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SCO Bankruptcy: March 2, 2011 Hearing Transcript, as text, 2 OPA Bills and MORs for April, May and June ~ by pj - updated
Friday, August 12 2011 @ 11:25 AM EDT

We have the transcript [PDF] of the March 2, 2011 hearing in the SCO bankruptcy. I've done it as text for you, all 118 pages of it. Well. Really I did it for historians, mostly, since it's clear the courts don't care, Novell doesn't much either any more, and expending effort in any delusion that it will make any difference to the bankruptcy leaves a certain Sisyphean taste in my mouth.

This is the SCO carcass, and the buzzards are picking the bones.

It isn't every day, though, that you hear a lawyer tell a court that it would be unquestionably illegal to approve a proposed deal, but that happened that day. And yet the judge approved it anyway.

"People are crazy and times are strange," as the great Bob Dylan sings, "I'm locked up tight. I'm out of range. I used to care, but things have changed."

Of course, if the appeal of SCO's loss to Novell goes SCO's way, it will all matter a great deal.

And that is still TSG's hope, evidently, as we see in this question and answer between Bonnie Fatell for Blank Rome for the Chapter 11 trustee and Bruce Comer of Ocean Park:

A. The litigation claims -- or, the claims were all -- were one of the excluded assets in the transaction.

Q. Okay, and that includes the Novell litigation as well as the pending IBM litigation and any other litigation?

A. All claims that we're aware of.

Notice the *pending* litigation with IBM, she says? Pending how? Not unless SCO prevails on appeal. The dream lives. And it's a bit disturbing to hear him say, "all claims that we are aware of." Does that mean if they can think up some new ones, they own the right to bring them?

And where is Novell? Attachmate? Whoever they are? This is about killing Linux by making it cost too much, after all, and some extremely persistent folks wanting to make it happen. And yet they have disappeared from the field from all we know or can see.

I went to the trouble to transcribe it anyway, though, because it's by far the clearest explanation of exactly what the deal was, or at least how it was portrayed to the court, how it all went down and who was supposed to get what. And it's part of the big picture, which we set out to complete, and I certainly didn't feel I understood who got what before. You can find all the documents associated with the sale here, attached as exhibits to #1141, if you are the type that likes to do deep digging. But I think you'll agree when you read the transcript that it finally becomes clear. I learned a lot of other things from reading this transcript, and I think you will too.

Richard Bolandz, the CEO of UnXis, was there, hilariously arguing that the world as we know it would be irreparably damaged unless SCO could sell to UnXis. Here's what Blank Rome represented his proffer would include:

Mr. Bolandz will testify that they believe that if the sale does not close, without a major capital infusion, SCO will be unable to continue to operate, and there will be irreparable harm, not only to SCO but to the enormous number of national and international businesses in over eighty countries which rely on the SCO operating system to conduct their day-to-day business. Failure to continue the SCO business will have a huge economic and financial impact worldwide.
Well, hardly. There are a lot of businesses willing to step into the breach. I'll let Novell's lawyer, Adam Lewis, speak his piece, as he responded to this and the then-proposed sale to UnXis:
So what we're buying is a transferee of these assets who may turn out to be worse than SCO, and certainly worse than SCO looked when we originally sought to them, or to Santa Cruz and then to SCO. And that's not adequate assurance of future performance either.

I want to emphasize, the public interest issue here is not relevant, and it's certainly not a reason to impose on Novell yet another transaction, in case in which Novell and the other creditors, through these endless efforts to sell these assets over SCO's objections, is going to end up holding the bag on a three million dollar claim. The other creditors aren't going to get a penny either. The only beneficiaries of this transaction are going to be the lender and the administrative claimants and the buyer.

That isn't a good reason to ignore the law, Your Honor. No reason is a good reason to ignore the law, but that's an especially bad reason to ignore the law. The trustee chose his course of action here. What he wanted to try to accomplish -- whether he wanted to settle, whether he could settle with Novell at a price people could live with, that was not possible. The parties tried and they didn't get there. But he chose that course of action. Why should the consequences of that be imposed on Novell again, after we suffered through all the missteps of SCO and its management for a year and a half, and now we're almost two years into the trustees regime, and we're facing the same kind of problems -- except the price keeps going down, and the insolvency keeps going up.

So what we have is a sublicense of a license -- and it has to be a license. Everybody admits that. They can't get away from saying it, even though they may try. A sublicense of a license from Novell that's part of an integrated transaction that is still executory.

It's as simple as that, Your Honor. And as a consequence they cannot do this without our consent and without sharing the existing default of at least three million dollars. And I might say, Your Honor, to some extent for what it's worth, if we're talking about motive, which I think are also relevant, our position probably hurts us too. Because we believe that 180-some odd thousand dollars of costs in the litigation are going to end up being administrative expenses. We're not going to get -- the money that's coming in isn't going to go towards that, if it doesn't come in at all. So in that sense, we're probably not going to get our share of that, because as you know, that has to be distributed pro rata.

It's not a big amount. I'm sure our share of that wouldn't be a big amount, given all the other unpaid administrative claims, and paid administrative claims that might have to be reallocated if this case is indeed administratively insolvent as it seems -- everybody agrees it is.

So as much as it would be nice to kind of have some successful, in some sense, outcome to this case, the law just doesn't permit it here. And no amount of talking around whether these are licenses, and whether the APA's executory, whatever has to be cured and whether our consent is necessary, changes what the facts are. And the facts are, there is a -- there's going to be a sublicense of a license -- that sublicense is not some little ordinary course sublicense floating around there, just like all the others, and it's a sublicense of a license where our consent is needed, and that's a license that's part of an APA where our consent and cure is needed, and those things are not on the table.

And so the Court, in my respectful opinion, cannot approve this transaction, much as it might like to, and much as it might benefit McDonalds. Or a small business. Or your computer, Your Honor.

THE COURT: Or me.

MR. LEWIS: Thank you, Your Honor.

The part about the license is because SCO's argument goes something like this: When Novell won at trial, the jury ruled that it retained the copyrights to UNIX and UnixWare up to the sale of the business to Santa Cruz in 1995. If so, then Santa Cruz had at least an implied license to use the copyrighted materials, and they then could sublicense it to others, and they did. So looking at the way everyone behaved, without objection, SCO would be free to do the same thing again, and pass along the implied license to UnXis.

Here's William Broderick explaining it, if you can follow:

Q. So let's go back to what the sublicense is a sublicense of. What's it a sublicense of? What license?

A. Which sublicense are you talking about?

Q. The sublicense that is being granted to UnXis under this transaction.

A. Okay, what they're doing is, the sublicense is a sublicense for what's been defined as the licensed properties. The licensed properties are the intellectual property and copyrights that the Court in Utah said didn't get transferred to Santa Cruz, and SCO does not own, but since the asset purchase agreement closed in 1996, Santa Cruz and Caldera and everybody have been using them and licensing them with no objections from Novell, so we've got a right to license those products. Since those products, we don't have the ownership of those, then what we're doing is we're selling what we own and we are licensing what we don't own the same way it's been licensed since 1996 by Santa Cruz Operations.

Not exactly the same. This is a hugely different situation. Santa Cruz never sold off the business with the implied license before. As Mr. Lewis frames the question:
Q. But it would be fair to say, would it not, that SCO has not historically entered into such a sublicense as part of a larger transaction in which it put itself out of business?...

A. SCO has never done -- that's true.

Duh. No one ever did that in the history of this code, in spite of the balderdash that Broderick serves up otherwise. When there were sales, it was total, until the 1995 sale, when Novell sold what Santa Cruz needed to work on what was intended to benefit both companies, a new use for the code, a merged product, as you can see in the 1995 Operating Agreement [PDF] for a 64-bit product. Santa Cruz failed to fulfill that, and it isn't passing along that obligation to UnXis. Anyway, when AT&T licensed to IBM and HP, it surely was never like this. And what Novell passed to Santa Cruz wasn't like this either. It's a totally different situation.

And of course the judge did rule in SCO's favor, to no one's surprise:

It is clear from the foregoing that the Trustee is trying to sell only the rights Debtor received in the 1995 APA, the development. unXis is therefore receiving only the rights that the District Court determined Debtors have -- nothing more and nothing less. Debtors have sublicensed the materials in the ordinary course of its business without Novell's permission or insistence that it had to give its permission, since 1995. Thus, Debtors are seeking authority to sell property of the estate. The Trustee concedes that if it does not own an asset, he is not selling it. Novell's consent is therefore not necessary. Moreover, the parties established a course of conduct precluding consent. Broderick Declaration.
Here's part of what SCO said to him to persuade him, as if they needed to:
Your Honor, in December, 2010 two bidders, including UnXis, were conducting detailed diligence and refining their bids. As of January 14th of this year the trustee, through OPA, had received two bids, and I will describe them, Your Honor. The first, UnXis, submitted a bid which included 600,000 dollars in cash and two-year warrants to purchase three percent of the outstanding UnXis common stock. The UnXis bid excluded the net working capital of the business worth, in OPA's estimate, from 700,000 to 900,000 dollars. UnXis also agreed to pay up to 50,000 dollars of cure costs. Furthermore, the UnXis bid included the acquisition of all of the non-debtor foreign subsidiaries and provided for the employment of all current employees in those non-debtor foreign subsidiaries.

