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SCO v. Novell, Day 12, Tuesday, March 23, 2010 - as text
Saturday, October 23 2010 @ 08:04 PM EDT

This is the text transcript of day twelve of the SCO v. Novell trial that began on Monday, March 8, 2010 and ran for 15 days, Monday through Friday, for three weeks, with the Hon. Ted Stewart presiding. This day is Tuesday, March 23, and the witnesses that day were James Tolonen and Allison Amadia. Here is Groklaw's eyewitness report from the trial for that day.



Jump to actual transcript start, Part 2, Part 3.

March 2010
M Tu W Th F
08 09 10 11 12
15 16 17 18 19
22 23 24 25 26

The transcript of this day is in three parts: part 1 [PDF] [Text], part 2 [PDF] [Text] and part 3 [PDF] [Text].

1991


IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION

THE SCO GROUP, INC., a Delaware )
corporation, )
Plaintiff, )
vs. )Case No. 2:04-CV-139TS
NOVELL, INC., a Delaware )
corporation, )
Defendant. )
_________________________________)
AND RELATED COUNTERCLAIMS. )
_________________________________)

BEFORE THE HONORABLE TED STEWART
---------------------------------
March 23, 2010
Jury Trial

REPORTED BY: Patti Walker, CSR, RPR, CP
[address]

1992


A P P E A R A N C E S

For Plaintiff: Brent Hatch
HATCH JAMES & DODGE
[address]

Stuart Singer
BOIES SCHILLER & FLEXNER
[address]

Edward Normand
BOIES SCHILLER & FLEXNER
[address]

For Defendant: Sterling Brennan
WORKMAN NYDEGGER
[address]

Eric Acker
Michael Jacobs
MORRISON & FOERSTER
[address]

1993



I N D E X
Witness Examination By PAGE
James Tolonen Mr. Brennan (Direct) 1999
Mr. Hatch (Cross) 2038
Mr. Brennan (Redirect) 2090
Mr. Hatch (Recross) 2100
Allison Amadia Mr. Brennan (Direct) 2103

1994


EXHIBITS RECEIVED INTO EVIDENCE:
Plaintiff's:
754 2062
503 2101

Defendant's:
N-8 1999
T-34 2038
X-4 2093
B-6 2096

1995

SALT LAKE CITY, UTAH; TUESDAY, MARCH 23, 2010; 8:30 A.M.

PROCEEDINGS

THE COURT: Good morning.

Do we have anything before we bring the jury in?

MR. JACOBS: A brief report, Your Honor. In the wake of your ruling on Mr. Keller yesterday, that Mr. Keller would be allowed to testify, we took his deposition yesterday afternoon. Shortly after the deposition, SCO reported to us that they do not plan to call Mr. Keller in their case in chief. They reserve the right to call him in their rebuttal case.

MR. SINGER: Mr. Jacobs' report is accurate. With respect to all the issues of privilege, we decided we weren't going to call him, at least in our case in chief.

We have raised with the other side, Your Honor, now that the end is somewhat in sight, the issues of closing. We wanted to make sure our discussions are consistent with what the Court's requirements are.

First, we indicated that we intended, if it meets with the Court's approval, to split our closings as we did in the opening where Mr. Hatch and I would both address the jury as part of closing.

THE COURT: That will be fine.

MR. SINGER: Second, we're talking about the time for each side. I think we -- well, an hour and 15 minutes.

1996

They suggested an hour and a half. Either of those would be okay with us if it meets with the Court's schedule.

THE COURT: An hour and 15 minutes.

It's our intention, counsel, to try to get this to the jury by noon. It will take at least 45 minutes to instruct the jury. If you can confine it to an hour and 15 minutes, that would include your rebuttal time.

MR. SINGER: Yes. Thank you, Your Honor.

THE COURT: Mr. Brennan.

MR. BRENNAN: Thank you.

Just so we're all clear, it's our anticipation that the last witness and the last presentation of evidence would conclude by 1:30 on Thursday?

THE COURT: Yes.

MR. BRENNAN: Then the Court's intention would be to instruct essentially first thing Friday morning, then go to the closings, as you've indicated, and be done by noon for them to take the case?

THE COURT: Yes. Is that going to work? I mean, is that going to be a great disadvantage to cut you to an hour and 15 minutes?

MR. BRENNAN: We were hoping for an hour and a half, Your Honor, but we're mindful of the schedule. We thought we had worked out a mechanism that would permit an hour and a half. It might be that it would run to 12:30.

1997

THE COURT: That is your mechanism?

MR. BRENNAN: Yes, that's the mechanism.

THE COURT: Let's keep our language simple here for the Judge.

Counsel, I am mindful of the complicated nature of this case. I'm also mindful of the fact that the issues for the jury are somewhat limited. And I, frankly, worry more than anything about the jury's ability to benefit from too lengthy of closings. If you feel strongly that an hour and a half is necessary for you, then I will give you both of you an hour and a half. But I will tell you that my experience is that after a while, there are diminishing returns. But I'll ultimately leave that up to you. If you think an hour and a half is necessary, I'll give it to you.

MR. BRENNAN: I can tell you have listened to me long enough to give that direction. What if we were to report to the Court tomorrow whether we felt we needed the extra 15 minutes.

THE COURT: Really, we can decide Friday morning, if we need to. There is no hurry. Just understand that I really do expect us to finish the testimony Thursday at 1:30 without question. And then the closer we can keep to noon for the jury, the better off we all are.

I might remind you that one of the jurors -- Ms. Malley reminded me of this this morning -- number ten,

1998

indicated she had a vacation that begins Saturday. It was actually going to begin Friday, but when I asked her if it can be delayed one day, she said yes. She is still planning on a vacation Saturday and Sunday. She will be back Monday. If they have to go beyond late Friday night, I'll have to tell her go ahead and take your vacation and the jury can come back next week, which is not a problem. But just keep that in mind, if you would please, counsel.

MR. BRENNAN: We will. Thank you, Your Honor.

THE COURT: Is there anything else?

MR. SINGER: Not from the plaintiffs.

MR. BRENNAN: No, Your Honor.

THE COURT: What will we be doing first thing?

MR. BRENNAN: Our first witness will be James R. Tolonen. And that will be followed by Allison Amadia, Your Honor.

THE COURT: All right. Thank you.

Ms. Malley, if you would, please.

Counsel, Ms. Malley just informed me that apparently there was an accident on the freeway south, and a juror may be on the other side. So that you don't have to sit here and be nervous, I will excuse myself and come back as soon as we have all the jurors.

(Recess)

THE COURT: Ms. Malley, if would you please bring

1999

the jury in.

(Jury present)

THE COURT: Good morning, ladies and gentlemen.

Mr. Brennan.

MR. BRENNAN: Thank you.

Your Honor, Novell wishes to call as its next witness Mr. James Tolonen.

JAMES TOLONEN,

Having been duly sworn, was examined

and testified as follows:

THE CLERK: If you would please state and spell your name for the Court.

THE WITNESS: Sure. My name is Jim Tolonen. T-o-l-o-n-e-n.

DIRECT EXAMINATION

BY MR. BRENNAN:

Q Good morning, Mr. Tolonen.

A Good morning.

Q Have you ever worked for Novell?

A Yes, I have.

Q When was it that you worked for Novell?

A I worked for Novell from 1989 to 1998.

Q During that time period, what position or positions did you hold at Novell?

A Throughout that entire period as the chief financial

2000

officer. I was also, for part of that, senior vice president and executive vice president, and then a member of the office of the president, which was a three-member strategy council.

Q As a member of the office of the president, what essentially did you do?

A It was really the highest group of all the executives. We probably had maybe 6,000 employees world around and a dozen or more executives. This was a small group that met regularly just to discuss strategy with Ray Noorda.

Q Please tell the jury a little bit about your educational background, if you might.

A That's going way back, but I have a master's -- let's go back, an engineering degree from the University of Michigan. I later also received an MBA in finance and accounting. I later also have achieved a certified public accountant, a CPA, as well.

Q You mentioned that you began formally working for Novell in 1989. If you could summarize for us your work experience from the time that you obtained your MBA from Michigan to the time that you started with Novell in 1989.

A After college I worked as a certified public accountant for about five years. That's part of the training required to achieve the CPA certificate is direct public accounting experience. I then worked in several small technology

2001

start-ups, generally in the California Bay area, Silicon Valley area. One of those was a company called Bosher where I met Ray Noorda. He was brought in as a CEO there while I was vice president of finance. That company later got acquired and he left. Several years later I left and went to a technology start-up in networking in the Bay Area called Excelan. We took that company public and in 1987 ran it as a successful public company for several years, and then Novell acquired it in 1989.

Q Thank you. You mentioned an individual by the name of Ray Noorda. Can you tell us who Ray Noorda is?

A Certainly. Ray Noorda was the chief executive officer of Novell. He was brought in at the founding of Novell long before -- I mean, somewhere between my earlier work experience with him and later, and continued as the CEO of Novell through 1994 or so.

Q What was your personal relationship with Mr. Noorda?

A I directly reported to him the entire time at Novell, and also I guess at some level a mentor. He was someone I looked up to and learned a lot from.

Q I'm going to have jump forward a bit. You've described for us your work experience prior to joining Novell in 1989. You've told us that you worked there until 1998. If you could summarize your work and professional experience from

2002

1998 to the present, please.

A Sure. After leaving Novell, I was at that time an existing board member of a small public company that asked me to step in as president and chief financial officer of that company to help it out for about a year, and I did that. I took a little time off with my family, and then I moved back after that, that one-year experience. I then went to -- became an investor, then a board member, and then chief operating officer and chief financial officer and took another company public in the early 2000s. I then joined a third -- next company after that, which is Business Objects, maybe a half billion dollar corporation when I joined it, large multinational, traded both in Europe and in the United States on both exchanges, dual listed, dual traded, very complex structure. And I was the chief financial officer there for about seven years. And then just retired about a year ago when that company was sold to SAP.

Q At present, do you have any board positions or other --

A I do. I stay active. I'm a board member of a public company called Glu-Coat systems, a technology company in the Bay Area. Also a board member of a philanthropic organization doing green work as El Coral, interacting with Coral Reef Alliance, trying to help out indigenous people in the coral areas around the world.

2003

If I keep going -- I find it hard to retire, so I'm also doing advisory services on several small start-up companies in the Bay Area.

Q You mentioned various positions that you've held either as a senior executive officer or as a board member. I would like to have you focus for a moment on the experience you have had as a senior executive officer of publicly traded companies. And, in short, can you explain to the jury what, in your view, the duties and responsibilities are of a senior executive officer of a publicly traded company?

A Most of my experience has been as a chief financial officer. Although I think that term is often not well understood. People think about it as the guy with the green armband that is doing the books, which is a very important part of the role. For virtually all of the companies I was chief financial officer or president, or chief operating officer, I had that role, which includes the treasury function, the investments, the cash, the credit functions of screening for new customers, the paying the bills functions of accounts payable, all of worldwide payroll responsibilities, information services and technology, all the computing systems of the company worldwide, investor relations. As a public company, you are always communicating with shareholders, analysts and investor relations. Often

2004

facilities comes with that, the real estate aspects of expansion and contraction and dealing with landlords and construction and operation and occupancy of buildings. Because of my background being fairly broad in not just the finance but the engineering background, I often got involved in sales presentations, customer briefings and presentations, a very broad role.

Q Let me have you now focus on the experience you've had as a member of boards of directors of publicly traded companies. What, in general, have you viewed your responsibilities to be as a member of the board of directors of these various companies?

A It's really a strategic adviser and a shareholder representative. It's a fiduciary role. It's representing sort of the inside in. Its helping the company be successful. One of my good friends who's a senior, he was a publisher in the internal auditing field, says the perfect board member keeps his nose into everything but his fingers out of everything. You observe, you're a fiduciary, you're an oversight, but you don't actually do the work. You encourage and help and inspect management.

Q What was it that brought you to Novell in 1989?

A As I mentioned, a company that I was the chief financial officer of, a public company called Excelan, was

2005

acquired by Novell.

Q You've described for us your general duties and responsibilities of a senior officer, particularly a chief financial officer. Would you describe for us, particularly focused on the time that you were the CFO of Novell, what your job duties were at Novell as chief financial officer?

A In fact, they were the same. Let me cover those, but also try and be more a little more specific. I talked about the financial aspects. So there is running the accounting systems of the company. There is the external reporting. As a public company, you have all the Securities and Exchange Commission reports that are required to be filed periodically, the public company documents. There is all the internal reporting, budgeting, forecasting, comparison of actual versus those plans, management operational accounting, the treasury investment, the global tax strategy, certainly mergers and acquisitions. Particularly at Novell, I think while I was there we did -- I guess 15 or more acquired acquisitions of smaller companies. And often with those there is also divestitures. All that is complicated accounting transactions. Often the CFO, in my case, I was involved with virtually all of those.

Q Are you familiar with what is known as the UNIX operating system?

A I am familiar with it. I have never actually

2006

programmed in it, but I'm quite familiar with it.

Q Explain to us what your understand is of the UNIX operating system.

A I'll give some context for that. The computers -- or the hardware aspects require two kinds of software, operating systems software, which is really the things that translate the machine language into instructions, then there is what most of us deal with, which is the applications, what you actually see on the screen. So UNIX was a very broad, stable operating system that was developed by an organization called the UNIX Systems Laboratories. Most of its early life was owned by AT&T. There was even a company called Bell Laboratories. People heard of Bell Lab sometimes. That's where UNIX was invented as a software operating system. It was originally designed for high power computers and mini computers before the existence of PCs. It later revolved to be, because of that, a very broad and often called ruggedized because it had the trial by fire of lots of large system transactions using it. So it was very -- considered a stable industrial strength company operating system.

Q You mentioned UNIX System Laboratories. Is it true that Novell acquired UNIX System Laboratories?

A Yes, it did.

2007

Q Do you recall when about that acquisition took place?

A '92 or three probably.

Q Let me have you focus, if you would, on UNIX System Laboratories and the UNIX system before Novell acquired it. Did Novell have any relationship relative to the UNIX operating system or UNIX System Laboratories before it acquired UNIX System Laboratories?

A Not so much directly with the Bell Laboratory and UNIX operating system as with the dozens to hundreds of licensees of that operating system. What Novell's early claim to fame was was that it could connect dissimilar computers so they could share information. That's called networking. And because UNIX had proliferated across anything from HP, UX, UNIX, Sun UNIX, IBM UNIX, and people licensed some of that technology that were deploying it in their unique computer systems, Cray, Andel, it was widely used. If those computers could talk to one another, we were helping connect those computers as a network operating system so they could talk to one another.

Q What was the Novell product or system that would allow that --

A It was called NetWare.

Q Are you familiar with a product known as UnixWare?

A I am.

Q Could you describe your understanding of UnixWare?

2008

A As UNIX -- as the personal computer started coming on to the corporate world, there was a question of what was the right operating system for the personal computer. Microsoft, of course, had a DOS version. There were other DOS versions, ER DOS that Novell owned for a period of time. But those systems were not considered at that time strong, ruggedized and powerful enough for corporate usage. They were still evolving, very young in their infancy and testing. So there was a question could UNIX fulfill that. A version of UNIX for the PC or Intel processor was called UnixWare.

Q Who developed UnixWare?

A We did that.

Q Novell?

A Novell.

Q Were you involved in Novell's acquisition of UNIX System Laboratories?

A I was.

Q Would you describe what your role was in that acquisition?

A I was one of the three or four key executives assigned to doing that transaction. If you think about corporate acquisitions as three or four phases, life cycles just like people or plants or animals, one is the discovery or finding a company or fit and having some level of social

2009

interaction. Often there is an illusion between mergers and acquisitions and marriages. There is a dating phase. Then there is actually the event, the marriage. That's the transaction itself. The documents are on. That tends to be much more legal and finance driven.

THE COURT: Mr. Tolonen, could you slow down a little bit so the court reporter can get down what you are saying.

THE WITNESS: I would be happy to. I get excited.

So the marriage phase, the transaction phase which tends to be more ceremonial. At some level it's very complicated because there are a lot of issues. There are people issues, technology issues, ownership rights issues, there's negotiations of cost and price, and everything is a tradeoff.

Then there is an integration and an operating phase and that's where, like a marriage, it's the reality of living together. So different people get involved in different phases of that.

BY MR. BRENNAN:

Q Can you tell us why it was Novell decided to acquire UNIX System Laboratories?

A It was part of a large strategy for the Novell entity. We were rapidly growing. It was a time of great change in the computer industry. Microsoft was coming in the stage

2010

of -- again, thinking about the size and the time, personal computers were just coming out networking. The Internet, as we know it, wasn't described in a public way. It was in a technology way. People knew it could be done. It was evolving from a very early military system which was connecting military computers and getting into the public domain to what we now call the Internet. In that kind of system we believed there needed to be a lot of applications that were network aware. There needed to be a networking operating system. There needed to be a very powerful operating system. So we were expanding in each of those areas, acquisition of application software and then also operating systems software.

Q And UNIX essentially filled the role of the operating system?

A It did. It served a significant role in terms of a computer operating system that would scale and grow and be very powerful.

Q Now when Novell acquired UNIX System Laboratories, did it acquire all of the company's assets or only a subset?

A It acquired the entire business.

Q How much did Novell pay to acquire all of the UNIX System Laboratories business?

A I believe it was something in excess of $300 million.

Q To your understanding, did that include the acquisition

2011

of any copyrights that pertained to the UNIX software?

A Absolutely, everything. It was the entire business, all of its assets, all of its liabilities, all of its property.

Q Just jump forward for a minute. Were you also involved in the sale of certain assets by Novell to a company called Santa Cruz Operation?

A Yes, I was.

Q Just so we can understand perhaps the distinction between the acquisition by Novell of all of the UNIX System Laboratories business and the sale of some of the assets by Novell to Santa Cruz Operation, was there a difference between those two transactions?

A Yes, there was.

Q Could you describe what the basic difference was?

A In the case of an acquisition of a company, the acquirer, the buyer acquires everything about the company, all of its assets, all of its liabilities and risks associated with ownership. You know, the people involved, generally the entire operation think of it as an all kind of a purchase. In a different kind of a purchase, it's called a purchase of specific assets, there is a -- rather than just saying you get everything, you say, here's the list of things you get, here's the list of things you don't get. So

2012

there's a much more of a carve out, a specific target of a particular asset being acquired. We were, in the case of The Santa Cruz Operation, selling only a specific part of the business. In fact, we kept some other parts and we had licensed other parts to other businesses.

Q Now focusing on the transaction between Novell and Santa Cruz Operation, was there a point -- perhaps using your dating and marriage metaphor, was there a point in this dating, marriage stage where there was contemplation given to selling all of the business to Santa Cruz rather than just part of it?

A I'll say yes to that, meaning that we were in the process of diversifying UNIX into the marketplace. At the time Novell was competing very heavily with Microsoft. Microsoft had DOS and then came out with Windows and was -- if you remember the terminology of the days, Windows 97 was kind of the first stable version of Windows that seemed to work. That was coming and wasn't even out yet. They were talking about an NT, or a new technology that would be more powerful. We wanted to proliferate UNIX in as many strong company hands as possible to make it a viable competitor in the marketplace.

Q Ultimately did Novell sell all of the assets relative to UNIX that it had acquired from UNIX System Laboratories

2013

to Santa Cruz or only a smaller subset of those assets?

A Smaller subset.

Q Could you explain to the jury why it was that Novell did not sell all of its related assets to Santa Cruz?

A Probably two or three reasons. We had talked to other companies as well. Santa Cruz Operation had been a licensee of the UNIX technology from Novell. They had a product in the marketplace on the Intel platform that was using UNIX, and they had a product in that space. They were therefore a good candidate to help us take this product into the PC space. We had many other customers who were also licensees and much, much larger customers. IBM was a licensee. Hewlett Packard was a licensee. And Sun Computer Systems was a licensee. In fact, Novell itself had incorporated much of the UNIX technology we had purchased from UNIX System Laboratories into other areas of our business. An example would be the Tuxedo product, which, that's again, assuming acronyms, t-u-x-e-d-o, transactions for UNIX extended to distributing operations. So it was a networking aspect of UNIX to connect to similar UNIXs. We wanted to keep that. We had other parts of UNIX that were potentially in our code because we merged engineering organizations. We needed to keep that. We were really selling the rights to continue

2014

the UNIX operation to SCO but only for the Intel chips, that business, and not in competition or not to take away our own ownership rights, our own other products, or our own relationship with our other licensees.

Q What was Novell hoping the Santa Cruz Operation would do with the assets relative to UNIX if Novell did sell?

A Proliferate it into the PC marketplace through a product called UnixWare.

Q How did Novell expect that to be beneficial to get that into Novell?

A It would give another strong competing operating system in the marketplace to the Microsoft version. It would give a company that wanted to continue to develop and operate and extend that operating system in the PC space. And if they were very successful, we could have also reaped some further benefits. There was a royalty structure such that below a certain level Santa Cruz Operation would not owe any additional money to Novell, and in the middle range they would cross a hurdle, and then there was a cap of how much royalties they would pay, assuming they were successful at that.

Q What was your role in the transaction whereby Novell sold certain specified assets to Santa Cruz Operation?

A I was one of the key three or four executives assigned to the project to sell those assets. It was myself, the

2015

technology head of UNIX Systems Labs, a guy by the name of Mike DeFazio, the general counsel of Novell, David Bradford, and our outside primary counsel, Tor Braham, from Wilson Sonsini was the negotiating team and the development of the agreement team.

Q You mentioned the law firm of Wilson Sonsini. Did Novell at the time have a member of its board of directors by the name of Larry Sonsini?

A Yes, it did.

Q What was the relationship between Larry Sonsini and the Wilson Sonsini firm?

A He was one of the founders. That's his name in the Wilson Sonsini.

Q To your observation, what was the relationship between Larry Sonsini, one of the founding members of the firm, and then this Tor Braham who you indicated was with Wilson Sonsini?

A Tor was one of the Wilson attorneys. I worked with him on many transactions and accounts. He was a prime representative of Wilson for Novell. His specialty was in technologies, mergers, acquisitions, software licensing. A very bright guy. And at some level was sort of an up and comer that was assigned to our company because Larry wanted sort of an oversight, and wasn't doing work as a board member, he wanted to make sure his firm was representing us

2016

well.

Q Now you've mentioned that during your tenure at Novell you worked on a number of merger and acquisition deals. Had you worked with the Wilson Sonsini firm prior to the transaction involving Santa Cruz Operation?

A Yes, I had.

Q What was the Wilson Sonsini's firm relationship to Novell?

A They were our primary outside counsel on corporate matters, on SEC matters, and then contract, merger, acquisition matters.

Q Had you worked with Tor Braham before the Santa Cruz Operation transaction?

