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To read comments to this article, go here
Transcript of Bankruptcy Hearing Feb. 5, 2008
Friday, February 22 2008 @ 04:07 PM EST

Here's the transcript [PDF] of the February 5th hearing before Judge Gross in the SCO bankruptcy. It's the one we thought would be the boring one, but it turned out not to be so dry after all.

First, the hearing was about extending the scope of the Tanner retention. It was not formally opposed, but we find out from the transcript that in fact there were "informal comments" from the US Trustee's Office, which resulted in some changes. Upon that, the judge signed the order. The second issue was the one about extending the exclusivity time period to file a reorganization plan. Naturally, SCO's attorney argued that they'd like to know how the Utah court rules in SCO v. Novell so as to take that into account in any reorganization plan. That has turned out not to be relevant to their plans at all, as they've in the interim filed a plan that isn't dependent on what Utah does, but the attorney does tell the court that they were working on a plan and hoped to file it soon.

Next, SCO's attorney addresses the objections regarding math in SCO's monthly operations reports, which they say they take seriously and will fix, if investigation shows the need. The December report was not late, as it turns out there was an extension granted to SCO by the US Trustee's Office, because of SCO needing to file its 10K with the SEC. And that is when it gets interesting.

At that point, the floor was given to the objector pro se, Al Petrofsky:

MR. PETROFSKY: First of all, it's the Debtors burden to show probable success of the organization. And what they concentrate on in the motion and in the argument this morning is showing a low probability of success if they file a plan now. That's not.... They need to show that there is a probability of success in May or July. And to make that determination, we need to know that there's going to be something left in May or July. And the way to do that is we need to see how things are going, and we need to have accurate monthly reports. Now I appreciate that they, they acknowledge that there, they at least acknowledge that there could be problems with these reports, and that they are endeavoring to fix them. But they refused to continue this hearing until those fixes had been made. Now, this, I mean the error I pointed out in the objection was a $400 thousand error right in the bottom line of net profit and loss. Now that's not a small matter.... And I just don't think it makes sense to, to give a four month extension when the latest accurate report we have is now three months old. And I think it makes more sense to give a shorter extension, or continue this hearing until accurate reports have been filed.

At that, the judge overruled the objections and signed the order. His reasons are significant, and I think they indicate that the objections were offensive to him, causing him to react:

THE COURT: All right. Thank you, Mr. Petrofsky. Anything further from anyone? Well let me say this. I'm going to grant the motion, as submitted, and approve the dates. It is a complex case. There is no question that the, the Novell litigation is of major concern, and it's resolution has a tremendous impact on the case. And now we know that the trial is not scheduled until April, and you know, even that's somewhat late. But we'll deal with that at a later date, of course. And I am certainly satisfied that this, this Debtor has been acting responsibly, and to the best of its ability on the monthly operating reports. As far as the probability of success, the fact of the matter is none of us really will know for certain what the probability of success of a successful reorganization is until we know the results of the Novell litigation for one, and even then, we all recognize that there may be an appeal, and so, you know, it may be some time. And I'm also satisfied on the, based on the Debtors' representations that it is continuing to, to make a diligent effort to make some kind of a business transaction which may somehow enhance it ability to file a successful plan of reorganization. So based upon all of those factors, as well as all of the factors of the cases discussed under Section 1121 of the Code, the Court will overrule the objection, and will grant the motion.

At that point, SCO's attorney approached the judge and then the judge added:

THE COURT: Thank you, Ms. Werkheiser. It is also, I think, you know, significant to me that I haven't heard anything from the United States Trustee's Office expressing significant concerns about the monthly operating reports, and, and the reporting by the Debtor. And Mr. McMahon, did you have anything that you wanted to report on that?

MR. McMAHON: Your Honor, Joseph McMahon for the United States Trustee. I don't think that our office has a specific issue to raise today with respect to the accuracy of the monthly operating reports. Obviously, Your Honor, if upon further examination, or in the future, we were to discover an issue that warrants the attention of the Court, we will be sure to bring it here.

