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SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement - Updated
Sunday, November 18 2007 @ 02:53 AM EST

Ding. Ding. Ding. We have a winner in the contest for the all-time best title for any document ever filed in the SCO v. the World litigations. I know that some of you have gotten attached to the Sur-Sur-Sur Replies of yore. But this tops everything. SCO has filed the following:
Senior Secured Super-Priority Debtor-in-Possession Credit Agreement

Teasing. It's what they call these things. It's about the "Litigation Credit Facility" mentioned in the APA, the $10 million York is willing to loan SCO to fund the "Specified Litigation". And guess which that is: "the IBM litigation and the Novell Litigation and all appellate, supplemental and/or collection proceedings related thereto." This isn't a reorganization plan. It's York funding SCO's litigation lottery. They list what qualifies as a legitimate litigation expense, and on the list is appellate bonds. In short, I think maybe SCO can't afford to appeal unless they get some moolah. You have to post a bond, in case you lose.

Guess who is listed as the Purchaser? "York Capital Management, or its designee, assignee or nominee". Why, I declare. I believe we are playing keep-away.

Of course, it's obvious SCO is good to pay it all back. Not. If it loses, guess what happens? York goes to the head of the line, leaps over Novell and every other creditor with super priority status. See page 19 of the PDF, 17 of the document. Too bad, so sad, Novell. You don't get your money. Nyah nyah.

Oh and on the next page, York says that upon the "termination date" York gets paid back in full without having to apply to that pesky bankruptcy court. Here's the docket entry in full:

219 - Filed & Entered: 11/16/2007
Notice of Service
Docket Text: Notice of Service Notice of Filing of Senior Secured Super-Priority Debtor-in-Possession Credit Agreement Filed by The SCO Group, Inc.. (Attachments: # (1) Exhibit A # (2) Certificate of Service and Service List) (O'Neill, James)

So this is how SCO proposes to play the game. When SCO loses in Utah, guess who will take priority over Novell as the super dooper high chieftan of super-priority creditors? York! Um. Or its designee. That's if the court goes along with this, which I doubt. If they did, it'd be a court sanctioning of SCO using Novell's money to sue Novell, without any risk to SCO of ever having to pay the money back that the Utah court says SCO improperly converted.

In fact, a clause says that SCO agrees that no one will get ahead of York:

2.12 Waiver of any Priming Rights. Upon the Closing Date, and on behalf of themselves and their estates, and for so long as any Obligations shall be outstanding, each Borrower hereby irrevocably waives any right (whether pusuant to Sections 364(c) or 364(d) of the Bankruptcy Code or otherwise) and agrees not to apply to the Bankruptcy Court seeking any right to grant or to confer any Lien of equal or greater priority than the Liens securing the Obligations.

By the way, York appears to trust SCO about as much as you do. It's not a "here's $10 million -- let us know when it's gone" type of free fall loan. No. Every month, SCO has to tell them what bills it has incurred and York pays the provider of the legal service directly. I gather Novell is the last entity that will let SCO play middleman with other people's money.

And there is a muzzle on this litigious puppy. SCO can't initiate any litigation other than in connection with the Chapter 11 or the IBM or Novell litigations, if it "in the reasonable judgment of the Lender, might adversely affect the transactions contemplated hereby or, other than the Specified Litigation, might have a materially adverse affect on the assets, business or financial condition of the Borrowers or the Lender." So, York has figured out a way to put SCO on a leash. That's Section III, Conditions of Loans, 3.1(b)

And SCO can't sell off any assets or merge or set up subsidiaries or settle any litigation without first consulting York. York gets to look at their books. It has placed restrictions on what SCO can do with stock and what it can buy in the way of assets. SCO has to tell York what is going on in the litigation, and York gets to see pretty much whatever SCO has. And significantly, if SCO files a reorganization plan that York hasn't consented to, it's a default on the agreement. York says any reorganization plan must say that York gets paid back in full before anyone else. That's on page 41. And if there is a trustee appointed to take over for SCO management in the bankruptcy, that constitutes a default also. And get a load of this term. It's a default if there should be:

(ix) the entry of an order by the Bankruptcy Court granting relief from or modifying the automatic stay of Section 362 of the Bankruptcy Code (x) to allow any creditor (other than Lender or its successors or assings) to execute upon or enforce a Lien on any Collateral...which ... would have a Material Adverse Effect;

I guess you'd have to call that the anti-Novell clause. It's also a default event if SCO goes to Chapter 7.

What happens then? On a default, of course all loans are payable instantly, but here's what else happens:

(c) the Lender shall have the right to control the prosecution and settlement of the Specified Litigation, such right to be exercised commercially reasonably;...

The cherry on top is on page 42. SCO has to reimburse York on demand for all "reasonable" costs and expenses incurred or expended in connection with the administration of the Agreement or in connection with enforcing it. And if litigation were to ensue, SCO has to indemnify under the Agreement, so SCO pays the bills for York. With what? The proceeds of Me Inc?

No. Really.

How is SCO, having sold most of its assets, supposed to pay this loan back? I guess they could use the other money York is paying for the Unix assets, the other $10 million. But then York will have provided the estate with nothing in the way of money for the other creditors, just a way for York to be paid back in full.

SCO isn't borrowing enough to pay Novell what it probably owes Novell according to the Utah court, let alone the other creditors. So what do they, the creditors, do, sue York? What good would that do, when SCO indemnified York, and it has no assets to shake a stick at, no business ongoing either that I can see, and no prospects? It's lose-lose if you are Novell, this agreement. The agreement essentially asks the bankruptcy court to ignore the fact that a Utah court already ruled that SCO was liable for conversion. With this agreement in place, Novell has no possibility of being made whole, no matter what the Utah court says next. And so SCO gets to grab money that belonged to Novell, sue them for something they were found not guilty of (slander of title), cost them a fortune in legal fees (which Novell would be asking the Court to have SCO reimburse), and now, poof. No remedy. Novell gets to be right, but all it can do is swallow hard?

And should the lovebirds ever get into litigation with each other over the agreement, they agree there will be no jury and no special, exemplary, consequential or punitive damages. Actuals only.

I'm thinking lovebirds might not be the exact word I'm looking for. Maybe York watched what happened to BayStar. This is an agreement that simply screams desperation.

On page 49 there is a Guaranty clause, 9.1, which seems to indicate that somebody is guaranteeing to pay back the loan if SCO doesn't. Man. SCO can't even borrow money any more without a guarantor. The wording indicates there is more than one guarantor, each jointly and severally liable. Who might these guarantors be? Me Inc is one, har har. But there is a signature line for one more guarantor. It doesn't say who it is.1 So unless a SCO executive or board member is personally guaranteeing the loan, which is certainly possible, there is someone out there besides York wanting this litigation to continue enough to be willing to be on the hook for $10 million. Actually more than York. York isn't a bit willing to be on the hook for anything, not so much as a paperclip. You can certainly see why they want the deal. They get the assets and they make money without fail. But where is the benefit to SCO? To the estate? All they seem to get is a way to keep suing people, with less for SCO even if they were to prevail than if they hadn't done this deal. Which they won't anyway. Prevail, that is.

