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SCO's 10K, MyDoom, and the Morgan Keegan letters
Thursday, January 29 2004 @ 05:24 PM EST

The new SCO 10K is available. There are some interesting exhibits, as well. What is missing in the long list of exhibits are the Sun and Microsoft licenses. The Morgan Keegan letters are attached as exhibits, and there is an Independent Contractor Agreement with S2 Strategic Consulting. So where are the Sun and Microsoft licenses? Shouldn't they be listed in the SEC filing also? The 10K refers to limitations on the Microsoft license, but it doesn't explain what limitations it is referring to.

Another odd thing. The 10K, which is for the fiscal year ending October 31, 2003 and which was signed and filed on January 28, 2004, mentions the MyDoom virus, which happened January 26, 2004. It puts it in the context of adverse results from their litigation strategy and seems to pin the blame on the Linux community, which as it now turns out is inaccurate:

As a result of our action against IBM and our SCOsource initiatives to protect our intellectual property rights, several participants in the Linux industry and others affiliated with IBM or sympathetic to the Linux movement have taken actions attempting to negatively affect our business and our SCOsource efforts. Linux proponents have taken a broad range of actions against us, including, for example, attempting to influence participants in the markets in which we sell our products to reduce or eliminate the amount of our products and services they purchase from us. We expect that similar efforts likely will continue. There is a risk that participants in our marketplace will negatively view our action against IBM and our SCOsource initiatives, and we may lose support from such participants. Any of the foregoing could adversely affect our position in the marketplace, our results of operations and our stock price.

We have also experienced several denial-of-service attacks on our website, which have prevented web users from accessing our website and doing business with us for a period of time. Additionally, we have recently experienced a distributed denial-of-service attack as a result of the "Mydoom" worm virus. It is reported that the effects of this virus will continue into February 2004. If such attacks continue or if our customers and strategic partners are also subjected to similar attacks, our business and results of operations could be materially harmed.

This gives the decided impression of tremendous eagerness on the part of SCO to include this information and to make it seem the Linux community or sympathizers were responsible. MyDoom, experts now say, was done by professional spammers in Russia. It also leaves out the date of this virus, which misleadingly makes it seem like it happened during the fiscal year ending October 31, 2003. So what does SCO have to do now? Are they supposed to correct this SEC filing to make it factually accurate? Speaking of attacks, what about the last one? Was that by the same criminal spammer group?

The 10K also mentions a Proxy Statement, but it isn't made available in this filing:

Portions of the Registrant's proxy statement to be filed pursuant to Regulation 14A in connection with its annual meeting of stockholders are incorporated by reference into Part III of this Form 10-K.

If I've missed it, perhaps someone can show me where this document can be found. You can access the complete list of exhibits on this page. If you are curious to compare last year's 10K with this one, it is here. Obviously, there has been a sea change.

Morgan Keegan came into the picture way back in August of 2002 and appears to have realized at some point that this was not your garden variety situation:

The SCO engagement has taken a number of unexpected twists and turns that have required assistance that goes beyond conventional investment banking services.

The impression I form from the letters is that they hoped IBM would buy the company. The other impression I form is that SCO in this 10K is trying hard to portray the company as still actively in the software business. They describe their core business like this:

Our core business is to sell and service our UNIX operating system and related software products to small-to-medium sized businesses and branch offices and franchisees of Fortune 1000 businesses. Our main products that drive the majority of our UNIX revenue are OpenServer and UnixWare. We intend to continue to maintain our core business in fiscal year 2004 by continuing our research and development efforts to enhance our OpenServer and UnixWare products and their related services.

However, the numbers indicate that if this is their "core business", it isn't doing very well:

If the market for UNIX continues to contract, it may adversely affect our business.

Our revenue from the sale of UNIX-based products has declined over the last four years. This decrease in revenue has been attributable primarily to increased competition from other operating systems, particularly Linux, lower information technology spending and the worldwide economic slowdown. If the demand for UNIX-based products continues to decline, and we are unable to develop UNIX products and services that successfully address a market demand, our business will be adversely affected. Because of the long adoption cycle for operating system purchases and the long sales cycle of our operating system products, we will not be able to reverse these revenue declines quickly.

If they relied on revenue from their software and services, I think they'd be in real trouble, if they'd be in business at all. So we can thank Sun and Microsoft (and then the BayStar deal) for keeping them afloat. SCO expects their alleged "core business" to do worse soon, when they start suing end users, according to the 10K:

The success of our UNIX business will depend on the level of commitment and certification we receive from industry partners and developers. In recent years, we have seen hardware and software vendors as well as software developers turn their certification and application development efforts toward Linux and elect not to continue to support or certify to our UNIX operating system products. If this trend continues, our competitive position will be adversely impacted and our future revenue from our UNIX business will decline. The decline in our UNIX business may be accelerated if industry partners withdraw their support from us as a result of our SCOsource initiatives and in particular any lawsuit against end users violating our intellectual property and contractual rights. . . .

Our SCOsource initiatives, particularly lawsuits against end users violating our intellectual property and contractual rights, may cause industry partners, developers and hardware and software vendors to choose not to support or certify to our UNIX operating system products. This would lead to an accelerated decline in our UNIX products and services revenue and would adversely impact our results of operations and liquidity.

But what strikes me the most is this:

To protect our proprietary rights, we rely primarily on a combination of copyright laws, contractual rights and a detailed legal strategy. . . .

Intellectual Property Protection Generally

Our SCOsource initiatives rely primarily on a combination of contract rights, copyright laws and a detailed legal strategy. We also require that our employees and consultants sign confidentiality and nondisclosure agreements. We also regulate access to, and distribution of, our documentation and other proprietary information.

We cannot guarantee the success of our SCOsource initiatives and other efforts to protect our intellectual property rights, but we will continue to seek to enforce and pursue these rights through public awareness and the legal system, if necessary. Additionally, we cannot be certain that we will succeed in preventing the future misappropriation of our copyrights or that we will be able to prevent the unauthorized use of our technology in the future.

I don't remember seeing this language emphasizing contractual rights and mentioning "a detailed legal strategy" showing up before. Does this mean they are recognizing that the initial thrust of their SCOSource program didn't work out and they need to shift from accusations of System V code in Linux to a complex strategy to go after Unix customers who also use Linux, relying on license terms plus copyright accusations regarding the ABI files, as opposed to suing the Linux world at large for System V code allegedly in Linux? I could be mistaken, and only time will confirm or deny, but that is what it sounds like to me from this language. I also get a hazy first impression that the letters they sent out to their customers regarding auditing them on their use of Linux is intended to prevent further shifts to Linux, putting them in a kind of license prison so they can't switch to Linux as long as their Unix license terms remain in effect:

Warning Letters to Linux End Users.

In response to our belief that parts of our UNIX source code and derivative works have been inappropriately included in the Linux operating system, in May 2003, we sent letters to approximately 1,500 large corporations notifying them that using the Linux operating system may violate our asserted intellectual property rights. Subsequently, we began contacting Linux end users about their use of Linux, and in December 2003, we began sending additional letters to selected Fortune 1000 Linux end users specifically asserting that using the Linux operating system in a commercial setting violates our rights under the United States Copyright Act, including the Digital Millennium Copyright Act, because certain copyrighted application binary interfaces, or "ABI Code," have been copied from our copyrighted UNIX code base and derivative works and contributed to Linux without proper authorization and without copyright attribution. In the letter we also warned Linux end users that we intend to take appropriate actions to protect our rights and that they may not use our copyrighted code except as authorized by us.

Linux End User Intellectual Property ("IP") License Initiative. In August 2003, we first offered to Linux end users our IP license in the United States and recently began offering the license in countries outside the United States. The license permits the use of our intellectual property, in binary form only, as contained in the Linux operating system. By purchasing the license, customers will properly compensate us for our UNIX intellectual property as currently found in Linux.

Requiring UNIX Licensees to Certify Full Compliance with License Agreements. Beginning in December 2003, we began delivering written notice to a large number of our UNIX licensees that they must certify in writing to us that they are in full compliance with their license agreements, including certification that they are not using our proprietary UNIX code and derivative works in Linux, have not allowed unauthorized use of our licensed UNIX by their employees or contractors and have not breached confidentiality provisions relating to licensed UNIX code.

If that impression proves accurate, that would be pretty much an admission that except for the ABI files, there is no code they can claim in Linux that they can go after end users about. They can try to go after IBM for methods and derivative code and contractual violations and such, but from what attorneys have explained to me, even if they prevailed, that has no applicability to end users. End users are not parties to that IBM contract. As for the claims on the ABI files, they are the same allegations that went nowhere in the BSDi case. No doubt they are aware that it isn't likely to fly this time either, so perhaps they have decided to go after Unix customers who also use Linux, based on licensing terms and the ABI claims instead, hoping to terrorize companies with the DMCA? That is my provisional theory, after reading this 10K. I could be wrong of course, because I'm trying to understand SCOThink, and I don't think like SCO.

Here are the Morgan Keegan letters, so you can form your own impression.

****************************************************************************


Exhibit 10.8

August 16, 2002

Mr. Darl McBride
President & CEO
Caldera
355 South 520 West
Lindon, Utah 84042

Dear Darl:

This letter confirms the engagement of Morgan Keegan & Company, Inc. ("Morgan Keegan") to act as exclusive financial advisor to Caldera International, Inc. ("Caldera" or the "Company") to assist the Company in its analysis, consideration and, if appropriate, execution of various financial and strategic alternatives available to it, and such other matters to which you and we may agree during the course of our engagement. Such financial alternatives and other matters may include assisting the Company in securing additional equity and/or debt capital; and assisting the Company in its analysis and consideration of the financial aspects of certain potential strategic transactions, including, but not limited to, mergers, acquisitions, spin-offs, joint ventures, minority investments, negotiated purchases, or other similar transactions (individually, the "Transaction" and collectively, the "Transactions").

