2003-10-17 11:57:43 EDT 800-811-8824 / 690025 Called in. No trouble registering. 2003-10-17 12:01:25 EDT Operator: "We are taking in additional callers and will start in approximately five minutes." 2003-10-17 12:04:19 EDT Blake Stowell: McBride and Bench will speak today. 2003-10-17 12:04:55 EDT McBride: $50 million private equity investment led by BayStar Capital. Pleased with the structure of the transaction. Private placement Convertible at fixed conversion price, $16.93. Closing bid price for five trading days prior to transaction. Upon conversion, 2,953,000 shares, 17.5%. No dividend payable for first year. Year 2: Dividend 8% per annum payable quarterly, cash or stock at SCO's option. Year 3: dividend 10% Year 4 and later: dividend 12%. Liquidation preference: OIP + 8% or ... Will use proceeds for blah blah [all the usual SCO activities]. More info attached to the 8-K filing which "went out within the past hour." 2003-10-17 12:08:14 EDT Q&A session. #1 Steven Shankland, CNET Q: Last May in conference call, you guys said you were looking for equity capital, but you decided not to because of SCO Source. Why did you reverse course? A: "It's easiest to raise money when you don't need it." People approached us, so we sat down, looked at the possibilities. Dilution in May on $50 million would have been much greater. We bought shares back a year ago, 4.3 million shares at $0.93. Now we are issing 2.9 million shares at $15.93. Good deal for shareholders. Q: When do the shares convert? A: [Bob Bench] That can occur any time. We are registering them immediately. #2 Matt Kelly, Deutsche Bank Q: Why do a PIPE with BayStar? A: BayStar compelling ... "very strong track record." Companies in BayStar's portfolio have performed very well: XM Radio, XMSR. Breadth in industry, strong in tech. #3 Herbert Jackson, Rennaissance Ventures Q: Can you give any color to the strategic partnerships in terms of use of proceeds? A: Multiple opportunities ... 2 million UNIX servers active and running. We've got a very strong installed base of SCO UNIX. We've come back to our installed base and said that we're going to keep moving. Longest running SCO server is 20 years ... we're going to refresh them. Next is web services play. Finally, obviously, is SCO source. We're not here to spell out how it's going to be allocated across the various buckets. #4 Deonne Cornet, Decatur Jones Q: Does BayStar have rights to do partial conversion? Minimum size? When does redemption kick in? A: [Bench] They can begin to convert immediately. Minimum of 100,000 shares at a time. Mandatory redemption at stock price of 150% for 20 consecutive trading days. The company has redemption rights, SCO can redeem after 3 years at liquid presumption. Q: Is BayStar's style to hold their preferreds to the end, or to trickle some stock out to help liquidity? A: [Bench] BayStar will help liquidity and we are happy with that. Q: Any changes to guidance for this quarter? A: [Bench] No. [MacBride] We've got a lot of comfort around the track record of other companies that have taken investment from Baystar. #5 Peter Galley, e*week magazine Q: There's been a bit of back-off, particularly enterprise clients. Invoices on hold. Litigation against enterprise clients on hold. Does this investment mean you are backing off? A: Investment is independent of our plans and actions to enforce our copyrights. "The reason we put the licensing plan in place is because customers asked for it." The licensing plan is our preferred path. We're not trying to track down people who are using Linux at home, in their garage. We're interested in people who use Linux for commercial benefit. "We are signing up additional deals." If we have certain companies who are using Linux, and we reach an impasse, we absolutely reserve the option to use a legal remedy. We extended the pricing period to the end of this month. "We're having very good traction with our licensing discussions." "As long as people are licensing up we're in great shape." End of quarter, end of fiscal year is end of October. Q: Survey says 80% of IT people unfazed by you. Does that concern you at all? A: In the short six-month period, 20% say that they *are* concerned. "There is no doubt there is some impact in the market place." "We're not running a 100-yard dash; we are running a marathon." #6 Paula Rooney, CRN Q: Possible negotiations with IBM; any possibility of settlement? A: "We don't rule out the possibility along the way of trying to reach some kind of global settlement." "In fairness to IBM, this is not just an IBM issue." "There are other issues here that have an impact on other players." An entire industry has the problem; an entire industry would have to work on the resolution. Q: What is the status of IBM lawsuit and Red Hat issue A: Red Hat case: we're back and forth there. We filed a motion to dismiss. In the coming weeks and months, we'll hear about that. With respect to IBM, that one is in claims-counterclaims-response mode; "I expect in the next week or so ..." more developments. #7 Larry Sullivan, Capital Guardian Q: It sounds like you're already making license revenus from Linux. Was BayStar aware of that? A: "BayStar did a full level of due diligence in our company." #8 Gavin Clarke, Computer Wire Q: What's going on with SGI and the October 14 deadline? Fresh deadline, or talks to resolve your differences? A: "We do have discussions going on with SGI. We are working with issues. We have agreed to hold tight on rescinding on contracts." "We are pleased with SGI's behavior during the cure period." "They did come out and announce they had removed the 100 lines of code." "We will continue to engage with them." Q: Can we expect any more action against big-name companies like SGI? A: With respect to Unix companies or end users? Q: Unix companies A: We don't say any more action at this time against Unix companies. We are currently investigating large companies which use Linux. Additional strength for us if the large company is also one of our licensees. 2003-10-17 12:30:48 EDT End of Q&A. Stowell: normal disclaimer about forward-looking statements, risk factors. 2003-10-17 12:33:04 EDT McBride closing remarks. BayStar has a stellar track record with a number of tech companies. We've had preliminary, not definitive, discussions, about strategically where we are going. The momentum in the market place, we believe, continues to build for SCO: Sco Source, reinvigorating our legacy Unix business, SCO x. Strong improvements in our bottom line and share price. SCO believes in IP and people getting paid for it. We've made great progress in a year, we have a lot more work ahead of us, we're all excited. Next level of success. Blah. 2003-10-17 12:35:27 EDT End of call.