Here's what we've been waiting for, the transcript of the hearing in the SCO bankruptcy on November 16th:
231 -
Filed & Entered: 11/26/2007
Transcript
Docket Text: Transcript of Hearing held on November 16, 2007 before the Honorable Kevin Gross. (related document(s)[218], [208] ) (NAB, ) It's 51 pages, so let's dig in. If the part that interests you most is the asset sales motion, later withdrawn without prejudice, meaning they can refile, the discussion on that begins on page 14. By the way, a SCO spokesperson told the Salt Lake Tribune, which asked about dropping the motion, "we are continuing to work on the transaction." Would you like to see some great lawyering?
Then take a look beginning on page
19, where SCO's attorney Arthur Spector says his firm had four lawyers working on the deal "literally around the clock, no break, around the clock twice in the middle of this week." He adds that Proskauer, representing York, had 14 lawyers working on the SCO-York APA and other documents for the proposed assets sale, trying to get it ready in time for the hearing. That's just Proskauer. At the hearing, York was represented by three law firms. One of them, Scott McNutt, was still working on the documents, according to Spector, during the hearing. Spector says all this in the context of wanting to get the motion approved that very day. Notice on page 20 though, how IBM's lawyer from Cravath, Richard Levin, turns Spector's words against him: MR. LEVIN: I understand Mr. Spector's desire to get something done and I don't deny the -- or don't doubt the authenticity of it, but he just described 14 lawyers on one side and four lawyers on another working four days around the clock with maybe a day in between those two -- sets of two, and he wants to get this done in -- it's no longer 39 minutes, Your Honor. It's much shorter than that. And yet he said despite all that work there are still problems. There are still things that need to be corrected in this agreement. Let's slow down. Let's get it right. There's a regularly scheduled hearing I think about two and a half weeks from now. Lawyers get paid for moments like that. You know how when you are in an argument and a day later you think of what you *should* have said, the coulda woulda shoulda part of the argument? Well, for lawyers, the skill is to think of it in the moment and say it when it matters most. And of course we know that in the end the hearing was set for the later date, and subsequently the SCO "emergency" motion was dropped. Mr. Levin is blowing my socks off. Thanks to Groklaw's Cecil we now have a text version without line numbers, for those who prefer it or who rely on screen readers. The version with the line numbers, as they appear in the PDF, is here.
*************************************
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
IN RE:
THE SCO GROUP, INC. et al.,
Debtor.
Case No. 07-11337(KG)
Chapter 11
(Jointly Administered)
[address]
November 16, 2007
2:04 p.m.
TRANSCRIPT OF HEARING BEFORE
HONORABLE KEVIN GROSS
UNITED STATES BANKRUPTCY COURT JUDGE
APPEARANCES:
For the Debtors:
Pachulski, Stang, Ziehl, Young,
Jones & Weintraub, P.C.
By: JAMES E. O’NEILL, ESQ.
[address]
For the Debtors:
Berger Singerman
By: ARTHUR J. SPECTOR, ESQ.
[address]
Audio Operator:
Nicole Schaefer
Proceedings recorded by electronic sound recording, transcript produced
by transcription service.
____________________________
J&J COURT TRANSCRIBERS, INC.
[address, phone, fax, email]
APPEARANCES (Cont'd.):
For the Debtors:
Berger Singerman
By: DANIEL LAMPERT, ESQ.
[address]
For the Debtors:
Dorsey & Whitney LLP
By: ERIC LOPEZ SCHNABEL, ESQ.
[address]
For Novell:
Young Conaway Stargatt & Taylor, LLP
By: MICHAEL R. NESTOR, ESQ.
[address]
For Novell:
Morrison & Foerster LLP
By: ADAM A. LEWIS, ESQ.
DAVID MELAUGH, ESQ.
[address]
For IBM Corporation:
Potter Anderson & Corroon, LLP
By: LAURIE SELBER SILVERSTEIN, ESQ.
[address]
For IBM Corporation:
Cravath, Swaine & Moore LLP
By: RICHARD B. LEVIN, ESQ.
DAVID R. MARRIOTT, ESQ.
[address]
For the U.S. Trustee:
Office of the U.S. Trustee
By: JOSEPH McMAHON, ESQ.
[address]
2
APPEARANCES (Cont'd.):
For York Capital Management:
Proskauer Rose, LLP
By: JEFFREY W. LEVITAN, ESQ.
[address]
York Capital Management:
Duane Morris LLP
By: FREDERICK B. ROSNER, ESQ.
[address]
For York Capital Management:
McNutt Law Group, LLP
By: SCOTT H. McNUTT, ESQ.
For Alan P. Petrofsky:
ALAN P. PETROFSKY, PRO SE
(Telephonic Appearance)
3
THE CLERK: Please rise.
THE COURT: Good afternoon. You may be seated.
MR. O'NEILL: Good afternoon, Your Honor.
THE COURT: Thank you.
MR. O'NEILL: Good afternoon, Your Honor.
THE COURT: Mr. O'Neill, good afternoon.
MR. O'NEILL: Your Honor, this is -- things are moving
even as we speak.
THE COURT: Yes.
MR. O'NEILL: And I do appreciate the Court's
indulgence and, as mentioned, we called chambers earlier just
to let Your Honor know basically we have two matters that are
kind of on the going forward unresolved docket for today.
Those matters are Number 3, which is the debtors' motion for
approval of CFO Solutions in connection with their provision of
a chief financial officer for the debtor, and also Number 4 on
the agenda, which is the emergency motion regarding the bid
procedures. And, as we reported to chambers, we're still
working out some of the details on the bid procedures and we
requested, and kindly the Court has agreed, to hear that matter
at three o'clock today. We -- I did inform the parties when I
got here that we had made that request.
THE COURT: Yes.
MR. O'NEILL: And we will -- we plan to go forward
with item Number 2 on CFO Solutions, and I think that Mr.
4
Spector and Mr. McMahon from the trustee can give the Court an
update on that. They have made some progress even just before
the hearing to see whether they could resolve their differences.
I wanted to report, Your Honor, on
item Number 1, which is the debtors' application to employ Dorsey &
Whitney as special counsel. I believe that there were some informal
questions raised by the U.S. Trustee, and I think those have been
resolved, and Mr. Schnabel can give the report on that item.
THE COURT: And I did notice there had been a supplemental affidavit
filed.
MR. O'NEILL: Yes, Your Honor. There was a supplement affidavit. I
believe Mr. Schnabel has a copy of that should Your Honor require it.
THE COURT: Thank you, Mr. O'Neill. Good afternoon, Mr. Schnabel.
MR. SCHNABEL: Good afternoon, Your Honor. For the record, Eric
Lopez Schnabel on behalf of Dorsey & Whitney I guess as the 327(e)
applicant.
THE COURT: Yes.
MR. SCHNABEL: Your Honor, if I may hand up so that
you could look at these items, a redline to the order. We have
a clean copy of the order and the supplemental affidavit by my
partner, Mr. Taylor, that was filed this morning, and I can
5
kind of walk through what the discussions have been, what the
resolution is with the Office of the United States Trustee.
THE COURT: That would be fine. Thank you.
MR. SCHNABEL: Thank you.
THE COURT: Thank you, Mr. Schnabel. Thank you.
