The SCO Group, Inc. today announced it has entered into an
agreement with BayStar Capital II LP to repurchase and retire all
40,000 shares of Series A-1 Convertible Preferred Stock currently
held by BayStar. The shares of Series A-1, which have a face value
of $40 million, will be retired through a payment of $13 million in
cash and the issuance of 2,105,263 shares of the Company’s common
stock, payable and issuable upon closing which will occur upon the
effectiveness of a shelf registration statement for the resale of
the common stock by BayStar.
Upon repurchase, all shares of Series A-1 preferred stock will
be cancelled and retired and the rights and preferences of the
Series A-1 shares will be terminated including the right to $40
million of liquidation preference, preferred dividend rights that
would accrue at a rate of 8% and escalate by 2% annually up to 12%,
restrictive covenants and all other contractual rights granted to
the holders of Series A-1 shares. Following the repurchase, the
Company will have only common stock outstanding.
Upon closing, the effective result of the Company’s Series A-1
financing activities (giving effect to the repurchase, together
with the prior conversion of 10,000 shares of Series A-1 for
740,741 shares of common stock), will be the Company having
received $37 million in proceeds, before expenses, and having
issued 2,846,004 shares of common stock at an effective price of
approximately $13.00 per share.
The agreement includes a restriction on sales and dispositions
by BayStar of the Company’s common stock. BayStar may not exceed on
any trading day, 10% of SCO’s average daily trading volume on
Nasdaq during the five trading days preceding such trading day. The
agreement includes a mutual general release by the parties and has
not required compensation to any outside agents.
“After productive and substantial discussions with SCO’s
management team, board of directors and legal team, BayStar is
extremely satisfied with SCO’s current operating and cash
management plans, new initiatives, management of the litigation,
and plans for improving its business going forward,” said Larry
Goldfarb, managing general partner, BayStar Capital.
“We’re pleased that we are able to repurchase and retire the
Series A-1 shares and we believe the agreement will benefit the
Company and its shareholders,” said Darl McBride, President and
CEO, The SCO Group, Inc. “This agreement will eliminate
restrictions, covenants, preferences, accruals for dividends, and
allow the company greater flexibility to manage key aspects of its
strategy moving forward. We believe the net effect of this
agreement will allow the company to focus on its strategic
initiatives, retain sufficient cash to defend its intellectual
property, accomplish its corporate objectives and provide greater
flexibility in the management of our operations.”
The SCO Group also announced today that its 2nd Fiscal Quarter
2004 earnings release and investor conference call, previously
scheduled for June 2, 2004 at 9:00 am Mountain Time, will be moved
to June 10, 2004 at 9:00 am Mountain Time. The delay of the
earnings announcement will allow the company to complete and
address the accounting related to the repurchase and retirement of
the Series A-1 Preferred Shares.