|IBM's Objection to SCO's Proposed Assets Sale, as text
Sunday, November 04 2007 @ 04:04 AM EST
Here, thanks to Steve Martin, we have IBM's Objection to Debtor's Emergency Motion
for an Order Approving Asset Purchase Agreement, (B) Establishing Sale and Bidding Procedures, and (C) Approving the Form and Manner of the Notice of Sale, as text. Here's IBM's Addendum A also.
If you'd like to cross reference as you read, here's SCO's "Emergency" Motion [PDF]. I'd say their emergency is they filed for bankruptcy. What a mistake that is turning out to be.
What does IBM seem to think this asset sale is about? I'd say this paragraph sums it up, after IBM has just reminded the court that SCO at the First Day Hearing represented to the court that "management and the Board are working on business solutions having nothing to do with this litigation":
Yet, SCO has now filed, with virtually no prior communication and barely any supporting information, an Emergency Motion (the "Motion") to sell the "foundation of the company". Despite SCO's "heavy responsibility to its customers", the sale would hand its customers to a financial investor with no apparent operating system experience. Even worse, the transaction appears specifically designed to facilitate and promote, not resolve, the pending litigation.
Then IBM begins to count the other ways that the motion and this plan are deficient.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
The SCO GROUP, INC., et al.,
Case No. 07-11337 (KG)
Hearing: November 6, 2007 at 11:00 a.m.
Re: Docket No. 149
IBM'S OBJECTION TO DEBTOR'S EMERGENCY MOTION
FOR AN ORDER (A)
APPROVING ASSET PURCHASE AGREEMENT, (B) ESTABLISHING SALE AND
BIDDING PROCEDURES, AND (C) APPROVING THE FORM AND MANNER OF
NOTICE OF SALE
International Business Machines Corporation ("IBM"), a creditor
in this Chapter 11 case, objects to the "Emergency Motion For An
Order (A) Approving Asset Purchase Agreement, (B) Establishing Sale
and Bidding Procedures And (C) Approving The Form And Manner Of The
Notice Of Sale," filed with this Court by the debtor and debtor in
possession, The SCO Group, Inc. ("SCO") or "debtor"), on October
At the First Day Hearing in this case on September 18, 2007, SCO
told this Court:
- "SCO filed these cases to stabilize its business ... to have
its breathing spell";
- "this company looks to reorganize" with its mobility products
and "the Unix software business that is, has been the foundation of
- "SCO owes a heavy responsibility to its customers";
Yet, SCO has now filed, with virtually no prior communication and
barely any supporting information, an Emergency Motion (the
"Motion") to sell the "foundation of the company". Despite SCO's
"heavy responsibility to its customers", the sale would hand its
customers to a financial investor with no apparent operating system
experience. Even worse, the transaction appears specifically
designed to facilitate and promote, not resolve, the pending
- "management and the Board are working on business solutions
having nothing to do with this litigation";
- SCO looks forward "to coming to this Court with a plan of
reorganization ... [that] will lead to an overall resolution, a
business resolution of our disputes in the context of an overall
plan of reorganization"; and
- "we intend to keep the lines of communication open with our
friends on the other side of the courtroom, and others as well."
(Transcript of First Day Hearing at 8-10 (D.I. 59).)
The Motion and attached documents do not answer the most basic
questions about SCO's proposed asset sale: whether there is an
emergency or a need to sell these assets; what assets are actually
included in the sale; whether this is the right buyer; whether this
is the right price; or whether this is the right procedure. The
burden should not be on creditors or this Court to search for the
facts and justification for a sale. Rather, SCO must set forth this
and other required information before even bid procedures may be
approved. In addition, the sale itself is flawed. As discussed more
fully below, SCO's Motion therefore fails at two levels:
First, SCO's Motion, proposed bidding procedures, and
sale notice are all deficient in themselves and should not be
approved. SCO has not provided any information supporting its
proposed asset sale or the proposed bidder protections, any
information describing the sale process in which it has already
engaged or in which it proposes to engage leading to the auction,
or any information on the proposed purchaser's qualifications or
connections to SCO.(See Section I.A below.) Moreover, the
bidder protections (fee and overbid amounts) are based on a
misleading characterization of the purchase price. (See
Section I.B below.) In addition, SCO's proposed sale notice fails
to identify the intellectual property, the executory contracts, or
the litigation rights being sold, and it mischaracterizes the
purchase price. (See Section I.C below.)
Second, this Court should not approve a bid-procedures
motion where, as here, the proposed underlying sale is improper and
itself cannot be approved. SCO proposes to sell assets that it does
not own. Any such sale is improper. (See Section II.A
below.) SCO proposes to borrow $10 million as part of the sale, but
the borrowing must be considered under the separate standards and
practices of section 364 of the Bankruptcy Code. (See
Section II.B below.) Finally, SCO does not provide any evidence why
the asset sale is a sound exercise of business judgment, any
explanation or justification for the haste in which SCO has entered
into a sale of substantially all of its assets, any evaluation of
how selling a substantial portion of its assets and entering into a
loan with post-confirmation repayment terms will affect any future
Chapter 11 plan, or any valuation of the assets being sold.
(See Section II.C below.)
IBM respectfully submits that this Court therefore should deny
the Motion and, at the very least, direct SCO not to bring a sale
motion to this Court until it has established and followed proper
procedures and provided full disclosure.
The facts on which this Objection is based include: (1) SCO's
litigation campaign against computer software industry
participants, including IBM and Novell, Inc. ("Novell"); and (2)
SCO's proposed (free and clear) sale of its Unix Business,
including assets at issue in SCO's litigations with IBM and
A. SCO's Litigations.
In early 2003, SCO attempted to profit from the Unix and Linux
operating systems by, among other things, embarking on a
far-reaching publicity campaign to create the false and
unsubstantiated impression that SCO had rights to the Unix and
Linux operating systems that it does not have and by bringing
baseless legal claims against IBM, Novell, and others.3
While SCO filed lawsuits across the country, most of the
litigation relating to SCO's claims and the numerous counterclaims
asserted against it have been litigated in the U.S. District Court
for the District of Utah, where SCO has its principal place of
business. SCO sued both IBM and Novell in Utah, where the parties
have been litigating separate cases before the same U.S. District
Judge (Dale A. Kimball) and the same U.S Magistrate Judge (Brooke
C. Wells) for more than four years.
SCO's cases against IBM and Novell concern a host of complex
intellectual property and other issues relating to the Unix assets
SCO purports to sell, such as who owns the copyrights to
the Unix operating system; whether SCO has the right to control
hundreds of millions of lines of computer source code created and
owned by IBM; whether SCO has the right to foreclose the use by
others of the publicly-available Linux operating system, which
includes hundreds of thousands of lines of IBM copyrighted code;
and whether IBM has a perpetual and irrevocable license relating to
AIX, one of IBM's Unix products.
In a series of decisions, the Utah court called into question
the veracity of SCO's statements about its claims and rights and,
at least in the IBM case, materially limited SCO's case. More
importantly, the Utah court entered an order in the Novell case,
rejecting a keystone of SCO's litigation campaign. The court ruled
that Novell, not SCO, owns the core Unix copyrights and that Novell
has the right, which it has exercised on IBM's behalf, to waive
SCO's purported claims against IBM.
