IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

IBM'S OBJECTION TO DEBTOR'S MOTION FOR AN ORDER (I) (A)
ESTABLISHING SALE AND BID PROCEDURES, (B) APPROVING FORM OF
ASSET PURCHASE AGREEMENT, AND (C) APPROVING THE FORM AND
MANNER OF NOTICE OF SALE; AND (II) APPROVING (A) SALE OF CERTAIN
ASSETS FREE AND CLEAR OF INTERESTS AND (B) ASSUMPTION AND
ASSIGNMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

International Business Machines Corporation ("IBM"), a creditor in this Chapter 11 case, objects to the "Motion for an Order (I) (A) Establishing Sale and Bid Procedures, (B) Approving Form of Asset Purchase Agreement, and (C) Approving the Form and Manner of Notice of Sale; and (II) Approving (A) Sale of Certain Assets Free and Clear of Interests and (B) Assumption and Assignment of Executory Contracts and Unexpired Leases," filed with this Court by the debtors and debtors in possession, The SCO Group, Inc. ("SCO Group") and SCO Operations, Inc. ("Operations", and, collectively, with SCO Group, the "Debtors"), on February 5, 2009 (the "Motion").

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Preliminary Statement¹

1. The Motion and attached documents do not answer basic questions about the Debtors' proposed asset sale: What is the urgency to approve the terms of the asset sale, particularly if the Debtors are not presently entertaining any proposed bids on the assets? What products and services are included in the assets proposed to be sold? is the proposed procedure the right one? How will the bidder protections be applied? The burden should not be on creditors or this Court to search for the facts and justifications for a sale. Rather, the Debtors must set forth this and other required information before even bid procedures may be approved.

2. The Motion (i) lacks a justification for approving the proposed asset sale now, (ii) lacks adequate information describing the assets to be sold or the proposed sale process; (iii) lacks adequate information about the proposed method for choosing a "stalking horse" bidder; and (iv) lacks adequate information about the proposed bidding procedures. The Motion, form of asset purchase agreement, proposed bidding procedures and sale notice are all deficient in themselves and should not be approved. (See Section A below.) The proposed bidder protections are inadequately described and misleading. (See Section B below.) Finally, the Debtors' proposed sale notice fails to identify the products and services comprising the assets being sold, and it fails to provide an accurate description of the terms and conditions of the proposed asset sale. (See Section C below.)

3. For these reasons, as explained more fully below, this Court should deny the Motion.

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The Debtors' Proposed Sale of the Assets

4. The Debtors filed with the Court both the Amended Joint Plan of Reorganization (the "Plan") [Docket No. 654] and the related Disclosure Statement (the "Disclosure Statement") [Docket No. 655] on January 8, 2009.

5. The Debtors filed the Motion "in furtherance of the Plan" with the Court on February 5, 2009, seeking, among other things, approval of the proposed (free and clear) sale by auction (the "Asset Sale") of (i) some or all of the Debtors' assets relating to its "Mobility Products" and (ii) its "OpenServer Business" (collectively with the Mobility Products, the "Assets"). (Mot. Prelim. Stmt., ¶ 1.) The Motion notes that the "Retained Litigation", as defined in the Motion, would be retained by reorganized SCO Group for the benefit of the Debtors' creditors and equity security holders and is expressly excluded from the Assets proposed to be sold. (Mot. ¶ 4.)

6. The Motion also seeks approval of (i) the form of an asset purchase agreement (the "APA") attached to the Motion proposed to be used for the Asset Sale (if no "stalking horse" bidder is selected), (ii) the form and manner of notice of the Asset Sale (the "Sale Notice") attached to the Motion and (iii) the bidding procedures proposed to govern the Asset Sale (the "Bidding Procedures") attached to the Motion, which provide, among other things, a potential cash break-up fee and expense reimbursement if the Debtors designate a "stalking horse" bidder who is not the successful bidder at the auction or if any of the Assets are purchased by anyone other than the designated "stalking horse" bidder (whether i the auction or otherwise). (Mot. ¶¶ 6, 9.)