The liability of having to wind down those entities, Your Honor, has not been determined, but OPA preliminarily estimates that these costs would easily exceed 500,000 and possibly exceed 1,000,000 dollars That's exclusive of time and expenses related to professionals, Your Honor.

Importantly, prior to the final auction date UnXis deposited the full amount of the purchase price into escrow with the trustee's counsel.

In contract, Your Honor, the second bidder submitted a bid of eighteen dollars in cash. Similarly to the UnXis bid the second bid also excluded the net working capital of the business, included the acquisition of all foreign subsidiaries and provided for the assumption of all current employees....

An auction occurred on January 19, 2011. UnXis and the second bidder attended. At that auction the second bidder declined to submit a bid above its existing bid. Accordingly, thereafter the trustee determined that UnXis was the highest and best bidder. The trustee then entered into the asset purchase agreement by and between The SCO Group, Inc. and SCO Operations, Inc. and UnXis, Inc.

So. A done deal. Legal schmegal. It was cheaper to sell the assets than to keep them. And they had no real competitive bids. This is the first and only argument for selling to UnXis that makes any sense to me at all, by the way, that it actually was cheaper than shutting SCO down without a sale, that the costs in severance, in Europe in particular, would be excessive.

But SCO used a very odd analogy to justify the deal, and it's like they are locked in NeverNever Land, where SCO never lost to Novell and they can talk like they actually own the copyrights, no matter what the jury actually ruled:

Your Honor, it's our position that every time this was transferred the right to use that copyrighted transferred as well. Again, the Court hasn't pointed to any document that sets out the terms and conditions. So, Your Honor, what we have to do is look at the conduct of the parties.

I struggled, Your Honor, to try and find an analogy here of, you know, what else can I think of that this might be like. Well, let's assume for the moment that someone owns a baking business and they have a secret recipe for their brownies. And they sell that business, lock, stock and barrel to a new purchaser. That purchaser develops that business, expands it, it's now nationally acclaimed, internationally acclaimed, there are restaurants throughout the world that carry that brownie and make their own flavor of that brownie. They might add peanut butter chips, they might put on coconut, whatever, they change that brownie. Nevertheless, that recipe and that brownie still resides with the person who acquired that business.

Now, what would happen if the original owner of that recipe suddenly said well, I want my recipe back? I never gave you a license to take that recipe and even though you've built your business and you've licensed it or you've transferred the recipe to other people I never gave you a license so I get to pull that back. Your Honor, there's a course of conduct there. Well, that's the same course of conduct here.

Anyone still paying attention might point out that Novell didn't sell its business, lock, stock and barrel to Santa Cruz, which might explain her struggle. It just didn't, not even if SCO were to win on appeal, get another trial, and win that too. Nothing will ever give them the patents or the trademarks, so it can't ever be a lock, stock and barrel deal. In Judge Ted Stewart's ruling after the second Utah trial, he made it clear that SCO didn't get the copyrights, just the business, and here's the definition of what they got:
SCO relies on Recital A in arguing that SCO acquired the "Business," which is defined as "the business of developing a line of software products currently known as Unix and UnixWare, the sale of binary and 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." SCO, however, ignores Recital B which states that Santa Cruz would only acquire "certain assets." Those "certain assets" are set forth in more detail in Schedule 1.1(a) and do not include the excluded assets set out in Schedule 1.1(b). Under the plain language of the original APA, the copyrights were excluded from the transaction.
Why, then, does TSG keep saying that lock, stock and barrel stuff? These are lawyers talking, so they have to know. Lawyers can read. Like I say, it's like they are locked in NeverNever Land. I come away with the feeling that it was a little bit of a walk through. Or maybe it's Quantum SCO. They have the copyrights and they don't. All at the same time.

In any case, the analogy is a false one, right out of the gate. Here's one that would fit: Let's say you owned the copyrights to a brownie recipe, but you let others use the recipe, for an ongoing fee. So they built that business and it flourished, and they added coconut and sprinkles or whatever. Then they turned around, claimed they owned the copyright to the brownie recipe, sued you wrongfully when you stood up and said, "No you don't. I do." And then after protracted litigation, you win and the jury says you do, indeed, own the copyright and they have to pay you. But instead they declare bankruptcy and under that protection, they sell off their business and then say not only will they not pay you any more, but nobody else has to ever pay you for using that recipe, despite decades of contractual obligations.

Doesn't express quite the same message, does it?

But who's counting? This is the SCO carcass, after all, and vultures do show up when there is a carcass, so they can pick the bones and lap up any blood left on the meat. No one interferes with a vulture's meal.

When Mr. Lewis cross-examined Bruce Comer of Ocean Park, he asked about the second bidder, and we learn why it dropped out, or at least we get two versions of what happened:

Q. Okay. At the auction on the 19th, isn't it true that the other bidder declined to overbid, at least according to it, because it believed that the bidding process had not gone according to the procedures set up by the Court?

MS. FATELL: Objection, Your Honor. I'm not sure the relevance of that. The other bidder has not filed an objection, has not appeared in this court, and I don't see why that's a relevant issue.

MR. LEWIS: Your Honor, I'm not appearing here for the other bidder. The debtor is purporting to argue that this is a good faith transaction, and I think whether there was possibly irregularities in the process is relevant, whoever complained about them. And I think Mr. Cahn will confirm that there were such complaints. Isn't that true?

THE COURT: Well, I'm going to -- I will allow the question.

MR. LEWIS: Thank you, Your Honor.

A. Sure. Could you repeat the question?

Q. Sure.

A. It's sort of two different questions, there, so I wouldn't mind resetting it.

Q. At the auction on the 19th, the other bidder declined to bid, did it not, because it said there had been irregularities in the auction process?

A. Yes, but they had sort of declined to bid even before they'd registered that issue. We'd given them some time -- actually, most of the weekend, to up their bid. We informed them what the topping bid was, and they chose not to. And then they sort of threw out some issues with irregularity, which, frankly, we guess may have been related to them getting their deposit back as quickly as they could.

Q. Okay, one of their complaints, was it not, was that documents, revised documents were being sent to them at the last moment?

A. Yes, that's true. But the economics were communicated to them in plenty of time.

Q. Okay.

A. And we'd actually postponed the auction a couple hours to make sure they had enough time to respond.

Q. Now, have you valued the warrants?

A. No.

Q. Have you made any attempt to value the warrants?

A. No, we didn't think -- one, it wasn't a crux issue in the auction itself, and it's so contingent on other funding, it'd be a pretty difficult exercise to put a specific number on it.

Q. Let me ask you to elaborate by what you mean that it wasn't a crux issue at the auction. What does that mean? A. Well, even prior to that, we had one bidder who was -- their bid was 600,000 dollars. They had put the full purchase price in escrow with Blank Rome. They were offering to cover an additional 50,000 dollars of cure costs, so the difference between the bid -- the other bidder was very aggressive at pushing liabilities onto the estate from lease -- in the negotiation, they were very into pushing the leases in Utah, New Jersey, and we just thought that the estate would be saddled with a lot of expenses. And then their figure, which they didn't give to us, so they left the purchase price blank until the very last minute -- I think it was the last couple of days or maybe a few hours before the bid deadline, they put in eighteen dollars, which almost, to us, made it question whether they were really being serious or not, whether they were trying to be almost a vulture investor that was going to come in, and if they were the only last-person standing, try to grab the assets.

Q. Do you have any clue at all what those warrants are worth?

A. I could give you -- I haven't done that work. I don't know.

Q. Okay. So essentially, the purchase price here is 600,000?

A. As we stated in my declaration, the buyer's leaving behind the networking capital, and they're also taking all of the employees and the foreign subsidiaries which would have a great cost to the estate if we had to wind those down.

So that's what happened to the second bidder, with his marvelous sense of humor. And that's why it's good to have this transcript, because in fact the documents did keep changing, and there was a provision for that, so there really was no way to know what was what, until now. Not that I consider this necessarily the last word. This is how SCO represented the deal to the court that one day.

So, Mr. Lewis asks Mr. Comer, is SCO basically broke? The answer is Yes. Well, then, Mr. Lewis proceeds, will anyone actually benefit from this sale, anyone but the lenders and Ocean Park and the other professionals like Blank Rome? And the answer is, nope:

Q. Okay. Now, you heard Mr. Tarr's summation of your proffered testimony and you heard his discussion of the current cash and payable of the debtors, excluding professionals and other administrative expenses. Does that tell you that this estate is administratively insolvent right now?

A. Yes, I think it probably is.

Q. Okay. Expect that to get better or worse?

A. It's going to get worse. It's been getting worse ever since we were involved starting September of '09. It's been a struggle.

Q. In fact, isn't it true that out of this transaction, there's going to be very little money for anyone, if any money at all, other than the two million dollar lender?

A. Well, I think it's tough -- when we brought this offer, as you can imagine, as an investment banker, financial advisor, when we brought this offer to the trustee himself, we had to explain it. And I think you have -- in this case, you have to look at the costs of a wind-down, the employees, the benefit to the employees, the customers, the people using the software, the support of the software of an ongoing concern, and then the cost of the estate were it to have to wind this thing down and take care of the employment costs in Europe and the various jurisdictions and do things properly, it would take much longer and cost a lot more that has to be set aside. So the default for the estate is not a zero, and we can waive things, you know, the estate can waive things away. It would be to take care of those costs which all -- the buyer, here, is assuming all the employees, all the leases, and then the purchase price and the network and capital.

