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Stock deal expands SCO's freedom

BayStar Capital and SCO have agreed to a deal under which BayStar recoups some of its investment in SCO and the Unix company has more freedom in running its business.

SCO will buy back all of BayStar's 40,000 preferred shares in the company for $13m (£7m) in cash and roughly 2.1 million shares of the company's common stock.

As a result of the transaction there will be no more preferred SCO stock outstanding, giving SCO more freedom to make business decisions, said SCO spokesman Blake Stowell.

The preferred shares offer special powers to stockholders, such as the right to a seat on the SCO board and the power to block any acquisition, legal settlement or even payment to SCO's lawyers, Stowell said. However, the preferred shares are not tradable on the stock exchange.

As part of the deal with BayStar, SCO has also agreed to focus on protecting its intellectual property and de-emphasise its Unix business.

BayStar acquired 20,000 preferred SCO shares when it invested $20m in the company last year. In April, BayStar said it was looking for a way out of its investment in SCO, but a month later doubled its holdings in the company by buying 20,000 preferred shares from the Royal Bank of Canada (RBC) for an undisclosed sum.

Under the buyback agreement with SCO, BayStar can sell the common stock but its daily selling may not exceed 10% of the average trading volume of SCO shares on the Nasdaq over the preceding five trading days.

The investment by BayStar and RBC has been seen as crucial in allowing SCO to pursue its intellectual property battle. Stowell said that after paying off BayStar, SCO still has enough cash to continue litigating. Cornett estimated SCO has roughly $45m left in cash to continue its legal battle.

Joris Evers writes for IDG News Service


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