7. The Motion proposes the following minimum reserve prices:

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Asset			Minimum Bid	Subtotal	Total
(a)	Mobility Products and OpenServer Business (combined)			$6,000,000	$6,000,000
(b)	Mobility Products (aggregate)			$2,000,000
		FCmobilelife (or Me Inc. mobile)	$1,000,000
		Hipcheck	$500,000
		Shout Postcard	$250,000
		Shout Marketing	$250,000
		Cloud Server	$1,000,000
	Mobility Products (separately)		$3,000,000
(c)	OpenServer Business		$5,000,000
Mobility Products (aggregate) and OpenServer Business					$7,000,000
Mobility Products (separately) and OpenServer Business					$8,000,000

(Mot. ¶ 6, APA at Ex. A-2.)

8. The Motion further seeks authority for the Debtors to select a "stalking horse" bidder (the "Stalking Horse Bidder"), which would be a potential purchaser of the Assets that:

(a) commits to the purchase prior to the [a]uction, so that its stalking horse bid can be communicated to other potential bidders, (b) agrees to pay at least the minimum (reserve) price for the Assets, (c) posts a non-refundable deposit in the amount of at least 10% of the proposed purchase price for the Assets, and (d) executes a definitive agreement for the purchase of the Assets that does not have a due diligence or financing contingency ...

(Mot. ¶ 7.) If the entity selected as the Stalking Horse Bidder is not the successful bidder at the auction or if any of the transferred assets in the sale are purchased by any party other than the designated Stalking Horse Bidder (whether in the auction or otherwise), then the Stalking Horse Bidder would be entitled to receive from the Debtors a cash break-up fee in an amount

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of up to 3% of the purchase price under the APA for the Asset Sale to such other purchaser (the "Breakup Fee") and reimbursement of up to $30,000 of the fees and expenses incurred or to be incurred by the Stalking Horse Bidder in connection with the consummation of the purchase of the Assets (the "Expense Reimbursement"). (Mot. ¶¶ 7,8.) Further, the proposed Bidding Procedures provide that if there is a Stalking Horse Bidder, then at auction the initial minimum overbid must be at least $25,000 plus the sum of the Breakup Fee and maximum Expense Reimbursement. (Mot. ¶ 9.)

* * *

9. As more fully described below, the Motion lacks sufficient information or justification to approve the proposed Asset Sale; the proposed bidder protections are inadequately described and misleading and the proposed Sale Notice fails to identify properly the products and services constituting the Assets. Therefore, this Court should not approve the Bidding Procedures, the form of the APA or the Sale Notice.

Argument

THE MOTION, FORM OF APA, BIDDING PROCEDURES AND PROPOSED SALE
NOTICE ARE DEFICIENT AND SHOULD NOT BE APPROVED.

A. The Motion Lacks Sufficient Information or Justification to Approve the Asset Sale.

10. Where a debtor in possession seeks approval of a sale or disposition of property of the estate outside of the ordinary course of business, "there must be some articulated business justification" before the court may order such disposition under section 363(b) of the Bankruptcy Code. In re Lionel Corp, 722 F.2d 1063, 1070 (2d Cir. 1983); In re Del. & Hudson Ry. Co, 124 B.R. 169, 176 (D. Del 1991); In Re Montgomery Ward Holding Corp, 242 B.R. 147, 153 (Bankr. D. Del. 1999). The court must scrutinize a sale of a

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substantial portion of a debtor's assets under section 363 of the Bankruptcy Code closely because of the danger that such a sale might deprive parties of substantial rights inherent in the chapter 11 plan confirmation process. 3 Alan N. Resnick & Henry J. Sommer, Collier on Bankruptcy, ¶ 363.02[2] (15th rev. ed. 2008).

11. In examining a sale under section 363 of the Bankruptcy Code, the court should consider "all salient factors pertaining to the proceeding", including "the likelihood that a plan of reorganization will be proposed and confirmed in the near future, the effect of the proposed disposition on future plans of reorganization ..." and "whether the asset is increasing or decreasing in value." In re Lionel Corp, 722 F.2d at 1071; see also In Re Montgomery Ward Holding Corp, 242 B.R. at 153-54 (citing In re Lionel Corp, 722 F.2d at 1071).