While the Utah court has not yet ruled on IBM's summary judgment
motions (which concern all of SCO's claims), that court has stated
that the Novell ruling "significantly impacts" the IBM case. The
parties disagree as to the full effect of the Novell decision on
the IBM case, but SCO concedes that the ruling forecloses six of
SCO's nine claims against IBM.4 SCO filed its petition for relief under
the Bankruptcy Code on the eve of trial in the Novell matter
— shortly before the Utah court was expected to rule on the
While SCO's description of the assets proposed for sale is
impenetrably vague, it appears that SCO seeks to sell assets that
are at issue in the Utah litigations and to which SCO has either no
rights or fewer rights than it claims. For example, IBM has devoted
hundreds of millions of dollars to develop Unix source code
relating to its AIX and Dynix products. IBM has also
contributed substantial resources to the Linux operating system,
to which IBM has made extensive source code contributions (as
illustrated in the table attached to this Objection as Addendum A).
IBM has contractual and intellectual property rights, which SCO has
breached and/or infringed, in both IBM's Unix products and Linux
contributions.5 SCO does not have the rights it purports
to have in these assets.
B. SCO's Proposed Sale Free and Clear of its Unix
On October 19, 2007, five weeks after it filed for bankruptcy,
SCO signed a Term Sheet with JDG Management Corporation d/b/a York
Capital Management to "sell, assign, transfer and convey to
Purchaser all right, title, and interest in and to the assets,
properties, and rights of Seller used or useful in connection with
the operation of the SCO Unix Business as conducted in the past,
present, or proposed to be conducted," apparently free and clear of
all liens, claims, interests and encumbrances. (Term Sheet at 1;
Mot. ¶ 5.) Included in the asset sale, among other things, is
a substantial portion of SCO intellectual property relating to its
Unix Business, certain executory contracts that purchaser will
select at a later date, and certain litigation rights related to
its Unix Business, including lawsuits pertaining to the Linux
operating system. (Mot. ¶ 5.)
However, SCO does not list or identify, in the Term Sheet or in
the Motion, just what intellectual property SCO purports to sell as
part of its Unix Business, including whether SCO intends to sell
its Unix-based products that include IBM's copyrighted works.
Similarly, SCO does not identify in the Term Sheet or in the Motion
which executory contracts it intends to assign in the sale,
including whether it intends to assign certain Unix license
which IBM has an interest. Nor does SCO identify which
litigation rights related to its Unix Business it intends to
SCO describes the total purchase price for the sale as the
estimated aggregate amount of "up to $36 million" (the "Purchase
Price"). (Term Sheet at 3; Mot. ¶ 10.) The Purchase Price is
comprised of: (1) a cash payment of $10 million (subject to
reduction for assumed liabilities and the level of accounts
receivable at Closing); (2) up to $10 million in the form of a
secured litigation credit facility to fund SCO's ongoing
litigation against Novell and IBM, which is secured by all the
remaining assets of SCO and must be repaid by SCO with interest and
in full by October 31, 2009; (3) up to $10 million in the form of
a 20% interest for SCO in future litigation judgments that
are contingent and may never be collected by the proposed
purchaser; and (4) up to $6 million in the form of revenue share
based on sales by the proposed purchaser related to a cross
license agreement with SCO, which also includes warrants for the
proposed purchaser to purchase up to a 10% interest in cross
licensee Me, Inc., a non-debtor affiliate of SCO. (Term Sheet at
3-7; Mot. ¶ 10.) SCO does not provide, in the Term Sheet or in
the Motion, any type of financial appraisal or valuation regarding
the transferred assets included in the Sale or any estimate of the
expected values of the contingent future interests.
The Term Sheet provides that if the proposed purchaser is
designated as "stalking horse" under the Bid Procedures Order but
is not the successful bidder at auction, or if any of the
transferred assets in the sale are purchased by any party other
than the proposed purchaser, then the proposed purchaser is
entitled to receive from SCO a cash break-up fee in the amount of
$780,000 and expense reimbursements in an amount up to $300,000
(which is not conditioned upon any expense documentation). (Mot.
¶ 12.) Further, the proposed Bid Procedures Order sets a
minimum overbid requirement of $1,630,000, all in cash. (Mot.
* * *
Based on these facts, it appears that SCO seeks improperly to
sell assets that it does not own, including IBM licenses and IBM
copyrighted works; that the proposed sale notice and bid procedures
do not comport with even the minimum standards for procedures and
notice for a sale under section 363 of substantially all of the
assets of the estate; that there is no evidence of any exercise of
SCO's business judgment in either the bid procedures and
protections or the proposed sale; and that the proposed sale does
not provide adequate protection of IBM's interests in the assets to
be sold. Therefore, this Court should not approve either the bid
procedures or the notice of sale, nor should it approve the sale
I. SCO'S MOTION, BIDDING PROCEDURES, AND PROPOSED SALE NOTICE
ARE DEFICIENT AND SHOULD NOT BE APPROVED.
A. SCO's Motion Does Not Provide Any Information in Support
of the Bidding Procedures or Bidder Protections.
To obtain a bidding procedures order and approval of bidder
protections such as a break-up fee and expense reimbursements, the
requesting party must show that such protections are "necessary to
preserve the value of the estate". In re O'Brien Envir. Energy,
Inc., 181 F.3d 527, 535-37 (3d Cir. 1999); In re Integrated
Res., Inc., 147 B.R. 650, 657 (S.D.N.Y. 1992); In re
SpecialtyChem Prods. Corp., 372 B.R. 434, 439-40 (E.D. Wis.
2007). Approval of bidder protections is not warranted where the
purchaser has not entered into a legally binding agreement, there
is no information on the value of the proposed sale, and there is
no evidence as to the time, effort, expense and risk that the
purchaser contributed to the proposed sale. See In re
Tiara Motorcoach Corp., 212 B.R. 133, 137-38 (Bankr. N.D. Ind.
1997); In re Ancor Exploration Co., 30 B.R. 802, 808-09
(N.D. Okla. 1983) (to approve sale, record must support
findings on whether, among other things, other prospective
purchasers have been solicited and, if not, the justification for
not doing so).
Where a debtor in possession seeks approval of bidding
procedures that include a break-up fee and expense reimbursement,
courts should "highly scrutinize" any such fees. In re Hupp
Indus., Inc., 140 B.R. 191, 195 (Bankr. N.D. Ohio 1992); see
also In re Integrated Res., Inc., 135 B.R. 746, 750-51
(Bankr. S.D.N.Y. 1992). Therefore, approval of bidder protections
as part of a proposed section 363 sale should be denied if the
debtor in possession provides "insufficient information upon which
to evaluate the merits of the proposed sale". In re Hupp,
140 B.R. at 195; In re Twenver, Inc., 149 B.R. 954, 956
(Bankr. D. Colo. 1992).