THE COURT: I know that --

MR. McMAHON: Thank you.

THE COURT: I'm sure you would. And obviously the Court places great confidence in the United States Trustee's Office to raise those sorts of issues and concerns.

I think that's about as strong a hint as there could be that the way to get concerns addressed is to bring them to the US Trustee's Office or at least hire an attorney to represent one's interests effectively. This is clearly not helping. Whether it is deliberately not helping I can't say, but the overall impact is harmful, in my estimation. Am I surprised? Hardly. Here's the PDF as text, first with line numbers followed by a version without, so you can take your pick. If you wish to jump to the no-lines version, use this link:

*****************************

UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE

IN RE:

THE SCO GROUP, INC., et al.,

Debtors.

Chapter 11

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

February 5, 2008
10:00 a.m.
(Wilmington)

TRANSCRIPT OF PROCEEDINGS
BEFORE THE HONORABLE KEVIN GROSS
UNITED STATES BANKRUPTCY COURT JUDGE

Proceedings recorded by electronic sound recording;
transcript produced by transcription service.

1 THE CLERK: Please rise.

2 THE COURT: Good morning everyone. Please be

3 seated.

4 UNIDENTIFIED SPEAKER: Good morning, Your Honor.

5 THE COURT: Good morning. Ms. Werkheiser, good

6 morning.

7 MS. WERKHEISER: Good morning, Your Honor. For the

8 record, Rachel Werkheiser from Pachulski, Stang, Ziehl &

9 Jones on behalf of the Debtors.

10 THE COURT: Yes.

11 MS. WERKHEISER: With me today, Your Honor, is Jamie

12 O'Neill from, from my office as well as - -

13 THE COURT: I recognize him.

14 MR. O'NEILL: Good morning, Your Honor.

15 THE COURT: Good morning.

16 MS. WERKHEISER: And Ms. Robson from Berger

17 Singerman is joining us on the phone.

18 THE COURT: Yes.

19 MS. ROBSON: Good morning, Your Honor.

20 THE COURT: Good morning, Ms. Robson. How are you?

21 MS. ROBSON: I'm good, thank you.

22 THE COURT: Good. And I think, while we're doing

23 this, I believe we have Mr. Petrofsky also on the telephone.

24 MR. PETROFSKY: Yes, Your Honor. Good morning.

25 This is Al Petrofsky appearing pro se.

2

1 THE COURT: Yes. Good morning, sir. All right, Ms.

2 Werkheiser.

3 MS. WERKHEISER: If I may proceed with the agenda,

4 Your Honor?

5 THE COURT: Please.

6 MS. WERKHEISER: Thank you.

7 THE COURT: Thank you.

8 MS. WERKHEISER: The first matter on the agenda is

9 the Debtors' motion to approve expansion of the scope of

10 Tanner LC's retention to prepare Federal and State tax

11 returns for the Debtors. Your Honor previously approved

12 their retention to be accountants and auditors for the

13 Debtors' financial statements and in preparation of the

14 Debtors' public filings with the SEC. Your Honor, we did

15 receive an informal, some informal comments from the Office

16 of the United States Trustee with respect to Tanner's

17 expanded scope engagement letter, and Tanner has agreed to

18 the changes requested by the Office of the United States

19 Trustee. And I do have a black line and a clean proposed

20 order if I may approach.

21 THE COURT: Please. Thank you, Ms. Werkheiser.

22 Good morning Mr. McMahon.

23 MR. McMAHON: Your Honor, good morning. Good to see

24 you.

25 THE COURT: Good to see you, sir. Thank you. Thank

3

1 you. All right.

2 MR. PETROFSKY: Hello?

3 THE COURT: Hello. Yes, I'm sorry. This is Judge

4 Gross. I am reviewing the proposed order on the Tanner

5 retention.

6 MR. PETROFSKY: I'm sorry. I having...(microphone

7 not recording) over here. I'm going to hang up and try to

8 call Court Call back on a different phone.