1. The Motion Lacks Any Justification for Its Timing.

12. The Debtors have proposed a Plan that provides for the Asset Sale as one of the means of implementing the Plan, to generate cash with which to pay some creditors' claims. The proposed Disclosure Statement summarizes the Plan's terms as follows:

"(i) sale by public auction of the Mobility [Products] and OpenServer [Business], with proceeds of such sale being used to pay Allowed Claims on [the date the Plan becomes effective]; and/or in addition, if the sale does not generate an amount deemed sufficient by the Debtors, in their sole discretion, to pay all Allowed Claims other than the Allowed Claims subject of the [Retained] Litigation in full ..., (ii) the Debtors will pursue a go-forward business model ..."

(Disclosure Statement at 21 (emphasis added); Plan at 11.) Proceeding with the Asset Sale now would not be a means of implementing the Plan but instead would be a means of short-circuiting the Plan.

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13. The Motion's sole stated reason in support of conducting a sale process now is, "the Debtors' revenues have been declining over the past several years and the Debtors may not have the liquidity to sustain their operations for a prolonged period of time", along with this conclusory statement: "[t]he Debtors have determined, in their reasonable business judgment, that [an auction of the Assets] at this time is warranted and necessary and seek approval of the [Asset Sale] as a means for implementing the Plan." (Mot. ¶¶ 1, 11.) The Motion proposes procedures that would result in a sale by April 30, 2009. The Debtors' Plan process proposes a confirmation hearing before then. The Motion fails to explain the need for the Asset Sale before confirmation. If the Plan is not confirmed, then there is reason to question whether the Asset Sale in the manner proposed in the Plan and the Motion should proceed at all. If it should, then the Motion could be revisited then.

14. The Motion does not suggest that the Debtors have received any bids for the Assets or that any prospective purchaser has expressed an interest in purchasing the Assets. The Motion does not describe what, if any, potential bidders the Debtors have contacted or whether there have been any indications of interest in the Assets that would make bidder protections such as a break-up necessary. Nor does the Motion provide any evidence that there is a good business opportunity presently available, as long as the Debtors act quickly. Thus, independent of the proposed Asset Sale's overlap with the Plan process, the Motion suggests no apparent reason for pursuing an Asset Sale process now.

15. Finally, the Motion does not assert that the Debtors have had declining revenues and limited liquidity. To the contrary, the Disclosure Statement and the Plan express high expectations from the Mobility Products' future revenues and extol the virtues of

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the Debtors' going forward business model. Based on the information provided in the Disclosure Statement, the Plan, and the Motion, and Debtors describe the Assets as expected to generate value going forward, which is at odds with the haste with which the Debtors are seeking to divest themselves of the Assets. For these reasons, the Motion provides nothing to suggest that the Asset Sale should proceed now.

2. The Motion Lacks Adequate Information About the Assets To Be Sold and the Process for Selling Them.

16. The Motion and the APA do not adequately identify the products and services that comprise the Assets. Key details and provisions of the Assets and of the Plan described in the Motion and the APA are inconsistent with the Plan and Disclosure Statement themselves. For example, the APA implies that the Mobility Products are owned by a non-debtor subsidiary or an affiliate of the Debtors, identifying Mobility Products in the following way:

"Me Inc. (or Mobility) Products" means the source and object code for the (i)Me Inc. Platform, (ii) the Me Inc. Mobile Server, (iii) the Me Inc. Client Framework, (iv) Me Inc. Shout, (v) Me Inc MI4 time management, calendaring, and task management solution, (vi) Shout Hosted Platform, (vii) Shout Postcard, and [sic] (viii) Vote/Shoutback, (ix) Grassroots, (x) Order Entry, (xi) SCO Mobile Server, (xii) SCO Mobile Client Framework, (xiii) Edgeclick and (xiv) Edgeclick SDK, and all related Technology, Intellectual Property and Products of Sellers, as of the Closing, but excluding all Technology, Intellectual Property and Products relating to the OpenServer Business.

(APA at § 1.1.) In addition, the Motion says the "Mobility Products have been developed by Me, Inc., a wholly-owned subsidiary of The SCO Group, Inc." (Mot. at 1 n.2.) However, the Disclosure Statement and the Plan say that these assets are actually owned by the Debtors. In addition, the APA contemplates that SCO Global, Inc., a non-debtor subsidiary

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of the Debtors, will act as a potential signatory on behalf of the sellers, without explaining in what manner or to what extent SCO Global, Inc. would be involved in the Asset Sale.

