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SCO's 10K, MyDoom, and the Morgan Keegan letters
Thursday, January 29 2004 @ 05:24 PM EST

The new SCO 10K is available. There are some interesting exhibits, as well. What is missing in the long list of exhibits are the Sun and Microsoft licenses. The Morgan Keegan letters are attached as exhibits, and there is an Independent Contractor Agreement with S2 Strategic Consulting. So where are the Sun and Microsoft licenses? Shouldn't they be listed in the SEC filing also? The 10K refers to limitations on the Microsoft license, but it doesn't explain what limitations it is referring to.

Another odd thing. The 10K, which is for the fiscal year ending October 31, 2003 and which was signed and filed on January 28, 2004, mentions the MyDoom virus, which happened January 26, 2004. It puts it in the context of adverse results from their litigation strategy and seems to pin the blame on the Linux community, which as it now turns out is inaccurate:

As a result of our action against IBM and our SCOsource initiatives to protect our intellectual property rights, several participants in the Linux industry and others affiliated with IBM or sympathetic to the Linux movement have taken actions attempting to negatively affect our business and our SCOsource efforts. Linux proponents have taken a broad range of actions against us, including, for example, attempting to influence participants in the markets in which we sell our products to reduce or eliminate the amount of our products and services they purchase from us. We expect that similar efforts likely will continue. There is a risk that participants in our marketplace will negatively view our action against IBM and our SCOsource initiatives, and we may lose support from such participants. Any of the foregoing could adversely affect our position in the marketplace, our results of operations and our stock price.

We have also experienced several denial-of-service attacks on our website, which have prevented web users from accessing our website and doing business with us for a period of time. Additionally, we have recently experienced a distributed denial-of-service attack as a result of the "Mydoom" worm virus. It is reported that the effects of this virus will continue into February 2004. If such attacks continue or if our customers and strategic partners are also subjected to similar attacks, our business and results of operations could be materially harmed.

This gives the decided impression of tremendous eagerness on the part of SCO to include this information and to make it seem the Linux community or sympathizers were responsible. MyDoom, experts now say, was done by professional spammers in Russia. It also leaves out the date of this virus, which misleadingly makes it seem like it happened during the fiscal year ending October 31, 2003. So what does SCO have to do now? Are they supposed to correct this SEC filing to make it factually accurate? Speaking of attacks, what about the last one? Was that by the same criminal spammer group?

The 10K also mentions a Proxy Statement, but it isn't made available in this filing:

Portions of the Registrant's proxy statement to be filed pursuant to Regulation 14A in connection with its annual meeting of stockholders are incorporated by reference into Part III of this Form 10-K.

If I've missed it, perhaps someone can show me where this document can be found. You can access the complete list of exhibits on this page. If you are curious to compare last year's 10K with this one, it is here. Obviously, there has been a sea change.

Morgan Keegan came into the picture way back in August of 2002 and appears to have realized at some point that this was not your garden variety situation:

The SCO engagement has taken a number of unexpected twists and turns that have required assistance that goes beyond conventional investment banking services.

The impression I form from the letters is that they hoped IBM would buy the company. The other impression I form is that SCO in this 10K is trying hard to portray the company as still actively in the software business. They describe their core business like this:

Our core business is to sell and service our UNIX operating system and related software products to small-to-medium sized businesses and branch offices and franchisees of Fortune 1000 businesses. Our main products that drive the majority of our UNIX revenue are OpenServer and UnixWare. We intend to continue to maintain our core business in fiscal year 2004 by continuing our research and development efforts to enhance our OpenServer and UnixWare products and their related services.

However, the numbers indicate that if this is their "core business", it isn't doing very well:

If the market for UNIX continues to contract, it may adversely affect our business.