A Yes, I had.

Q What were your impressions of Mr. Braham?

A I liked him a lot. He was a very smart attorney.

Q I would like to have you focus on the specifics of the asset purchase agreement. Did you ever see any drafts of the asset purchase agreement before it ultimately was signed by the parties?

A Yes, I did.

Q What, to your understanding, was the purpose of reviewing drafts going back and forth?

A It really was a business review. And the chief financial officer, as I mentioned, has certain fiduciary

2017

responsibilities to the business in its reporting. And transactions, acquisitions and divestitures have complex accounting issues, so I was a business executive reviewer of the transaction and probably virtually every draft.

Q In terms of the asset purchase agreement itself, what was your relationship with Novell's general counsel, David Bradford, in connection with this transaction?

A He was probably the lead in the transaction -- in creating the document with Tor Braham and senior executives both assigned to this project.

Q Was it your understanding that under the asset purchase agreement Novell would be selling certain specified assets to Santa Cruz?

A Yes.

Q To your understanding, what did Novell get in return for the assets that it did transfer or sell to Santa Cruz?

A Essentially stock in the company. The company was relatively small. It didn't have a lot of cash to buy the business. We eventually came to an agreement that they would issue new shares to Novell to become a partial owner, smaller owner, I think it was 17 percent of the company ultimately, in exchange for the assets that they wanted to acquire.

Q And did you ever attempt to place some sort of valuation on the stock shares in Santa Cruz that Novell

2018

obtained from Santa Cruz as part of this transaction?

A Absolutely. We had to do that both in terms of negotiating, understanding the value, but also in terms of external reporting, what do we get. So that's part of our books and records.

Q What was the valuation that Novell arrived at in terms of the Santa Cruz stock it obtained?

A It was -- I would say around $50 million. Six million shares, and we determined a price of -- it was about $8.50 or 70 cents. If you like, I can tell you how that gets arrived at.

Q Perhaps you might. My suspicion is it's a fairly detailed accounting mechanism, but if you could summarize for us how that value was arrived at.

A I can. Maybe specifically for the jury, how does one come up with these things, how does one determine the value of something. Santa Cruz Operation was a publicly traded company. So there was a value that could be determined every day by looking in the paper and saying what is Santa Cruz Operation's stock worth. Well, it's $10 and something a share. But a company's value in its stock -- the price per share is impacted by how many shares there are. Sometimes I talk about this as a pizza or a piece of pie to people when I'm explaining it to them saying if the price of a pizza is $10 for a large pizza, there are ten

2019

slices, you could say it's a dollar a slice. Each one of those is a share. But if someone were to cut all of those pieces in half, now what is a piece worth, what's a share worth. Well, it's half. It's less. So in the case of a company that had a value, it was the value in the paper every day. Let's call it $10 a share. They were going to create new pieces. They were going to create six million new slices, new shares. So the value per share would be less. So some work was done consistent with other accounting principles at the time to say how much less, and we came up with the $8.70 as being about 15 percent less per share than the current traded value because there is a whole lot more shares showing up. They just issued pieces of paper to us. So the ownership of the company, now it was worth this much. Now, you know, it hasn't changed in value, but the value of a slice or one share has decreased because now there's more shares. So we came up with the $8.71. And it was reviewed by our auditors as a reasonable assessment, and the attorneys, and that's the numbers we used for our SEC filings.

Q When you say SEC filings, what do you mean?

A Securities and Exchange Commission, a public company periodically reporting.

Q Now if I could direct your attention -- this will

2020

likely be on the screen for you -- to what has been admitted into evidence as Exhibit 1. It's the asset purchase agreement by and between The Santa Cruz Operation, Inc. and Novell, Inc. dated September 19th, 1995. In particular, I would like to direct your attention, Mr. Tolonen, to a provision in the asset purchase agreement, and that would be -- this will show on your screen as well -- section 1.1 under the heading the acquisition. And this, so you know, Mr. Tolonen, by now is very familiar to the jury, but I would like to have you focus on this. It states under 1.1(a) the following, purchase and sale of assets. On the terms and subject to the conditions set forth in this agreement, seller -- let me pause there. Did you understand under this asset purchase agreement that the seller was Novell?

A That's correct.

Q And it continues, will sell, convey, transfer, assign and deliver to buyer -- let me pause again. Did you understand the buyer to be Santa Cruz Operation?

A I did.

Q And buyer will purchase and acquire from seller on the closing date, as defined in section 1.7, all of seller's right, title and interest in and to the assets and properties of seller relating to the business, collectively live the assets, identified on schedule 1.1(a) hereto.

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Notwithstanding the foregoing, the assets to be so purchased shall not include those assets, the excluded assets, as set forth on schedule 1.1(b). My question to you is, did you have an understanding, as you reviewed the asset purchase agreement, that what Novell would be selling or transferring to Santa Cruz would be set forth in schedule 1.1(a)?

A Absolutely. That's the nature of an asset and purchase agreement. This is what you get and this is what you don't get.

Q Did you also have an understanding that assets that would be excluded, that is that would not be purchased by Santa Cruz, would be set forth in schedule 1.1(b)?

A Yes, correct.

Q Now if we might then turn to schedule 1.1(b) of the asset purchase agreement. You will see that on the screen. You will see that on page 2 of that schedule under the heading Roman numeral V, intellectual property, it references as excluded assets, quote, all copyrights and trademarks, except for the trademarks UNIX and UnixWare. And then section B -- subsection B is all patents. Do you see that?

A Yes, I do.

Q Was it your understanding at Novell that Novell purposefully was excluding from the assets to be transferred

2022

under the asset purchase agreement all copyrights and trademarks except for the trademarks UNIX and UnixWare?

A Yes, absolutely.

Q Did you also understand that Novell was excluding from the asset purchase agreement all patents?

A Yes.

Q Why was it that Novell was excluding all copyrights and trademarks except for the trademarks UNIX and UnixWare?

A It was part of our strategy and really necessary under the nature of the transaction in light of the value in the software is in its ownership, and the ownership is often controlled by the copyrights, just like the ownership of a book would be. Software is a little more complex than that. It doesn't have an ending necessarily. New chapters keep getting added and software keeps getting written and modified. So who has rights to what becomes very important, one. Two, Santa Cruz Operation was relatively small and couldn't afford the entire value of -- or a greater value than what was the list of assets acquired, so the things that were retained were part of that price negotiation, what do you get for how much can you pay. And it was important strategically to Novell. We had other customers. They were larger customers. They were important industry customers who were licensing product and technology from us, that we

2023

retained the rights to the royalty flows off of those. We had to have the ownership to be able to control those relationships. And I think there are probably two other reasons. One was we had intermingled at some level the operating groups. We knew exactly what we were selling, but we didn't want to have any ownership questions on the code we retained, our NetWare operating system, who owns that. So we wanted to be clear we still owned the copyrights and the UNIX code from Bell Labs. And we had some concerns over the long-term viability of Santa Cruz Operation. There's lots of mergers and acquisitions in software, what if they were going to be acquired by another company, one that would be a competitor to Novell, so we didn't want to have any rights brought into question or any of our own ownership rights of the software brought into question in such a situation. So it was a critical part of the agreement.

Q Were you aware that all copyrights and trademarks, except for the trademarks UNIX and UnixWare, and all patents were going to be excluded from the transaction before the asset purchase agreement was signed?

A Does anyone know how an agreement ends until it ends. It's not done until it's done. Were there negotiations about what goes, what doesn't go, what's on each list? Of

2024

course.

Q Were you surprised by the inclusion of this language in the asset purchase agreement?

A No. It was an important element to the strategy from Novell's point of view.

Q Did you consider this to be a lawyer's error or a scrivener's error or a mistake?

A Absolutely not. In fact, it was expressly called out in the board of directors resolution that that was one of the things we were keeping.

Q Did you consider Novell's outside counsel, Tor Braham at the Wilson Sonsini firm, to be operating out of control or out of his authority in preparing the asset purchase agreement which included the excluded asset schedule that we've been looking at?

A No. A very smart guy doing a very quality job.

Q Did you understand Mr. Braham and the other attorneys at Wilson Sonsini to be acting at the direction of Novell management, including yourself, in the preparation of the asset purchase agreement?

A Yes.

Q After the asset purchase agreement was signed on September 19th, 1995, did you have any further involvement with the asset purchase agreement or the transaction prior to the date that it closed later in December?

2025

A I would say casual involvement. It's my recollection that I was assigned to another project. This one, essentially the asset purchase agreement part, was concluded. There was some tidying up to do in the contract. There was an amendment that I kept abreast of but was not as actively involved in those, called clean up points.

Q Between the time that the initial asset purchase agreement was signed in September 19th, 1995 and the actual close of the transaction in December 1995, did you ever have occasion to make any presentations to the Novell board of directors regarding what was going on between Santa Cruz and Novell pursuant to the asset purchase agreement?

A Yes.

Q Could you generally describe that for the jury?

A As a chief financial officer, I was not a member of the board of directors. Generally that is the case. But like the general counsel, the chief financial officer is often called on to go to board meetings to make presentations, and I was present at many of those board meetings. I made several presentations to the board about the status of the contract and about the ongoing business relationship. As I said, the contract itself was part of it, but then there's also the integrations and how is it going, and what are the accounting aspects of the transaction and how it gets reported.

2026

Q At any time during any of the interim Novell board of directors meetings from the date that the asset purchase agreement was signed in September until the asset purchase agreement closed in September, were there ever any discussions that you were a party to at the board level or any member of the board or any other invited executive questioned or wondered whether copyrights and trademarks other than the trademarks UNIX and UnixWare were being in fact sold to Santa Cruz?

A Not that I'm aware of, no.

Q You mentioned there had been an Amendment No. 1.

MR. BRENNAN: If we could place on the screen a portion of Exhibit 1.

This is actually T-5. Your Honor, I believe T-5 is in evidence already. Just for Your Honor's benefit, this also is a replication of part of Exhibit 1 in evidence.

BY MR. BRENNAN:

Q Mr. Tolonen, if I could direct your attention to Exhibit T-5. Does this appear to be Amendment No. 1 to the asset purchase agreement?

A It does. Appears to be.

Q To your understanding, did Amendment No. 1 change or modify the exclusion in the initial asset purchase agreement so that the initial asset purchase agreement was changed and copyrights or trademarks other than UNIX or UnixWare would

2027

then be sold or transferred to Santa Cruz Operation?

A No, I do not believe it made that change.

Q You mentioned earlier that, to your understanding, there had been a resolution by the Novell board of directors approving the asset purchase agreement; is that correct?

A That is correct.

Q And did you have an understanding as to whether the Novell board of directors actually included a resolution that specifically approved of the exclusion of copyrights and trademarks?

A That's correct as well.

Q To your understanding, was the initial asset purchase agreement signed by Mr. Robert Frankenberg?

A Yes, it was.

Q To your understanding, who was Mr. Frankenberg?

A He was the chief executive officer, CEO that replaced Ray Noorda when Ray Noorda retired.

Q To your observation, who was more involved from a senior management level in the asset purchase agreement, yourself or Mr. Frankenberg?

A Myself. There was a team of executives on the outside counsel who were working on it day after day after day. Bob, as the CEO, was the ultimate signator, but we all had to give our review and approval that says yes, our work is done and you are okay to go here and sign this.

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Q Now did there come a time while you still were the Novell chief financial officer that there was Amendment No. 2 to the asset purchase agreement that was discussed?

A Yes. That was about maybe a year later.

Q And I would like to have you focus your attention on what became ultimately Amendment No. 2. Did you have any role or involvement in what became Amendment No. 2?

A Yes. I was the signer of that amendment.

MR. BRENNAN: Your Honor, I believe we have in evidence Exhibit N-8. Maybe we can just confirm that. If not, I'll move it. It also is a part of Exhibit 1 in evidence.

THE COURT: N-8 has not yet been admitted.

BY MR. BRENNAN:

Q Mr. Tolonen, if you will look at what's on the screen. It's titled Amendment No. 2 to the asset purchase agreement. If we could scroll down, for your benefit, to the second page, I believe you'll see a signature. Is that your signature?

A Yes, it is.

MR. BRENNAN: Your Honor, for ease of reference, I do wish to move into evidence Novell Exhibit N-8, Amendment No. 2.

THE COURT: Any objection?

MR. HATCH: It's already in as Exhibit 1, Your

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Honor.

MR. BRENNAN: I do recognize it is part of the larger Exhibit 1, but just for ease of reference for this examination it would help to have this separately.

THE COURT: It will be admitted.

(Defendant's Exhibit N-8 was received into evidence.)

MR. BRENNAN: Thank you, Your Honor.

BY MR. BRENNAN:

Q Mr. Tolonen, looking at the top of Amendment No. 2, if we could just highlight that first provision, it states, quote -- if I'm reading correctly -- as of the 16th day of October, 1996. Did I read that date correctly?

A It looks correct to me, yes.

Q The September 19, 1995 asset purchase agreement, the agreement, between Novell, Inc. and The Santa Cruz Operation is amended in the following respects. And then if I could have you focus on paragraph A. I will highlight that. That continues, quote, with respect to schedule 1.1(b) of the agreement titled Excluded Assets, section V, subsection A shall be revised to read, colon, all copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the agreement required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies. However, in no event shall

2030

Novell be liable to SCO for any claim brought by any third party pertaining to said copyrights and trademarks. Now with that particular language in mind, my question is did you approve of this Amendment No. 2?

A I signed it.

Q So I would like to step back in time and talk about with you how Amendment No. 2 came to be. First of all, did you work with anyone else at Novell in terms of the legal draftsmanship of Amendment No. 2?

A There was a young attorney, Allison, that worked for David Bradford that was involved. I think David also reviewed it.

Q Do you remember this young attorney, her name would be Allison Lisbon?

A Yes, that's correct.

Q Did you have any interaction with Ms. Lisbon regarding Amendment No. 2?

A Yes, I did.

Q Now before Amendment No. 2 was approved and entered into, were you aware that there had been a previous draft that had been proposed by Santa Cruz Operation?

A Yes, I was.

Q If I could direct your attention to Novell Exhibit T-34.

MR. BRENNAN: Your Honor, this is not yet in

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evidence.

BY MR. BRENNAN:

Q It will either be on the screen or there is also a binder in front of if you if you would like a hard copy of this document. Are you able to see it on the screen?

A Yes, I can see that.

Q For your benefit, if we could display the whole document, you will see that what is before you doesn't have any signatures on it, correct?

A Correct.

Q To your understanding is T-34 a draft of Amendment No. 2 that was proposed by Santa Cruz Operation?

A I'll take your word that that was the draft. It's a little hard to read on the screen without the full size here.

Q Perhaps what we could do is highlight, so you can see a little more clearly, paragraph A of the proposed Amendment No. 2. And looking at that language, does this appear clear?

A Yes, that helps. There was some language here that was in an early draft, and I'm presuming it was the one proposed by SCO, that was unacceptable to us and we deleted certain parts of that.

MR. BRENNAN: Your Honor, I wish to move into

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evidence Novell Exhibit T-34.

MR. HATCH: Your Honor, I don't think he has established foundation with this witness.

THE COURT: I'll overrule the objection. It will be admitted.

(Defendant's Exhibit T-34 was received into evidence.)

MR. BRENNAN: Thank you, Your Honor.

Now if we could then have displayed to the jury what is highlighted.

BY MR. BRENNAN:

Q Let's look at the language that was proposed by Santa Cruz Operation. The proposed language for Amendment No. 2 was, quote, with respect to schedule 1.1(b) of the agreement, titled Excluded Assets, section V, subsection A shall be revised to read: All copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of this Amendment No. 2, which pertain to the UNIX and UnixWare technologies and which SCO has acquired hereunder. However, in no event shall Novell be liable to SCO for any claim brought by any third party pertaining to said copyrights and trademarks. Do you see that language?

A Yes, I do.

Q Was the language that was selected for this subpart A

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unacceptable to Novell?

A Yes, it was.

Q Why was that?

A Because SCO had not acquired all of the copyrights under the -- as of the purchase agreement.

Q So was your understanding, then, the reason for rejecting the proposed language that Santa Cruz offered was because it suggested that SCO would have acquired all the copyrights?

A Yes.

Q I would like to ask you for just a minute about those who might have or might not have been involved with Amendment No. 2. You are familiar with an individual by the name of Ed Chatlos?

A Yes.

Q Was Mr. Chatlos involved in any way in the negotiation or preparation or approval of Amendment No. 2?

A No, not to my knowledge. He was involved with the SCO Operation and was part of the UNIX system sale, the UNIX and UnixWare sale. But no, he was not a negotiator.

Q And you are familiar with an individual by the name of Duff Thompson?

A Yes.

Q Who was Duff Thompson?

A He was a Novell employee who came to Novell through

2034

another acquisition. He was an attorney by training and was working in the Novell business development group. In fact, was involved in between the two parts of the contract. Where I was involved, I was involved in the main asset purchase agreement and this amendment, and he was involved in helping clean up the contract in Amendment No. 1.

Q To your observation, was Mr. Thompson involved at all in the negotiation, drafting or ultimate approval of Amendment No. 2?

A At all is a little -- I don't recall his involvement, no, in any significant way.

Q Are you familiar with an individual by the name of Ty Mattingly?

A Yes.

Q Who do you understand Mr. Mattingly to be?

A He was an assistant to Ray and a mid level manager who was also working in the business development group.

Q To your observation, was Mr. Mattingly involved in any way with Amendment No. 2?

A Probably not directly or specifically, no.

Q If we might, I would like to turn back to Trial Exhibit N-8 in evidence. This is the Amendment No. 2 that was signed and approved by both parties. To your understanding, what was the purpose of Amendment No. 2?

MR. BRENNAN: In particular, go back and highlight

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section A of Amendment No. 2.

THE WITNESS: Sure. I would describe Amendment 2 as similar to Amendment 1 in that it was generally a clean up type of amendment, not deemed a material or significant amendment in terms of changing of the asset purchase agreement, but improving clarity.

The primary discussion was around how -- it was both in Amendment No. 1 and 2, how do the two companies deal with third parties who are other licensees of UNIX. So how does SCO and Novell deal with IBM or with Sun or with other companies in developing process and procedures around how would we make that work smoothly and best for all parties concerned. That's what the latter half is.

In this particular case, it was proposed by SCO that there should be some changes to make clear that they had rights they would need. Copyright laws -- I'm not a lawyer, so this may not be perfect, but there is the ownership of the copyright and then use licenses. You could say there are also lots of nuance of that. There can be a use license for a territory or a use license for a particular operating system or a computer system. So you can carve up the licenses in lots of ways, often done by the owner as licensing to multiple different parties for different uses.

One might think of that as like in a book or a

2036

movie, you have the rights to distribute this movie in Chinese, or in Europe, or whatever, but you don't own the movie. You get -- for a certain amount of money, you get the rights to use this in some fashion.

There was a concern that was raised that was it clear that SCO had the right use rights they needed with regard to the acquisition of UNIX and UnixWare, and we wanted to be clear that, of course, they should have the right use rights. It's not an ownership question. It's a use question. This was designed to try and address that. Clearly, they weren't excluded the use part. They were allowed the use that they needed for the acquisition of UNIX and UnixWare.

BY MR. BRENNAN:

Q Now under Amendment No. 2 did Novell intend to transfer actual ownership of UNIX copyrights to Santa Cruz?

A No, absolutely not.

Q Did you ever tell anyone that Novell intended to transfer ownership of the UNIX copyrights to Santa Cruz by or under Amendment No. 2?

A No. In fact, that language was taken out of the earlier draft.

Q In any of your dealings with the Novell board of directors, did you ever suggest to the board or make any reports to the board suggesting that under Amendment No. 2

2037

Novell was transferring ownership of the UNIX copyrights?

A No. That would have been contrary to the resolution which excluded them.

Q Now with what you just said in mind, that is that the initial resolution relative to the asset purchase agreement was by resolution of the board?

A Yes.

Q And, in particular, there was a resolution regarding exclusion of copyrights, correct?

A That's correct.

Q When you signed Amendment No. 2, did you go back to the board of directors and get approval to sign Amendment No. 2?

A No, I did not.

Q Why is that?

A It was not any change in the original asset purchase agreement exclusion, it was a clarification of the terms of that agreement.

Q If under Amendment No. 2 there had been an actual transfer of ownership of the UNIX copyrights to Santa Cruz, do you believe that that would have been a material change that would have required board of director approval by Novell?

A Yes. There would have been an easy way to do that, put it on the schedule of included assets, which we clearly did not do.

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Q Why is it that you think Amendment No. 2 did not transfer ownership of the UNIX copyrights to Santa Cruz?

A It was not its intent.

Q Now we've talked about the schedule 1.1(b) of the asset purchase agreement, which is the excluded assets. Under Amendment No. 2, did Amendment No. 2 also change the schedule of included assets?

A No, it did not.

Q Do you know when Novell closed the deal with Santa Cruz in December of 1995, whether there was a bill of sale for the assets being transferred?

A Yes, there was.

Q And in connection with Amendment No. 2, was there a revision of that bill of sale to include any UNIX related copyrights?

A No, there was not.

Q Do you have a financial interest in the outcome of this litigation?

A No, I do not.

MR. BRENNAN: Mr. Tolonen, thank you. I have no further questions at this time.

THE COURT: Mr. Hatch.

CROSS-EXAMINATION

BY MR. HATCH:

Q Good morning, Mr. Tolonen.

2039

A Good morning.

Q Now you indicated I think in your testimony that you were one of two or three key executives at Novell who were handling the transaction, the APA, correct?

A Yes, that's correct.

Q Do you know what the name of the -- the code name that was given internally to Novell for this project?

A I don't recall the code name. We had lots of acronyms and code names.

Q You were the key executive and you didn't know what the actual code name was?

A I probably did 20 different code names, mergers and acquisitions while I was at Novell.

Q Is it possible that you've overstated your role in this deal?

A No, I do not believe I have.

MR. HATCH: Let me have -- let's go to Exhibit 86.

BY MR. HATCH:

Q Do you see this document, Mr. Tolonen?

A Yes, I can see it.

Q Do you know who Ed Chatlos is?

A I do.

Q Have you ever heard of the term sleigh ride team?

A That was the business development team's code name for this project.

2040

Q And the people on here are people that you understood were involved in this transaction, correct?

A On the business development side, yes. Not so much on the contract side.

Q Have you seen this document before?

A I don't see that I'm on the to list. I may have seen it. I don't recall.

Q You understand that this is Mr. Chatlos talking to the entire sleigh ride team, correct?

A The business development team, yes.

Q From people from both sides, correct?

A I see this is a memo from Ed Chatlos, yes.

MR. HATCH: Your Honor, I would move Exhibit 86 into evidence.