17. The description of Hipcheck is similarly confusing. The APA defines "OpenServer" as follows:

"OpenServer" means all assets and business of Sellers, the Subsidiaries and the Sellers' Affiliates, relating to the design, manufacture, marketing, distribution, sale and related operations and functions of Operating System Products (other than the Unix operating system), the Layered Operating System Products and Hipcheck, and excluding the Me Inc. Products and Excluded Assets.

(APA at § 1.1, (emphasis added).) However, the Disclosure Statement, the Plan, the Motion and the APA itself (under Exhibits A-1 and A-2 which set forth a list of the Assets) all describe Hipcheck as a component part of the Mobility Products.

18. The Motion also does not describe the process the Debtors intend to follow to market the Assets, whether its financial advisor will participate in the process and, if so, how and to what extent. The full extent of the marketing procedures described in the Motion are set forth as follows: the Debtors shall provide notice of the Bidding Procedures and auction to "... (vi) all persons or entities known to the Debtors that have asserted an interest in all or any portion of the Assets; and (vii) all potential bidders known to the Debtors"; and:

[w]ithin five business days after the entry of the Bid Procedures Order, or as soon thereafter as is practicable, the Debtors or their authorized agent shall cause to be published a notice, substantially in the form of the Sale Notice, in the national editions of the Wall Street Journal and/or such other publications as the Debtors and their advisors determine will promote the marketing and sale of the Assets to other interested parties whose identities are unknown to the Debtors.

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(Mot. ¶ 16.) Because the APA contemplates that the Asset Sale would be consummated by April 30, 2009, a mere 64 days after the hearing on the Motion, the Debtors should have already established and the Motion should describe a thorough and detailed plan to market the Assets and solicit and evaluate potential bids and bidders. (See APA at §4.1.) Newspaper notices will not likely be sufficient to generate meaningful participation in the auction, especially where there is no evidence that any potential bidders have indicated any interest in the Assets.

19. The Motion lacks any meaningful description of the due diligence process for potential bidders. The Bidding Procedures do not provide any additional detail or discussion of the proposed due diligence process, providing only that the Debtors shall "[a]ssist Potential Bidders in concluding their respective due diligence investigations ... and that the Debtors will "coordinate the efforts of Potential Bidders in conducting their respective due diligence investigations regarding the [Assets]." (B.P. at 1, 3.) Neither of these statements describe anything approximating a carefully considered plan for due diligence procedures that would allow prospective purchasers to evaluate the Assets swiftly and efficiently and participate in the Asset Sale in accordance with the schedule the Debtors propose. The due diligence process is of special importance here, as prospective purchasers will have the opportunity to select from a menu of assets. Consequently, if there are any prospective purchasers, the Debtors may need to provide access to confidential information relating to the Assets in a customized fashion organized individually for each prospective purchaser based on the Assets in which such prospective purchaser has indicated an interest. Further, because of disputes over rights to certain intellectual property that is at the heart of the Retained Litigation, the Debtors must take care to maintain confidentiality of property

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rights that are the subject of any such pending claims. The Motion provides for none of these procedures.

20. Without a clear and consistent description of the Assets and the sale process, creditors and the Court cannot evaluate how the Asset Sale relates to the Debtors' business as a whole or how it may affect the Debtors' reorganization. They cannot evaluate whether the proposed sale is a sound exercise of business judgment and complies with the other requirements of section 363. Therefore, they cannot evaluate whether pursuing a bid process is a wasteful diversion. Further, because the Assets' description is inadequate, potential bidders will be left in the dark about what property they are bidding for and may be reluctant to bid. Similarly, the deficiencies and inaccuracies in the APA, including the ambiguous description of whether equity interests in any of SCO Group's subsidiaries will be deemed excluded assets or will constitute a portion of the Assets to be purchased², will leave any potential purchaser of the Assets uncertain about its ownership. The Motion should not be approved without resolution of these matters.