Our revenue from the sale of UNIX-based products has declined over the last four years. This decrease in revenue has been attributable primarily to increased competition from other operating systems, particularly Linux, lower information technology spending and the worldwide economic slowdown. If the demand for UNIX-based products continues to decline, and we are unable to develop UNIX products and services that successfully address a market demand, our business will be adversely affected. Because of the long adoption cycle for operating system purchases and the long sales cycle of our operating system products, we will not be able to reverse these revenue declines quickly.

If they relied on revenue from their software and services, I think they'd be in real trouble, if they'd be in business at all. So we can thank Sun and Microsoft (and then the BayStar deal) for keeping them afloat. SCO expects their alleged "core business" to do worse soon, when they start suing end users, according to the 10K:

The success of our UNIX business will depend on the level of commitment and certification we receive from industry partners and developers. In recent years, we have seen hardware and software vendors as well as software developers turn their certification and application development efforts toward Linux and elect not to continue to support or certify to our UNIX operating system products. If this trend continues, our competitive position will be adversely impacted and our future revenue from our UNIX business will decline. The decline in our UNIX business may be accelerated if industry partners withdraw their support from us as a result of our SCOsource initiatives and in particular any lawsuit against end users violating our intellectual property and contractual rights. . . .

Our SCOsource initiatives, particularly lawsuits against end users violating our intellectual property and contractual rights, may cause industry partners, developers and hardware and software vendors to choose not to support or certify to our UNIX operating system products. This would lead to an accelerated decline in our UNIX products and services revenue and would adversely impact our results of operations and liquidity.

But what strikes me the most is this:

To protect our proprietary rights, we rely primarily on a combination of copyright laws, contractual rights and a detailed legal strategy. . . .

Intellectual Property Protection Generally

Our SCOsource initiatives rely primarily on a combination of contract rights, copyright laws and a detailed legal strategy. We also require that our employees and consultants sign confidentiality and nondisclosure agreements. We also regulate access to, and distribution of, our documentation and other proprietary information.

We cannot guarantee the success of our SCOsource initiatives and other efforts to protect our intellectual property rights, but we will continue to seek to enforce and pursue these rights through public awareness and the legal system, if necessary. Additionally, we cannot be certain that we will succeed in preventing the future misappropriation of our copyrights or that we will be able to prevent the unauthorized use of our technology in the future.

I don't remember seeing this language emphasizing contractual rights and mentioning "a detailed legal strategy" showing up before. Does this mean they are recognizing that the initial thrust of their SCOSource program didn't work out and they need to shift from accusations of System V code in Linux to a complex strategy to go after Unix customers who also use Linux, relying on license terms plus copyright accusations regarding the ABI files, as opposed to suing the Linux world at large for System V code allegedly in Linux? I could be mistaken, and only time will confirm or deny, but that is what it sounds like to me from this language. I also get a hazy first impression that the letters they sent out to their customers regarding auditing them on their use of Linux is intended to prevent further shifts to Linux, putting them in a kind of license prison so they can't switch to Linux as long as their Unix license terms remain in effect:

Warning Letters to Linux End Users.

In response to our belief that parts of our UNIX source code and derivative works have been inappropriately included in the Linux operating system, in May 2003, we sent letters to approximately 1,500 large corporations notifying them that using the Linux operating system may violate our asserted intellectual property rights. Subsequently, we began contacting Linux end users about their use of Linux, and in December 2003, we began sending additional letters to selected Fortune 1000 Linux end users specifically asserting that using the Linux operating system in a commercial setting violates our rights under the United States Copyright Act, including the Digital Millennium Copyright Act, because certain copyrighted application binary interfaces, or "ABI Code," have been copied from our copyrighted UNIX code base and derivative works and contributed to Linux without proper authorization and without copyright attribution. In the letter we also warned Linux end users that we intend to take appropriate actions to protect our rights and that they may not use our copyrighted code except as authorized by us.

Linux End User Intellectual Property ("IP") License Initiative. In August 2003, we first offered to Linux end users our IP license in the United States and recently began offering the license in countries outside the United States. The license permits the use of our intellectual property, in binary form only, as contained in the Linux operating system. By purchasing the license, customers will properly compensate us for our UNIX intellectual property as currently found in Linux.