9 THE COURT: It may be that, we were, we were silent

10 here in the courtroom while I was reading something. Are you

11 still having difficulty hearing?

12 MR. PETROFSKY: Okay. We'll go ahead.

13 THE COURT: Okay. Does anyone wish to comment?

14 I've reviewed the proposed order, and it certainly is

15 acceptable to the Court. Any further comments or - -

16 MR. McMAHON: Your Honor, Joseph McMahon. No

17 objection to the order.

18 THE COURT: Excellent. Okay. Then I'm going to

19 enter the order.

20 MS. WERKHEISER: Thank you, Your Honor.

21 THE COURT: Okay.

22 MS. WERKHEISER: Your Honor, that brings us to the

23 second matter on the agenda, which is the Debtors' first

24 exclusivity extension request motion.

25 THE COURT: Yes.

4

1 MS. WERKHEISER: Requesting an extension of 120 days

2 both for the time to file the plan and the, the corresponding

3 solicitation exclusivity period, which would bring us to May

4 11th, '08 to file a plan, and July 11th to solicit that plan

5 exclusively. The Debtors received one response from Mr.

6 Petrofsky, who's joining us by the telephone. And if I may

7 present the motion first, and then respond to Mr. Petrofsky's

8 objection thereafter.

9 THE COURT: Yes, please.

10 MS. WERKHEISER: The Debtors believe that they have

11 established cause to extend the exclusivity time based on the

12 size and complexity of the case. This is the Debtors' first

13 extension. And as Your Honor is aware from other pleadings

14 filed before the Court, the Novell litigation is, is going

15 forward, and I've been informed that the trial has been

16 scheduled on that matter for late April. I believe it's

17 either April 28th or April 29th. And I believe that's

18 scheduled as a 4 day bench trial. And then I don't know how

19 the judge is going to rule. If he's going to rule from the

20 bench, or if he's going to issue an opinion. So that's,

21 that's out there, Your Honor, as - -

22 THE COURT: Absolutely.

23 MS. WERKHEISER: - - a matter that, that we would

24 like to either have some kind of resolution to, or at least

25 be able to address in any plan. The Debtors also believe

5

1 that they're making good faith progress towards finding a

2 consensual plan, or at least a plan to present they are,

3 they're working on a deal right now that hopefully we'll be

4 able to present to the Court soon. As well as you know that

5 previously the, the Debtors have looked into a sale of part

6 of their enterprise to York Capital. Although that deal did

7 fall through, but we are making progress towards reaching a

8 deal and being able to file a plan. The Debtors are paying

9 their administrative expenses as they become due.

10 THE COURT: Yes.

11 MS. WERKHEISER: And we are working diligently with

12 our constituents and our creditors to, to work towards a

13 plan. Mr. Petrofsky's objection surrounds the filing of the

14 MOR's, or the monthly operating reports that are required by

15 the Office of the United States Trustee. And Mr. Petrofsky's

16 concerns the Debtors are investigating and, and taking very

17 seriously. If there are mistakes in our monthly operating

18 reports, then the Debtors are going to work diligently to fix

19 those, those problems. And as far as the December monthly

20 operating reports, they were filed yesterday per an agreement

21 with the Office of the United States Trustee. So they

22 weren't, there was an extension in place between the, the,

23 the United States Trustee's Office and the Debtors, so that

24 the Debtors can concentrate on filing their year-end SEC

25 filings. The 10K was due at the end of January. So our

6

1 financial team was working on that. So the Debtors believe

2 that they have established cause to extend exclusivity. And

3 as I said, if Mr. Petrofsky's concerns about the monthly

4 operating reports are investigated, and the Debtors realize

5 they made a mistake, then the Debtors will file amended

6 monthly operating reports, and work diligently to make sure

7 that those mistakes don't continue to happen, if there are,

8 in fact, mistakes. We've, Mr. Petrofsky sent an email this

9 morning about the December monthly operating reports, and a

10 concern that he had therein, however we haven't received a

11 response from our client as to, before I came over, over to

12 court this morning, Your Honor. But we will investigate them

13 and take them very seriously, because it is an obligation of

14 the Debtors, and the Debtors intend to meet that obligation.