Update: You probably think it'd be impossible to write a song about a senior secured super-priority debtor-in-possession credit agreement, don't you? Well, Groklaw is up to the challenge. An anonymous reader (I think in New Zealand) found the title inspirational, and he has burst out in song, called ItsyBitsySCO [Ogg]. Lyrics here.


1 The title page mentions "certain subsidiaries as guarantors" but Me Inc is the only one mentioned by name, and Cattleback is specifically not deemed a subsidiary. The opening paragraph limits subsidiaries to domestic ones. However the definition of "Subsidiary" is of interest as a clue:

Subsidiary. With respect to any person, any corporation, association, joint stock company, business trust, partnership, limited liability company or other similar organization of which 50% or more of the ordinary voting power for the election of a majority of the members of the board of directors or other governing body of such entity is held or controlled by a such Person or a Subsidiary of such Person; or any other such organization the management of which is directly or indirectly controlled by such Person or a Subsidiary of such Person through the exercise of voting power or otherwise, or any joint venture, whether incorporated or not, in which such Person has a 50% or greater ownership interest. Cattleback Intellectual Property Holdings, Inc. is not a Subsidiary.

I confess freely that even reading this, I am not at all clear what it is saying. Since the board at SCO is voted on by one share = one vote, I gather then that if you owned 50% or more of SCO's stock, you get to be a subsidiary and hence liable for the $10 million, should Me Inc not have enough to pay it all back. Snark. Or it might be saying you are a subsidiary if SCO owns 50% or more of you. Doesn't Ralph Yarro have more than 50%? I guess not any more. While this type of agreement is found in bankruptcies, usually you see a bank as guarantor, along with subsidiaries. Here's info on Worldcom's super dooper agreement, for example, and the guarantors were the subsidiaries and Citibank, J.P. Morgan Securities, and General Electric Capital Corporation. I thought of Worldcom because one of SCO's directors, Omar Leeman, used to work there as president of special markets and president of business operations at MCI , before Worldcom and MCI merged. Worldcom's agreement was court approved, as was Enron's, for all the good it did.


  


SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement - Updated | 424 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections go here
Authored by: mobrien_12 on Sunday, November 18 2007 @ 03:09 AM EST
Thank you.

[ Reply to This | # ]

SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: pdp on Sunday, November 18 2007 @ 03:11 AM EST
Ans who is to gain the most from all these machiavellian machinations and
prospective Fudologics, I ask ...;-))

C

---
(defvar MyComputer '((OS ."GNU/Emacs") (IPL . "GNU/Linux")))
I am not a number, I am an individual with a unique number

[ Reply to This | # ]

Off topic here please
Authored by: fudisbad on Sunday, November 18 2007 @ 03:11 AM EST
Post comments not relating to the article here.

---
"SCOís failure to provide code for the methods and concepts it claims were
misappropriated is [...] a violation of this courtís orders." - Judge Brooke
Wells

[ Reply to This | # ]

You gotta be kidding me.
Authored by: mobrien_12 on Sunday, November 18 2007 @ 03:13 AM EST
So SCOG goes chapter 11, sells its assets to York, and York gives them more
money to blow on lawyers?

So do the Novell and IBM cases continue then????

What's the point, as Darl had finally come to the trial he'd been demanding for
all this time and SCOG was shown with no case?

[ Reply to This | # ]

Somebody big..
Authored by: Anonymous on Sunday, November 18 2007 @ 03:47 AM EST
Okay, so there's someone who can just casually throw away tens of millions just
in order to beat IBM, knowing that the chance is low.

either

a) somebody really big believes that they can absolutely get away with anything
in the American system.

b) somebody really big is already on the hook and sees only one chance to get
off.

It's totally clear that this agreement has to be made by someone. That someone
has to have tens of millions to simply burn (it's clear it will be burnt. IBM
will and Novell will not give up; the chance on appeal is clearly limited).
That somebody has to be traceable if a court wants to since they have to have
made promises to people who made promises to York. This means that they can be
clearly found.

If that somebody isn't already on the hook for this legislation, they have to
believe that there is no way that the US legal system will allow the liability
to come back to them.

The second case is more interesting. Imagine that some company (we'll call them
Teenyflabby for this example) was behind the lawsuit. Imagine that IBM already
has sufficient evidence of Teenyflabby involvement (from the sealed filings)
that Teenyflabby knows they are on the hook for the litigation. At this point,
funding litigation won't do Teenyflabby any more harm and it might, just might,
end up in a better result. This gets particularly interesting if Teenyflabby
happened to be a large software company (perhaps Oracle size, or more likely
even bigger). They would inevitably have lots of patent and copyright
agreements with IBM which would likely have been breached by the actions SCOX
carried out. Given the number of patents IBM owns, and all sorts of other
issues IBM could come up with, this would probably end up with Massive (10e16
dollars +- one order of magnitute) liability to MS.

I think b) is the most likely explanation.

[ Reply to This | # ]

  • Somebody big.. - Authored by: Anonymous on Sunday, November 18 2007 @ 04:13 AM EST
  • Somebody big.. - Authored by: Anonymous on Monday, November 19 2007 @ 09:48 AM EST
    • Somebody big.. - Authored by: PJ on Monday, November 19 2007 @ 09:59 AM EST
    • Not no risk - Authored by: Anonymous on Friday, November 23 2007 @ 03:17 AM EST
SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: electron on Sunday, November 18 2007 @ 03:50 AM EST
> And get a load of this term. It's a default if there
> should be:
>
>> (ix) the entry of an order by the Bankruptcy Court
>> granting relief from or modifying the automatic stay of
>> Section 362 of the Bankruptcy Code (x) to allow any
>> creditor (other than Lender or its successors or assings)
>> to execute upon or enforce a Lien on any
>> Collateral...which ... would have a Material Adverse
>> Effect;

What I don't understand is: how can that money be used in the IBM/Novell
litigation if the automatic stay of litigation is still in force?

If that automatic stay is lifted then SCO is in default of that agreement and it
loses _access_ to that moolah.

If that automatic stay is not lifted then it cannot _use_ that moolah.

Either way it looses control over its UNIX franchise to a hitherto unspecified
back-room boy brokered by York Investments.

---
Electron

"A life? Sounds great! Do you know where I could download one?"

[ Reply to This | # ]

No investor bets $10M on a dead horse
Authored by: kawabago on Sunday, November 18 2007 @ 04:01 AM EST
Some other entity is behind this to keep the litigation going. I wonder who it
could be....

