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Ralph Yarro, SCO's "former Chairman" wants to loan SCO $2M - Updated - Oct. MORs & Motion Granted, Withdrawn,
Thursday, February 18 2010 @ 12:22 PM EST

You've been expecting this, I'm sure. Ralph Yarro wants to loan SCO some money, $2 million, or more accurately up to $2 million, and the SCO trustee, Edward Cahn, wants to let him. It's all at "arm's length" and "in good faith" negotiations with this SCO insider, don't you know. So, does this mean nobody else wants to fund SCO? No potential buyers? Just Ralph? And Cahn asks the court to please shorten the time to handle the motion. Is SCO on its last legs or something?

The motion calls Yarro the "former Chairman" of SCO's board of directors. See all the stuff you can hide if you don't file MORs or with the SEC, despite being a public company? Say, didn't Cahn promise to file those MORs by now? What, they look too awful? Still, they're supposed to be filed. Well, well. SCO's MO seems to be catching. Delay, delay, delay while they keep their greedy hand reaching desperately for the brass ring.

"The Trustee is advised that Seung Ni Capital Partners, L.L.C. is a newly formed entity formed by Ralph J. Yarro III (“Yarro”) and was created for the purpose of providing postpetition financing to the Debtors. Since Yarro is the former Chairman of the Debtors’ Board of Directors and the Debtors’ largest shareholder, Yarro is an insider pursuant to Bankruptcy Code section 101(31). See 11 U.S.C. § 101(31). The Trustee represents that at all times the negotiations among the Trustee, his advisors and Yarro were at arms-length and in good faith."
Wait. Look at page 2. It's a loan from Ralph in public and "other lenders from time to time". Uh oh. Page 3:
9. In accordance with the Credit Agreement, additional Lenders may also make loans to the Debtors under the Credit Facility from time to time.
Not another weirdo deal with shadows... Remember the York deal in 2007, speaking of shadows? It was a Super Dooper Senior Secured Super-Priority Credit Agreement too. We'd better look at the exhibits, which set forth the precise terms. I'll swing back by after I do that. My opinion of Judge Cahn sadly just went down a considerable peg. He's become an enabler now in my view, and while you don't despise a wife for being married to a drunk, if she buys the booze and covers for him when he's too drunk to go to work, is she not making herself part of the problem? The only thing that ever helps an alcoholic is to confront the consequences of what he's done, so he can get in touch with reality.

Here's the filing, so you can analyze the exhibits too:

a 02/18/2010 - 1051 - Motion to Authorize --MOTION OF CHAPTER 11 TRUSTEE FOR ORDER (I) AUTHORIZING DEBTORS ESTATES TO OBTAIN POSTPETITION FINANCING AND TO GRANT SECURITY INTERESTS AND SUPERPRIORITY ADMINISTRATIVE EXPENSE STATUS PURSUANT TO 11 U.S.C. §§ 105, 363(c), 364(c), 364(e) AND 507(b); (II) MODIFYING THE AUTOMATIC STAY PURSUANT TO 11 U.S.C. § 362; AND (III) GRANTING OTHER RELIEF Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. Objections due by 2/26/2010. (Attachments: # 1 Notice Notice of Motion # 2 Exhibit A # 3 Exhibit B) (Fatell, Bonnie) (Entered: 02/18/2010)

02/18/2010 - 1052 - Motion to Shorten Notice and Response to Trustees Motion for Order (I) Authorizing Debtors Estates to Obtain Post Petition Financing and to Grant Security Interests and Superiority Administrative Expense Status Pursuant to 11 U.S.C. §§ 105, 363(c), 364(c), 364(e) AND 507(b); (II) Modifying the Automatic Stay Pursuant to 11 U.S.C. § 362; and (III) Granting Other Relief Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. Objections due by 2/26/2010. (Attachments: # 1 Proposed Form of Order Order Granting Motion) (Fatell, Bonnie) (Entered: 02/18/2010)

Mr. Yarro has some history, speaking of good faith and ex-positions, from his Canopy days, when he was accumulating wealth. Well, dispensing it too, I gather.

Also I wanted to mention that the next bankruptcy hearing will be March 5. Nothing in February. They postponed:

02/16/2010 - 1050 - Notice of Adjourned/Rescheduled Hearing Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. Hearing scheduled for 3/5/2010 at 11:00 AM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. (Fatell, Bonnie) (Entered: 02/16/2010)

If anyone can OCR Exhibit A [pdf] for me, I'd appreciate it very much. For extra points, if anyone wishes to do a comparative chart of this Exhibit A with the York deal's Exhibit A [pdf], I think that would be very, very interesting and incredibly useful.