Q. So to be clear, the two million dollar lender is benefiting, some administrative claimants may benefit some, the employees are benefiting, but no creditors?

A. Well, we haven't figured out what precisely is going to be left or what's going to be left, but it's going to be fairly limited after the administrative claims and the debtor loan.

I believe that is Mr. Comer of Ocean Park saying, We're getting ours, and your client will be getting absolutely nothing. Hahahaha. C'est la vie, bub.

Speaking of benefits, during the hearing, Comer was asked about the financial side of the deal and about Ocean Park's fees:

Q. Thank you. Mr. Comer, how much has Ocean Park been compensated so far in this Chapter 11 case? Do you know approximately?

A. I'd have to go check my records. I don't know right off the bat.

Q. Somewhere over 600,000 dollars, isn't it?

A. It's several hundred thousand dollars.

Q. Yes. I think it's over 600,000, just looking at the latest operating report. Does the employment agreement approved by the Court provide for any kind of success fee with respect to this transaction?

A. Yes, it does.

Q. Will you tell the Court what that is?

A. There were a couple of retainers and, then, there's a success fee. There's a formula, but there's a minimum of 150,000 dollars.

Q. Okay. So that 150,000 would come out of the proceeds of this transaction.

A. That's correct.

You can't really blame Ocean Park for this ridiculousness. The judge kept the case going in the face of all reason, as did the Chapter 11 Trustee Edward Cahn, choosing to let the shareholders and lenders gamble on a litigation lottery dream, a dream to which they stay true, hence denying creditors -- most especially Novell -- any hope of payments, even though in the beginning, SCO still had money to pay everybody.

Oh, look. Another new bill for TSG to pay to Ocean Park. No. Two!

Wait, I hear you say. You thought the title of the last document Ocean Park filed was "First and Final Application of Ocean Park Advisors, LLC, Financial Advisor and Investment Banker to the Chapter 11 Trustee of TSG Group, Inc. Et Al, for Compensation in Connection with Asset Sales", so you thought there would be no more bills. Ha! That was just in connection with the sale in April, and this is bankruptcy court, where the money flows like water forever and a day, but only in one direction.

So with the "success fee" Ocean Park got in connection with the sale to unXis in the amount of $150,000, and considering that the total sale price was only $600,000 and Ocean Park spent many months marketing the assets, and that their bills were on the day of the hearing already up to $600,000 -- not to mention Blank Rome's bills for the same months to work on the same awful deal (not to mention the other times UnXis tried to buy these assets) -- and I think you can understand why the lenders were a little miffed to realize they were never getting their 2 million back, unless SCO hits the litigation lottery.

The new filings:

08/02/2011 - 1307 - Certificate of No Objection Regarding Eighteenth Monthly Application of Ocean Park Advisors, LLC for the period March 1, 2011 to March 31, 2011 (related document(s) 1270 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/02/2011)

08/02/2011 - 1308 - Certificate of No Objection Regarding Nineteenth Monthly Application of Ocean Park Advisors, LLC for the period April 1, 2011 to April 30, 2011 (related document(s) 1294 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/02/2011)

08/02/2011 - 1309 - Monthly Application for Compensation of Ocean Park Advisors, LLC (Twentieth) for the period May 1, 2011 to May 31, 2011 Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. Objections due by 8/22/2011. (Attachments: # 1 Notice # 2 Exhibit A # 3 Exhibit B # 4 Certificate of Service) (Tarr, Stanley) (Entered: 08/02/2011)

08/08/2011 - 1310 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 4/30/11 (TSG Group, Inc. (f/k/a The SCO Group, Inc.), et al.; 07-11337) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/08/2011)

08/08/2011 - 1311 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 4/30/11 (TSG Operations, Inc. (f/k/a SCO Operations, Inc.), et al.; 07-11338) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/08/2011)

08/08/2011 - 1312 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 5/31/11 (TSG Group, Inc. (f/k/a The SCO Group, Inc.), et al.; 07-11337) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/08/2011)

08/08/2011 - 1313 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 5/31/11 (TSG Operations, Inc. (f/k/a SCO Operations, Inc.), et al.; 07-11338) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/08/2011)

08/08/2011 - 1314 - Monthly Application for Compensation of Ocean Park Advisors, LLC (Twenty-First) for the period June 1, 2011 to June 30, 2011 Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. Objections due by 8/28/2011. (Attachments: # 1 Notice # 2 Exhibit A # 3 Exhibit B # 4 Certificate of Service) (Tarr, Stanley) (Entered: 08/08/2011)

08/10/2011 - 1315 - Certificate of No Objection Regarding Tenth Monthly Application of Blank Rome LLP for the period August 1, 2010 to August 31, 2010 (related document(s) 1272 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/10/2011)

08/10/2011 - 1316 - Certificate of No Objection Regarding Eleventh Monthly Application of Blank Rome LLP for the period September 1, 2010 to September 30, 2010 (related document(s) 1273 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/10/2011)

08/10/2011 - 1317 - Certificate of No Objection Regarding Twelfth Monthly Application of Blank Rome LLP for the period October 1, 2010 to October 31, 2010 (related document(s) 1274 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/10/2011)

08/10/2011 - 1318 - Certificate of No Objection Regarding Thirteenth Monthly Application of Blank Rome LLP for the period November 1, 2010 to November 30, 2010 (related document(s) 1275 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/10/2011)

08/10/2011 - 1319 - Certificate of No Objection Regarding Fourteenth Monthly Application of Blank Rome LLP for the period December 1, 2010 to December 31, 2010 (related document(s) 1276 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/10/2011)

08/10/2011 - 1320 - Certificate of No Objection Regarding Fifteenth Monthly Application of Blank Rome LLP for the period January 1, 2011 to January 31, 2011 (related document(s) 1279 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/10/2011)

08/10/2011 - 1321 - Certificate of No Objection Regarding Sixteenth Monthly Application of Blank Rome LLP for the period February 1, 2011 to February 28, 2011 (related document(s) 1283 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/10/2011)

08/10/2011 - 1322 - Certificate of No Objection Regarding Seventeenth Monthly Application of Blank Rome LLP for the period March 1, 2011 to March 31, 2011 (related document(s) 1284 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/10/2011)

08/10/2011 - 1323 - Certificate of No Objection Regarding Eighteenth Monthly Application of Blank Rome LLP for the period April 1, 2011 to April 30, 2011 (related document(s) 1295 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Tarr, Stanley) (Entered: 08/10/2011)

08/10/2011 - 1324 - Certification of Counsel Regarding Chapter 11 Trustee's Motion Pursuant to Bankruptcy Code Sections 105 and 363 and Bankruptcy Rule 9019 for Entry of an Order Authorizing the Trustee to Enter Into a Settlement Agreement With the Lenders (related document(s) 1305 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Attachments: # 1 Exhibit A # 2 Exhibit B (blackline)) (Tarr, Stanley) (Entered: 08/10/2011)

And now you know what Mr. Lewis was talking about.

You know what I wish Bob Dylan would do? I wish he'd do an autobiographical ebook, not just the book book, meaning the kind of ebook that includes media, so he could explain his musical journey with example videos, so those of us who are not musicians could follow along better. I enjoyed very much reading about how he changed his way of playing the guitar in his book, but after listening to hours and hours of his songs, I'd love to know if I understood him right. And if he'd include a chapter by his bass guitarist, Tony Garnier explaining how he decides what to do, I'd personally find that so gratifying. That guy's playing knocks my socks off.

[ Update: I looked and looked for some YouTube live performances of Garnier playing with Dylan. They used to be there, but someone has removed them all. So not only can't I show you Garnier at work, some truly amazing guitar playing by the incredibly talented and graceful Larry Campbell is also now lost to music historians. This is so sad. Such a loss. Here's a photograph of the three of them, Dylan, Garnier and Campbell playing together.

Now, it wouldn't be such a cultural crime if whoever did it made them available for money as an alternative. I'd pay. But to remove them until the landscape looks like they never existed is a terrible loss to musical history and to culture. Some of us enjoy watching and comparing one live performance with another at another venue or with different musicians. Even Dylan in an interview said once that he prefers the live to listening to his records. There's reasons for that. Please someone collect these live historical performances somewhere before it's too late.

Update 2: Finally, here's one that has survived the massacre -- on the Bob Dylan official channel, Garnier playing electric bass on "Love Sick". It's better than none. But it's a bit like yearning for a hamburger, and being told you can only have a Big Mac. You might really love a Big Mac, but you want more choices than that. There needn't be just one official source in the Internet-enabled world. And if the music industry would please start to think about *using* technology instead of fighting it, it could be so great. For example, if they encouraged fans to share with them their phone videos of live performances so the company could collect them all, what an unbelievable resource that would be for fans, who no doubt would be willing to pay for access. I know I would, although the truth is, people buy music they love, once they are exposed to it for free, so it could work as an introduction to the artist.