MR. BRENNAN: Your Honor, I don't think they have laid a foundation for this.

THE COURT: I would have to agree. He says he's never seen it, he's never seen it.

MR. HATCH: All right. I would agree, too. If he's not part of the team, he's not here.

MR. BRENNAN: Your Honor, that's just argument. I move to strike.

BY MR. HATCH:

Q Well, let me ask you, sir --

THE COURT: Just a second. The Court will agree

2041

with Mr. Brennan, that Mr. Hatch's comment was testifying and ask the jury to disregard his comment.

BY MR. HATCH:

Q This memo from Ed Chatlos, you understood him to be who?

A Certainly this was a large transaction that probably had dozens and dozens and dozens of people involved trying to keep up with its status, which were people had different roles. I was the key executive assigned by the company to be the business executive on the APA. It doesn't say there weren't other e-mails going around about trying to keep up.

Q Mr. Duff Thompson is on this document, correct?

A Yes.

MR. HATCH: Your Honor, I would represent that we've left open Mr. Thompson coming back, if necessary, for things just like this. We'll bring him back if we have to verify this document, and I would proffer that. I don't know if that would change the objection of Mr. Brennan or not.

MR. BRENNAN: I assume it's up to them as to who they would like to bring back, Your Honor. We'll have to wait and see if they make that presentation.

MR. HATCH: I would like to use the document with that proffer.

THE COURT: Mr. Brennan, I recall on one occasion

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I allowed you to use a document based upon your representation that the foundation for it would be subsequent. I think I have to extend the same courtesy.

MR. BRENNAN: Certainly. We would like to extend every courtesy, Your Honor.

THE COURT: Mr. Hatch --

MR. BRENNAN: Your Honor, I'm sorry. On that point, given the representation, we're assuming that Mr. Thompson will, in fact, be brought back.

THE COURT: That's what I'm going to verify.

MR. HATCH: Your Honor, I'm trying to make sure that somebody from my team knows whether he's available or not, so let me see.

MR. BRENNAN: So, Your Honor, I suppose -- I do want to extend every courtesy, but I think we need to have a firm commitment.

THE COURT: I would agree with you, Mr. Brennan.

MR. HATCH: Let me do it this way, Your Honor.

BY MR. HATCH:

Q Do you know who Robert Shimp is?

A I recall the name.

Q Do you know who he is?

A I don't know him personally. I have met him. He was a another employee at the time.

Q Do you know who Ty Mattingly is?

2043

A Yes, absolutely.

Q He's part of the sleigh ride team?

A Business development team.

Q Do you know who Art Sabsevitz is?

A I don't recall that name.

Q Do you know who Jim Machi is?

A I do recall him being involved in the project.

Q From which side? Who does he work for?

A I don't recall.

Q You don't recall?

A I don't recall.

Q You don't know whether he worked for Santa Cruz or for Novell?

A I believe it was on Novell's side.

Q You are not sure?

A I believe it was on the Novell side.

Q How about Lisa Ozimek?

A I don't recall her.

Q Don't know which side?

A Nope.

Q Do you know who Geoff Seabrook is?

A Nope.

Q Don't know which side, Novell or Santa Cruz?

A No.

Q Tor Braham you know?

2044

A Absolutely. I worked with him on pretty much a daily basis on the APA. He was a senior attorney at Wilson, as we mentioned.

Q He didn't tell you about any of these people?

A There were dozens and dozens of people on the project. There were key people and less key people in different parts of the project, technology team, business development team, contract team, and senior executives reviewing the work.

Q How about Bill Traber -- excuse me, Biff Traber?

A Yes. These were also people I knew. This whole list of people, people on the technology or business development.

Q But do you know who Biff Traber is?

A I've met him, but I didn't have a lot of dealing or interaction with him.

Q Do you know if he worked for Novell or Santa Cruz?

A I believe this was Novell as well.

Q How about Ron Palmeri?

A Yes, Novell.

Q Do you know David Black?

A I don't recall.

Q You don't know whether he worked for Novell or Santa Cruz?

A I believe this whole list was Novell.

Q You believe the whole list is Novell?

A Ted Smith was, Duff Thompson was, Jeff Turner was.

2045

Q Geoff Seabrook wasn't, was he?

A I don't recall.

Q Ted Smith you know. Burt Levine?

A I don't recall. I think he might have been on the UNIX system lab side.

Q You think Burt Levine was from where?

A I don't recall.

Q You didn't know that he was the lawyer for Novell?

A He was a more junior lawyer. I worked with a higher level, his boss, and our outside counsel.

Q Your name doesn't appear on here anywhere, does it?

MR. BRENNAN: Objection. That's been asked and answered, Your Honor.

THE COURT: Sustained.

MR. HATCH: Thank you, Your Honor. I just wanted to make sure.

BY MR. HATCH:

Q There is one other name on here, Gary Daniels. Do you know Gary Daniels?

A I don't see that name. Where's that? I don't recall.

Q What is the date on this document?

A September 2nd.

Q 1995?

2046

A Yes.

Q This deal closed -- I mean this deal was originally presented to the board on the 18th of September, correct?

A Correct.

Q The packet was given to the board on the 15th of September, correct?

A I believe that's correct, to review.

Q So you are not appearing on a document that's less than two weeks before the board is being presented with the deal; is that right?

A I am not appearing on this document. I was getting copies of the drafts to review.

Q You are not able to identify a significant number of these people, are you?

MR. BRENNAN: Objection, Your Honor. That mischaracterizes the witness's prior testimony.

MR. HATCH: I'll move on.

THE COURT: All right.

BY MR. HATCH:

Q When did the face-to-face negotiating with Santa Cruz start?

A In the spring of '95. We had been talking to them for quite a while, so it was maybe late spring, late June, July, early summer where the intensity increased.

Q Somewhere between spring and late July?

2047

A Yes.

Q Did you go to California as part of those negotiations?

A I'm sorry? I was living in California and, yes, I was at the Santa Cruz Operation site on occasion, yes.

Q How often did you go?

MR. BRENNAN: Is the question, just so we're clear, how often did he go to California?

BY MR. HATCH:

Q Well, you understood Mr. Chatlos went to have face-to-face negotiations with Santa Cruz Operation, correct?

A I went on occasion because I was more of the senior review level of the entire strategy and contract, not so much the day-to-day. I was working with David Bradford, Tor Braham, Mike DeFazio, the senior executives on the project, not all the other dozens of people involved on a daily basis.

Q David Bradford and Tor Braham. But I'm talking -- you are aware that Mr. Chatlos went to have face-to-face negotiations with the Santa Cruz Operation?

A Of course.

Q And were you aware that Mr. Thompson -- Duff Thompson went as well?

A Yes. He later became one of the Novell representatives on the board for Santa Cruz. He certainly was involved in

2048

the ongoing relationship. He was relatively new to Novell, so he was -- he was technically an attorney, so he was moved into the business development group. And they had a lot of daily interaction with trying to move this project forward, but not so much with the strategy and the legal contract review that the general counsel and the CFO must have representing a company. We were the ultimate approvers for Frankenberg.

Q Now are you saying that you went with Mr. Chatlos and Mr. Thompson with these face-to-face meetings that they conducted over a course of three months in California?

A I said on several occasions I was on-site at Santa Cruz Operation. Do I recall who was there at each meeting? I do not.

Q That wasn't quite my question. You say you were on-site, you were there looking at financial documents, then, I guess on a couple of occasions?

A Documents associated with the purchase agreement, yes.

Q I'm asking you a different question. I'm asking you during the three months that Mr. Chatlos was negotiating face-to-face with representatives of the Santa Cruz Operation, ultimately to culminate in the APA, were you part of those negotiations with Mr. Chatlos?

A I don't recall all of them. Was I part of the negotiations? Absolutely. Was I on-site during all of

2049

those negotiations? No, of course not.

Q He testified he was there literally daily for three months?

A They were. It was a very complicated transaction, lots of things. I think to liken it maybe to a field operation versus the general that has got all the strategy pieces on the strategist side.

Q Let's talk about that for just a second. You talked about the field workers and the general. Who is the general in this whole deal?

A The general of the whole deal was probably Ray Noorda. Initially Bob Frankenberg in terms of saying we want to do this deal. Now how does it get executed relies on all the parts to execute it. Complicated transaction, taking months.

Q Ray Noorda, how was Mr. Noorda --

A It was originally part of his strategy to diversify the UNIX. So the start of the strategy was even before Frankenberg came on.

Q That's long before Santa Cruz Operation --

A They were a licensee at the time.

Q Mr. Noorda didn't have anything to do with --

A With the APA, that's correct, but the strategy.

Q Why did you raise his name?

MR. BRENNAN: Objection. We're just arguing with

2050

the witness at this juncture.

MR. HATCH: No, we're not.

MR. BRENNAN: I move to strike.

THE COURT: Overruled.

THE WITNESS: I was mentioning it because of the overall strategy -- the corporate strategy, which I was involved with before UNIX System Labs, before Duff was a part of the company, before the entire process.

BY MR. HATCH:

Q So you are moving back years before?

A And through this process and after the process. In '92, I was back on the process in signing it.

Q Let's be real clear with the jury here. Mr. Noorda wasn't there when Amendment 2 was involved?

A That's correct.

Q Mr. Noorda wasn't there when the APA was signed?

A That is absolutely correct.

Q So you are saying Mr. Noorda was involved years before?

A Embarking on the strategy of which I was a part, yes, correct.

Q Would it surprise you that Mr. Frankenberg, who was the number one guy at Novell, never mentioned you as part of the team when he testified here?

A Yeah, that would surprise me.

Q Would it surprise you that Mr. Thompson, the person

2051

Mr. Frankenberg tasked with the sleigh ride project, never mentioned you as part of the team?

A That might not surprise me so much. I didn't work with him on a regular and daily basis. As I said, he was in the business development group and I was working with the legal and the contract and the finance groups.

Q Mr. Chatlos was here too, would it surprise you that he didn't mention you as part of the negotiating team?

A That would surprise me as well.

Q I believe Mr. Mattingly didn't mention you either. Would that surprise you?

A That would surprise me. We may be talking definitions. Specific negotiating team was a group of people out in the field. The people that had the signature authority and the review authority and the board of directors and the shareholders' interests were the senior executives, DeFazio, David Bradford and myself, the senior executives in the company on these projects.

Q Let's talk about Mr. Bradford. Mr. Bradford, you indicated, oversaw some of the legal aspect of this, correct?

A He did.

Q Eventually Mr. Bradford -- well, let's do this. I'm going to give you what has been marked as Exhibit

2052

G-4.

MR. HATCH: Your Honor, I believe this has already been admitted into evidence.

THE COURT: It has.

BY MR. HATCH:

Q Mr. Tolonen, this is Exhibit G-4. It's already been marked into evidence. You see that first two pages are the same document, just one of them has what I call a sticky -- one of those sticky pads that was over the top of the actual document. Do you see that?

A Okay.

Q Can you see that --

MR. HATCH: Can we go to the first page.

BY MR. HATCH:

Q Do you see the part up here. Let me try that again. I never get this. It says, see final sleigh ride agreement for complete set. Do you see that?

A Uh-huh. (Affirmative)

Q Now this is a document from who? It says David Bradford, right?

A It says it's from David Bradford, correct.

Q So Mr. Bradford apparently knew it was called sleigh ride. We got that?

A Uh-huh. (Affirmative)

Q He's writing a memo here to Mr. Chatlos, correct?

2053

A Correct.

Q So it's clear, let's go to the next page. We don't have the sticky there. And the subject here is the asset purchase agreement between Novell and Santa Cruz Operation, Inc., right?

A That's the subject.

Q And just to be clear, it doesn't say the license agreement, correct?

A Asset purchase agreement, the APA, yes.

Q That's what you understood it was right, right? It's not a license agreement, right?

A Asset purchase agreement.

Q Thank you. And if we go down, Mr. Bradford is -- he's passing on the final asset purchase agreement for signature, correct?

A Correct.

Q And who is this addressed to?

A To Ed Chatlos.

Q Not to you, right?

A He is sending him an agreement, yes, that's correct.

MR. HATCH: And let's go down to the paragraph that starts let me also. Mr. Calvin, if you would highlight that.

BY MR. HATCH:

Q It says, let me also congratulate you for the efforts

2054

you expended in putting this deal together. Do you see that?

A Uh-huh. (Affirmative)

Q Now he's congratulating three groups of people here in a sense, isn't he? He's congratulating Mr. Chatlos directly, right?

A He is.

Q And then you notice on the cc line, he includes two people here?

A Uh-huh. (Affirmative)

Q He included Ty Mattingly, right?

A Yes.

Q And did you understand that he was a key player in the negotiation of this deal?

A He was involved in the process.

Q Well --

A I was receiving my drafts directly. I didn't have to get them from Bradford. I was getting them directly, the same time David did.

Q All right. Well, this is -- I mean this letter is Mr. Bradford sending the final signature page to Mr. Chatlos so he can give it to Santa Cruz, correct?

MR. BRENNAN: Objection, Your Honor, the document speaks for itself.

MR. HATCH: Let's read it.

2055

BY MR. HATCH:

Q Paragraph 2, he says, the purpose of this memorandum is to let you know that I have reviewed the final document -- and let Mr. Chatlos know, right?

A Uh-huh. (Affirmative)

Q -- and find the same to be an accurate reflection of the business and legal terms and conditions negotiated between the parties. Okay.

A Uh-huh. (Affirmative)

Q I therefore approve this asset purchase agreement for final signature by Bob Frankenberg. He is the head of the company, right?

A He is the CEO, and David is approving the agreement. Sending them copies they didn't even have.

Q You have indicated that you will let him know of my approval.

A That David is giving his approval.

Q In other words, Mr. Bradford is going to Mr. Chatlos to tell Mr. Frankenberg -- excuse me, you have indicated you will let him know of my approval. In other words, he's asking Mr. Chatlos to tell the number one guy in the company that this can go forward?

A David is giving his approval and telling someone else to make sure of that information, correct.

Q Then he thanks Mr. Chatlos, on the cc line is Mr.

2056

Mattingly, who was part of the deal, and then Ed Smith. Who is Ed Smith?

A He's thanking other members of the business development team.

Q Didn't Ed Smith work for Duff Thompson?

A Yes, he did, in the business development team.

Q Doesn't this memo cover the three key players, Mr. Frankenberg, Mr. Chatlos -- excuse me, four -- Mr. Mattingly, Mr. Thompson through one of his staff?

A No, I think it's quite the contrary. It shows none of them had approval power. That David was approving it.

Q David is saying he's given a legal review of it?

A I therefore approve this asset purchase agreement.

Q Does Mr. Bradford have authority over Mr. Frankenberg? You're not saying that, are you?

A No. I'm saying he's approving it. He's giving his approval for his review. None of the others, I don't think -- I don't recall if they were doing that or not.

Q Let me ask you this, Mr. Tolonen. We had here in the first week of trial Mr. Frankenberg, Mr. Chatlos, Mr. Thompson and Mr. Mattingly. I'll represent to you that all of them testified in no uncertain terms that the intent of this deal was to transfer all the assets, including the copyrights. Is your purpose here to tell this jury that all of

2057

those people -- the people who are mentioned here, either directly or by proxy, were not truthful with the jury when they testified the first week of this trial?

A I'm saying perhaps they didn't understand it or hadn't read the agreement. It's very clear, as was the board decision. Those are the things I know about.

Q Are you aware of Mr. Bradford attending any of the negotiation meetings in California?

A I don't know whether he did or not. I don't recall. I suspect he did, although he may have been working on other projects and delegated some of that.

Q Would it be fair to say Mr. Bradford's and the legal department's role in this was to document the intent of the parties through a legal document?

A Fundamentally, yes. The legal review of the contract was through David Bradford's approval and the outside Wilson Sonsini attorneys, absolutely.

Q Now I think you indicated you had read a final version of the APA prior to going to the board, correct?

A I believe that's correct, yes. I would have received a final copy, absolutely.

Q Did you typically receive copies of materials that were going to be sent -- that were sent to the board prior to the board meetings?

A If I was going to be in attendance in the meeting, I

2058

would generally receive materials.

THE COURT: Please, do not speak over each other.

MR. HATCH: I'm trying very hard, Your Honor.

BY MR. HATCH:

Q Were you in attendance at the board meeting where the APA was approved?

A I don't believe I was at the particular meeting where it was approved.

Q So you can't speak to what happened at that board meeting?

A Correct.

Q But did you receive the materials that the board got prior to that meeting?

A Yes. I received a final copy of the agreements to review.

THE COURT: Mr. Hatch, would you find an appropriate time for us to break for the first break today?

You've got flexibility. It doesn't have to be now, just keep it in mind.

MR. HATCH: They are all staring me down now, we want a break.

THE COURT: You don't like having that responsibility.

MR. HATCH: I will bring some exciting background.

This will be fine.

2059

THE COURT: You're sure?

MR. HATCH: I'm not going to incur the wrath of the jury, Your Honor.

THE COURT: We'll take 15 minutes then.

(Jury excused)

THE COURT: We'll take 15 minutes.

(Recess)

***** Part 2 *****

2060

(Recess)

THE COURT: Are we ready, counsel?

MR. HATCH: As ready as we can be.

MR. BRENNAN: Yes, Your Honor.

THE COURT: All right.

(WHEREUPON, the jury enters the proceedings.)

THE COURT: Go ahead, Mr. Hatch.

MR. HATCH: Thank you.

BY MR. HATCH

Q. Mr. Tolonen, during the break did you have a long discussion about your testimony with your counsel?

A. No, a short conversation. He gave me the pep talk and said you're doing fine. Keep up the good work.

Q. When we left off we were talking about the preparation for the board meeting on September the 18th. Let me give you what has been marked as Exhibit 754. Do you see that document, sir?

A. Yes, I can see that.

Q. This is, again, from Mr. Bradford. You worked with him to preparing the board, correct?

A. I worked with David Bradford, and he is obviously sending something to me directly from himself and to the board on this transaction.

Q. Have you seen this document before?

A. I don't know if I did or not. I don't recall. I

2061

probably helped prepare it. I probably printed out some of the attachments and prepared some of the -- someone in my group, in the finance group might have done some work for him, for David.

Q. We talked about the attachments --

A. There is a stock trading chart, and that would have been something that probably came out of one of my groups. There is historical financial performance and analysis, which is something I did or someone from my group did.

Q. Then on page 5, if you turn the sheet, there appears to be some financial dealings as well in paragraph three. Do you see that?

A. I'm sorry. Paragraph three? Yes.

Q. Okay. That would have come from your shop as well?

A. It was a mathematical computation and we would have been involved in looking at that to make sure that the numbers were correct and accurate, and that the percentages were under 20 and those things that were important to finance.

Q. You were part of the team that tried to help portray accurately things to the board so that they could make decisions accurately and appropriately, correct?

A. Yes.

MR. HATCH: Your Honor, I would move the admission

2062

of Exhibit 754.

MR. BRENNAN: Your Honor, no objection. I thought this was already in evidence. Maybe I am mistaken.

MR. HATCH: Not in this form.

THE COURT: 754 is not. It may be a different number, but --

MR. BRENNAN: No objection.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 754 was received into evidence.)

BY MR. HATCH

Q. So that the jury can see it, let's go back to the first page, Mr. Tolonen. As we indicated, this is a memorandum from Mr. Bradford to the Novell board of directors?

A. Yes.

Q. September 15th, correct?

A. That is what it says, yes.

Q. To your understanding that is just a couple of days before the board of directors meeting, correct?

A. Yes.

Q. Just so we're clear, the board of directors meeting wherein the A.P.A. was approved?

A. Correct.

Q. Then page 3, this is the market trading performance

2063

chart that you indicated someone on your staff likely made, correct?

A. Yes.

MR. HATCH: The next page, Mr. Calvin.

BY MR. HATCH

Q. This is the historical performance analysis that you were talking about as well?

A. This could have been my group or it could have been the business development group.

Q. Let's go to the next page. In paragraph three, and we will highlight that, it talks about what Novell was receiving from SCO, correct?

A. In board of directors terms, correct. It is a summary, not --

Q. I understand. It is interesting that you put it that way, in board of directors terms. Is it fair to say that that is not legalese, it is more English?

A. It is a letter, it is not the contract, yes, English.

Q. You do that for the board because no one expects the board to be able to read and parse a lengthy agreement, so you're trying to give them an executive summary, correct?

A. It is an executive summary. Or maybe as an analogy, and when I was talking to the jury I used the pizza analogy, and that was maybe an extreme case, and you wouldn't do that with the board, but maybe looser language than a contract,

2064

and it is English not as legal. That's all.

Q. But you're trying to put in the important points and not leave anything out?

A. Absolutely.

Q. You wouldn't want to mislead the board?

A. We certainly didn't want to do that.

Q. Here you are actually setting forth, at least financially, what Novell is going to get from SCO from entering into the A.P.A., correct?

MR. BRENNAN: Objection, Your Honor. That mischaracterizes the witness's testimony. He did not say that he prepared this or that he --

MR. HATCH: I think he indicated that he or someone in his group --

THE WITNESS: May have contributed to it or the business development group. I was not a board member. I wasn't a director. I was a recipient of this.

BY MR. HATCH

Q. You're familiar with this language, right?

A. I have not seen this document. I don't recall it specifically. I wasn't at that board meeting.

Q. Let's do it the way Mr. Brennan wants us to do it and let's walk through it.

MR. BRENNAN: Objection, Your Honor. That is just argument and not necessary. I move to strike.

2065

MR. HATCH: I'll rephrase, Your Honor.

BY MR. HATCH

Q. Paragraph 3-A says that Novell is going to get 16 percent, stock equal to 16.6 percent of SCO after the transaction. It says 19.9 percent of shares outstanding before the transaction. Do you see that?

A. That is correct. I think I mentioned under 20 percent was important.

Q. That was important why?

A. For accounting reasons, technical accounting reasons and how the transaction is recorded as an asset purchase not as a company -- SCO was not becoming a consolidated entity with Novell.

Q. If I understand your prior testimony, and let me make sure, this is how you understood the deal, right?

A. I'm sorry? This is how --

Q. This part of it --

A. That we were receiving this compensation as the payment from SCO of approximately seven and a half percent, 6 million shares of their stock, yes.

Q. I think you had told the jury when Mr. Brennan was questioning you that that was somewhere between 50 and $60 million of value in your mind?

A. Correct.

2066

Q. B says 95 percent of all royalties. We are under the heading Novell receives from SCO. The company was putting a value of close to $50 million on that, correct?

A. But it technically wasn't consideration because we owned it 100 percent and they were administering those under the contract.

