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Change of Control Agreement & Hollands On the Stock
Thursday, December 16 2004 @ 05:22 PM EST

SCO has filed an intriguing 8K with the SEC, dated December 10, 2004. It is a Change of Control Agreement1 :

Item 1.01. Entry into a Material Definitive Agreement.

On December 10, 2004, The SCO Group, Inc. (the “Company”) entered in Change in Control Agreements with the following officers: Darl C. McBride, Chief Executive Officer; Bert B. Young, Chief Financial Officer; Christopher Sontag, Sr. Vice President and General Manager, SCO Source Division; Jeff F. Hunsaker, Sr. Vice President and General Manager, UNIX Division; and Ryan Tibbitts, Vice President, General Counsel and Secretary (each, an “Officer”). Each agreement is effective as of December 10, 2004. Other than the name of the Officer who is a party to each of the agreements (individually, an “Agreement” and collectively, the “Agreements”), and the address of each Officer, the Agreements are substantially identical. A copy of the form of the Agreement is attached hereto as Exhibit 99.1.

Pursuant to the terms of each Agreement, the Officer agrees that he or she will not voluntarily leave the employ of the Company in the event any individual, corporation, partnership, company or other entity takes certain steps to effect a Change in Control (as defined in the Agreement) of the Company, until the attempt to effect a Change in Control has terminated, or until a Change in Control occurs.

If the Officer is still employed by the Company when a Change in Control occurs, any stock, stock option or restricted stock granted to the Officer by the Company that would have become vested upon continued employment by the Officer shall immediately vest in full and become exercisable notwithstanding any provision to the contrary of such grant and shall remain exercisable until it expires or terminates in accordance with its terms.

Each Officer shall be solely responsible for any taxes that arise or become due pursuant to the acceleration of vesting that occurs pursuant to the Agreement.

Obviously it's the second to last paragraph that stands out. Speaking of stock options, here's 100,000 for Darl, 150,000 for Tibbits, 25,000 for Sontag, 25,000 for Hunsaker,30,000 for Daniel Campbell, and 150,000 for Bert Young.

Call me a cynic, but I can't help but recall that Dec. 21 is the 4th quarter and year-end teleconference.

Hollands on the Stock

Speaking of accelerated vesting reminds me that Melanie Hollands has written an article about SCOX stock and why it was rising in November. She sees several reasons, but it's best if you just hop on over and see for yourself. If I try to explain anything in any detail, I may mangle it, because it's not my field. But what struck me is this paragraph, after she writes that BayStar has been continuing to sell off its shares (it now has sold, she records, 14% of its original shares):

"The stock's run has also been propelled by fresh speculative activity and year-end positioning in the market, aided by its high volatility and limited trading volume. Some 'top 15' institutional holders of SCOX have actually been adding to their positions: Chesapeake Partners Management Co. Inc., Glenhill Capital, Barclay's Global Investors N.A., S&E Partners LP, and Citadel Investment Group LLC. There's probably also some jockeying around SCO's fiscal fourth quarter 2004, scheduled for release Dec. 21. . . .

"Although BayStar's position in SCOX has been reduced to 1,746,453 shares (10 percent of outstanding), this one position accounts for a substantial 19.7 percent of its fund – so the portfolio and concentration risks are still high. For my part, I don't like to have any one position that constitutes more than 4 or 5 percent of my portfolio -- the market and concentration risks get too high. So, with a position that constitutes 19+ percent of a portfolio, whatever happens to the SCOX stock price dominates the risk profile and returns of that portfolio.

"Although JHC, which had been holding SCOX for well over a year, sold only 61,867 of its 545,764 shares, its activity is interesting -- in part because it's run by Jonathan Cohen, who has a business relationship with Royce Capital (SCOX's second-largest institutional shareholder), and in part because its position is a hefty concentration of its total portfolio – over 4.8 percent. Interestingly, Royce hasn't been one of the recent sellers. . . .

"Technically speaking, SCOX looks like it's been bouncing off the bottom, but it's a pretty meaningless bounce. Why? Because the volume is not near levels that would indicate a strong move is going to follow through on the upside."


1

THE SCO GROUP, INC.

CHANGE IN CONTROL AGREEMENT

This Change in Control Agreement (this “Agreement”), is made this 10th day of December, 2004, by and between [ ] (the “Executive”) and The SCO Group, Inc. (the “Company”). The Executive and the Company are sometimes referred to herein individually as a “Party”, and collectively, as the “Parties”.