Significant factors to be considered by bankruptcy courts in
approving bidding procedures and bidder protections include whether
the underlying negotiated agreement is an arms'-length transaction
between the estate and the negotiating acquirer and whether any
bidder protections would have a chilling effect on other potential
bidders. See, e.g., In re O'Brien, 181 F.3d at 534;
In re Integrated Res., 147 B.R. at 657; In re Hupp,
140 B.R. at 194.
1. SCO Does Not Provide Information on the Sale
Here, SCO has not provided adequate information on which
creditors and the Court can evaluate the merits of the sale, the
bidding procedures, or the bidding protections. The Motion and the
Term Sheet do not provide any information concerning a valuation of
the assets being sold or describe the process SCO undertook to sell
them. SCO does not provide any information on whether it explored
any alternatives to selling substantially all of its assets (such
as an internal reorganization, as it told this Court it would do at
the First Day Hearing) or whether it could conduct a sale in a less
hasty manner. Nor does it offer any reason for its haste. SCO does
not describe what other bidders it contacted (if any) or whether
there was any other interest in the assets that would make bidder
protections such as a break-up fee unnecessary. SCO does not
forth what process it will follow to market the assets for the
auction, whether its financial advisor will participate in the
process and, if so, how and to what extent. SCO simply asserts an
unsupported conclusion that the sale was entered into to "maximize
the value of the Debtors' assets" and will result in the highest
and best offer and is in the best interests of the estate. (Mot.
¶ 5.) Without some meaningful indication that a bidding
procedure will produce bidders and the highest and best offer,
there is no basis on which to approve it and authorize an
2. SCO Does Not Provide Information on the Sale
In addition to lacking information about the sale process, the
Motion and the Term Sheet lack adequate information about the
assets to be sold, the liabilities to be assumed, the contracts to
be assumed and assigned and the associated cure costs, and the
litigation to be assigned. The Motion and the Term Sheet also lack
adequate information about the purchase price.
First, the description of the assets SCO proposes to sell
is inadequate. In the Term Sheet and Motion, SCO says the
transferred assets include "the intellectual property of the
Debtors' relating to the Unix Business", but fails to
identify with any particularity what intellectual property is in
fact actually related to the Unix Business. (Mot. ¶
6(j) (emphasis added).) The Term Sheet and Motion do not
specifically identify or list the source code, object code,
computer programs, patents and other assets that are included as
part of its sale of the Unix Business. Without a detailed list of
the intellectual property included in the sale, creditors and this
Court cannot evaluate how the sale relates to the business as a
whole and SCO's reorganization. They cannot evaluate whether the
sale is a sound exercise of business judgment and complies with the
other requirements of section 363. Therefore, they cannot evaluate
whether pursuing a bid process is a wasteful diversion.
Second, SCO fails to specify which of its executory
contracts are being assigned, what the cure costs may be (which
will reduce the cash purchase price), or what liabilities are
assumed (which will also reduce the cash purchase price). It
also fails to specify what litigation rights are being sold and
instead states vaguely that it is selling all litigation rights
against third parties (other than IBM and Novell) pertaining to the
Unix Business and/or Unix software, "including, but not limited
to, those lawsuits pertaining to the Linux operating system
(the 'Linux Litigation')". (Mot. ¶ 6(h) (emphasis added).)
Finally, although the Motion describes a purchase price
of "up to $36 million", it provides no information on which to
determine whether it is in fact 6 million or $36 million. The
estate is promised only $10 million under the terms of the sale,
reduced by assumed liabilities, cure costs and accounts receivable
variations. (Mot. ¶ 10.) Up to $16 million of the remaining
purchase price is entirely contingent, and the balance of
consideration is in the form of a high interest rate secured
litigation credit facility. SCO makes no disclosure of how it
valued that contingent consideration. Without at least that
information, creditors and this Court have no way of determining
the value of the proposed sale or any of the other matters,
discussed below, that depend on a proper valuation.
3. SCO Does Not Provide Information on the Proposed
Further, SCO has not provided information on the proposed
purchaser's qualifications of the kind it requires from competing
bidders. For example, as part of the bidder protections, SCO
requires that to qualify as a competing bidder, each prospective
bidder must, among other things:
c. Provide reasonably satisfactory evidence of its
financial ability to (i) fully and timely perform if it is declared
to be the Successful Bidder (including but not limited to adequate
financial resources or financing commitments to pay the Purchase
Price and fund the Litigation Credit Facility in full), and (ii)
provide adequate assurance of future performance of all contracts
and leases to be assigned to it.
d. Disclose any connections or agreements with the Debtors, the
Proposed Purchaser, any other potential, prospective bidder
Qualified Bidder, and/or any officer, director or
equity security holder of the Debtors or Proposed
(Mot. ¶ 15.) However, the Motion does not provide any
evidence, let alone "reasonably satisfactory evidence," that the
proposed purchaser satisfies any of the requirements that SCO
proposes to impose on competing bidders. The qualification and
disclosure requirements in the Bid Procedures should be uniform for
both the proposed purchaser and competing bidders.
Without providing basic information concerning the terms,
merits, and process of the sale and the qualifications of the
proposed purchaser, SCO leaves the Court and its creditors unable
to determine if SCO exercised sound business judgment by agreeing
to the proposed bidding procedures and fees. It leaves the Court
and creditors unable to determine whether the procedures and fees
are reasonable, whether they will produce a robust auction (or any
auction at all), and whether this Court should approve them.
B. SCO's Proposed Bidder Protections and Fees Are
The amount of a break-up fee and expense reimbursement must
constitute a fair and reasonable percentage of the proposed
purchase price and must not be so substantial as to produce a
chilling effect on other potential bidders. See, e.g., In
re O'Brien, 181 F.3d at 534; In re Integrated Res., 147
B.R. at 657; In re Hupp, 140 B.R. at 194. In determining
what is reasonable, courts will generally approve fees and expenses
"limited to one to four percent of the purchase price", but are
reluctant to approve anything higher absent extraordinary
circumstances. In re Tama Beef Packing, Inc., 321 B.R. 496,
498 (B.A.P. 8th Cir. 2005).
To the extent that the Motion reveals the basis for the bidder
protections and break-up fee and expenses, they far exceed
acceptable bidder protections. Although SCO characterizes the
purchase price as "up to $36 million," the estate actually is
guaranteed only a maximum of $10 million, subject to reduction for
an unstated amount of assumed liabilities. (Mot. ¶ 10.) The
million litigation loan to SCO that it must repay at a very
steep interest rate cannot be counted as part of the purchase
price. The remaining purchase price of up to $16 million is
contingent on the proposed purchaser's future and uncertain
litigation recoveries and on its future and uncertain sales of
mobility products. The contingent consideration is wholly
Based on a $10 million maximum guaranteed sale price, SCO's
proposed break-up fee of $780,000 is almost 8%. The expense
reimbursement fee of up to $300,000 (which SCO does not condition
on any documentation) amounts to an additional 3% of the total
maximum guaranteed sale price. Together, they total almost 11% of
the highest guaranteed sale price, well above what is generally
considered reasonable, and will likely have a chilling effect on
competing bids. In addition, this high break-up fee and expense
reimbursement appear to be payable even if this Court rejects the
proposed sale and the assets are later sold to another purchaser in
a different auction or under a plan of reorganization. (Mot. ¶
The proposed overbid protections are also unreasonable. They
require a competing bid to exceed the proposed purchaser's initial
bid "by at least $1,630,000 in cash" — over 16% of a $10
million bid. (Mot. ¶ 15(f).) Moreover, the overbid must be all
cash, even though the proposed purchaser's bid includes
substantial, non-cash contingent components. (Mot. ¶ 15(f).)