15 In a timely and an efficient manner. And if Your Honor has

16 any questions.

17 THE COURT: I do not. Mr. Petrofsky, would you like

18 to be heard further on your objection? Or does your

19 objection speak for itself?

20 MR. PETROFSKY: I would like to go over a few

21 points, if I could.

22 THE COURT: Please.

23 MR. PETROFSKY: First of all, it's the Debtors

24 burden to show probable success of the organization. And

25 what they concentrate on in the motion and in the argument

7

1 this morning is showing a low probability of success if they

2 file a plan now. That's not. . .. They need to show that

3 there is a probability of success in May or July. And to

4 make that determination, we need to know that there's going

5 to be something left in May or July. And the way to do that

6 is we need to see how things are going, and we need to have

7 accurate monthly reports. Now I appreciate that they, they

8 acknowledge that there, they at least acknowledge that there

9 could be problems with these reports, and that they are

10 endeavoring to fix them. But they refused to continue this

11 hearing until those fixes had been made. Now, this, I mean

12 the error I pointed out in the objection was a $400 thousand

13 error right in the bottom line of net profit and loss. Now

14 that's not a small matter. . .. And I just don't think it

15 makes sense to, to give a four month extension when the

16 latest accurate report we have is now three months old. And

17 I think it makes more sense to give a shorter extension, or

18 continue this hearing until accurate reports have been filed.

19 THE COURT: All right. Thank you, Mr. Petrofsky.

20 Anything further from anyone? Well let me say this. I'm

21 going to grant the motion, as submitted, and approve the

22 dates. It is a complex case. There is no question that the,

23 the Novell litigation is of major concern, and it's

24 resolution has a tremendous impact on the case. And now we

25 know that the trial is not scheduled until April, and you

8

1 know, even that's somewhat late. But we'll deal with that at

2 a later date, of course. And I am certainly satisfied that

3 this, this Debtor has been acting responsibly, and to the

4 best of its ability on the monthly operating reports. As far

5 as the probability of success, the fact of the matter is none

6 of us really will know for certain what the probability of

7 success of a successful reorganization is until we know the

8 results of the Novell litigation for one, and even then, we

9 all recognize that there may be an appeal, and so, you know,

10 it may be some time. And I'm also satisfied on the, based on

11 the Debtors' representations that it is continuing to, to

12 make a diligent effort to make some kind of a business

13 transaction which may somehow enhance its ability to file a

14 successful plan of reorganization. So based upon all of

15 those factors, as well as all of the factors of the cases

16 discussed under 1121 of the Code, the Court will overrule

17 the objection, and will grant the motion.

18 MS. WERKHEISER: Thank you. May I approach, Your

19 Honor?

20 THE COURT: You certainly may.

21 MS. WERKHEISER: Thank you.

22 THE COURT: Thank you, Ms. Werkheiser. It is also,

23 I think, you know, significant to me that I haven't heard

24 anything from the United States Trustee's Office expressing

25 significant concerns about the monthly operating reports,

9

1 and, and the reporting by the Debtor. And Mr. McMahon, did

2 you have anything that you wanted to report on that?

3 MR. McMAHON: Your Honor, Joseph McMahon for the

4 United States Trustee. I don't think that our office has a

5 specific issue to raise today with respect to the accuracy of

6 the monthly operating reports. Obviously, Your Honor, if

7 upon further examination, or in the future, we were to

8 discover an issue that warrants the attention of the Court,

9 we will be sure to bring it here.

10 THE COURT: I know that -

11 MR. McMAHON: Thank you.

12 THE COURT: I'm sure that you would. And obviously

13 the Court places great confidence in the United States

14 Trustee's Office to raise those sorts of issues and concerns.

15 MR. McMAHON: Thank you very much, Your Honor.

16 MS. WERKHEISER: As, as I said, Your Honor, we are

17 taking Mr. Petrofsky's, as well as any comments from the

18 United States Trustee, very seriously. And we are going to

19 work with our clients to, to root out any problems that there

20 may be, and to fix them if there are, in fact, problems.

