Theo is an unlockable character that you can find in Star Ocean: The Divine Force. To unlock Theo, you must have completed the game up until you enter the Scorpium Network.
Theo can only be unlocked by playing through Laeticia's Story Mode.
If you chose Raymond as the main character, you'll be able to unlock JJ instead.
How To Unlock Theo
First you'll want to head to the Castle Aucerius Dungeons where Theo is imprisoned. There are no quest icons here; as soon as you reach his cell a cutscene will occur.
Then, head to Castle Aucerius and speak to the King. He will grant Theo's release if you can collect three signatures.
Head to the Semiomancy Consortium to find Melthia. She can be found up the stairs of the consortium in a side room.
Next head back to Castle Aucerius and speak with Captain Bertrand. He can be found just outside the Castle Aucerius Dungeons.
Head to find Geothel at the Seaport Of Cotto. He is hanging out in Theo's old headquarters at the end of the seaport.
Speaking to him initiates a quick fight.
Once all three signatures have been obtained, head back to Theo at the Castle Aucerius Dungeons.
Theo will now be unlocked and added to your party.