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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

In re:

The SCO GROUP, INC., et al.,

Debtors.
Chapter 11

Case No. 07-11337 (KG)
(Jointly Administered)

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 THE
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 23, 2007.

Preliminary Statement1

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 the company";
  • "SCO owes a heavy responsibility to its customers";

1

  • "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).)
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.

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

2

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.

3

Background Facts

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 others.2

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

4

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 pending motions.

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

5

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 Business.

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 agreements in

6

which IBM has an interest. Nor does SCO identify which litigation rights related to its Unix Business it intends to sell.

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. 15(f).)

7

* * *

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 itself.

Argument

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 specific

8

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 Process.

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 set

9

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 auction.

2. SCO Does Not Provide Information on the Sale Terms.

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 being

10

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 Purchaser's Qualifications.

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 or

11

Qualified Bidder, and/or any officer, director or equity security holder of the Debtors or Proposed Purchaser.
(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 Unreasonable.

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 $10

12

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 unvalued.

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. 12.)

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 components.

13

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[2] (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. 1991).

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

14

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 ownership.

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 litigation.

15

II. SCO'S PROPOSED ASSET SALE IS IMPROPER AND UNSUPPORTED BY ANY EVIDENCE.

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 Improper.

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

16

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.

17

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 loan.

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;

18

(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 whole.

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.

19

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 strategy.

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.

Conclusion

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

20

when this reorganization proceeding began less than two months ago. Accordingly, IBM requests that the Court deny SCO's Motion.

Dated: November 1, 2007

POTTER ANDERSON & CORROON LLP

By: (signature)
Laurie Selber Silverstein (No. 2396)
Gabriel R. MacConaill (No. 4734)
[address]
[phone]
[fax]

-and-

CRAVATH SWAINE & MOORE LLP
Richard Levin
David R. Marriott
[address]
[phone]
[fax]

Of Counsel:

INTERNATIONAL BUSINESS MACHINES CORPORATION
Alec S. Berman
[address]
[phone]

Attorneys for International Business Machines Corporation

21

1 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 at ___".
2 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.
3 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.
4 IBM believes the Novell ruling effectively rejects SCO's claims against IBM and effectively grants several of IBM's counterclaims against SCO.
5 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.
6 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 protected.").

  


IBM's Objection to SCO's Proposed Assets Sale, as text | 276 comments | Create New Account
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IBM's Objection to SCO's Proposed Assets Sale, as text
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
embellishment.

They leave it open to the reader to conclude what tSCOg is really up to.

A good work !

DSM

[ Reply to This | # ]

Footnote number three
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!
j

[ Reply to This | # ]

Off topic goes here
Authored by: Waterman on Sunday, November 04 2007 @ 05:03 AM EST
Make the links clicky per the red directions please.

[ Reply to This | # ]

Spelling corrections go here.
Authored by: Waterman on Sunday, November 04 2007 @ 05:06 AM EST
So PJ can find them easily.

[ Reply to This | # ]

News picks discussion goes here.
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 | # ]

This looks really bad.....
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.

I am optimistic that Red Dress Day is fast approaching.

:-)

[ Reply to This | # ]

SCO's Proposed Assets Sale, is a sham
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
completion.

---
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 | # ]

Summary judgement in the IBM case.
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"?

Best wishes,
Bob

[ Reply to This | # ]

Say what you like about Boies Schiller...
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 | # ]

IBM's Objection to SCO's Proposed Assets Sale, as text
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 | # ]

Is It Stupidity or Desperation?
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
trustees.

[ Reply to This | # ]

IBM's Objection to SCO's Proposed Assets Sale, as text
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 | # ]

What about the Trustee?
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
Asking for cash, only?
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 | # ]

SCOX is deficient and bankrupt.
Authored by: Anonymous on Sunday, November 04 2007 @ 10:36 AM EST
Just went to yahoo to see what scox share price is..


Finance.yahoo.com for scox

It makes me feel warm and tingly inside to see those words at the top of the yahoo page. SCOX is deficient and bankrupt.

Admit it... 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.


regards

Franki

[ Reply to This | # ]

Wow that was a lot of fun :) - "this Court lacks the authority to approve..."
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 | # ]

Point of Clarification regarding SCO sale: what "free and clear" really means
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 | # ]

IP vultures
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 no experience running an OS software company.

We all know here that York is nothing more than the latest Pipe Fairy, and, given our collective distaste for software patent-based 'businesses,' I think this inclusion into IBM's motion strikes a symbolic blow for the 'old-fashioned' computing businesses, like IBM, whose business is facing the customer, not the judge;>

[ Reply to This | # ]

IBM's Objection to SCO's Proposed Assets Sale, as text
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 | # ]

Rules Governing Judicial Misconduct and Disability
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. Almost all 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 judicial decision.
Rules Governing Judicial Misconduct and Disability Judicial Misconduct and Disability Form http://www.deb.uscourts.gov

[ Reply to This | # ]

SCO's asset sale completely shows SCO's hands
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
comes 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 | # ]

IBM's Objection to SCO's Proposed Assets Sale, as text
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.

Cheers!

[ Reply to This | # ]

Judge, let's take this mess into Chapter 7
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
hook.

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
obligations.

Put SCO out of its mercy.

In lieu of this, let's get the SCO-Novell and Swiss Arbitration going. This
will
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 | # ]

IBM's Objection to SCO's Proposed Assets Sale, as text
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 | # ]

    McDonalds?
    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 | # ]

    IBM's Objection to SCO's Proposed Assets Sale, as text
    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?

    [ Reply to This | # ]

    Not just for the little guys
    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.

    [ Reply to This | # ]

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