21 THE COURT: The Court appreciates the Debtors'

22 diligence and concern.

23 MS. WERKHEISER: Thank you, Your Honor.

24 THE COURT: And with that, if there's nothing

25 further, we will adjourn and stand in recess until the next

10

1 hearing.

2 MS. WERKHEISER: Thank you, Your Honor.

3 THE COURT: Thank you very much counsel. Good to

4 see you all. Good day now.

5 (Whereupon at 10:14 a.m. the hearing in this matter was

6 concluded for this date.)

7

8

9

10

11

12

13

14

15

16

17

18 I, Jennifer Ryan Enslen, approved transcriber for

19 the United States Courts, certify that the foregoing is a

20 correct transcript from the electronic sound recording of the

21 proceedings in the above entitled matter.

22

23 /s/Jennifer Ryan Enslen 02/11/08
Jennifer Ryan Enslen

24 [address]

25 [phone]

11

*****************************
*****************************

UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE

IN RE:

THE SCO GROUP, INC., et al.,

Debtors.

Chapter 11

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

February 5, 2008
10:00 a.m.
(Wilmington)

TRANSCRIPT OF PROCEEDINGS
BEFORE THE HONORABLE KEVIN GROSS
UNITED STATES BANKRUPTCY COURT JUDGE

Proceedings recorded by electronic sound recording;
transcript produced by transcription service.

THE CLERK: Please rise.

THE COURT: Good morning everyone. Please be seated.

UNIDENTIFIED SPEAKER: Good morning, Your Honor.

THE COURT: Good morning. Ms. Werkheiser, good morning.

MS. WERKHEISER: Good morning, Your Honor. For the record, Rachel Werkheiser from Pachulski, Stang, Ziehl & Jones on behalf of the Debtors.

THE COURT: Yes.

MS. WERKHEISER: With me today, Your Honor, is Jamie O'Neill from, from my office as well as - -

THE COURT: I recognize him.

MR. O'NEILL: Good morning, Your Honor.

THE COURT: Good morning.

MS. WERKHEISER: And Ms. Robson from Berger Singerman is joining us on the phone.

THE COURT: Yes.

MS. ROBSON: Good morning, Your Honor.

THE COURT: Good morning, Ms. Robson. How are you?

MS. ROBSON: I'm good, thank you.

THE COURT: Good. And I think, while we're doing this, I believe we have Mr. Petrofsky also on the telephone.

MR. PETROFSKY: Yes, Your Honor. Good morning. This is Al Petrofsky appearing pro se.

2

THE COURT: Yes. Good morning, sir. All right, Ms. Werkheiser.

MS. WERKHEISER: If I may proceed with the agenda, Your Honor?

THE COURT: Please.

MS. WERKHEISER: Thank you.

THE COURT: Thank you.

MS. WERKHEISER: The first matter on the agenda is the Debtors' motion to approve expansion of the scope of Tanner LC's retention to prepare Federal and State tax returns for the Debtors. Your Honor previously approved their retention to be accountants and auditors for the Debtors' financial statements and in preparation of the Debtors' public filings with the SEC. Your Honor, we did receive an informal, some informal comments from the Office of the United States Trustee with respect to Tanner's expanded scope engagement letter, and Tanner has agreed to the changes requested by the Office of the United States Trustee. And I do have a black line and a clean proposed order if I may approach.

THE COURT: Please. Thank you, Ms. Werkheiser. Good morning Mr. McMahon.

MR. McMAHON: Your Honor, good morning. Good to see you.

THE COURT: Good to see you, sir. Thank you. Thank

3

you. All right.

MR. PETROFSKY: Hello?

THE COURT: Hello. Yes, I'm sorry. This is Judge Gross. I am reviewing the proposed order on the Tanner retention.