As exclusive financial advisor to the Company, Morgan Keegan will perform the following functions:

    a.Assist Caldera in the assessment of certain market information and business strategies relevant to the operations of the Company;

    b.Assist Caldera in developing an appropriate value range in connection with a Transaction;

    c.Assist Caldera in reviewing, evaluating and structuring any proposed Transaction;

    d.Assist Caldera in developing a general negotiating strategy and in actual negotiations with potential investors, lenders and/or merger and acquisition candidates and consult with and assist counsel and independent accountants in structuring and carrying through to settlement any agreement which may be reached;

    e.Assist Caldera in preparing summary information (the "Information") with respect to the Company for distribution to potential investors, lenders and/or merger and acquisition candidates selected by Morgan Keegan and Caldera, describing the Company and its business, it being specifically agreed that (i) the Information shall be based entirely upon information supplied by the Company (or public information), and Caldera hereby warrants that, to the best of its knowledge, the Information supplied shall be complete and accurate in all material respects, and not misleading and (ii) Morgan Keegan shall not be responsible for the accuracy and completeness of the Information except as it pertains to public information derived from research performed by Morgan Keegan.

    f.Morgan Keegan will advise and assist Caldera, on a best efforts basis, in obtaining the private equity and/or debt investment required to capitalize the Company in such amount and upon such terms as deemed to be appropriate by the Company and Morgan Keegan. Morgan Keegan agrees to provide Caldera with a list of all investors contacted by Morgan Keegan on a monthly basis. Morgan Keegan will provide advice and assistance in structuring and pricing the securities and in locating appropriate financing sources.

In order to coordinate our efforts with respect to a possible Transaction, during the period of our engagement hereunder, if the Company or its management receives an inquiry regarding a Transaction, the Company or such persons will promptly advise Morgan Keegan of such inquiry. All contact with third parties by Morgan Keegan must be approved by the Company.

1. In consideration for the services rendered by Morgan Keegan hereunder, the Company shall pay Morgan Keegan:

    a.An advisory fee equal to a warrant to purchase 200,000 shares of Caldera common stock for an exercise price of $0.01 per share (the "Warrant Fee"), payable upon execution of this Agreement. The company will file a registration statement for the shares underlying the warrant. Morgan Keegan agrees that for a period of one year from the date of this agreement, it will sell no more than 50,000 shares in any single calendar quarter.

    b.In the event that the Company sells equity and/or debt securities, the Company will pay Morgan Keegan placement fees (the "Contingent Placement Fees") payable in cash at closing as follows:

    i.Cash equal to six (6) percent of the principal amount of equity financing (common stock, preferred stock and convertible preferred stock); plus

    ii.Cash equal to three (3) percent of the principal amount of mezzanine financing (convertible debt, whether subordinated or not); plus

    iii.Cash equal to one (1) percent of the principal amount of senior debt provided, however, that Morgan Keegan shall not be entitled to such a fee with respect to senior debt sourced from commercial banks and other institutional lenders.

      For those potential investors listed on Appendix A, the Contingent Placement Fee otherwise owing to Morgan Keegan shall be reduced by 50%. If more than one closing is required in connection with the sale of such Securities, only that portion of the Contingent Placement Fee applicable to each closing shall be payable at such closing.

    c.In the event of the sale or acquisition of the Company by a third party, the Company will pay Morgan Keegan a transaction fee (the "Transaction Fee") payable in cash at closing equal to the greater of: (i) two (2) percent of the aggregate consideration (the "Transaction Consideration"), as defined below, paid to the Company and its shareholders or (ii) $250,000 (not including gains, if any, from the Warrant Fee).

    d.In the event that the Company completes an acquisition, the Company will pay Morgan Keegan a Transaction Fee payable in cash at closing equal to the greater of: (i) two (2) percent of the Transaction Consideration paid to a target or its shareholders or (ii) $250,000 (not including gains, if any, from the Warrant Fee). Notwithstanding this section 1 (d), the Transaction Fee payable to Morgan Keegan relating to the closing of a transaction or series of transactions with Vista.com will be limited to $150,000 which will be prorated based on a total transaction value of $5 million.

      All fees payable pursuant to Sections 1(b), (c), and (d) above (collectively the "Success Fees"), shall be subject to a credit in favor of Caldera in the amount of $200,000 (the "Warrant Credit"). The Warrant Credit shall be applied against all Success Fees at a rate of 25% per payment to Morgan Keegan until such time as the Warrant Credit is fully depleted. In addition, whether or not a Transaction is completed, the Company will reimburse Morgan Keegan, on a monthly basis, for its reasonable out of pocket expenses (including fees and expenses of counsel) incurred in connection with its acting as advisor hereunder. The Company agrees to provide to Morgan Keegan, upon signing this Agreement, a $20,000 advance against such out of pocket expenses. Such out of pocket expenses shall not exceed $25,000 without the prior consent of the Company, which shall not be unreasonably withheld.

The "Transaction Consideration" for purposes of calculating a Transaction Fee shall mean the gross value of all cash, securities and other property paid directly or indirectly by an acquiror to a seller or sellers in connection with a Transaction. A seller may include the Company, an affiliate of the Company or stockholders of the Company. The value of any securities (whether debt or equity) or other property delivered as consideration in any Transaction shall be determined as follows: (i) the value of securities that are freely tradeable in an established public market will be determined on the basis of the average closing market price on the last five trading days immediately prior to the closing of the Transaction and (ii) the value of securities that are not freely tradeable or have no established public market and the value of consideration that consists of other property, shall be the fair market value thereof, as reasonably determined by the Company and Morgan Keegan. Transaction Consideration also shall be deemed to include the aggregate principal amount of all indebtedness assumed or acquired, directly or indirectly, by the acquiring party or any of its affiliates in a Transaction or retired, defeased or otherwise cancelled in connection with the Transaction and the present value of any agreements not to compete or consulting agreements.

Amounts paid into escrow and contingent payments in connection with any Transaction will be included as part of the Transaction Consideration. Transaction Fees on amounts paid into escrow shall be payable upon the release of such amounts paid into such escrow. If any portion of the consideration in connection with any Transaction is payable in the future on the basis of occurrence of certain future events, the portion of the Transaction Fee relating to such contingent payments shall be payable at the time the actual consideration is paid.

2. The Company will advise Morgan Keegan of its intention to make any offers or sales of Securities during the term of this agreement. As used herein, the terms "offer" and "sale" have the meanings specified in Section 2(3) of the Securities Act of 1933, as amended (the "Act").

3. The Company and Morgan Keegan agree that:

    a.The Company will not, directly or indirectly, make any offer or sale of any of the Securities or any securities of the same or similar class as the Securities, the result of which would cause the offer and sale of the Securities to fail to be entitled to the exemption from registration afforded by Section 4(2) of the Act.[do not understand this]

    b.The Company will comply with all requirements of Regulation D promulgated under the Act. Without limitation, the Company will:

    i.not offer or sell the Securities by means of any form of general solicitation or general advertising;

    ii.not offer or sell the Securities to any person who it does not have a reasonable basis to believe is an "accredited investor" (as defined in Rule 501 under the Act);

    iii.exercise reasonable care to assure that the purchasers of the Securities are not underwriters within the meaning of Section 2(11) of the Act and, without limiting the foregoing, that such purchases will comply with Rule 502(d) under the Act; and

    iv.file a Form D with the Securities and Exchange Commission as contemplated by Rule 503 under the Act. (Morgan Keegan shall have the right to approve the Form D, which approval shall not be unreasonably withheld. The Company will not make any other filings with the Securities and Exchange Commission with respect to the offer and sale of the Securities without Morgan Keegan's prior consent, which may not be unreasonably withheld.)

    b.Morgan Keegan will comply with all applicable requirements of Regulation D promulgated under the Act. Without limitation, Morgan Keegan will:

    i.not offer the Securities by means of any form of general solicitation or general advertising; and
    ii.not offer the Securities to any person who it does not have a reasonable basis to believe is an "accredited investor" (as defined in Rule 501 under the Act).

c.The Company agrees to take such action (if any) as Morgan Keegan may reasonably request to qualify the Securities for offer and sale under the securities laws of such states as Morgan Keegan may specify; provided that in connection therewith the Company will not be required to qualify as a foreign corporation or file a general consent to service of process. The Company agrees that it will make any filings or take other actions required under applicable state securities laws to permit the sale of the Securities.

4. If, in connection with the services or matters that are the subject of this Agreement, Morgan Keegan or any controlling person, affiliate, director, officer, employee or agent of Morgan Keegan (Morgan Keegan and each such other person referred to as an "Indemnified Person") becomes involved in any capacity in any lawsuit, claim or other proceeding for which indemnity may be sought pursuant to Section 4 of this Agreement, the Company shall immediately reimburse such Indemnified Person for any and all legal or other expenses reasonably incurred by such Indemnified Person in connection with investigating, preparing to defend or defending such lawsuit, claim or other proceeding. The Company also agrees to indemnify each Indemnified Person from, and hold it harmless against, any and all losses, claims, damages, liabilities or expenses to which such Indemnified Person may become subject arising in any manner out of or in connection with the services or matters which are the subject of this Agreement; provided, however, that the Company shall not be liable under this Section 4 in respect of any loss, claim, damage, liability or expense to the extent that it is finally judicially determined by a court of competent jurisdiction that such loss, claim, damage or liability resulted directly from the gross negligence or willful misconduct of Morgan Keegan in the performance of its services hereunder.