MR. SCHNABEL: Your Honor, as set forth in the application, Dorsey &
Whitney is general outside counsel to the debtors, provides a variety of
services, and with respect to our application a number of questions
arose, and it's a little bit complicated because we are actually active
as litigation counsel with the Boies firm, but our fees are paid by
Boies but our expenses in those litigation matters are paid by the
debtor.
THE COURT: Yes.
MR. SCHNABEL: So we have a number of things that we
-- the U.S. Trustee, Mr. McMahon, asked us to clarify, and
that's in the supplement affidavit. So let me just walk
through those issues.
First, we don't have, and to the extent we even have,
we waive any right with respect to a contingency fee in those
litigation matters. We're on a straight hourly basis, and
Boies pays us for the litigation work. With respect to those
litigation matters that Boies pays us, we waive our right
for any compensation for the fees from the debtors' estates. So
those are between us and Boies.
6
The exception to that is with respect to the expenses
in those litigation matters. We will, through the normal
administrative order and monthly application and final
application process, seek reimbursement from the estate from
the expenses. And that's the exact arrangement that occurred
between the parties prior to the petition.
Your Honor, there's -- the U.S. Trustee also asked us
to make an acknowledgment, which is in the supplemental
affidavit declaration, that we do represent the debtors in
the litigation and obviously we'll comply with our ethical and
professional obligations to represent the debtors notwithstanding this
third-party payor arrangement.
THE COURT: Yes.
MR. SCHNABEL: Finally,
Your Honor, this is a factual matter, a supplemental disclosure that
with respect to the litigation involving Novell that Dorsey was not
involved in the negotiation or consummation of the transaction that's at
issue in that litigation.
THE COURT: Okay.
MR. SCHNABEL: So those were
the supplemental disclosures that we were asked to make and are happy to
make. Your Honor, with respect to the changes in the form of order,
besides from the recitation of the supplemental affidavit being filed,
there -- we added provisions making more explicit the different areas of
services that we provide, which
7
is just
general outside corporate -- board governance litigation. The specific
litigation that are big assets of the estate and other types of
litigation, employment and so forth, that's itemized in the order.
Specific reference that we're obviously not authorized to represent the
debtors as lead bankruptcy counsel, and kind of an E, which is on Page 3
of the blackline, which is given that obviously in bankruptcy so much of
the general operations of the company and other legal matters become
involved, especially in a sale, that we're allowed to communicate and
provide assistance with bankruptcy counsel and with the company in, you
know, assisting it -- prepare schedules and other types of things,
relating to -- incidental to the general work that we do and have done.
In addition, Your Honor, there's a -- we had a retainer and were unable
to fully get our last week invoice -- or a couple days out and apply to
the retainer prior to the filing. We're authorized to do that through
those -- through this order subject to disclosing that in our first
monthly fee app with obviously objection rights reserved pursuant to the
admin order, and there was some tinkering with that language. And
finally, Your Honor, in the last paragraph, with respect to the Boies
application and to the extent there's a successful event which has to do
with their application, we've waived our fees to the estate, but we
agree to hold those invoices so that in case the U.S. Trustee needs them
or other
8
parties in interest need them
in connection with Boies seeking compensation upon a successful event,
those will be available, and we'll do that. And finally, Your Honor, the
last two sentences are just really reservation of rights relating to the
agreements and relating to our -- us seeking reimbursement for the
expenses in the litigation matters. Your Honor, unless you have any
questions, you know, Mr. McMahon can confirm, but I believe we're fully
consensual here.
THE COURT: That's fine. Mr. McMahon? Good afternoon.
MR. McMAHON: Good afternoon, Your Honor. We have no objection to the
form of order. THE COURT: Okay. It's fine with the Court with those
additions and explanations, and I will be pleased to enter the order.
MR. SCHNABEL: Thank you, Your Honor. MR. SPECTOR: Good afternoon, Your
Honor. THE COURT: Mr. Spector, good afternoon. MR. SPECTOR: Arthur
Spector of Berger Singerman, representing the debtor. I'm here at this
particular time to put forward the motion for approval of the employment
of CFO Solutions, and actually Ken Nielson, who is the temporary CFO
that they placed with the debtor. Mr. McMahon and the debtor
9
have been trying very hard for a very long time
over this matter to see if we could come to an understanding. Mr.
McMahon filed his objections, as he had a right to do and we expected,
because we couldn't work out all of the terms. We had some of them
worked out, but some of them weren't, and I think -- we have a witness
that flew in here today. He no longer works for the company, except
maybe as a consultant. And he flew in to testify today about this. His
name is Burt Young, and he's sitting back there, and he was prepared to
testify and I'll -- I guess I'll proffer this -- why the -- why I'll
argue the J. Alix protocols have no relevancy to the facts of this case.
He would testify that the role of a CFO in SCO is the traditional CFO
role of a publicly traded company, as SCO is. He would describe his
activities when he was the CFO for the few years that he was there and
that he was directed when his -- when it was told -- when he told them
that he was leaving, which was going to be leaving the 1st of October,
the same month as the year ends and the requirements for preparing
securities filings, financial statements comes due, why -- how it was
that they came about hiring Ken Nielson through CFO Solutions. He would
testify that his job was to find somebody who was conversant with
securities -- financial statements for securities issues, somebody who
is a good solid CFO with all
10
the
financial qualifications you would need for that role. He never heard
the term "CRO" until I asked him this morning in preparation for this
hearing about whether this person would be hired as -- in any way
fashioned as a CRO. He never heard the term before. I had to explain to
him what a chief restructuring officer was. He'll testify to that and
that none of the requests for replacements that he made to other
agencies ever contemplated anything to do with the bankruptcy. It was
strictly the role of the CFO to do what he was normally doing when the
company wasn't contemplating or in bankruptcy. Finally, he would testify
that if he were leaving this company in October 1st, 2006, a year before
this bankruptcy was filed, he would have done exactly the same thing and
hired the exact same person. The need for a temporary agency, which is
what CFO Solutions is, like Robert -- well it's -- Robert Half may be a
full-time placement -- but it's a placement employment agency is because
they needed somebody in a hurry and you couldn't wait through normal
newspaper advertising process to get somebody onboard. With those type
of factual background, Your Honor, we would argue at the close of the
hearing that J. Alix protocols have a lot of use in a lot of cases, but
they don't apply in this case and, therefore, the terms of the
objections, the objections raised by Mr. McMahon and the U.S. Trustee,
which presume that this is an appointment like a J. Alix, are off
11
base in this case. That's what we would be
proffering if we don't work something out. And Mr. McMahon has asked me
just before I stood up here if we could see if we can't work out those
last bit of terms. THE COURT: That's fine. Thank you very much, Mr.
Spector. Mr. McMahon? And by the way, I am certainly pleased to allow
you to forgo any comments in an effort to have an additional
conversation with Mr. Spector, if that would be helpful. MR. McMAHON:
Thank you, Your Honor, and good afternoon. Joseph McMahon for the United
States Trustee's Office. First, with respect to the proffer, I'm not
going to be asking to cross examine the witness. THE COURT: Okay. MR.