When an original bid is not all cash, overbids should not need to
be all cash. Any competing overbid should therefore also be allowed
to include non-cash components, such as better terms for the
revenue share agreement, more favorable terms on the litigation
proceeds sharing, or any other consideration that would exceed the
uncertain future recoveries under the contingent price
C. SCO's Proposed Sale Notice Does Not Adequately Describe
the Assets To Be Sold or the Sale Terms.
Federal Rule of Bankruptcy Procedure 2002(c) requires the
trustee or debtor in possession to give notice of a proposed sale.
Although the Rule provides that the notice is sufficient if it
generally describes the property to be sold, the description must
describe it so that one can reasonably determine what is to be
sold. 10 Alan N. Resnick & Henry J. Sommer, Collier on
Bankruptcy, ¶ 6004.03 (15th rev. ed. 2007); see
also In re Lowe, 169 B.R. 436, 440 (Bankr. E.D. Okla.
1994) (notice is not adequate if a simple inquiry would reveal
defect). The Rule also requires an accurate description of the
terms and conditions of the sale, including price. See In
re Ryker, 301 B.R. 156, 167-69 (D.N.J. 2003). Failure to
satisfy either of these requirements will justify invalidating any
sale conducted under the defective notice. See Wintz v.
Am. Freightways, Inc. (In re Wintz Cos.), 219 F.3d 807, 813
(8th Cir. 2000); In re Ryker, 301 B.R. at 167-69; In re
American Freight Sys., Inc., 126 B.R. 800, 803-05 (D. Kan.
The Motion's lack of information about sale terms is reflected
in the proposed Sale Notice as well. As described above, the
description of the assets to be sold is so ambiguous and uncertain
that the inadequacy cannot be cured by a simple inquiry. The
inadequate notice will defeat a fair auction and prevent creditors
and other parties in interest from protecting their interests
during the sale process.
Because the description of the assets SCO proposes to sell is
inadequate, potential bidders will be left in the dark about what
intellectual property they are bidding for and will be reluctant to
make a competing bid. Similarly, without a list of the intellectual
property included in the asset sale, those parties who claim an
ownership interest in some of the intellectual property that SCO
claims to own or control (such as IBM's copyrighted works or
Novell's Unix copyrights) will not have adequate notice of whether
SCO plans to include such property as part of the
transferred assets. This will prevent IBM from being able to
protect its property rights adequately and will leave any potential
purchaser of the transferred assets uncertain about their
A purchaser's opportunity to include or exclude certain
executory contracts or license agreements as part of the asset sale
will create uncertainty for licensees such as IBM, who do not know
whether their license agreements with SCO are going to be
transferred. As noted above, IBM has license agreements concerning
Unix System V in which SCO claims an interest. Without knowing
exactly what licenses are included in the transferred assets,
licensees such as IBM will be unable to determine what action, if
any, they need to take to protect their rights as licensees under
sections 363 and 365(n).
By using ambiguous language in describing the types of
litigation rights being sold, coupled with the ambiguity concerning
what underlying intellectual property is being sold, potential
bidders and current defendants in SCO lawsuits (such as IBM,
Novell, Red Hat, Inc. and AutoZone, Inc.) can only speculate about
who ultimately has the right to continue current lawsuits or pursue
potentially new causes of action. Given the uncertainty concerning
ownership over much of its intellectual property, it is imperative
that SCO specify the exact litigation rights it intends to sell and
those it intends to retain.
Finally, as discussed above, without any disclosure of how SCO
valued the contingent consideration, a competing bidder, creditors,
and this Court would have no way of determining whether another
bid, which may or may not include contingent recoveries, is more or
less than the proposed purchaser's bid. "Up to" $16 million is
simply not enough information on which to conduct an auction.
Neither is the limited description of assets, contracts, and
II. SCO'S PROPOSED ASSET SALE IS IMPROPER AND UNSUPPORTED BY
Given the skeletal information provided by SCO in support of its
proposed sale, IBM is able to set forth only preliminary objections
to the proposed transaction. In doing so, IBM does not waive its
right to make additional objections to the sale or to demand the
protections to which IBM is entitled under the Bankruptcy Code,
should this Court approve the Bid Procedures Order and SCO then
provides a complete description of the assets to be sold and the
terms and conditions of the sale. If it is apparent that the sale
in its present form cannot be approved, then this Court should not
approve bidding procedures, bidder protections, and an auction.
A. SCO's Proposed Sale Free and Clear of Disputed Assets is
Before a trustee or debtor in possession may sell any property
as property of the estate, the bankruptcy court must first
determine whether, in fact, the estate owns the property. The court
may not sell property free and clear of a disputed ownership
interest. See Darby v. Zimmerman (In re Popp), 323
B.R. 260 (B.A.P. 9th Cir. 2005); In re Claywell, 341 B.R.
396, 398 (Bankr. D. Conn. 2006); In re Rodeo Canon Dev.
Corp., 362 F.3d 603, 608 (9th Cir. 2004), op. w'drawn and
remanded by Warnick v. Yassian (In re Rodeo Canon Dev.
Corp.), No. 02-56999, 2005 U.S. App. LEXIS 3786 (9th Cir. Mar.
8, 2005) (case settled while motion for rehearing pending). To make
this ownership determination, the bankruptcy court must first
resolve any adverse claims of ownership made by parties other than
the estate. See In re Rodeo Canon, 362 F.3d at 608.
Failure to make this determination before a purported "free and
clear" sale divests the court of any authority to approve such a
sale. Id. at 610.
Here, SCO seeks Court approval to sell "substantially all of
[its] assets relating to its Unix operating system ... free and
clear of all liens, claims, interests and encumbrances". (Mot.
¶ 15.) However, such approval would be improper to the extent
SCO intends to include
certain Unix copyrights and IBM's copyrighted works in the sale,
because Novell and IBM, respectively, and not SCO, own (or at the
very least have ownership claims to) these assets. (Obj. at 5-6.)
As noted, the Utah court has ruled that Novell is the rightful
owner of the Unix copyrights, and SCO itself has admitted to
copying the IBM copyrighted works into its Linux products. (Obj. at
5-6 & n.5.) Therefore, this Court lacks the authority to
approve SCO's asset sale free and clear of adverse ownership claims
to the extent the sale includes Novell's and IBM's property.
See In re Rodeo Canon, 362 F.3d at 610.6
In addition, SCO's sale terms describing which claims and
liabilities are included and which are excluded are vague and
ambiguous. To the extent SCO intends to sell assets free and clear
of any claims that IBM may have against a purchaser for unlicensed
future use of IBM's copyrighted works, IBM similarly objects.
Bankruptcy laws do not eliminate successor liability for post-sale
conduct. See Schwinn Cycling and Fitness, Inc. v.
Benonis, 217 B.R. 790, 796-97 (N.D. Ill. 1997); see also
White v. Chance Indus., Inc. (In re Chance Indus., Inc.),
367 B.R. 689, 706 (Bankr. D. Kan. 2006) ("to the extent
[plaintiff's] claims against CRM or the reorganized debtor are
based upon post-confirmation conduct rather than pre-petition
conduct, they would not be ... discharged".) Therefore SCO cannot,
through the expedient of a bankruptcy sale, eliminate any claims
IBM may assert against a subsequent purchaser of SCO's Unix
Business for claims accruing after the sale.
