to which an Award may relate to rights ofrepurchase or rights of refusal in favor of the Company under the circumstancesand upon the terms set forth in an Award Agreement; to make adjustments in theperformance goals in recognition of unusual or non-recurring events affectingthe Company or the financial statements of the Company (to the extent inaccordance with Section 162(m)of the Code, if applicable), or in response tochanges in applicable laws, regulations, or accounting principles; to construeand interpret the Plan and any Incentive Award; to prescribe, amend and rescindrules and regulations relating to the Plan; to determine the terms andprovisions of Award Agreements; and to make all other determinations deemednecessary or advisable for the administration of the Plan.

 

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The Committee may, in its absolutediscretion, without amendment to the Plan, (i) accelerate the date on which anyTandem SAR, Stand-Alone SAR, Option or shares of Phantom Stock granted underthe Plan becomes exercisable, waive or amend the operation of Plan provisionsrespecting exercise after termination of employment or otherwise adjust any ofthe terms of such Tandem SAR, Stand-Alone SAR, Option or shares of PhantomStock, and (ii) accelerate the Vesting Date or Issue Date, or waive anycondition imposed hereunder, with respect to any share of Restricted Stock,Restricted Stock Unit or Phantom Stock or otherwise adjust any of the terms applicableto such share.

 

No member of the Committee shall be liablefor any action, omission or determination relating to the Plan, and the Companyshall indemnify and hold harmless each member of the Committee and each otherdirector or employee of the Company to whom any duty or power relating to theadministration or interpretation of the Plan has been delegated against anycost or expense (including counsel fees) or liability (including any sum paidin settlement of a claim with the approval of the Committee) arising out of anyaction, 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 employeereasonably believed to be in or not opposed to the best interests of theCompany.

 

5.                                       Eligibility.

 

The persons who shall be eligible to receiveIncentive Awards pursuant to the Plan shall be all employees and directors ofthe Company and its Subsidiaries, consultants and such other persons whom theCommittee 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 therules of Nasdaq Stock Market or any other securities exchange on which Companyshares are traded) unless and until the stockholders of the Company formallyapprove the Plan at a duly called stockholders meeting.  Notwithstanding any other provision of thePlan to the contrary, Incentive Stock Options may be granted only to employeesof the Company or its Subsidiaries. Subject to the foregoing, the Committee may grant Incentive Awards toany, all or none of such eligible persons at any time, from time to time,during the term of the Plan.

 

6.                                       AwardsUnder the Plan; Award Agreement.

 

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

 

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

 

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

 

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7.                                       Options.

 

(a)                                  Identificationof Options.

 

Each Option shall be clearly identified inthe applicable Award Agreement as either an Incentive Stock Option or a Non-QualifiedStock Option.

 

(b)                                 ExercisePrice.

 

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

 

(c)                                  Termand Exercise of Options.

 

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

 

(2)                                  AnOption shall be exercised by delivering notice to the Company’s principaloffice, to the attention of its Secretary, no less than one business day inadvance of the effective date of the proposed exercise.  An Option may also be exercisedelectronically by notifying the Company’s agent, pursuant to the methods thenin use by that agent.  Such notice shallspecify the number of shares of Common Stock with respect to which the Optionis being exercised and the effective date of the proposed exercise and shall besigned by the Participant or other person then having the right to exercise theOption.  Such notice may be withdrawn atany time prior to the close of business on the business day immediatelypreceding the effective date of the proposed exercise.  The Committee shall determine the time ortimes at which an Option may be exercised in whole or in part and the method ormethods by which and the form or forms in which payment of the Option ExercisePrice 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 aproperly executed exercise notice to the Company together with a copy ofirrevocable instructions to a broker to deliver promptly to the Company theamount of sale or loan proceeds to pay the full amount of the Option ExercisePrice, (iii) by delivering shares of Common Stock owned by the Participant forat lease six months with appropriate stock powers; or (iv) any combination ofthe foregoing forms.  In determining thenumber of shares of Common Stock necessary to be delivered to or retained bythe Company, such shares shall be valued at their Fair Market Value as of theexercise date.

 

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

 

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(d)                                 Limitationson Incentive Stock Options.