McMAHON: I just don't think it's going to add that much to really what
our issues outlined in the objection are. I would note just with respect
to the proffer that the mention of the consulting arrangement between
the debtor and the former chief financial officer is something which we
learned of at the 341 Meeting, and our rights are reserved with respect
to that arrangement. But moving to the CFO issues, if I could, Your
Honor, my -- after speaking with Mr. Spector immediately prior to Your
Honor taking the bench, my understanding of what the debtor's issues
presently are is different than what I understood them
12
to be immediately prior to the hearing walking over
here, and what I think would be productive is that with the debtor's
permission if they're willing to agree to use the next hearing, the
December 5th hearing as a backstop, that we could go back and attempt to
resolve the issues that are raised in our objection and to the extent
that it's agreeable we could present a form of order to Your Honor under
certification of counsel or at the next hearing, and if we cannot get
there, we would just address the matter at the next hearing. THE COURT:
Mr. McMahon. Mr. Spector -- MR. SPECTOR: Your Honor, certainly there's
no -- nothing unreasonable with that proposal, but I'm hopeful that if
Mr. McMahon and I can go out to the hallway that we may be able to come
back to you at three o'clock when we take the other matter and give you
an agreed order at that time. That would be my proposal. MR. McMAHON:
Your Honor, that's fine. THE COURT: Okay. MR. McMAHON: And if we can get
it done by 3:00, then great. THE COURT: That's certainly acceptable to
the Court. I think it would be helpful for everyone if you could reach
an agreement. So I guess that brings us to -- MR. O'NEILL: With that,
Your Honor -- THE COURT: -- to the recess.
13
MR. O'NEILL: -- I think we're going to take a break then until
three o'clock. THE COURT: Is that a reasonable amount of time, do you
think, to cover what you need to cover? MR. O'NEILL: Well, I -- we don't
have a lot of time today, and I don't want to impose upon the Court, so
I -- that was the time that we thought would be reasonable under -- THE
COURT: Yes. Would anyone else like to be heard from? MR. LEWIS: Thank
you, Your Honor. Adam Lewis of Morrison & Foerster for Novell. THE
COURT: Yes, Mr. Lewis. Certainly. MR. LEWIS: We -- we've been following
the docket religiously for the last few days, and I'm sure Mr. Spector
has been doing everything he can hoping to see something prior to this
afternoon. THE COURT: By way of an asset purchase agreement? MR. LEWIS:
That would be a start, yes, Your Honor. And we understand there are some
other agreements as well that are just either completed or about to be
filed. There's a -- and Mr. Spector can elaborate on that if need be,
but I don't think it's necessary at the moment. It's pretty short notice
even to talk about a bidding procedures motion when we don't know what
we're bidding on and whether the terms of the bidding procedures make a
lot of sense in light of that. I'm willing
14
to talk to Mr. Spector. You know, I've done this a long time. I
never say no for an opportunity to chat. THE COURT: Right. MR. LEWIS:
But I have to tell the Court in candor, I'm skeptical that I'm prepared
to agree to anything today without having had a chance to study this
agreement, see what else there is, have a chance to confer with my
client and litigation counsel and maybe tell Mr. Spector thereafter what
else we would like to see, so that we can streamline this process and
not come back here again and again. And maybe we can't. I mean, maybe in
the end we won't reach an agreement and there will be a fight over
whatever there is going to be. THE COURT: Certainly. MR. LEWIS: But to
have conversations be meaningful, we have to have an adequate
opportunity. And, again, I don't want to suggest that I'm pointing a
finger at Mr. Spector. I'm sure he's done everything he can, but -- and
I'm willing to talk to him now, but I am very skeptical that I'm
prepared to agree to anything. If the Court wants to take the time till
three o'clock, I'm certainly willing to try that, but that's the Court's
call. I just want the Court to make its decision based upon my candid
assessment of the situation.
THE COURT: I'm certainly prepared to allow
the time and hopefully the parties can at least discuss where you are
and what else is necessary, if anything, and how we should
15
proceed, and we can go into those details at three
o'clock. MR. LEWIS: Thank you, Your Honor. THE COURT: But I think rather
than my -- telegraph my thinking which might somehow sort of derail the
conversations, I would just as soon allow the parties to have those
discussions. MR. LEWIS: Of course, Your Honor. Thank you. THE COURT:
Thank you, Mr. Lewis. MR. LEVIN: Good afternoon, Your Honor. Richard
Levin, Cravath, Swaine & Moore, appearing for IBM Corporation. THE
COURT: Welcome, Mr. Levin. MR. LEVIN: Thank you, Your Honor. It's a
pleasure to be here. Your Honor, I would like to echo Mr. Lewis's
comments and tell you that of course we always talk. However, we're
looking at 39 minutes now. There are numerous issues in the bid
procedures order. I know three o'clock is going to roll around and
somebody's going to come in and say, well, can we have until four
o'clock, and then four o'clock is going to roll around, and I don't know
if somebody will say, can we have until five o'clock and so on. There's
just too much to get through in 39 minutes, and I think it is
unfortunate that the matters came to the Court as late as they did, but
since they did, I think we have to deal with that, and I think the
proper thing to do is put this over for a proper hearing after the
parties have a time -- have time to review what has been filed,
16
what has not yet been filed and what the
debtor-in-possession's case is going to be to approve even bid
procedures before even getting to the sale order. THE COURT: I
appreciate that Mr. Levin, and I understand. MR. LEVIN: Thank you, Your
Honor. THE COURT: And my first comment was, is three o'clock realistic,
and, look, we don't have a shutoff here at five o'clock either, but at
the same time my impression is there's an awful lot to cover -- MR.
LEVIN: Tremendous amount. THE COURT: -- in order to make a hearing on
the motion at all meaningful. So -- MR. LEWIS: I would concur in that,
Your Honor. THE COURT: Yes. MR. LEVIN: Your Honor -- THE COURT: On the
other hand, it may just be that the parties can at least address what
remains to be covered and how best to proceed in an orderly fashion. MR.
LEVIN: You know, it may make sense, Your Honor, for us to adjourn this
hearing and for the parties to actually sit out and talk since we're all
here, but, as Mr. Lewis said, we need to consult with our clients. THE
COURT: Yes. MR. LEVIN: We need to consider some of the things
17
and read them. It may be that we'll come back
with an agreed order of some sort. It may be that we won't, but I doubt
we're going to come back with an agreed order in an hour or an hour and
a half. THE COURT: No, I understand that, Mr. Levin. I would -- MR.
LEVIN: So I don't think there's sense in holding the Court up and
holding the time and suggesting we're going to come back with some form
of agreement this afternoon. THE COURT: Thank you. I appreciate that.
MR. LEVIN: Thank you, Your Honor. THE COURT: And I understand that very
well. Mr. Spector. MR. SPECTOR: I'd like to say one thing that I never
thought I'd say, from your lips to God's ear. Maybe we'll come back with
an agreed -- but, I'm not asking for -- if I have to ask for miracles,
there would be -- world peace would be on the list. I wouldn't waste it
on -- but, Judge, just so you have an idea, I, speaking for myself,
hoped that we would have an asset purchase agreement before this Court
before November 6th when we first came here and asked for the emergency
hearing -- emergency hurry-up hearing. I was hoping we'd have all that
and the questions that were raised, valid questions that were raised by
Novell, IBM and the U.S. Trustee would all be answered by the documents
and we would then bring witnesses to
18
supplement, and it would all be done in an appropriate manner. I have
colleagues, four of them that were up in New York, and they worked
literally around the clock, no break, maybe two hours I think they took
off, for two days, went around the clock twice in the middle of this
week. Fourteen lawyers I'm told were on the other side of the deal from
Proskauer representing York. I don't' know how much money has been spent
in legal fees to try to get the documents in order, and were still
catching things and -- well, yes, we filed the APA this afternoon after
one o'clock. THE COURT: Oh, it has been filed. MR. SPECTOR: Oh, yes. We
have a copy for Your Honor if you really want it. THE COURT: I'm sorry.