Requiring UNIX Licensees to Certify Full Compliance with License Agreements. Beginning in December 2003, we began delivering written notice to a large number of our UNIX licensees that they must certify in writing to us that they are in full compliance with their license agreements, including certification that they are not using our proprietary UNIX code and derivative works in Linux, have not allowed unauthorized use of our licensed UNIX by their employees or contractors and have not breached confidentiality provisions relating to licensed UNIX code.

If that impression proves accurate, that would be pretty much an admission that except for the ABI files, there is no code they can claim in Linux that they can go after end users about. They can try to go after IBM for methods and derivative code and contractual violations and such, but from what attorneys have explained to me, even if they prevailed, that has no applicability to end users. End users are not parties to that IBM contract. As for the claims on the ABI files, they are the same allegations that went nowhere in the BSDi case. No doubt they are aware that it isn't likely to fly this time either, so perhaps they have decided to go after Unix customers who also use Linux, based on licensing terms and the ABI claims instead, hoping to terrorize companies with the DMCA? That is my provisional theory, after reading this 10K. I could be wrong of course, because I'm trying to understand SCOThink, and I don't think like SCO.

Here are the Morgan Keegan letters, so you can form your own impression.

****************************************************************************


Exhibit 10.8

August 16, 2002

Mr. Darl McBride
President & CEO
Caldera
355 South 520 West
Lindon, Utah 84042

Dear Darl:

This letter confirms the engagement of Morgan Keegan & Company, Inc. ("Morgan Keegan") to act as exclusive financial advisor to Caldera International, Inc. ("Caldera" or the "Company") to assist the Company in its analysis, consideration and, if appropriate, execution of various financial and strategic alternatives available to it, and such other matters to which you and we may agree during the course of our engagement. Such financial alternatives and other matters may include assisting the Company in securing additional equity and/or debt capital; and assisting the Company in its analysis and consideration of the financial aspects of certain potential strategic transactions, including, but not limited to, mergers, acquisitions, spin-offs, joint ventures, minority investments, negotiated purchases, or other similar transactions (individually, the "Transaction" and collectively, the "Transactions").

As exclusive financial advisor to the Company, Morgan Keegan will perform the following functions:

    a.Assist Caldera in the assessment of certain market information and business strategies relevant to the operations of the Company;

    b.Assist Caldera in developing an appropriate value range in connection with a Transaction;

    c.Assist Caldera in reviewing, evaluating and structuring any proposed Transaction;

    d.Assist Caldera in developing a general negotiating strategy and in actual negotiations with potential investors, lenders and/or merger and acquisition candidates and consult with and assist counsel and independent accountants in structuring and carrying through to settlement any agreement which may be reached;

    e.Assist Caldera in preparing summary information (the "Information") with respect to the Company for distribution to potential investors, lenders and/or merger and acquisition candidates selected by Morgan Keegan and Caldera, describing the Company and its business, it being specifically agreed that (i) the Information shall be based entirely upon information supplied by the Company (or public information), and Caldera hereby warrants that, to the best of its knowledge, the Information supplied shall be complete and accurate in all material respects, and not misleading and (ii) Morgan Keegan shall not be responsible for the accuracy and completeness of the Information except as it pertains to public information derived from research performed by Morgan Keegan.

    f.Morgan Keegan will advise and assist Caldera, on a best efforts basis, in obtaining the private equity and/or debt investment required to capitalize the Company in such amount and upon such terms as deemed to be appropriate by the Company and Morgan Keegan. Morgan Keegan agrees to provide Caldera with a list of all investors contacted by Morgan Keegan on a monthly basis. Morgan Keegan will provide advice and assistance in structuring and pricing the securities and in locating appropriate financing sources.