The Company agrees that the indemnification and reimbursement commitments set forth in this Section 4: (i) shall apply whether or not any Indemnified Person is a formal party to any such lawsuit, claim or other proceeding and (ii) are in addition to any liability that the Company may otherwise have to any Indemnified Person. The Company agrees that, unless a final judicial determination is made to the effect specified in the proviso in the last sentence of the preceding paragraph, any settlement of a lawsuit, claim or other proceeding against the Company arising out of the transactions contemplated by this Agreement which is entered into by the Company shall include a release from the party bringing such lawsuit, claim or other proceeding of each Indemnified Person, which release shall be reasonably satisfactory to Morgan Keegan. The Company further agrees that no Indemnified Person shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Company in connection with Morgan Keegan's engagement hereunder, except for such losses, claims, damages or liabilities incurred by the Company that are finally judicially determined by a court of competent jurisdiction to have resulted directly from the gross negligence or willful misconduct of such Indemnified Person.

The Company and Morgan Keegan agree that if such indemnification or reimbursement sought pursuant to this Section 4 is finally judicially determined by a court of competent jurisdiction to be unavailable, then, whether or not Morgan Keegan is the Indemnified Person, the Company and Morgan Keegan shall contribute to the losses, claims, damages, liabilities and expenses for which such indemnification or reimbursement is held unavailable (i) in such proportion as is appropriate to reflect the relative benefits to the Company, on one hand, and Morgan Keegan on the other, in connection with the transactions to which such indemnification or reimbursement relates, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative faults of the Company, on the one hand, and Morgan Keegan on the other, as well as any other equitable considerations; provided, however, that in no event shall the amount to be so contributed by Morgan Keegan exceed the amount of the cash fees actually received by Morgan Keegan hereunder.

5. The term of Morgan Keegan's appointment and authorization hereunder shall extend from the date hereof through February 15, 2003, or such other date as may be mutually agreed by the Company and Morgan Keegan, and shall be automatically renewed for successive monthly periods until terminated in writing by either the Company or Morgan Keegan. The provisions of Sections 1, 2, 3, 4, 6, 8, 9, 10 and this Section 5 shall survive any termination of this Agreement. During the term of this Agreement, Morgan Keegan shall provide, on a monthly basis, the Company with a list of all potential investors, lenders and merger and acquisition candidates ("The Active Candidate List") that Morgan Keegan contacted on behalf of the Company in its capacity as exclusive financial advisor and with whom the Company had substantive, meaningful discussions. If the Company completes a Transaction with any entity on "The Active Candidate List" within twelve (12) months of the termination of this engagement, the Company shall be responsible for the payment of the fees under Section 1 of this Agreement.

6. Morgan Keegan is a full service securities firm and as such may from time to time affect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of the Company and other companies which may be the subject of the engagement contemplated by this Agreement.

7. All opinions and advice provided to the Company in connection with this engagement are intended solely for the benefit and use of the Company in connection with the matters described in this Agreement, and accordingly such advice shall not be relied upon by any person or entity other than the Company. The Company will not make any other use of any such opinions or advice. In addition, none of (i) the name of Morgan Keegan, (ii) any advice rendered by Morgan Keegan to the Company, or (iii) any communication from Morgan Keegan pursuant to this Agreement will be quoted or referred to in any report, document, release or other communication prepared, issued or transmitted by the Company, or any person controlled by the Company, without Morgan Keegan's prior written consent, which consent will not be unreasonably withheld.

8. In the event of consummation of any transaction, Morgan Keegan shall have the right to place advertisements in financial and other newspapers and journals at its own expense describing its services to the Company hereunder, provided that Morgan Keegan will submit a copy of any such advertisements to the Company for its approval, which approval shall not be unreasonably withheld.

9. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

10. This Agreement may not be amended or modified except in writing signed by each of the parties hereto and shall be governed by and construed in accordance with the laws of the State of Utah. Each of the parties hereto expressly waives all right to trial by jury in any action or proceeding arising out of this Agreement. This Agreement incorporates the entire understanding of the parties with respect to the subject matter hereof and supersedes all previous agreements should they exist with respect thereto and shall be binding upon and inure to the benefit of the Company, Morgan Keegan, and the other Indemnified Persons and their respective successors, assigns, heirs and personal representatives.

If the foregoing correctly sets forth the understanding and agreement between Morgan Keegan and the Company, please so indicate in the space provided below, whereupon this letter shall constitute a binding agreement as of the date first above written.




Very truly yours,



MORGAN KEEGAN & COMPANY, INC.



By:


/s/
KIMBLE L. JENKINS
Name: Kimble L. Jenkins
Title: Managing Director

Agreed and Accepted:

CALDERA, INC.


By:


/s/
DARL C. MCBRIDE


Name: Darl McBride
Title: President and CEO

APPENDIX A

VSpring Capital (SCO)
Vector Capital (SCO)
IDG Ventures (Broadmark)
Group Atlantic Partners, LLC (Broadmark)
Paladin Capital Group (Broadmark)
Pequot Capital (Broadmark)
Technology Crossover Ventures (Broadmark)
Ram Capital Resources, LLC (Impact Capital)
Crestview Capital Fund (Impact Capital)



Exhibit 10.9

February 13, 2003
Mr. Darl McBride
President & CEO
Caldera, dba The SCO Group
355 South 520 West
Lindon, Utah 84042

Dear Darl:

This letter shall serve as the first amendment and clarification to our engagement letter dated August 16, 2002 (the "Engagement Letter").

First, I would like to memorialize your and your management team's satisfaction with Morgan Keegan's services to date. The SCO engagement has taken a number of unexpected twists and turns that have required assistance that goes beyond conventional investment banking services. I understand that you are pleased with Morgan Keegan's assistance and contributions in addressing SCO's atypical needs. It has been, and remains, Morgan Keegan's objective to work diligently with management to build shareholder value at SCO. I also understand that it is our collective intent that Morgan Keegan will continue to work with SCO in the broad range of capacities that Morgan Keegan has served the Company to date.

Accordingly, the Engagement Letter between SCO and Morgan Keegan is amended and clarified as follows:

1.SCO and Morgan Keegan mutually agree to extend the date of the Engagement Letter to August 16, 2003. Further, SCO requires that Kim Jenkins continue to serve as the primary banker in connection with the SCO engagement.

2.SCO and Morgan Keegan agree that, in the event Sun Microsystems and/or Microsoft enters into a substantial SCOsource licensing arrangement with SCO during the term of the engagement, that such an event would fall under provision 1(b) of our Engagement Letter. As such, the aggregate amounts paid under the license agreements would be subject to the Contingent Placement Fee, calculated as six (6) percent for a license with Sun and one (1) percent for a license with Microsoft.

3.SCO and Morgan Keegan reaffirm the merger and acquisition provisions of the Engagement Letter and agree to the applicability of provision 1(c) regarding the payment of a Transaction Fee equal to 2% in the event of a sale or acquisition of SCO to a large strategic company.

Except as otherwise provided above, the Engagement Letter remains unamended in full force and effect.




Very truly yours,



MORGAN KEEGAN & CO., INC.



By:


/s/
KIMBLE L. JENKINS
Name: Kimble L. Jenkins
Title: Managing Director

Agreed and Accepted:

CALDERA, INC., dba The SCO Group


By:


/s/
DARL C. MCBRIDE


Name: Darl C. McBride
Title: Chief Executive Officer

2



Exhibit 10.10

August 16, 2003

Mr. Darl McBride
President & CEO
The SCO Group
355 South 520 West
Lindon, Utah 84042

Dear Darl:

This letter shall serve as the second amendment and clarification to our engagement letter dated August 16, 2002, as amended in a letter dated February 16, 2003 (hereinafter, the "Engagement Letter").

I am pleased to confirm in this letter that SCO and Morgan Keegan have mutually agreed to extend our Engagement Letter in accordance with the terms provided below.

1.SCO and Morgan Keegan mutually agree to extend the date of the Engagement Letter to August 16, 2004, on a non-exclusive basis. SCO requires that Kimble Jenkins continue to serve as the primary banker in connection with the SCO engagement.

2.In the event SCO decides to engage a second investment bank to assist with a financing event, then the Contingent Placement Fees payable to Morgan Keegan provided in Section 1(b) shall be reduced by 67% of the otherwise applicable fee (i.e., 2% for equity financings, 1.0% for mezzanine financing and 0.33% for debt financing). For clarification, if SCO does not engage a second firm, then 100% of the Contingent Placement Fee shall still apply. In the event that SCO does not engage a second full service investment bank, but instead engages the equivalent of a "finder," then the Contingent Placement Fee owed to Morgan Keegan shall be an amount equal to 6% minus the finder's fee, or 3%, whichever is greater. Further, SCO agrees to offer to Morgan Keegan the opportunity to be involved in all financing transactions that may take place during the term of this engagement, however, in the event that Morgan Keegan chooses to not be involved in a financing event, then no fees will be payable to Morgan Keegan for that event.

3.SCO and Morgan Keegan agree that all substantial SCOsource agreements entered into by SCO during the term of the engagement will fall under Section 1(b) of our Engagement Letter. It is understood that the nature of these deals may vary, and therefore depending on the structure of each SCOsource agreement, the Contingent Placement Fee will also vary. For agreements that generate higher margin revenue for SCO such as licensing deals or customer access-related deals, then the Contingent Placement Fee shall equal 3%. For agreements that generate lower margin revenue for SCO such as co-marketing/sales or co-development agreements, then the Contingent Placement Fee shall equal 1%. It is understood that no Contingent Placement Fee will be owed to Morgan Keegan in connection with any licensing agreements for which Morgan Keegan did not provide assistance.