 

(1)                                  Tothe extent that the aggregate Fair Market Value of shares of Common Stock withrespect to which Incentive Stock Options are exercisable for the first time bya Participant during any calendar year under the Plan and any other stockoption 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 theCode, such Options shall be treated as Non-Qualified Stock Options.  Such Fair Market Value shall be determined asof the date on which each such Incentive Stock Option is granted.

 

(2)                                  NoIncentive Stock Option may be granted to an individual if, at the time of thegrant, such individual owns, taking into account Section 424(d) of the Code,stock possessing more than 10% of the total combined voting power of allclasses of stock of the Company unless (i) the exercise price per share of suchIncentive Stock Option is at least 110% of the Fair Market Value of a share ofCommon Stock at the time such Incentive Stock Option is granted and (ii) suchIncentive Stock Option is not exercisable after the expiration of five yearsfrom the date such Incentive Stock Option is granted.

 

(e)                                  Effectof Termination of Employment.

 

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

 

(2)                                  Unlessthe applicable Award Agreement provides otherwise, in the event that theemployment of a Participant with the Company or a Subsidiary of the Companyshall terminate on account of the Disability or death of the Participant (i)Options granted to such Participant, to the extent that they were exercisableat the time of such termination, shall remain exercisable until the firstanniversary of such termination, on which date they shall expire, and (ii)Options granted to such Participant, to the extent that they were notexercisable at the time of such termination, shall expire at the close ofbusiness on the date of such termination. Notwithstanding the foregoing, no Option shall be exercisable after theexpiration of its term.

 

(3)                                  Unlessan applicable Award Agreement provides otherwise, if a Participant’s employmentwith 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 ofemployment, on which date they shall expire. Notwithstanding the foregoing, no Option shall be exercisable afterexpiration of its term.

 

(f)                                    Effectof Change in Control.

 

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

 

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the Plan.  Notwithstanding theforegoing, no Option shall be exercisable after the expiration of itsterm.  Any vested, exercisable Optionsoutstanding at the time of a Change in Control shall be cashed out, convertedto options of the acquiring entity, assumed by the acquiring entity orotherwise disposed of in the manner provided in any stockholder-approvedagreement or plan governing or providing for such Change in Control (“Change inControl Agreement”); provided that any such cash-out, conversion, assumption ordisposition of the Options shall not deprive the Option holder of the inherentvalue of his Options, measured solely by the excess of the Fair Market Value ofthe underlying Option shares immediately prior to the Change in Control overthe Option Exercise Price, without the holder’s consent.  In the absence of such governing provisionsin a Change in Control Agreement, the Committee in its sole discretion may on acase by case basis require any vested, exercisable Options that remainoutstanding upon a Change in Control to be cashed out and terminated inexchange for a lump sum cash payment, shares of the acquiring entity or acombination thereof equal in value to the fair market value of the Option,measured in the manner described above, immediately prior to the Change inControl. Any non-vested Options shall terminate upon a Change in Controlunless: (A) otherwise provided in the Change in Control Agreement or in awritten agreement, such as a severance agreement, between the Company and theParticipant; or (B) the Committee in its sole discretion on a case by casebasis elects in writing to waive termination.

 

8.                                       TandemSARs.

 

The Committee may grantin connection with any Option granted hereunder one or more Tandem SARsrelating to a number of shares of Common Stock less than or equal to the numberof shares of Common Stock subject to the related Option.  A Tandem SAR may be granted at the same timeas, or, in the case of a Non-Qualified Stock Option, subsequent to the timethat, its related Option is granted.

 

(a)                                  BenefitUpon Exercise.

 

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

 

(b)                                 Termand Exercise of Tandem SAR.

 

(1)                                  ATandem SAR shall be exercisable only if and to the extent that its relatedOption is exercisable.

 

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

 

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(3)                                  NoTandem SAR shall be assignable or transferable otherwise than together with itsrelated Option, and any such transfer or assignment will be subject to theprovisions of Section 20 of the Plan.

