BayStar Threatens to Sue SCO

SCO's former investor BayStar will be suing the Unix firm over the terms of their financial break-up.

Just when the Unix community thought that the fractious BayStar-SCO dispute was history, the investment house proved everyone wrong. The company now says it will sue SCO and continue the pairs troubled financial relationship.

The SCO Group Inc. had depended on BayStar Capital II LP to give it the financial fuel it needed to pursue its Linux lawsuits, however, the two earlier this year began to fight over control of SCOs direction. BayStar wanted the Unix company to focus on its litigation and discontinue software development.

But in June, the two companies came to terms on what appeared to be to a more-or-less friendly divorce. SCO said it would repurchase the $40 million Series A-1 shares held by BayStar for $13 million in cash several million shares of SCOs common stock. That was until Friday.

According to Justin Meise, BayStar spokesperson, the arranged settlement had not closed due to an "unresolved dispute between the parties," despite a prior announcement by The SCO Group to the contrary.

Further, Meese said that the Larkspur, Calif.-based private equity firm "intends to file an action requesting a declaratory judgment with respect to its rights under the Stock Repurchase Agreement. Until a final determination is made by the court, BayStar maintains its position as a Series A-1 Preferred stockholder of SCO."

In other words, SCO can say what its wants, but BayStar doesnt feel that SCO has lived up to its end of the bargain and theyll be suing SCO as a result.

SCO, had opened up the dispute between itself and its former investor when it announced in a press release earlier in the day that the company considered the repurchase transaction to be closed as of Wednesday. As far as SCO was concerned, its settlement was a done deal.

However, BayStar still has outstanding issues.

"BayStar has notified SCO that it is BayStars position that the repurchase transaction has not closed," because BayStar believed SCO had mislead it on how much money could be made from SCOs IP (intellectual property) licensing division, SCOsource, according to Blake Stowell, Lindon, Utah-based SCOs communications director.

According to SCOs public statements, the amount of revenue is currently slim. In the first quarter of 2004, SCOsource realized only $20,000 and in the last quarter the revenue from IP licensing came to a mere $11,000.

Next page: SCO vs. BayStar Heats Up Again