4.SCO and Morgan Keegan reaffirm the merger and acquisition provisions of the Engagement Letter including the applicability of Section 1(c) regarding the payment of a Transaction Fee equal to 2% in the event of a sale, acquisition, or sale of all or a substantial portion of the assets of SCO. In the event of a settlement with IBM during the term of this engagement, SCO agrees to pay Morgan Keegan a Transaction Fee equal to 2% of the aggregate proceeds from such settlement.

For clarification, although a second firm may assist SCO in connection with an M&A transaction, such participation will not serve to reduce Morgan Keegan's fee hereunder. Further, SCO agrees to offer to Morgan Keegan the opportunity to be involved in all M&A transactions that may take place during the term of this engagement, however, in the event that Morgan Keegan chooses to not be involved in an M&A transaction, then no fees will be payable to Morgan Keegan for that transaction.

5.SCO and Morgan Keegan agree that the minimum payments of $250,000 provided in Sections 1(c) and 1(d) no longer apply. Further, that upon payment of the Contingent Placement Fee owed to Morgan Keegan in connection with the recent Microsoft agreement and deduction from that fee of the Warrant Credit, that the Warrant Credit will be deemed to be paid in full.

Except as otherwise provided above, the Engagement Letter remains unamended in full force and effect.




Very truly yours,



MORGAN KEEGAN & CO., INC.



By:


/s/
KIMBLE L. JENKINS
Name: Kimble L. Jenkins
Title: Managing Director

Agreed and Accepted:

CALDERA, INC., dba The SCO Group


By:


/s/
ROBERT K. BENCH


Name: Robert K. Bench
Title: Chief Financial Officer

2



  


SCO's 10K, MyDoom, and the Morgan Keegan letters | 229 comments | Create New Account
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SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: Anonymous on Thursday, January 29 2004 @ 10:35 PM EST
Darl and company *have* to be dropping acid. I've never seen such a paranoid,
void of facts group of comedians in my life! Where else can you get
entertainment like this?!?

Void

[ Reply to This | # ]

SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: Hygrocybe on Thursday, January 29 2004 @ 10:42 PM EST
I agree PJ, again it is only an impression, but to me the wording in this
document has a large flavour of "we really are no longer certain of a
win". (I wonder what SCO's share price will be in the next day's
trading) But in any event, this looks as if SCO has at last realised the pit
its legal nonsense has produced and how far down it has fallen already..I
wouldn't purchase software from SCO and I cannot see other firms doing this
either, so the next 10K may look even more bleak.

---
Blackbutt, Australia

[ Reply to This | # ]

UNIX certification?
Authored by: SkArcher on Thursday, January 29 2004 @ 10:46 PM EST
This caught my eye straight out of the box;
Our SCOsource initiatives, particularly lawsuits against end users violating our intellectual property and contractual rights, may cause industry partners, developers and hardware and software vendors to choose not to support or certify to our UNIX operating system products.

Does this mean SCO is listing loss of Open Group (trademark) Unix certification as a risk to its business caused by the SCOSource initiatives?

If so, does this have anything to do with the new Open Source Strategy for the Open Group (authored by none other than Bruce Perens?

If this is the case, could this be due to The Open Group upgrading the standards expected of a (trademark) Unix? Or could a more serious approach to trademark Unix certification include greater support and motion towards a fully Open-Source Unix? And could this be why Novell are dead set on staking total claim towards the Unix source?

If this all comes out in the way we hope/know it will... could Unix finally be returning to the state it was in before the AT&T/USL vs. BSDI case & settlement? A final acknowledgement that Unix got to where it was and is by the very earliest stirrings of the Open Source movement?

Probably not, but it'd be nice, would it not?

---
irc.fdfnet.net #groklaw

[ Reply to This | # ]

SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: Anonymous on Thursday, January 29 2004 @ 10:46 PM EST
"Additionally, we cannot be certain that we will succeed in preventing the
future misappropriation of our copyrights or that we will be able to prevent the
unauthorized use of our technology in the future."

This sounds to me like weasel wording. If they have copyrights or any ownership,
they can prevail in the courts. If they don't have the copyrights, they cannot
prevent further dissemination of the code.

Which is it?

[ Reply to This | # ]

SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: eggplant37 on Thursday, January 29 2004 @ 10:48 PM EST
I love it. Outright slander. Very nice.

Darl, you ignorant, ignorant man. That you have no concept of the definition of
the word "allegedly" is simply, completely beyond me.

[ Reply to This | # ]

SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: Anonymous on Thursday, January 29 2004 @ 10:51 PM EST
Bloody BBC World Service just (a couple of minutes ago) broadcast
the story that MyDoom might have been associated with Linux.
Anyone have the luddites ear?

[ Reply to This | # ]

Whu - huh?
Authored by: RedBarchetta on Thursday, January 29 2004 @ 10:52 PM EST
"If such attacks continue or if our customers and strategic partners are also subjected to similar attacks, our business and results of operations could be materially harmed."

Oh yeah, those DDoS attacks definitely interefered with the stampede to get licenses from SCO's web site. While I don't condone the attack, I find this statement highly misleading because it implies the SCO's web site is a key avenue for sales. Their latest SEC filing says otherwise.

Their SEC filings are starting to sound more like press releases. Not that I have a problem with that... ;-)

[ Reply to This | # ]

Revisions?
Authored by: fmckee on Thursday, January 29 2004 @ 11:00 PM EST
There are revisions, and then there are rewrites. How far back can a company
legally "revise" documents that have been submitted to the SEC?
Second question, are there any rules to what constitutes a
"revision" vs. a "rewrite".

It was clear to me that SCO back in October/November was saying it was all
"peachy". Now they are revising it with Mydoom & gloom.

Now, I realize this would only be one of many laws SCO execs have violated.
I'm more curious on how far back you can go and what limits there are to what
can be changed (if any).

Thanks in advance to those that respond.

[ Reply to This | # ]

Why can't I switch to Linux or Windows?
Authored by: Anonymous on Thursday, January 29 2004 @ 11:04 PM EST
Why would it be illegal to move from SCO to Linux, and not, say, to Windows or
Solaris, or even junk my hardware and move to a Mac?

[ Reply to This | # ]

They start the diet tomorrow
Authored by: hamjudo on Thursday, January 29 2004 @ 11:27 PM EST
Item 9A. Controls and Procedures

Evaluation of disclosure controls and procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were adequately designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms.

The end of the period was October 31st 2003. Was any information not recorded, processed, summarized or reported as required earlier in the period?

Are the controls and procedures still in place, or have they stopped reporting as required?

[ Reply to This | # ]

2002 in 2004
Authored by: Anonymous on Thursday, January 29 2004 @ 11:28 PM EST
If letters written in August 2002, are relevant enough for investors or
potential investors or regulators to know about *NOW* in late January 2004.

Should they not have been even more relevant in 2003, or even 2002? We've had
a whole 10-K, several quarterlies, and about 16 months in between now and the
first letter.

Is this an implicit admission that they have previously failed to disclose
pertinent information?

IANAL, IANA investment expert, but I wonder if they are doing this on legal
advice? i.e. could some lawyer have advised them that they ought to, or it
could be strongly argued that ought to, have disclosed this stuff -- and they
don't want to compound the error but not disclosing it any longer.

[ Reply to This | # ]

  • 2002 in 2004 - Authored by: Anonymous on Friday, January 30 2004 @ 07:08 AM EST
Another example of SCO not mitigating damages.
Authored by: Anonymous on Thursday, January 29 2004 @ 11:29 PM EST
Is this not more proof that SCO avoids mitigating damages? Security experts and
antivirus companies all say that the virus is programmed to attack www.sco.com
on Feb. 1st. and yet, in their Jan 28 filing, they already claim to have been
hit!? So the question is, "was sco attacked by MyDoom previous to Feb
1." ?

If not, then it would seem that SCO wrote that in anticipation that they would
in fact be attacked, and brought offline.. In order for that to be absolutely
true before the fact, they would have to take NO measures to protect themselves
from the DDOS and then claim to be the victim..

Play the SCO-Limbo.. How low can you go?

[ Reply to This | # ]

SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: rjamestaylor on Thursday, January 29 2004 @ 11:30 PM EST
What?!
    2.SCO and Morgan Keegan agree that, in the event Sun Microsystems and/or Microsoft enters into a substantial SCOsource licensing arrangement with SCO during the term of the engagement, that such an event would fall under provision 1(b) of our Engagement Letter. As such, the aggregate amounts paid under the license agreements would be subject to the Contingent Placement Fee, calculated as six (6) percent for a license with Sun and one (1) percent for a license with Microsoft. [Emphasis mine.]

When I read the above I went back to 1(b) to see how it related to licensing fees. I never dreamed 1(b) would refer to debt and equity instruments!

    b.In the event that the Company sells equity and/or debt securities, the Company will pay Morgan Keegan placement fees (the "Contingent Placement Fees") payable in cash at closing as follows:
So, when I paid (past tense, thank you) Microsoft a License Fee for its products, did that make me an equity partner with Bill or did it mean Steve "Staypuff Marshmellow-man" Balmer was indebted to me?! Of course not! How can these licensing fees from Sun and MS be considered income for 2003?!

Oh, Sun, you who are trying now to benefit from Desktop Linux: screw off. Sun is a major part of the problem and is in bed with Microsoft and Caldera/SCO. Shame on you.

---
SCO delenda est! Salt their fields!