WITNESSETH:

WHEREAS, both the Compensation Committee of the board of directors of the Company and the entire board of directors of the Company (collectively, the “Board”) has determined that it is in the best interests of the Company and its stockholders for the Company to agree to provide for accelerated vesting of stock options and restricted stock under the circumstances described below to the Executive and other executives who are responsible for the policy-making functions of the Company; and

WHEREAS, the Board recognizes that the possibility of a Change in Control of the Company is unsettling to such executives and desires to make arrangements at this time to help assure their continuing dedication to their duties to the Company and its stockholders, notwithstanding any attempts by outside parties to gain control of the Company; and

WHEREAS, the Board believes it important, should the Company receive proposals from outside parties, to enable such executives to perform their regular duties, and where appropriate, to assess such proposals and advise the Board as to the best interests of the Company and its stockholders, and to take such other action regarding such proposals as the Board determines to be appropriate; and WHEREAS, the Board also desires to demonstrate to the executives that the Company is concerned with their welfare and intends to provide that loyal executives are treated fairly; and

WHEREAS, the Board wishes to assure that executives of the Company receive fair and competitive acceleration of vesting should the Company experience a Change in Control.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Parties hereto agree as follows:

1. Attempted Change in Control. In the event that any individual, corporation, partnership, company, or other entity (“Person”), which term shall include a “group” (within the meaning of section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Act”)), begins a tender or exchange offer, circulates a proxy to the Company’s stockholders, or takes other steps to effect a “Change in Control” (as defined in Exhibit A attached hereto and made a part hereof), the Executive agrees that he will not voluntarily leave the employ of the Company and will render the services contemplated in the recitals to this Agreement until such Person has terminated the efforts to effect a Change in Control or until a Change in Control has occurred.

2. Change in Control. If the Executive is still employed by the Company when a Change in Control occurs, the Executive shall be entitled to the following benefits:

2.1 any stock, stock option or restricted stock granted to the Executive by the Company that would have become vested upon continued employment by the Executive shall immediately vest in full and become exercisable notwithstanding any provision to the contrary of such grant and shall remain exercisable until it expires or terminates in accordance with its terms.

2.2 Notwithstanding anything herein to the contrary, to the extent that any payment or benefit provided for herein is required to be paid or vested at any earlier date under the terms of any plan, agreement or arrangement, such plan, agreement or arrangement shall control.

3. Taxes.

3.1 The Executive shall be solely responsible for any taxes, whether federal, state or local that arise or become due pursuant to the acceleration of vesting referred to in Section 2.1 above, and nothing herein shall obligate the Company to indemnify the Executive for any such taxes.

3.2 The Executive has had sufficient opportunity to consult his own attorney, accountant and other advisors in determining any federal, state or local tax consequences resulting from the transactions contemplated herein.

4. Not an Employment Agreement. Nothing contained in this Agreement shall be construed as a contract of employment between the Company and the Executive, or as a right of the Executive to continue in the employ of the Company, or as a limitation of the right of the Company to discharge the Executive with or without cause.

5. Amendment. No amendment, change, or modification of this Agreement may be made except in writing, signed by both Parties.

6. Termination. This Agreement shall terminate on the third anniversary of the date hereof, provided, however, that commencing on the third anniversary of the date hereof and on each annual anniversary thereafter (the “Renewal Date”), unless previously terminated, the term of this Agreement shall be automatically extended so as to terminate one year from such Renewal Date, unless at least sixty days prior to the Renewal Date the Company shall give notice to the Executive that the term of this Agreement shall not be so extended. This Agreement shall not apply to a Change in Control which takes place after the termination of this Agreement.

7. Assignability; Binding Nature.

7.1 No right, benefit, or interest hereunder shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt, or obligation, or to execution, attachment, levy, or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the

immediately preceding sentence shall, to the full extent permitted by law, be null, void, and of no effect.

7.2 The provisions of this Agreement shall be binding upon and shall inure to the benefit of the Executive, his executors, administrators, legal representatives, and assigns, and the Company and its successors.

8. Statutory Changes. All references to sections of the Act or the Code shall be deemed also to refer to any successor provisions to such sections.

9. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Utah, without regard to principles of conflicts of laws thereof.

10. Entire Agreement. This Agreement contains the entire understanding and agreement between the Parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the Parties with respect thereto. For the avoidance of doubt, this Agreement does not address and accordingly, does not supersede, the benefits offered under any employee benefit plan or the benefits payable to the Executive upon the Executive’s death or disability. To the extent that this Agreement is inconsistent with the terms of any plan under which any stock, stock option or restricted stock was granted to the Executive, the terms of this Agreement shall prevail.

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

12. Notices: All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other Party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

[Name of Executive]
[Address of Executive]

If to the Company:

The SCO Group, Inc.
355 South 520 West
Suite 100
Lindon, Utah 84042

or to such other address as either Party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

13. Headings: The headings and captions herein are provided for reference and convenience only, shall not be considered part of this Agreement, and shall not be employed in the construction of this Agreement.