Q. Sir, I think my question was what is the value of that that was put on it by the company?

A. The royalties would be retained from the other SVRX royalties, so $47 million.

Q. Just so we are clear it is under the section called Novell receives from SCO, correct?

A. That they would collect it and then remit it back to us as the administrator, correct.

Q. Then in C it says, a third item says if SCO hits our business forecasts, which admittedly is aggressive, royalties on future UnixWare shipments by SCO through the year 2002, which royalties have a net present value of 50 to $60 million. Do you see that?

A. Uh-huh.

Q. Explain to the jury what net present value is.

A. It is a calculation to try and bring forward the value of something to be received in the future. A simple case would be would you rather have $100 today or $100 three

2067

years from now? I will take the $100 today. What is the $100 three years from now worth? Something less. That is the present value.

Q. So the board is being told here that the value to us today, we're saying it is probably 50 to $60 million, although the total amount will be greater over the course of the year or in the forecast, correct?

A. I believe in my earlier testimony I said one of the elements of the A.P.A. was a royalty transaction that had a minimum floor below which SCO would pay nothing, and a range where if they were able to penetrate the market we would share in that royalty, and then a cap. There were three elements to the royalties, the potential royalties. It could be zero. It could be a lot or it could be something in between.

Q. If my math is right and I add those up, this appears to come between 150 and $170 million. Does that square with your recollection?

A. If you mathematically add them up and you get that, and it is sort of a funny characterization because some of them were already ours. The middle one was already ours and we owned that. We retained that.

MR. HATCH: Mr. Calvin, go up and highlight for me paragraphs one and two on that same page.

BY MR. HATCH

2068

Q. Now, again, this is the high level summary for the board, correct?

A. Yes.

Q. It says under one that Novell is giving SCO -- A says the UNIX technology assets, right?

A. Yes.

Q. And B is the UnixWare technology assets?

A. Correct.

Q. Paragraph two says Novell retains, I think, all patents, right?

A. Yes.

Q. It says a license back, and we have heard reference in this case to a T.L.A. or a transfer of license agreement, and you have heard of that, correct?

A. Yes.

Q. What did you understand the T.L.A. to be?

A. That we kept the rights to internal use of UNIX and UnixWare, even though the products were part of the assets sold.

Q. The NetWare? NetWare?

A. A license back to UNIX and UnixWare for internal use and --

Q. So SCO was licensing it back to Novell was your understanding, right?

A. Okay.

2069

Q. And C is Tuxedo and other miscellaneous and unrelated technology?

A. Assets that were part of the UNIX system that we did not sell, yes.

Q. I think you mentioned Tuxedo earlier and I think NetWare as well, correct?

A. NetWare was a Novell product, yes.

Q. Those were things that you retained. Okay. So in this high level summary for the board it does not say that Novell is retaining the copyrights, does it?

A. I don't see it there.

Q. Now, let's go for a second to the A.P.A.

MR. HATCH: Exhibit 1, Mr. Calvin.

BY MR. HATCH

Q. Again, it says it is an asset purchase agreement, correct?

A. Yes, it does.

Q. It does not say it is a license agreement, right?

A. It says asset purchase agreement.

Q. Let's go to Section 1.1-A.

MR. HATCH: Let's go, if you would, Mr. Calvin -- let me get my copy out. If you would, go to Section 1.3-A-1. Highlight the little i and one so that we can read that, so that I can see that.

2070

BY MR. HATCH

Q. Do you see it says intent?

A. Yes.

Q. It says the intent of the parties hereto is that all of the business and all of the seller's backlog, if any, relating to the business be transferred to the buyer. Do you see that?

A. Okay.

Q. Do you believe that is the intent of the parties to the A.P.A.?

A. Okay. I believe it is in the A.P.A. as terms, yes.

Q. It says the intent, right?

A. Yes.

Q. It says all of the business, right?

A. It is a capital B, and so it is a defined term, so the assets sold --

Q. That is a good point.

A. I don't know --

Q. Explain to the jury what you mean when you have it capitalized.

A. Oftentimes in agreements you use a definition in a contract so that it can be reused later as saying when I use this word it means that definition rather than having to repeat the whole schedule again.

Q. Let's go to recital A.

2071

MR. HATCH: Highlight that for me.

Blow it up. I have bad eyes. That is why I have these.

There we go.

BY MR. HATCH

Q. Can you read that?

A. Yes, I can.

Q. Is this where you're talking about where it defines business?

A. It looks like it is where it says, paren, collectively the business, quote, unquote, capitalized, and that would mean it is reusing the term and to refer back to the definition.

Q. That is the point of putting in the quotes under it --

A. It is a defined term.

Q. It means what it says here, right?

A. Right.

Q. Let's read what the business is here.

A. Sure.

Q. It says seller is engaged in the business of developing a line of software products currently known as UNIX and UnixWare, and the sale of binary source code licenses to various versions of UNIX and UnixWare, the support of such products, and the sale of other products which are directly related to UNIX and UnixWare. Collectively, the business.

2072

Right?

A. Correct.

Q. Is that an accurate description of Novell's business?

A. We were developing and selling binary source and supporting those products.

Q. Okay. That is an accurate description of Novell's business, the UNIX and UnixWare business, correct?

A. The developing and sale and support, okay, and that is what it means when we use the term business here.

Q. That is the whole business?

A. That is what this definition in this contract is referring to, the development and sale and support, yes.

Q. Let's go down to Section 1.1-A.

MR. HATCH: Highlight it starting with all of it.

BY MR. HATCH

Q. It says purchase of assets, and it says all of seller's -- it uses the word all, do you see that?

A. It says all and all is identified on the schedule, yes.

MR. HATCH: Highlight that, Mr. Calvin, starting with all.

BY MR. HATCH

Q. All of seller's right, title and interest. What does right mean?

A. Well, I don't know that -- there is not a capital so it is not defined.

2073

Q. Is a copyright a right?

A. It could be a right, but I would say that is one that was not sold because it was not on the schedule identified here in this paragraph.

Q. Well, that is why we are here, sir.

A. Okay.

Q. All of seller's right, title and interest in and to the assets and property of the seller relating to the business. It is again capitalized, right, the business?

A. Right. Okay.

Q. Then it says collectively the assets and it says identified on the next page, Schedule 1.1-A?

A. The list of assets sold, correct.

Q. Right?

A. Uh-huh.

Q. Let's go to Schedule 1.1-A. Number one, again, it says all, and it uses the word all and it uses rights again, all rights and ownership of UNIX and UnixWare, including but not limited to all versions of UNIX and UnixWare and all copies of UNIX and UnixWare including revisions, updates in process and all technical design, development, installation, operation and maintenance information concerning UNIX and UnixWare, including source code, source documentation, source listings, and annotations and appropriate engineering notebooks, test data, test

2074

results, as well as all reference manuals and support materials normally distributed to seller and to end users, and potential end users in connection with the distribution of UNIX and UnixWare, such assets to include without limitation the following. Then it continues to go through a rather lengthy listing of all of these things, correct?

A. Yes, a complete list of what was and what wasn't.

Q. Now, shortly after this transaction occurred wasn't there a transition between the transfer of this business from Novell to SCO?

A. You can't just flip a light switch. There were hundreds of employees and thousands of customers and, yes, there was a process of moving it across the line, if you will.

Q. Were you involved in that process?

A. Not very much, no. Yes on some elements, but it did not take a lot of my time.

Q. Do you know what involvement you had?

A. I don't recall specifically. I stayed involved in some form because of being an executive on the project and wanting to make sure that it went smoothly, and there were some facilities issues and some human resource issues. I mean, some of the contracting issues I mentioned earlier, I got later involved in an amendment on the A.P.A. a year

2075

later. I stayed involved but not --

Q. Were you involved in any of the announcements to customers or the press as to what had happened in the transaction?

A. No. Well, to the analyst community, yes, absolutely, but not so much to the customers or the press.

Q. The analyst community you indicated to them that Novell had sold the business to SCO, correct?

A. We explained it similar as I did here, what was sold and what we retained and the relationship that we still had with UNIX and UnixWare and the industry.

Q. Now, eventually you indicated, I believe, that you said that you signed amendment number two, correct?

A. Yes. That is correct.

MR. HATCH: Let's put up amendment number two.

BY MR. HATCH

Q. You talked about Section A of amendment number two, and if we can pull that up, it said with respect to Schedule 1.1-B of the agreement entitled excluded assets, Section 5, subsection A shall be revised to read -- do you see that?

A. Yes.

Q. When you say revised to read, what does that mean?

A. It was an amendment to change the language of that one paragraph of the A.P.A., the asset purchase agreement.

Q. And it replaces the language, correct?

2076

A. Correct.

Q. So the old language is of no effect?

A. From this day forward I would presume that this would be the correct language when the parties agreed to an amendment.

MR. HATCH: Mr. Calvin, put up Schedule 1.1-B, the old language that has been revised.

BY MR. HATCH

Q. Let's go to Section 5. Well, go back to the first page. Now, you understood that Section 1.1-B was the excluded assets, correct?

A. Correct.

Q. I think as we can see here, and Mr. Calvin will highlight it, it says any asset not listed on 1.1-A including without limitation any assets which pertain to NetWare. Do you see that, NetWare?

A. Certainly.

Q. Section two again says NetWare. Do you see that?

A. Yes.

Q. And you indicated that NetWare was Novell software that you wanted to make sure SCO was not getting, correct?

A. One of many things, yes.

2077

Q. That was not part of the deal, NetWare?

A. Correct.

Q. So with excluded assets we're talking about NetWare, and Tuxedo was another one that you mentioned, I believe, right?

A. Yes.

Q. Then Section 4 again talks about NetWare, right?

A. Okay. Yes.

Q. Section 4-B is NetWare, right?

A. Okay.

Q. Section C is NetWare, right?

A. Yes.

Q. So all the intellectual property we have been talking about so far has been NetWare, correct?

A. Yes.

Q. If we go to Section 5, which is what amendment two meant, right?

A. Okay. Yes.

Q. It says intellectual property and it says all copyrights and trademarks except for the trademarks UNIX and UnixWare. Do you see that?

A. Yes.

Q. Now, when we read the term sheet to the board, the only thing that was mentioned in that was patents, right?

2078

A. Not on the board's resolution, but in the letter --

Q. The term sheet?

A. Correct. I remember that.

Q. We're talking over each other.

MR. HATCH: I will try not to.

BY MR. HATCH

Q. Okay. So this language in A, all copyrights and trademarks excepts for the trademarks in UNIX and UnixWare, that is the part that was revised and replaced, so this language does not exist in the agreement anymore, correct?

A. It was revised.

Q. Let's go back to amendment two.

MR. HATCH: Blow up A again, please.

BY MR. HATCH

Q. Again, here is Section 5, where we just were, and subsection A, that is the part that is copyrights, will be revised to read, and it is replacing it with the language below here, correct?

A. Okay.

Q. It says all copyrights and trademarks, and then it says except for the copyrights and trademarks owned by Novell as of the date of the agreement required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies, right?

A. Correct.

2079

Q. So no longer does it say you don't get any copyrights at all, right?

A. I believe this was the discussion that we had earlier that says that they get -- it is a limiting -- we have taken out the language that says you get all of the copyrights, and instead it says you will get the rights you need for the acquisition of the technologies.

Q. Okay.

A. It is a very narrow definition.

Q. It says the copyrights you are getting are the ones that require you to exercise the rights --

A. Or the use of those.

Q. Okay.

A. My recollection, and I said this clearly, was this was not a change in the transaction to release copyrights.

Q. Well, you indicated that you didn't go back to the board for approval because at the time no one felt that this changed the agreement materially, right?

A. It was not against the board's resolution, correct.

Q. Well, it wasn't what Mr. Frankenberg who was the head of the company -- was he chairman of the board as well?

A. I don't recall if there was an independent chairman or not. He may well have been chairman at the time.

Q. Mr. Frankenberg testified that this agreement transferred all of the copyrights.

2080

MR. BRENNAN: Objection, Your Honor. Two points. First of all, there has been an exclusion order and now we are introducing prior testimony. Second of all, it is improper, and Mr. Hatch did it earlier, to ask a witness to vouch for prior testimony of another witness that this witness didn't hear. I would object and move to strike the reference to the prior witness's testimony that Mr. Tolonen has not had the benefit of listening to.

THE COURT: As long as the testimony is accurately reflected --

MR. HATCH: I think it is for the jury to understand, but if I couch it and put myself on the line here saying that Mr. Frankenberg testified to the jury that the intent was to transfer the copyrights, all of the business --

MR. BRENNAN: Your Honor, Mr. Frankenberg offered no testimony regarding amendment number two. What he did testify to was that he left the company before amendment two was negotiated and executed. That is a mischaracterization, to the extent that Mr. Hatch is suggesting that Mr. Frankenberg testified that the intent of amendment number two was to transfer copyrights.

THE COURT: I don't believe that is what Mr. Hatch said. He said the intent of the original A.P.A. and that is all that he was representing.

2081

MR. HATCH: I think he is trying to get me and us confused here.

THE WITNESS: Mr. Frankenberg was wrong about the A.P.A. as well.

BY MR. HATCH

Q. That is your position?

A. The A.P.A. thoroughly excluded it. I don't know that he --

Q. My question was slightly different. The jury is going to be asked to determine who owns the copyrights. One of the things is the intent of the parties. Do you believe that Mr. Frankenberg is not telling this jury the truth when he says the intent of this agreement was to transfer the copyrights?

MR. BRENNAN: Your Honor, I object. It is inappropriate to ask the witness to vouch for the truthfulness of another witness's testimony.

THE COURT: I will sustain that objection.

MR. HATCH: I did misword that.

Let's move on, because I don't think it is worth going over.

BY MR. HATCH

Q. At the very least we do know that the portion of the A.P.A. that said none of the copyrights were transferred has been replaced by this language and that is no longer in

2082

effect, right?

A. That is what the amendment did, yes.

Q. Just so we are clear, it says that what SCO is getting is the copyrights and trademarks owned by Novell as of the date of the agreement requiring SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare, right?

A. That is the reading of the agreement, yes.

Q. Now, two things here. I want to go back.

MR. HATCH: Mr. Calvin, if you will, go back to the A.P.A., Exhibit 1, Section 1.1-A. Blow that up. It is on the bottom.

BY MR. HATCH

Q. It says everything necessary to exercise its rights. What rights did it get? What rights did SCO get? We just read it. It is the fourth line down. It says all of seller's right, title and interest, right?

MR. BRENNAN: Objection, Your Honor. This is not a complete presentation, and the question of what Section 1.1-A suggests or states --

THE COURT: He is asking what it says. He is asking the witness what it says. I think it is an appropriate question.

THE WITNESS: I think the question is appropriate in its context. You can't read a part of a sentence. It says all of the interests as identified in the schedule and

2083

as excluded by the other schedule and that is the sentence. You can't just read the first five words.

BY MR. HATCH

Q. Let me make sure that I am clear here. Are you telling the jury that they didn't get all of the rights because the excluded assets schedule, which has now been amended away, that somehow you're going to piggyback that back in now saying that they don't get the copyrights?

A. No, I am saying there is a list of purchased assets on 1.1 and the copyrights are not there.

Q. Sir, let's go back to amendment two. Do you remember when Mr. Brennan was talking to you he put in front of you a prior draft of amendment two?

A. I do.

Q. And I think you indicated that that was not accepted and that it was changed and we then got this final amendment two.

A. Right. The draft was a version that SCO had proposed and we said no, not acceptable, and took out some language.

Q. Go to T-34.

MR. HATCH: Highlight the A language.

BY MR. HATCH

Q. One of the changes here in addition to getting all of the rights required, you'll notice it says except for the

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copyrights and trademarks owned by Novell as of the date of this amendment number two. Do you see that?

MR. BRENNAN: Your Honor, I object. I assume it is inadvertent, but there was a reference to all of the rights required in the question, and that language does not appear in what Mr. Hatch is showing the witness, thus it mischaracterizes matters.

MR. HATCH: I think I even started my question by saying that, Your Honor.

THE COURT: Go ahead.

THE WITNESS: Excuse me. Am I looking at something new?

BY MR. HATCH

Q. This is on the draft, correct?

A. This is the existing draft that I looked at a while ago.

Q. That Mr. Brennan showed you.

A. Owe.

Q. It said for copyrights and trademarks owned by Novell as of the date of this amendment. Do you see that?

A. Okay.

Q. The amendment was about a year after the A.P.A., correct?

2085

A. Correct.

MR. HATCH: Let's go back down, Mr. Calvin, to amendment number two signed by Mr. Tolonen. Let's blow up A, if you would.

BY MR. HATCH

Q. Now it says as of the date of the agreement. Do you see that?

A. Okay.

Q. Wasn't one of the issues that the parties had was they wanted to make sure that the rights, the copyrights that were being transferred were those that were in existence as of the date of the agreement not a year later?

A. I'll say yes. In context it was as a cleanup point and this was an amendment to the agreement. There had been lots of code written by both parties in the mean time, so as not to bring that into question about what are we talking about here.

Q. Isn't it true that the reason that change was important is because Santa Cruz and senior Novell officials believed that as of the date of the amendment that in their mind the copyrights had already transferred?

A. No. I do not believe that is correct.

Q. Isn't it true that like you said this didn't have to go to the board, because this was just a clarification of what had transferred at the date of the A.P.A.?

2086

A. No. The agreement was clear what transferred and what didn't transfer.

Q. Now, you gave a declaration in this case, didn't you?

A. Yes. Several years ago I gave a declaration.

Q. At the request of Novell's lawyers?

A. I don't know who made the request, but I did give a declaration. I believe it was Novell's attorneys.

Q. Let me give you a copy of that. It is Exhibit 640. Is that a copy of your declaration?

A. Yes, it is.

Q. What is the date on that?

A. I don't know where the date is shown. The 20th day of April of 2007.

Q. Now, when you provided that declaration to Novell, you were not employed at Novell at the time?

A. Correct. I was not an employee.

Q. And you had not been employed there for almost nine years?

A. Correct.

Q. At that time you were the chief financial officer at a company called Business Objects S.A., right?

A. Correct.

Q. I think you talked about --

A. As one of the --

Q. Now, Business Objects S.A. from time to time has to

2087

make filings with the United States Securities and Exchange Commission, correct?

A. Correct.

Q. And you signed those on behalf of the company, correct?

A. Correct.

Q. Back then when you --

A. When I was the C.F.O.

Q. Let me give you a copy. Do you recall filing a form 8-K and --

MR. BRENNAN: The document put before the witness is not on any exhibit list. There is nothing to impeach and --

MR. HATCH: I am going to use it to refresh his recollection, Your Honor.

MR. BRENNAN: There has been no demonstration that he does not remember anything.

MR. HATCH: I will do that.

THE COURT: It will only be used if the witness cannot remember and for refreshing purposes and not for submission to the jury.

MR. BRENNAN: Thank you.

BY MR. HATCH

Q. Do you recall making a submission to the United States Securities and Exchange Commission form 8-K on February 6, 2007?

2088

A. I don't recall it, but I was there and we did it, yes.

Q. If you don't recall it, when you look at this does this refresh your recollection?

THE COURT: Mr. Hatch, why don't you ask him questions that may justify him referring to the document, and until it is necessary for him to refresh his memory it is not necessary for him to focus on the document.

MR. HATCH: Okay.

BY MR. HATCH

Q. Do you recall that shortly before you signed your declaration that your business then, Business Objects S.A., entering into a large strategic alliance with I.B.M.?

A. Okay. This refers to that. I mean, this talks about that. I am just scanning it quickly.

Q. Without --

A. It is a press release and it talks about other business highlights and --

THE COURT: Let's not focus on the document, just ask him questions.

MR. HATCH: I am trying to.

It is my fault.

BY MR. HATCH

Q. Without looking at the document, do you recall that shortly before you entered into your declaration that your company, Business Objects S.A., entered into a strategic

2089

alliance with I.B.M.?

A. I don't recall being associated -- almost every company I have worked with has done business with I.B.M. They are one of the largest technology companies in the industry.

Q. So you have done a lot of business with I.B.M.?

A. Off and on, I suppose I have.

Q. Do you specifically recall in the months before your declaration your company entering into a strategic alliance with I.B.M.?

A. I recall that Business Objects entered into a strategic alliance with I.B.M., yes.

Q. Do you recall when?

A. It has to be around this date because the 8-K was filed talking about it. I don't recall the exact date, no.

Q. Is that a coincidence? Did that have anything to do with your declaration?

A. Nothing whatsoever.

Q. Let's move forward to this year. You're involved, I think you said, on the board of several companies still, correct?

A. I am on one public company board, yes.

Q. I think you mentioned Blue Coat?

A. Yes.

Q. You're on the board of Blue Coat?

A. Yes, I am.

2090

Q. Didn't Blue Coat just announce in the last month that Blue Coat signed a global deal with I.B.M.?

A. I am not sure that I recall exactly the specifics of that, but they may well have.

Q. You're on the board, and how many meetings in the year did you meet in 2009 with Blue Coat?

A. Probably eight or ten meetings. I had committee meetings as well as board meetings. I'm a member of the audit committee and on a special committee as well.

Q. Was the deal with I.B.M. a big deal with your company?

A. No bigger than other large transactions.

Q. That just happened, right?

A. If you say there was a release about it I will say that it did. I don't recall the specifics of that agreement.

Q. Would you deny that the company announced just on February the 23rd, exactly a month ago today, that they signed a global agreement under which I.B.M. will provide new -- serve security web gateway offerings to new and existing clients?

A. That is true.

MR. HATCH: That's all that I have, Your Honor.

THE COURT: Mr. Brennan.

MR. BRENNAN: I have a few questions, Your Honor.

REDIRECT EXAMINATION

BY MR. BRENNAN

2091

Q. I would like to show you what has been marked and admitted as Exhibit C-3. Excuse me, wrong document. I apologize. Z-3. I confused my C and Z. Before you, Mr. Tolonen, is a document in evidence. It is the minutes of a meeting of the board of directors of Novell, Inc. on Monday, September 18th, 1995. I believe you told us that you were not physically present at that meeting, correct?

A. Correct.

Q. I would like to direct your attention down to the second page of Exhibit Z-3. You'll see that there are a series of resolutions, and I would like to in particular highlight the first set of resolutions where it says resolved.

MR. HATCH: Your Honor, I object. He has indicated that he was not there and involved.

MR. BRENNAN: The witness was asked several times by Mr. Hatch about his understanding of the board of director meeting minutes, and with respect to the resolution approved by the board. I am following up on Mr. Hatch's questions.

MR. HATCH: I believe it was the term sheet and the things that he signed, Your Honor.

THE COURT: I'm going to sustain the objection.

2092

BY MR. BRENNAN

Q. Are you aware that the Novell board of directors approved a resolution stating that Novell would retain all patents, copyrights and trademarks except for the trademarks UNIX and UnixWare?

MR. HATCH: Same thing, Your Honor. Objection.