[ Reply to This | # ]

SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: pooky on Thursday, January 29 2004 @ 11:38 PM EST
Interesting. I would like to know why an invesment banker is in any way shape or
form (a) involved in SCOSource licensing deals and (b) entitled to a percentage
of those deals value. This implies to me that MK is somehow involved in
proccurring the licenses for SCOSource, thus the fee? That is indeed far beyond
the standard practices for an investment banking firm. This also raises the
question of the nature of the Microsoft and Sun licensing deals, which are
conveniently absent from the filing. MK's involvment suggests to me that these
licenses are in fact some sort of loan or other payment to be treated as
investment capital for SCO. That would imply that Microsoft and Sun get some
sort of ownership in return? Why else would MK be entitled to a percentage?

Another point, why are MK and SCO reaffirming the provisions of their agreement
regarding a merger and the payment to MK if a merger should occur. This is done
either at the request of MK or SCO, and might imply that SCO has not abandoned a
strategy of possibly being acquired by another company, or at least that MK
originally thought this was a good possibility and has not abandoned hope that
it might happen.

-pooky

---
Veni, vidi, velcro.
"I came, I saw, I stuck around."

[ Reply to This | # ]

Morgan Keegan
Authored by: The Mad Hatter r on Thursday, January 29 2004 @ 11:46 PM EST

I'm starting to feel sorry for Morgan Keegan. After having read the letters it
looks like they didn't know what they were getting into, and that the
management team at Caldera/SCO may have been less than truthfull (or overly
optimistic) about the situation.

As I read the agreements they were hired to sell Caldera/SCO. If they were able
to do this they would recieve a good payment. The other payments listed are low
enough that they would have covered cost of operations, and possibly made a
small profit.

And then Caldera/SCO sued IBM.

As it stands Morgan Keegan will probably not make much (if anything) over the
next few months from SCO/Caldera, and the chance of a company sale is almost
non-existent. Who would buy a company with the sort of legal liabilities that
Caldera/SCO has?

Morgan Keegan - another victim of the Caldera/SCO tar baby.



---
Wayne

telnet hatter.twgs.org

[ Reply to This | # ]

MyDoom inclusion
Authored by: Anonymous on Thursday, January 29 2004 @ 11:59 PM EST
It took The SCO Group months to include the Novell copyright claims as a risk
factor in an SEC filing, and only 2 days for MyDoom to be cited as a risk
factor.

[ Reply to This | # ]

  • MyDoom inclusion - Authored by: Anonymous on Friday, January 30 2004 @ 12:54 AM EST
On What basis do they treat the License income as investment?
Authored by: webster on Thursday, January 29 2004 @ 11:59 PM EST
They claim a payment for the Sun and Microsoft Licenses and SCO agreed to it.
Is it an investment? Is is a disguised investment? Did Morgan Keegan find Sun
and SCO? How does licensing software require the services of a financial
advisor? Is this really a license, or a pay off? There must be more to their
agreement and more to their licenses.

I think we need full disclosure.

---
webster

Recent Windows refugee

[ Reply to This | # ]

SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: Anonymous on Friday, January 30 2004 @ 12:26 AM EST
"SCO argues that the authority of Congress under the U.S. Constitution to
“promote the Progress of Science and the useful arts…” inherently includes a
profit motive, and that protection for this profit motive includes a
Constitutional dimension."

Tell that to the BSA, RIAA and MPAA. They passed the No Electronic Theft Act
because LaMacchia couldn't be convicted of copyright violation or wire fraud
for operating a file sharing service without an element of personal financial
gain. Thanks to the the multi-billion dollar software business 17 USC now says:

The term ''financial gain'' includes receipt, or expectation of receipt, of
anything of value, including the receipt of other copyrighted works.

SCO has no court decisions in hand that support their view that they own any
ABIs or copyrights. They also have no court decisions in hand supporting their
view that the GPL they licensed these ABIs under is void or can be made
voidable.

Old-SCO entered into a Technology License Agreement with Novell. That license
allowed Novell and their sublicensees a perpetual worldwide royalty free license
to distribute the source code to SCO's Unix and Unixware derivatives -
including Monterey. That being the case, Caldera owns no trade secrets in
Monterey - even if they do own the copyrights - since they don't give Caldera
an econmomic advantage over their competitors.

The publicly traded company Caldera didn't even exist when the TLA was issued.
They repurchased all of Old-SCO's stock in the third quarter of 2002. Old-SCO
has subsequently been delisted. Clearly the majority of the assets were sold to
a new company with a new Board of Directors. The SCO-Novell APA is silent about
the subject of Netware and Linux non-compete clauses. For example Novell
developed their own iA64 OS code named Modesto that was intended to compete with
SCO's Monterey. SCO has no court decision in hand to support their claim that
any of the Linux source code violates their IP rights in any way.

Demanding that UNIX licensees not use competeing Linux technology that Caldera
themselves have licensed and used under the GPL is a plain violation of the
antitrust laws.

Old-SCO made the System V ABI available for use as a reference standard by the
Free Standards Organization. Their employees maintained the registry, and headed
the Sample Implementation Team. Caldera Open Linux used these ABI elements, was
LSB certified, and was GPL'd. What the SCO Group is attempting to do is almost
without parallel. It isn't unheard of for a member of a standards-setting
consortia to try and to threaten the other members with the exercise of
undisclosed rights (see FTC v Dell Computer or FTC v Rambus). The SCO Group is
unique in that they have unilaterally declared their own licenses null and void,
and are demanding ex-post facto exclusive dealing clauses for purely
anticompetitive reasons.

They control the UNIX licensing for 6000 organizations and 30,000 licensees.
Their slogan Merging Unix and Linux for Business turns out to be some kind of
horizontal merger of these two server operating system markets for the purpose
of permanently controlling and raising the end users prices.

The SCO Group ABI letters seek to alter the scope of the old AT&T UNIX
licenses. For example: If information relating to a SOFTWARE PRODUCT subject to
this Agreement at any time becomes available without restriction to the general
public by acts not attributable to LICENSEE or its employees, LICENSEE'S
obligations under this section shall not apply to such information after such
time.

The SCO Group seeks to make this a fruitless exchange where the general public
can use UNIX methods and procedures, or unprotectable elements in other
products, but UNIX licensees themselves cannot.

They also falsely claim that section 2.01 is the scope, when it's actually
paragraph 2 (only software provided by AT&T becomes subject to the terms of
these agreements).

[ Reply to This | # ]

SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: blacklight on Friday, January 30 2004 @ 12:44 AM EST
I am pleased to find that the SCO Group has disclosed its business strategy in
its latest 10-K - no surprise. The SCO Group's case is gossamer-thin, as it
continues to cling to the fiction that (a) it owns the copyrights to the ABI
files, and (b) it deliberately ignores Linus Torvald's assertion thhat he
developed those files independently: the SCO Group's continued use of
discredited notions and ideas clearly indicates that it is simply devoid of any
replacement notions and ideas. The SCO Group's own 10-K is also clear feedback
that our approach in dealing with the SCO Group is effective. From now on, it's
just a question of turning up the heat and cranking up the voltage.

[ Reply to This | # ]

SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: Anonymous on Friday, January 30 2004 @ 12:48 AM EST
Could this agreement with Morgan Keegan concerning the Sun and Microsoft deals
be the reason SCOG doesn't think it owes Novell the 95% of the license fees.
Also, I wonder if Morgan Keegan is aware of this. What I mean by this is, if
Morgan Keegan thinks it is getting 6% of the whole license deal with Sun do they
realize SCOG only has the rights to 5% of that deal or are Morgan Keegan just
getting 6% of the 5% SCOG collection fees. And could this also come back to bite
SCOG in the butt.

[ Reply to This | # ]

Four things about Morgan Keegan
Authored by: Anonymous on Friday, January 30 2004 @ 12:49 AM EST
There are several threads which discuss issues relating to Morgan Keegan.
Including

(a) Did they get involved with something they did not expect

(b) Whether they are involved in trying to collect SCOsource licensing deals,
and if so, whether such deals necessarily include stock sales.

(c) Have they made money out of this deal?


The answers are:
(a) I don't know. But I do know they have an association with Darl McBride in
his previous job, and it seems likely they arrived at SCO thanks to Darl
McBride. See #1 for details. Search for "PointServe" in the
comment archive for a comment with many links to PointServe's and Darl's
biography.

(b) Yes they are - they have said so themselves. We do not know to what extent
they are involved in the Sun and MS deals. We do know that they are involved in
atleast trying to generate other SCOsource deals - they have said so. The deals
which they spoke about trying to generate (Hollywood) would not seem to be
likely related to investment services or stock sales. See #2 for details

(c) Yes they have.






1. Morgan Keegan appears to have been the investment banker for PointServe, and
seemed to be involved in the deal which secured PointServe $50m of PIPE equity
financing from Cox Enterprises and others. Darl McBride appears to have been CEO
of PointServe at this tie. Later in the same year, seemingly after McBride left
PointServe, it was reported in the press that PointServe was sueing their
investor, Cox Enterprises. Morgan Keegan appears to have become SCO's
investment banker about the same time that Darl arrived or soon after.

2. Morgan Keegan *IS* involved in trying to get SCOsource deals. You need only
read that Daniel Lyons article about SCO pursuing Hollywood, which includes
quotes from Morgan Keegan indicating their involvement.

3. They made $2m from BayStar/RBC. Also the warrant mentioned in these letters
is more, a couple of million plus. There may be more too.

[ Reply to This | # ]

A rock, a hard place, and the seating area in between..
Authored by: valdis on Friday, January 30 2004 @ 12:52 AM EST
So.. how does SCO want to plan the MS and Sun "licensing" deals?

If they claim it's income, they get to turn 95% of it over to Novell. Unless they decide to fight it in court, in which case the lawyers get the 95% instead. SCO loses.

If they claim it's a loan (as indicated by the MK arraingement), then they get to restate their income, with devastating results. SCO loses.