Update 3: It turns out that Larry Campbell, in this interview, answered the question, in part at least, that I wanted Garnier to address, saying:

Every once in a while I’ll hear myself playing a lick and I think, “Oh, that’s Chet Atkins right there. I remember sitting down and copping that, and I just used it.” Things like that will happen. But there are moments—and this happens with Phil more than with anyone else, where you get into the stream of the music and you get lost and you’re not thinking, and that’s where your own voice pops out. There’s no planning or preconception and you don’t have time to logically think out an idea—you’re just reacting to what you hear and going on your instincts. That can sometimes be disastrous, of course, but the beauty of it is when your subconscious takes over and you become a musician expressing himself on a real pure level. And when those moments happen you don’t realize it until the moment’s over and you’re thinking, “What was that? That was great! I didn’t know I could do that!” [Laughs]
And by the way, some of the moments that someone has cleansed from the Internet were moments like that. - End Update.]

Anyway, as I say, none of this SCO stuff matters, unless the appeal goes wrong, in which case, as the song says, I'll be with you when the deal goes down.

Here's the transcript of the hearing as text: I've put a very few remarks here and there in purple text, clearly marked, rather than write a long essay, mainly links to resources so when something happens, you'll know what it was:

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

Page 1

UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE

Case No. 07-11337 (kg)

---------------------x

In the Matter of:

THE SCO GROUP, INC., et al.

Debtors.

---------------------x

United States Bankruptcy Court
824 North Market Street
Wilmington, Delaware

March 2, 2011

2:07 PM

BEFORE: HON. KEVIN GROSS

U.S. BANKRUPTCY JUDGE

ECR OPERATOR: GINGER MACE

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HEARING re Motion of the Chapter 11 Trustee for Order (1) Authorizing the Marketing, Auction and Sale of Substantially all of the Debtors Software Business Assets Consistent with Form Asset Purchase Agreement and Free and Clear of Liens, Claims and Encumbrances, (2) Authorizing Assumption, Assignment, and Sale of Certain Executory Contracts and Unexpired Leases, (3) Approving Bidding Procedures in Connection with Auction, (4) Establishing Sale Hearing Date and (5) Granting Related Relief

Transcribed by: Hana Copperman

Page 3

APPEARANCES:

BLANK ROME LLP

BY: BONNIE G. FATELL, ESQ.

STANLEY TARR, ESQ.

LISA CASEY SPANIEL, ESQ.

EDWARD N. CAHN, ESQ. (TELEPHONICALLY)

REPRESENTING: Edward N. Cahn, Chapter 11 Trustee

YOUNG CONAWAY STARGATT & TAYLOR, LLP

BY: SEAN T. GREECHER, ESQ.

REPRESENTING: Novell, Inc. and SUSE GmbH

MORRISON & FOERSTER LLP

BY: ADAM LEWIS, ESQ.

REPRESENTING: Novell, Inc. and SUSE GmbH

U.S. DEPARTMENT OF JUSTICE

BY: JULIET SARKESSIAN, ESQ.

REPRESENTING: Office of the United States Trustee

Page 4

POTTER ANDERSON & CORROON LLP

BY: R. STEPHEN MCNEILL, ESQ.

REPRESENTING: IBM Corp.

MEIER & FINE, LLC

BY: MARILYN FINE, ESQ. (TELEPHONICALLY)

REPRESENTING: Richard Bolandz

DAY PITNEY LLP

BY: AMISH R. DOSHI, ESQ. (TELEPHONICALLY)

REPRESENTING: Creditor, Oracle America, Inc.

ALLEN & OVERY, LLP

BY: LISA KRAIDIN, ESQ. (TELEPHONICALLY)

PHILIP D. LEE, ESQ. (TELEPHONICALLY)

REPRESENTING: Special Counsel to the Canadian Nortel Group

SCO BY: RYAN TIBBITS, ESQ. (TELEPHONICALLY)

REPRESENTING: SCO

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ALSO APPEARING:

ADAM MEISLIK (TELEPHONICALLY)

ALAN P. PETROFSKY (TELEPHONICALLY) In Pro Per/Pro Se

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PROCEEDINGS

THE COURT: Good afternoon, everyone. Thank you and please be seated.

UNIDENTIFIED SPEAKER: Good afternoon, Your Honor.

THE COURT: It's good to see all of you.

MR. TARR: Good afternoon, Your Honor. For the record, Your Honor, Stanley Tarr of Blank Rome.

THE COURT: Yes, Mr. Tarr.

MR. TARR: On behalf of the Chapter 11 Trustee. Your Honor, the trustee, Edward N. Cahn, is participating in today's hearing telephonically.

THE COURT: All right. Mr. Cahn.

THE COURT: Good afternoon, Judge.

MR. CAHN: Good afternoon, sir.

MR. TARR: I'm joined in the courtroom by my colleagues at Blank Rome, Bonnie Fatell and Lisa Casey Spaniel. From SCO, Your Honor, in the courtroom is a declarant, Bill Broderick, and on the phone is SCO's general counsel, Ryan Tibbits. From Ocean Park Advisors, the trustee's financial advisors, we're joined in the courtroom by another declarant, Bruce Comer. And, finally, Your Honor, from the buyer, UnXis, Richard Bolandz is also in the courtroom.

THE COURT: Thank you. Good afternoon, everyone. And, Mr. Lewis?

MR. TARR: And I'm sorry, and I should --

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THE COURT: Oh, I'm sorry, Mr. Tarr.

MR. TARR: And I should mention his attorney is also present on the phone as well.

THE COURT: Thank you, Mr. Tarr. Mr. Lewis, good to see you again. Mr. Greecher.

MR. LEWIS: Thank you, Your Honor. Adam Lewis of Morrison & Foerster and Sean Greecher of Young Conaway for Novell.

THE COURT: Yes. Thank you, sir. Welcome back.

MR. LEWIS: Thank you, Your Honor. It's a pleasure to be here.

THE COURT: It's good to have you here.

MR. TARR: Well, Your Honor, the trustee, his professionals, debtors' management and the buyer are all glad to finally be here in front of Your Honor --

THE COURT: Yes.

MR. TARR: -- on this matter and trust that you're feeling better.

THE COURT: Coming along. It's been a tough couple of months, I must say, but we're getting there. Thank you.

MR. TARR: Terrific. Your Honor, if I may, the only matter on today's agenda is the trustee's motion for an order authorizing the sale of substantially all of the debtors' software business assets and authorizing the assumption, assignment and sale of certain executory contracts and

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unexpired leases.

THE COURT: Yes.

MR. TARR: Your Honor, I propose that the presentation of the trustee's motion proceeds as follows. A brief history of background regarding this Chapter 11 cases, the proffer of Mr. Comer's testimony regarding the sale process, although he is available in the courtroom if necessary.

THE COURT: All right.

MR. TARR: Mr. Comer's proffer will be followed by my colleague, Bonnie Fatell, who will offer the declaration of Richard Bolandz from the buyer. After the presentation, with respect to Mr. Bolandz, Ms. Fatell will offer Bill Broderick, another declarant, for direct examination. And then, Your Honor, Ms. Fatell will address the Novell objection.

THE COURT: All right.

MR. TARR: If that's an acceptable course to Your Honor I will continue.

THE COURT: That is acceptable, certainly, Mr. Tarr, and are there any objections outstanding other than Novell's at this point?

MR. TARR: There are, and if it pleases the Court I'll get to that in turn.

THE COURT: Okay. Very well.

MR. TARR: Thank you.

MR. DOSHI: Your Honor, on the phone, may I be heard

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for a moment?

THE COURT: Who is this?

MR. DOSHI: Your Honor, Amish Doshi on behalf of Oracle America, Inc. In response to Your Honor's inquiry I think our -- Oracle's objections and reservation of rights -- we have reached an agreement, and before moving into what appears to be a contested hearing I was just wondering if we can have our agreement on the record, and if it's acceptable to Your Honor if I can be excused, assuming it's acceptable to Your Honor.

THE COURT: Let me ask Mr. Tarr if that's acceptable to you in your presentation.

MR. TARR: Your Honor, that's fine. What I can do is give the status of objections that are non-Novell --

THE COURT: All right.

MR. TARR: -- and allow for administrative, I guess, convenience for others on the phone to, perhaps, leave.

THE COURT: Absolutely. Let's do that, Mr. Tarr. Thank you for your flexibility.

MR. TARR: Terrific. With respect to Oracle, Your Honor, Oracle filed a reservations of rights and an objection to the notice of cure amounts. Both were filed on the docket. Although the trustee has not been able to completely resolve all of the concerns asserted by Oracle prior to today's hearing trustee expects to do so prior to closing. In any event, the

Page 10

Trustee and Oracle have reached the following agreement with respect to Oracle's reservation of rights and the objection, and I had indicated to counsel for Oracle that I would read it into the record if that's okay, Your Honor.

THE COURT: Absolutely.

MR. TARR: The agreement is as follows. "First, Oracle's reservation of rights shall remain in place until further agreement or Court order. Second, to the extent the trustee and the buyer receive Oracle's consent to the transfer of any agreements prior to closing such consent would be included as part of this Court's record, pursuant to a certification of counsel.

Third, if the Oracle agreements are not transferred to the buyer prior to closing they shall remain with the estate subject to the trustee's rights to seek to assume or reject in the future."

