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SCO's letter agreement re escrow account |
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Thursday, June 08 2006 @ 11:05 PM EDT
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Here's the new letter agreement between SCO Group and Boies Schiller about topping off the escrow account, just filed with the SEC. It seems they put $5 million more in the kitty. Note number 4. Lawyers always make sure they get paid, as I've told you many times. And frankly, they need to, because when people are in trouble, they are very interested in paying for help; but when it's over, it can be harder to motivate a client to pay a bill, so the lawyers naturally don't want to be left holding expenses in their hands and having to pay them out-of-pocket. Here, the firms are sure to be paid for any expenses. When I show you IBM's new filing, in the next article, you'll probably be able to figure out why more money is needed, even in the IBM litigation, let alone the Novell arbitration and lawsuit.
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EXHIBIT 99.1
The SCO Group, Inc.
[address]
June 5, 2006
Mr. David Boies
Boies, Schiller & Flexner LLP
[address]
Re: First Amendment (this “Amendment”) to the Letter Agreement dated October 31, 2004 (the “Original Letter Agreement”) among The SCO Group, Inc. (the “Company”), Boies, Schiller & Flexner LLP (“BSF”), Kevin McBride, and Berger Singerman (together, the “Three Original Firms”)
Dear Mr. Boies:
As we have discussed, pursuant to the Original Letter Agreement, the Company was obligated to deposit at least $5 million into an escrow account (the “Escrow Account”) for the payment of any expert, consulting and other expenses (including out-of-pocket expenses of all law firms working on the SCO Litigation (as defined in the Original Letter Agreement)) approved by BSF. Because much of the initial $5 million deposited into the Escrow Account has been utilized for the payment of expert, consulting and other expenses, the Company and the Three Original Firms desire to amend the Original Agreement to provide for a mechanism to increase the money in the Escrow Account in the event that the Company and BSF mutually agree to increase the amount of such money.
Accordingly, notwithstanding anything to the contrary in the Original Letter Agreement, the Company and the Three Original Firms desire to amend the Original Letter Agreement as follows:
1. In the event that the Company and BSF from time to time mutually agree in writing that it is necessary to replenish the money in the Escrow Account, the Company will replenish the Escrow Account in the amount mutually agreed upon by the Company and BSF;
2. The Company and BSF mutually agree that the Escrow Account initially will be replenished in the amount of $5 million, which money will be deposited by the Company into the Escrow Account within a reasonable period of time after the date hereof; and
3. Any money remaining in the Escrow Account after the completion of the work contemplated in the Original Letter Agreement will be returned to the Company; provided, however, that before such money is returned to the Company, the
Company will have paid all approved expenses contemplated in the Original Letter Agreement and in this Amendment that are to be paid from the Escrow Account.
Except as set forth herein, this Amendment does not alter the terms or conditions of the Original Letter Agreement.
This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute the same agreement.
If the terms of this Amendment are agreeable, please so indicate by signing below and returning this letter to Bert B. Young at The SCO Group, Inc., [address].
Sincerely,
By:
/s/ Darl C. McBride
Darl C. McBride
Chief Executive Officer
Agreed and Accepted this 5th day of June, 2006.
BOIES, SCHILLER & FLEXNER LLP
By:
/s/ Stuart Singer
Name: Stuart Singer
Title: Partner
BERGER SINGERMAN
By:
/s/ Mitch Berger
Name: Mitch Berger
Title: President
/s/ Kevin McBride
Kevin McBride
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Authored by: tredman on Thursday, June 08 2006 @ 11:31 PM EDT |
What #4?
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Tim
"I drank what?" - Socrates, 399 BCE[ Reply to This | # ]
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Authored by: dwandre on Thursday, June 08 2006 @ 11:31 PM EDT |
So PJ can find them... [ Reply to This | # ]
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- 4 should be 3. - Authored by: Anonymous on Friday, June 09 2006 @ 02:54 PM EDT
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Authored by: webster on Thursday, June 08 2006 @ 11:47 PM EDT |
So PJ can find them...