[ Reply to This | # ]

SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: GriffMG on Sunday, November 18 2007 @ 04:48 AM EST
I just Googled 'SENIOR SECURED SUPER-PRIORITY DEBTOR-IN-POSSESSION CREDIT
AGREEMENT' to see if this was unusual, and it seems to be almost normal to only
loan nigh-on bankrupt huge sums of money if you are made the numero uno creditor
- try for yourself.

I don't know about the other terms and conditions, but that one seems to be
almost run of the mill.

---
Keep B-) ing

[ Reply to This | # ]

SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: Khym Chanur on Sunday, November 18 2007 @ 04:51 AM EST

By the way, York appears to trust SCO about as much as you do. It's not a "here's $10 million -- let us know when it's gone" type of free fall loan. No. Every month, SCO has to tell them what bills it has incurred and York pays the provider of the legal service directly. I gather Novell is the last entity that will let SCO play middleman with other people's money.

Hmmmm. If York had said "here's $10 million in cash, but it can only be used for litigation, none of the other creditors can touch it, and if you go into Chapter 7 all of what's left goes immediately back to us" and the BK judge had accepted that, could York enforce that against the BK court if the judge changed his mind, or if the creditors filed an appeal and the appellate judge ruled that the litigation fund could pay off creditors? By never letting SCO touch any of the money York can prevent the money from ever being used for anything besides litigation.

---
Give a man a match, and he'll be warm for a minute, but set him on fire, and he'll be warm for the rest of his life. (Paraphrased from Terry Pratchett)

[ Reply to This | # ]

SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: DieterWasDriving on Sunday, November 18 2007 @ 04:57 AM EST

This is a very easy to understand agreement: SCO managment has written an
agreement to move all of the money out of the corporation if they can't spend it
in time. Sure, it looks as if someone else is providing a loan to fund the
lawsuit. But SCO previously had enough money to continue the lawsuits except
for that pesky "conversion" ruling. This line of credit allows them
to continue the lawsuits, yet if they have a serious ruling against them all of
the money goes "poof" into York.

SCO actually wants these harsh terms to force a settlement on the parts of the
lawsuit that they are certain to lose. "You won't get a penny if you win,
and it will cost $10M to finish this out. Why don't you settle for $1."


My version: I will buy your pencil in a $30 deal. $10 of that will be a loan,
and you must use that money to buy me paper. $10 will be a part of the
royalties if I use the pencil to write a profitable book. There will be an
additional $10 if the book is a best seller. Oh, and you'll be responsible for
paying for someone to write up the agreement and for the courier to deliver it
to me.

[ Reply to This | # ]

Hmm - conspiracy to defraud?
Authored by: Peter Baker on Sunday, November 18 2007 @ 05:14 AM EST
IMHO, this is so obvious an attempt to derail normal legal process that it ought
to be actionable. How much further does SCO and its 'friends' have to go before
it reaches "conspiracy to defraud' status?

There was no permission from the Court to even *start* this discussion, the
terms are plain rediculous in view of their Ch11 status and the ownership of
very the assets under discussion are at best questionable.



---
= P =

[ Reply to This | # ]

Desperation
Authored by: bezz on Sunday, November 18 2007 @ 05:16 AM EST
There must have been some interesting talks going in before and after the
Chapter 11 filing. This deal is so desperate, I can hardly imagine how bad
SCO's negotiations were.

First, a debtor would typically try to arrange DIP financing at the start of
Chapter 11. That lender automatically goes to the front of the line in
disbursing assets and is virtually assured repayment, even before the secured
creditors.

But SCO couldn't go that route.

Maybe their condition is so bad, they could not get a lender to provide DIP
financing. But as of their 31 July 07 10-Q filing, they only had $10.4 million
cash, $3.1 million receivables and $1.3 million Other Current Assets, for a
total of $14.9 million in Current Assets. I'll ignore the other assets as they
would auction at a fire sale for pennies on the dollar. You can ignore
liabilities because a DIP lender gets paid before everyone else. With what's on
hand, a DIP financing lender should be available for some cash. Maybe not $10
million, but something to tide them over. And under terms that are not as
onerous as York's.

To get access to the $10 million loan reserved for litigation -- that is exactly
what it is because SCO is paying LIBOR interest plus margin -- SCO has to also
sell all of its assets that York can get. Even though nobody at SCO or their BK
lawyer, Spector, really knows yet what they can sell. They DO know how much
it's worth, though. And SCO had to agree to loan terms more strict than a DIP
Financing lender could demand.

Maybe DIP lenders saw only downsides and none would offer the financing.

But I also see the possibility SCO never even tried to get DIP financing. The
sleaze and ugliness surrounding this whole case just begs the conclusion that
SCO is nothing more than a puppet willing to litigate for Mr. Big. The assets
to be sold are dubious at best and clouds of Novell ownership hang over parts of
it. Yet, York was willing to offer up a purported $36 million (the amount
Novell claims in Utah), gets a minimum initial $1.63 million overbid and a hefty
$1.08 million breakup and expense fee.

On a term sheet that was written before the APA was finalized.

And SCO's lawyer admitted to the court -- the day the APA was filed -- that they
still were not sure exactly what SCO was selling and could not market to anyone
else.

But it has to be approved right now.

RIIIIGHT!

The most galling part is SCO and their lawyers had the nerve to claim that
interest-bearing loans from York should be counted as an asset in calculating
the $36 million value of the bid. When the accounting is done, SCO will have
already spent the money on lawyers -- it's just more debt on the books. So, if
they borrow $10 million to pay lawyers, where does the money to repay York come
from? That's right kids, what is left of SCO's assets (see Balance Sheet
discussion above), which will probably be tidily close to $10 million or less
when the file their 10-K.

[ Reply to This | # ]

SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: Alan(UK) on Sunday, November 18 2007 @ 05:24 AM EST
First cup of Groklaw this Sunday morning.

The title has got to be a line of a song.

I have have no poetic ability but some of you have.

Come on, let's see some lyrics.

---
Microsoft is nailing up its own coffin from the inside.

[ Reply to This | # ]

Maybe York should talk to Goldfarb
Authored by: Anonymous on Sunday, November 18 2007 @ 05:34 AM EST
I seem to remember that he was less than impressed with the service he got from
his guarantor.

[ Reply to This | # ]

SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: g.d.shaw on Sunday, November 18 2007 @ 05:41 AM EST
So under this agreement York would be not merely funding but actually
controlling the litigation against IBM and Novell?

In the UK, my understanding is that such an arrangement would make York liable
for at least some (and possibly all) of IBM and Novell's costs. Is that the
case in Utah and/or Delaware?

[ Reply to This | # ]

SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: belzecue on Sunday, November 18 2007 @ 06:17 AM EST
"So unless a SCO executive or board member is personally guaranteeing the loan, which is certainly possible, there is someone out there besides York wanting this litigation to continue enough to be willing to be on the hook for $10 million."