[Remainder of Page Left Intentionally Blank]

IN WITNESS WHEREOF, the Company and the Executive have each caused this Agreement to be duly executed and delivered as of the date set forth above.

THE SCO GROUP, INC.

By: __________________

Name: ____________________

Title: _____________________

AGREED AND ACCEPTED:

_______________________
[Name of Executive]

EXHIBIT A

Change in Control

For the purposes of this Agreement, a “Change in Control” shall mean: (a) The acquisition by any Person of ultimate beneficial ownership (within the meaning of Rule 13d-3 of the Act) of 50% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, (iii) any acquisition by a stockholder who on the date hereof owns at least 25% of the Outstanding Company Common Stock, or (iv) any acquisition by any Person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Exhibit A; or

(b) Individuals who, as of the date hereof, constitute the board of directors of the Company (as such board may increase or decrease in size in accordance with the provisions below in this paragraph (b), the “Incumbent Board”) cease for any reason to constitute at least a majority of such board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of the Nominations and Governance Committee of the board of directors of the Company and at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than such board; or

(c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, immediately following such Business Combination more than 50% of, respectively, the shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination) ultimately beneficially owns, directly or

indirectly, 50% of more of, respectively, the then outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the board of directors of the Company providing for such Business Combination; or

(d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.


  


Change of Control Agreement & Hollands On the Stock | 218 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Change of Control Agreement & Hollands On the Stock
Authored by: entre on Thursday, December 16 2004 @ 05:32 PM EST
Corrections Here Please

[ Reply to This | # ]

Change of Control Agreement & Hollands On the Stock
Authored by: Anonymous on Thursday, December 16 2004 @ 05:35 PM EST
Call ME a cynic, but 45,000 stocks were traded just before the close.

Coincidence?

AndyC
(Not logged in)

[ Reply to This | # ]

Poison pill?
Authored by: Anonymous on Thursday, December 16 2004 @ 05:35 PM EST
So, are they trying to keep from being taken over, by forcing somebody to take
all the deadwood and encumbrances? Or are they trying to setup for a cashout if
somebody like Sun or Microsoft steps in and buys them (to stop the embarassing
connections back to HQ if nothing else)?

[ Reply to This | # ]

OT-Sept 15 Transcript Posted on Sco.com
Authored by: spuluka on Thursday, December 16 2004 @ 05:39 PM EST
I see that the full transcript of the September 15 hearing has been posted on
the Sco IBM lawsuit web page. Has this been unsealed by the court?

---
Steve Puluka
Pittsburgh, PA

[ Reply to This | # ]

Change of Control Agreement
Authored by: Anonymous on Thursday, December 16 2004 @ 05:41 PM EST
Call me a cynic - but if for example Company A lost a lot
of money to Company B, by e.g., losing a large lawsuit and
was taken over by Company B: then it seems like the
Officers in Comany A get a larger slice of any cake than
they would otherwise be entitled.

Seems like one of those takeover defences (poison pills?)
that can get challenged in Courts.

[ Reply to This | # ]

Options vesting
Authored by: Anonymous on Thursday, December 16 2004 @ 05:45 PM EST
a) It's actually pretty common for stock options to vest on change in control.

b) It's bizarre that they're still thinking that someone wants to buy them,
almost tragically delusional.

c) Their stock options have a strike price of $4.85. They're already underwater
and will probably never be more than a dollar or two above water, ever.

[ Reply to This | # ]

Can someone explain vested for us uninformed?
Authored by: Anonymous on Thursday, December 16 2004 @ 05:47 PM EST
And what the second to the last paragraph means?

[ Reply to This | # ]

Thrown up my hands in disgust...
Authored by: Groklaw Lurker on Thursday, December 16 2004 @ 05:53 PM EST
I've essentially given up trying to understand the fluctuations of SCOX. There
are so many different parties engaged in so many different activities with this
stock that it easily overwhelms my rudimentary knowledge of the stock market.

Logic tells me that SCOX should be trading at a few pennies per share because
that is all it is worth - SCO has no marketable products other than FUD and only
the slimmest chance of success in any of their legal battles, at best.

It is obvious to me that the price of SCOX has only, at best, a tenuous
relationship to the real world value of SCO itself.

---
(GL) Groklaw Lurker
End the tyranny, abolish software patents.

[ Reply to This | # ]

Change of Control Agreement & Hollands On the Stock
Authored by: frk3 on Thursday, December 16 2004 @ 05:58 PM EST

Sorry, but this sounds like a setup for a Canopy Group company arranged "Change of Control" to me. In fact, sounds like a setup to ensure that these officers can cash out before the legal hammers start falling on their heads.

Maybe I am wrong, but looks very suspcious to me and with the Canopy shell games in the recent past, it would not surprise me if something like this is being arranged, the announcement of which will be part of their earnings conference call coming up on the 21st of December, 2004.