3. The Motion Lacks Information About the Criteria for Selecting a "Stalking Horse" Bidder.

21. The Motion does not describe the criteria the Debtors will use to select a Stalking Horse Bidder. The Motion also does not describe whether a Stalking Horse

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Bidder must bid for all the Assets or may bid for individual assets constituting less than all the Assets. The Motion provides that a Stalking Horse Bidder "would be a potential purchaser of the Assets that (a) commits to the purchase prior to the Auction, so that its stalking horse bid can be communicated to other potential bidders ... ." (Mot. ¶ 7, (emphasis added).) Assets are defined in the Motion as "(i) some or all of the Debtors' assets relating to its mobility products ('Mobility Products'); and (ii) its 'OpenServer' business ('OpenServer Business') ...." Strict application of this definition of Assets to the standard described in the Motion for selecting a Stalking Horse Bidder would result in a requirement that a prospective Stalking Horse Bidder be a potential purchaser of, at a minimum, the OpenServer Business and at least some of the assets constituting the Mobility Products. However, the APA contemplates that there may be more than one Stalking Horse Bidder, stating that the stalking horse exhibit "will be appended to those [APA]'s submitted by prospective Purchaser(s) who are accorded by th3e Debtors Stalking Horse status pursuant to the Sale Motion and the Bid Procedures ...." (APA at Ex. "I", ¶ 2.) Further, the Bidding Procedures also appear to contemplate multiple Stalking Horse Bidders, providing that "the Debtors shall designate any Stalking Horse Bid(s) and file a notice of such designation(s) with the [Court] no later than 24 hours prior to the commencement of the Auction." (B.P. at 3.) The Motion should not be approved without additional detail and clarification of the basis for selection of a Stalking Horse Bidder, including whether there is a possibility that there may be more than one Stalking Horse Bidder.

4. The Motion Lacks Adequate Information About the Proposed Bidding Procedures.

22. The Motion does not provide any basis on which creditors and the Court can evaluate the Bidding Procedures. Moreover, the proposed procedures contemplate

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that "[t]he Debtors may modify the bid procedures set forth in the proposed order at any time prior to or during the Auction if the Debtors determine, in their judgment, that such modifications will better promote the goals of the auction process and are in the best interest of the bankruptcy estates and the creditors thereof ...." (Mot. ¶ 5 n. 5; see also, B.P. at 5.) The Debtors effectively seek to reserve unfettered discretion to modify the Bidding Procedures. They do not even attempt to provide information about what will inform their "judgment" or any limitations or qualifications on exercising such judgment.

23. The Motion asserts, "The Debtors have determined that the [Asset Sale] will enable them to obtain the highest and best offer for the Assets (thereby maximizing the value of their estates) and is in the best interests of the Debtors, their estates, creditors and holders of equity interests." (Mot. ¶ 15.) The Bankruptcy Code, however, leaves that determination to this Court, not to the Debtors. The Motion provides no support for the claim that the Bidding Procedures will attract prospective purchasers and produce the highest and best offer. To the contrary, the Motion's aggressive timeframe and the apparent lack of any prospective bidders, of any marketing process, of any specific due diligence procedures and of any basis on which to select one or more Stalking Horse Bidders may chase away bidders or hasten their exit from the process. Without some meaningful indication that the Bidding Procedures will produce bidders and the highest and best offer, there is no basis upon which this Court should grant the Motion and authorize an auction.

B. The Motion Lacks Adequate Information in Support of the Bidder Protections.

24. To obtain a bidding procedures order and approval of bidder protections such as a break-up fee and expense reimbursement, the requesting party must show that such protections are "necessary to preserve the value of the estate". In re O'Brien

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Envir. Energy, Inc., 181 F.3d 527, 535-37 (3d Cir. 1999); In re Integrated Res., Inc., 147 B.R. 650, 657 (S.D.N.Y. 1992); In re SpecialtyChem Prods. Corp., 372 B.R. 434, 439-40 (E.D. Wis. 2007).

25. Where the debtors in possession seek approval of bidding procedures that include a break-up fee and expense reimbursement, courts should "highly scrutinize" any such fees. In re Hupp Indus., Inc., 140 B.R. 191, 195 (Bankr. N.D. Ohio 1992); see also In re Integrated Res., Inc., 135 B.R. 746, 750-51 (Bankr. S.D.N.Y. 1992). Therefore, approval of bidder protections as part of a proposed section 363 sale should be denied if the debtors in possession provide "insufficient information upon which to evaluate the merits of the proposed sale". In re Hupp, 140 B.R. at 195; In re Twenver, Inc., 149 B.R. 954, 956 (Bankr. D. Colo. 1992).