Yes. Pay no attention to the man behind the curtain.

[ Reply to This | # ]

SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: Anonymous on Sunday, November 18 2007 @ 06:20 AM EST
ix) the entry of an order by the Bankruptcy Court granting relief from or modifying the automatic stay of Section 362 of the Bankruptcy Code (x) to allow any creditor (other than Lender or its successors or assings) to execute upon or enforce a Lien on any Collateral...which ... would have a Material Adverse Effect;
I'm confused. The "loan" is to allow SCO to continue litigation and appeal the upcoming rulings against them. But if the stay is lifted allowing the continuation of litigation, then SCO defaults on the loan. Is this really a loan to continue the current court cases? Or is it intended for something else?

[ Reply to This | # ]

Wouldn't it be great if...
Authored by: SilverWave on Sunday, November 18 2007 @ 06:44 AM EST
Someone taped all the calls and meetings between this benefactor and them...

of course that would never happen in real life...
no one is that sneaky or devious...
just like no one would hire PI's to follow reporters...

ho hum...

---
Software Patents are leeches on the creativity of mankind.

[ Reply to This | # ]

IBM/Novell can easily outbid
Authored by: gvc on Sunday, November 18 2007 @ 07:37 AM EST
So they are in the horns of a dilemma. Even assuming the down-side risk of
litigation to be $0 (which I do), $30M or
so to make it go away would be way simpler and probably no more expensive than
continuing to fight.

If I were IBM or Novell and could arrange the deal so that neither Darl nor BSF
saw a dime, I'd do it in a heartbeat. If I couldn't exclude these parasites,
I'd have a dilemma.

[ Reply to This | # ]

News Picks comments here
Authored by: Alan(UK) on Sunday, November 18 2007 @ 07:42 AM EST
Seeing that nobody has started the thread yet.

Does anyone know who Investor Village are and what their 'badware' is and also
is it available as a Debian package? News Picks is very uninformative.

Oh, and please put the News Picks title in your comments title.

---
Microsoft is nailing up its own coffin from the inside.

[ Reply to This | # ]

SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: Steve Martin on Sunday, November 18 2007 @ 07:50 AM EST

And SCO can't sell off any assets or merge or set up subsidiaries or settle any litigation without first consulting York.

You mean like TSG couldn't sell any new UNIX licenses or negotiate any license buy-outs without first consulting Novell? What makes York think TSG ("Contracts are what you use against parties you have relationships with.") will honor this contract when they didn't honor the one with Novell? This smells like a week-dead fish.

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

[ Reply to This | # ]

At what time does contempt of court/perjury come into play?
Authored by: Sunny Penguin on Sunday, November 18 2007 @ 07:55 AM EST
This deal was obviously in the works when tSCOg told Judge Kimbal they were not
going Bankrupt.
Can sanctions be given on a "stayed" court case in Utah?
Can a Utah criminal case be spun off for perjury?

[ Reply to This | # ]

It's beyond belief...
Authored by: JamesK on Sunday, November 18 2007 @ 08:13 AM EST
that they could submit something that's so blatantly against the interests of
creditors, let alone Novell's misappropriated money. This must be a big red
flag to the bankruptcy court.




---
-rw-rw-rw- are the permissions of the beast.

[ Reply to This | # ]

Innovation in litigation
Authored by: Jude on Sunday, November 18 2007 @ 08:22 AM EST
Too bad for SCO that they didn't think of a deal like this sooner. Now they
have to beg the bankruptcy court for permission to set it up with their
opponents arguing against it. Imagine how much nicer it would have been to have
something like this already in place beforehand.

I wonder if we're going to start seeing purpose-specific shell companies that
are set up specifically to pursue risky litigation? It would seem that a proper
setup would give the "investors" most of the booty if they win, but
limit losses to their investment if they lose.

[ Reply to This | # ]

It doesn't look like the guarantors are secret to me.
Authored by: Anonymous on Sunday, November 18 2007 @ 08:23 AM EST
The title of the proposed agreement (Attachment A to 219) flatly says:

certain Subsidiares of the Borrowers, as the Guarantors

Also, the first paragraph of the proposed ageement also defines the guarantors as:

"each domestic Subsidiary of the Borrowers existing on the Closing Date and each Subsidiary of the Borrowers that from time to time after the Closing Date becomes a party hereto pursuant to Section 5.14 hereof (each individually, as a "Guarantor", and collectively, as he "Guarantors")"

How does that possibly mean that there is some secret guartantor, other than a SCO subsidiary. I basically see this as York covering themselves against SCO funnelling off other assetts like they did with the patent through Cattleback. In fact, I would think that Cattleback is one of the as yet unnamed guarantors since they have been, and still are, a SCO subsidiary since before the bankruptcy was filed.

[ Reply to This | # ]

"York pays the provider of the legal service directly."
Authored by: billyskank on Sunday, November 18 2007 @ 08:27 AM EST
Doesn't that also have the benefit that SCO can keep on making FUD protecting its IP until Microsoft York run out of money?

---
It's not the software that's free; it's you.

[ Reply to This | # ]

What's the real deal?
Authored by: Anonymous on Sunday, November 18 2007 @ 09:14 AM EST
Others have pointed out that one of the reasons this has dragged on so long is that IBM wants a particular judgement. My own theory is that IBM wants Linux to be completely free of any taint of copyright infringement. In that respect, it isn't about crushing SCO, it's about making sure the puppet master has no strings to pull.

What I had thought would happen was that SCO would be forced into chapter 7. The trustee would settle all the cases on terms dictated by IBM, Novell and Red Hat. IBM would get what it wants.
  • The York deal is an attempt to get the litigation to survive SCO. I am surprised. The FUD value of this case is about zero now. Maybe the puppet master is trying to bankrupt Novell with lawyer bills.
  • If we look at this as an epic battle between IBM and Microsoft, interesting possibilities emerge. One is that the Microsoft-Novell deal was to make sure Novell would stay in the fight. Microsoft can't buy Unix and wants to make sure IBM doesn't get it.
The above two possibilities are contradictory. I have no clue. Make some more popcorn, this obviously isn't over yet.

[ Reply to This | # ]

tSCOG proposes York to replace Bankruptcy Court
Authored by: artp on Sunday, November 18 2007 @ 09:51 AM EST

I thought all this was the prerogative of the BK ? I guess tSCOG is getting really good at redefining the rules, and just can't stop with ONE !!!