And, finally, Your Honor, "If the trustee believes it has a basis for transferring any Oracle agreements to the buyer over Oracle's objection the trustee shall seek Court approval prior to transfer of any such agreement to the buyer." That's the agreement.

THE COURT: All right. Mr. Doshi?

MR. DOSHI: Your Honor, just two clarifications, Your Honor, and, obviously, all of Oracle's rights are reserved to

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the extent any further Court order or motion is filed. And, just to clarify, Oracle America, it also includes -- it's part of successors in interest, because Oracle America is a successor to, among others, Oracle USA, Oracle Corporation, BEA Systems, Inc. and Sun Microsystems.

THE COURT: All right. Mr. Tarr, I assume those are acceptable modifications.

MR. TARR: Absolutely. That's our understanding, Your Honor.

THE COURT: All right. All right, Mr. Doshi.

MR. DOSHI: Thank you. May I be excused, Your Honor?

THE COURT: You certainly may.

MR. DOSHI: Thank you.

THE COURT: Good day to you.

MR. TARR: The second objection, Your Honor, was an objection filed by EMC Corp. as to the notice of cure amounts. I'm not sure if anyone's on the phone. The trustee has resolved the objection with EMC in any case. The Office of the General Counsel for EMC has stated that they don't wish to terminate the source code agreement with the debtors, and, therefore, there is no objection to assumption and assignment.

THE COURT: All right. I don't see anyone on the phone for EMC. Anyone on the phone for EMC? All right. Thank you, then, Mr. Tarr.

MR. TARR: Okay. Then with respect to, Your Honor,

Page 12

Canadian Nortel Group, Your Honor, a reservation of rights was filed by the Canadian Nortel Group. In the reservation Nortel states that it has no objection to the proposed cure amount or to any contemplated assumption or assignment. However, Canadian Nortel Group reserves its right under applicable law and within their own Canadian proceedings to repudiate any agreements in the future. Accordingly, the trustee notes the reservation on the record but believes no issues remain outstanding.

THE COURT: All right. Does anyone for Nortel wish to be heard?

MS. KRAIDIN: Good afternoon, Your Honor. It's Lisa Kraidin from Allen & Overy on behalf of the Canadian Nortel Group.

COURT: Ms. Kraidin, good to talk to you.

MS. KRAIDIN: Nice to talk to you as well. I don't think that we have anything further to say because our papers do say it all, and Mr. Tarr has reflected what is in the papers. So, for the record, we do not object to the proposed cure amount, but, as Mr. Tarr said and as we've stated, the Canadian Nortel Group does reserve all rights under applicable law and in its own Canadian insolvency proceedings to repudiate any of the agreements in the future.

THE COURT: All right. Yes. I've heard of that case.

MS. KRAIDIN: I think you have.

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THE COURT: Well, thank you, Ms. Kraidin. I don't know. You're welcome to be excused or you're welcome to remain on the phone.

MS. KRAIDIN: I think I will be excused then. Thank you very much.

THE COURT: All right. Good to hear from you. Thank you.

MS. KRAIDIN: Sure.

THE COURT: Bye-bye now.

MR. TARR: Terrific. Your Honor, the next objection was filed by Hewlett-Packard. Your Honor, Hewlett-Packard's objection is resolved in connection with an insertion of language into a paragraph in the sale order. So if it's okay with Your Honor we'll note the specific language at the appropriate time.

THE COURT: Okay.

MR. TARR: Lastly, Your Honor, is the matter of Dinkumware. The letter was included in the binder --

THE COURT: Yes.

MR. TARR: -- that Your Honor received. I'm unaware if Dinkumware is represented in court today or on the phone.

THE COURT: I don't see anyone on my list. Is anyone here for Dinkumware? No.

MR. TARR: Okay. Well, Your Honor, Dinkumware had sent a letter to trustee's counsel, which, as I indicated, was

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provided to the Court. The letter indicated that the debtors, that there was a certain agreement with the debtors that had been terminated on May 7, 2001. The debtors have investigated Dinkumware's claim and responded to Dinkumware evidencing the fact that the agreement was never terminated. There is no valid cure objection, as the amounts under the agreement were paid in advance, and Dinkumware has only raised an objection in speaking with the debtors' management based upon an ipso facto provision in the agreement, which they believe allows them to terminate the agreement solely upon knowledge that a licensee, i.e. the debtors, has filed a bankruptcy petition. As this Court is well aware, Bankruptcy Code Section 365(e)(1) does not allow such a conclusion. Accordingly, we would ask that this Court overrule this objection, absent the assertion of a valid objection at this point.

THE COURT: All right. Anyone wish to be heard? I know no one has indicated that they're representing Dinkumware, but this is your opportunity. I have the read the objection. I understand the debtors' position, and I will overrule their objection.

MR. TARR: Thank you, Your Honor. That concludes, again, the non-Novell objections, unless there is someone else present in the court or on the phone.

THE COURT: Anyone else? All right. Thank you, Mr. Tarr. Thank you for taking care of these expeditiously, and

Page 15

now we can proceed, I think, with the main show for the day.

MR. TARR: Sure. As I indicated previously, Your Honor, the only matter on today's agenda is the sale motion. As Your Honor is aware, the trustee seeks the relief requested in the sale motion pursuant to Bankruptcy Code Sections 363 and 365. The trustee believes that there is a sound business purpose for the relief sought, that the proposed sale price is fair, that the trustee has provided adequate and reasonable notice, and that the buyer, UnXis, has acted in good faith.

Accordingly, Your Honor, the trustee believes that the evidence presented today, together with the declarations filed in support of the sale motion, meet the standard for granting the relief requested by the sale motion and believes that the transaction before this Court is within the discretion of the trustee's business judgment.

If I may beg this Court's indulgence I will spend a few minutes going through the certain context that preceded the filing of the sale motion.

THE COURT: Certainly, Mr. Tarr.

MR. TARR: As this Court is aware and as described in paragraphs 7 to 12 of the sale motion in early 2004 the SCO Group, Inc. commenced a slander of title action in the District Court for the District of Utah, arising from Novell, Inc.'s public claims that it, rather than SCO, owns the copyrights to technology underlying the UNIX operating system. Thereafter,

[PJ: You can find all the documents associated with the sale here, attached as exhibits to #1141.]

Page 16

Novell asserted counterclaims and SCO added new claims against Novell. Following competing motions for summary judgment, on August 10, 2007 the Utah District Court issued an opinion granting summary judgment that severely limited SCO's case against Novell. SCO appealed the District Court's decision to the Tenth Circuit Court of Appeals, and on August 24, 2009 the Tenth Circuit affirmed in part, reversed in part, and remanded for trial on the remaining issues.

Pursuant to the Tenth Circuit's remand a jury trial was held in Utah District Court between March 8, 2010 and March 26, 2010. On June, 2010 the District Court issued its memorandum decision, an order denying SCO's renewed motion for judgment as a matter of law or, in the alternative, for a new trial, as well as its findings of fact and conclusions of law.

Finally, Your Honor, as noted in the sale motion, the debtors have filed an appeal of that ruling in the Tenth Circuit.

The trustee and his professionals were aware that the outcome of a jury trial would have a material effect on the valuation of the debtors' software business assets. At the same time, it was critical for the trustee to stabilize the cash flow of the debtors' business, with the aid of post-petition financing, which was approved by this Court, and the restructuring implemented by the trustee's professionals.

By May, 2010, May of last year, the trustee, through

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his professionals, knew that the debtors had a long enough runway to run a sale process and OPA was instructed -- again, the financial advisors for the trustee -- OPA was instructed to proceed on that path. Although Mr. Comer's testimony will provide more detail, if I could just provide some summary points, Your Honor. The sale motion was filed on August 9th of 2010. On August 23, 2010 this Court entered the sale procedures order authorizing the marketing, auction and sale of substantially all of the debtors' software business assets.

Pursuant to the sale order a copy of such order was served on the U.S. Trustee's Office, counsel for the lenders under the credit agreement, any person who has entered an appearance or requested notice in these cases, all entities known to have expressed interest in a transaction for the software business assets within the year prior, all entities known to have a present interest in such assets as of the date of the sale procedures order, all regulatory and taxing authorities with an interest in the software business assets, all parties to executory contracts, all known unsecured creditors of the debtors, and all persons or entities entitled to receive notice pursuant to bankruptcy rules, local rules and other applicable law.

Also, Your Honor, pursuant to the sale procedures order, initial milestone dates were established. An initial

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bid deadline of October 5, 2010, the initial auction date, which, if necessary, was scheduled for October 25, 2010, and the initial sale hearing, which was scheduled for November 8th. On or before October 15th, pursuant to the sale procedures order, the debtor served cure notices with respect to the debtors' intent to assume and assign parties' contract and a proposed cure amount, if any, to all the necessary parties.

On January 6th the trustee filed modified bid procedures to set the final bid deadline for January 14, 2011. In that order, Your Honor, the minimum amount for deposit was raised to 100,000 dollars, and the final auction date was scheduled for January 19th.

Consistent with the modified bidding procedures contract parties were given notice of the highest bidder by January 21, and a modified APA was filed on the docket by January 24th. The modified bidding procedures also set February 7, 2011 at 4 p.m. as the objection deadline for all objections to the transactions, generally, and any objections based on the grounds that a contract counterparty has not received adequate assurance of future performance with respect to an assumed contract.