B. The Asset Sale Improperly Includes a Secured Loan with
Post-Confirmation Repayment Terms.
A trustee may obtain secured credit only if approved by the
court after notice and a hearing under section 364, not as part of
an asset sale under section 363. See 11 U.S.C. § 364.
Here, the debtor improperly seeks to include a secured loan as part
of the consideration for the transferred assets. As noted, $10
million of the purported $36 million purchase price is "in the form
of a litigation credit facility to fund litigation expenses". (Mot.
¶ 10.) According to the Term Sheet, this credit facility will
be secured by a first priority lien in all present and future SCO
assets, will have superpriority status, will accrue interest, and
will remain available to SCO after it emerges from bankruptcy.
(Term Sheet at 6.) The litigation credit facility therefore clearly
represents a secured loan and should be considered separately from
any consideration relating to a section 363 sale. Yet, the Motion
offers no justification for the loan nor any evidence that would
satisfy section 364's requirements.
SCO also fails to explain what, if any, repayment sources there
are. Since SCO proposes to pledge all its remaining assets as
collateral for the loan, any SCO reorganization plan, even if
confirmable, could be scuttled by its inability to repay the
C. SCO Has Failed To Provide Sufficient Evidence that the
Asset Sale Is a Sound Exercise of Business Judgment.
To obtain approval for a sale under section 363(b), the trustee
or debtor in possession must present evidence demonstrating "a good
business reason to grant such an application." In re Lionel
Corp., 722 F.2d 1063, 1070 (2d Cir. 1983); In re Montgomery
Ward Holding Corp., 242 B.R. 147, 153 (Bankr. D. Del. 1999). In
evaluating whether a sound business reason justifies the use, sale
or lease of property under section 363, courts will often consider
the following factors, among others: (1) the proportionate value of
the asset to the estate as a whole;
(2) the amount of elapsed time since the filing; (3) the effect
of the proposed disposition on a future plan of reorganization; and
(4) the proceeds to be obtained from the disposition vis-a-vis any
appraisals of the property. See, e.g., In re Lionel
Corp., 722 F.2d at 1071; In re Delaware & Hudson Ry.
Co., 124 B.R. 169, 176 (Bankr. D. Del. 1991). Here, SCO has not
presented any evidence on these factors that would allow either the
Court or SCO's creditors to determine whether SCO has exercised
sound business judgment in selling substantially all of its assets,
let alone for a maximum guaranteed payment of only $10 million.
First, SCO does not value the assets being sold compared
to the assets of the estate as a whole. The Motion does not provide
any financial information regarding the assets SCO plans to divest
and those it plans to retain. Without basic financial statements
concerning sales, revenue, income, etc., generated by either the
transferred assets or those assets (if any) that will remain, the
Court and SCO's creditors are left only to guess about the
proportionate value of the sale compared to that of the estate as a
Second, SCO filed for bankruptcy protection less than two
months ago and, outside of a few general references to declining
revenues and skittishness of existing and prospective customers
about its bankruptcy, it has not provided any explanation or
justification for the undue haste in which it has entered into this
sale of substantially all of its assets. (Mot. ¶ 5.) Indeed,
during its First Day Hearing, SCO told the Court that it filed for
bankruptcy protection in large part to give it breathing space and
time to reorganize its businesses and reformulate its business
plan. (D.I. 59 at 8-10.) Now, before its Chapter 11 case has
progressed in any substantial manner, SCO apparently seeks to sell
the majority, if not all, of its business for what amounts to, at
most, $10 million in guaranteed payments, some contingent future
payments, and a loan to continue its longstanding, expensive and
unsuccessful litigation against Novell and IBM.
Without providing some details concerning the necessity for
entering into the sale so quickly (coupled with the lack of
financial disclosure relating to the sale), this Court and SCO's
creditors are left unable to determine any reason for the rush to
sell or how this may fit into an overall restructuring
Third, SCO does not address how selling a substantial
portion of its assets and entering into a loan with
post-confirmation repayment terms will affect any future Chapter 11
plan. Without some explanation from SCO concerning this important
issue, the Court and SCO's creditors cannot help but be concerned
that the proposed sale is an attempt by SCO to continue an
unsuccessful and expensive litigation strategy without any serious
intent to bring business solutions to bear on its underlying
business and financial problems.
Finally, SCO has not provided any valuation of the assets
being sold. Without any type of valuation by SCO's outside
financial advisor or even by SCO itself, neither the Court nor
SCO's creditors can begin to determine if the Purchase Price is
fair or reasonable. At its First Day Hearing, SCO touted the
significant value of its intellectual property, but now purports to
sell most or all of it for, at most, only $10 million in guaranteed
payments. Absent some credible evidence of what the assets are
actually worth, the Court and SCO's creditors will not be able to
determine if that is an appropriate price.
SCO has asked the Court to approve an "emergency" request to
permit the sale of what appears to be much, if not all, of SCO's
business assets. The procedure that led to the proposed
transaction, the procedure for going forward with it (or an
alternative), and the requisite showing of the support for its
terms and conditions are all absent. So, too, is any proffered
justification for the sale itself or any explanation for SCO's
apparent abandonment of its stated intentions
when this reorganization proceeding began less than two months
ago. Accordingly, IBM requests that the Court deny SCO's
Dated: November 1, 2007
POTTER ANDERSON & CORROON LLP
Laurie Selber Silverstein (No. 2396)
Gabriel R. MacConaill (No. 4734)
CRAVATH SWAINE & MOORE LLP
David R. Marriott
INTERNATIONAL BUSINESS MACHINES CORPORATION
Alec S. Berman
Attorneys for International Business Machines
||References to SCO's Motion are given as "Mot. ¶ ___".
References to IBM's Objection are given as "Obj. at ___".
References to SCO's asset sale Term Sheet are given as "Term Sheet
||IBM does not intend by this description to start or engage in
litigation here of matters that have been long pending in the U.S.
District Court for the District of Utah. Indeed, IBM believes that
because of the extensive record already before the Utah District
Court and that court's familiarity with the issues in that
litigation, only the Utah court should decide those issues, once
this Court grants relief from the automatic stay to permit that
case to proceed. IBM sets forth this description here only as
background to its Objection and to explain IBM's interest in SCO's
proposed sale of assets.
||At the section 341 hearing, SCO CEO, Darl McBride, estimated
that SCO has "incurred over $50 million" in operating expenses
prosecuting these lawsuits. Mr. McBride stated that absent these
litigation expenses, SCO's Unix Business would have been both
"profitable and cash flow positive" during this time period.
||IBM believes the Novell ruling effectively rejects SCO's claims
against IBM and effectively grants several of IBM's counterclaims
||Indeed, SCO has admitted without qualification that it copied,
verbatim, the entirety of IBM's copyrighted works in its SCO Linux
Server 4.0 and OpenLinux 3.1.1 Asia products.
||Similarly, to the extent SCO purports to sell Unix System V
licenses to which IBM is a party "free and clear of all liens,
claims, interests and encumbrances", IBM objects and reserves its
licensee rights under sections 363 and 365(n). See
Precision Indus., Inc. v. Qualitech Steel SBQ, LLC, 327 F.3d
537, 548 (7th Cir. 2003) (lessees have the right to seek protection
under section 363, and "upon request, the bankruptcy court is
obligated to ensure that their interests are adequately
|Authored by: dmarker on Sunday, November 04 2007 @ 04:51 AM EST|
|IBM once again paints the picture in very straight terms and with no|
They leave it open to the reader to conclude what tSCOg is really up to.