In order to coordinate our efforts with respect to a possible Transaction, during the period of our engagement hereunder, if the Company or its management receives an inquiry regarding a Transaction, the Company or such persons will promptly advise Morgan Keegan of such inquiry. All contact with third parties by Morgan Keegan must be approved by the Company.

1. In consideration for the services rendered by Morgan Keegan hereunder, the Company shall pay Morgan Keegan:

    a.An advisory fee equal to a warrant to purchase 200,000 shares of Caldera common stock for an exercise price of $0.01 per share (the "Warrant Fee"), payable upon execution of this Agreement. The company will file a registration statement for the shares underlying the warrant. Morgan Keegan agrees that for a period of one year from the date of this agreement, it will sell no more than 50,000 shares in any single calendar quarter.

    b.In the event that the Company sells equity and/or debt securities, the Company will pay Morgan Keegan placement fees (the "Contingent Placement Fees") payable in cash at closing as follows:

    i.Cash equal to six (6) percent of the principal amount of equity financing (common stock, preferred stock and convertible preferred stock); plus

    ii.Cash equal to three (3) percent of the principal amount of mezzanine financing (convertible debt, whether subordinated or not); plus

    iii.Cash equal to one (1) percent of the principal amount of senior debt provided, however, that Morgan Keegan shall not be entitled to such a fee with respect to senior debt sourced from commercial banks and other institutional lenders.

      For those potential investors listed on Appendix A, the Contingent Placement Fee otherwise owing to Morgan Keegan shall be reduced by 50%. If more than one closing is required in connection with the sale of such Securities, only that portion of the Contingent Placement Fee applicable to each closing shall be payable at such closing.

    c.In the event of the sale or acquisition of the Company by a third party, the Company will pay Morgan Keegan a transaction fee (the "Transaction Fee") payable in cash at closing equal to the greater of: (i) two (2) percent of the aggregate consideration (the "Transaction Consideration"), as defined below, paid to the Company and its shareholders or (ii) $250,000 (not including gains, if any, from the Warrant Fee).

    d.In the event that the Company completes an acquisition, the Company will pay Morgan Keegan a Transaction Fee payable in cash at closing equal to the greater of: (i) two (2) percent of the Transaction Consideration paid to a target or its shareholders or (ii) $250,000 (not including gains, if any, from the Warrant Fee). Notwithstanding this section 1 (d), the Transaction Fee payable to Morgan Keegan relating to the closing of a transaction or series of transactions with Vista.com will be limited to $150,000 which will be prorated based on a total transaction value of $5 million.

      All fees payable pursuant to Sections 1(b), (c), and (d) above (collectively the "Success Fees"), shall be subject to a credit in favor of Caldera in the amount of $200,000 (the "Warrant Credit"). The Warrant Credit shall be applied against all Success Fees at a rate of 25% per payment to Morgan Keegan until such time as the Warrant Credit is fully depleted. In addition, whether or not a Transaction is completed, the Company will reimburse Morgan Keegan, on a monthly basis, for its reasonable out of pocket expenses (including fees and expenses of counsel) incurred in connection with its acting as advisor hereunder. The Company agrees to provide to Morgan Keegan, upon signing this Agreement, a $20,000 advance against such out of pocket expenses. Such out of pocket expenses shall not exceed $25,000 without the prior consent of the Company, which shall not be unreasonably withheld.

The "Transaction Consideration" for purposes of calculating a Transaction Fee shall mean the gross value of all cash, securities and other property paid directly or indirectly by an acquiror to a seller or sellers in connection with a Transaction. A seller may include the Company, an affiliate of the Company or stockholders of the Company. The value of any securities (whether debt or equity) or other property delivered as consideration in any Transaction shall be determined as follows: (i) the value of securities that are freely tradeable in an established public market will be determined on the basis of the average closing market price on the last five trading days immediately prior to the closing of the Transaction and (ii) the value of securities that are not freely tradeable or have no established public market and the value of consideration that consists of other property, shall be the fair market value thereof, as reasonably determined by the Company and Morgan Keegan. Transaction Consideration also shall be deemed to include the aggregate principal amount of all indebtedness assumed or acquired, directly or indirectly, by the acquiring party or any of its affiliates in a Transaction or retired, defeased or otherwise cancelled in connection with the Transaction and the present value of any agreements not to compete or consulting agreements.