[ Reply to This | # ]

Darl McBride Dolls.....
Authored by: Anonymous on Friday, January 30 2004 @ 01:07 AM EST
Darl McBride could make a MINT selling little Darl McBride dolls.

I'd give $100 for one. It'd look GREAT right under tux's foot!

[ Reply to This | # ]

SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: Anonymous on Friday, January 30 2004 @ 01:32 AM EST
"The other impression I form is that SCO in this 10K is trying hard to
portray the company as still actively in the software business. "

With a tech staff of only 75 left, it's a bit hard to see how they can stay in
the OS business. Linux has twice as many people contributing to the kernel
alone, not to mention all the stuff like tool-chains (GNU), GUI
(XFree/KDE/Gnome), etc that make up a modern OS. It's no wonder their product
announcement at Vegas was a laundry list of GPL projects bolted on top of a
slightly tweaked Unixware base.

Anyone know the size of IBM's AIX team for comparison?

John.

[ Reply to This | # ]

Interesting changes in 10K from previous SCO filings
Authored by: Anonymous on Friday, January 30 2004 @ 01:41 AM EST
I believe that SCO has been reading Groklaw, and taking advantage of PJ's hard work. Here are some examples.

In the S3 from November, SCO says they are looking to "...enforce our intellectual property rights", and in January's S3/A amendment they changed that to the far weaker "...establish our intellectual property rights". This was pointed out in PJ's side-by-side comparison on January 17.

Now, they say they are going to "...establish and protect their intellectual property rights..." See? That's much stronger.

In the S3, they said that the success of the SCOsource initiative may depend "on the strength of our intellectual property rights", but in the S3/A it became "on the perceived strength of our intellectual property rights." -- a definite weakening of the claim. In the 10K the "perceived" has been stricken. SCO's description of the DOS attacks are actually less inflammatory than in the S3/A. In the S3/A, they explicitly said that the attacks were a "recent Linux proponent action." Now, the only allegation that it was the result of Linux proponents is the proximity to the previous and following paragraphs, detailing first how Linux proponents are trying to talk people out of running SCO software and last the various indemnifications and legal relief funds, but there is no accusation of Linux proponents being directly behind the historical DDoS attacks or the MyDoom virus.

Interestingly, the 10K asserts that Novell vetoed "our termination of the IBM, Sequent, and SGI licenses." I was not aware that SCO actually tried to terminate the SGI licenses. Did this happen, or is SCO saying that Novell vetoed it in advance? This is new in the 10K, I haven't seen it before.

Interestingly, too, as recently as the S3/A, the reason for SCO's decrease in legacy operating system sales was attributable first to the "worldwide economic slowdown, lower information technology spending, and increased competitive pressue from alternative operating systems." Now it is "primarily to increased competition from other operating systems, particularly Linux, lower information technology spending and the worldwide economic slowdown." Now, they also say that "we will not be able to reverse these revenue declines quickly.", a blazing red flag.

The paragraph "We anticipate using the funds available to us from our private placement to target vertical markets for our existing UNIX-based offerings, to expand our UNIX licensing program and provide migration options for Linux end users, to roll-out major upgrades for our UNIX-based operating systems and to further establish our intellectual property rights." is now missing. It appears that SCO is (probably realistically) giving up on its software business.

Thad Beier

[ Reply to This | # ]

Darl's underpants.....
Authored by: Anonymous on Friday, January 30 2004 @ 01:55 AM EST
Darl's underpants must be feeling pretty snug right now....

Stock price droped below $15 today too, looks like all the speculators'
underpants are feeling snug as well....

Perhaps a shareholder class action suit would free up some of those important
missing documents relating to the SUN and MS "licensing" deals. As
a potential shareholder, the details of their ONLY licensing wins would be
important to me, I think the SEC should look into this.... The most important
question: "Is it a license with a finder's fee or is it funding with
ownership/repayment terms?" If it's the latter, they've defrauded other
investors by claiming it as income in their quarterly statments.

Either way, I'm enjoying the coverage from home..... Looking forward to a
judgement against SCO with extreme prejudice. Thanks all, this site has really
become one of my favorite spots....

[ Reply to This | # ]

Stowell - Mydoom is response to SCO's IP claims
Authored by: Anonymous on Friday, January 30 2004 @ 02:02 AM EST
http://deseretnews.com/dn/view/0,1249,590039062,00.html

"Our company has had to fight for our intellectual property rights
the last 10 months or so in the industry. We've tried to assert our
intellectual property rights, and we've tried to do it in a legal and
forthright way. In response, we receive these types of activities by
individuals
who have no desire to keep their activities within the bounds of the
law,"
Stowell said.

[ Reply to This | # ]

SCO clearly wants to be bought out
Authored by: Anonymous on Friday, January 30 2004 @ 02:08 AM EST
Reading through the Morgan Keegan letters gives me much more than an
*impression* that they are interested in being sold--that is clearly why they
were hired in the first place, to assist in an M&A deal from the very
beginning. McBride was hired at the end of June 2002; MK's first letter here is
August 2002, in which they state their function as "assisting the Company
in its analysis and consideration of the financial aspects of certain potential
strategic transactions, including, but not limited to, mergers, acquisitions,
spin-offs, joint ventures, minority investments, negotiated purchases, or other
similar transactions." McBride was hired because of his previous
experience in raising cash and corporate mergers. This is not about IBM, but
anybody willing to buy them out. Their stock price at the time was ~$1-2, and as
is clear from these letters and SEC filings, they know themselves they have a
depreciating asset.

Much has been made here and on various other sites about a 'pump and dump'
strategy--these letters make it clear that that is not what the SCO strategy is.
Not only is it highly suspect, the executives at SCO clearly know they could not
possibly get away with it, given the glaring amount of attention they're
getting. What is legal, however, is appreciating the stock price as much as
possible, and then selling the company to the highest bidder. They have about 18
months to do so, before their money runs out.

[ Reply to This | # ]

SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: Anonymous on Friday, January 30 2004 @ 02:12 AM EST
Can anyone tell me what the relationship between SCOG and Tarentalla is, as the
company i work for has dropped 50k this year on new moon canaveral licensing,
which for the uninformed was recently bought up this past year by tarantells

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MS and SUN deals treated as loans/equity financnig
Authored by: rjamestaylor on Friday, January 30 2004 @ 03:02 AM EST
Very interesting and more detailed than what I saw reading the same points.

The language in the supplement regarding treating any MS/Sun SCOSource
licensing deals as a 1(b) event could be explained away, perhaps, but the
specificity of each potential transaction as 6% (equity) or 1% (senior debt) in
context of 1(b) makes it not only clear that these licenses probably aren't
"income" but "liabilities" but that Microsoft drives a
harder bargain that Sun (basically, Sun shows itself as the weenie company here,
yet again; if I had investments in Sun I'd be seeking a management clearout
Real Soon Now).

---
SCO delenda est! Salt their fields!

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Darl is speaking at Harvard on Monday - Webcast!
Authored by: Anonymous on Friday, January 30 2004 @ 03:14 AM EST
Just found this posted in another area of Groklaw....

http://jolt.law.harvard.edu/p.cgi/speakers.html

The Harvard Journal of Law and Technology is pleased to welcome Mr. Darl McBride to campus. Mr. McBride is President and Chief Executive Officer of SCO (formerly the Caldera Group), a software and services company headquartered in Lindon, Utah. During his tenure as CEO, he has overseen the expansion of SCO's business operations in the fields of UNIX development, intellectual property licensing, and Internet web services development

Mr. McBride has previously held executive positions at Franklin Covey, IKON Office Solutions, and Novell. He holds a Bachelor of Science degree from Brigham Young University and received a Masters degree from the University of Illinois at Urbana-Champaign.

Mr. McBride will be speaking, and will participate in a Q&A session along with Chris Sontag, SCO's Senior VP and General Manager, SCOsource. This event will be broadcast live over the web for those unable to attend in person.(Emphasis mine)

We HAVE to watch this. I only wish I were closer to Boston, I would attend!

Mike A.

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SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: RSC on Friday, January 30 2004 @ 03:27 AM EST
"If the market for UNIX continues to contract, it may adversely affect our
business."

With all the effort they are putting in to make UNIX better than the
competition, no wonder there is a contraction.

I have seen quite a few comment on Graklaw and in other publications that UNIX
is old and useless and should be left to die.

I am so sick and tired of the complete lack of faith in an OS that has change to
landscape of information technology for decades.

How can anyone who has been in the IT industry for more than 5 years deny the
influence UNIX has had on linux and FOSS. I am sickened by the idea that the
FOSS community can so easily throw UNIX on the scrap heap.

Where would GNU be without UNIX (GN?), where would POSIX be without UNIX, and
where would LINUX be without UNIX?

With SCOs' stupidity, and the complete lack of faith from a large part of the
IT community in general, we can see the death of a huge part of computing
history.



Sorry, 'bout that. I just feel like I am losing an old friend. It saddens me.

RSC.



---
----
An Australian who IS interested.

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OT: VARBusiness -- oldies but goodies
Authored by: belzecue on Friday, January 30 2004 @ 04:32 AM EST
http://vb.channelsupersearch.com/news/var/47339.asp

IT’s Most Dangerous Man Needs Protection

By T.C. Doyle
VARBusiness
- 10:18 AM EST Tues., Jan. 20, 2004

[quote]

How Darl McBride, CEO of SCO, went from being the leader of a sleepy OS software
company to the most dangerous man in IT, which CMP's InformationWeek magazine
recently labeled him, is the stuff of legends. For starters, McBride's $1
billion-plus lawsuit against IBM for contract violations put Lindon, Utah-based
SCO on the map. Then its legal assault on the Linux community catapulted McBride
into the spotlight.