 

(4)                                  ATandem SAR shall be exercisable by delivering notice to the Company’s principaloffice, to the attention of its Secretary, no less than one business day inadvance of the effective date of the proposed exercise.  A Tandem SAR may also be exercisedelectronically by notifying the Company’s agent, pursuant to the methods thenin use by that agent.  Such notice shallspecify the number of shares of Common Stock with respect to which the TandemSAR is being exercised and the effective date of the proposed exercise andshall be signed by the Participant or other person then having the right toexercise the Option to which the Tandem SAR is related.  Such notice may be withdrawn at any timeprior to the close of business on the business day immediately preceding theeffective date of the proposed exercise.

 

9.                                       Stand-AloneSARs.

 

(a)                                  BenefitUpon Exercise.

 

The exercise of a Stand-Alone SAR withrespect to any number of shares of Common Stock shall entitle the Participantto a cash payment, for each such share, equal to the excess of (i) the FairMarket Value of a share of Common Stock on the exercise date over (ii) theReference Value of the Stand-Alone SAR. Such payments shall be made as soon as practicable after the effectivedate of such exercise.

 

(b)                                 Termand Exercise of Stand-Alone SARs.

 

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

 

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

 

(c)                                  Effectof Termination of Employment.

 

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

 

(d)                                 Effectof Change in Control.

 

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

 

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exercisable until their expiration notwithstanding the provisions ofSection 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 shallexpire at the close of business on the date of such Change in Control.  Any vested, exercisable Stand-Alone SARsshall, upon a Change in Control, be cashed out, converted, assumed or otherwisedisposed of in the same manner as applies to Options under Section 7(f) of thePlan.

 

10.                                 RestrictedStock and Restricted Stock Units.

 

(a)                                  IssueDate and Vesting Date.

 

At the time of the grant of shares ofRestricted Stock, the Committee shall establish an Issue Date or Issue Datesand a Vesting Date or Vesting Dates with respect to such shares, or in the caseof Restricted Stock Units, a Vesting Date or Vesting Dates.  The Committee may divide such shares or unitsinto classes and assign a different Issue Date and/or Vesting Date, asapplicable, for each class.  If thegrantee is employed by the Company or a Subsidiary of the Company on an IssueDate (which may be the date of grant), the specified number of shares ofRestricted Stock shall be issued in accordance with the provisions of Section10(e) of the Plan.  Provided that allconditions to the vesting of a share of Restricted Stock imposed pursuant toSection 10(b) of the plan are satisfied, and except as provided in Section10(g) of the Plan, upon the occurrence of the Vesting Date with respect to ashare of Restricted Stock, such share shall vest and the restrictions ofSection 10(c) of the Plan shall lapse.

 

(b)                                 Conditionsto Vesting.

 

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

 

(c)                                  Restrictionson Transfer Prior to Vesting.

 

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

 

(d)                                 Dividendson Restricted Stock.

 

The Committee in its discretion may requirethat any dividends paid on shares of Restricted Stock shall be held in escrowuntil all restrictions on such shares have lapsed.

 

(e)                                  Issuanceof Certificates.

 

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

 

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

 

(2)                                  Eachcertificate issued pursuant to this Section 10(e), together with the stockpowers relating to the shares of Restricted Stock evidenced by suchcertificate, shall be held by the Company unless the Committee determinesotherwise.

 

(f)                                    Consequencesof Vesting.

 

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

 

(g)                                 Effectof Termination of Employment.

 

(1)                                  Subjectto such other provision as the Committee may set forth in the applicable AwardAgreement, and to the Committee’s amendment authority pursuant to Section 4 ofthe Plan, upon the termination of a Participant’s employment by the Company orany Subsidiary of the Company for any reason other than Cause, any and allshares of Restricted Stock or Restricted Stock Units that have not vested shallbe immediately forfeited by the Participant and transferred to the Company,provided that if the Committee, in its sole discretion and within 30 days aftersuch termination of employment notifies the Participant in writing of itsdecision 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 suchunits subject to such continuing restrictions as the Committee may prescribe insuch notice.  If shares of RestrictedStock are forfeited in accordance with the provisions of this Section 10,the Company shall also have the right to require the return of all dividendspaid on such shares, whether by termination of any escrow arrangement underwhich such dividends are held or otherwise.