And SCO can't sell off any assets or merge or set up subsidiaries or settle any litigation without first consulting York. York gets to look at their books. It has placed restrictions on what SCO can do with stock and what it can buy in the way of assets. SCO has to tell York what is going on in the litigation, and York gets to see pretty much whatever SCO has. And significantly, if SCO files a reorganization plan that York hasn't consented to, it's a default on the agreement. York says any reorganization plan must say that York gets paid back in full before anyone else. That's on page 41. And if there is a trustee appointed to take over for SCO management in the bankruptcy, that constitutes a default also. And get a load of this term.

---
Userfriendly on WGA server outage:
When you're chained to an oar you don't think you should go down when the galley sinks ?

[ Reply to This | # ]

Maureen O'Gara is at it again
Authored by: gvc on Sunday, November 18 2007 @ 10:02 AM EST
http://www . sys-con . com/read/457496.htm

"Novell Drops $100m Claim Against SCO"

[ Reply to This | # ]

  • Not new - Authored by: Steve Martin on Sunday, November 18 2007 @ 10:30 AM EST
    • Not new - Authored by: gvc on Sunday, November 18 2007 @ 10:43 AM EST
      • Not new - Authored by: Anonymous on Sunday, November 18 2007 @ 03:21 PM EST
        • Not new - Authored by: Steve Martin on Sunday, November 18 2007 @ 10:34 PM EST
          • Not new - Authored by: PJ on Sunday, November 18 2007 @ 11:55 PM EST
            • Not new - Authored by: gvc on Monday, November 19 2007 @ 03:58 PM EST
Hang on...
Authored by: Anonymous on Sunday, November 18 2007 @ 10:03 AM EST
So, York is smart enough to cover their backs against pretty much every trick in
the book (ie. they acknowledge that they are dealing with a bunch of crooks),
but they're not smart enough to realise that SCO is never going to win a penny
in court. How does that work?

[ Reply to This | # ]

Un-stay! Un-stay
Authored by: mexaly on Sunday, November 18 2007 @ 10:36 AM EST
If the BK judge doesn't like the fetid reek of the super duper, he could just
bring the motion to un-Stay The Honorable Judge Kimball out before December 5th.
Say, perhaps on November 20th.

I sure hope the BK judge doesn't like the fetid reek of super duper. I hope the
trustee doesn't either.

This will be the real test of the honorability of the Delaware court.

---
My thanks go out to PJ and the legal experts that make Groklaw great.

[ Reply to This | # ]

Correction: Yarro owns 26%
Authored by: Anonymous on Sunday, November 18 2007 @ 11:13 AM EST
PJ: "Doesn't Ralph Yarro have more than 50%?"

Yarro owns 5,531,855 shares, 127,500 options for a total "diluted" basis holding of 5,659,355 .

As of the last 10-Q there were about 21,372,000 shares outstanding. This means Yarro's ownership is 26.4.%. Ownership of shares by other insiders is small. 4 board members own ZERO shares outright (they do have options): Leeman, Millington, Campbell and Young. Tibbits owns 3708 shares outright (he has options on 232,082). McBride owns 33,021, but has options on 730,000.

Yarro and the board does control a "poison pill" provision created in September 2004, that would inflate their shares in the event of a hostile takeover. I do not know whether the poison pill is effective post-bankruptcy.

For everyones benefit. I have uploaded to google spreadsheet a institutional ownership list by quarters going back to 2002. I know of no other synoptic listing of ownership than this one that I have maintained.

Posted by Stats_for_all. Anyone using or reviewing this comment, Please respond to this thread, so I know my work is usable by Groklaws many readers. I have recently experienced difficulty with invisibility of my comments. I do not know why I have been rendered invisible.

[ Reply to This | # ]

SCO Middleman
Authored by: red floyd on Sunday, November 18 2007 @ 11:41 AM EST
"I gather Novell is the last entity that will let SCO play middleman with
other people's money."

That's rather unfair to Novell. At the time of the APA, SCO was oldSCO, Santa
Cruz, a respectable, if stodgy, Unix company.

I doubt that anyone could have predicted the SCOundrels.

---
I am not merely a "consumer" or a "taxpayer". I am a *CITIZEN* of the United
States of America.

[ Reply to This | # ]

This is a desperate attempt to keep the litigation alive
Authored by: Anonymous on Sunday, November 18 2007 @ 11:42 AM EST
The SCOx war camp must keep litigating.

When the litigation stops, counter attacks begin.

This is a huge lateral play. The legally nebulous and possibly
undefinable rights to UNIX are legally passed to a fresh running
back. The new running is legally protected from counter attacks.

The whole legal attack begins anew. When that attack falters, just
lateral again and again. This keeps the campaign alive.

When SCOx's attack stops, how long do DM's designated
fall guys stay out of jail? See why they so want to keep going?

[ Reply to This | # ]

SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: Anonymous on Sunday, November 18 2007 @ 11:42 AM EST
So in principle York (or whoever hides behind that front) can limit their
expenses to $10M to continue the evil SCO saga to the next step and get whatever
is left of SCO after the litigation.

Nice trick to continue the litigation without the responsibilities.

[ Reply to This | # ]

Bonuses Triggered
Authored by: Anonymous on Sunday, November 18 2007 @ 12:41 PM EST
So when does SCO reveal this sale/loan also is considered a triggering event
that sends bonuses to SCO execs and BSF.

[ Reply to This | # ]

SCO as satire, or the rise of Gonzo lawyering
Authored by: Anonymous on Sunday, November 18 2007 @ 12:46 PM EST

SCO has become a parody of itself, and its lawyers have -- intentionally or unintentionally? -- appropriated the term Gonzo as a description of what they are doing these days.

This from the Wikipedia article:

The term has also come into (sometimes pejorative) use to describe journalism (or generally any writing) that is broadly in the vein of Thompson's writing, characterized by a drug-fueled stream-of-consciousness technique.

Replace "journalism" with "lawyering,: and you have it in a Nutshell. Stream of consciousness certainly seems to fit.

And from another Wikipedia article:

Gonzo journalism is a style of storytelling that mixes factual events into a fictional tale.

Sounds about right.

[ Reply to This | # ]

SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: Anonymous on Sunday, November 18 2007 @ 12:57 PM EST
Let me see if I have this straight.

SCO has entered Chapter 11 bankruptcy. The job of the court is to help it, if
possible, reorganize so as to become financially stable. Now ongoing litigations
are highly relevant to business recovery plans, and so the court has, as I
understand it, power of approval regarding litigation. However, as part of SCO's
plan it wants to take this power away from the court and give it to another
firm. I can't imagine that in a million years a bankruptcy court would approve
that sort of deal.

[ Reply to This | # ]

Replacement of Management or Conversion to Ch 7
Authored by: Anonymous on Sunday, November 18 2007 @ 01:03 PM EST
At what point does the bankruptcy judge have the prerogative to either replace
management, which is clearly not working to preserve estate value? I have to
think that replacing Darl and friends and putting SCO in the hands of a trustee
would convert this to a Chapter 7 proceeding.

Can a creditor request the management replacement?