26. The amount of a break-up fee and expense reimbursement must constitute a fair and reasonable percentage of the proposed purchase price and must not be so substantial as to produce a chilling effect on other potential bidders. See, e.g., In re O'Brien, 181 F.3d at 534; In re Integrated Res., Inc., 147 B.R. at 657; In re Hupp, 140 B.R. at 194. In determining what is reasonable, courts will generally approve fees and expenses "limited to one to four percent of the purchase price", but are reluctant to approve anything higher absent extraordinary circumstances. In re Tama Beef Packing, Inc., 321 B.R. 496, 498 (8th Cir. B.A.P. 2005).

1. The Motion Does Not Adequately Describe the Proposed Method of Application of the Proposed Bidder Protections and Fees.

27. The Motion provides inconsistent descriptions of the proposed bidder protections, including the Breakup Fee and Expense Reimbursement, and fails to answer

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critical questions relating to contingencies flowing from the bidder protections that could threaten the integrity of the auction process.

28. The Motion does not describe the treatment of competing bids for non-identical packages of less than all of the Assets and how and to what extent such competing bids may trigger a payment of the Breakup Fee and Expense Reimbursement to a Stalking Horse Bidder. The Motion says that the Breakup Fee and Expense Reimbursement will be payable "if either (a) a Stalking Horse Bidder is not the Successful Bidder or (b) any of the Assets are transferred by Debtors to any party other than a Stalking Horse Bidder (whether pursuant to the [Asset Sale] or otherwise) ...." (Mot ¶ 8, (emphasis added).) The description does not say whether the transfer of Assets triggering the payment obligations is limited to only those transfers that involve an overlap of some or all of the specific assets that are the subject of the Stalking Horse Bidder's proposed bid.

Furthermore, the Bidding Procedures provide that if there is a Stalking Horse Bidder, then at the auction the initial overbid must be at least $25,000 plus the sum of the Breakup Fee and Expense Reimbursement.³ (B.P. at 4.) As drafted, the Motion and the Bidding Procedures provide no information to describe how the bidder protections (including the initial overbid calculation) will operate if a competing bidder bids for less than all of the assets that are the subject of a bid from a Stalking Horse Bidder, i.e., whether such competing bidder will be required to comply with an initial overbid amount that includes the full Breakup Fee or whether the applicable Breakup Fee in such instance will be determined on

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the basis of the proportional value assigned by the Stalking Horse Bidder for each asset it proposes to purchase. The Bidding Procedures say only that "[t]he Debtors also retain discretion with respect to how to conduct the Auction of Bids are received in differing packages of [Assets]." (B.P. at 4.) Quite simply, the Motion provides the creditors, this Court and any potential competing bidders with no guidance on the process to be followed for the application of bidder protections to competing bids for non-identical portions of the Assets.

2. The Proposed Bidder Protections and Fees Are Unreasonable.

30. The Motion is inconsistent as to the calculation of any "Breakup Fee". At one point, the Motion says the "Breakup Fee" is up to 3% of the purchase price under the APA for the Asset Sale to another purchaser. (Mot. at ¶ 8 (emphasis added).) At another point, the Motion says "the maximum amounts payable by the Debtors as a result of the [bidder protections] is 3% of the purchase price offered by a Stalking Horse Bidder as Breakup Fee plus $30,000 as Expense Reimbursement ...." (Mot. at ¶ 26 (emphasis added).) The Motion should not be approved without reconciliation of this conflict.

31. To the extent that the Motion reveals the basis for, and the proposed application of, the bidder protections including the Breakup Fee and Expense Reimbursement, there is a risk in some circumstances that bidder protections will exceed acceptable levels. For example, if a Stalking Horse Bidder bid solely on "Shout Postcard" or "Shout Marketing", each of which have a $250,000 minimum reserve price, the proposed Breakup Fee of 3% would amount to $7,500. The Expense Reimbursement of up to $30,000 would amount to an additional 12% of the total sale price. Together, they would total 15% of

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the sale price, well above what is reasonable, and would likely have a chilling effect on competing bids.