Unless the Court has questions at this juncture, Your Honor, I would move to proffer the testimony of W. Bruce Comer, III relating to the sale process conducted by the trustee.

THE COURT: Is there any objection to proceeding by

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proffer, Mr. Lewis?

MR. LEWIS: No, Your Honor. I'd like to examine Mr. Comer, but absolutely not.

THE COURT: All right. Thank you. That's fine. All right. Thank you, Mr. Tarr. You may proceed with the proffer.

MR. TARR: Thank you. Your Honor, Bruce Comer is present in the court today and if called to testify would testify as follows. He is the founder and a managing director of Ocean Park Advisors, LLC, a position which he has held since 2004. He has broad experience in the software and technology industry, including as an adviser, investor and in mergers and acquisitions. OPA was retained by the trustee as financial advisor and investment bankers as of September 15, 2009. In that capacity he is familiar with the debtors' day-to-day operations, business and financial affairs.

In May, 2010, OPA began gathering information from the debtors to commence marketing the debtors' assets and software business assets, and by authorization of the trustee the formal marketing of the debtors' software business assets started on July 19, 2010.

[PJ: So this would be the date OPA would begin to bill SCO for "helping" them set up this deal. However, there were earlier aborted deals they also billed for.]
Prior to commencement to the marketing of such assets OPA, in conjunction with the debtors' management and counsel for the trustee, prepared a brief marketing summary, a teaser, a confidential information memorandum, a list of potential purchasers and a data room for potential purchasers to conduct

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due diligence. Mr. Comer would further testify that OPA worked with the debtors to prepare and place public notices of the sale of the debtors' software business assets, including a press release announcing the sale on September 17, 2010, a legal notice in The Salt Lake Tribune, Desert News and utahlegals.com during the week of September 17th through the 23rd, 2010, and a quarter-page color advertisement in the September 27, 2010 issue of Computerworld. A lot of numbers there.

[PJ: That would be the Deseret News. Did anyone see that ad in the Sept 27 issue of ComputerWorld? If so, I'd like to see it.

UPDATE: Someone was kind enough to send it to me:

]

In discussion with the debtors' management and industry contacts OPA developed a list of over 100 potential bidders that included strategic buyers as well as private equity investors. OPA and the debtors' management ensured that bidders who participated or expressed interest in the debtors' prior sale process or processes were included. OPA sent teasers to 107 parties, of which 78 were potential bidders and the rest were so-called intermediaries. OPA directly contacted via telephone or electronic mail ninety-three potential bidders about their interest in acquiring the debtors' software business assets.

Throughout the five month period of marketing efforts the debtors entered into eighteen non-disclosure agreements with interested parties.

[PJ: So what happened to those 18 potential bidders? They signed an NDA, presumably saw things they didn't like, and then withdrew? How do we know that is true? Is there a list? It's all waving in the air otherwise.]
OPA engaged in discussions with all parties that had submitted a bid by the initial bid deadline of October 5, 2010

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or had indicated that they were close to submitting a bid. Neither of the bids received by that date, Your Honor, the initial bid deadline, was acceptable or qualified. Accordingly, the trustee and his professionals determined that it would be best to extend the initial bid deadline a few days, until October 11th, in order to have qualified bids for the auction. By the second bid deadline OPA had received five preliminary and, I stress, unqualified bids. The initial auction date was adjourned, and from mid-October through late December of 2010, a so-called extended marketing period, OPA attempted to clarify and qualify the bidders. In consultation with the trustee, during the extended marketing period OPA attempted to contact every party that had initially signed an NDA and had completed some amount of diligence but who had not submitted bids by the second bid deadline. Throughout the extended marketing period OPA continued to search for other potential bidders beyond the initial list of potential purchasers. OPA was receptive to unsolicited calls from all parties who had contacted the debtors about its assets. Some of those parties conducted additional diligence or reevaluated their interest in submitting a bid for the debtors' software business assets. One of those parties ultimately made a deposit and submitted a bid.

In December, 2010 -- I'm not sure if it's two or three bidders --

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(Pause) Your Honor, in December, 2010 two bidders, including UnXis, were conducting detailed diligence and refining their bids. As of January 14th of this year the trustee, through OPA, had received two bids, and I will describe them, Your Honor. The first, UnXis, submitted a bid which included 600,000 dollars in cash and two-year warrants to purchase three percent of the outstanding UnXis common stock. The UnXis bid excluded the net working capital of the business worth, in OPA's estimate, from 700,000 to 900,000 dollars. UnXis also agreed to pay up to 50,000 dollars of cure costs. Furthermore, the UnXis bid included the acquisition of all of the non-debtor foreign subsidiaries and provided for the employment of all current employees in those non-debtor foreign subsidiaries.

The liability of having to wind down those entities, Your Honor, has not been determined, but OPA preliminarily estimates that these costs would easily exceed 500,000 and possibly exceed 1,000,000 dollars That's exclusive of time and expenses related to professionals, Your Honor.

Importantly, prior to the final auction date UnXis deposited the full amount of the purchase price into escrow with the trustee's counsel.

In contract, Your Honor, the second bidder submitted a bid of eighteen dollars in cash. Similarly to the UnXis bid the second bid also excluded the net working capital of the

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business, included the acquisition of all foreign subsidiaries and provided for the assumption of all current employees.

[PJ: In that case, why does SCO Japan's bank account have SVRX royalties in its control? I mean if UnXis didn't get the bank accounts, why is SCO Japan still holding the bank accounts, as apparently it is, judging by Cahn's most recent filing to the court, informing it that SCO Japan would stop accepting SVRX royalties for Novell?]
An auction occurred on January 19, 2011. UnXis and the second bidder attended. At that auction the second bidder declined to submit a bid above its existing bid. Accordingly, thereafter the trustee determined that UnXis was the highest and best bidder. The trustee then entered into the asset purchase agreement by and between The SCO Group, Inc. and SCO Operations, Inc. and UnXis, Inc.

Mr. Comer is familiar with the negotiations that led to the terms of the proposed transaction with respect to the debtors' software business assets. The negotiations among the debtors' management, the trustee's professionals and UnXis were at arm's length and in good faith and such negotiations were vigorous.

Mr. Comer is unaware of and has no reason to suspect any bid collusion or other improper conduct by UnXis in connection with the sale process. To the best of his knowledge UnXis is not affiliated with nor an insider of the debtors. There are sound business reasons for the trustee to enter into the agreement and for this Court to enter the proposed sale order. Mr. Comer would testify that extensive marketing has been undertaken to sell the debtors' software business assets, that there are sufficient funds in the estate to pay cure costs that are not paid by the buyer. In Mr.

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Comer's professional opinion the market has been thoroughly tested over five months in respect to the debtors' software business assets, and UnXis's bid is the highest and best bid for such assets. Mr. Comer would testify that with respect to the APA with UnXis Schedule 2.1(a) sets forth the acquired assets. Schedule 2.1(c) sets forth the excluded assets. Section 2.2 of the agreement sets forth the grant of the sublicense to UnXis. Section 3 sets forth the 600,000 dollar purchase price in cash, which is, again, currently being held in escrow by the trustee, plus upside in the form of warrants if UnXis meets its financing target.

And, finally, Your Honor, Section 6.8 sets forth that the buyer will offer employment to all of the hired employees as defined thereunder, including medical, dental and other benefits for such employees.

I would also note that the U.S. Trustee has asked us to note on the record that this transaction doesn't contemplate the sale of avoidance actions, for the record.

[PJ: If you are curious what that means, it's talking about a rule in bankruptcy that if you paid someone in the 90 days prior to filing for bankruptcy, it can in theory be clawed back, if you favored one creditor over the others. But it can also be about how you spent money after you filed, claiming it was "ordinary course of business". Here's a website, Delaware Bankruptcy Litigation, that has written quite a bit about the topic, including about a current case, a Chapter 7 case, involving a company called Viashow that is ongoing in Delaware where the trustee filed several avoidance actions against some creditors, and you can read a complaint [PDF] that addresses that topic. The case alleges insiders of the bankrupt company Viashow found a way to strip the company of more then $4 million dollars under the guise that it was normal course of business expenses.

I know what you are thinking. But who here in the SCO picture would care enough to stand up and allege fraud? Mr. Cahn? Puh-lease. He's been like the enabling wife of an alcoholic. And this US Trustee's Office representative barely has said a word since replacing the one that handled most of the bankruptcy, and I don't expect that to change. She heard Novell say this was an illegal deal, but she didn't try to block it, so that tells me something. So most likely this is pro forma, just stuff that has to be said to rubber stamp the deal. Attachmate? I'd be happy to be surprised, but I would be surprised. The old Novell would have done what needs doing to protect Linux. But now?]

Briefly, Your Honor, with respect to the debtors' financial condition currently, there is a secured post-petition indebtedness of 2,000,000 dollars, which, as discussed before, was approved by this Court. As Your Honor will recall, two phases of restructuring have been implemented by the trustee, the first in March/April of 2010 and the second this year,

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January/February of this year.

The restructurings relate primarily to headcount and employee cuts, since seventy-five percent of the debtors' costs are employee related salary and benefits.