I could be completely and totally wrong though. :)

[ Reply to This | # ]

Change of Control Agreement & Hollands On the Stock
Authored by: AntiFUD on Thursday, December 16 2004 @ 05:59 PM EST
The actual agreement is text

---
IANAL - But IAAAMotFSF - Free to Fight FUD

[ Reply to This | # ]

Tinfoil Hat time -- Where's Alan Raymond?
Authored by: Steve Martin on Thursday, December 16 2004 @ 06:20 PM EST

Okay, these are the guys who were included in the Agreements:

  • Darl C. McBride, Chief Executive Officer
  • Bert B. Young, Chief Financial Officer
  • Christopher Sontag, Sr. Vice President and General Manager, SCO Source Division
  • Jeff F. Hunsaker, Sr. Vice President and General Manager, UNIX Division
  • Ryan Tibbitts, Vice President, General Counsel and Secretary

<tinfoil hat>

Is there any significance to the fact that Alan Raymond, Vice-President of Sales for the Americas, is not included in this list? Perhaps TSG is not interested in hanging on to their Sales VP. (For that matter, is it significant that Ralph Yarro is not on the list either?)

</tinfoil hat>

---
"When I say something, I put my name next to it." -- Isaac Jaffee, "Sports Night"

[ Reply to This | # ]

Early signs
Authored by: ExcludedMiddle on Thursday, December 16 2004 @ 06:23 PM EST
I think that what we see here is the exec team preparing their parachutes. And,
to the surprise of no one, they are golden ones. Of course, with SCO stock, such
as it is, they are only gold-plated.

They are probably facing the facts here. The litigation is going poorly now. And
some of the PSJs from IBM, should they succeed, would eviscerate the licensing
strategy, even if the lawsuit continued on. This would be a complete loss in the
court of public opinion (and about time too!) There's not much other business in
this company to make it worth very much.

The exec team is clearly thinking ahead. They have all of these non-vested
options on the table, which would be a shame to lose.

So I imagine this scenario: We have seen that the cadre of Canopy sticks close
together. If a Canopy sister-company performs a "buyout" of TSG, all
of the golden parachutes trigger, and the exec team gets to exercise these last
shares before the SCO plane goes into a final nosedive.

I am again looking at their filings from the point of view of an investor, and I
would again imagine myself screaming at them! Even if I was just betting on the
lawsuit. The deal with their lawfirm was stupid from the point of view of
motivating a lawfirm, and was finacially irresponsible as well. The only ones
that benefit are the Boies firm, and the exec team.

While this little move is probably legal, I would hope that when (not if!) this
change of control occurs, the deal is scruitinized from every standpoint by the
proper authorities for such things. Who would want to obtain such a company? The
only answer I can think of is one of those quid pro quo deals that would
personally enrich those who are part of the transaction.

At least at this point, we've got our clearest indication yet that the exec team
is about to give up.

[ Reply to This | # ]

Rats from a sinking ship?
Authored by: Christian on Thursday, December 16 2004 @ 06:34 PM EST
It looks like there is a trade-off here. Darl et al get to exercise their options immediately if there is a change in control. But then there is the part about the officers not being allowed to quit after certain activities leading up to the change in control take place. Why is that? One reason I can think of is that loss of the officers could cause a big drop in the SCOX price in the middle of the buyout. Canopy would not like that, would they?

Who would have negotiated this? Darl McBride locked in his office with himself? I doubt it. So what was the other side trying to gain? Or was it just a payout to McBribe and his cronies?

[ Reply to This | # ]

Change of Control Agreement & Hollands On the Stock
Authored by: Anonymous on Thursday, December 16 2004 @ 06:36 PM EST
This is the SCO normal course of releasing fluff information prior to the
conference call to focus talks away from earnings. It is predictable and
insignificant related to the other issues on the table.

[ Reply to This | # ]

OT Here please!
Authored by: tiger99 on Thursday, December 16 2004 @ 06:52 PM EST
My, my, you are all so quick off the mark today that no-one has posted this
section yet. But here it is now.

[ Reply to This | # ]

Corrections here please.
Authored by: tiger99 on Thursday, December 16 2004 @ 06:54 PM EST
If there are any, of course.

[ Reply to This | # ]

Dog wagging+
Authored by: Anonymous on Thursday, December 16 2004 @ 07:13 PM EST
In the immediate, this is just wagging the dog to manufacture some positive spin
for the quarterly conference. "Look how much confidence we have in our
legal position... We're certain that IBM (once they get past their blatant
discovery abuse and repeated delaying tactics...) is going to realize they can't
possibly win, at which point they're going to try and buy us out".