 

(2)                                  Inthe event of the termination of a Participant’s employment for Cause, allshares of Restricted Stock or Restricted Stock Units granted to suchParticipant that have not vested as of the date of such termination shallimmediately be returned to the Company, together with any dividends paid onsuch shares of Restricted Stock.

 

(h)                                 Effectof Change in Control.

 

Upon the occurrence of a Change in Control,all outstanding shares of Restricted Stock or Restricted Stock Units that havenot theretofore vested shall immediately expire and be cancelled.

 

(i)                                     SpecialProvisions Regarding Restricted Stock Awards.

 

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

 

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

 

11.                                 PhantomStock.

 

(a)                                  VestingDate.

 

At the time of the grant of shares of PhantomStock, the Committee shall establish a Vesting Date or Vesting Dates withrespect to such shares.  The Committeemay divide such shares into classes and assign a different Vesting Date foreach class.  Provided that all conditionsto the vesting of a share of Phantom Stock imposed pursuant to Section 11(c) ofthe 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 PhantomStock, such share shall vest.

 

(b)                                 BenefitUpon Vesting.

 

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

 

(c)                                  Conditionsto Vesting.

 

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

 

(d)                                 Effectof Termination of Employment.

 

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

 

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

 

(e)                                  Effectof Change in Control.

 

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

 

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(f)                                    SpecialProvisions Regarding Phantom Stock Awards.

 

The Committee may designate on a case by casebasis whether Phantom Stock awards are intended to be “performance basedcompensation” within the meaning of Code Section162 (m).  The grant of Phantom Stock so designatedshall be based on the attainment by the Company (or a Subsidiary or division ofthe Company if applicable) of performance goals pre-established by theCommittee, based on one or more of the following criteria:  (i) the attainment of a specified percentagereturn on total stockholder equity of the Company; (ii) the attainment of aspecified percentage increase in earnings per share of Common Stock; (iii) theattainment of a specified percentage increase in net income of the Company; and(iv) the attainment of a specified percentage increase in profit beforetaxation of the Company (or a Subsidiary or division of the Company ifapplicable).  Attainment of any suchperformance criteria shall be determined in accordance with generally acceptedaccounting principles as in effect from time to time.  Such shares shall be released fromrestrictions only after the attainment of such performance measures have beencertified by the Committee.

 

12.                                 StockBonuses.

 

In the event that the Committeegrants a Stock Bonus, a certificate for the shares of Common Stock comprisingsuch Stock Bonus shall be issued in the name of the Participant to whom suchgrant was made and delivered to such Participant as soon as practicable afterthe date on which such Stock Bonus is payable.

 

13.                                 Rightsas a Stockholder.

 

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

 

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

 

Nothing contained in thePlan or any Award Agreement shall confer upon any Participant any right withrespect to the continuation of employment by the Company or any Subsidiary ofthe Company or interfere in any way with the right of the Company or anySubsidiary of the Company, subject to the terms of any separate employmentagreement to the contrary, at any time to terminate such employment or toincrease or decrease the compensation of the Participant.  The Committee’s granting of an IncentiveAward to a Participant at any time shall neither require the Committee to grantany other Incentive Award to such Participant or other person at any time orpreclude the Committee from making subsequent grants to such Participant or anyother person.

 

15.                                 SecuritiesMatters.

 

(a)                                  TheCompany shall be under no obligation to effect the registration pursuant to theSecurities Act of any interests in the Plan or any shares of Common Stock to beissued hereunder or to effect similar compliance under any state laws.  Notwithstanding anything herein to thecontrary, the Company shall not be obligated to cause to be issued or deliveredany certificates evidencing shares of Common Stock pursuant to the Plan unlessand until the Company is advised by its counsel that the issuance and deliveryof such certificates is in compliance with all applicable laws, regulations ofgovernmental authority and the requirements of any securities exchange on whichshares of Common Stock are traded.  TheCommittee may require, as a condition of the issuance and delivery ofcertificates evidencing shares of Common Stock pursuant to the terms hereof andof the applicable 

 

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Award Agreement, that the recipient of suchshares make such covenants, agreements and representations, and that suchcertificates bear such legends, as the Committee, in its sole discretion, deemsnecessary or desirable.