I had checked a little while ago. MR. SPECTOR: Okay. We have a copy for
Your Honor. We'll give it to you. But, yes, we filed it a few minutes
ago. We know that putting it in the system a few minutes ago is
meaningless. We could have handed them out right now. We also have a
credit facility -- the credit facility agreement, which is in
substantially complete order, and it may be deemed filed as we speak
because we directed people to get that on the system as well. A third
document that we have to file as the third part of this piece is called
a cross licensing agreement. That's still in motion. We could not get --
we have drafts
19
going back and forth,
but it's not finished. We would like to have that on file also. And then
Novell, IBM, the U.S. Trustee will have the whole deal in front of them.
We understand that, and we do not -- we would like the Court not to just
simply say, let's all go home. We would prefer that Your Honor continue
this to the three o'clock call. We have people here from York, well, at
least one lawyer from York, that would be here. They have a stake in
what's going on as well, and if Your Honor's decision at that time is to
say let's all go home, come back on Tuesday -- I know Your Honor doesn't
have court on Monday -- and if we can find airline tickets to get back
here for Tuesday, maybe that would be the best time. Everybody could
then -- presumably we'll have the documents, all of the documents, and
they can look at it over the weekend and Monday and maybe we'll have a
more intelligent discussion before we get to court, and even if we get
to court and have to fight, we'll have a more intelligent hearing. So, I
just ask Your Honor, because Mr. McNutt for York is back there still
working on documents, that we not do anything until at least we give the
privilege of coming before the Court. THE COURT: Understood, and
certainly that will be the case. Mr. Levin. MR. LEVIN: I understand Mr.
Spector's desire to get something done, and I don't deny the -- or don't
doubt the authenticity of it, but he just described 14 lawyers on one
20
side and four lawyers on another working
four days around the clock with maybe a day in between those two -- sets
of two, and he wants to get this done in -- it's no longer 39 minutes,
Your Honor. It's much shorter than that. And yet he said despite all
that work there are still problems. There are still things that need to
be corrected in this agreement. Let's slow down. Let's get it right.
There's a regularly scheduled hearing I think about two and a half weeks
from now. Had the bid procedures motion been filed with the APA and with
the sale procedure, it wouldn't be reasonable to schedule a hearing two
and a half weeks after the filing of the bid procedures motion on the
bid procedures themselves. That's the stage of the proceeding that we're
at today. They just -- effectively, they just filed it today, minutes
before the hearing and during the hearing. I would suggest this matter
be continued. We're happy to spend the afternoon talking, or listening,
because we don't have a lot to say until we hear. We've got a 55 page
single-spaced agreement that we were just handed. We're not even going
to read that before three o'clock. So, we'll be happy to spend the
afternoon listening as long as we're all here in this building, but this
hearing ought to be continued to December, I think it's 6th is the next
regularly scheduled hearing or 5th, two and a half weeks hence. That's
what we would like to see happen today, Your Honor. THE COURT: Yes, Mr.
Lewis.
21
MR. LEWIS: Thank you, Your Honor.
After listening to Mr. Spector's comments, I guess I'm more inclined to
agree with Mr. Levin now. I mean, I just -- I'm happy to spend my time
talking. I would do that -- I'm a bankruptcy lawyer. We do that all the
time. I'm here. The idea that we're going to come back next Tuesday or
Wednesday -- there may be York people who have come down from New York.
I've come from California for the second time now. I don't want to be
turning around, coming back again, only to find out that we are going to
have more fights and maybe have to come back yet again. I'm inclined to
concur with Mr. Levin's comments that -- now that we just set this for
the next -- the emergency is gone. There's no emergency. I don't know if
there ever was one, but it's gone now. We're long past that. We're
obviously going to be long past that whatever we do today. So, let's
have this done on a considered basis where everybody has a reasonable
opportunity to respond. There are so many complicated questions that we
would like to try to flesh out, and we're probably not going to flesh
them out this afternoon. We may get some stuff done today, but more and
more between now and say the 5th, and then we can maybe at least narrow
the issues. That's not going to happen by next Tuesday or Wednesday in
any case. So, I guess at the moment now I concur with Mr. Levin's
suggestion, we just reschedule this for the next
22
hearing date, let the parties have a reasonable
opportunity to see everything, some of which hasn't even been filed yet,
and maybe very important this cross license agreement may be the tail
that wags the dog for all I know, and so let us go and voluntarily
spend, as we would, time talking about what we can talk about today, but
let's have this done on a reasonable schedule. There's no emergency.
There's no need to keep this going. Thank you, Your Honor. THE COURT:
Thank you, Mr. Lewis. Mr. McMahon. MR. McMAHON: Your Honor, good
afternoon. We believe that the objector's proposal has merit, and we
would join in their request to push the matter to first December
hearing. Thank you. THE COURT: Thank you, Mr. McMahon. MR. SPECTOR: Your
Honor, all I want to ask is that we defer these requests -- THE COURT:
Yes. MR. SPECTOR: -- until three o'clock when York can -- York, by the
way, their lawyer came from San Mateo. THE COURT: Well, why don't we do
this. Let's resume at 3:15. We'll pick a few of the minutes we've lost.
And what I'm going to do is try and at least get you a courtroom or some
area, or you're welcome to remain in here, or -- and talk, or you can go
into a separate courtroom if you'd prefer. Which would work best for
everyone?
23
UNIDENTIFIED ATTORNEY: Okay.
THE COURT: Right here is fine? UNIDENTIFIED ATTORNEY: Yes, this is --
UNIDENTIFIED ATTORNEY: Defer to my -- THE COURT: Is this -- UNIDENTIFIED
ATTORNEY: This is fine, Your Honor. Yes. THE COURT: Okay. So why don't
you talk. If you finish before 3:15, obviously you can let us know and
I'll come back, but in the meantime, out of courtesy really more than
anything, I'm going to allow the time, and we'll resume in about 45
minutes. Thank you. UNIDENTIFIED ATTORNEY: Thank you very much.
UNIDENTIFIED ATTORNEY: Thank you, Your Honor. (Recess) THE CLERK: Please
rise. THE COURT: Thank you, counsel. You may be seated, everyone. Who
would like to speak first? Mr. Spector? MR. SPECTOR: Thank you, Your
Honor. The matter of the CFO Solutions -- THE COURT: Yes. MR. SPECTOR:
-- I'm please to advise the Court that Mr. McMahon and I have agreed to
carry this over to December th. We have resolved one of the three issues
that separated
24
us. The other two I'm
going to try to see if I can get resolved. THE COURT: And if you can, of
course, then you can send over an order under certification. MR.
SPECTOR: And we'll -- if we have to, on December 5th, we'll come back
and argue based on the proffer. THE COURT: Okay, wonderful. And just so
I'm clear and also Mr. Spector's clear, Mr. McMahon, you would not be
seeking to cross examine a witness at that hearing. MR. McMAHON: Your
Honor, no. THE COURT: Okay. Thank you. MR. SPECTOR: With respect to the
minor matter of the bid procedures motion, we have with us today an
increased staff of folks, some of whom represent the potential stalking
horse bidder, York Capital Management, and the rest are -- I'd like to
introduce my partner, Dan Lampert -- THE COURT: Mr. Lampert, welcome.