MR. BRENNAN: I am entitled to ask the witness whether he is aware of a resolution.

THE COURT: He is indeed entitled to ask that question. The document itself --

MR. HATCH: If he could re-word it. I may have misheard it. I thought he talked about in terms of what the board did and --

BY MR. BRENNAN

Q. The question was are you aware that the board of directors of Novell approved a resolution to the effect that Novell under the asset purchase agreement would retain all of its patents, copyrights and trademarks except for the trademarks UNIX and UnixWare?

A. Yes.

Q. Now, in connection both with my earlier questions of you and Mr. Hatch's questions, there were suggestions made apparently by Mr. Hatch that you may not have had involvement in the transaction. You did attend, in fact, board meetings between September of 1995 and December 6th of

2093

1995 where the asset purchase agreement was discussed; is that correct?

A. Yes. That is correct.

Q. If I could direct your attention now to what has been marked, but not yet in evidence, to Exhibit X-4. X-4 are minutes of a meeting of the Novell board of directors held on October 20th, 1995. Do you recall being present at that meeting?

A. Yes.

Q. Do you recall making a presentation or having discussions with the board at that meeting regarding the asset purchase agreement?

A. Yes, it was discussed.

MR. BRENNAN: Your Honor, I would like to move into evidence Exhibit X-4.

MR. HATCH: I am not sure what is redacted.

MR. BRENNAN: There are redactions of privileged attorney-client matters that were discussed at the meeting. Exhibit X-4 are the meeting minutes redacted to remove the privileged communications. This was produced during the course of discovery and is on Novell's list.

MR. HATCH: Your Honor, I have no objection.

THE COURT: It will be admitted.

(Defendant's Exhibit X-4 was received into evidence.)

2094

BY MR. BRENNAN

Q. If we could look at the second paragraph of Exhibit X-4, it says six of the eight directors were in attendance for the meeting. It names Bob Frankenberg, Alan Ashton, Ian Wilson, Elaine Bond, Larry Sonsini and John Young. Do you see that?

A. Yes, I do.

Q. It says also present by invitation are David R. Bradford, Mary Burnside, Jeff Turner and Jim Tolonen. Do you see that?

A. Yes, I do.

Q. That reference to Jim Tolonen is to you, correct?

A. Yes, it is.

Q. Then if we could go down to the lower half of the first page, there is a section entitled status of the SCO transaction. Do you see that?

A. Yes, I do.

Q. It reads, quote, Mr. Frankenberg then asked Mr. Bradford to review the current status of the company's efforts to close the transaction with Santa Cruz Operation. Mr. Bradford and Mr. Tolonen then outlined the status of the following action items. One, H.S.R. filings. Do you know what H.S.R. fillings are?

A. Sure. That is a Hart-Scott-Rodino filing and it has to

2095

do with employment law.

Q. Then it references, two, operating agreements; three, disclosure schedules; four, benefits agreement, and; five, source code licensing arrangements. It continues, it was pointed out that while excellent progress had been made on each of the foregoing, the company had decided to move its target close date to the end of November. Do you see that language?

A. Yes, I do.

Q. Do you recall being present at the board meeting and discussing the items that are referenced in the board meeting minutes?

A. Yes, I do.

MR. BRENNAN: I would like to have shown to the witness Novell Exhibit B-6.

This is not yet in evidence, Your Honor.

BY MR. BRENNAN

Q. Exhibit B-6 is the minutes of the meeting of the board of directors of Novell, Inc. held on Monday, December 11th, 1995. Did you attend that meeting as well?

A. Yes, I did.

MR. BRENNAN: Your Honor, I would like to move into evidence Exhibit B-6.

MR. HATCH: I don't have any objection, Your

2096

Honor.

THE COURT: B-6 will be admitted.

(Defendant's Exhibit B-6 was received into evidence.)

BY MR. BRENNAN

Q. If we look at the minutes of the board of directors meeting that Novell held on Monday December 11, 1995, and let's focus on the second paragraph, and it says six of the eight directors were in attendance for the meeting. It lists Mr. Frankenberg, Mr. Ashton, Mr. Wilson, Ms. Bond, Mr. Sonsini and Mr. Young. Do you see that?

A. Yes, I do.

Q. It says also present by invitation were David R. Bradford, Mary Burnside, Jeff Turner and Jim Tolonen. Do you see that?

A. Yes, I do.

Q. Scroll down a little lower. There is a reference at the bottom of page 1 to the UnixWare sale to SCO. Do you see that?

A. Yes.

Q. It states that management announced that the sale of the UnixWare product line to SCO was closed on December 6, 1995. Mary Burnside and Jim Tolonen outlined the efforts undertaken to transition employees from Novell to SCO and

2097

Hewlett-Packard. Do you see that?

A. Yes, I do.

Q. Did you in fact discuss with the members of the Novell board of directors at the December 11, 1995 board meeting the transition of employees from Novell to S-C-O and Hewlett-Packard?

A. Yes, we did.

Q. If you would, turn to what has been admitted into evidence as Exhibit G-4. This is a document that Mr. Hatch showed you. So that we can have a clear look at it, let's turn to page 2 of Exhibit G-4.

MR. BRENNAN: Highlight the first and second full paragraphs of that document.

BY MR. BRENNAN

Q. Mr. Hatch discussed this with you, but so that we are all literally on the same page, the memorandum from Mr. Bradford says I am now in receipt of a final asset purchase agreement between Novell and SCO. Simultaneous to my receipt of this contract you have been faxed an identical copy. Do you recall receiving on or before the date of this memorandum a copy of the asset purchase agreement?

A. Yes.

2098

Q. Then it reads the purpose of this memorandum is to let you know that I have reviewed -- just so we are clear, you understand the I to be David Bradford?

A. Absolutely.

Q. You understood that Mr. Bradford's role at that juncture as general counsel to be what relative to this transaction?

A. To pull all the pieces together and to agree that the intent as negotiated had been met by the legal contract, the terms of the legal contract, and give his agreement so that Mr. Frankenberg would be comfortable signing it.

Q. In fact, as you have indicated, the language of Mr. Bradford's memo continues, I have reviewed the final document and find the same to be an accurate reflection of the business and legal terms and conditions negotiated between the parties. I, therefore, approve this asset purchase agreement for final signature by Bob Frankenberg. Do you see that?

A. Yes, I do.

Q. Did you understand that the form of the asset purchase agreement that Mr. Bradford had approved as being an accurate reflection of the business and legal terms and conditions negotiated between the parties, that is Novell and Santa Cruz Operation, was the form of the asset purchase agreement that Mr. Frankenberg signed on September 19th,

2099

1995?

A. Yes, that is my understanding.

Q. Just a question or two about what transpired after the initial asset purchase agreement was entered into. What to your observation occurred with respect to the UnixWare business after it was transferred to Santa Cruz Operation?

A. Well, there was a period of time, and I think we referred to that as the overlap period, the actual transfer of people and assets and technology was moving. Novell stayed involved and also was a party to the contract in a number of ways, so we continued to be friends of Santa Cruz, not an investor but owner of 17 percent owner of the company and supporter of the business, as well as to continue with our other UNIX related business partnerships with the other companies that we had relationships with. Over a longer term our expectations for the success of that were not met, frankly. One of the things we looked at earlier was a proposed business plan where royalties would be calculated. The parties had agreed how big the market was and what kind of penetration over time would be achieved, and at which point no royalties would be paid and at which point royalties would be paid and a cap. I don't believe any royalties were ever paid under that, so there were really never -- it was not as successful as we had

2100

hoped.

MR. BRENNAN: No further questions, Your Honor.

THE COURT: Mr. Hatch.

MR. HATCH: A short inquiry.

RECROSS-EXAMINATION

BY MR. HATCH

Q. To follow up on Mr. Brennan's discussion of the board minutes and the sale, let me give you what has been marked as Exhibit 503. Do you recognize Exhibit 503 as being the 10-Q of Novell dated March 12, 1996?

A. Okay. Yes.

Q. Look on pages 16 of 17. Is that your signature?

MR. BRENNAN: I assume the question is whether this is an electronic signature?

THE WITNESS: It is an electronic signature of mine.

BY MR. HATCH

Q. That is how you file them with the S.E.C.?

A. Yes. The electronic filings have a slash S to reflect the signature.

Q. There is no doubt that you signed this on behalf of the company?

A. That is my signature.

Q. What does your signature represent?

2101

A. The chief financial officer and executive vice --

Q. No, by signing this what are you telling the S.E.C.?

A. That this is true and correct to my belief.

Q. Right.

MR. HATCH: Your Honor, I move Exhibit 503.

MR. BRENNAN: No objection, Your Honor.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 503 was received into evidence.)

BY MR. HATCH

Q. This is shortly after the sale of the business to SCO?

A. Two quarters. It would have been the second quarter.

Q. Your have to talk about the transaction and give a representation to the S.E.C. of what happened, correct?

A. Correct.

Q. I have a couple of quick questions. Turn to page 9.

MR. HATCH: If you would put that on the screen. Highlight the first line.

BY MR. HATCH

Q. It says in December?

A. Yes.

Q. In December, 1995, Novell sold its UNIX and UnixWare product line to the Santa Cruz Operation. Correct?

2102

A. Correct.

Q. You understood both UNIX and UnixWare?

A. Yes.

Q. Turn to page 10.

MR. HATCH: Highlight the paragraph, Mr. Calvin, that starts with UNIX Systems Group.

BY MR. HATCH

Q. What are you talking about here? You're talking about $19 million in royalties as a result of the sale to SCO?

A. That is the accounting calculation of how the royalty present value shows up in our financial statements because of the purchase.

Q. Again, you recognize the sale of the UNIX and the UnixWare product line to SCO in December of 1995, correct?

A. Yes.

MR. HATCH: That's all that I have, Your Honor.

THE COURT: May this witness be excused, counsel?

MR. BRENNAN: On Novell's behalf, yes.

THE COURT: Mr. Hatch?

MR. HATCH: Yes.

THE COURT: Mr. Tolonen, that means that you do not need to worry about being re-called. You can go back to your business. I do need to caution you. Please do not discuss your testimony with any other witnesses in this case or potential witnesses or in the presence of any other

2103

witness, and please do not communicate the content of your testimony to any other witness in the case.

Thank you very much.

THE WITNESS: Thank you.

THE COURT: Mr. Brennan.

MR. BRENNAN: Yes. Novell wishes to call Ms. Allison Amadia.

ALLISON AMADIA

Having been duly sworn, was examined

and testified as follows:

THE WITNESS: Allison Amadia, A-l-l-i-s-o-n, A-m-a-d-i-a.

DIRECT EXAMINATION

BY MR. BRENNAN

Q. Good morning, Ms. Amadia.

A. Good morning.

Q. So we're clear, have you previously been known by your maiden name?

A. I have.

Q. What is that?

A. It is Lisben.

Q. Would you please tell us your occupation.

A. I am an independent legal consultant and my speciality is technology licensing.

Q. In addition to your consulting work that you do, you

2104

are involved in other activities such as teaching and other professional pursuits?

A. Yes. I am a part-time lecturer at Santa Clara Law School and I teach a technology licensing class there.

Q. Please summarize for us your educational background.

A. Yes. I received a bachelor of arts from the University of California at Davis in political science, and a juris doctorate degree from the University of Pennsylvania.

Q. After you completed your law degree, did you then go to work for a federal district judge?

A. I did. I worked for Judge William B. Shubb in the Eastern District of California.

Q. That would be a District Court judge such as the judge that we have here, Judge Stewart?

A. Yes.

Q. Have you ever worked for Novell?

A. I did work for Novell from 1995 to 1997.

Q. During that span that you were employed by Novell, what was your position or capacity at Novell?

A. I was in-house counsel.

Q. What were your job duties or responsibilities while you worked for Novell as in-house counsel?

A. Basically supporting the business division and in licensing contracts and other contracts that were assigned to me through the legal department.

2105

Q. Where was your place of business or physical location?

A. San Jose.

Q. Did Novell have an office in San Jose when you worked there?

A. Yes.

Q. Are you familiar with the asset purchase agreement between Novell and the Santa Cruz Operation which was entered into in 1995?

A. I am familiar with it.

Q. How is it that you have become familiar with the asset purchase agreement?

A. I became familiar with it when I was an employee at Novell. I was working on a contract, a licensing agreement involving I.B.M. and Novell and Santa Cruz, and reviewed the asset purchase agreement back at that time when we were working on that transaction and also making amendments to the asset purchase agreement.

Q. Are you familiar as well with what is known as amendment number two to the asset purchase agreement?

A. Yes. I was the lead negotiator and drafts person on behalf of Novell with respect to amendment number two.

Q. So is it fair to say that you were essentially one who wrote it?

A. Yes. Well, wrote it and also responded to drafts of it from my counterpart at Santa Cruz.

2106

Q. Can you tell the jury how amendment number two came about?

A. Yes. I was working on a royalty buy-out license between Novell and I.B.M. when I was employed by Novell, and at the time that that royalty buy-out license was executed, and Santa Cruz became aware of it, they objected to it. So we began to negotiate a three party settlement, so to speak, between Santa Cruz, I.B.M. and Novell with respect to I.B.M.'s rights as a buy-out to the SVRX license. At the time that we were negotiating that agreement, which was finally executed and is referred to as amendment number X, we also discussed and eventually agreed to future buy-out rules. Novell and Santa Cruz were trying to identify in the future if there were opportunities for buy-outs how that would be conducted so that there wouldn't be any future litigation on that matter. That is how we started with amendment number two.

Q. Did you have any communications or discussions with any legal representatives of the Santa Cruz Operation with respect to either amendment X that you have identified or with what became amendment number two to the asset purchase agreement?

A. Yes. I had many face-to-face and phone conversations with Steve Sabbath, who was the general counsel of Santa Cruz at the time, and with respect to both the amendments

2107

number X and two.

Q. This Mr. Sabbath, who you said was the general counsel of Santa Cruz Operation, did he ever make any suggestion or statement to you regarding the ownership of copyrights under the asset purchase agreement?

A. Yes, he did. In the context of trying to negotiate the terms for the future buy-outs, he contacted me by phone and said, more or less, oh, by the way, we need to also amend the asset purchase agreement because there has been a clerical error in the original agreement and it did not include the transfer of copyright ownership, so this is another thing that we need to fix was what he said.

Q. So when Mr. Sabbath made reference to some clerical error, did you have any understanding as to what he was referencing?

A. Yes. I mean, I had some understanding, but I basically told him at the time to let me go and review the documents and do some research and I will get back to you.

Q. You were not involved in the actual draftsmanship of the initial asset purchase agreement?

A. No, I was not.

Q. So your involvement with amendment number two began after the initial asset purchase agreement was entered into. Is that fair?

A. Correct.

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Q. So when Mr. Sabbath indicated to you that he believed there had been some sort of clerical error, what did you do next in response to Mr. Sabbath's suggestion or request?

MR. NORMAND: Your Honor, this raises a privilege issue that might be more appropriate to speak about at sidebar.

MR. BRENNAN: If we can, Your Honor, just so the record is clear, this witness has never been deposed and there has never been a privilege asserted with respect to her testimony.

MR. NORMAND: That is correct, Your Honor.

THE COURT: Do you still want the sidebar?

MR. NORMAND: Yes, I do.

THE COURT: All right.

(WHEREUPON, a sidebar was begun.)

MR. NORMAND: The issue is as follows, Your Honor. From what I understand from the declaration, the witness is about to testify that she called Tor Braham, an outside attorney for Wilson Sonsini. We took a Rule 30(b) deposition of Wilson Sonsini and Novell attended, and at that deposition when I asked about any discussions that Mr. Braham had with anyone at Novell other than David Bradford, there was an cross the board privilege objection. Therefore, I was not permitted to cross-examine the Wilson Sonsini 30(b)(6) representative about the extent of the

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discussions with Novell.

Therefore, I was not given full discovery on the issue of what the intent was under the A.P.A. So for this witness to now link back and say that she spoke to Mr. Braham and found out the, quote, intent of the A.P.A. with respect to Novell would be unfair.

MR. JACOBS: I will handle this, Your Honor.

Neither Ms. Amadia nor Mr. Braham were deposed by SCO. Mr. Braham had long departed Wilson Sonsini by the time of this deposition. I alluded to this yesterday in our conversation, and SCO took a deposition of Wilson Sonsini as an entity and the Wilson Sonsini lawyer was trying to deal with this very odd circumstance and he is the one that asserted the privilege. Novell has not asserted the privilege with respect to communications between Ms. Amadia and Mr. Braham and Mr. Braham and Ms. Amadia, and there is no such assertion of privilege.

Now, because of the confusion around this deposition and the nature of the deposition they were taking, and the fact that Mr. Braham was gone by then, and the fact that they never took Mr. Braham's deposition, and the fact that they never took Ms. Amadia's deposition, they may be able to point to snippets, but they have not made a record asserting privilege as to communications between Mr. Braham and Ms. Amadia.

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MR. NORMAND: I would like to read a portion of the transcript of this Rule 30(b)(6) because Novell's counsel is there, and Mr. Jacobs is correct that in many instances the Wilson Sonsini attorney would first make a privilege objection, and then the pattern of the deposition was Mr. Brakebill would -- Novell would decide whether they wanted to waive some portion of the objection. Here Mr. Brakebill says there may be some discussions between Mr. Bradford and Ms. -- or Mr. Braham or Wilson Sonsini that may not be privileged. The premise of the whole discussion is that almost all of them are privileged, and now I will decide when they are or are not.

Then later in the transcript there is a flat out objection from the Wilson Sonsini attorney that you cannot answer on grounds of privilege whether Wilson Sonsini spoke with anyone other than Mr. Bradford at Novell. And Mr. Brakebill did not consider it then the way he had done several other times in the deposition. I don't think it is accurate to say that Novell was not acting in cooperation or at least in discussions with Wilson Sonsini as to the extent of the privilege that was being invoked.

MR. JACOBS: I think it is quite clear that they did not clearly make the record that Novell was asserting a privilege vis-a-vis the conversation between Ms. Amadia and Mr. Braham. In fact, in both the declaration -- I'm sorry,

2111

in Ms. Amadia's declaration, which has been out there now for three years, there has never been any argument or litigation around this scope of privilege assertion or around the failure to waive or anything like that. So to now spring that --

MR. NORMAND: One last thought.

THE COURT: The question is whether or not a privilege was exercised in regard to questions about communications between anyone at the law firm and anyone at Novell other than Bradford. If the privilege was then invoked, then I cannot allow this witness to discuss those questions or those conversations between herself and anyone at the law firm.

MR. JACOBS: The privilege was not invoked by Novell. That is the problem, Your Honor. This was a 30(b)(6) deposition of Wilson Sonsini as an entity. Mr. Parnes representing SCO as an entity --

THE COURT: If in fact Mr. Normand was clearly disadvantage by the exercise of the privilege, and whether it be by Novell or whether it be by the law firm, then --

MR. JACOBS: No, Your Honor. He chose for some strategic reason, unbeknownst to us, Mr. Normand and SCO chose to handle the inquiry into Wilson Sonsini's communications, that is the specific lawyers at Wilson Sonsini, by not deposing those attorneys and --

2112

THE COURT: Tor Braham?

MR. JACOBS: Or Ms. Amadia. They specifically chose to depose the entity and to try to position the entity, as to whether the law firm as an institution had a position on whether the copyrights transferred. It was a very peculiar deposition and a very peculiar approach to deciding the question of what the testimony would determine.

Again, Ms. Amadia's declaration was out there and this issue could have been ventilated and raised before we got to this trial, and so the complexity of this I think is unfair to us now that she can't testify to what she did.

MR. NORMAND: I want to make sure we are all on the same page. No one has taken issue with this in the last several days when this issue came up with whether the privilege was invoked properly. He presupposes that I should have filed a motion to compel that the privilege was invoked. More properly, I am arguing that it is incongruous now for Ms. Amadia to tell the jury that I spoke with Tor Braham and he is the end all as to the intent of Novell under the A.P.A., when I was not permitted by Novell's attorney, that was present and free to waive the privilege on behalf of Novell, as he did many other times, and where he chose not to waive the privilege, and it is not fair for her to suggest to the jury now that Mr. Braham spoke to Novell and the intent under the A.P.A. is --

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THE COURT: Is it true that during the course of the deposition that Novell on occasion waived the privilege?

MR. JACOBS: Your Honor, in candor I have not reviewed that deposition with this specific testimony in mind. So I cannot speak to the representations Mr. Brakebill is making, but what I can speak to is the fact that Wilson Sonsini was stuck in the situation where Mr. Braham is no longer at the firm, and so the Wilson Sonsini lawyer cannot go back and investigate what questions were being asked and he is stuck here in this situation --

THE COURT: I think this turns on the question of whether or not Novell had opportunities to waive the privilege and refused to do so or failed to do so, and now because the deposition did not get into this area I cannot, therefore, allow it at trial to now proceed with questions about her communication with Tor Braham.

MR. JACOBS: Then you would have to find, Your Honor, that SCO's counsel asked the 30(b)(6) representative of Wilson Sonsini whether she could testify as to the communications that Mr. Braham had with Ms. Amadia, and whether they have any institutional recollection of those, and whether had the privilege not been asserted there would have been such testimony, and whether the witness was following his counsel's and Novell's attorney's direction.

If there is no instruction and an actual following

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of the instruction, then the record is incomplete. What I will represent to Your Honor is that Mr. Braham himself actually does not have a recollection of the conversation Ms. Amadia is going to report. So had they asked the question there would be testimony as to Mr. Braham's communications with Ms. Amadia, but absent the assertion of the privilege the answer would have been no.

However, she was never deposed. She has a very clear recollection of it being brought up, about the asset purchase agreement by Mr. Braham.

MR. BRENNAN: Just one other thing. In the declaration which Ms. Amadia did submit, and which SCO's attorneys had for some time and was never objected to, and it was relied upon by Judge Kimball in prior rulings, and this was never raised as grounds for not allowing the testimony on this point. Mr. Normand is very intelligent and he has had the declaration all this time, for several years, and what has apparently occurred here --

THE COURT: Did he have the declaration before the law firm was deposed?

MR. BRENNAN: I didn't know the answer to that.

MR. JACOBS: He did not.

MR. BRENNAN: Just one other comment, Your Honor.

As far as the process, you will remember that when we have had privilege issues that have come up before, I on

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behalf of Novell raise them in advance with the Court so that there would be a ruling made before the witness was called. Apparently this is premised on this declaration and Mr. Normand did not give us or Your Honor the advance benefit that I gave before.

MR. NORMAND: We gave points and authorities on the issue of privilege and this issue was flagged and Mr. Jacobs -- it was going to create an issue from witness to witness, and I thought that is where we were, and it was not a blanket ruling that --

THE COURT: I believe that is the proper representation. I don't think it was improper. We are going to have a lot of sidebars during the course of the trial on the same basis, the issue of privilege.