Over the time since the trustee's appointment in these cases in August, '09 the number of employees have decreased from sixty to less than thirty today.

As of this week the debtors' net working cap consists of account payables in the amount of 60,000, account receivables in the amount of 680,000 and cash in the amount of 900,000. I would note, Your Honor, that all those numbers are exclusive of -- I should be more specific. With respect to account payables it's exclusive of SVRx professional fees, admin costs, et cetera. That number just represents the operating business.

THE COURT: Okay.

MR. TARR: And, then, with respect to the cash amount, that's exclusive of what has been set aside in reserve in respect of SVRx royalties.

Mr. Comer trustee believes that it's critical for these estates that the transaction before this Court goes forward without delay for the benefit of the software business, the debtors' employees, the debtors' customers, including various governments around the world, large financial institutions, large retailers, universities across the globe

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and many others.

Currently, Your Honor, a capital infusion is necessary to allow the business to stabilize and grow. The trustee and his professionals have restructured as much as they can without causing harm to the future ability of the debtors to continue the software business. Revenues are declining, and it's imperative that this sale occur now or there will be irreparable harm to the software business in terms of the debtors' ability to sustain its products, its customers and its employees.

That concludes the proffer of Mr. Comer's testimony, Your Honor.

THE COURT: All right. Thank you. Thank you, Mr. Tarr. Mr. Lewis, are you going to cross-examine, Mr. Comer?

MR. LEWIS: I would like to, Your Honor, please.

THE COURT: You certainly are entitled to, and, Mr. Comer, if you'll come forward, sir. Mr. Comer, if you will remain standing in the witness stand while you're sworn that would be -- THE WITNESS: Okay.

THE COURT: -- helpful. Thank you.

THE CLERK: Raise your right hand and state your full name for the Court, spelling your last name, please.

THE WITNESS: W. Bruce Comer, III. Last name is Comer, C-O-M-E-R.

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(Witness duly sworn)

THE COURT: Thank you, Mr. Comer.

CROSS-EXAMINATION

BY MR. LEWIS:

Q. Good afternoon, Mr. Comer. I think we've met before in this setting.

MR. LEWIS: Your Honor, I propose --

THE COURT: Yes?

MR. LEWIS: -- to examine Mr. Comer largely based upon his declaration.

THE COURT: All right.

MR. LEWIS: His proffer has pretty much tracked it, maybe added a little bit to it, so I may switch back and forth, but the declaration makes a handy document to work from.

THE COURT: All right.

MR. LEWIS: So, if I may, Your Honor, I'd like to hand Mr. Comer a copy so he has it handy, and the Court, if the Court wants one I have some extras here.

THE COURT: I know I've got it in here.

MR. LEWIS: Okay.

THE COURT: That would be fine. You certainly may approach the witness.

MR. LEWIS: Thank you, Your Honor.

Q. Mr. Comer, let's just start by having you authenticate

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your declaration. Does that look like a true and correct copy of the declaration that you had filed in this case?

A. Yes, it does.

Q. Thank you. Mr. Comer, how much has Ocean Park been compensated so far in this Chapter 11 case? Do you know approximately?

A. I'd have to go check my records. I don't know right off the bat.

Q. Somewhere over 600,000 dollars, isn't it?

A. It's several hundred thousand dollars.

Q. Yes. I think it's over 600,000, just looking at the latest operating report. Does the employment agreement approved by the Court provide for any kind of success fee with respect to this transaction?

A. Yes, it does.

Q. Will you tell the Court what that is?

A. There were a couple of retainers and, then, there's a success fee. There's a formula, but there's a minimum of 150,000 dollars.

Q. Okay. So that 150,000 would come out of the proceeds of this transaction.

A. That's correct.

Q. Now, does Ocean Park have any prospective arrangements or business with the buyer here, UnXis, or [unc-sis]?

A. No.

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Q. Okay. At the auction on the 19th, isn't it true that the other bidder declined to overbid, at least according to it, because it believed that the bidding process had not gone according to the procedures set up by the Court?

MS. FATELL: Objection, Your Honor. I'm not sure the relevance of that. The other bidder has not filed an objection, has not appeared in this court, and I don't see why that's a relevant issue.

MR. LEWIS: Your Honor, I'm not appearing here for the other bidder. The debtor is purporting to argue that this is a good faith transaction, and I think whether there was possibly irregularities in the process is relevant, whoever complained about them. And I think Mr. Cahn will confirm that there were such complaints. Isn't that true?

THE COURT: Well, I'm going to -- I will allow the question.

MR. LEWIS: Thank you, Your Honor.

A. Sure. Could you repeat the question?

Q. Sure.

A. It's sort of two different questions, there, so I wouldn't mind resetting it.

Q. At the auction on the 19th, the other bidder declined to bid, did it not, because it said there had been irregularities in the auction process?

A. Yes, but they had sort of declined to bid even before

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they'd registered that issue. We'd given them some time -- actually, most of the weekend, to up their bid. We informed them what the topping bid was, and they chose not to. And then they sort of threw out some issues with irregularity, which, frankly, we guess may have been related to them getting their deposit back as quickly as they could.

Q. Okay, one of their complaints, was it not, was that documents, revised documents were being sent to them at the last moment?

A. Yes, that's true. But the economics were communicated to them in plenty of time.

Q. Okay.

A. And we'd actually postponed the auction a couple hours to make sure they had enough time to respond.

Q. Now, have you valued the warrants?

A. No.

Q. Have you made any attempt to value the warrants?

A. No, we didn't think -- one, it wasn't a crux issue in the auction itself, and it's so contingent on other funding, it'd be a pretty difficult exercise to put a specific number on it.

Q. Let me ask you to elaborate by what you mean that it wasn't a crux issue at the auction. What does that mean? A. Well, even prior to that, we had one bidder who was -- their bid was 600,000 dollars. They had put the full purchase price in escrow with Blank Rome. They were offering to cover

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an additional 50,000 dollars of cure costs, so the difference between the bid -- the other bidder was very aggressive at pushing liabilities onto the estate from lease -- in the negotiation, they were very into pushing the leases in Utah, New Jersey, and we just thought that the estate would be saddled with a lot of expenses. And then their figure, which they didn't give to us, so they left the purchase price blank until the very last minute -- I think it was the last couple of days or maybe a few hours before the bid deadline, they put in eighteen dollars, which almost, to us, made it question whether they were really being serious or not, whether they were trying to be almost a vulture investor that was going to come in, and if they were the only last-person standing, try to grab the assets.

Q. Do you have any clue at all what those warrants are worth?

A. I could give you -- I haven't done that work. I don't know.

Q. Okay. So essentially, the purchase price here is 600,000?

A. As we stated in my declaration, the buyer's leaving behind the networking capital, and they're also taking all of the employees and the foreign subsidiaries which would have a great cost to the estate if we had to wind those down.

Q. I understand. That was -- the other buyer was doing that as well, right?

A. That is correct.

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Q. Okay. Now, you heard Mr. Tarr's summation of your proffered testimony and you heard his discussion of the current cash and payable of the debtors, excluding professionals and other administrative expenses. Does that tell you that this estate is administratively insolvent right now?

A. Yes, I think it probably is.

Q. Okay. Expect that to get better or worse?

A. It's going to get worse. It's been getting worse ever since we were involved starting September of '09. It's been a struggle.

Q. In fact, isn't it true that out of this transaction, there's going to be very little money for anyone, if any money at all, other than the two million dollar lender?

A. Well, I think it's tough -- when we brought this offer, as you can imagine, as an investment banker, financial advisor, when we brought this offer to the trustee himself, we had to explain it. And I think you have -- in this case, you have to look at the costs of a wind-down, the employees, the benefit to the employees, the customers, the people using the software, the support of the software of an ongoing concern, and then the cost of the estate were it to have to wind this thing down and take care of the employment costs in Europe and the various jurisdictions and do things properly, it would take much longer and cost a lot more that has to be set aside. So the default for the estate is not a zero, and we can waive things, you

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know, the estate can waive things away. It would be to take care of those costs which all -- the buyer, here, is assuming all the employees, all the leases, and then the purchase price and the network and capital.

Q. So to be clear, the two million dollar lender is benefiting, some administrative claimants may benefit some, the employees are benefiting, but no creditors?

A. Well, we haven't figured out what precisely is going to be left or what's going to be left, but it's going to be fairly limited after the administrative claims and the debtor loan.

Q. Well, you've testified you think the estate's administratively insolvent now. How is there going to be any money left for unsecured creditors?

A. Oh, unsecured?

Q. Yeah.

A. Okay. I -- no, nothing for unsecured creditors, you're correct.

Q. Either way, whether this sale goes through or not?

A. That's right.

Q. So this sale is for the benefit of the secured creditor, for the benefit of the administrative claimants, and for the benefit of employees. But not for the benefit of general unsecured creditors?

A. That is -- and customers and the people using the software.

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Q. Other third parties?

A. Yes.

Q. Yes. But not the creditors? A. The unsecured creditors, that's right. Q. Right. Now, I'm just curious. Well, let me ask you this question a little bit differently. On a kind of general level, you're intimately familiar with the transaction, right?