MR. SPECTOR: -- who has been admitted for this case. Thank you for that,
Your Honor. THE COURT: Yes. MR. SPECTOR: He's part of the team that did
the all-nighters and (indiscernible). We're prepared to proceed and we
understand that at the last hour there were some procedural points that
Your Honor has deferred until we can get the full cast of characters
here.
25
THE COURT: Yes. MR. SPECTOR: I'm
not going to -- in deference to that because that was on the table
first, I'm not going to proceed right now and present our witnesses for
the bid procedure or make my argument on the bid procedure, although we
are prepared to go forward and do all of that today. THE COURT: Thank
you, Mr. Spector. Mr. Lewis, you've had a little bit of time to talk.
MR. LEWIS: Yes, Your Honor, and we appreciate it. Unfortunately, as I
envisioned, it was -- it was a useful talk, but there's -- it only, I
think, emphasizes there's a lot to know and a lot we don't know yet, and
I don't think it's going to be clear by early next week. I would suggest
that the Court -- or ask the Court consider hearing this matter on the
5th. Assuming that we get everything filed promptly so that we know what
we're dealing with and can duly prepare for the 5th, ask the Court for
response dates because it is -- THE COURT: Yes. MR. LEWIS: -- a bit
shortened notice, and it is over a holiday period. We're willing to live
with that burden. And also that way we'll know what we're doing, but we
do have to know when it's being filed. There's also -- I don't think
I'll do this if I don't have to. I almost certainly will do this in
connection with an actual sale motion, but in connection with the
bidding procedures motion, once I see what gets filed, I
26
may want to do some discovery. That will obviously be
on cooperation of parties if I -- I will not try to do that unless I
really feel I need to and I will try to save my discovery for after if
and when a bidding procedures motion is approved and a sale motion is
actually filed for a hearing. But that's where I am on this, Your Honor.
Mr. Levin can speak for himself. THE COURT: Thank you. Thank you, Mr.
Lewis. Mr. Levin. MR. LEVIN: Thank you, Your Honor. We are -- not
surprisingly, we were not able to reach an agreement on bid procedures.
We stand by our prior position that the hearing should go forward on
December 5th. We have no objection to shortening time for the bid
procedures motion to be heard on December 5th, as Mr. Lewis said,
assuming the sale motion, which Mr. Spector has advised us contains all
of the information that would normally be in a bid procedures motion as
well, assuming that motion gets filed today or perhaps tomorrow. In
addition, to make this hearing meaningful we need not only asset
purchase agreement, which has been filed and which we have a copy of,
but there are extensive exhibits and schedules, and that is where the
heart of this agreement is. That's where the bulk of the substantive
matters are contained, and without seeing that we can't know really what
the asset purchase agreement means. As to the discovery issue, we, of
course, also would
27
reserve the right to
take discovery. Today is a good example. Mr. Spector just said he is
prepared to call witnesses. We don't have an idea of who those witnesses
are. We think if he is going to call witnesses that we be given advanced
notice of that so that we have an opportunity to prepare and perhaps
even if it's not discovery we have some opportunity to prepare for cross
examining those witnesses and understanding what they're going to say.
We are not looking to launch a discovery battle here, but there are
many, many unanswered questions in the papers filed so far. It may be
that the sale motion and the exhibits and schedules answers all of those
questions, but we simply don't know. We're shooting in the dark. We
would propose, Your Honor, that if the matter gets continued to December
5th that we set an objection deadline of Friday, November 30, and a
reply deadline of Tuesday at noon on December 4 so that we can have that
in advance of the hearing on the 5th. THE COURT: Thank you, Mr. Levin.
Mr. McMahon. MR. McMAHON: Your Honor, good afternoon. Our position is
the same as the objector's. We think it would advisable to carry this to
the 5th for a variety of reasons which have already been identified on
the record. Thank you. THE COURT: Thank you, Mr. McMahon. Mr. Spector.
MR. SPECTOR: Your Honor, I understand why they're saying that. There are
a lot of things that they think they
28
need. We don't think they necessarily need them all for purposes of a
bid procedures motion or a hearing on a bid procedures motion.
Typically, what's most important is when you get the APA you look at the
conditions of closing. They have that now, I know. And if we came back
in a few days, they would have had -- that's the gist of it. I'm told
that the schedules are available. With a confidentiality agreement we
can make those available as well. And the other documents should be on
file. Either -- one of them already is, the credit facility. I don't --
believe that was being filed when we left about an hour ago. It should
be on file by the end of the day if it isn't. And the other one we hope
to have filed either over the weekend or on Monday. That's the cross
licensing agreement. I'll tell you the real problem with putting it over
to December 5th. The problem with putting it over to December 5th is if
we intend to have an auction process, which is what we intended, and we
have fulsome marketing for a period of -- you know, how fulsome can it
be if we have to close by December 31st, and that's what I'm getting to.
York has advised us that it's a condition of closing that the closing
has to come by December 31st. I'm told that there are exigent reasons
for that. It's not just because they want to speed it up to jump
everybody else's opportunity to put in a competing bid, that they have
extrinsic reasons why that has to happen. And we
29
don't want to lose York. I know this Court and other
parties in the court have heard this before from purchasers. We want it
yesterday and we don't want -- we want the bid procedures to be as
stringent as possible, we want the bid protections to be as aggressive
as possible, otherwise we walk. I know you hear that and it's a matter
of chicken in a lot of cases, and the one that takes the risk really is
debtor who really wanted the deal. Maybe we're running into something
like that, too, but I don't think so. York has spent a lot of time and
money to get this deal and they've been clear from the beginning. Terms
have come and terms have gone, but one thing that's always been clear is
that they wanted a closing by the end of this year. And I just want to
point out something that is so rarely used, how we could save this deal,
and I'm not necessarily espousing it because I haven't checked with my
client. Of course, marketing -- marketing is an important issue and I
see that, you know, I said the magic word, and we do want to see a
possibility, that is the debtor-in-possession wants to see potentially
competing bids to either bid up York or to sell it to somebody else if
it need be and we'd have a better deal. That's -- THE COURT: And I
assume there's nothing stopping the marketing process from proceeding
even today. MR. SPECTOR: Yes, there is. THE COURT: Tell me.
30
MR. SPECTOR: Two things. Number one is we have
to make sure that people know what they're bidding on, and, number two,
we're in an agreed phase with York that until we beg a bid procedures
order we aren't to market the property. We're in a -- what do you call
that term -- UNIDENTIFIED ATTORNEY: No shop. MR. SPECTOR: -- a no shop
provision that until we get the bid procedures order we won't go out
shopping. So, as I was saying, we do think that marketing to others is
important, but I should point out it's not required under the Bankruptcy
Code. Under 363(b) and under Bankruptcy Rule 6004(d) -- 6004(f)(1), a
sale could be a public sale, which is the auction, which is the way we
usually do it in bankruptcy, or it could be a private sale. Now, we have
spent an awful lot of time and energy working out a deal with York. If
it so happens, and I'm not making this as a motion, Your Honor, because,
again, I haven't talked to my client, and they do want to see marketing,
but it's theoretically possible that we could come back on December 5th
and say, you know what, Judge, forget the bidding procedures order, we'd
like to turn this into a motion for sale under a private sale provision
under 6004(f)(1) and let's go with York and be done with it. That's a
possibility, too, without bid procedures. So, if you can do the greater,
why can't we do the lesser? That's my argument.