[ Reply to This | # ]

SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: Anonymous on Sunday, November 18 2007 @ 01:21 PM EST
There is a debate here over York's motivation. One side says that the deal would
be a loser for York and so someone else must be paying off York to pursue it.
The other side says no, if you think carefully about the deal you can see it
could be a winner for York and so it may be pursuing it out of its own
motivation.

But now look at the specific terms of the proposed deal and you see that, while
it might benefit York, it is so countrary to the purposes of Chapter 11
bankruptcy law that there is no way the court would approve it. And York has
enough legal expertise to know that.

That leads me to think that York is pushing the deal, not because it thinks it
might get it, but rather because some third party is motivating it to do so as a
way of trying to drag things out as long as possible. Well, maybe that is wrong,
but it makes more sense than any other explanation I can think of.

By they way, some say that York's plan was to hope it could slip it by the court
without it realizing what was happening. But remember that York knew that IBM
and Novell are deeply concerned with SCO and that they have exceptionally
competent legal teams who would be sure to make the judge fully aware of what is
wrong with such a deal, so I don't think York could have been thinking it could
sneak things by the court.

[ Reply to This | # ]

Defective by design
Authored by: jbb on Sunday, November 18 2007 @ 01:24 PM EST
SCO never believed it would win the lawsuits against IBM and Novell. It was all just part of their anti-Linux FUD and shakedown campaign. They're are playing the same dirty trick here. Sure, it would be swell for them if the York deal went through just as it would have been swell if every Linux user gave them $399 per CPU or if they won a multi-billion dollar judgment against IBM. But that was never plan-A.

The purpose of the York deal is to tie up the bankruptcy court and prevent Judge Gross from unstaying the Utah litigation. That's is why York "let slip" their fears that the Utah case would be a death sentence. How can Judge Gross unstay the Utah case now as long as their is a non-zero chance of the York scam deal going through? But the York deal is so riddled with flaws that it will take months and months of wrangling to even try to fix them all. Yet if they all get fixed the deal is no good to SCO so it is really an almost pointless exercise.

It's a brilliant plan actually because it's got Novell, IBM, and the trustee all clamoring for delay.

The key point that has been missed is that the details of the York deal are not important. The important question is how can SCO possibly have a viable business going forward with adverse rulings in the Novell and IBM cases? The best the York deal can do (for SCO) is stiff Novell and IBM (as outlined in the article by our lovely and talented PJ). Yet here we are lined up to hash out the outrageous and irrelevant details of the York deal while the Utah case stays on hold. **sigh**

---
You just can't win with DRM.

[ Reply to This | # ]

Hang on! Microsoft wants Unix?
Authored by: DMF on Sunday, November 18 2007 @ 01:55 PM EST
If we assume for the sake of argument that York is a wrapper class (aka
"stalking horse") for Microsoft, then a sale accomplishes quite a few
different things. Here everyone seems to concentrate on the influx of $$ that
will enable the FUD litigation to continue. But look at some of the other
effects.

Microsoft, or one of their shell shills, would end up owning Unix! (to the
extent that SCO now "owns" Unix.) Utah has essentially decided that
that includes at least some copyrights and possibly patents (everything
developed after the transfer from Novell).

What, one wonders, could be boiled from that carcass?

[ Reply to This | # ]

Cattleback Intellectual Property Holdings, Inc. is *NOT* a Subsidiary.
Authored by: Anonymous on Sunday, November 18 2007 @ 02:07 PM EST
So if Cattleback is NOT a subsidiary,
then why did SCOG transfer what it did over to it?
If it isn't a subsidiary, then I would say the
transfer stinks, and is just a way to try to take
more value out of SCOG to keep away from Novell,
IBM and others.

I surely hope the BK court reverses any transfer
to Cattleback, since it is NOT a subsidiary.

[ Reply to This | # ]

SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: ThrPilgrim on Sunday, November 18 2007 @ 02:21 PM EST

Does this line from page 2 of the Notice of service

PLEASE TAKE FURTHER NOTICE that the Debtors reserve the right to modify and/or revise the Credit Agreement without further notice or hearng prior to the fiing of the Motion and prior to or at the hearng on the Motion.

mean that SCO and York a can tie up Novell and IBM's lawers responding to this only to see it re-written as it's presented to the Judge?

[ Reply to This | # ]

Translation - SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: Anonymous on Sunday, November 18 2007 @ 02:30 PM EST
SCO doesn't have the wherewithall to appeal Judge Kimball's decision.

[ Reply to This | # ]

Ch 11 done yet or not??
Authored by: nola on Sunday, November 18 2007 @ 04:27 PM EST
I may have missed this, but has SCO's petition for chapter 11 been approved?
Or is it still pending a ruling from Judge Gross?

I had thought that it was still pending but I'm not sure.

[ Reply to This | # ]

IBM or Novell should lay down a $1 cash deal
Authored by: Anonymous on Sunday, November 18 2007 @ 04:36 PM EST
Someone else should lay down a $1 cash deal for the material in the APA. No
debt, no interest, no strings, just $1 cash. I believe a good case can be made
for that deal being a lot better for the creditors than the current York deal.

The current York deal looks like a way to
1) prolong the ill advised money losing lawsuits
2) vacuum up any remaining assets into a priority creditor
3) basically mess up everyone

Therefore the $1 clear cash offer should be much more valuable to SCO's
creditors.

I would like to see SCO and the trustee bust heads over the competing
valuations.

[ Reply to This | # ]

Stocks In Bankruptcy
Authored by: bezz on Sunday, November 18 2007 @ 04:57 PM EST
The stocks are probably worthless at this time. When companies reorganize under
Chapter 11, equity debtors (e.g. stock holders) are near the end of the line.
And then the existing stocks are typically eliminated and new stocksissed in the
reorganized company. Look at the K-Mart and Silicon Graphics stocks as an
example.

[ Reply to This | # ]

The SDSSSPCA, aka the York Plan.
Authored by: webster on Sunday, November 18 2007 @ 06:00 PM EST
..
This plan is so unnecessary. It just adds expense and depletes assets for SCO
when they should be concentrating on their business reorganization. Unless, of
course they no longer consider themselves a business. If so, they can just shut
down and pay the lawyers.

It is late in the game. Look at the odds. Look at the point spread. With five
minutes to go, SCO needs five touchdowns. This is SCO not Boise State. For
York this is neither a bet or an investment. The guarantor has satisfied York
that it has it all.

The York Plan is an expensive way to pay for litigation. Let that shy guarantor
pay it directly, voluntarily to the lawyers. If it is so desperate as to
concoct this deal, it will pay directly without a deal. Why pay more as a
guarantor later when it can pay much less now? Is anonymity worth so much? Do
they think that SCO, if they survive, wouldn't be grateful?