That may buy them another few weeks of unrealistic stock support, then when it
finally starts to collapse again, look for a Canopy buyout, at which point the
aforementioned executives (and a few lawyers... remember the arrangement with
the legal team containes a few perks in the event of a buyout...) collect a
little extra cash.

Standard procedure when you're dead in the water but the money hasn't quite run
out yet.

[ Reply to This | # ]

Baystar sales
Authored by: bstone on Thursday, December 16 2004 @ 07:18 PM EST
Someone's not very good with math. Although she gets the
SEC reported numbers right that Baystar sold 462,192 of their
2,208,645 shares, that's 21% not 14% of their initial holdings.

She then goes on to say that the SEC shows no Baystar sales
since December 7th. While that is a correct fact, the REASON
the SEC reports show no sales since then is that, as their
sales on the 7th, Baystar owned only 9.99% of SCO outstanding
stock and therefore is no longer required to file reports with
the SEC. In fact, they checked the "no longer need to report"
box on their filing that day.

Whatever Baystar has sold since the 7th, we don't know. If
they've continued selling at the same rate, they would have
sold another 80,000 shares by now or a total of about 25%
of their initial holdings.



[ Reply to This | # ]

  • From 10% to 5% - Authored by: Anonymous on Thursday, December 16 2004 @ 08:56 PM EST
    • From 10% to 5% - Authored by: bstone on Thursday, December 16 2004 @ 11:46 PM EST
      • obfuscation - Authored by: Anonymous on Friday, December 17 2004 @ 11:36 AM EST
Change of Control Agreement & Hollands On the Stock
Authored by: Anonymous on Thursday, December 16 2004 @ 07:26 PM EST
Just looking at this, trying to keep an open, neutral mind (yeah, I know, damned
near impossible, but I'm *trying*). If I were an outsider who knew nothing
about the lawsuit, nothing about the history of the entity that calls itself The
SCO Group, I think I'd have to say, "This doesn't look good. This sounds
like a dying company."

SCOX is on the ropes, this coming quarterly announcement is going to be nothing
but bad news, the management probably fears a takeover, and the lawsuits don't
look too promising. Even a blind man could see the writing on the wall.

[ Reply to This | # ]

Talk up a buy out = raise the stock price
Authored by: Anonymous on Thursday, December 16 2004 @ 07:40 PM EST
1. If you had a company that nobody in the world was interested in buying out.

But you wanted to give ***the impression*** that somebody,
say IBM, was
interested in buying you out

One way to do that, would be change bylaws and issue press
releases etc.,
designed to give ***the impression*** that you were
preparing to protect your
interests in the event of a buy out ("change of
control")

2. Buy outs often raise stock prices, so even the mere act
of preparing or
giving ***the impression*** of preparing for a buy out,
could raise your stock
price (or perhaps prevent it falling further) -- which
would be nice for people who got options at prices below the pre-raised price.



Of course, whether the above applies in this case, is not
known to me.

[ Reply to This | # ]

Change of Control Agreement & Hollands On the Stock
Authored by: Anonymous on Thursday, December 16 2004 @ 07:41 PM EST
As entertaining as all the conspiracy theories are (and who knows they could be
right ;-)), this may be as simple as a reaction to the change in accounting
rules regarding stock options. Many tech companies around here (Sili valley) are
also making changes in their option programs since the accouunting parctices are
changing Jan 1 and other changes have to be implemented by Jun 1. I read
recently that this is especially true of "underwater" options and that
many companies are accelerating them to get them off the books (which will
basically screw the optionees - sigh). This may amount to nothing more than
accounting adjustments.

[ Reply to This | # ]

Wookiees!!!
Authored by: Simon G Best on Thursday, December 16 2004 @ 08:00 PM EST

Recently, AllParadox forecast "Heavy [troll] showers, mixed with intermittent DDOS, through the 21st". With the forthcoming quarterly conference on the 21st expected to be bad news from and for The SCO Group, it would not be surprising, as others have said, for there to be 'wookiees' (as in, 'Hey, look at the wookiee!').

There's the news of Greg Aharonian's lawsuit against copyright in software, with The SCO Group and the GPL getting curious mentions. The timing of it seems rather convenient for The SCO Group as a potential wookiee. As another commenter suggested above, the news of golden parachutes above could also be a wookiee. And, of course, there are the trolls.

So, are there any other possible wookiees that people have noticed? Obviously there's the risk of mistaking things for wookiees when they're not (and none of the potential wookiees I've mentioned here are necessarily wookiees), but I'm just curious.

---
Open Source - open and honest? Not while the political denial continues.