THE COURT: Mr. Levin
can't wait.
31
MR. LEVIN: I feel like I
have a lot of energy today, Your Honor, despite having a cold. THE
COURT: Okay. MR. LEVIN: Mr. McNutt stood at this lectern ten days ago
and said that they have been working on this since 2005. Now, I don't
know if that's early 2005 or late, but it's at least two years ago. And
now all of a sudden we're jammed into less than a six-week period from
something that started in October and was said to be an emergency then.
The emergency seems to have dissipated. There was a November 9 deadline.
And what the debtor-in-possession is asking here, Your Honor, is that
they launch on a marketing process on assets -- as Mr. Spector just
said, we need to identify what the assets are. Haven't been identified
yet. That's confidential. It requires a confidentiality agreement. That
means bidders are going to have to sign a confidentiality agreement.
They're all going to have to get up to speed and bid between
Thanksgiving and Christmas at a time when people who are possibly
interested in doing that are already rushing themselves to close
year-end deals. This is not realistic. Even if we were to approve it
today, that is what the process would be, and to close before year end,
yes, you might get a waiver of the ten days under 6004, maybe, but for
all practical purposes, we're going to need to have an auction and a
sale hearing before December 20 -- 20th, I think -- no, 21st,
32
which is the Friday before. Now, nobody is
coming to an auction on Monday, December 24th. We can be confident about
that. So, this just -- and the fact that they've been working on it for
this long, all of a sudden there's an emergency? It just disadvantages
the estate. It disadvantages the debtor-in-possession. It disadvantages
the creditors. It's not the right way to do this. A private sale might
be permissible when there's an adequate showing of what has gone into
producing the private sale, no showing. Maybe when the motion to approve
the sale gets filed we'll see something about that, but nothing now.
This is a rush to we don't know what at a time when it simply -- the
market will not accept it, will not assimilate it. This has got to be
heard on December 5th, and we've got to set an ordinary procedure to
have a proper auction at a time when participants in the auction process
will actually come to the table. THE COURT: Mr. Lewis. MR. LEWIS: Thank
you, Your Honor. Let me start kind of at the rear end of this, since Mr.
Levin has taken some of my thunder away from me. That's why he got up
first. I'm anxious for this estate to generate some money for its
creditors because we're one -- probably one of the two biggest
creditors, probably along with IBM. In a sense, we are the creditors.
There are a lot of smaller ones, and I don't want
33
to denigrate them, but if our claims are anywhere
near $40 million, which we hope to find out some day when we're able to
proceed in Utah, you know, we're the -- we are the creditors, and what
we would like out of this is an important thing, and we're not
indifferent to the estates getting some money, but that really leads to
the point, which is I don't know that if York walks I care, because I
don't know what else there is that's out there that's been tried or
might be tried and why the debtor is so determined to sell to York. All
those questions we raised in our brief, all of those things bear, I
think, on the question of whether that's even an issue, and, of course,
there is the open question whether York will adhere to the December 31st
deadline any more than they did to the November 9th deadline, which
generated the alleged emergency before. And, as I say, even if they do,
I'm not sure that I care. I might, but I don't know enough. And then I'm
also disturbed to hear talk about, well, we might just turn this into
some kind of other proceeding if we have it on the 5th, and I want to
say now I think we ought to set a proceeding and we ought to abide by
it, and if the debtor wants to change it to something else then let it
re-notice the proceeding, not turn something into something else,
because if the debtor tries to turn this into a private sale and I've
gotten notice of bidding procedures hearing and I haven't had a chance
to do discovery on the sale, as I said I
34
probably won't do discovery on the bidding procedures, then I've
been -- you know, I've basically been outflanked without a chance to
test this, and I think the parties need a reasonable opportunity to test
this, and in that sense I would certainly endorse what Mr. Levin has
said about setting this on a reasonable track. We're not talking about a
sale by the end of the year. It seems to me it's just not realistic, and
it's not fair to the creditors, and we don't know enough about what's
been going on between the debtor and the buyer and the debtor and other
potential parties and who has what interest in the outcome of this for
us to do any of that. So, I urge the Court to go ahead -- if the debtor
wants to set a bidding procedures hearing for the 5th, let's do that,
but that's all that's on for the 5th, and if the debtor wants to change
that into something else, let the debtor re-notice it, and then if we go
ahead on the 5th, let us set a hearing on an actual sale in a reasonable
amount of time, giving parties a chance to vet these assets that doesn't
include a big chunk of time in the biggest holiday season of the year.
Thank you. THE COURT: Thank you, Mr. Lewis. Mr. Spector. MR. SPECTOR: I
was just making a rhetorical flourish, making an argument. I wasn't
really saying I was going to switcheroo on December 5th. I don't -- I
may have made it too strongly. The point was the greater and the
35
lesser. Your Honor, Mr. McNutt rises. I think
you heard from him the last time. He'd like to speak to York's
particular concerns, if he may. THE COURT: Thank you. That's fine. Mr.
McNutt, good afternoon. (Mr. McNutt not speaking into microphone) MR.
McNUTT: Your Honor, good afternoon. Scott McNutt, McNutt Law Group, San
Francisco. Once or twice a year I have the pleasure of being in court
and having firms like Cravath and Morrison & Foerster explain that we're
railroading them in some meteoric trail and it's impossible for them to
keep up with our timetable. I take that for what it is. There is
obviously to me, but not to someone who is not familiar with this, a
great deal of urgency here. As everyone is aware, this debtor is under a
death sentence. After two or three years of active litigation in the
District Court in Utah, litigation against Novell and IBM, the Judge
ruled a -- issued a tentative decision that will result in a substantial
judgment being awarded against this debtor. Now, York is a number of
investment funds. It's very well established. It's very liked. One of
those funds likes to buy legacy software Companies. This is a legacy
software Company. Buried in this -- I don't want to use an unfriendly
term, but buried in all of this complexity of this multi-year
36
litigation, there is a little healthy legacy
software company called UNIX. We want to buy it. Now, for business
reasons, to put this into a fund in this year, we need to close it by
year end. It's just a simple business issue. And we'll walk away from
the transaction if we can't do that. We have increasing desires to walk
away from this transaction. This is a small transaction. It is a -- it
has some defined parameters. Now we find ourselves actively arguing with
the likes of Cravath, Morrison & Foerster and other lawyers that will --
that given the chance will turn this into a very complicated proceeding,
and a deal that maybe could have been done for a modest price is now
becoming a much higher price with no end in sight unless we get to that
point where we actually are able to buy the assets, and then we either
have them or not, we take our lumps or not, and we'll have realized the
value that we believe to be here. And from my own experience -- I've
worked on several of these transactions for York -- holding a company
like this together when it's in the throws of huge external problems is
very difficult, and the company itself has a hard time focusing on the
healthy little part of the business when it has these huge problems over
here. So, we'd like to come back on Tuesday. We know we've pressed the
Court's patience because it has been difficult to come to rest on some
of these documents because there are so many moving parts. Thank you,
Your Honor.
37
THE COURT: Thank you, Mr.