The prospects of winning the litigation are dismal now that they are a judgment
and two cases down. The prospects of settlement are dismal with BK months away.
The guarantor sees immense value in maintaining the litigation without its name
on it.

So nix the York Plan. Let that guarantor step forward and charitably pitch in
to help Ole SCO. The lawyers will appreciate it and wax overlength, surreply
and reconsider to their hearts' content. The courtroom may also get a little
peek toward PIPEFairyLand.

---
webster

[ Reply to This | # ]

SCO not technically chapter 11, can they just leave ch 11 whenever they want and get the 10mil
Authored by: Anonymous on Sunday, November 18 2007 @ 06:05 PM EST
SCO does a good job of hiding things, for example claiming they will make it to
Trial without bankruptcy. Then giving the impression that they want to keep
unix on the first day at the BQ appearance and how important it is to there
business. Now as I see it, I am wondering if they can just pull out of
bankruptcyand make the sale. Then say well we got the delay we wanted. They had
to know all a long the Novel was going to be lifted. They just needed more time
to come up with something. So I am wondering how serious this ch. 11 is. Could
just be a stall. Can they pull out of bankruptcy whenever they want?
Technically they aren't ch 11.

[ Reply to This | # ]

Is this even enforceable?
Authored by: Kelledin on Sunday, November 18 2007 @ 06:05 PM EST

IANAL (obviously), but by my understanding of bankruptcy law, contract terms that seek to arbitrarily, proactively set up BK creditor priority are pretty much unenforceable. Novell gets its priority level as a consequence of how it set up the APA payment pass-through, but brazenly using BK creditor priority as a bargaining chip can't work, for intuitively obvious reasons: it would enable wholesale raiding of the estate through silly courtroom games like this.

If I'm right, I expect Novell, IBM, and/or the US Trustee to stand up and object forcefully.

---
<Lionel Hutz> I'll be defending...The SCO Group!!!??? Even if I lose, I'll be famous!

[ Reply to This | # ]

Was York One of the Original PIPE Fairies?
Authored by: Anonymous on Sunday, November 18 2007 @ 06:42 PM EST
In the original PIPE deal with BayStar, there were two investors. One was BayStar for $20 million, and the other was through RBC for $30 million. RBC would not say who the real investor behind the $30 million was, but they always made vague statements that it was being done on behalf of a client. In other words, RBC was acting as a front for someone else and it wasn't RBC's money that was at risk. Was this someone else York?

If I recall correctly, PIPE deals were at the time limited to a maximum of $30 million from a single investor. This is why Baystar couldn't legally front the entire amount themselves. This means there has always been a mysterious third party involved. People assumed this third party was Microsoft itself. Yet that doesn't seem likely, considering the trouble that Microsoft went through to keep their ties to Baystart indirect. It would be more likely that Microsoft would line up another Baystar-like company to act as their proxy. RBC wouldn't be enough of a shield on their own, as there would be too much risk that RBC would be asked to make their records public at some point. Some other entity would be needed to act as a plausible investor.

Searches in Google for "york capital pipe" turn up numerous references to York Capital as being one of the top investors in PIPE deals in terms of amount of money invested. To anyone looking to arrange a PIPE investment, York would be an obvious source. We also can see from their current proposal that they don't have many qualms about who they get involved with.

SCO said they had been talking to York about buying the Unix business since 2005. So, York is not new to this game. When Baystar wanted SCO to sell their Unix business and concentrate on litigation, it is possible that York was lined up as the potential buyer. In other words, this wasn't necessarily an idle suggestion by Baystar. An actual deal may have been proposed which SCO wasn't at that time prepared to accept. Now York is in a better bargaining position to bring SCO into line.

So why would York come out from behind the curtains now? Well, now that SCO is in bankruptcy, anyone wishing to buy their assets in a complex deal would have to have a large and visible amount of money behind them for the deal to be acceptable to the court and the creditors. A front company with no visible assets and invisible owners would not likely be considered credible enough.

So why would York be involved at all? We know that Microsoft was behind the Baystar side of the original PIPE deal. At the time, people were being called "paranoid" or "tin foil hat wearers" for suggesting this, but the truth leaked out in the end. However, the identity of the other investor was never revealed.

If it was York, it is quite possible (likely even) that they were offered a similar deal by Microsoft. York, being the sort of company they are, would like have demanded better guarantees from Microsoft than Baystar did, so they may not have been out of pocket on the deal. This means they may not have lost their appetite for involvement in SCO. It also means that when SCO needed cash in a hurry, they could turn to York. York would already know all about SCO in intimate detail from their previous involvement and so wouldn't have to spend a lot of time getting familiar with their history.

So, is York one of the original PIPE fairies? And are they presently operating on their own behalf, or are they fronting for someone else? It would be interesting to know.

[ Reply to This | # ]

Cattleback
Authored by: Anonymous on Sunday, November 18 2007 @ 06:43 PM EST
Who wants to bet that Cattleback has already sold that patent?

[ Reply to This | # ]

  • Cattleback - Authored by: Anonymous on Sunday, November 18 2007 @ 11:39 PM EST
SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement
Authored by: Yossarian on Sunday, November 18 2007 @ 07:38 PM EST
>You have to post a bond, in case you lose

As I've said several time before, a bankruptcy court can
reduce the size of the appeal bond. See the case where a
judgment for Pennzoil against Texaco sent Texaco to
bankruptcy, and it did not have a $12,000,000,000 bond for
appeal. The bankruptcy court reduced the Texaco's bond size.

[ Reply to This | # ]

Suggestion for Novell
Authored by: Anonymous on Sunday, November 18 2007 @ 08:06 PM EST
Novell should make a SIGNIFICANTLY HIGHER bid than York for SCO's alleged
"intellectual property" (whatever was not covered by the Utah
judgment). Because the exact ownership and nature of this IP is in question, the
bid should be contingent on the money going into an escrow account until it is
eventually decided what exactly SCO really owns (so that money can be returned
for those portions which SCO doesn't own, and therefore can't legally sell).

Therefore, Novell has the high bid, and is exercising reasonable caution with
the escrow demand. This is not what SCO wants, but if the Judge rules to go with
a lower bidder, he is in effect ruling that SCO's convenience is more important
than the principle of establishing rightful ownership. If SCO sells something it
doesn't own, then the rightful owner will be forced to bear the expense of
litigation to establish its rights, and is thereby harmed.

With the money in escrow, it has a good chance of returning to Novell via
Chapter 7 or claims.

[ Reply to This | # ]

This is a Poison Pill Defense.
Authored by: Anonymous on Sunday, November 18 2007 @ 11:07 PM EST
I gather then that if you owned 50% or more of SCO's stock, you get to be a subsidiary and hence liable for the $10 million, should Me Inc not have enough to pay it all back. Snark. Doesn't Ralph Yarro have more than 50%?
Ralph Yarrow is the largest current registered shareholder, with about 25%. No other registered shareholder has a significant about.