[ Reply to This | # ]

Call me perplexed...
Authored by: Latesigner on Thursday, December 16 2004 @ 08:19 PM EST
I was never understood why anyone would have bought this stock on the open
market and after the Aug.03 obfuscated code debacle I never understood why SCOx
didn't tank immeadiately.
Instead it went to $22 before it began it's drift downwards.
So now, with the writing on the wall and BayStar dumping it, it goes up again ?
Truly, markets are wondrous.

[ Reply to This | # ]

Exhibit A section (d) approaching fast!
Authored by: Anonymous on Thursday, December 16 2004 @ 08:39 PM EST
Exhibit A
(d) Approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.

SCOX as we know it won't see 2007.
I hope it doesn't see 2006.

[ Reply to This | # ]

Buy out?
Authored by: RedBarchetta on Thursday, December 16 2004 @ 08:40 PM EST
There's a reason why Darl and gang executed this agreement with themselves (that's what it is, isn't it? :-P ).

It's all a ploy to prop the SCOX stock price after the Dec. 21st teleconference.

At the teleconference you'll see Darl McBride and the rest of the rats plugging this agreement as if it were significant to their overall strategy. Darl is going to give the impression that a buyout is probable, or at the very least make it seem like TSG is positioning itself for a buyout (and thus the need for a new vesting agreement -- someone needs to be ready to catch all those wads of cash!). All the FUD machines in the press will overhype it as usual (Enderle? anyone? anyone?...). The stock price shoots up 40 or 50 cents. Mission accomplished.

Fortunately, there is reality, and it asks, "...why would it make a difference to an officer of a [soon-to-be] bankrupt company whether he/she is fully vested?"

100% of zero... is zero!


---
Collaborative efforts synergise.

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Change of Control Agreement & Hollands On the Stock
Authored by: Anonymous on Thursday, December 16 2004 @ 09:04 PM EST
I suspect that Darl and company, over the past few weeks, have come to the
realization that the company is doomed. As such, it would make perfect sense to
have instituted a change of control and exit -- stage right, before the roof
falls in.

I do not, in anyway, believe these guys do anything that is not in their *own*
interest.

krp

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Official "The SCO Group" Positions
Authored by: fudisbad on Thursday, December 16 2004 @ 09:29 PM EST
Main posts in this thread may only be made by senior managers or attorneys for
"The SCO Group". Main posts must use the name and position of the
poster at "The SCO Group". Main posters must post in their official
capacity at "The SCO Group".

Sub-posts will also be allowed from non-"The SCO Group" employees or
attorneys. Sub-posts from persons not connected with "The SCO Group"
must be very polite, address other posters and the main poster with the
honorific "Mr." or "Mrs." or "Ms.", as
appropriate, use correct surnames, not call names or suggest or imply unethical
or illegal conduct by "The SCO Group" or its employees or attorneys.

This thread requires an extremely high standard of conduct and even slightly
marginal posts will be deleted.

PJ says you must be on your very best behavior.

If you want to comment on this thread, please post under "OT"

---
FUD is not the answer.
FUD is the question.
The truth is the answer.

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Reg Broughton disappears from executive list
Authored by: stats_for_all on Thursday, December 16 2004 @ 10:17 PM EST
Reg Broughton, Senior VP International, had his name and picture taken off the executives page between 12/15 and 12/16.

The page with Broughton existed in the Google cache until about 7:30 EST on 12/16. The page had been spidered on 12/2/04. The more recent Google cache has the revised page without Reg Broughton.

Interestingly, this page still lists Tom Raimondi, Jr. as a director. Raimondi resigned November 24th.

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Change of Control Agreement & Hollands On the Stock
Authored by: belzecue on Friday, December 17 2004 @ 12:25 AM EST
Surprising? No.

Surprising would be if SCO DID NOT send out a wookie days before an earnings
conference.

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melanie Holland Quote
Authored by: Anonymous on Friday, December 17 2004 @ 01:04 AM EST
Technically speaking, SCOX looks like it's been bouncing off the bottom, but it's a pretty meaningless bounce. Why? Because the volume is not near levels that would indicate a strong move is going to follow through on the upside
Translation: SCO's stock is doing the Dead Cat Bounce. I just love the way MH can turn a phrase.

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  • On Balance Volume - Authored by: Anonymous on Friday, December 17 2004 @ 11:48 AM EST
Practicalities of a hostile takeover = not likely
Authored by: Anonymous on Friday, December 17 2004 @ 02:14 AM EST
Some of threads speculate about SCO's management fearing the possibility of
take-over

I guess, if one were following this line of speculation, one would be thinking -
that they might be thinking:

1. Stock price could tank at any time

2. If stock price fell to pennies, somebody could buy the whole company, or the
majority of the company easily


IANAL, IANA-Stock-Analyst, but this doesn't very likely

***** LOOK AT WHO OWNS THE STOCK *****

To get control of the company, somebody will have to get 50%+1 of the total
stock

Now not all the stock is on the open market

Canopy owns 35% or 40% or something around this figure whenever I check

Other insiders own a few additional percentage points

Canopy's friends like EsNet [who have 2 people on the board] probably own a few
more percent

Some of the others associated with the scheme (Royce, Cohen) own some more

My guess is that maybe 35%, 40%, 45% or perhaps even over 50% is held by
SCO-insiders and their friends.

