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Canopy Files Motion to Dismiss Yarro From Board of Canopy
Saturday, February 19 2005 @ 02:10 PM EST

Here's Canopy Group and the Noordas' (the current Canopy management, as in Mr. Mustard) Motion to Remove Ralph J. Yarro III as Director and their Memorandum in Support.

Yarro has already been terminated for cause as Canopy's President and Chief Executive Officer, although he disputes the legality of the action, but this motion is to remove him from the Board of Directors. Because of Ray Noorda's health issues, there is a question as to whether he can act as a Director, and there is also an allegation that Yarro took advantage of Mr. Noorda's trust and exercised undue influence over to Noordas to get them to agree to things like the Equity Plan, and so I gather Canopy has decided to deal with all that by trying to remove Mr. Yarro by means of this motion.

The alternative, to try to do it by means of a corporate action, like on December 17th, would likely only result in Yarro litigating the action anyway, so it makes sense to just bring the motion, and let the Court decide, under its authority under the Utah Revised Business Corporation Act, Utah Code Ann. 16-10a-809. Statutes come into play when the corporate players can't get matters resolved among themselves. The court would in the end be drawn into it, in all likelihood anyway, due to questions about Mr. Noorda's mental capacity. There is another method in the bylaws, I believe, for choosing a new Director in the event of incapacity, but I wouldn't think the Canopy side wishes to follow that procedure, and incapacity has yet to be proven, and there may well be issues about the bylaws, for all I know. It's a mighty complex story, and we've just begun. The poor judge. It's going to be, for him, like trying to untie a knot in a shoe lace. You look at it and think, where do I begin?

The standard will be what is in the best interests of Canopy. Mr. Yarro will present his record, highlighting any successes he can claim; the opposition lists here what they claim is a record of fraud, self-dealing and wrongful self-enrichment, "gross abuses" of his position as a director, wasteful transactions, and "improper and dishonest conduct" to the detriment of the company and the majority shareholder, the Noorda Family Trust. Yarro is also accused of improperly acquiring an option by which he "may allegedly acquire forty percent of the company's non-voting shares." The memo in support alleges that in between 1999 and 2004, "Yarro took a total of at least $19,535,602 pursuant to the Incentive Plan and exercises of resale rights purportedly acquired pursuant to the Equity Plan. This amount does not include the value of options and stock improperly acquired by Yarro, generous amounts paid to Yarro as base compensation and annual bonuses, or compensation received by Yarro directly from Portfolio Companies."

The allegations are similar to those found in the original complaint, but highlight Mr. Yarro's role without the additional allegations against Darcy Mott and Brent Christensen, although they are mentioned in passing as aiding and abetting. The document goes on to say that the figure also does not include "excessive and wasteful" compensation paid to other Canopy employees.

You can get a glimpse of just how much money Yarro received from one portfolio company, SCO Group, in the figures in this earlier Groklaw article. In that article, a bio for Yarro listed approximately 20 companies where Yarro was Chairman of the Board at one time.

The motion mentions that there is an evidenciary hearing on March 8, so unless the court changes the date, I hope some of you can attend on that day. It would be held in Provo, at the Fourth District Court, 125 North 100 West, Provo UT 84601, 801-429-1000. It's always wise to call the court first, though, as there are often last-minute changes in scheduling. The motion also gives us more news:

"Concurrentlly with the filing of this Motion, Plaintiffs are filing a Motion requesting the Court to consolidate this action with the Yarro Action. Pursuant to Rule 42 of the Utah Rules of Civil Procedure, the Motion to Consolidate has been filed in the earlier-filed Yarro Action. An evidentiary hearing has been set in the Yarro Action commencing on March 8, 2005, to consider the Motion for Preliminary Injunction filed by Ralph J. Yarro, Darcy G. Mott, and Brent D. Christensen in that case. Canopy and the Noordas respectfully request that the Court set this Motion for an evidentiary hearing to be held concurrently with the evidenciary hearing presently scheduled for March 8-11, 2005, in the Yarro Action."

This means they are asking that both litigations be merged into one, which actually makes a lot of sense, since they are pretty obviously almost mirror images of the other, as far as facts and parties. However, it's up to the judge. We have the other filings mentioned, and I'll get them up on Groklaw as fast as I can.

We also have an important SCO v. Novell hearing too on the 8th, at 3 PM before Judge Kimball, so if any of you were planning to attend that one, please stick with those plans, and let us know what happens there. I'm thinking that if everyone planning to attend either hearing could let me know in advance, it would help me ensure we are covered for both. Thanks.


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