However, if your interpretation is correct, then this clause could be intended as a poison pill defense. Nobody would want to own 50% of SCO, including the creditors.

Consider the following scenario. Suppose Novell were to win their case after SCO has expended the $10 million loan fighting them. It is common in bankruptcy situations for the company to issue new stock to the creditors, converting the loans into equity. Under this scenario, Novell could end up being by far the largest shareholder, possibly owning more than 50%.

So the result could be Novell being on the hook for York's $10 million. SCO sells their assets to York, squanders the money fighting Novell, and in the end Novell has to pay York for the privilege of being sued.

This sounds like a poison pill defense. Nobody is going to want to own SCO under any circumstances. This clause can't be allowed to stand. The agreement as a whole is ridiculous and should be rejected by the court as being in bad faith.

[ Reply to This | # ]

Has that trick ever worked?
Authored by: Anonymous on Monday, November 19 2007 @ 01:34 AM EST
This sounds like an awesome piece of contract lawyering, the result of many
years of authorship experience with such deals. Which leads me to believe that
this is a fairly standard trick among that class of bankruptcy lawyer that
specializes in "bustups," as one T. Soprano might put it.

Now companies may certainly *try* to place their preferred creditor at the head
of the line, but I can't see where that might have actually been allowed to fly,
*especially* in a case like this, where the named creditor has been the most
recent member invited to the party.

OTOH, I can see where such a deal might get approved. Some of you may remember
Corel Software. They made the premier vector graphics drawing program of their
age.

In this day and age, when we connect our scanner to our computer, we just plug
the little rectangular plug into the little rectangular socket, and it just
works, mostly, but in those dark days, boys and girls, the standard sort of
connection for scanners and cd-rom drives, both peripherals that were very
useful when working with graphics programs like Corel's, used a connection
called SCSI, and in those days, connecting SCSI devices was something of an
art.

So Corel found it fiscally advantageous to develop their own suite of SCSI
drivers that supported a wide number of manufacturers' devices and operating
systems, even though their main line of business was selling graphics software.

Now, hypothetically speaking, if Corel had found themselves staring down a
lawsuit or two of this magnitude over their SCSI driver product, a lawsuit with
better odds of winning than SCO faces, certainly, and they were forced into
chapter 11, and really just wanted to get on with making graphics software, this
sounds like the kind of deal they could make, and get approved, after some
adjustments. Though I should think there would be easier ways to do the same
thing, namely selling the lawsuits outright, or folding them into a subsidiary
company as part of the reorg.

Can any of the more experienced legal minds comment?

bkd

[ Reply to This | # ]

Things that make you go hmmm.
Authored by: Anonymous on Monday, November 19 2007 @ 09:11 AM EST
Most of the opinions here express astonishment that SCO management are
attempting to implement this deal under Chapter 11. So another thought struck
me: what if SCO had implemented this deal and then entered Chapter 11/7?

IANAL nor a bankrupt, so my knowledge of these matters is limited to
speculation, but I guess that such a deal would be open to considerable scrutiny
if a corporation subsequently entered bankruptcy. The claim is that the deal has
been under consideration for some time but it has only become an imperative when
SCO filed for Chapter 11. Possibly, the only way SCO management would get this
deal to fly without being liable for sanctions subsequently is to get the BK
court to rubber-stamp it. But that would be duplicitous so I'm sure SCO's
management would never be a party to such behaviour.

The secret to comedy is timing. A million ruined keyboards attest to SCO's gift
for comedy. Is their timing now so badly off?

------------------
Nigel Whitley

[ Reply to This | # ]

COnstructive Trust, Conversion and Indemnification
Authored by: rsteinmetz70112 on Monday, November 19 2007 @ 12:06 PM EST
I have been pondering the relationship of the three major elements of the Novell
situation.

First Novell won of the issues of conversion, and Constructive Trust but the
amounts are not settled. In order to settle the amounts some court must
determine how much money was converted and how much should be put into the
trust.

The amount converted was to be established at trial by determining what is
anything else the SUN and Microsoft agreements included and deducting that from
the total amount paid, then paying Novell the remainder.

The Constructive Trust is a separate matter. As I understand it the Trust would
be calculated based on the least balance of SCO's accounts, that is the money
that SCO hasn't spent yet.

I'm sure I am oversimplifying but as I understand it what happens is that money
paid is which was Novell's is the first money in and the last money out,
therefore it is basically all of the money SCO never spent or the least balance
in their account. I'm sure SCO has tried to manipulate that.

If SCO spent some of Novell's money and no longer has it then the amount SCO no
longer has becomes a liability and a debt owed to Novell. So in addition to the
amount put in trust, SCO will also likely owe Novell a lot of money, probably
more than they have.

Exactly what happens during an appeal is not clear so I'll ignore it for now,
except to wonder what would happen if SCO were ordered to place the bulk of
their current cash balance in a sort of Escrow Account pending the outcome of an
appeal. I think they could not continue operation without some sort of revolving
credit line.

Finally the indemnification agreement. PJ mentioned that York would escape
liability by receiving indemnification from SCO. I don't think that's completely
accurate. I think SCO would be responsible for York's liability, as much as they
can, but if SCO's assets were insufficient then York would have to pay any
shortfall. In the event of a major liability, it's for me hard to see how SCO
would have the assets to cover it or even significant additional defencse costs.


---
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 | # ]

The Utah court not entering judgement was a spanner.
Authored by: rfrazier on Monday, November 19 2007 @ 03:17 PM EST
I take it that what would have been ideal for SCO, given that Novell won
summary, would have been for the decision to have been entered, so that they
could have started the appeal process before entering Ch 11. Then they could
have said to the bankruptcy judge that the best way of sorting things out would
be to stay the trial concerning the amount of the conversion, etc., while they
finish the appeal process. This also would have had the side effect of slowing
things down no end.

Best wishes,
Bob

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SCO's Proposed Super Dooper Senior Secured Super-Priority Credit Agreement - Updated
Authored by: sonicfrog on Monday, November 19 2007 @ 04:47 PM EST
Best... Check... Kiting.... Scheme... EVER!!!

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Paying for litgation
Authored by: snakebitehurts on Monday, November 19 2007 @ 07:24 PM EST
I'm confused. I thought SCO's deal for $24 million with Boies, Schiller covered
the costs of litigation through all appeals in the Novell and IBM litigation?

On the super duper deal - All I can say is a can't wait to see the responses
from Novell, IBM, the Trustee and the Judge.

While the Dec 5 hearing will be entertaining, I will not be surprised if the
judge defers everything until another day. Especially since most of the hearing
will likely be Novell and IBM saying some variation of "... you gotta' be
kidding me! ..." over and over and over. :-)

MikeD

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