McNutt. No one has to worry about pressing my patience. I'm very
patient, and I understand -- you know, let me say this. The -- and I'll
hear from you still, Mr. Lewis, but I'll tell you what my thinking is.
Emergencies are the very nature of bankruptcy, and by their very nature
emergencies create a lot of inconvenience for parties and hurry-up and
people's schedules and -- are in upheaval often and they have to produce
a work product very quickly and drop everything else and come to court,
and there's often a fine line between inconvenience and real substantive
prejudice, and I think that the line really has been crossed here at
this point, where parties are not only being inconvenienced, but they're
being prejudiced, and mistakes happen and judges make mistakes when
there's -- when issues as complicated as these are forced. In fact I
would say very candidly that if we proceed too quickly I also think the
debtors are going to be prejudiced here because of the papers that I've
seen thus far, and I haven't seen the new papers and I haven't seen all
of them, but I just think that the debtors themselves and indeed
indirectly York are going to benefit if we proceed in a somewhat less
hasty fashion, and I am going to schedule this for December the 5th. I'm
going to give the parties an opportunity to finalize their positions, to
identify the assets.
38
I heard, for
example, that York is interested in buying a -- you know, a very small
operating copy, UNIX, but as I have read the papers thus far, York is
itself -- investing itself in a lot of these more complicated issues.
But we really have to sort that out I think further, and I just don't
think that it is realistic, reasonable or wise to proceed on Tuesday,
have people come back, when I know that we will be a little bit better
off than we are today as far as people understanding the nature of the
transcript, but not enough to really assist everyone, including me, in
arriving at an appropriate decision. So, I just think that -- we'll have
to see. I am not prejudging where we go after December 5th and what that
schedule might be depending upon what I hear on December 5th, but I just
think that we would all be making a huge mistake to proceed so quickly.
MR. McNUTT: Thank you, Your Honor. This case is peculiarly one where it
has to be gotten right the first time. THE COURT: I think that's
correct. Hopefully we -- we're not going to have time -- as one judge
once told me, trial judges are just supposed to make the decision and
let the appellate courts get it right, but we want to get it right the
first time. MR. McNUTT: I always like it when the appellate judges kill
the wounded, but -- THE COURT: Yes. Thank you, Mr. McNutt.
40
MR. SPECTOR: I just want to thank Your Honor for
accommodating us as much as you already have, and we understand and as
usual respect the Court's ruling and will abide by it. THE COURT: Thank
you. And -- now we do have I guess some filings to discuss. MR. LEVIN:
Your Honor, the dates and the deadlines. THE COURT: Yes. And I think
that probably the proposal that you've made with a November 30 filing
with your response to the bid procedures motion based upon the further
filings and reply on December the 4th by noon -- MR. LEVIN: We'll make
noon on both days, Your Honor. THE COURT: That's fine. MR. LEVIN: Okay.
And what about the filing of the motion and the other supporting papers?
THE COURT: Well, I think all -- let me ask Mr. Spector. What are we
realistically, very realistically, talking about? MR. LEVIN: And I have
one other issue after that, Your Honor. THE COURT: Thank you. MR.
SPECTOR: I missed what was the November 30th obligation. THE COURT:
November 30 would be the objectors' filings. MR. SPECTOR: Objecting to I
suppose the rest of the
41
documents --
THE COURT: That's right. MR. SPECTOR: We would like to file the sale
motion sometime between now and November 30th, and the proposed order
approving the sale would be a part of that. And we would also be filing
the remaining documents to the extent they weren't filed today in I
would say a reasonable -- today's the 16th -- I would have said a week
or the 23rd, but that's -- that's not a day. The 20 -- would the 27th be
a reasonable day to get that in? I'm looking to the people that do the
work. The 27th, is that enough? MR. LEVIN: I didn't -- what document?
MR. SPECTOR: Well, we're going to get the sale motion in, which is what
we addressed before, and all of the other documents that haven't already
been filed would be in by then. Actually, we may be able to get those
documents in now. MR. LEVIN: Your Honor, I don't mean to speak out of
school. Mr. Spector has represented to us that the sale motion is either
ready or almost ready, and he's asking for 11 days from now to file and
then giving us three days to respond to that. If they are in such a rush
as they've been describing, it should be ready now and should be filed
in the next day or two. THE COURT: Yes, I -- after all, they were
pushing for a hearing on Tuesday. Presumably --
42
MR. LEVIN: That's right. THE COURT: -- we were going
to have papers filed by Tuesday. MR. LEVIN: And if we're going to make
-- and if all of the things that we said were missing from bid
procedures motion are, in fact, contained in the sale motion, we're
agreeing to shorten time from now until December 5th, but not from
November 27th to December 5th. THE COURT: Yes, I -- MR. SPECTOR: I was
-- I had to talk to the people that's why it was catching me unawares. I
originally thought you were saying November 30th for our obligation to
get it in. -- THE COURT: Oh, no, no. MR. SPECTOR: And -- all right. So
we're talking now about getting the other -- the cross license -- MR.
LAMPERT: The significant documents that are outstanding I think that are
left are the -- UNIDENTIFIED ATTORNEY: Can you come up to the
microphone? THE COURT: Yes. MR. LAMPERT: Good afternoon, Your Honor. Dan
Lampert from Berger Singerman, the transactional all-night person. And
the significant documents that remain open are the cross license
agreement, the security agreement, the sale
42
motion and the sale order and the DIP loan agreement motion.
UNIDENTIFIED ATTORNEY: The cross license -- UNIDENTIFIED ATTORNEY: We
said that already. THE COURT: You are going to proceed with that
pursuant to Section 364 I assume? MR. SPECTOR: 364. We'll have a 363
motion -- 363, 365 slash motion and a 364 motion. THE COURT: Okay. MR.
SPECTOR: And those documents we can have in by -- MR. LAMPERT: Well,
from our side, we're -- we need to have them -- MR. SPECTOR: -- Tuesday.
THE COURT: Fine. Okay. MR. SPECTOR: A lot better than the 27th. THE
COURT: Yes. MR. LEWIS: Will that -- will that include schedules and
other -- THE COURT: That is my understanding. MR. LEWIS: -- critical
information? THE COURT: That's my understanding. Those are -- MR. LEVIN:
Is that also noon on the -- on Tuesday the 20th? THE COURT: Yes. I'm
going to make it at noon because there's a holiday coming, and you may
not be working
43
all weekend but at least
you can have an opportunity to be reviewing them all weekend. MR. LEVIN:
Or we may be -- I appreciate that, Your Honor. Thank you. The other open
item is the schedules and exhibits, and Mr. Spector said, and we have no
objection conceptually, that there should be a confidentiality
agreement. I don't want to be in a position where we haven't been able
to negotiate a confidentiality agreement for two weeks, and I think that
we need to have the understanding that lawyers in this court typically
have that these documents will remain confidential and the details of a
confidentiality agreement are not necessary in this circumstance, that
these documents will be kept with us and our clients and any other
advisors working on it, and that is the end of the matter, rather than
launching into a long and laborious negotiation over a confidentiality
agreement. But I would suggest, Your Honor, that as part of what they
file by next Tuesday, if bidders are going to be required to sign a
confidentiality agreement, that that proposed confidentiality agreement
be included with the bid procedures. THE COURT: I think that's fair, and
that should be done. Mr. McMahon, did you want to say anything? I mean,
my own view is that we do often operate, especially in exigent
circumstances such as this, with a confidentiality understanding and
perhaps the parties who receive the documents
44
would just at least keep a record of parties who
receive and have access to those documents. Mr. McMahon, did you want to
suggest something? MR. McMAHON: Your Honor, yes, just for clarification
purposes. I assume that we're talking about documents that are part and
parcel of the APA and the deal such that we would expect that the
debtors would be filing a motion to place whatever items need to placed
under seal and that the agreement which counsel just referenced on the
record would hold us over until such point as that motion is resolved by
the Court. THE COURT: Were we talking about asset purchase exhibits or
were we talking about underlying documents, due diligence type
documents? MR. O'NEILL: Your Honor, James O'Neill. I believe we're
talking about the schedules and exhibits to asset purchase agreement. I
mean, I -- my understanding was that there was a proposal that all the
parties present had agreed to maintain confidentiality with respect to
those documents. I -- we would not -- if they are confidential documents
they wouldn't be filing the schedules on the docket -- THE COURT: Right.