Amounts paid into escrow and contingent payments in connection with any Transaction will be included as part of the Transaction Consideration. Transaction Fees on amounts paid into escrow shall be payable upon the release of such amounts paid into such escrow. If any portion of the consideration in connection with any Transaction is payable in the future on the basis of occurrence of certain future events, the portion of the Transaction Fee relating to such contingent payments shall be payable at the time the actual consideration is paid.

2. The Company will advise Morgan Keegan of its intention to make any offers or sales of Securities during the term of this agreement. As used herein, the terms "offer" and "sale" have the meanings specified in Section 2(3) of the Securities Act of 1933, as amended (the "Act").

3. The Company and Morgan Keegan agree that:

    a.The Company will not, directly or indirectly, make any offer or sale of any of the Securities or any securities of the same or similar class as the Securities, the result of which would cause the offer and sale of the Securities to fail to be entitled to the exemption from registration afforded by Section 4(2) of the Act.[do not understand this]

    b.The Company will comply with all requirements of Regulation D promulgated under the Act. Without limitation, the Company will:

    i.not offer or sell the Securities by means of any form of general solicitation or general advertising;

    ii.not offer or sell the Securities to any person who it does not have a reasonable basis to believe is an "accredited investor" (as defined in Rule 501 under the Act);

    iii.exercise reasonable care to assure that the purchasers of the Securities are not underwriters within the meaning of Section 2(11) of the Act and, without limiting the foregoing, that such purchases will comply with Rule 502(d) under the Act; and

    iv.file a Form D with the Securities and Exchange Commission as contemplated by Rule 503 under the Act. (Morgan Keegan shall have the right to approve the Form D, which approval shall not be unreasonably withheld. The Company will not make any other filings with the Securities and Exchange Commission with respect to the offer and sale of the Securities without Morgan Keegan's prior consent, which may not be unreasonably withheld.)

    b.Morgan Keegan will comply with all applicable requirements of Regulation D promulgated under the Act. Without limitation, Morgan Keegan will:

    i.not offer the Securities by means of any form of general solicitation or general advertising; and
    ii.not offer the Securities to any person who it does not have a reasonable basis to believe is an "accredited investor" (as defined in Rule 501 under the Act).

c.The Company agrees to take such action (if any) as Morgan Keegan may reasonably request to qualify the Securities for offer and sale under the securities laws of such states as Morgan Keegan may specify; provided that in connection therewith the Company will not be required to qualify as a foreign corporation or file a general consent to service of process. The Company agrees that it will make any filings or take other actions required under applicable state securities laws to permit the sale of the Securities.

4. If, in connection with the services or matters that are the subject of this Agreement, Morgan Keegan or any controlling person, affiliate, director, officer, employee or agent of Morgan Keegan (Morgan Keegan and each such other person referred to as an "Indemnified Person") becomes involved in any capacity in any lawsuit, claim or other proceeding for which indemnity may be sought pursuant to Section 4 of this Agreement, the Company shall immediately reimburse such Indemnified Person for any and all legal or other expenses reasonably incurred by such Indemnified Person in connection with investigating, preparing to defend or defending such lawsuit, claim or other proceeding. The Company also agrees to indemnify each Indemnified Person from, and hold it harmless against, any and all losses, claims, damages, liabilities or expenses to which such Indemnified Person may become subject arising in any manner out of or in connection with the services or matters which are the subject of this Agreement; provided, however, that the Company shall not be liable under this Section 4 in respect of any loss, claim, damage, liability or expense to the extent that it is finally judicially determined by a court of competent jurisdiction that such loss, claim, damage or liability resulted directly from the gross negligence or willful misconduct of Morgan Keegan in the performance of its services hereunder.