Of course if it's over 50%, then any hostile take-over is effectively impossible


But even if it's under 50%, it's probably not practical (unless SCO has plans to
print up lots more stock and issue it to the public, or Canopy has plans to dump
all their stock in the near future - both of which would drive the stock price
down very fast)

For example, let's say the insider-group and allies, including Canopy and all
their friends, owned only 35% of te stock. That would mean, at most 65% of the
stock is available on the market (probably less, because institutions may hold
on to their shares long temr), but let's say 65% is on the open market (the most
favorable possible scenario for a hostile taker-over)....

...To get 50% of the whole company, somebody would need to get their 50% from
the available 65% -- which is 50/65 * 100 = 77% of all shares available on the
market

That's quite a lump to acquire





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OT: Patent Poker and Cartels
Authored by: geoff lane on Friday, December 17 2004 @ 03:13 AM EST
When two companies have a IP dispute that is settled with a mutual exchange of
patent licenses they are essentially creating a cartel in which goods are traded
internally to the cartel at a different price to that used for trading with
companies outside the agreement.

Why is this legal?


---
Invention and Innovation are not synonyms.

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Are there any SCO Officers not on the list? (eom)
Authored by: Anonymous on Friday, December 17 2004 @ 05:57 AM EST
.

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Some new SEC rule
Authored by: inode_buddha on Friday, December 17 2004 @ 08:54 AM EST
I don't have a refernce but there was an article in today's paper that the SEC
is now requiring options to be expensed.

---
"When we speak of free software, we are referring to freedom, not price." --
Richard M. Stallman

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Change of Control Agreement & Hollands On the Stock
Authored by: Anonymous on Friday, December 17 2004 @ 09:12 AM EST
I see quite a few mentions here of "takeover". I don't know by whom?
SCO is right now on the wrong end of at least two suits from IBM (GPL and Lanham
act IIRC) and they may be liable for damages to a multi billion dollar revenue
stream (IBM's) in each. As of now, SCO has penned agreements (with their legal
teams) that will take their cash balance to zero (or near enough). As such, SCO
has little they can loose on these threats. Any company that buys SCO (except
IBM) will find themselves having paid cash for assets worth less than what they
paid and looking at two potentially loosing lawsuits from a well funded
opposition (that appears ready and willing to fight "all the way").
What they get for this is a fading UNIX business and the SCO lawsuits (which are
a 500 ton building teetering on two small legal toothpicks at this time). IBM
doesn't want SCO and what rational company would step in front of this train and
under that legal liability?

As such, SCO can't be doing this to protect themselves from a buyout unless they
really believe they have a business model. The only business model SCO has is
these lawsuits. If the SCO executives believe in the lawsuits then they did not
file them in a cynical attempt to initiate a buyout.

All this sort of flies in the face of the recent (last two years) insider
selling (not trading just selling). Given that there is evidence that they did
(IMO) file the lawsuits in an attempt to engender a buyout, this seems like a PR
move designed to influence those who are uncertain about the chances of the
lawsuits. It's a public show of confidence by the SCO board and the expected
result can only be a short term "bump" in shareholder confidence at
best.

I vote PR stunt pure and simple.

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Who would want to buy SCO (now or later)?
Authored by: dobbo on Friday, December 17 2004 @ 10:00 AM EST

I keep asking myself this, and I can't find any reason why any one would want to buy SCO.

I can see a reason to by SCO's stock. Sepulative investment in case SCO win the case. I believe that such an investment would be made without fully reviewing the facts in detail. Those buying SCO stock (when it isn't SCO or Canopy) are the type of investors that do not know that Windows isn't an operating system, and think that PC can only run Windows. I'm not saying that these investors are dumb, just that they don't have our level of technical knowledge. These types of investors have money to spread around, and while they don't expect to gain on every investment they do expect to see a net rise in the funds they manage. Thus a few high risk, high reward stocks are worth it to them.

But I would expect any one looking to buy SCO to do a bit more research. I would expect them see that any rewards SCO get against IBM, Novell, RH or DC will be more than wiped out by the losses. So who would want to come in from outside and buy SCO while the litergation is going on?

As for IBM (or Novell or RH or DC) buying SCO to "make them go away" again I ask "Why would they?" If one of the companies currently being sued by SCO was to buy it they would be out of pocket not just they price of SCO, not just their own costs to date too, they would probably end up paying the costs (and some damages) to the other companys as well. This vastly increases the cost of buying SCO. If they just keep on and fight until SCO is wiped from the face of the planet it will only cost them their own costs.