A good work !
[ Reply to This | # ]
|Authored by: Anonymous on Sunday, November 04 2007 @ 05:01 AM EST|
|Wouldn't the Trustee _have_ to kill the sale if footnote 3 is correct? My|
understanding is that the Chapter 11 is to reorganize--ie to _become_ profitable
again?? And yet this footnote seems to argue, SCO will continue as a
debt-generating entity after satisfying its _current_ debts.
Apologies for any basic misunderstandings. Rock on, PJ!
[ Reply to This | # ]
|Authored by: Waterman on Sunday, November 04 2007 @ 05:03 AM EST|
|Make the links clicky per the red directions please.|
[ Reply to This | # ]
- I see PJ made good use of the extra - Authored by: Waterman on Sunday, November 04 2007 @ 05:15 AM EST
- About time too! - Authored by: Anonymous on Sunday, November 04 2007 @ 07:28 AM EST
- eve online goes native linux and mac - Authored by: Anonymous on Sunday, November 04 2007 @ 06:25 AM EST
- And you thought Microsoft was Bad check out these guys. - Authored by: Anonymous on Sunday, November 04 2007 @ 08:34 AM EST
- Off topic goes here - Authored by: odysseus on Sunday, November 04 2007 @ 10:50 AM EST
- How is that a troll? - Authored by: Anonymous on Sunday, November 04 2007 @ 11:40 AM EST
- Off topic goes here - Authored by: Anonymous on Sunday, November 04 2007 @ 11:41 AM EST
- Off topic goes here - Authored by: Anonymous on Sunday, November 04 2007 @ 11:47 AM EST
- Atari ST - Authored by: Anonymous on Sunday, November 04 2007 @ 01:16 PM EST
- Atari ST - Authored by: Anonymous on Sunday, November 04 2007 @ 02:18 PM EST
- Off topic goes here - Authored by: PJ on Sunday, November 04 2007 @ 12:58 PM EST
- Off topic goes here - Authored by: Anonymous on Sunday, November 04 2007 @ 01:04 PM EST
- Off topic goes here - Authored by: wal on Sunday, November 04 2007 @ 01:33 PM EST
- The Acorn OS had resizeable windows going back to 1987 - Authored by: billyskank on Monday, November 05 2007 @ 04:46 PM EST
- Specifications - Even Microsoft follows them - Authored by: WatchfulEye on Monday, November 05 2007 @ 08:11 PM EST
- Is a Domain Name an Automatic Trademark ? - Authored by: Anonymous on Sunday, November 04 2007 @ 11:22 AM EST
- Forbes on Eee PC - MS (afraid) will sell an OEM Eee PC OS at 1/3 of price to compete with Linux. - Authored by: Anonymous on Sunday, November 04 2007 @ 01:01 PM EST
- SCO (BS&F) is deficient -- fails to file quarterly RH report - Authored by: Anonymous on Sunday, November 04 2007 @ 03:04 PM EST
- dilbert on media relations - Authored by: Anonymous on Sunday, November 04 2007 @ 08:19 PM EST
|Authored by: Waterman on Sunday, November 04 2007 @ 05:06 AM EST|
|So PJ can find them easily.|
[ Reply to This | # ]
|Authored by: Waterman on Sunday, November 04 2007 @ 05:10 AM EST|
|Please put article name in titke if starting a new thread.|
[ Reply to This | # ]
|Authored by: tiger99 on Sunday, November 04 2007 @ 07:35 AM EST|
|... for the SCOundrels. IANAL, but what I see here is clearly intended to draw
the full attention of the BK court to the several other trials, including
specifically both IBM and Novell, which really need to be concluded in order for
the BK court to know how much cash they have left (or more likely, how much debt
which they have no hope of ever paying).|
If Judge Kimball ever gets to
conclude matters in Novell, far less IBM, it will be game over.
optimistic that Red Dress Day is fast approaching.
[ Reply to This | # ]
|Authored by: rsteinmetz70112 on Sunday, November 04 2007 @ 07:51 AM EST|
|Bankruptcy is supposed to be for the benefit of the creditors.|
This proposed sale seem little more than a thinly veiled attempt to dump the
failing IBM and Novell litigation while at the same time continuing to pay the
current management form a different pocket.
If I understand correctly, after the sale SCO will consist of Me INC, (which
currently has few if any assets) and the IBM and SCO litigation. They will get
$10,000,000 and a credit line for 10,000,000. That will basically leave a
judgment proof shell for IBM and Novell to fiht over.
I'd guess after those cases conclude, SCO will determine that an appeal is not
warranted and that they don't have the resources to continue operations.
I think the Judge will see the necessity of determining what SCO really owns and
will allow the Novell case and the arbitration at least to go forward to
Rsteinmetz - IANAL therefore my opinions are illegal.
"I could be wrong now, but I don't think so."
Randy Newman - The Title Theme from Monk
[ Reply to This | # ]
|Authored by: rfrazier on Sunday, November 04 2007 @ 08:54 AM EST|
|Will the Court in Utah have been working on the IBM case? In particular, would|
it be prudent or even allowed for the judge in IBM's case, Kimball, to have been
working on the decision on the request for summary judgment? Or would even that
come under the stay? And, even if it didn't, do judges "put off today what
may never happen tomorrow"?
[ Reply to This | # ]
|Authored by: Anonymous on Sunday, November 04 2007 @ 09:15 AM EST|
|But if I ever decide on a future career in corporate crime, I definitely want|
them as part of my team. Ruthless, contemptuous of their opponents, completely
lacking in good faith and willing to try and exploit any possible loophole, no
matter how tiny. If Enron had had these guys on board, they might still be
scamming old ladies out of their pension funds even today...
[ Reply to This | # ]
|Authored by: AceBtibucket on Sunday, November 04 2007 @ 09:34 AM EST|
|Do not meddle in the affairs of dragon, mortal. |
Remember that thou art crunchy and
go well with catsup.
[ Reply to This | # ]
|Authored by: bezz on Sunday, November 04 2007 @ 09:43 AM EST|
|When it comes to SCO management's take on things, we have a proven track record|
of ridiculous arguments. What surprises me is their bankruptcy lawyers
submitted motions that are so deficient in terms of procedure.
These BK lawyers have a lot of experience, so the emergency proposed sale motion
is telling. I can overlook the business aspects of the proposal (the lawyers
are taking it from SCO's mouth, after all), but to miss basic procedures (is
York qualified to use the assets, does SCO have free and clear title, WHAT ON
EARTH IS ACTUALLY FOR SALE!!! among others) can't be a simple oversight.
No, SCO's BK lawyers are probably fully aware that this will go to Chapter 7 and
made a mad rush to sell everything off before the court and Trustee gets any
wiser. This is desperation.
And as for the proposal to have BSF -- a listed creditor -- represent SCO in BK
proceedings, I'm in awe. What audacity, having such a clear conflict of
interest in front of a Federal BK Court.