The Company agrees that the indemnification and reimbursement commitments set forth in this Section 4: (i) shall apply whether or not any Indemnified Person is a formal party to any such lawsuit, claim or other proceeding and (ii) are in addition to any liability that the Company may otherwise have to any Indemnified Person. The Company agrees that, unless a final judicial determination is made to the effect specified in the proviso in the last sentence of the preceding paragraph, any settlement of a lawsuit, claim or other proceeding against the Company arising out of the transactions contemplated by this Agreement which is entered into by the Company shall include a release from the party bringing such lawsuit, claim or other proceeding of each Indemnified Person, which release shall be reasonably satisfactory to Morgan Keegan. The Company further agrees that no Indemnified Person shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Company in connection with Morgan Keegan's engagement hereunder, except for such losses, claims, damages or liabilities incurred by the Company that are finally judicially determined by a court of competent jurisdiction to have resulted directly from the gross negligence or willful misconduct of such Indemnified Person.

The Company and Morgan Keegan agree that if such indemnification or reimbursement sought pursuant to this Section 4 is finally judicially determined by a court of competent jurisdiction to be unavailable, then, whether or not Morgan Keegan is the Indemnified Person, the Company and Morgan Keegan shall contribute to the losses, claims, damages, liabilities and expenses for which such indemnification or reimbursement is held unavailable (i) in such proportion as is appropriate to reflect the relative benefits to the Company, on one hand, and Morgan Keegan on the other, in connection with the transactions to which such indemnification or reimbursement relates, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative faults of the Company, on the one hand, and Morgan Keegan on the other, as well as any other equitable considerations; provided, however, that in no event shall the amount to be so contributed by Morgan Keegan exceed the amount of the cash fees actually received by Morgan Keegan hereunder.

5. The term of Morgan Keegan's appointment and authorization hereunder shall extend from the date hereof through February 15, 2003, or such other date as may be mutually agreed by the Company and Morgan Keegan, and shall be automatically renewed for successive monthly periods until terminated in writing by either the Company or Morgan Keegan. The provisions of Sections 1, 2, 3, 4, 6, 8, 9, 10 and this Section 5 shall survive any termination of this Agreement. During the term of this Agreement, Morgan Keegan shall provide, on a monthly basis, the Company with a list of all potential investors, lenders and merger and acquisition candidates ("The Active Candidate List") that Morgan Keegan contacted on behalf of the Company in its capacity as exclusive financial advisor and with whom the Company had substantive, meaningful discussions. If the Company completes a Transaction with any entity on "The Active Candidate List" within twelve (12) months of the termination of this engagement, the Company shall be responsible for the payment of the fees under Section 1 of this Agreement.

6. Morgan Keegan is a full service securities firm and as such may from time to time affect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of the Company and other companies which may be the subject of the engagement contemplated by this Agreement.

7. All opinions and advice provided to the Company in connection with this engagement are intended solely for the benefit and use of the Company in connection with the matters described in this Agreement, and accordingly such advice shall not be relied upon by any person or entity other than the Company. The Company will not make any other use of any such opinions or advice. In addition, none of (i) the name of Morgan Keegan, (ii) any advice rendered by Morgan Keegan to the Company, or (iii) any communication from Morgan Keegan pursuant to this Agreement will be quoted or referred to in any report, document, release or other communication prepared, issued or transmitted by the Company, or any person controlled by the Company, without Morgan Keegan's prior written consent, which consent will not be unreasonably withheld.

8. In the event of consummation of any transaction, Morgan Keegan shall have the right to place advertisements in financial and other newspapers and journals at its own expense describing its services to the Company hereunder, provided that Morgan Keegan will submit a copy of any such advertisements to the Company for its approval, which approval shall not be unreasonably withheld.

9. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

10. This Agreement may not be amended or modified except in writing signed by each of the parties hereto and shall be governed by and construed in accordance with the laws of the State of Utah. Each of the parties hereto expressly waives all right to trial by jury in any action or proceeding arising out of this Agreement. This Agreement incorporates the entire understanding of the parties with respect to the subject matter hereof and supersedes all previous agreements should they exist with respect thereto and shall be binding upon and inure to the benefit of the Company, Morgan Keegan, and the other Indemnified Persons and their respective successors, assigns, heirs and personal representatives.

If the foregoing correctly sets forth the understanding and agreement between Morgan Keegan and the Company, please so indicate in the space provided below, whereupon this letter shall constitute a binding agreement as of the date first above written.




Very truly yours,



MORGAN KEEGAN & COMPANY, INC.



By:


/s/
KIMBLE L. JENKINS
Name: Kimble L. Jenkins
Title: Managing Director

Agreed and Accepted:

CALDERA, INC.


By:


/s/
DARL C. MCBRIDE


Name: Darl McBride
Title: President and CEO

APPENDIX A

VSpring Capital (SCO)
Vector Capital (SCO)
IDG Ventures (Broadmark)
Group Atlantic Partners, LLC (Broadmark)
Paladin Capital Group (Broadmark)
Pequot Capital (Broadmark)
Technology Crossover Ventures (Broadmark)
Ram Capital Resources, LLC (Impact Capital)
Crestview Capital Fund (Impact Capital)



Exhibit 10.9

February 13, 2003
Mr. Darl McBride
President & CEO
Caldera, dba The SCO Group
355 South 520 West
Lindon, Utah 84042

Dear Darl:

This letter shall serve as the first amendment and clarification to our engagement letter dated August 16, 2002 (the "Engagement Letter").

First, I would like to memorialize your and your management team's satisfaction with Morgan Keegan's services to date. The SCO engagement has taken a number of unexpected twists and turns that have required assistance that goes beyond conventional investment banking services. I understand that you are pleased with Morgan Keegan's assistance and contributions in addressing SCO's atypical needs. It has been, and remains, Morgan Keegan's objective to work diligently with management to build shareholder value at SCO. I also understand that it is our collective intent that Morgan Keegan will continue to work with SCO in the broad range of capacities that Morgan Keegan has served the Company to date.

Accordingly, the Engagement Letter between SCO and Morgan Keegan is amended and clarified as follows:

1.SCO and Morgan Keegan mutually agree to extend the date of the Engagement Letter to August 16, 2003. Further, SCO requires that Kim Jenkins continue to serve as the primary banker in connection with the SCO engagement.

2.SCO and Morgan Keegan agree that, in the event Sun Microsystems and/or Microsoft enters into a substantial SCOsource licensing arrangement with SCO during the term of the engagement, that such an event would fall under provision 1(b) of our Engagement Letter. As such, the aggregate amounts paid under the license agreements would be subject to the Contingent Placement Fee, calculated as six (6) percent for a license with Sun and one (1) percent for a license with Microsoft.

3.SCO and Morgan Keegan reaffirm the merger and acquisition provisions of the Engagement Letter and agree to the applicability of provision 1(c) regarding the payment of a Transaction Fee equal to 2% in the event of a sale or acquisition of SCO to a large strategic company.

Except as otherwise provided above, the Engagement Letter remains unamended in full force and effect.




Very truly yours,



MORGAN KEEGAN & CO., INC.



By:


/s/
KIMBLE L. JENKINS
Name: Kimble L. Jenkins
Title: Managing Director

Agreed and Accepted:

CALDERA, INC., dba The SCO Group


By:


/s/
DARL C. MCBRIDE


Name: Darl C. McBride
Title: Chief Executive Officer

2



Exhibit 10.10

August 16, 2003

Mr. Darl McBride
President & CEO
The SCO Group
355 South 520 West
Lindon, Utah 84042

Dear Darl:

This letter shall serve as the second amendment and clarification to our engagement letter dated August 16, 2002, as amended in a letter dated February 16, 2003 (hereinafter, the "Engagement Letter").