Dobbo

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A way to get blood from that turnip?
Authored by: joef on Friday, December 17 2004 @ 10:19 AM EST
Look at the facts:

The options are underwater now, so can only have value in the event of a major
run-up.

Which is most unlikely as things presently exist.

And, in any event, not all are vested, so they couldn't be exploited until they
do vest.

But, in the unlikely event of a change in control, they would immediately vest
according to the filing.

And a change in control often causes a significant price run-up of the shares of
a company based on the "sombody must KNOW something" mindset.

Which would allow these executives to bail out of their stock positions with a
possible profit.

Now, the question I would pose is: Is there a sham deal on the horizon that
could amount to a change of control which might trigger the vesting? A shell
game of asset manipulation among the Canopy shells just might qualify. Of
course, it might also allow one to penetrate the corporate veil of the Canopy
group.

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What if????
Authored by: Anonymous on Friday, December 17 2004 @ 10:36 AM EST
Everyone's been asking, "Why would IBM or RH or anyone buy SCO?".
Probably, no single company would.

But......what if more than one of them got together? A joint
RH/Novell/IBM/<insert name of other Linux distro> operation. Do away with
the UNIX question for good by GPL'ing as much of it as possible. Do it in such
a way as to devalue the stock so that the options would be worthless.

Oh, and keep Darl around, just to mess with him. Parking garage
attendant....maybe just make him walk around in a penquin suit at trade shows.

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Is there anything IBM could do?
Authored by: Anonymous on Friday, December 17 2004 @ 03:25 PM EST
Being that IBM is claiming copyright infringement is there anything IBM can do
to prevent SCO from paying out money to these people until the lawsuit is
resolved?

Any money paid out in such an agreement would likely go to IBM.

It appears to me that to top management at SCO is trying to milk the company
before it goes down in flames. These are the exact people who started the legal
fiasco, no? They surely don't deserve to be rewarded!

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Today's closing price
Authored by: joef on Friday, December 17 2004 @ 05:56 PM EST
Is it just a coincidence that SCOX closed today at $4.75?

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Change of Control Agreement & Hollands On the Stock
Authored by: Anonymous on Friday, December 17 2004 @ 06:28 PM EST
Yes, some Canopy trick deal is the most likely Scenario.
Also remember their past squabble with Baystar.

One must consider which assets and liabilities SCO has, and which controlling
interests there are.

1. Cash. All of the cash is at risk if litigation goes to conclusion, either
for continued legal fees, or in form of damages and countersuits they will be
liable for. This cash is at more and more risk, the closer we draw to their
date with Ms Justitia.

2. Products and customers.

2A SCO has quite a few customer on their legacy platform, which provides a small
but somewhat reliable stream of revenue. These customers are small shops who'd
rather keep their old systems going than spend money on a migration. HW and
license cost a pittance, but getting consultants to help with migration costs a
bundle. With careful pruning of existing product staff and cost control, the
legacy software can be spun off as a separate company.

2B Their IP portfolio product is not worth even a tenth of a percent of what
they pay the people assigned to scosource. It will be gone in a flash when the
lawsuit is inevitably lost, and in the meantime, it's bleeding money big time.

So, by now, I am sure you can all guess where this is going, and what Yarro will
do.

Split SCO into 2 units.
1) Spin off a separate company and move the cash assets and the legacy product
into a new company.
2) Move the Scosource business to a separate company. Move no more but the cash
required to pay off Boies contract there. This company will own the Unix
contracts and the IBM litigation.

When splitting the companies, they will make sure to value the SCOSOurce
business very high, while the legacy business will go at less than face value.
When making the split, this ensurees tah the insiders will own options way over
water.

When the whole thing blows, which is when Judge Kimball drops the hammer, SCO's
assets have already been ferreted away, and there is no value left for IBM's
countersuit. The insiders can cash out on the legacy business.

I am sure this has been the plan for some time. Even Boies must have known,
which is why he covered his bases by requiring a 20% cut of any financing
proceedings. So, Boies will maybe end up owning 20% of the 'legacy' company.

I bet the reason Baystar fought SCO, was that SCO must have been considering
this defensive move, and Baystar knew about it. Since the reason Baystar went
was the prospect of a big litigation windfall, they balked when SCO insiders
tried to ferret the cash away by authorizing an off-market buyout program.
Eventually Baystar realized they had been duped, and are now content with
selling what they have at whatever they can get. Their reputation as clever
movers and shakers in the PIPE business would have taken a devastating hit if
they admitted publically that they were duped by an amateur con-man as Darl
McBride.

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