MR. PETROFSKY: I'm sorry. I having...(microphone not recording) over here. I'm going to hang up and try to call Court Call back on a different phone.

THE COURT: It may be that, we were, we were silent here in the courtroom while I was reading something. Are you still having difficulty hearing?

MR. PETROFSKY: Okay. We'll go ahead.

THE COURT: Okay. Does anyone wish to comment? I've reviewed the proposed order, and it certainly is acceptable to the Court. Any further comments or - -

MR. McMAHON: Your Honor, Joseph McMahon. No objection to the order.

THE COURT: Excellent. Okay. Then I'm going to enter the order.

MS. WERKHEISER: Thank you, Your Honor.

THE COURT: Okay.

MS. WERKHEISER: Your Honor, that brings us to the second matter on the agenda, which is the Debtors' first exclusivity extension request motion.

THE COURT: Yes.

4

MS. WERKHEISER: Requesting an extension of 120 days both for the time to file the plan and the, the corresponding solicitation exclusivity period, which would bring us to May 11th, '08 to file a plan, and July 11th to solicit that plan exclusively. The Debtors received one response from Mr. Petrofsky, who's joining us by the telephone. And if I may present the motion first, and then respond to Mr. Petrofsky's objection thereafter.

THE COURT: Yes, please.

MS. WERKHEISER: The Debtors believe that they have established cause to extend the exclusivity time based on the size and complexity of the case. This is the Debtors' first extension. And as Your Honor is aware from other pleadings filed before the Court, the Novell litigation is, is going forward, and I've been informed that the trial has been scheduled on that matter for late April. I believe it's either April 28th or April 29th. And I believe that's scheduled as a 4 day bench trial. And then I don't know how the judge is going to rule. If he's going to rule from the bench, or if he's going to issue an opinion. So that's, that's out there, Your Honor, as - -

THE COURT: Absolutely.

MS. WERKHEISER: - - a matter that, that we would like to either have some kind of resolution to, or at least be able to address in any plan. The Debtors also believe

5

that they're making good faith progress towards finding a consensual plan, or at least a plan to present they are, they're working on a deal right now that hopefully we'll be able to present to the Court soon. As well as you know that previously the, the Debtors have looked into a sale of part of their enterprise to York Capital. Although that deal did fall through, but we are making progress towards reaching a deal and being able to file a plan. The Debtors are paying their administrative expenses as they become due.

THE COURT: Yes.

MS. WERKHEISER: And we are working diligently with our constituents and our creditors to, to work towards a plan. Mr. Petrofsky's objection surrounds the filing of the MOR's, or the monthly operating reports that are required by the Office of the United States Trustee. And Mr. Petrofsky's concerns the Debtors are investigating and, and taking very seriously. If there are mistakes in our monthly operating reports, then the Debtors are going to work diligently to fix those, those problems. And as far as the December monthly operating reports, they were filed yesterday per an agreement with the Office of the United States Trustee. So they weren't, there was an extension in place between the, the, the United States Trustee's Office and the Debtors, so that the Debtors can concentrate on filing their year-end SEC filings. The 10K was due at the end of January. So our

6

financial team was working on that. So the Debtors believe that they have established cause to extend exclusivity. And as I said, if Mr. Petrofsky's concerns about the monthly operating reports are investigated, and the Debtors realize they made a mistake, then the Debtors will file amended monthly operating reports, and work diligently to make sure that those mistakes don't continue to happen, if there are, in fact, mistakes. We've, Mr. Petrofsky sent an email this morning about the December monthly operating reports, and a concern that he had therein, however we haven't received a response from our client as to, before I came over, over to court this morning, Your Honor. But we will investigate them and take them very seriously, because it is an obligation of the Debtors, and the Debtors intend to meet that obligation. In a timely and an efficient manner. And if Your Honor has any questions.

THE COURT: I do not. Mr. Petrofsky, would you like to be heard further on your objection? Or does your objection speak for itself?

MR. PETROFSKY: I would like to go over a few points, if I could.