 

(b)                                 Thetransfer of any shares of Common Stock hereunder shall be effective only atsuch time as counsel to the Company shall have determined that the issuance anddelivery of such shares is in compliance with all applicable laws, regulationsof governmental authority and the requirements of any securities exchange onwhich shares of Common Stock are traded. The Committee may, in its solediscretion, defer the effectiveness of any transfer of shares of Common Stockhereunder in order to allow the issuance of such shares to be made pursuant toregistration or an exemption from registration or other methods for complianceavailable under federal or state securities laws.  The Committee shall inform the Participant inwriting of its decision to defer the effectiveness of a transfer.  During the period of such deferral inconnection with the exercise of an Option, the Participant may, by writtennotice, withdraw such exercise and obtain the refund of any amount paid withrespect thereto.

 

16.                                 WithholdingTaxes.

 

Whenever cash is to bepaid pursuant to an Incentive Award, the Company (or its agent) shall have theright to deduct there from an amount sufficient to satisfy any federal, stateand local withholding tax requirements related thereto.  Whenever shares of Common Stock are to bedelivered pursuant to an Incentive Award, the Company (or its agent) shall havethe right to require the Participant to remit to the Company in cash an amountsufficient to satisfy any federal, state and local withholding tax requirementsrelated thereto.  With the approval ofthe Committee, a Participant may satisfy the foregoing requirement by electingto have the Company (or its agent) withhold from delivery shares of CommonStock having a fair market value equal to the amount of tax to be withheld.  Such shares shall be valued at their FairMarket Value on the date on which the amount of tax to be withheld isdetermined.  Such a withholding electionmay be made with respect to all or any portion of the shares to be deliveredpursuant to an Incentive Award.

 

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

 

If any Participant shall, in connection withthe acquisition of shares of Common Stock under the Plan, make the electionpermitted under Section 83(b) of the Code (i.e., an election to include ingross 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 offiling notice of the election with the Internal Revenue Service, in addition toany filing and a notification required pursuant to regulation issued under theauthority of Code Section 83(b).

 

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

 

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

 

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19.                                 Amendmentor Termination of the Plan.

 

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

 

20.                                 TransfersUpon Death; Non-Assignability.

 

Upon the death of a Participant, outstandingIncentive Awards granted to such Participant may be exercised only by theexecutor or administrator of the Participant’s estate or by a person who shallhave acquired the right to such exercise by will or by the laws of descent anddistribution.  No transfer of anIncentive Award by will or the laws of descent and distribution shall beeffective to bind the Company unless the Committee shall have been furnishedwith (a) written notice thereof and with a copy of the will and/or suchevidence as the Committee may deem necessary to establish the validity of thetransfer and (b) an agreement by the transferee to comply with all the termsand conditions of the Incentive Award that are or would have been applicable tothe Participant and to be bound by the acknowledgments made by the Participantin connection with the grant of the Incentive Award.

 

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

 

21.                                 Expensesand Receipts.

 

The expenses of the Planshall be paid by the Company.  Anyproceeds received by the Company in connection with any Incentive Award will beused for general corporate purposes.

 

22.                                 Failureto Comply.

 

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

 

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23.                                 EffectiveDate and Term of Plan.

 

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

 

24.                                 ApplicableLaw.

 

Except to the extent preempted by anyapplicable federal law, the Plan will be construed and administered inaccordance with the laws of the State of Delaware, without reference to theprinciples of conflicts of law.

 

25.                                 ParticipantRights.

 

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

 

26.                                 Unfunded Status of Awards.

 

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

 

27.                                 NoFractional Shares.

 

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

 

28.                                 Beneficiary.

 

A Participant may filewith the Committee a written designation of a beneficiary on such form as maybe prescribed by the Committee and may, from time to time, amend or revoke suchdesignation.  If no designatedbeneficiary survives the Participant, the executor or administrator of theParticipant’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, Section422 of the Code and Section 162(m) of the Code, and all provisions hereof shallbe construed in a manner to so comply.

 

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