Again, my dilemma is whether or not at the deposition the attorney for SCO apparently -- the fact is is that the testimony was not permitted because privilege was invoked, and there was no waiver by Novell and the questions were not asked, and I think it would be unfair to allow the questions now to be asked of the witness about her conversation with Mr. Braham since they were not permitted in the deposition.

MR. JACOBS: If that is your ruling, I have to at the break closely look at the transcript and -- I will do that now.

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THE COURT: Yes.

MR. JACOBS: Could the question be asked did you have a conversation with Mr. Braham? Because, again, there is no record that that was foreclosed, and then the witness can answer yes and then we can move on.

MR. BRENNAN: And the third point is that we need to have a brief break to inform the witness that she is not permitted to testify as to her discussion with Mr. Braham, if it turns out --

THE COURT: That is the Court's ruling.

You may revisit it, if and when you have had a chance to look at the deposition. I think you ought to go right now while the noise is still on and tell her that, if you would, please.

MR. BRENNAN: Okay.

THE COURT: You will be permitted to ask the question did you or did you not have a conversation with --

MR. BRENNAN: Thank you, Your Honor.

MR. NORMAND: Thank you, Your Honor.

(WHEREUPON, the bench conference was concluded.)

MR. BRENNAN: Thank you, Your Honor.

THE COURT: Go ahead, Mr. Brennan.

BY MR. BRENNAN

Q. Before our sidebar, Ms. Amadia, we were talking about communications that you had had with Mr. Sabbath, the

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general counsel at Santa Cruz Operation and his request that this clerical error be fixed. Did you do anything to look into that or to follow up on Mr. Sabbath's request?

A. Yes. The first thing that I did was review the actual asset purchase agreement and note the schedules, both the asset schedule and the excluded asset schedule, which clearly showed that the copyrights were excluded. They were on the excluded asset schedule and they were not in the included asset schedule.

Q. Let's pause just for a moment, and if we could briefly look at Exhibit 1 in evidence. We will look at Section 1.1 of the asset purchase agreement. 1.1-A in particular. Do you recognize this to be language from the initial asset purchase agreement?

A. Yes.

Q. Following up on Mr. Sabbath's request, did you look at this language that is before you from Section 1.1 of the asset purchase agreement?

A. Yes.

Q. You'll notice that there is reference to a Schedule 1.1-A, which is the schedule of included assets. Did you look at Schedule 1.1-A to see if there was reference to the UNIX copyrights in that schedule?

A. Yes, I did.

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Q. Did you see a reference to the UNIX copyrights in that schedule?

A. No.

Q. Still then on Section 1.1 of the asset purchase agreement, it continues notwithstanding the foregoing the assets to be so purchased shall not include those assets, the excluded assets set forth in Schedule 1.1-B. Do you see that?

A. Yes.

Q. Did you also look at that language with respect to assets that were excluded from the transaction?

A. I did.

Q. Did you look at the actual Schedule 1.1-B?

A. I did.

Q. Let's then turn to Schedule 1.1-B. Is this the portion of the schedule of excluded assets that you looked at in following up on Mr. Sabbath's request?

A. Yes.

MR. BRENNAN: Let's highlight Roman numeral five, intellectual property.

BY MR. BRENNAN

Q. Did you review these words in the list of excluded assets?

A. I did.

Q. Based upon your review of that, did you form any

2119

conclusion as to whether or not the asset purchase agreement transferred UNIX copyrights?

A. I did. I formed the conclusion that the asset purchase agreement did not transfer copyrights.

Q. Now, in addition to your own reading of the asset purchase agreement, did you do anything else to ascertain the intent of the initial asset purchase agreement?

A. I did. I contacted Novell's internal legal department and was given the name of the attorney who negotiated the original asset purchase agreement and I contacted that attorney. I --

Q. Let me interrupt you just for a moment. What was the name of that attorney that you contacted?

A. The outside counsel?

Q. Yes.

A. Tor Braham.

Q. Who did you understand Mr. Braham to be?

A. I understood Mr. Braham to be counsel with Wilson Sonsini, and the lead drafts person and negotiator of the original asset purchase agreement.

Q. Now, after you yourself had reviewed the initial asset purchase agreement, and after you had communicated with Mr. Braham, what happened next in terms of Mr. Sabbath's request to modify or change or correct the asset purchase agreement?

A. Well, after my communication with Tor Braham and my

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review, I basically was directed by Novell legal and business not to alter the original A.P.A. with respect to copyright ownership. So I received a draft from Mr. Sabbath, and I reviewed it and modified it in a way that I intended that it not effect the original copyright exclusion in the A.P.A.

Q. Let me show to you what is in evidence, Exhibit T-34. It is entitled amendment number two to the asset purchase agreement. So that you can get your bearings, I will ask Mr. Lee to highlight the introduction and paragraph A. I'm going to ask you to take a look at that. Is this what Mr. Sabbath sent to you as a proposed draft of amendment number two?

A. Yes.

Q. After you received this proposed draft by Mr. Sabbath, what did you do next?

A. We had conversations about this language, Steve and I, and I basically told him that we were not going to alter the original A.P.A. in terms of the transfer of copyrights. He indicated that, you know, he felt that Santa Cruz's business was going to be hampered if they didn't have certain rights to that which they had acquired. That is when I said, well, we can modify this language to affirm the rights that you have acquired in terms of license grants and rights to use the technology. Then I

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would mark up the paragraph and send him my proposed language to that effect.

Q. Did you, in fact, prepare such a revision?

A. I did.

Q. I would like to show you what is in evidence as Exhibit N-8. First, let's turn to page number 2 of Exhibit N-8. There appears to be a signature under the heading Novell. Do you see that?

A. I do.

Q. Do you have any understanding as to whose signature that is?

A. Yes, I do. That is James Tolonen.

Q. Who did you understand Mr. Tolonen to be?

A. He was the executive vice president and C.F.O. of Novell at the time.

Q. Did you have any involvement with Mr. Tolonen relative to amendment number two?

A. I did. Mr. Tolonen was named the executive basically in charge of the amendment number X and the amendment number two, and in brokering a settlement with respect to amendment number X and any changes that were going to be made on amendment number two. I had business discussions with him about what we were to do with amendment number two.

Q. In any of your communications with Mr. Tolonen, did he suggest to you that Novell ought to agree to transfer

2122

ownership of the UNIX copyrights to Santa Cruz Operation?

A. No, he did not.

Q. Did anyone at Novell ever suggest to you that in connection with amendment number two that Novell ought to transfer ownership of UNIX copyrights to Santa Cruz Operation?

A. No, no one did.

Q. If we could go back now to the first page of the exhibit. Let's highlight the language in Section A. Just so you know, the jury has had the benefit of seeing this several times, but this is the first time we have had a chance to talk together in this trial, Ms. Amadia. Section A reads as follows: With respect to Schedule 1.1-B of the agreement, titled excluded assets, Section 5, subsection A shall be revised to read all copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the agreement required by SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies. However, in no event shall Novell be liable to SCO for any claim brought by any third party pertaining to said copyrights and trademarks. Now, did you understand that this was the final language agreed to between Novell and Santa Cruz Operation? Correct?

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A. Correct.

Q. Under this language was it your intent as commenter or drafts person to effect the transfer of UNIX copyrights by Novell to Santa Cruz Operation?

A. No, that was not my intent.

Q. Why is it that you had no intent by virtue of amendment number two to transfer ownership of the UNIX copyrights to Santa Cruz Operation?

A. Well, there was no business decision to make that transfer. So as the legal negotiator I am going to follow the business decision and the business decision was not to transfer copyright as to the original A.P.A., and from my research, and certainly as to amendment number two.

Q. Now, with respect to the initial asset purchase agreement, including amendment number one and amendment number two, which you participated in drafting, were you aware of any business reasons why Novell would want to retain actual ownership of the copyrights particularly in the context of a potential insolvency or transfer or --

A. Well, there is language in the asset purchase agreement that I reviewed that explains that Novell retained a royalty stream from the existing code. There is reference to Novell retaining an equitable interest in those SVRX licenses. So there is some indication from the language of the A.P.A. that Novell had a very strong interest in retaining the

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copyright ownership to protect that royalty stream.

Q. Based upon your understanding of the language of the initial asset purchase agreement and your conclusion that it did not transfer the copyright ownership by Novell to Santa Cruz Operation, did you believe that you would have had to obtain approval or authorization from someone senior at Novell before you could change the asset purchase agreement to transfer copyright ownership?

A. Absolutely.

Q. Why did you hold that understanding?

A. Well, that is just, you know, standard business practice. I mean, something that significant would need to be agreed to on a business level and a very high level business level before anyone would make that change.

Q. Were you ever authorized by anyone at Novell to modify the asset purchase agreement so that it would transfer ownership of the copyrights to Santa Cruz Operation?

A. No, I was not.

Q. Did you ever ask for such authorization?

A. No, I did not.

Q. So when you prepared the language that actually was approved by Novell and signed by Mr. Tolonen, was your understanding that it was also approved by Mr. Sabbath at Santa Cruz Operation?

A. Yes. The language that we were just looking at was

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actually signed by both parties.

MR. BRENNAN: Just so we can be clear on that point, perhaps I can ask Mr. Lee if he could pull up amendment number two, just the very last portion of Exhibit 1. I have thrown him a monkey wrench. We'll see how quick he is.

I want to simply show the signature page by Mr. Sabbath to amendment number two.

My apologies for the delay.

Your Honor, with your indulgence, it will just take a few more seconds.

THE COURT: All right.

MR. BRENNAN: Thank you. I appreciate everyone's patience with me.

BY MR. BRENNAN

Q. What is before you is the counter signature by Santa Cruz Operation to amendment number two. You'll see that it references as the signer Steve Sabbath. That is the individual who you understood to be in essence the general counsel for Santa Cruz Operation, correct?

A. Correct.

Q. Now, let me back up. When Mr. Sabbath sent over his first version, Exhibit T-34, and let's pull that up, T-34. Highlight the proposed language that Mr. Sabbath initiated. In the version that Mr. Sabbath proposed it reads,

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quote, all copyrights and trademarks except for copyrights and trademarks owned by Novell as of the date of this amendment number two which pertain to the UNIX and UnixWare technologies and which SCO has acquired hereunder. Now, that language was not accepted, was it?

A. No.

Q. Why is it that that language was rejected by Novell?

A. Well, again, Novell was not interested in transferring copyright ownership, and this language seems to have that effect, or at least go some way toward that effect.

Q. Then if we could turn back to amendment numbers two and eight, which is the version that was approved and signed, and let's highlight the language so that we can compare them. Did Mr. Sabbath protest, after you sent to him the revised language that removed the provisions that he wanted, and say words to the effect that this is not acceptable to Santa Cruz because we wanted to get an amendment that said that we acquired the ownership of the copyrights?

A. Steve Sabbath was a bit of a screamer in general, to give you some context, and having negotiated the amendment number X with him, and that was a lengthy settlement negotiation, and he didn't accept any language readily. When I explained to him that, you know, if your concern is that you can't move forward in your business and develop

2127

this technology and exploit it then, you know, the license grants that are in the underlying asset purchase agreement really should meet that concern. What we are willing to do in amendment number two is affirm those license grants and make it clear that Novell is not going to come back later and sue you for copyright infringement for the assets and for your continued development of the assets. I don't recall if he continued to scream or if he accepted it at first explanation, but he did sign it, so I did know or feel that at the end of the transaction he had accepted the language.

Q. During the discussions that culminated in Mr. Sabbath cosigning on amendment number two, did you express to him Novell's position that it was not transferring ownership of the copyrights to Santa Cruz Operation under amendment number two?

A. Yes.

THE COURT: Mr. Brennan, how much more do you have?

MR. BRENNAN: I just have three questions.

THE COURT: All right.

MR. BRENNAN: I hope I have calculated that right. I only get three questions now, having made that statement.

BY MR. BRENNAN

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Q. If I could have you focus on the second sentence of what is on the screen, and it begins however in no event --

A. Yes.

Q. Let's highlight that. However, in no event shall Novell be liable to SCO for any claim brought by any third party pertaining to said copyrights and trademarks. What was the intent and purpose of that language?

A. The intent of that language was to say, okay, so here we are with amendment number two and we are affirming that you have certain licenses to the technology, to the right to use it, to manufacture it, to make modifications to it. In that original A.P.A. there are representations and warranties, there are indemnities, and we are not trying to alter any of that. We are not saying that somehow we're giving you something additional in amendment number two that you can now seek some kind of suit against Novell. The license grants themselves were actually in the asset purchase agreement.

Q. I have two questions left. Question two, in your mind are you positive that Novell did not intend to transfer copyrights with respect to UNIX to Santa Cruz Operation under the language of amendment number two that you prepared?

A. I am.

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Q. Last question. How can you be so sure?

A. Because I negotiated it and I drafted it. That wasn't my intent. I didn't have the authority to do otherwise.

MR. BRENNAN: Thank you, Your Honor.

THE COURT: We'll take our recess now.

THE CLERK: All rise for the jury, please.

(WHEREUPON, the jury leaves the proceedings.)

THE COURT: We'll take 20 minutes, counsel.

MR. BRENNAN: Thank you, Your Honor.

(Recess)

***** Part 3 *****

THE COURT: Are we ready, counsel?

MR. JACOBS: Your Honor, I have had a chance to review the transcript, and I believe that my characterization of the record was far more correct than Mr. Normand's.

In the deposition that we're discussing, this is the deposition of April 27th, 2007, it's a 30(b)6 deposition, and Aaron Alter is the witness for the firm, for Wilson Sonsini. Aaron Alter was Mr. Braham's subordinate on the 1995 asset purchase agreement. There are only a handful, less than five, less than four privileged instructions in this whole deposition in which Mr. Alter is examined at length about all relevant aspects of the asset purchase agreement. In particular, there is this -- there are these two relevant exchanges:

Question. What did Wilson Sonsini and Novell discuss in 1995 regarding the prospects of retaining intellectual property in UNIX and UnixWare?

Mr. Perens -- he's the internal general counsel for Wilson Sonsini -- well, I'll have to instruct not to answer based on privilege. I don't know if you -- if there's any waiver issue that you wanted to instruct us on.

Mr. Brakebill, counsel for Novell. I would ask him whether he knows, first of all, a

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foundational question, and see whether there's any issue of instruction.

Answer, the witness. I don't personally recall. And while I am the Wilson designee here, I would suggest in having read Tor's declaration -- bracket Tor Braham's declaration -- closed bracket, that he was the primary negotiator, and I believe he answers that question quite specifically in his deposition.

So that's the testimony on the 1995 transaction.

Then as to Amendment Number 2, Your Honor, there is no instruction whatsoever around Amendment Number 2. Mr. Alter is asked:

Question. Amendment Number 2, Mr. Alter. Handing you a copy of previously marked as Exhibit 1009. Do you recognize this document?

Answer. I do not.

Question. Is the question of the negotiation and drafting of Amendment Number 2 a topic you're prepared to address today?

Lacks foundation, counsel. Why don't you ask him what role our firm had, if any, in this.

The witness. Okay. So, Mark, I don't -- I don't recall. I don't recall. I'm reading the trailer, and I'm trying to see if it was even a

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Wilson document or whether Novell did it.

Question by Mr. Normand. I take it you

didn't have any involvement with respect to

Amendment --

Answer. If I did I don't recall.

Question. And do you know whether the

firm had any involvement with respect to Amendment

Number 2?

Answer. I also don't know that off the

top of my head.

Question. And I take it you don't know

whether Mr. Braham did.

Answer. I did not -- I do not. I'm sorry.

In other words, no instruction around Amendment Number 2, no opposition to Mr. Normand inquiring of the law firm. Again, Mr. Braham has left. They have Mr. Braham's declaration already. They've chosen not to take Mr. Braham's deposition. And that's the state of the record. There is no privilege assertion of relevance here, Your Honor.

THE COURT: Mr. Normand?

MR. NORMAND: Three things, Your Honor. First, Mr. Jacobs hasn't spoken to the 100 documents over which Novell has claimed a privilege concerning negotiation of the APA in the fall of 1995. Whether the assertion that privilege is appropriate or not, the question is whether it would be

2132

congruous to allow this witness to speak to Mr. Braham's intent when we haven't gotten discovery on all of the communications between Wilson Sonsini and Novell.

Two, Mr. Jacobs quoted on Page 45 of the transcript. If you go to Page 48, there is a specific question and a specific answer.

Question. Did Wilson Sonsini ever tell other than Mr. Bradford anyone from Novell that the copyrights in UNIX and UnixWare would not transfer?

Mr. Perens. I'll instruct not to answer on the grounds of attorney-client privilege.

And three, Your Honor, we never disputed that there has been a selected waiver with respect to these communications about Amendment Number 2. Ms. Amadia put in a declaration on it, and Mr. Braham put in a declaration on it. The issue is the witness reaching back in time saying, I spoke with Mr. Braham. He can't speak to, quote-unquote, Novell's intent when we haven't got full discovery on Novell's intent.

THE COURT: I understand the line of questioning that Mr. Brennan would have liked to have pursued with Ms. Amadia was, as represented by Mr. Normand, what Mr. Braham, tell me, when I called him and asked him about the intention of the APA. It seems to me based upon what was represented in the side bar as well as what has now been read

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to me that that line of questioning was not permitted during the deposition.

MR. JACOBS: I'm sorry, Your Honor. He's leading you into error. There is a whole transcript about the intent underlying the APA.

THE COURT: We're not talking about the APA. We're talking about Amendment 2, and it could be, more specifically, conversations between Mr. Braham and Ms. Amadia about Amendment Number 2. That is what no line of questioning was allowed because of privilege.

Isn't that a fact, Mr. Jacobs?

MR. JACOBS: No, I don't think so, Your Honor. I think the question on Amendment Number 2 and the role of Wilson Sonsini on Amendment Number 2 was specifically allowed and was referred to, and the witness Mr. Alter didn't know Mr. Braham's involvement in it. So there was no blockage of examination on Amendment Number 2. And Mr. Normand just didn't make his record.

MR. NORMAN: I agree with what Mr. Jacobs just said, and I explained to him on the break and I'll explain again, I want to be very clear about our position. There has been a selective waiver. Ms. Amadia and Mr. Braham have both spoken to their discussions regarding Amendment Number 2. Novell wants to put in Ms. Amadia's testimony of her discussion with Mr. Braham on the proposition that Mr. Braham

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can speak to Novell's intent. We have not gotten full discovery on Novell's intent in 1995.

THE COURT: Okay. That is a separate issue. That is not what was represented at the side bar.

MR. NORMAND: That is what I've been trying to say for 20 minutes, Your Honor. I'm sorry if I was unclear.

THE COURT: That was not what was represented at side bar. What was represented at the side bar was that a question was posed to the witness in the law firm about Braham's conversation with Ms. Amadia, and there was a privilege exercised, and you were therefore not allowed to ask of the witness representing the law firm about that conversation. That was what was represented at the side bar.

MR. NORMAND: That's not what I meant to say.

THE COURT: Is that what happened in the deposition?

MR. NORMAND: No. What happened in the deposition was we were not permitted to speak to Wilson Sonsini's, all of Wilson Sonsini's communications with Novell in 1995.

THE COURT: Okay. That's a different issue.

All right. I will permit Mr. Brennan to reopen, and he may ask this witness about conversations with Mr. Tor Braham.

MR. NORMAND: Do you want to do that now, Your Honor?

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THE COURT: Yeah. We'll let him finish before you go to your cross.

MR. BRENNAN: Your Honor, if I could have permission just to tell Ms. Amadia that I'm going to ask that question.

THE COURT: Do that now while Ms. Malley is bringing in the jury.

MR. BRENNAN: Thank you.

(Whereupon, the jury returned to the court proceedings.)

THE COURT: Ladies and gentlemen, Mr. Brennan has been given permission to ask some questions. And so though he had said that he only had three more to go, this is specifically at the Court's permission and not a request. And don't hold it against him if he's going to ask a few more questions to this witness.

MR. BRENNAN: Thank you. You just made my day, Your Honor.

Q. BY MR. BRENNAN: What I'd like to have you do, Ms. Amadia, is focus back in time when Mr. Steve Sabbath, general counsel of Santa Cruz Operation, had approached you making a request that the asset purchase agreement be amended, and then what you undertook to do relative to deciding how to respond. And I believe you indicated that you spoke with Tor Braham, who was the lawyer at Wilson Sonsini. Do you

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recall that?

A. I do, and I did. I spoke with Tor Braham, because after reviewing the asset purchase agreement I -- it seemed very clear that copyright ownership was not intended to be transferred, and I wanted to understand from the drafter and the lead negotiator himself whether that was some kind of clerical error as it had been presented to me by Mr. Sabbath or whether that was intentional. He indicated very clearly that that was intentional. There were good reasons for that. And he directed me not to modify it.

Q. And when you say he directed you not to modify it, what did you understand him to mean in that regard?

A. He said, don't change the schedule of excluded assets such that the copyright ownership would transfer to Santa Cruz.

MR. BRENNAN: Thank you, Your Honor. I appreciate your indulgence.

THE COURT: Mr. Normand?

CROSS-EXAMINATION

BY MR. NORMAND:

Q. Good afternoon, Ms. Amadia.

A. I'm sorry. I didn't hear you.

Q. Good afternoon.

A. Oh, good afternoon.

Q. Now, you've testified that you perceived your job

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in 1996 as to follow the business decision; is that correct?

A. Correct.

Q. And when you were determining what the intent was under the asset purchase agreement, you didn't call any of the business negotiators of the asset purchase agreement; correct?

A. No, I did not.

Q. Now, you perceived your job as an attorney in 1996 to follow the intent of business negotiators; correct?

A. Well, I didn't negotiate the original asset purchase agreement, so I perceived my job as to follow the business intent of the business people in making any changes to that with respect to Amendment Number 2.

Q. You said you called Tor Braham; correct?

A. Yes. And I spoke with Jim Tolonen, as well, who, as I said in my earlier testimony, is the lead business person involved in the transaction of Amendment X and Amendment Number 2.

Q. And with respect to your discussion with Mr. Braham, if Mr. Braham was wrong about what the business negotiators had intended under the APA, then what he told you about that intent was wrong; correct?

A. Yeah, I suppose so; although I also received direction from Jim Tolonen and from inhouse Novell counsel that was consistent with what Tor told me. So I didn't have one source for that understanding.

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Q. And if what Mr. Tolonen had told you about what he regarded as the intent under the APA did not reflect the intent of the business negotiators in 1995, then you had a misunderstanding of the business intent; correct?