THE COURT: Please.

MR. PETROFSKY: First of all, it's the Debtors burden to show probable success of the organization. And what they concentrate on in the motion and in the argument

7

this morning is showing a low probability of success if they file a plan now. That's not. . .. They need to show that there is a probability of success in May or July. And to make that determination, we need to know that there's going to be something left in May or July. And the way to do that is we need to see how things are going, and we need to have accurate monthly reports. Now I appreciate that they, they acknowledge that there, they at least acknowledge that there could be problems with these reports, and that they are endeavoring to fix them. But they refused to continue this hearing until those fixes had been made. Now, this, I mean the error I pointed out in the objection was a $400 thousand error right in the bottom line of net profit and loss. Now that's not a small matter. . .. And I just don't think it makes sense to, to give a four month extension when the latest accurate report we have is now three months old. And I think it makes more sense to give a shorter extension, or continue this hearing until accurate reports have been filed.

THE COURT: All right. Thank you, Mr. Petrofsky. Anything further from anyone? Well let me say this. I'm going to grant the motion, as submitted, and approve the dates. It is a complex case. There is no question that the, the Novell litigation is of major concern, and it's resolution has a tremendous impact on the case. And now we know that the trial is not scheduled until April, and you

8

know, even that's somewhat late. But we'll deal with that at a later date, of course. And I am certainly satisfied that this, this Debtor has been acting responsibly, and to the best of its ability on the monthly operating reports. As far as the probability of success, the fact of the matter is none of us really will know for certain what the probability of success of a successful reorganization is until we know the results of the Novell litigation for one, and even then, we all recognize that there may be an appeal, and so, you know, it may be some time. And I'm also satisfied on the, based on the Debtors' representations that it is continuing to, to make a diligent effort to make some kind of a business transaction which may somehow enhance its ability to file a successful plan of reorganization. So based upon all of those factors, as well as all of the factors of the cases discussed under 1121 of the Code, the Court will overrule the objection, and will grant the motion.

MS. WERKHEISER: Thank you. May I approach, Your Honor?

THE COURT: You certainly may.

MS. WERKHEISER: Thank you.

THE COURT: Thank you, Ms. Werkheiser. It is also, I think, you know, significant to me that I haven't heard anything from the United States Trustee's Office expressing significant concerns about the monthly operating reports,

9

and, and the reporting by the Debtor. And Mr. McMahon, did you have anything that you wanted to report on that?

MR. McMAHON: Your Honor, Joseph McMahon for the United States Trustee. I don't think that our office has a specific issue to raise today with respect to the accuracy of the monthly operating reports. Obviously, Your Honor, if upon further examination, or in the future, we were to discover an issue that warrants the attention of the Court, we will be sure to bring it here.

THE COURT: I know that -

MR. McMAHON: Thank you.

THE COURT: I'm sure that you would. And obviously the Court places great confidence in the United States Trustee's Office to raise those sorts of issues and concerns.

MR. McMAHON: Thank you very much, Your Honor.

MS. WERKHEISER: As, as I said, Your Honor, we are taking Mr. Petrofsky's, as well as any comments from the United States Trustee, very seriously. And we are going to work with our clients to, to root out any problems that there may be, and to fix them if there are, in fact, problems.

THE COURT: The Court appreciates the Debtors' diligence and concern.

MS. WERKHEISER: Thank you, Your Honor.

THE COURT: And with that, if there's nothing further, we will adjourn and stand in recess until the next

10

hearing.

MS. WERKHEISER: Thank you, Your Honor.

THE COURT: Thank you very much counsel. Good to see you all. Good day now.

(Whereupon at 10:14 a.m. the hearing in this matter was concluded for this date.)

I, Jennifer Ryan Enslen, approved transcriber for the United States Courts, certify that the foregoing is a correct transcript from the electronic sound recording of the proceedings in the above entitled matter.

2/11/08

/s/Jennifer Ryan Enslen
Jennifer Ryan Enslen
[address]
[phone]

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