I am pleased to confirm in this letter that SCO and Morgan Keegan have mutually agreed to extend our Engagement Letter in accordance with the terms provided below.

1.SCO and Morgan Keegan mutually agree to extend the date of the Engagement Letter to August 16, 2004, on a non-exclusive basis. SCO requires that Kimble Jenkins continue to serve as the primary banker in connection with the SCO engagement.

2.In the event SCO decides to engage a second investment bank to assist with a financing event, then the Contingent Placement Fees payable to Morgan Keegan provided in Section 1(b) shall be reduced by 67% of the otherwise applicable fee (i.e., 2% for equity financings, 1.0% for mezzanine financing and 0.33% for debt financing). For clarification, if SCO does not engage a second firm, then 100% of the Contingent Placement Fee shall still apply. In the event that SCO does not engage a second full service investment bank, but instead engages the equivalent of a "finder," then the Contingent Placement Fee owed to Morgan Keegan shall be an amount equal to 6% minus the finder's fee, or 3%, whichever is greater. Further, SCO agrees to offer to Morgan Keegan the opportunity to be involved in all financing transactions that may take place during the term of this engagement, however, in the event that Morgan Keegan chooses to not be involved in a financing event, then no fees will be payable to Morgan Keegan for that event.

3.SCO and Morgan Keegan agree that all substantial SCOsource agreements entered into by SCO during the term of the engagement will fall under Section 1(b) of our Engagement Letter. It is understood that the nature of these deals may vary, and therefore depending on the structure of each SCOsource agreement, the Contingent Placement Fee will also vary. For agreements that generate higher margin revenue for SCO such as licensing deals or customer access-related deals, then the Contingent Placement Fee shall equal 3%. For agreements that generate lower margin revenue for SCO such as co-marketing/sales or co-development agreements, then the Contingent Placement Fee shall equal 1%. It is understood that no Contingent Placement Fee will be owed to Morgan Keegan in connection with any licensing agreements for which Morgan Keegan did not provide assistance.

4.SCO and Morgan Keegan reaffirm the merger and acquisition provisions of the Engagement Letter including the applicability of Section 1(c) regarding the payment of a Transaction Fee equal to 2% in the event of a sale, acquisition, or sale of all or a substantial portion of the assets of SCO. In the event of a settlement with IBM during the term of this engagement, SCO agrees to pay Morgan Keegan a Transaction Fee equal to 2% of the aggregate proceeds from such settlement.

For clarification, although a second firm may assist SCO in connection with an M&A transaction, such participation will not serve to reduce Morgan Keegan's fee hereunder. Further, SCO agrees to offer to Morgan Keegan the opportunity to be involved in all M&A transactions that may take place during the term of this engagement, however, in the event that Morgan Keegan chooses to not be involved in an M&A transaction, then no fees will be payable to Morgan Keegan for that transaction.

5.SCO and Morgan Keegan agree that the minimum payments of $250,000 provided in Sections 1(c) and 1(d) no longer apply. Further, that upon payment of the Contingent Placement Fee owed to Morgan Keegan in connection with the recent Microsoft agreement and deduction from that fee of the Warrant Credit, that the Warrant Credit will be deemed to be paid in full.

Except as otherwise provided above, the Engagement Letter remains unamended in full force and effect.




Very truly yours,



MORGAN KEEGAN & CO., INC.



By:


/s/
KIMBLE L. JENKINS
Name: Kimble L. Jenkins
Title: Managing Director

Agreed and Accepted:

CALDERA, INC., dba The SCO Group


By:


/s/
ROBERT K. BENCH


Name: Robert K. Bench
Title: Chief Financial Officer

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