A. I -- yeah. My -- when I testified as to following the direction of the business intent, it was as to changes or amendments to Amendment Number 2.

Q. Your understanding --

A. Okay. So I was going to follow the direction of the business intent with respect to the modification to the asset purchase agreement.

Q. Let me make sure I understand. I heard you say you had three bases in which you concluded that you thought you understood in 1996 was the intent of the APA on the issue of copyright transfer; correct?

A. Uh-huh (affirmative).

Q. One, your discussion with Mr. Tolonen; two, your discussion with Mr. Braham; and, three, your review of the asset purchase agreement; is that fair to say?

A. Yes.

Q. Now, you recognize that there was an issue with the copyright exclusion language in the asset purchase agreement; correct?

A. Can you say that again? I recognize that --

Q. That there was some issue with the language of the

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copyright exclusion in the asset purchase agreement; correct?

A. I was told by Steve Sabbath that there was an issue with the copyright exclusion.

Q. But you recognized that there was an issue with the clarity of the language; correct? Otherwise you wouldn't have agreed to enter into any amendment at all.

A. No, I didn't think there was any issue at all with the copyright exclusion. I thought it was very clear in the asset purchase agreement in Schedule 1.1(a) and Schedule 1.1(b) that copyright actually was excluded.

Q. So your testimony is that this paragraph in Amendment Number 2 serves no purpose?

A. Oh, no. It serves a purpose.

Q. What purpose did it serve?

A. Well, understanding the context, we are trying to negotiate Amendment Number X with Santa Cruz and IBM. Santa Cruz has threatened litigation. They're telling us we need to agree to their terms on the buyout provision with IBM and future buyouts in order to avoid litigation. And then they throw in this alleged clerical error.

And so in that context, trying again to settle this dispute and be able to move forward and let us run our perspective businesses, I saw the purpose of Amendment Number 2 with regard to altering the copyright section as appeasing them to make them understanding that we have no

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intention of suing them for copyright infringement for their rights to develop this code and run their business that they acquired. So again, I modified that section to affirm the licenses that were already in the APA.

Q. So your view was, your testimony is there was no lack of clarity in the original APA, but you signed Amendment Number 2, anyway?

MR. BRENNAN: Objection; mischaracterizes her statement.

MR. NORMAND: Your Honor, she can answer these questions.

THE COURT: Well, number one, she did not sign.

MR. BRENNAN: That was my objection.

THE WITNESS: I did not think there was any lack of clarity in the original APA.

Q. BY MR. NORMAND: But you did recommend to Mr. Tolonen that he sign the language in Amendment Number 2 that changed the original asset purchase agreement; correct?

A. I didn't view it as a change. I viewed it as language to clarify it.

Q. But it did change it; correct?

A. I still don't believe it changed it.

Q. You don't think it's a new language?

A. It can have new language to shed additional light without changing the underlying meaning, and that was what I

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was intending to do.

Q. And do you think Mr. Sabbath agrees with you?

A. I think he should agree with me. I don't know whether he does agree with me.

Q. You just said in your testimony that you, and I'll use your word, felt that Mr. Sabbath had agreed with your view on the issue of copyright ownership; is that right?

A. Yeah.

Q. But you're not sure if he agrees; right?

A. Like I said, he didn't dispute it when I presented the rationale of the changed language and the changed language, and he signed the document.

Q. But it's possible that Mr. Sabbath believed that the language you two had agreed to did confirm that copyrights had transferred; correct?

A. I don't know how he could believe that.

Q. But you don't know what he believes; correct?

A. Well, if we were going to amend the schedule --

Q. Yes or no? You don't know what he believes on this issue; correct?

THE COURT: Will you answer the question? If there's something else that needs to be brought out, it will be brought out on redirect.

THE WITNESS: Okay. I apologize.

What was question?

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Q. BY MR. NORMAND: You don't know what Mr. Sabbath believes with respect to the language you two ended up settling on with respect to Amendment Number 2; right?

A. I can't speak to what is in his mind, no.

Q. And you agree that the jury should consider the actual words of Amendment Number 2 in deciding the parties' intent; right?

A. I do.

Q. Let me show you what's previously been marked as SCO's Exhibit 137. This is Santa Cruz' 1996 annual report.

And, Mr. Calvin, can we go to the page.

I'm showing you language, Ms. Amadia, stating that Santa Cruz stated in this 1996 annual report in December 1995, the company, Santa Cruz, acquired certain assets related to the UNIX business including the core intellectual property from Novell.

Do you see that language?

A. Yes.

Q. Do you agree with that language?

A. I don't -- I don't necessarily agree or disagree. I think it's got some ambiguity in it.

Q. You agree that copyrights are among the core intellectual property of the UNIX; right?

A. I don't know that.

Q. I thought you said it was important to Novell that

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they keep the UNIX copyrights. Why would they have done that if it wasn't core?

A. It was important to secure the royalty stream from the pre-asset purchase agreement code.

Q. You've said you're a software licensing attorney; correct?

A. (Witness indicates by nodding head up and down.)

Q. And your testimony is that copyrights are not core intellectual property concerning software?

A. Well, again the use of the words intellectual property is ambiguous here. I don't know what they mean by intellectual property in this statement.

Q. I'm asking you as a general legal matter, would you agree that the copyrights are among the core intellectual property in any given piece of software?

A. In software? Yes, typically.

Q. You were asked about your review of the asset purchase agreement. Do you recall those questions?

A. Yes.

Q. You recall reviewing Schedule 1.1(a) of the asset purchase agreement sometime in 1996?

A. Yes.

Q. Mr. Calvin, could you bring that up. And if you could bring up that Roman Numeral I with the top language, as well.

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Do you recognize this, Ms. Amadia, as Schedule 1.1(a) of the asset purchase agreement?

A. I do.

Q. And Roman Numeral I identifies assets that were being transferred to Santa Cruz; correct?

A. Correct.

Q. And those assets include, all rights and ownership of UNIX and UnixWare including but not limited to all versions of UNIX and UnixWare and all copies of the UNIX and UnixWare including revisions and updates in process, and all technical, design, development, installation, operation and maintenance information concerning UNIX and UnixWare, including source code, source documentation, source listings and annotations, appropriate engineering notebooks, test data, test results as well as all reference manuals and support materials normally distributed by seller to end users and potential end users in connection with the distribution of UNIX and UnixWare, such assets to include without limitation the following:

Do you see that language?

A. Yes.

Q. Now, if there were no excluded assets scheduled to the APA, this language would include the copyrights of UNIX

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and UnixWare; correct?

A. I don't believe so, no.

Q. Why not?

A. Well, if you scroll down there is a section in the included asset schedule on intellectual property.

Q. But I asked you about this language in Roman I.

A. So you're saying if this is the only language in the asset schedule?

Q. Correct.

A. No, I still don't believe it would. When I read this then and as I read it now, it refers in my mind to the tangible media of UNIX and UnixWare and not speaking to the intellectual property or copyright.

Q. So your testimony is that copyrights as a general matter are not among the rights and ownership of UNIX and UnixWare; is that right?

A. Yeah.

Q. Let's look at --

A. I mean, whenever you have a property right or you have a right and a tangible thing, you know, you often will transfer all rights, title and interest. That's what I think that title and ownership language is.

Q. Although it doesn't say, all rights, title and interest; correct?

A. No, it doesn't.

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Q. It says, all rights and ownership; correct?

A. It does.

Q. But you still say that copyrights are not among all rights and ownership of a given --

A. Let's just put it this way. As a technology licensing practitioner, I would not rely on that language to imply that I had copyright ownership.

Q. Now, you refer to Roman Numeral V, I believe it was.

Mr. Calvin, if you could bring up that language. That is the intellectual property language.

Roman V is the language you're referring to?

A. Yes.

Q. And then that says:

Intellectual property. Trademarks UNIX and

UnixWare as and to the extent held by seller

excluding any compensation seller receives with

respect to the license granted to X/Open regarding

the UNIX trademark.

Correct?

A. Yes.

Q. Is it your testimony that this is the only intellectual property that you believe was included in Schedule 1.1(a) of the APA?

A. Yes.

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Q. Now --

A. Potentially -- well, yeah, because this is the intellectual property section, so, yeah.

Q. And you're a software licensing attorney. You said that; correct?

A. (Witness indicates by nodding head up and down.)

Q. You've heard of trade secrets in software; correct?

A. Yes.

Q. So is it your testimony that trade secrets were not included in the assets that Santa Cruz had acquired?

A. Well, if you go back to Section Roman Numeral I --

Q. Well, yes or no? Is it your testimony that trade secrets were among the assets that Santa Cruz acquired?

A. I don't think it's clear.

Q. You don't know?

A. I don't think it's clear from the language.

Q. Do you have a view?

A. Well, I can tell you that Amendment Number 2 attempted to clarify that and make it clear that whatever copyright rights, whatever specific rights under copyright law that Santa Cruz needed in order to exercise their rights to do this business that they did obtain them under the original APA. So if they needed trade secret rights in order to run their business then they acquired them.

Q. I'm not asking you about copyright, though. I'm

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asking you about trade secrets. That's a discrete subject matter. It's a discrete form of intellectual property; right?

A. Yes.

Q. And there are no trade secrets identified in the excluded assets schedule in the APA; correct?

A. Correct.

Q. So it falls that they must be included if they exist in UNIX and UnixWare; correct?

A. No. The excluded asset schedule is more, for lack of a better term, what we call belts and suspenders. So really what is included or what are included in Schedule 1.1(a), there really isn't an actual need to have a list of excluded assets except to indicate without, you know, any doubt that these things are not included. So the fact that trade secrets aren't excluded doesn't mean they were included.

Q. So your testimony is after the APA signed no one owned the trade secrets in UNIX and UnixWare; is that right?

A. No. After the APA was signed Novell owned the trade secrets in UNIX and UnixWare.

Q. But they're not in the excluded assets schedule. I thought that's where you said the intellectual property was excluded.

A. It doesn't have to be in there.

Q. Why not?

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A. The excluded asset schedule typically is a list of items that the parties think of and agree are not included, but it's not exhaustive. What's exhaustive is the schedule of included assets.

Q. Why would one be exhausted and one not be exhausted?

A. Because it's very clear in the section that refers to the schedule that what is being sold is what is in Schedule 1.1(a).

Q. So that long language I read at the beginning of the Schedule 1.1(a) and bored the jury with, you don't regard that language which ends with the phrase, without limitation as being exhaustive; is that your testimony?

A. No. I didn't say 1.1(a) wasn't exhaustive. It is. It's limited to what is in that schedule. 1.1(b) is exhaustive.

Q. So your testimony is that Novell may have excluded other assets that it did not identify in the excluded asset schedule?

A. Yes.

Q. And your testimony would be the same with respect to know-how?

A. I was just going to say, know-how is another way. Know-how isn't mentioned in either included or excluded.

Q. And so you presume that it is excluded if it's not

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mentioned at all?

A. Yes.

Q. Let's look at the language of Amendment Number 2.

And, Mr. Calvin, if you could bring up that Paragraph A.

Now, I've heard you say that this paragraph was intended to confirm that Novell had retained the UNIX and UnixWare copyrights. Is that a fair description of your testimony?

A. Yes.

Q. Now, this language doesn't use those words; correct?

A. Correct.

Q. Your testimony is that you intended for Amendment Number 2 to affirm, that was your word, that SCO has what you called a license, that was your word, under the asset purchase agreement; correct?

A. Correct.

Q. So you use the word "affirm." And the way you would affirm a license is would be actually by saying in the document the word "license."

A. Typically.

Q. But not here?

A. Not here.

Q. The asset purchase agreement does not use the word

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"license" in describing Santa Cruz' rights; correct?

A. Well, that goes to the fundamental question of what is a license. When you grant someone the right to do something with technology that you own, that's a license. It doesn't have to use the word "license" for it to be a license.

Q. So your view is the asset purchase agreement sets out an implied license; is that right?

A. No. It sets out a license. It just didn't use the word "license," which isn't required for it to be a license.

Q. So other than by implication, how would you know when you read the APA that there is a license if it doesn't use the word "license"?

A. Because you specifically read the provisions that show you what you're allowed to do. So it says, you have a right to take this code. You have a right to develop derivative works to this code. You have a right to market it. You have a right to distribute it, et cetera.

Q. Now, you work in software licensing; correct?

A. (Witness indicates by nodding head up and down.)

Q. You know that the phrase implied license is a term of art; correct?

A. Uh-huh (affirmative).

Q. It's the words used to describe a license when the word "license" is not used in a document; correct?

A. I've heard it described that way, yeah.

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Q. So you would agree with me that if the asset purchase agreement does not use the word "license," then any standard of proof license would have to be an implied license; correct?

A. Well, I still think that it can be a license without using the word "license." So an implied license is often something that is, something that you gleam from it that you say, well, if I can do X, then I must be able to do Y, because I can't get to X without doing Y.

That's not what I'm saying. I'm saying that the APA explicitly said that Santa Cruz could do certain things, and that was an explicit license agreement, even though it didn't use the word "license."

Q. Let me make this a easier. The APA is titled, The Asset Purchase Agreement; correct?

A. Uh -- huh (affirmative).

Q. The word "license" is not in the title; correct?

A. Correct.

Q. And as far as you know, the word "license" is nowhere used in the APA describing any rights that Santa Cruz has; correct?

A. Yes.

Q. Now, it comes time to Amendment 2, and you testified that you wanted to be clear that Santa Cruz had acquired a license, but you do not use the word "license" in

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Amendment 2 either; correct? In fact, it says, the jury can see, that Santa Cruz acquired the UNIX and UnixWare copyrights required for SCO to exercise its rights with respect to the acquisition of the UNIX and UnixWare technology.

Do you see that language?

A. Yes.

Q. That's the plain language; correct?

A. Uh-huh (affirmative).

Q. And you don't clarify that someone has obtained a license by amending an asset transfer provision; correct?

A. We did. Do you want to know why?

Q. Your counsel can ask you why, and I've heard you speak to why.

A. Okay.

Q. But you didn't use the word "license"; correct?

A. No.

Q. You could have signed something that said Santa Cruz has a license, and you didn't sign something that says that; correct?

A. Correct.

Q. So your testimony that Paragraph A of Amendment 2 which does not use the word "license" affirms that Santa Cruz had a license under the asset purchase agreement, which also does not use the word "license"; is that right?

A. Several licenses under the APA, yeah.

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Q. So let me make sure I understood that. Amendment Number 2 Paragraph A clarifies that Santa Cruz had several licenses?

A. Uh-huh (affirmative).

Q. But it also doesn't use the phrase, several licenses; correct?

A. Correct.

Q. And you know that Santa Cruz agreed to give Novell over $100 million in payments under the asset purchase agreement; correct?

A. I believe so.

Q. So your testimony is that Santa Cruz agreed to give Novell over $100 million in payments for an unwritten and implied license to use the copyrights; is that right?

A. No, that's not right.

Q. Your testimony is that they paid over $100 million in payments, and part of the rights that they received was an implied, unwritten license to use the copyrights; correct?

A. No.

Q. What's incorrect?

A. It's not an implied license. It was expressed. It was very clear what they were getting the rights to do in my mind.

Q. So it was an expressed license, but it doesn't use the word "license." How is that possible?

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A. It was an expressed right to do something --

Q. Okay.

A. -- which had a value.

Q. So expressed right is different from an expressed license; correct?

A. Not really. I mean, I look at copyrights as a bundle of rights, okay? So if you have -- you have certain rights under copyright law, and Santa Cruz was definitely given a number of those rights.

Q. But they weren't given them in the form of a description license; correct?

A. No, they were not.

Q. Now, as an attorney --

A. But I don't think that has any difference in terms of their ability to do those things. I'm not aware that it would impact their ability to do it whether they used the word "license" or didn't. They still would have that right free from, you know, any infringement claim from Novell that they're somehow infringing on their copyrights.

Q. Let's look at the language in Paragraph A because I'm not sure I'm following what you're saying. This says:

The copyrights and trademarks owned by Novell as of the date of agreement required SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technology.

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You're not here to testify what copyrights are required for SCO to exercise its rights, are you?

A. No.

Q. You understand that if SCO has only an implied license to use the UNIX copyrights, then SCO cannot bring a lawsuit to enforce those copyrights, aren't you?

A. Can you repeat the question?

Q. You understand that if SCO has only an implied license to use the UNIX copyrights that it cannot enforce those copyrights in court? You understand that from your background; right?

A. Yes.

Q. And enforcing the copyrights in a company software is part of running a software business; correct?

A. Potentially. It depends upon what your -- I mean, in this case there are license rights. That wasn't the business that they really acquired.

Q. Well, if a company can enforce the copyrights and the source code, then it cannot prevent third parties from misusing the source code; right?

A. They could enforce a copyright after the derivative work. They had ownership as to the derivative work.

Q. But you agree they did not enforce under your view of their rights the copyrights in UNIX that existed as of 1995; correct?

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A. Yeah. I didn't believe and I still don't believe from reading the APA that they had the right to license the underlying code. So I would believe the right to enforce the copyright is part of that business.

Q. Your understanding of the APA was that Santa Cruz could not license the UNIX and UnixWare source code to third parties; is that right?

A. In its form as of the signing of the APA? Only under certain limited circumstances.

Q. Your understanding was that after the APA Santa Cruz could not license the versions of UnixWare that existed as of the time of the APA to third parties; is that right?

A. Yes.

Q. You agree that Amendment Number 2 revises the excluded asset schedule of the asset purchase agreement; correct?

A. Can you say that again?

Q. You agree that Amendment Number 2 revises the excluded asset schedule of the asset purchase agreement; correct?

A. Yes.

Q. Mr. Calvin, can we pull up that demonstrative?

Ms. Amadia, is that in front of you on the screen?

A. Yes.

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Q. This is meant to depict the language in Amendment Number 2 that we've been talking about replaces the language of the excluded assets schedule of the APA. Do you think this is a fair representation of that?

A. I can't read the original schedule on my screen. I can only read the bubble language. But let me get closer.

Yeah.

MR. NORMAND: Your Honor, can I show this to the jury? We gave this to Novell this morning.

MR. BRENNAN: Not precisely in this form. I don't have an objection to this page. There was another one, I don't know whether they intend to use it, to which I have an objection, but I don't what's now before the Court.

THE COURT: All right. The jury may see this page.

Q. BY MR. NORMAND: Ms. Amadia, you recognize the language on the left side of this demonstrative to be the language from the original excluded assets provision of the APA; correct?

A. Correct.

Q. And you would agree with me that the language on the right is the language from Amendment Number 2 that replaces the old language; correct?

A. Correct.

Q. Now, you agree that under the plain language of Amendment Number 2 Novell has included in the transfer of

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assets the copyrights required for SCO to exercise its rights in UNIX and UnixWare; correct?

A. Well, the way that I wrote and intended Amendment Number 2 to be read is that this language was saying that whatever copyright rights Santa Cruz needed in order to exercise the rights it was given under the asset purchase agreement, then that would be -- they would have those rights.

Q. Would you agree with me that it's a fair interpretation of this language that Novell has included in the transferred assets the copyrights required for SCO to exercise its rights in UNIX and UnixWare? Correct?

A. Well, so that -- yeah. I suppose it's a reasonable interpretation to say that if they required those rights under the original APA that they were transferred in this revised schedule. But the original language of this Amendment Number 2 in this section was presented by Steve Sabbath. And what we were attempting to do is work with the language that he had proposed and modify it in a way that was acceptable to us. We weren't -- so had I started from whole cloth in drafting an amendment that was affirming SCO's license rights, I wouldn't have necessarily modified Schedule 1.1(b). And if I was intending to modify them in order to transfer copyrights, I would have definitely amended Schedule 1.1(a), which listed the included assets, and we didn't do that.

Q. But in the terms of the question that I asked,

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would you agree with me that it's reasonable to interpret this language as saying that among the copyrights included in the transfer are those that SCO needs to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies? Correct?

A. Yes.

Q. Now, let's pull up SCO 97.

Ms. Amadia, have you seen Novell's press release dated June 6, 2003, on the issue of copyright transfer?

A. No, I haven't.

Q. Novell's attorneys haven't showed you this language?

A. No.

Q. Let me highlight the language for you towards the bottom of the first paragraph. And because you haven't seen this, let me read into the record a little bit of background.

In a May 28th letter to SCO Novell challenged SCO's claims to UNIX patent and copyright ownership and demanded that SCO substantiate its allegations that Linux infringes SCO's intellectual property rights.

And then at Number 2. 1995 SCO Novell asset purchase agreement was sent to Novell last night by SCO. To Novell's knowledge, this amendment is not present in Novell's files. The amendment

2161

appears to support SCO's claim that owners have

certain copyrights for UNIX be transferred to SCO in 1996.

Do you see that language?

A. I do.

Q. Do you agree with that last sentence that I read into the record?

A. No, I don't. I don't agree with the last sentence.

Q. But you agree that that's a reasonable interpretation of the language that is actually used in Amendment 2; correct?

A. Without having the background knowledge of the intent of the draftsperson and the business people in that transaction, I suppose it is a reasonable interpretation. But I have that background knowledge, so for me it wouldn't be reasonable for me to interpret it that way.

Q. And you said that the intent of the business people is relevant in determining the party's intent of the agreement; correct?

A. Well, it certainly is as far as my job as an attorney and what I was going to draft or agree to in a substantive agreement, yeah.

Q. And with respect to this language that we've been looking at, if Novell's general counsel approved the language of this press release you think his interpretation was

2162

unreasonable?

A. As I said, without having the background knowledge of the intent of the draftsperson in Amendment Number 2 and the business intent in drafting that Amendment Number 2, I don't think that would be unreasonable. But I have that knowledge, so to me it would be unreasonable.

Q. In 2002 or 2003, did anyone from Novell ever ask you about Amendment Number 2? Did they ever ask you to send them a copy of Amendment 2?

A. Not that I recall, no.

Q. Now, you've previously said -- and let's go back, Mr. Calvin, to Paragraph A of Number 2 and pull out that language.

You previously said that you intended Paragraph A in Amendment Number 2 to set out what you called a process; correct?

A. I'm sorry. Paragraph A?

Q. Yes.

A. No. I was actually referring to Paragraph B when I said that.

Q. You previously said in your declaration that this paragraph maybe sets out a process; correct?

A. No. I don't -- I believe it was the buyout process that I was referring to, which is Section B.

Q. So it's not your view that Santa Cruz was under

2163

some obligation if it wanted copyrights to go back to Novell and ask Novell to send it copyrights; is that right?

A. Well, to the extent that they believe what was required in order for them to exercise their rights under the APA was full copyright ownership, then they would need to do something beyond this. But I guess that's what you mean by process.