But, these are the kinds of shenanigans companies that file for Chapter 11, but
are really Chapter 7, do. Say what you will about Delaware being
business-friendly (it is), they also get to see plenty of BK cases that are only
worthy of conversion to Chapter 7.
Keep up the good work, SCO. You're making this very easy for the judge and
[ Reply to This | # ]
- Is It Stupidity or Desperation? - Authored by: John Hasler on Sunday, November 04 2007 @ 11:12 AM EST
- Delay, delay, delay - Authored by: jbb on Sunday, November 04 2007 @ 01:49 PM EST
- Splat! - Authored by: Sawdust Bytes on Sunday, November 04 2007 @ 03:12 PM EST
- Delay, delay, delay -- old ICC trick - Authored by: Anonymous on Sunday, November 04 2007 @ 03:55 PM EST
- Delay, delay, delay - Authored by: ozbird on Sunday, November 04 2007 @ 04:39 PM EST
- Maybe - Authored by: Anonymous on Sunday, November 04 2007 @ 05:12 PM EST
- Delay, delay, delay - Authored by: bezz on Sunday, November 04 2007 @ 05:28 PM EST
- Delay, delay, delay - Authored by: bezz on Sunday, November 04 2007 @ 04:44 PM EST
- Falling off a mountain. - Authored by: Jaywalk on Monday, November 05 2007 @ 05:21 AM EST
|Authored by: Anonymous on Sunday, November 04 2007 @ 09:53 AM EST|
|The thought occurs to me that there are probably frequent deals like this that|
go through during bankruptcy. However most of them don't have a strong
interested party, such as IBM that can present so very well documented
objections. As a result the creditors end up with virtually nothing, taking
large losses, the customers are left in the lurch, and the CEO escapes by the
skin of their teeth. Right at the moment, any SCO customers still left, can
thank IBM for whatever support they can get.
SCO Unix may be an old and neglected version of Unix. But there are still
people who depend on it. I have the feeling that the proper company, could step
in and fill the nitch of providing that needed support.
[ Reply to This | # ]
|Authored by: Anonymous on Sunday, November 04 2007 @ 10:01 AM EST|
|OK, here's what I don't get. Why isn't SCOX required to involve the Trustee|
and/or the court from the very beginning of this? Or at least, before they
signed the term sheet with York?
If the court doesn't buy into this new APA, then are they going to just fork
over the $780K? I don't think that is right. What's to stop SCOX's board from
signing new term sheets with anyone they please, and giving them money too? I
thought the whole point of Chapter 11 was that you weren't fully in control of
your business anymore, especially with regards to direction and strategy.
[ Reply to This | # ]
- What about the Trustee? - Authored by: Anonymous on Sunday, November 04 2007 @ 11:54 AM EST
- Exactly - Authored by: Anonymous on Monday, November 05 2007 @ 07:43 AM EST
- Breakup costs - Authored by: Anonymous on Monday, November 05 2007 @ 02:11 AM EST
|Authored by: Anonymous on Sunday, November 04 2007 @ 10:11 AM EST|
|I wonder why SCO asked for some hefty sum to be payed in cash, only? Why not ask|
them for that cash and a fully tanked Cessna right away? That would save them a
lot of trouble!
IMANAL - I'M Absolutely Not A Lawyer (just didn't log in)
[ Reply to This | # ]
|Authored by: Anonymous on Sunday, November 04 2007 @ 10:36 AM EST|
|Just went to yahoo to see what scox share price is..|
It makes me feel warm and tingly inside to see those words at
the top of the yahoo page. SCOX is deficient and bankrupt.
I'm not the only one that gets off on that right? :-)
I just wish it
meant that Darl and co where bankrupt as well. (Financially broke I mean... we
already know that they are morally bankrupt.)
I'd pay alot to see them
loving under a bridge somewhere.
[ Reply to This | # ]
|Authored by: SilverWave on Sunday, November 04 2007 @ 11:45 AM EST|
|This quote stands out for me:|
"this Court lacks the authority to approve SCO's asset sale free and clear
of adverse ownership claims to the extent the sale includes Novell's and IBM's
property. See In re Rodeo Canon, 362 F.3d at 610.6"
Software Patents are leeches on the creativity of mankind.
[ Reply to This | # ]
|Authored by: Anonymous on Sunday, November 04 2007 @ 11:49 AM EST|
|I've noticed that some might think that SCO is trying to sell copyrights that|
have been already determined by Judge Kimball to belong to Novell.
But SCO is too clever for that.
When you see a litany of rights being sold, ALWAYS (!!) look the introductory
words that qualify the list.
Here's what SO says in the term sheet:
"Except for the Excluded Assets, the Seller will sell, assign, transfer and
convey to Purchaser all right, title and interest in and to the assets,
properties and rights of Seller used or useful in connection with the operation
of the SCO Unix Business or Seller as conducted in the past, present or proposed
to be conducted, tangible and intangible, pursuant to Section 363 of the United
States Bankruptcy Code (the "Transferred Assets"_. The Transferred
Assets shall include, without limitation, all of the following: (a) all tangible
personal property, supplies, computers, printers, equipment, furniture,
fixtures, goods and other similar assets; (b) all rights and benefits under
agreements, contracts, leases, licenses, instruments, general intangibles,
commitments and understandings, written or oral, identified in writing by
Purchaser to Seller (the "Designated Contracts"); (c) all trade names,
trademarks, service marks and service names (including, without limitation,
registrations, licenses and applications pertaining thereto), together with all
goodwill associated therewith (the "Trademarks"); (d) all (i) customer
and client lists, vendor lists, catalogues, data relating to vendors, promotion
lists and marketing data and other compilations of names and requirements, (ii)
telephone numbers, internet addresses and web sites, and (iii) other material
information related to Seller's business; (e) all source code, object code,
computer programs, designs, processes, drawings, schematics, blueprints,
copyrights, copyright applications, inventions, processes, know-how, trade
secrets, patents, patent applications and other proprietary information,
including, but not limited to, the registered copyright applications,
inventions, processes, know-how, trade secrets, patents, patent applications and
other proprietary information (collectively with the Trademarks, the
"Intangible Property Rights"); (f) all inventories and work in process
of Seller; (g) all accounts, accounts receivable, notes receivable, chattel
paper, documents, and all other receivables of any type or nature of Seller
including, but not limited to, all accounts receivable arising from bona fide
transactions for the sale of licenses or maintenance or services, entered in
good faith, involving existing products of Seller entered into in the ordinary
course or business that meet agreed upon requirements; (h) any cause of action,
claim, suit, proceeding, judgment or demand, of any nature, of or held by Seller
against any third parties (except to the extent such suit is an Excluded Asset),
including, but not limited to, those lawsuits pertaining to the Linux operating
system in which the Seller is presently engaged and all present and future
enforcement rights against third parties (other than IBM and Novell) pertaining
to the Linux operating system (the "Linux Litigation"); (i) all
goodwill associated with Seller's business and the Transferred Assets, including
all of the Intangible Property Rights; and (j) all rights in and to any
governmental and private permits, licenses, certificates of occupancy,
franchises and authorizations, to the extent assignable, used in or relating to
Seller's business or the Transferred Assets."