C. The Proposed Sale Notice Does Not Adequately Describe the Assets To Be Sold or the Proposed Sale Process.

32. Federal Rule of Bankruptcy Procedure 2002(c) requires the trustee or debtor in possession to give notice of a proposed sale. Although the Rule provides that the notice is sufficient if it generally describes the property to be sold, the description must describe it so that one can reasonably determine what is to be sold. 10 Alan N. Resnick & Henry J. Sommer, Collier on Bankruptcy, ¶ 6004.03[2] (15th rev. ed. 2008); see also In re Lowe, 169 B.R. 436, 440 (Bankr. E.D. Okla. 1994) (notice is not inadequate if a simple inquiry would reveal defect). The Rule also requires an accurate description of the terms and conditions of the sale, including price. See In re Ryker, 301 B.R. 156, 167-69 (D.N.J. 2003). Failure to satisfy either of these requirements will justify invalidating any sale conducted under the defective notice. See Wintz v. Am. Freightways, Inc. (In re Wintz Cos.), 219 F.3d 807, 813 (8th Cir. 2000); In re Ryker, 301 B.R. at 167-69; In re American Freight Sys., Inc., 126 B.R. 800, 803-05 (D. Kan. 1991).

33. The proposed Sale Notice reflects the Motion's lack of information about the proposed sale process and the Assets proposed to be sold. As described above, the description of the assets to be sold is so ambiguous and uncertain that the inadequacy cannot be cured by a simple inquiry. Additionally, the Sale Notice, by incorporating the terms of the APA and the Bidding Procedures, fails to identify properly and adequately whether each of the Assets proposed to be sold are owned by the Debtors or by their non-debtor subsidiaries and further fails to provide adequate information as to when and to what extent equity interests in subsidiaries of the Debtors may be included in the transferred assets. The

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inadequate notice will defeat a fair auction and prevent creditors and other parties in interest from protecting their interests during the sale process.

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Conclusion

For the foregoing reasons, IBM respectfully requests that this Court deny the Motion as premature and without adequate basis. If this Court determines to grant the Motion, however, it should require SCO to revise the APA, the Bidding Procedures and the Sale Notice to provide: (i) adequate information about the matters set forth above and (ii) practicable solutions to address the issues highlighted above.

Dated: February 18, 2009

POTTER ANDERSON & CORROON LLP
By: (signature)
Laurie Selber Silverstein (No. 2396)
Gabriel R. MacConnaill (No. 4734)
[address]
[phone]
[fax]

- and -

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

Of Counsel:

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

Attorneys for Creditor International Business Machines Corporation

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1	References to SCO's Motion are given as "Mot. ¶ __". References to SCO's proposed bidding procedures are given as "B.P. at __". References to the Debtors' form of asset purchase agreement are given as "APA at § __".
2	Exhibits A-1 and A-2 to the APA, which set forth the available Assets for sale, state that the transferred assets include, with respect to each of the OpenServer Business and the Mobility Products, "the [e]quity [i]nterests owned by SCO Group or any of the [s]ubsidiaries in and to SCO Operations and the [s]ubsidiaries involved in [the OpenServer Business or the Mobility Products, as applicable] ..." In addition to being facially inconsistent with the description of "Excluded Assets" provided in Section 2.3(f) of the APA (even after taking into account Section 2.6 of the APA which provides that the equity interests in foreign Subsidiaries will be transferred to the purchaser), Exhibits A-1 and A-2 to the APA suggest that SCO Operations would be sold as part of the Asset Sale to the extent it is involved in the OpenServer Business or the Mobility Products. Consequently, if there are two separate bidders, one if which purchases the OpenServer Business and one of which purchases the Mobility Products, it is possible that both may have a claim to the same equity interests.
3	Notably, the "Initial Overbid and Subsequent Bidding Increments" section of the summary of key provisions of the Bidding Procedures set forth in the Motion at ¶ 9 provides that the initial overbid requirement applies only to a "competing bid for the Assets that are subject to the [Stalking Horse Bidder's bid] ..." The Bidding Procedures do not include such a qualification.