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webster
[ Reply to This | # ]
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Authored by: sk43 on Thursday, June 08 2006 @ 11:52 PM EDT |
Does anyone know what this firm does? Leonard Samuels and Fred Goldberg, in
particular?[ Reply to This | # ]
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Authored by: XORisOK on Thursday, June 08 2006 @ 11:55 PM EDT |
PJ... When I show you IBM's new filing, in the next article, you'll probably be
able to figure out why more money is needed, even in the IBM litigation, let
alone the Novell arbitration and lawsuit.
Good tease. I will be up all night lookiing! :^)
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Cogito Ergo ZOOM - "I think, Therefore I drive fast!"[ Reply to This | # ]
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Authored by: Zarkov on Friday, June 09 2006 @ 12:42 AM EDT |
A question on the mechanisms of control over these typs of escrow account....
Would it be possible for these types of accounts to be used as 'slush funds' by
which someone could move large amounts of cash out of the business?
From just looking at the agreement my first thought was that there is nothing
stopping BSF using this fund to sidestep the cap on their fees... it seems that
as long as BSF ask for more money to be deposited in the account, SCOX are
happpy to do that.
So who decides what the money gets spent on? And when?[ Reply to This | # ]
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Authored by: Anonymous on Friday, June 09 2006 @ 02:17 AM EDT |
Only after they closed the bankrupcy and fraud cases :)
Sure, the lawyers wanna get paid should those happen.
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Authored by: Anonymous on Friday, June 09 2006 @ 03:59 AM EDT |
Like posted earlier, I too wonder what number 4 PJ is refering to. Is it a typo
and supposed to maybe be a "3" or am I missing something?[ Reply to This | # ]
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Authored by: dcf on Friday, June 09 2006 @ 09:41 AM EDT |
Given that the letter is dated June 5, the $5 million dollar payment would not
have been included in the just-released results for their fiscal second quarter
which ended April 30.
For SCO's fiscal Q1 (ending Jan 31, 2006), cost of SCOsource revenue (presumably
primarily expenses related to the trials) were $4 million, including the final
$2 million fixed payment towards their lawyers fees. For fiscal Q2, that cost
was $3.76 million, so the non-fee portion nearly doubled. Next quarter, it will
apparently be at least $5 million.
[ Reply to This | # ]
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Authored by: Anonymous on Friday, June 09 2006 @ 09:29 PM EDT |
I haven't read anything that says they made a $5 million payment. Only that
they agreed to replenish the $5 million escrow account. We'll know when we see
the 10-Q due to be filed with the SEC by June 15 (always due by the 45th
calendar after the quarter end, except it's the 90th day for the 4th quarter,
i.e., the 10-K).
The 10-Q breaks out the restricted cash due to Novell so that we can see what
how much was left at April 30 for out-of-pocket legal expenses. SCO's payment
escrow payment would only be $5 million if all the restricted cash was due to
Novell. On the other hand, if they recorded nothing as being due to Novell,
then they'd only have to pay less than $2 million to replenish the escrow
account back up to the $5 million escrow level.
Of course, I could have missed something.
nealywilly[ Reply to This | # ]
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Authored by: Anonymous on Sunday, June 11 2006 @ 01:04 PM EDT |
There's been no mention/discussion regarding BSF's deposition of Sam Palmisano
-- yet it must have occurred already, from the discovery schedule.
I was expecting that, if David Boies was ever going to make his grand appearance
before trial, it would be for the Sam deposition. That is, after all, his
primary (in my estimation, his only) strength/skill as a litigator.
So -- do we know anything? Did it happen at all? [ Reply to This | # ]
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Authored by: Anonymous on Tuesday, June 13 2006 @ 12:38 AM EDT |
Actually, this says nothing about the lawyers getting paid. It says that the
escrow account is for "expert, consulting and other expenses (including
out-of-pocket expenses of all law firms working on the SCO Litigation[)]".
Noticeable absent is any mention of attorney's fees. There is a separate
agreement for the attorney's fees. February 26, 2003 engagement letter between SCO and Boies,
Schiller The escrow account is just the attorneys making sure they do not
get stuck with the litigation expenses. [ Reply to This | # ]
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