Q. Yeah.

A. Yeah.

Q. It would be fair to describe that is a form of process; right?

A. I don't think that anyone -- well, I can't speak for Steve Sabbath, but I did not believe that the original APA required for Santa Cruz to have full copyright ownership with all of the rights that are incident to full copyright ownership. So I didn't view this as something that was going to trigger a process, because what I viewed it as is an affirmation of their licenses in the original APA. So I didn't expect anything to come out of it in terms of a process of someone making any claim that they required copyright ownership.

Q. But your view was that there was a process that had to unfold before Santa Cruz could obtain copyright ownership; is that right?

A. Like I said, my reading of the APA, my discussions

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with Tor Braham and Jim Tolonen indicated to me that Santa Cruz had certain rights with respect to the technology and that the underlying copyright ownership was retained by Novell for good reason. And I did not anticipate that Santa Cruz needed any more than those license rights, an affirmation of those rights in order to do their business.

So, no, I think in my mind this cleared up any doubt as to whether or not they had the right to go and run the business, and that was all they needed was those license rights.

Q. So I think I understand.

Your testimony is if Santa Cruz did need them, if they were required, then they got them?

A. No, not exactly.

Q. So there's no process. And you say they didn't get them at the time.

A. I don't believe that they needed them, and I don't believe that they got them. If, in fact, they thought they needed them, I would imagine they would need to come back and have some form of amendment actually granting them with retroactive rights and amended bill of sale and everything tantamount to a transfer. This was never a transfer in my mind. So, you know, I feel like I'm saying the same thing.

Q. Now, this language in Paragraph A doesn't say anything about Santa Cruz' obligations to come back to Novell;

2165

correct?

A. No.

Q. It doesn't have any language that refers to any process; correct?

A. Not that I can see.

Q. And we've gone through the fact that Paragraph A of Amendment 2 revises the excluded assets schedule of the asset purchase agreement; correct?

A. Yes.

Q. And there's no other provision of the excluded assets schedule that sets out any process; correct?

A. Not that I'm aware of.

Q. Let me ask you it a different way, Ms. Amadia. Before Amendment 2 when Santa Cruz actually thought it did not own the copyrights, it already had the right to ask Novell to transfer them; correct?

A. I don't believe so. No.

Q. No. Let's look at Section 4.12 of the APA. And let's pull out that language at the top, Mr. Calvin.

So, Ms. Amadia, this is from the APA Section 4.12, states:

Each party hereto, at the request of another party hereto, shall execute and deliver such other instruments and do and perform such other acts and things as may be necessary or desirable for

2166

effecting completely the consummation of this

agreement and the transactions contemplated

hereby.

Do you see that language?

A. Yes.

Q. Do you see the language in the second line that says, at the request of another party?

A. Yes.

Q. So under this provision Santa Cruz could have made a request to Novell for the copyrights if they believed they did not own them; correct?

A. No, I don't believe so.

Q. You think that Santa Cruz literally could not ask Novell in the form of a request, would you, please, transfer copyrights to us?

A. I think they could ask, and I think they did ask. I don't think Novell was obligated by this provision to grant them.

Q. Well, I'm --

A. I don't believe the original APA granted them, and this provision addresses following acts in order to consummate the agreement and the transactions contemplated hereby. I'm reading the actual language. And the agreement was an asset purchase agreement of certain assets which did not include --

Q. Well, I appreciate all of that, I do, and maybe my

2167

question wasn't clear enough.

A. Okay.

Q. I'll try to ask a clear question, and see if we can get a yes or no. And if you can't let me know.

A. Okay.

Q. But my question was, didn't Santa Cruz have a right to make a request to Novell? Whatever Novell did in response, Santa Cruz could have made a request?

A. Do I have to say yes or no, or can I --

Q. If you can't say yes or no you can explain why.

A. Absolutely. Whether or not this language was in the agreement there's no law that prohibits Santa Cruz from making that request.

Q. And Novell could have said no in response to the question; right?

A. Correct.

Q. And none of that in your view changed after Paragraph A of Amendment Number 2 was put in place; correct?

A. Correct.

Q. So Paragraph A of Amendment Number 2 never had anything in Section 4.12; correct?

A. Well, again, to the extent there's any document or further assurance that they requested in relation to the licensees that they received under the original APA, then I think this section would require Novell to respond and perform

2168

in good faith with respect to those licenses. I believe they still had that obligation under the original APA. So I guess the answer is yes, there is no additional, there's no additional obligations that came about as a result of the Amendment Number 2.

Q. Now, you don't think that Steve Sabbath after he executed Amendment Number 2 thought he got nothing out of that paragraph amendment?

A. No, I don't. I don't think he got nothing. I think he thought he got what he needed, which would clear license rights to go forward, to use the code, to develop it, to, you know, own modifications to it, to do all of the things they intended to do to acquire the assets.

Q. You think he thought he had clear license rights in the form of the agreements that don't use the word "license"?

A. Yeah.

Q. Now, let's look at the draft language that we talked about that Mr. Sabbath sent to you. And I think that's in, what was put in at T34. Let's pull up that Paragraph A.

I think you said Mr. Sabbath told you initially in the beginning of the discussions that the purpose of the Amendment was to clarify that the UNIX and UnixWare copyrights had transferred; correct? I'm not saying you agreed with it, but I'm saying that was your understanding of what he was proposing; right?

2169

A. Yes.

Q. Let's look at this language. The language that you're saying he sent to you said:

All copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of this Amendment Number 2, which pertain to the UNIX and UnixWare technologies and which SCO has acquired hereunder.

Do you see that language?

A. Yes.

Q. You spent a little time with that language with counsel, and unfortunately for the jury I'm going to ask you about grammar a little bit.

The first part of this language says, all copyrights and trademarks; correct?

A. Correct.

Q. So if the language stopped there, then what you would have is a situation where all copyrights and trademarks had been excluded; is that fair to say?

A. That's fair to say.

Q. The language goes on, and it begins with the word "except," so that's an exception; correct?

A. Correct.

Q. All copyrights and trademarks except for the copyrights and trademarks owned by Novell as of the date of

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this Amendment Number 2.

Now, that would have said that Santa Cruz acquired all of Novell's copyrights and trademarks; correct?

A. Yes. If it had stopped there?

Q. Yes.

A. Yes.

Q. Now, that's not what either you or Mr. Sabbath intended; correct?

A. It's not what he signed and what Novell signed, either, yeah.

Q. But Mr. Sabbath didn't intend to have anything clarify that Santa Cruz had acquired Novell's NetWare copyrights; correct?

A. Correct.

Q. So this was, first two parts of this sentence, they're simply inaccurate?

A. They're what?

Q. Inaccurate.

A. Well, it wasn't ever intended to be read alone. So as a draftsperson I take offense to it being called inaccurate, even though I didn't draft it. Steve drafted it. But it was never intended to be read --

Q. I was hoping you wouldn't be offended. I mean, Mr. Sabbath --

A. It was intended to be read in context and

2171

particularly in the context of a complete sentence, which it was written, but, yeah.

Q. So we agree -- you know, I'm going to get to that third part, and I'm not trying to exclude it. But do we agree, if you read the first two parts what that language literally says is Santa Cruz had acquired all of Novell's copyrights and trademarks. And you didn't understand that's what Mr. Sabbath intended; correct?

A. No. Yeah.

Q. And then the last part explains the second part. The last part says, which pertain to the UNIX and UnixWare technologies and which SCO has acquired hereunder.

Now, all of Novell's copyrights and trademarks did not contain the UNIX and UnixWare technologies; correct?

A. Correct.

Q. There were Novell copyrights and trademarks that pertained to NetWare; correct?

A. Yes.

Q. So this language that Mr. Sabbath sent you actually didn't even reflect his intent, did it?

A. Well, if it didn't reflect his intent, I don't know why he presented it.

Q. But what I'm getting at --

A. I think he did. He was saying that he was intending to transfer copyright ownership with respect to all

2172

copyrights which pertained to UNIX and UnixWare that they claim to have acquired under the original APA.

Q. Well, I guess I'm focussing on the comma, and here's the grammar, the comma in the second line of the sentence, and, comma identifies, does it not, it identifies the copyrights and trademarks owned by Novell as of the date of the amendment as pertaining to the UNIX and UnixWare technologies? And that was not accurate, was it?

A. Comma error, but yeah. It probably should have been that pertain, not which pertain.

Q. Now, you agreed that if Novell had signed the language that Mr. Sabbath sent to you, that would have provided that all of the UNIX and UnixWare copyrights were transferred; correct? And again, I'm not saying you did sign it, but --

A. Again, if I were Steve Sabbath, I would not have presented this language in and of itself and expected to retain copyright ownership from this language.

Q. Let me ask it differently. The reason you didn't sign this language, I thought I heard you testify earlier, because your view was if you had signed it, it would have made very clear that Santa Cruz had acquired all the UNIX and UnixWare copyrights.

A. I don't know that I said that.

MR. BRENNAN: I want to state an objection. That

2173

mischaracterizes the witness' prior testimony.

Q. BY MR. NORMAND: Well, if it does, explain that.

A. No. I think what I said, or I can at least say now what I meant to say is it would have created an ambiguity that there was an intent to transfer copyright ownership.

Q. And you think that the language that you ultimately settled on with Mr. Sabbath contained no ambiguity?

A. I think it did contain some ambiguity. And if you're a transactional attorney and you understand the way these transactions work in the context of settling a threatened litigation, sometimes you're willing to live with a little bit of ambiguity in order to get a deal done. And I don't think that the ambiguity was such that at the end of the day it wasn't clear.

I mean, like I said, in a perfect world I never would have accepted Steve Sabbath's original language and even modify the excluded asset schedule. I would have started with basically some statement affirming the license grant. But knowing Steve Sabbath and who he was and what his reaction was going to be to a whole modification of his proposed language, that was not going to bring the deal forward and get the parties on to do their businesses, which is where we all wanted to be. So I tried to work within the confines of his initial drafts.

Q. Let me ask you a different question in that vein.

2174

And if we could go back, Mr. Calvin, to the excluded assets. Now pull up that language on Roman V.

So you agree, Ms. Amadia, that under the APA Santa Cruz did acquire trademarks of UNIX and UnixWare; correct?

A. Yes.

Q. Okay. And you said that Amendment Number 2 clarified the asset schedule of the APA; correct?

A. Yes. Well, yes.

Q. So Amendment Number 2 confirmed that Santa Cruz had acquired UNIX and UnixWare trademarks; correct?

A. Can I actually see the language on Amendment Number 2 at the same time, or can somebody present me with that document?

Q. Sure. I think we can stack it up there.

A. Because I don't want to misspeak. Section A of Amendment Number 2. That would be great.

Q. So as you look at it, I thought I heard you say earlier that Amendment Number 2 was designed to clarify the excluded assets schedule. And it was meant to confirm what assets Santa Cruz had and had not acquired; correct?

A. Uh-huh (affirmative).

Q. So Amendment Number 2 was not designed to say that Santa Cruz had not acquired the UNIX and UnixWare trademarks; correct?

2175

A. Yes. At the time that this section was being modified, trademarks wasn't really top of line for either party. And -- but I don't think -- it certainly didn't intend to take them away.

Q. So the language now in Paragraph A, I hope I'm not testing the jury's patience, but the language says that what was transferred to Santa Cruz were the copyrights and trademarks owned by Novell as of the date of the agreement required for SCO to exercise its right with respect to the acquisition of UNIX and UnixWare technologies.

Do you see that language?

A. Yes.

Q. And you agree with me that that language identifies the UNIX and UnixWare trademarks as having been transferred; correct?

A. It doesn't expressly identify them. But to the extent that the UNIX and UnixWare trademarks were required for SCO to exercise its rights under the APA, they were transferred through Amendment -- well, their transfer was clarified in Amendment 2. They actually were transferred in the APA.

Q. And you said in response to my question earlier that Paragraph A did not change that; correct?

A. Yes.

Q. So the way Paragraph A identifies UNIX and UnixWare

2176

trademarks is by identifying them as required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies; correct?

A. Yes. Well, the UNIX and UnixWare trademarks were also listed in the schedule of included assets.

Q. Now, but this language pertains to the excluded assets schedule; right?

A. Right.

Q. And we've agreed, haven't we, that there are at least some intellectual property rights that are not specifically identified in the included assets schedule in the APA?

A. Yeah. Again, I view intellectual property rights as you can dissect them into individual rights and licenses. So certainly we're saying under trademark law and under copyright law there were certain rights that SCO got licenses to or I guess acquired with respect to trademarks.

Q. Well, when you say, I guess acquired, I want to be clear.

A. Yeah.

Q. This paragraph --

A. Again, it all ties -- the whole purpose of Amendment Number 2 in this language was to tie it back to the original assets purchase agreement.

Q. So Santa Cruz got the UNIX and UnixWare trademarks

2177

because they were acquired for its business; correct?

A. If they were required for its business, then they got them.

Q. Well, that's not what I heard you say. I want to make sure we're being clear. You said that they did get them under the original APA; correct?

A. Yes.

Q. And you said that this Paragraph A does not change that; correct?

A. Yes.

Q. Okay. Now, this Paragraph A on its face does not draw any distinction between trademarks and copyrights; correct?

A. Correct.

Q. So if there are copyrights that are required for SCO to exercise its rights, like the UNIX and UnixWare trademarks, they were transferred; correct?

A. Yeah.

Q. Ms. Amadia, you testified very briefly to the negotiations that were among Novell and IBM and Santa Cruz in the first half of 1996; at least that's how I heard it; is that a fair description?

A. Uh-huh (affirmative).

Q. And that arose in a situation where Novell was claiming to act on behalf of Santa Cruz; correct?

2178

A. Correct.

Q. Novell had entered into an agreement with IBM and said in the agreement, we're acting on behalf of Santa Cruz; correct?

A. Yes.

Q. And after Santa Cruz found out about that agreement, Santa Cruz was upset; correct?

A. Correct. Well, Santa Cruz was collecting the royalty stream under all SVRX licenses including that agreement. So the way they found out about it was Novell's agreement, it prevents them from being ready to receive the check.

Q. But Santa Cruz did object to the agreement that Novell had negotiated with IBM on behalf of Santa Cruz; correct?

A. They did. They ultimately agreed to an amendment that revised that, and that was Amendment Number X.

Q. And there was really a dispute among Novell and Santa Cruz throughout a lot of 1996; correct?

A. I'm only aware of the dispute regarding Amendment X.

Q. That's what I meant. It lasted several months; correct?

A. It did last several months. I don't know about the year language. But it did last several months.

2179

Q. And to your knowledge, throughout that whole dispute with Santa Cruz, Novell never claimed to own the UNIX and UnixWare copyrights, did it?

A. The issue never came up. Nobody made any claims as to ownership.

Q. And there came a time when IBM who had entered into that agreement with Novell earlier became involved; in other words, there came a time when all three companies were involved in the discussion; correct?

A. Yeah. The ultimate amendment was signed by all three companies.

Q. And do you recall whether during that process among the three companies IBM insisted that Santa Cruz should agree to lift restrictions on IBM's software agreement because SCO could protect itself through its copyrights?

A. No.

Q. You don't recall any discussion on that?

A. I don't recall that.

Q. Let me show you to see if we can refresh your recollection. SCO 123.

And, Ms. Amadia, I wanted to -- let's identify it at the top. I can't really speak to the internal substance of the document because it's not in. But do you see the title of the document?

MR. BRENNAN: Do you have a copy that I may see?

2180

MR. NORMAND: Yeah. Sorry.

Q. BY MR. NORMAND: Do you see the language at the very bottom that I think Mr. Calvin will pull up?

A. Can I ask, who's the author of the document?

Q. I can't tell you.

A. Okay.

Q. All I'm trying to do is refresh your recollection, if you've seen this document.

A. Oh, okay.

Q. So take a second and look at it and let me know if you recognize it.

A. I don't recall seeing this document.

Q. It doesn't refresh your recollection at all?

A. Huh-uh (negative).

Q. And you don't recall any discussion in which IBM said that Santa Cruz could protect itself through its copyright ownership?

A. I don't recall.

Q. In 1996, Ms. Amadia, you had occasion to review the asset purchase agreement; correct?

A. Correct.

Q. And you were at Novell in 1995 when the asset purchase agreement was signed; is that right?

A. I don't know.

Q. Would you recall when --

2181

A. I was there in 1995, and it was signed in 1995. I don't recall the exact month I started and the exact month it was signed. But I was not involved in it at all.

Q. Do you recall reviewing either in 1995 or 1996 a technology license agreement that was executed in connection with the asset purchase agreement?

A. I don't recall if I reviewed that.

Q. Do you recall reviewing a strategic development agreement between Novell and Santa Cruz that was also executed in 1995?

A. No.

Q. Do you know whether the technology license agreement uses the word "license"?

A. I think it does, yeah. I've reviewed it now since. But not at that time do I recall if I reviewed it.

Q. And what is your current job, Ms. Amadia?

A. I'm an independent legal consultant. I have my own practice. And I represent companies in myriads of corporate transactions including licensing transactions.

Q. Did you have an infertility law firm?

A. I also have an infertility law practice, yes.

Q. So how much licensing software work do you do at this point?

A. About 95 percent of my practice is licensing and general corporate counsel work, and about 10 percent of my

2182

practice is fertility, which is contract based, as well, but obviously deals with a different body of law.

Q. Thank you, Ms. Amadia.

THE COURT: Mr. Brennan?

MR. BRENNAN: Yes, thank you, Your Honor.

REDIRECT EXAMINATION

BY MR. BRENNAN:

Q. Ms. Amadia, you may recall that Mr. Normand asked you a whole series of questions regarding the thought process and intent of Steve Sabbath. Do you recall those various questions?

A. Yes.

Q. I'd like to have placed before the witness Exhibit Y23. It's not in evidence, Your Honor. I'll represent that this is the declaration of Steven M. Sabbath that was signed in the SCO --

THE COURT: Mr. Normand?

MR. NORMAND: This is going to raise some issues, unless Mr. Brennan is speaking careful, I guess.

MR. BRENNAN: Your Honor, clearly some of us were speaking uncareful and opened the door wide open.

THE COURT: No, he didn't, Mr. Brennan. The Court is not going to allow you to use this in the way you hoped to.

MR. BRENNAN: Just so I can be clear. Do we have to do it in front of the jury or at side bar, Your Honor? I

2183

do have a problem --

THE COURT: I will inform you that your intent to use this for a substantive purpose is not permitted under the rules. You can use it for impeachment, but this witness is not being impeached by this document.

MR. BRENNAN: Well, will the Court allow me to ask any questions regarding the statements by Mr. Sabbath that he made under oath regarding the subject matter of the questioning that Mr. Normand directed?

THE COURT: No.

MR. BRENNAN: Thank you, Your Honor.

THE COURT: For the reason I just stated, which ought to be clear to you, Mr. Brennan.

MR. BRENNAN: Thank you.

Q. BY MR. BRENNAN: Now, you were asked by Mr. Normand questions regarding the use of the word "license." You'll recall that Mr. Normand at that time declined to allow you to explain why the word "license" was or was not used in Amendment Number 2?

A. Uh-huh (affirmative).

Q. I'm going to give you that chance now. Will you explain why the word "license" was not used in the Amendment Number 2?

A. Again, I have had conversations with Tor Braham. When I was told by Steve Sabbath that there was a

2184

typographical error in the original APA, and it did not include transfer of copyright ownership. And what Tor explained to me was that, no, it was not a typographical error, and there was no intent to transfer copyright ownership and that Novell had strong reasons to retain copyright ownership. So -- I may have missed part of your question. Do you mind?

Q. Yes. I apologize. I was hoping that you could --

A. I haven't eaten yet, so I'm getting kind of hungry.

Q. I think we're near the break. I was hoping you could explain why the word "license" is not used in Amendment 2.

A. Oh, yes. So what Tor explained to me was that the original transaction was structured as an asset purchase agreement and that it morphed a little bit based upon the business dealings and consideration that basically what Santa Cruz could afford to pay. And so my understanding from that is that that to me as a licensing attorney gives me some reason to believe why there wasn't the word "license" and there wasn't, you know, provisions and titles related to licenses in the original asset purchase agreement because it was originally intended to be a full and complete asset purchase agreement including copyright transfer.

Q. And as it turned out, it was not a full asset transfer; correct?

2185

A. No. I mean, it's very clear in the provisions in the APA that Novell retained the royalty stream for the existing licenses and other rights and needed, at least the way Tor explained it, needed the copyright ownership in order to protect those rights.

Q. Thank you.

I have no further questions, Your Honor.

THE COURT: Thank you, Mr. Brennan.

Mr. Normand, do you have any anything?

MR. NORMAND: No, your Honor.

THE COURT: May this witness be excused?

MR. BRENNAN: Yes, Your Honor.

THE COURT: Mr. Normand?

MR. NORMAND: Yes.

THE COURT: That means that you will not be recalled. I will instruct you to not discuss your testimony with any other witness in this case or potential witness or in the presence of any other witness, nor should you communicate the content of your testimony with anyone that may be a witness in this case.

Thank you. You better go get something to eat.

We'll recess for the afternoon, ladies and gentlemen.

(Whereupon, the jury left the court proceedings.)

THE COURT: Counsel, please remember that you need

2186

to get me any objections to the jury instructions before 8 o'clock in the morning.

Okay. Is there anything else before we recess?

MR. BRENNAN: No. Thank you.

THE COURT: Are we going to finish by 1:30 by Thursday?

MR. BRENNAN: We certainly feel bound by that. The only thing I suggest is that we do clock management. I believe at this juncture most likely SCO has consumed more time than we have. And so both sides are going to have to do a mathematical calculation, and I would imagine if they exceed -- just a quick hypothetical. If we had, for example, one day left and they had exceeded more than their allotted share, they would have no time to do anything else with. I know that's a simplistic way of stating the problem, but I hope --

THE COURT: I think they have been warned.

MR. BRENNAN: Thank you.

THE COURT: All right. We'll be in recess until 8:30.

MR. BRENNAN: I appreciate that.

THE COURT: I don't know whether it makes any difference if we have any hearings or not. It seems like you clear out regardless.

(Whereupon, the court proceedings were concluded.)

2187

STATE OF UTAH )

) ss. COUNTY OF SALT LAKE )

I, KELLY BROWN HICKEN, do hereby certify that I am a certified court reporter for the State of Utah;

That as such reporter, I attended the hearing of the foregoing matter on March 23, 2010, and thereat reported in Stenotype all of the testimony and proceedings had, and caused said notes to be transcribed into typewriting; and the foregoing pages number from 2130 through 2187 constitute a full, true and correct report of the same.

That I am not of kin to any of the parties and have no interest in the outcome of the matter;

And hereby set my hand and seal, this ____ day of _________ 2010.

______________________________________

KELLY BROWN HICKEN, CSR, RPR, RMR

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