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SCO Files Notice of Cure Amounts Re Leases and Executory Contracts - Ex. A - Updated 2Xs
Thursday, July 09 2009 @ 06:15 AM EDT

There is a monster SCO filing in the bankruptcy, 531 pages, I'm told, a Notice of Cure Amounts in Connection with the Assumption and Assignment of Unexpired Leases and Executory Contracts [PDF] and then a 7-part exhibit. SCO proposes to transfer everything on this list to unXis "free and clear of all liens, claims, encumbrances and interests upon satisfaction of the cure amounts... except for Assumed Liabilities and Permitted Encumbrances".

It is to me one of the most fascinating documents SCO has ever filed. It presents a picture of SCO's business that is very different from what they have presented to the courts. One fascinating thing is that it seems it was possible to get UNIX System V after 1995, despite SCO testimony at trial in SCO v. Novell that after that time period you could only get UNIX by licensing UnixWare.

Forget that you don't think this sales plan will ever happen. It's an opportunity to look at the innards of SCO's business. I went through every page, looking for what new customers, or any updating customers, licensed after 1995. I was curious to see whether UnixWare took off and UNIX drifted down or suddenly stopped after 1995. I had a theory that perhaps SCO didn't want to sell UNIX after that, so as to avoid paying Novell royalties. But what I found instead surprised me greatly.

What I see from these exhibits is that SCO's business slowed noticeably after 1994. I don't know why, but for sure it wasn't Linux. And I think this filing strongly indicates that IBM in no way killed SCO's business beginning in 2000 as SCO alleged in its complaint. It was already declining, judging from this list. Why would anyone want to buy this business, I asked myself? People seem to have lost interest in UNIX and UnixWare around that time period. There are some new customers after that, but it's nothing like the 80s and 90s up until 1995. Of course, by that I mean they lost interest in SCO's UNIX versions. We know UNIX continues to sell well, but I guess new customers mostly chose other vendors. (Update: Readers point out what I didn't think about: 1995 was the year Windows 95 really took off.)

Here are the filings:

07/08/2009 - 832 - Notice of Service /Notice of Cure Amounts in Connection with the Assumption and Assignment of Unexpired Leases and Executory Contracts (related document(s) 815 ) Filed by The SCO Group, Inc.. (Attachments: # 1 Exhibit A Part 1 # 2 Exhibit A Part 2 # 3 Exhibit A Part 3 # 4 Exhibit A Part 4 # 5 Exhibit A Part 5 # 6 Exhibit A Part 6 # 7 Exhibit A Part 7 # 8 Certificate of Service and Service List) (Makowski, Kathleen) (Entered: 07/08/2009)

Executory usually means still live in some way, some part not yet performed, but I don't think that's altogether the case with this list. For example, SCO lists both AutoZone's license on page 5 of Exhibit A Part 1 and Chrysler's 1997 license, presumably not this one, since the dates don't match, in a later page of that exhibit. That's so odd. Neither of them use SCO products any more. Nor are they ever likely to. So, does executory mean litigation to SCO? If so, is unXis interested in litigation? What effect is there if those licenses go to unXis?

Remember Darl McBride testified that the only way to get Unix was to get UnixWare after the mid 1990s? Well, look at this:

  • Computer Associates got UNIX System V Release 4.1 ES Reference Source in July of 1999.

  • Data General got UNIX System V Release 3.X Reference Source in 1999.

  • Cisco on October 2, 2002 licensed UNIX System V Release 3.X Reference Source. The license is CISC2002RS. You'll find it on page 50 of Part 3. That's on Darl's watch. He started at SCO in the summer of 2002.

  • Comnic Corporation got UNIX System V Release 2.0 in 1998. That's in Part 3.

  • Morgan Stanley got UNIX System V Release 4.1ES Reference Source in 1999. That's in Part 5.

  • Entegrity Solutions in 2001 licensed UNIX SYstem V Release 3.X Reference Source. That's in Part 5 also.

  • Grau Data Storagae in 2004 got UNIX System V Release 3.X Reference Source. That's on Darl's watch too, by the way.

  • Network Systems & Technologies in 2001 licensed UNIX System V Release 3.X Reference Source.

  • Northrup Grumman in 2003 also got UNIX System V Release 3.X Reference Source. That would also be on Darl's watch.

  • OTG SOftware in January of 2002 got UNIX System V Release 3.X Reference Source.