The only problem is, that spotlight has turned out to become a bit of a
searchlight,so much so that the company has taken steps to protect McBride from
those who'd like to see harm come his way.

At Comdex, for example, two burly bodyguards who were assigned to protect him,
flanked McBride. Also, he wound up staying in a hotel suite at the Bellagio
Hotel and Casino in Las Vegas that required guests to be escorted to their
rooms.

That's what happens, of course, when you take on some of the most devoted and
loyal fans of any given technology in the business. To protect him, SCO keep
tabs on bulletin boards, chat rooms and Web sites where personal attacks against
McBride are rampant. He's been called everything from scum to the anti-Christ.
That, he can live with. But posting his address along with a MapQuest link to
his house in a chat room? That crosses the line.

To hear McBride and friends tell it, the only place he's dangerous is in front
of the TV come Super Bowl Sunday. Call him what you please, but don't touch
that remote.

[endquote]

-----

http://vb.channelsupersearch.com/news/var/46158.asp

The Wildest Ride In Las Vegas

By T.C. Doyle
VARBusiness
- 8:38 AM EST Wed., Nov. 19, 2003


[quote]

... When asked, McBride initially said he thought he was forcing IBM and others
into a legal corner where their only options were to raise a white flag and
settle, or take their chances in court. After putting up an initial fight, he
says, most will likely opt to settle, he believes. And he may be right: It may
indeed be easier for most to write a check than do battle with SCO in court,
except perhaps for IBM. Upon reflection, McBride changed his analogy to a
crossroads from a corner. SCO has forced people down a path where they now are
at a crossroads, he says. "Now they need to make a choice," he
adds.

[endquote]

-----

http://vb.channelsupersearch.com/news/var/44952.asp

Editor’s Letter
Get Set For The 2003 ARC Hall Of Shame
According to their channel partners, seven vendors have many issues to address
By Robert C. DeMarzo
VARBusiness
- 4:00 PM EST Wed., Oct. 08, 2003

[quote]

SCO should apply some of the money it's shelling out in legal fees in its suit
against IBM and Linux users to its channel efforts. The company's ARC scores
were a train wreck in the enterprise operating systems category. Who cares what
line of code is buried inside some obscure Linux program that can trace its
roots to IBM's Unix license dating back to the Partridge Family? SCO partners
clearly don't appreciate the company's products. And if the folks at Sun who
make and market Solaris are laughing, they had better stop--their scores were
even worse. "

[endquote]

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OT: Microsoft FUD about OpenSource
Authored by: Greebo on Friday, January 30 2004 @ 05:52 AM EST
Hi,

Just found this story about microsoft in India. They turned up at a press conference with 4 companies that had switched back to Microsoft after trying OpenSource.

Apparently these 4 companies found OpenSource too radical, and had to go running back to Microsoft. There's no specific details about problems - just FUD.

I liked this quote the best :

They pointed out how they had a tough time working on Unix/Linux, lost their mails or got them "after 22 days", and how their lives changed for the better by reverting to Microsoft.

I wonder how much Microsoft lowered their prices to tempt these companies back.

You can be damn sure this is just the start of the Microsoft FUD.

Cheers,

Greebo

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Senior Debt? Oh!
Authored by: soronlin on Friday, January 30 2004 @ 06:23 AM EST
If, like me, you have no idea what this term means...
senior debt: Debt that has priority for repayment in a liquidation. — investorwords
Now that is very interesting. Trust Microsoft to have a soft landing ensured.

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"I'm not sure what we got"
Authored by: Anonymous on Friday, January 30 2004 @ 06:24 AM EST
Remember the quote "If Novell is claiming we paid them $100 million, and we didn't get the copyrights, I'm not sure what we got," Stowell said Tuesday. "To do what they are doing is outright fraud. You don't take over $100 million from someone, and then claim that you never sold them anything." (reported here for example)?

The 10-K shows another interesting twist in this saga.
Page 64
On May 7, 2001, the Company acquired certain assets, liabilities and operations from The Santa Cruz Operation in exchange for: (i) the issuance of 4,000,000 shares of common stock (400,000 of which were held in escrow for a one-year period); (ii) the issuance of options to purchase up to an aggregate of 415,000 shares of the Company's common stock in exchange for options to purchase The Santa Cruz Operation common stock previously held by individuals who became employees of the Company; (iii) $23,000,000 in cash, including the forgiveness of $7,000,000 previously advanced to The Santa Cruz Operation; and (iv) a non-interest bearing promissory note in the amount of $8,000,000 due in quarterly installments of $2,000,000 beginning July 2002. The following table summarizes the components of the consideration paid to The Santa Cruz Operation (in thousands, except per share data):
Consideration paid:
Fair value of common stock (4,000 shares at $13.88 per share) $ 55,520
Fair value of options to purchase 415 shares of common stock issued in exchange for 3,323 outstanding options of The Santa Cruz Operation 4,201
Cash 23,000
Note payable (discounted at 6.5%) 7,322
Direct expenses 3,744

Total consideration $ 93,787

So actually new SCO bought "certain assets, liabilities and operations" from old SCO for $94 million, not from Novell for $100 million (or "over $100 million", depending which line you read).

Then on page 69-70:
As discussed in Note 3, the Company issued to The Santa Cruz Operation an unsecured, non-interest bearing promissory note in the amount of $8,000,000. Four quarterly payments of $2,000,000 were payable to The Santa Cruz Operation beginning in the Company's third quarter of fiscal year 2002. Because the promissory note was non-interest bearing, the promissory note was recorded at a discount using an interest rate of 6.5 percent.

On March 28, 2002, the Company completed an agreement with The Santa Cruz Operation to settle certain matters related to the acquisition of the server and professional services groups. In connection with the settlement, the parties agreed that the Company would pay $5,000,000 as total settlement of the $8,000,000 face value note payable, and The Santa Cruz Operation would pay the Company $564,000 for operating costs incurred and paid by the Company that related to operations of The Santa Cruz Operation. Prior to the settlement, the collectibility of these items from The Santa Cruz Operation was uncertain, and therefore, the amounts had been expensed as incurred by the Company. The difference between the carrying value of the note payable of $7,777,000 and the $5,000,000 payment, along with the $564,000 expense reimbursement, have been recorded as an adjustment to the purchase price paid by the Company. As a result, goodwill was reduced from $2,278,000 to $0, and intangible assets were reduced by $1,063,000 in fiscal year 2002.


So new SCO actually managed to get a later reduction of about $3 million in that purchase price.

Then on Page 75:
During fiscal year 2002, the Company bought back an aggregate of 3,615,000 shares of its outstanding common stock from The Santa Cruz Operation in two transactions. The Company paid an aggregate of $3,514,000 for these shares, or an average of $0.97 per share. In connection with the repurchase, the Company received and accepted a resignation letter from one of the directors representing The Santa Cruz Operation on the Company's board of directors.

Looka like another major reduction in the purchase price - 3.615 million shares valued at $13.88 = $50 million, settled for $3.5 million instead.

So it looks quite reasonable to say that new SCO actually paid about $44 million.

Back to the question of what they got - according to the 10-K:
The Company accounted for the acquisition of certain assets and operations from The Santa Cruz Operation using the purchase method of accounting. Under this method, the total purchase price, including direct fees and expenses, was allocated to the tangible and intangible assets acquired and the liabilities assumed based upon their respective fair values. The following table summarizes the allocation of the consideration to the tangible and intangible assets acquired and liabilities assumed (in thousands):

Purchase price allocation:
Liabilities assumed net of tangible assets acquired $ (5,482 )
Accrual for severance payments, non-essential facilities and related costs (3,011 )
Intangible assets acquired:
Distribution/reseller channel 26,700
Existing technology (consisting primarily of UnixWare and OpenServer) 5,800
Acquired in-process research and development 1,500
Trade names 800
Distribution agreement 1,400
Goodwill 66,080

Total $ 93,787


Thus if new SCO paid about $44 million, of which $26 million is allocated to the distributor channel, there's about $20 million left to cover everything else.

An earlier version of what new SCO obtained can be found here (page 218), and is set out below:
Purchase price allocation:
Tangible assets acquired net of liabilities assumed....... $ 2,057
Accrual for shut-down of non-essential facilities and related costs.......................................... (500)
Deferred income taxes associated with non-deductible intangible assets...................................... (5,443)
Intangible assets acquired: Acquired intangible assets of SCO...................... 4,574
Distribution/reseller channel.......................... 26,200
Assembled workforce.................................... 20,000
Existing technology (consisting primarily of UnixWare and OpenServer)....................................... 6,200
Acquired in-process research and development........... 1,600
Trade name and trademarks.............................. 1,400
Distribution agreement................................. 1,400
Goodwill............................................... 35,566
Total............................................. $93,054


So here's one possible answer to the question :
For approximately $44 million paid to old SCO, new SCO obtained (amongst others) a "Distribution/Reseller channel" which they valued at $26 million, and an "Assembled Workforce" which they valued at $20 million.

(Apologies for crooked alignment of the figures.)

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More legal trouble
Authored by: RE on Friday, January 30 2004 @ 06:33 AM EST
in the legal chapter of their 10-k filing they have an old case:

IPO Class Action Matter We are an issuer defendant in a series of class action lawsuits filed in the United States District Court for the Southern District of New York, involving over 300 issuers that have been consolidated under In re Initial Public Offering Securities Litigation, 21 MC 92 (SAS). The plaintiffs, the issuers and the insurance companies have negotiated a Memorandum of Understanding (“MOU”) with the intent of settling the dispute between the plaintiffs and the issuers. We have executed this MOU and have been advised that almost all (if not all) of the issuers have elected to proceed under the MOU. The MOU is still subject to court approval and the preparation of appropriate settlement documents. If the settlement is approved by the court and settlement agreements can be entered into by the parties, and if no cross-claims, counter claims or third party claims are later asserted, this action will be dismissed with respect to the Company and its individuals.