Update: The October MORs are filed. And Judge Gross has already signed the order granting SCO's request to shorten the time for their motion on getting the money from Ralph, and here comes another bill from Blank Rome:

02/18/2010 - 1053 - Order (WITH REVISIONS BY THE COURT) Granting Motion of Chapter 11 Trustee to Shorten Notice and Response to Trustee's Motion for Order (I) Authorizing Debtors Estates to Obtain PostPetition Financing and to Grant Security Interests and Superiority Administrative Expense Status Pursuant to 11 U.S.C. §§ 105, 363(c), 364(c), 364(e) AND 507(b); (II) Modifying the Automatic Stay Pursuant to 11 U.S.C. § 362; and (III) Granting Other Relief (related document(s) 1052 ) Order Signed on 2/18/2010. (SDJ) Modified text to add information on 2/18/2010 (SDJ). (Entered: 02/18/2010)

02/18/2010 - 1054 - Second Application for Compensation and Reimbursement of Expenses of Blank Rome LLP for the Period of November 1, 2009 Through November 30, 2009 Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. Objections due by 3/10/2010. (Attachments: # 1 Notice # 2 Exhibit A # 3 Exhibit B) (Fatell, Bonnie) (Entered: 02/18/2010)

02/18/2010 - 1055 - Debtor-In-Possession Monthly Operating Report for Filing Period October 31, 2009 (The SCO Group, Inc.; 07-11337) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 02/18/2010)

02/18/2010 - 1056 - Debtor-In-Possession Monthly Operating Report for Filing Period October 31, 2009 (SCO Operations, Inc.; 07-11338) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 02/18/2010)

02/18/2010 - 1057 - Notice of Withdrawal of Motion to Shorten Notice (related document(s) 1052 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 02/18/2010)

The judge altered the date that objections are due, however, from February 26 to March 1, and the hearing will be on March 5th. I have no idea why Cahn then filed a notice of withdrawal of the motion.

In the bill from Cahn's law firm, two things stand out to me. On page 6, I see a notation for November 24, 2009 "Teleconference with P. Hunt Regarding Counsel for R. Yarrow," and on page 7, I see a notation "Review Draft Agreement with K. McBride and Email Comments to S. Singer" on Nov. 4, 2009. And on November 9th, "Conference S. Tarr Regarding Stratboy." On that same day, it describes Jeff Hunsaker as having resigned. There are several notations about that. On November 24th, Bonnie Fatell reviewed "news article regarding SCO" amd a teleconference with P. Hunt "regarding debtor financing from R. Yarrow". That's a misspelling.

On November 2, we see settlement discussions with IBM's Richard Levin and with Novell. The next day there is a "detailed email regarding SVRX licenses" and some discussion about the Swiss arbitration. And the next day, Fatell conferenced with SCO's people on all that and with Cahn on "settlement strategy". Boies Schiller's Mauricio Gonzalez then sent a "detailed memo on APA and intent of parties". I'm sure we can just imagine how that read. Ryan Tibbitts chimed in too with a report on "intent of APA" and the next day Fatell is reading "information and documents from R. Tibbitts regarding transfer of copyrights". Then there was research on whether the APA was an executory contract, and on November 6, the team met to discuss "settlement strategy" and then had a teleconference "regarding preparation for settlement meeting" and then more emails with Mr. Levin about a protective order and email to J. Kessler from Tarr "Re Novell/IBM research". Then Fatell reviewed "draft Trustee outline for settlement meeting". Then on the 9th, there's a review of "Novell theory of sale", more strategizing, and then on the 11th the meeting happened. On the 19th, the notation reads "review license agreement with IBM regarding certain software." They'd rather we not know, but maybe the Sequent stuff? Anyway, all the strategy sessions were apparently for nothing, as no settlement ensued.

It's interesting that at the end of October, Cahn was saying publicly that SCO's claims were worth pursuing, while behind the scenes, he was trying to settle, and Novell and IBM wouldn't.

All through this time period, we also see AutoZone settlement notations, and clearly IBM and Novell were informed of a fair amount, and this time period was also when the Wayne Gray trademark issue was still happening, and there were lease negotiations going on too. For sure, Ms. Fatell is a hard worker. The bill comes to $106.082, 80% of the actual amount of services rendered, $132,602.50. Time for a loan from Yarro, I guess, looking at the MORs. Unless they can get a loan from Germany or Japan. All the assets seem to have ended up there.

Wait. Nov. 24, "Teleconference Regarding Paris Lease". Paris? As in France? Evidently yes, as the next day, there's a call with B. Linney "regarding French lease in Paris." I don't recall SCO having a presence in Paris. Do you?

There's a disclaimer with the MORs. Here's the last paragraph:

Historically, the Company may not have distinguished between direct liabilities of debtor and non-debtor companies. The Trustee with its financial advisors is conducting a thorough analysis of the intercompany arrangement among the debtors and the non-debtor subsidiaries and reserves the right to modify these MOR's upon completion of its review.
Update 2: Now there's more ping pong on the date for Cahn's motion to shorten the time be heard:

02/19/2010 - 1058 - Certificate of No Objection (related document(s) 1045 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 02/19/2010)

02/19/2010 - 1059 - Certificate of Service (related document(s) 1051 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 02/19/2010)

02/19/2010 - 1060 - Certification of Counsel Regarding Order Vacating the Order Granting Motion of Chapter 11 Trustee to Shorten Notice (related document(s) 1051 , 1052 , 1053 , 1057 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 02/19/2010)

Now that the judge granted his motion to shorten the time to object, Cahn would now like to vacate the motion to shorten the time. But in Exhibit A, attached to the main filing, it asks that the date for objections be set again for February 26th, not March 1, the date the judge hand wrote over the February date.

Huh? Well, at least we know that the judge and Cahn are not privately conferring closely, or at least not closely enough, since they can't seem to get this straight, not that Judge Gross doesn't do whatever Cahn asks, so far.

I can't explain it. He didn't do what they wanted perfectly, so now they want him to improve his compliance, I guess.


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