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The SCO Group Exchanges Series A Convertible Preferred Stock
Friday, February 06 2004 @ 01:15 PM EST

Here's SCO's latest press release.


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

The SCO Group Exchanges Series A Convertible Preferred Stock
Friday February 6, 9:15 am ET

LINDON, Utah, Feb. 6 /PRNewswire-FirstCall/ -- The SCO Group, Inc. ("SCO") (Nasdaq: SCOX- News), the owner of the UNIX operating system and a leading provider of UNIX-based solutions, today announced it has exchanged the preferred stock issued in connection with its $50 million private financing completed in October 2003 for a new series of preferred stock. Pursuant to an exchange agreement, SCO issued one new share of Series A-1 Convertible Preferred Stock with revised rights and preferences in exchange for each share of Series A Convertible Preferred Stock previously issued.

This exchange will eliminate the conversion feature that was initially recorded as a current liability on SCO's balance sheet. Further, SCO will no longer be required to record a charge in its quarterly statements of operations for the change in the fair value of the derivative related to the conversion feature. Any difference between the fair value of the new Series A-1 Convertible Preferred Stock and the carrying value of the Series A Convertible Preferred Stock and related conversion feature, will be recorded as a dividend in SCO's income statement for its second quarter, which will end on April 30, 2004.

"The $50 million equity financing SCO closed in October 2003 was an important step to secure the capital necessary to fund all aspects of our business strategies," said Bob Bench, chief financial officer of The SCO Group. "As a result of this exchange, SCO will eliminate the current accounting treatment associated with the Series A Convertible Preferred Stock and, therefore, remove the related current liability on our balance sheet as well as eliminate the need to mark the conversion feature to market each quarter and record a charge for the change in its fair value."

The Series A-1 Convertible Preferred Stock generally has the same rights and preferences as the Series A Convertible Preferred Stock, except that the Series A-1 Convertible Preferred is convertible into SCO's common stock at a variable price based upon the market price of SCO's common stock, subject to a floor price for conversion of $13.50 per share. There is no ceiling on the conversion price. The Series A-1 Convertible Preferred stockholders have certain limited voting rights and the right, but not the obligation, to nominate a candidate for election to SCO's Board of Directors at SCO's next annual meeting of stockholders. The holders of Series A-1 Convertible Preferred Stock have also agreed to some limits on their rights to require SCO to redeem their preferred stock, an increase to the amount of debt that SCO may incur without consent, as well as other contractual benefits, giving SCO expanded operational flexibility.

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