  • Pacific Data (no date) got UNIX System V Release 4.2 Reference Source.

  • Quest Software got UNIX System V Release 3.X Reference Source in 1999.

  • SolutionsSoft Systems in 1999 got UNIX System V Release 3.X Reference Source.

  • Tandem Computer licensed UNIX System V Release 4.2MP on December 9, 1998. That is on page 42 of Part 3. Note it wasn't listed as "Reference Source".

  • Los Alamos in 1997 licensed UNIX System V, Release 4.1 Enhanced Security.

  • Trusted Systems on the Net in December of 2002, also on Darl's watch, got UNIX System V Release 3.X Reference Source.
You know what else surprised me? How few customers there were for UNIX System V 4.2MP. See what you think as you go through the exhibits. No doubt you'll notice things I missed.

What else is interesting about what SCO wants unXis to get? In Exhibit A Part 1, I noticed that in the list of "packaged products" I see in 2006 Sun Microsystems is listed as having a "Business Cooperation Agreement" with SCO. 2006? Its 2001 Distributor Agreement is on the list too, p. 13, and Tarantella's 2001 Distributor Agreement. Ditto Microsoft's 1995 Distributor Agreement, on page 12 and on page 17, IBM is listed as having an Engineering Services Agreements in 1990, 2001 and 2004. Ditto Sun in 1998 and its OEM Distributor agreement from 1997 is on the list too, on page 20. IBM also is listed for two OEM Distribution Agreements in 2002 on page 19. Why would unXis want any of that?

And this is weird. On page 18, on the list to be transferred is SCO Software (China) Company's Master Distributor Agreement dated 1999 (Dascom). I thought that SCO China was no more.

And also going to unXis is the 2008 Franklin Covey Product Sales Inc. Business Cooperation Agreement. I thought SCO was going to keep its iPhone app. That is found on page 28. And then at the bottom of the page, there is this:

Novell, Inc.
UNIX SVRX Royalty
collections due July 15, 2009 -- $13,129.51 -- Asset Purchase Agreement -- 1995
Why would that go to unXis? Speaking of cure amounts, Sun is listed on page 29 with a cure amount of $50,000 for Java support in OpenServer. On the next page, the cure amount for Microsoft for Xenix code in "old SVRX" in UnixWare and OpenServer is $44,395.00.

On page 65 of the Part 2 of Exhibit A, Novell is listed as a licensee, and we find the Dec. 6, 1995 Technology License Agreement listed. Why would that transfer and not the rest of the APA? It says the TLA granted Novell limited rights to UNIX and Unixware, which is what Novell has said. SCO has an idea it's about copyrights, but this list doesn't designate it that way.

And remember Bank of America? It turns out that its most recent license was 1992, for "Customer Evaluation (Sept. 4, 1992)" for UNIX System V Release 4.2.

This will all be part of the next hearing on the sales plan in bankruptcy court in Delaware on July 27. The deadline to object is July 22.

Update 2: It might be useful to compare SCO's list of contracts on Exhibit A (here and with Exhibit A continued) with claims made by Darl McBride in the December 22, 2003 4Q teleconference:

Before we move on to today's SCOsource announcements, I'd like to make a few comments on our core Unix operating business. In our OpenServer and UnixWare product lines, we continue to see good uptake from existing customers while attracting new customers in our key vertical markets, which encompass large as well as small to medium businesses. Let me just rattle off a few of the customer deals that we completed transactions with during the previous quarter.

In North America the list would include organizations such as: the Department of Justice, Lockheed Martin, US Air Force, Accent Oil, Goodyear, AT&T, Avaya, CSK Auto, Pinkertons, 84 Lumber, Cracker Barrel Restaurants. McDonald's, GE Aircraft Engines, Daimler-Chrysler, and NASDAQ. To move on to Europe, we are looking at organizations like Barcrest, Marconi, Dolond and Atchison, Fleet Air Army, and Argos; in Germany BMW; out of Italy, Ministry of Finance. Moving on to AsiaPac area: out of Japan, we have companies like Toshiba, Matsushita Electronics, and Image Partner. Out of Taiwan: LCC, Taiwan educational training group. In China: China Central Bank, Peoples Bank of China, Highway Administration, and Shandong Province. In India: India Overseas Bank, Bank of Pakistan, and Bank of India.

I can't help but notice he mentioned DaimlerChrysler. But it said after SCO sued DC that it had not used their software in many years. That seems to be a mismatch right there.

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