BayStar threatens SCO with lawsuit

The SCO Group and investment firm BayStar Capital are apparently unable to agree on whether a June stock repurchase agreement between the two companies has closed, and BayStar now intends to file a lawsuit against the Unix vendor, according to statements issued by the two companies Friday.

The SCO Group and investment firm BayStar Capital are apparently unable to agree on whether a June stock repurchase agreement between the two companies has closed, and BayStar now intends to file a lawsuit against the Unix vendor, according to statements issued by the two companies Friday.

BayStar, based in Larkspur, Calif., was lead investor in a $50 million transaction, announced last October that also included financing from the Royal Bank of Canada.

In April of this year, BayStar informed SCO that it wanted out of the investment, claiming that the Lindon, Utah, software company had breached its purchase agreement, but just one month later, BayStar doubled its stake in SCO by purchasing 20,000 shares of SCO’s preferred stock from the Royal Bank of Canada, which was in the process of walking away from its SCO investment.

In early June, SCO and BayStar appeared to have settled their differences. The two companies agreed to a repurchase agreement that gave BayStar $13 million in cash and approximately 2.1 million shares of SCO common stock — valued at $10.1 million at the time — in exchange for the investment company’s 40,000 shares of SCO preferred stock.

On Friday, SCO issued a press release announcing that the repurchase transaction had closed. BayStar responded, just hours later, with a press release of their own maintaining that the repurchase had not closed. “BayStar intends to file an action requesting a declaratory judgement with respect to its rights under the Stock Repurchase Agreement,” the statement said.

A BayStar spokesman declined to explain why BayStar was planning to file a lawsuit, but SCO spokesman Blake Stowell confirmed that BayStar had been seeking confidential information on the nature of his company’s SCOsource Linux licensing business.

SCO declined to provide the information requested by BayStar, “in order to protect the confidential and proprietary nature of the information and the names of the companies engaged in SCOsource licensing discussions,” SCO said in a statement.

BayStar has been issued a certificate for the 2.1 million shares of stock, and SCO is prepared to pay the $13 million in cash stipulated by the deal as soon as BayStar provides wire transfer instructions, the statement said.

SCO claims that the Linux operating system violates its intellectual property rights and is presently engaged in lawsuits with IBM, Novell and Red Hat in connection with these claims. The company has also sued DaimlerChrysler and AutoZone in connection with its intellectual property claims, although the bulk of the DaimlerChrysler lawsuit was thrown out of court last week.

Separately, on Monday SCO announced an update to its OpenServer version of Unix. Version 5.0.7 of the product will now include support for the open source PostgreSQL database, as well as Java 1.4.2, the company said.