MR. O'NEILL: -- either. THE COURT: That makes sense. MR. McMAHON: That's
understood, Your Honor, but what -- let me just get to it. You wouldn't
be filing an
45
un-redacted version of the
schedules with the court, but to the extent that it's part and parcel of
the deal, Your Honor, the documents should be filed under seal and the
debtor should be filing a motion to lodge those documents with the court
under seal, with all parties in interest rights reserved with respect to
being heard on that matter. They're part of what the Court is
authorizing. It's not like they should be in an office of some law firm
after Your Honor considers them is my point. So, I have no problem with
proceeding on the agreement that Novell, IBM, other parties that they
debtors may agree to give the documents to, you know, hold those and
agree not to disseminate them pending Your Honor's ruling on the seal
motion, but the seal motion's got to get filed and the documents have to
be lodged with the court under seal for the purpose. THE COURT: Mr.
O'Neill? MR. O'NEILL: I just wouldn't want that process to hold us up,
Your Honor, and I wouldn't want objections to a seal motion to hold up
the process, so that's my -- that's my concern. THE COURT: And I'm not
going to allow -- what we'll do is you'll file your motion, which I'll
approve, and we'll have a hearing on any issues relating to the filing
under seal on the 5th as well, but that will at least move things
forward at this point. MR. O'NEILL: And in the meantime, all the parties
46
shall be -- will be bound by the
confidentiality -- THE COURT: That's right, and anyone else who comes
forward and is willing to be bound by confidentiality may also have
access to those documents. MR. McMAHON: Your Honor, thank you for the
clarification. THE COURT: Absolutely. Thank you, Mr. McMahon, for
helping me to explain it further. MR. McNUTT: Your Honor, this doesn't
particularly help my client, but I have not been before you before, so
I've got to put this right out front. This is a purchase and sale. It
concerns money. This is intellectual property, this -- and core to what
York will be buying is a precise language of the sales order. I assume
that that sales order will be aggressively challenged and that there'll
be a lot of time spent here with Your Honor seeing if the order can be
approved in the form York is going to require as a condition of this
deal. I just want to be honest with the Court. Usually these things are
subject to significant flexibility. In this situation that order --
because making clear that what we're buying is not tainted with other
disputes is particularly important, the exact verbiage is going to be
important. THE COURT: Is that going to be in the asset purchase
agreement, the precise language that you're concerned about? MR. McNUTT:
Well, the asset purchase agreement has
47
already been filed. It will be in the sales motion -- THE COURT: In the
sales motion, okay. MR. McNUTT: -- which I believe will be filed
Tuesday. MR. SPECTOR: We've committed to file it Tuesday. What we're
waiting on is the order with the exact language they want to have. THE
COURT: I see. MR. SPECTOR: That's why it hasn't been filed. We have the
motion. We don't have the order to go with it. THE COURT: Okay. Now I
understand. MR. McNUTT: I just want to be candid. That will be, in my
eyes, the issue, and everything else will follow that. As to schedules,
all that sounds very good. These sorts of schedules do change as you
approach closing. Everyone will have to be reasonable about disclosing
what may change and what its materiality is. That's -- thank you, Your
Honor. THE COURT: Thank you, Mr. McNutt. MR. LEVIN: Thank you for your
indulgence, Your Honor. As I said, there was one other matter, and that
was -- THE COURT: Yes. MR. LEVIN: Mr. Spector said that he was ready to
call witnesses, and I suggested earlier that we be given a list of those
witnesses. I would suggest Tuesday at noon would be an appropriate
deadline for that as well.
48
THE COURT:
Mr. Spector, would that present a problem? MR. SPECTOR: I can always do
that, but I'd rather see the objection so I know what it is I'm
fighting. So it makes more sense, I think, to wait till after their
objections are filed. Then I can tell you who I want to call to rebut
them. THE COURT: Well, I -- MR. LEVIN: We filed the objection, Your
Honor. It could only narrow. So whatever he was going to put on today,
that's what we'd like to know based on the objection that we filed. THE
COURT: That's fine, and what you -- yes. In other words, what testimony
you would be presenting in support of your motion -- MR. SPECTOR: I can
do that. THE COURT: -- with the understanding that you can always delete
witnesses who you don't think are necessary after you see what's filed
on the 30th, hopefully in discussion with the objecting parties. MR.
SPECTOR: I can do that. THE COURT: Is there anything further for us to
discuss? MR. LEWIS: What time, Your Honor, on the 5th? THE COURT: What
time did we schedule this? Let me
49
see.
I think -- 10:00 a.m. MR. LEWIS: Thank you, Your Honor. THE COURT: We'll
start at 10:00, and I will do -- I'll just do a very brief order setting
for the schedule so there's no confusion, and obviously, as I say at
every hearing, I'm available if the parties run into any difficulties or
need the Court's assistance or intervention. Mr. O'Neill. MR. O'NEILL:
Yes, Your Honor. Just to the extent that if -- I don't know whether any
of the other parties intend to call witnesses, but obviously if they get
to a point in the process where they do intend to call witnesses, if we
could just have the same courtesy of identification of witnesses, as
well, in sufficient time so that we can be aware of who's going to be
presented that would be very much appreciated. THE COURT: I think that's
a -- I think that's a -- MR. LEWIS: We're happy to do that, Your Honor.
THE COURT: Thank you, Mr. Lewis. MR. LEVIN: As are we, Your Honor. THE
COURT: All right, Mr. Levin. Thank you, sir. Anyone else? Mr. O'Neill.
MR. O'NEILL: I think that's -- I think that's it for today, Your Honor.
THE COURT: All right. And as I said, if you need me, I'm available. Just
-- we can even arrange a conference call if need be.
50
MR. O'NEILL: Thank you very much. THE COURT: Thank
you, everyone. UNIDENTIFIED ATTORNEY: Thank you very much, Your Honor.
UNIDENTIFIED ATTORNEY: Thank you, Your Honor. THE COURT: Good day and
good weekend. * * * * * C E R T I F I C A T I O N I, DENISE M.
O’DONNELL, court approved transcriber, certify that the foregoing is a
correct transcript from the official electronic sound recording of the
proceedings in the above-entitled matter, to the best of my ability.
/s/
Denise M. O’Donnell
DENISE M. O’DONNELL
Date: November 26, 2007
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