And when you do a search for the file number 21 MC 92 (SAS) you find the complaint here

And the allegation is:
NATURE OF THE ACTION

1. This is a securities class action alleging violations of the federal securities laws in connection with the initial public offering conducted on or about March 20, 2000 (the "IPO" or the "Offering") of 5,000,000 shares of Caldera Systems, Inc. ("Caldera" or the "Issuer") and the trading of Caldera common stock in the aftermarket from the date of the IPO through December 6, 2000, inclusive (the "Class Period").
2. In connection with the IPO, the underwriters named as Defendants herein participated in a scheme to improperly enrich themselves through the manipulation of the aftermarket trading in Caldera common stock following the IPO.
3. In this regard, these underwriters created artificial demand for Caldera stock by conditioning share allocations in the IPO upon the requirement that customers agree to purchase shares of Caldera in the aftermarket and, in some instances, to make those purchases at pre-arranged, escalating prices ("Tie-in Agreements").
4. As part of the scheme, these underwriters required their customers to repay a material portion of profits obtained from selling IPO share allocations in the aftermarket through one or more of the following types of transactions: (a) paying inflated brokerage commissions; (b) entering into transactions in otherwise unrelated securities for the primary purpose of generating commissions; and/or (c) purchasing equity offerings underwritten by these underwriters, including, but not limited to, secondary (or add-on) offerings that would not be purchased but for the unlawful scheme alleged herein. (Transactions "(a)" through "(c)" above will be, at varying times, collectively referred to hereinafter as "Undisclosed Compensation").
5. In connection with the IPO, Caldera filed with the SEC a registration statement ("Registration Statement") and a prospectus ("Prospectus"). The Registration Statement and Prospectus will be, at varying times, collectively referred to hereinafter as the "Registration Statement/Prospectus." The Registration Statement/Prospectus was declared effective by the SEC on or about March 20, 2000.
6. The Registration Statement/Prospectus was materially false and misleading in that it failed to disclose, among other things further described herein, that the underwriters named as Defendants herein had required Tie-in Agreements in allocating shares in the IPO and would receive Undisclosed Compensation in connection with the IPO.
7. As part and parcel of the scheme alleged herein, certain of the underwriters named as Defendants herein also improperly utilized their analysts, who, unbeknownst to investors, were compromised by conflicts of interest, to artificially inflate or maintain the price of Caldera stock by issuing favorable recommendations in analyst reports.
8. The Individual Defendants (defined below) not only benefitted from the manipulative and deceptive schemes described herein as a result of their personal holdings of the Issuer's stock, these defendants also knew of or recklessly disregarded the conduct complained of herein through their participation in the "Road Show" process by which underwriters generate interest in public offerings.


Hm seems they are now playing old tricks, even darl didn't have to teach them how to screw your investors.

and the other case is:
In April 2003, a former Indian distributor of ours filed a claim in India, requesting summary judgment for payment of $1,428,000, and an order that we trade in India only through the distributor until the claim is paid. The distributor claims that we are responsible to repurchase certain software products and to reimburse the distributor for certain other operating costs. Management does not believe that we are responsible to reimburse the distributor for any operating costs and also believes that the return rights related to any remaining inventory have lapsed. Discovery is ongoing in this case and initial hearings have been held. We intend to vigorously defend this action.


if they are found guilty in the india case it could cast them $1,428,000.

And for the australian guys that where wondering if the The Australian Competition and Consumer Commission was sitting on their hands, in their previous filings SCO states:

The Australian Competition and Consumer Commission (the “ACCC”) has contacted us regarding complaints it has received regarding our intellectual property claims and our statements regarding the need for commercial Linux users to obtain a UNIX license. We intend to respond to the ACCC’s inquiry. The ACCC has notified us that it has not made any decision to pursue the complaints it has received or determined what, if any, action it will take.


Sounds like they must have a large legal department.

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Let's follow the path of the SUN
Authored by: wllacer on Friday, January 30 2004 @ 06:42 AM EST
What i find most interesting is the SUN conexion, which could explain the MK letter. I posted it previously, but it seems people got more interested in the side note about S2.
You can find this common stock warrants to SUN filled as
Exhibit 10.12 210000 shares at $1.83 from 11 march 2003
Exhibit 10.13 12500 shares at $1.83 from 31 july 2003
Exhibit 10.14 12500 shares at $1.83 from 31 oct 2003

What's the role of SUN ? It doesn't look like a normal license agreement.

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Sun ain't no friend of mine
Authored by: Anonymous on Friday, January 30 2004 @ 07:06 AM EST
During the year ended October 31, 2003, two significant
customers, Microsoft and Sun, accounted for approximately 21
percent and 12 percent of the Company's revenue. During fiscal
years 2002 and 2001, no single customer accounted for more
than ten percent of the Company's total revenue.

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Creative accounting
Authored by: Anonymous on Friday, January 30 2004 @ 10:13 AM EST
I don't have a degree in business or accounting, but I can't figure out how
they are making money off of license sales at all. We have Novell getting 95%,
Bois and Co getting 20% and now Morgan Keegan getting 6%. That's 121% of every
license being paid out to other people. Who knows what other percentages they
are giving away.

The $25,000,000 from Sun and Microsoft actually cost them $30,250,000. Go
figure.

Randy

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Auditor Report Is From 2001!!!
Authored by: Anonymous on Friday, January 30 2004 @ 10:35 AM EST
Did anyone notice that the "independent auditor" report is from 2001
(and from the defunct Arthur Anderson, no less)? Where is the one for 2003?

Fruity

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Morgan Keegan only wants to be treated fairly
Authored by: Anonymous on Friday, January 30 2004 @ 10:43 AM EST

After all, if they're expected to bring a bucket (BYOB? :-) ) and help bail out the sinking ship that is SCO, it's only fair that they be compensated for their work.

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Novell - when is reply?
Authored by: jmc on Friday, January 30 2004 @ 12:47 PM EST
I wondered if some legal guru could say by when Novell have to file their
response/counterclaim to SCO's "slander of title" suit?

[ Reply to This | # ]

S2 Strategic Consulting weirdness
Authored by: Anonymous on Friday, January 30 2004 @ 02:21 PM EST
Other people have commented that they can find no website or yellow pages entry for S2 Strategic Consulting. The agreement reads as if S2 is *very* small -- quite possibly a single person using a dba name.

The agreement covers all of SCO's usual bugbears: secrecy, IP, and indemnification. IANAL, but a few of the lines in the agreement got my attention:

From section 6.1:

SCO, and its suppliers as appropriate, own all right, title and interest in and to SCO software and materials including, but not limited to, all patent, copyright, trade secret and other proprietary rights embodied therein, whether or not specifically recognized or perfected under relevant laws

Can they do that? It sounds like they're agreeing to use SCO's definition of copyrights, patents, etc., regardless of whether they match up with what the law actually says.

From Section 12.3:

This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Utah and the United States of America, specifically excluding the United Nations Convention on Contracts for the International Sale of Goods, and without giving effect to conflict of laws.

Again, it sounds like they're trying to pick and choose which laws apply to them. I don't remember ever hearing that one was allowed to do that.

In any case, the meat of the agreement is Exhibit A, where they discuss the services S2 is contracted to perform. It's interesting to see the long list of things that SCO basically admits they are unable to do in-house. For example:

assist SCO in valuing SCO and/or, as appropriate, valuing SCO's intellectual property or operations; provided that any formal valuation or fixed asset appraisals needed would be executed by outside appraisers;

So they don't already have a clue what the company might be worth. Nice. A number of the agreed items refer to various services in support of a Transaction, which the agreement then goes on to define as: SCO selling licenses, SCO acquiring someone, SCO being acquired, and my favorite: (iv) any reorganization or restructuring pursuant to a Chapter 11 plan of reorganization confirmed pursuant to Section 1129(b) of the Bankruptcy Code (collectively, a "Plan") that is initiated by IC and defined in writing as required in this section 1. We can only hope. It makes me very happy to see that bankruptcy is considered a serious option down in Lindon.

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SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: Anonymous on Friday, January 30 2004 @ 02:46 PM EST
The part I didn't get was the Baystar deal. It looks like they sold Bayster
50,000 shares of "preferred stock" for $50M. Preferred stock is
worth $1,000 per share? How does this work?

Obviously there's only one entity that would be willing to throw away $50M in
this way....

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How I learned to stop worrying and love the virus.
Authored by: Anonymous on Friday, January 30 2004 @ 04:09 PM EST
I have noticed one upside to this stupid "MyDoom" mess. My regular
spam seems to be running at about 25% of normal.

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The Morgan Keegan letters and others
Authored by: glchisum on Friday, January 30 2004 @ 06:27 PM EST
Do all of these deals to Keegan and Associates and to the lawyers mean that ole
Darl is putting the company in hock big time. INAL or a financial analyst.

any comments.

---
What doesn't kill you, only makes you stronger!!

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SCO's 10K, MyDoom, and the Morgan Keegan letters
Authored by: Anonymous on Friday, January 30 2004 @ 07:02 PM EST
This article is not correct at all. Where does it mention in SCO's 10k report
MyDoom or any virus or denial of service attacks? .....It doesn't. Someone is
pulling your leg! This is all the assholes at SCO need.... some linux wienies
getting their facts totally skewed ....to enable them to maintain the stupid
posture of victims of the overzealous. Remove this erroneous article please.

[ Reply to This | # ]

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