If you weren't paying attention you can miss the key words. SCO "...will
sell, assign, transfer and convey to Purchaser all right, title and interest in
and to the assets, properties and rights of Seller..."
So -- SCO is selling only THE RIGHTS THAT SCO HAS, i.e., a quitclaim deed. In
other words, SCO isn't warranting that they own anything: a quitclaim deed
neither warrants nor professes that the grantor's claim is actually valid.
[ Reply to This | # ]
|Authored by: Anonymous on Sunday, November 04 2007 @ 12:26 PM EST|
|IBM has many bullets to take down SCO with in this matter, yet the one I find
most entertaining is where they point out that York, the proposed buyer, has
experience running an OS software company.
We all know here that York
is nothing more than the latest Pipe Fairy, and,
our collective distaste
for software patent-based 'businesses,' I think this
inclusion into IBM's
motion strikes a symbolic blow for the 'old-fashioned'
like IBM, whose business is facing the customer, not
[ Reply to This | # ]
|Authored by: rps on Sunday, November 04 2007 @ 12:35 PM EST|
|Dang! This is so well done by IBM, I'm almost in tears over the joy of it. Great|
lawyering is a beutiful thing to behold.
[ Reply to This | # ]
|Authored by: Anonymous on Sunday, November 04 2007 @ 12:35 PM EST|
|What exactly are they getting at here? The following is from the USA Bankruptcy
Court - District of Delaware.
Congress has created a procedure that
permits any person to file a complaint in the courts about the behavior of
federal judges - but not about the decisions federal judges make in deciding
cases. Below is a link to the rules that explain what may be complained about,
who may be complained about, where to file a complaint, and how the complaint
will be processed.
There is also a link to the form you must use.
complaints in recent years have been dismissed because they do not follow the
law about such complaints. The law says that complaints about judges' decisions
and complaints with no evidence to support them must be dismissed.
If you are a
litigant in a case and believe the Judge made a wrong decision - even a very
wrong decision - you may not use this procedure to complain about the decision.
An attorney can explain the rights you have as a litigant to seek review of a
Rules Governing Judicial Misconduct and
Judicial Misconduct and Disability Form
[ Reply to This | # ]
|Authored by: Anonymous on Sunday, November 04 2007 @ 01:29 PM EST|
|SCO's asset sale is so preposterous, so poorly done, it completely shows |
SCO's hand in this Bankruptcy Poker Game.
The proposed asset sale seems like s desperate Hail Mary throw.
Unfortunately, there are a ton of large creditors surrounding the ball and only
a vague idea of a buyer.
IBM's and Novell's objections and the US Trustee's objections have pierced the
veil of SCO's activities.
Interestingly, now SCO'slawyers are becoming desperate to do crazy work like
they did with the proposed purchase, because they need to bill and user up
the $30 million retainer fee that SCO gave them, otherwise, they will have to
cough up most of the fee to the bankruptcy court. Hah! What goes around
IBM's objections show how much of a sham this proposed asset purchase is.
How it is an attempt to avoid its obligations.
I think the bankruptcy court now fully knows what SCO is up to. This is why
this proposed asset sale removed this "emperor"'s clothes.
[ Reply to This | # ]
|Authored by: Anonymous on Sunday, November 04 2007 @ 02:03 PM EST|
|It appears to me that the SCO bankruptcy filing is SCO's attempt to prevent|
paying Novell what they owe them and being gutted financially in the process.
This whole saga ended when Judge Kimball ruled in Novell's favor with respect to
the Unix rights. Since just before the eve of the bankruptcy filing SCO has been
spending as much money a possible to empty the coffers in the form of bonuses,
salary increases and hiring more lawyers. Now they are attempting to sell rights
to assets that are not free and clear to a company that has no legitimate
business interest in SCO's line of business. Why? For me, this is the
interesting part, the dissection of SCO. As PJ has said many times, eventually
we will get to know the full story.
[ Reply to This | # ]
|Authored by: Anonymous on Sunday, November 04 2007 @ 02:35 PM EST|
|I think SCO has completely showed its hands.|
SCO is not interested in reorganizing in Chapter 11.
SCO is trying to sell of its business to avoid having to pay its creditors -
particularly Novell and IBM.
Let's be done with this sham.
Turn this bankruptcy into Chapter 7. Let's be done with it. Let's put out SCO
mercifully - without having its management and lawyers wriggling on the
In Chapter 7, we can finally find out what happened. We can force SCO's
lawyers to cough up the $30 million that they took from SCO to pay SCO's
debts. We can expose what actually happened behind closed doors at SCO.
SCO is going down. No doubt about it. Bankruptcy cannot stop its legal
Put SCO out of its mercy.
In lieu of this, let's get the SCO-Novell and Swiss Arbitration going. This
tell how much SCO is worth.
Interesting how SCO is willing to sell its Unix business for only $10 million.
How worthless is that compared to what it blunderbussed all along.
SCO's market cap is only $7 million. It should be worh even less than that.
Put SCO out of its misery.
Chapter 7, here we come.
[ Reply to This | # ]
|Authored by: Anonymous on Sunday, November 04 2007 @ 03:08 PM EST|
|I wonder if the Nazgul is getting bored. I mean, everything SCO does is so|
obviously flawed that a first year law student could write the IBM briefs.
[ Reply to This | # ]
|Authored by: Anonymous on Sunday, November 04 2007 @ 05:44 PM EST|
|Just a thought...|
If you were a big customer of SCO, what would you be doing right now? They
tried to sell their "business" to banker investors without a care in
the world about their customers. To make it worse, it was the first
"offer" to come along and it suddenly became an emergency to dump it
quickly. If I was in charge of IT at McDonalds or another SCO customer, I would
be looking real closely into porting over to Linux right now...
[ Reply to This | # ]
- Customers? What Customers? - Authored by: Anonymous on Sunday, November 04 2007 @ 06:43 PM EST
- McDonalds? - Authored by: Anonymous on Sunday, November 04 2007 @ 06:48 PM EST
- McDonalds? - Authored by: Anonymous on Sunday, November 04 2007 @ 06:50 PM EST
- Good Point - Authored by: Anonymous on Sunday, November 04 2007 @ 08:32 PM EST
- Good Point - Authored by: Anonymous on Sunday, November 04 2007 @ 10:03 PM EST
- Compatibility LIbraries - Authored by: Anonymous on Monday, November 05 2007 @ 02:01 AM EST
- McDonalds? - Authored by: Anonymous on Monday, November 05 2007 @ 01:19 PM EST
|Authored by: Anonymous on Monday, November 05 2007 @ 09:36 AM EST|
|If SCO's business s only worth 10 million (min) or 70 million (max sale price|
how is it they are asking for such substantial damages from IBM and Novell?
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|Authored by: Anonymous on Monday, November 05 2007 @ 01:27 PM EST|
|I'm currently at a MAJOR auto factory in th United States. SCO Unix is on the|
floor here in several areas. Would we be able to make cars without them? Yes.
Would it hurt, yeppers. Do not make the mistake that SCO has some insignificant
presence in the industry. Say what you will about the managment etc, but SCO
Unix (before being neglected) was rock solid. Some of the SCO boxes have 1+ year
uptimes. It's out there folks. Lots of customers.
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