A. Yes.

Q. Okay, what's the debtor going to be left with, in general, once this transaction is done?

A. We're going to be le -- the purchase price, the 600,000 dollars, the accounts receivable, which will be collected by the buyer. That value, as of today, is about 680,000 dollars, actually. The cash balance in the company after the cure amounts -- the net amounts of the cure are paid, and so that's the -- that's what will be left over.

Q. Any intellectual property?

A. No. That's going to the buyer.

Q. Any employees?

A. No, because the buyer's taking all the employees.

Q. So in essence, the debtors will be out of business when this transaction closes, except for the purpose of winding up their estates?

A. That is correct. The operating software business, that is correct. There will be no operating assets left.

[PJ: In that case, Mr. Cahn had to know prior to the sale that he'd have no one to work on the SVRx royalty collection, no? He didn't discover that after the deal was done.]

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Q. Okay. Now, you've described the -- you mentioned the sublicense in this transaction. What's that a sublicense of? What license is that a sublicense of?

A. I'm -- I was the financial advisor, here, and the marketer of the business, so I'd probably leave that to the attorneys who crafted that.

Q. Do you have any idea what it is?

A. Yeah, I can sort of understand, but I'm really not the person -- that's not my role in this transaction.

Q. I understand that, but you've been involved in it, you probably heard discussions about it, right?

A. Sure.

Q. So tell me what's being sublicensed.

MS. FATELL: Objection, Your Honor. I think the witness has already said twice now that this is a legal document and -- although he didn't use that word -- but that this is a legal issue and he's not comfortable speculating and putting in his own words what it means, so I don't know that this is the right witness to try and elicit that testimony.

THE COURT: Will there be another witness who will be qualified to answer the question, Ms. Fatell, do you know?

MS. FATELL: Mr. Broderick is more familiar with the contracts and licenses, so counsel can ask him.

THE COURT: Mr. Lewis, you'll --

MR. LEWIS: Your Honor, it's true that Mr. Comer's not

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a lawyer, but you don't have to be a lawyer to tell people what assets you're keeping and what assets you're licensing. I'm not going to ask him to go into the terms of the license and what it means and all that other stuff but --

THE COURT: Yes.

MR. LEWIS: -- there's no reason why he can't tell us what his understanding it.

THE COURT: Yeah, I'll overrule that objection --

THE WITNESS: Sure.

THE COURT: -- and allow you to answer.

THE WITNESS: Sure.

A. So my business -- so maybe if you wouldn't mind repeating the question?

Q. Sure. What license is the sublicense of?

A. So my understanding, and I'm not an intellectual property attorney, is that while SCO doesn't -- may not have the copyright which was found out by the jury trial, it has been a public company operating for decades, now, and it has an implied license or a sublicense or some right to operate its business, and it has been doing so for many decades, did it as a public company. And so it has that access to the historical source code bina -- you know, the licenses, et cetera, that was the long chain of intellectual property that was developed over thirty years ago.

MR. LEWIS: I have no further questions for this

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witness, Your Honor. Thank you.

THE COURT: All right, thank you. Thank you, Mr. Lewis.

Anything further? Any redirect or --

MR. LEWIS: Oh, I'm sorry, Your Honor. Let me just, if I may?

THE COURT: Sure.

Q. The proffer of testimony indicated that this debtor's not affiliated -- the buyer's not affiliated in any way with the debtors. The buyer is going to be getting a lot of the debtors' employees including some of its senior employees, right? Mr. Nielsen and so on?-

A. Oh, correct, yes.

Q. Yeah. Okay.

[PJ: Excuse me for noticing, but if that were true, would Mr. Nielson have signed the TSG monthly operating reports for May and June, since the sale happened in April? Just can't help but notice.]
MR. LEWIS: Thank you, Your Honor.

THE COURT: All right, Mr. Lewis.

MR. LEWIS: Appreciate it.

THE COURT: Thank you. Of course.

Ms. Fatell?

MS. FATELL: Thank you, Your Honor. Just very brief redirect. Bonnie Fatell, for the record.

REDIRECT EXAMINATION

BY MS. FATELL:

Q. Just a follow up to the last question. Are you aware, has the buyer had any discussions with any of the -- members of any

Page 38

of the employees of SCO with respect to employment contracts or arrangements, going forward?

A. No, we've pushed that off, so that has not occurred yet.

Q. There was a question about the two million dollar lender and all of the money going to the two million dollar lender. Is that your understanding that all of the sale proceeds will go to the two million dollar lender?

A. No.

Q. Can you explain that a little bit?

A. That goes back to the terms of the debtor loan that was put in place, and so there's a provision for some sales proceeds to be paid, and then it was actually a fairly complex structure, but essentially, some of the proceeds would go to pay the loan back; others would be -- would go to pay off administrative claims and be left in the estate to take care of the estate's business.

Q. There was a question about whether the debtor would be left with any assets, and you very specifically said there would be no operating assets. You are familiar with the litigation that's been going on with Novell, correct?

A. That's correct.

Q. And that's on appeal right now?

A. Um-hum.

Q. So the debtor continues to have some interest in that litigation?

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A. Absolutely. And there may be some holding companies and other assets, but the operations -- I guess what I was referring to was the customer-facing operations and assets will go to the buyer.

Q. Okay, and are you aware --

A. The litigation claims -- or, the claims were all -- were one of the excluded assets in the transaction.

Q. Okay, and that includes the Novell litigation as well as the pending IBM litigation and any other litigation?

A. All claims that we're aware of.

MS. FATELL: Your Honor, I don't have any other questions. Thank you.

THE COURT: All right, thank you, Ms. Fatell. Anything further?

MR. LEWIS: Nothing, Your Honor. Thank you.

THE COURT: All right, Mr. Comer, thank you, sir. You may step down, now.

MS. FATELL: May I have one moment, Your Honor.

THE COURT: You bet.

MS. FATELL: Your Honor, the trustee would next like to proffer the testimony of Mr. Richard Bolandz who's a representative for the buyer --

THE COURT: All right.

MS. FATELL: -- if that's acceptable.

THE COURT: Mr. Lewis, any objection?

Page 40

MR. LEWIS: No objection, Your Honor.

THE COURT: And obviously, you can reserve the right to cross-examine. MR. LEWIS: Thank you, yes.

MS. FATELL: Mr. Bolandz is in the courtroom, Your Honor.

THE COURT: Yes.

MS. FATELL: And his attorney, Marilyn Fine is on the telephone.

THE COURT: Very well, and I see that we also have his declaration, of course, in support.

MS. FATELL: Correct, Your Honor.

Your Honor, if called to testify, Mr. Bolandz would state as follows. He has been engaged by UnXis to serve as the company's CEO if the sale is approved by the court. He has actual knowledge regarding UnXis' management team, its shareholders, and it's strategic plans for the future. He's been involved in the negotiations for this acquisition of the debtors' software assets and the execution and delivery of the asset purchase agreement.

As CEO, Mr. Bolandz brings to UnXis over twenty years of professional experience as a senior executive in the information technology industry which includes the management of complex software development, technology commercialization,

Page 41

corporate development and restructuring, business process, reengineering, and development of global distribution channels.

As CEO, Mr. Bolandz states that it's his intention that UnXis will continue to support existing customers, perform on existing contracts, continue to support the global network of business partners, strategic alliances, and value-added resellers, that he will provide a substan -- there will be provided a substantial infusion of capital for product modernization, and UnXis will retain most of the debtors' employees and management team including, but not limited to the chief marketing and sales officer, the chief technology officer, and the chief financial officer.

UnXis will have a world-class advisory board of directors including but not limited to William Bancroft, who's a VP and general manager of Unisys global outsourcing and infrastructure services, Jane Cavalier, the president of BrightMark Consulting, Craig Feied, the director of the ERI Institutes for Innovation in Medicine -- that last name is spelled F-E-I-E-D -- Jody Westby, Esq., chief executive officer of Global Cyber Risk, and Denis Pombriant, managing principal of the Beagle Research Group.

UnXis is a Delaware corporation which was formed on June 12th, 2009 for the specific purpose of acquiring the software assets of SCO. The company was initially organized by two directors and officers: Eric LeBlan and Steven Norris.

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Mr. LeBlan is a partner in MerchantBridge Group which is an in-net-based information services company in the Middle East and has been involved in the information technology industry since the early 1980s. Mr. Norris has experience in public and private financing, mergers, and acquisitions.

Mr. Bolandz would further testify that the company has authority to issue 200 shares of stock, and as of this date, 100 shares have been issued: 50 shares to GulfCap Partners, LLC and 50 shares to MerchantBridge Holdings (Cayman) Limited. If the transaction is approved, UnXis will issue additional shares to its seed investor, a Mr. Stan Solomonson, who's a businessman who operates an unrelated business known as Future Foods and a personal acquaintance of Mr. Bolandz.

On behalf of UnXis, together with Eric LeBlan, they have negotiated the acquisition -- Mr. Bolandz -- excuse has negotiated the acquisition of the SCO assets and has conducted due diligence through Ocean Park Advisors over last several months. The UnXis asset purchase agreement dated as of January 19th, 2011 provides that UnXis will pay the cash purchase price of 600,000 which has already been funded into the trustee's escrow account and will contribute up to 50,000 dollars to cure delinquencies necessary to assume executory contracts.

All of the negotiations for acquiring the SCO software business have been arms' length and in good faith. Through

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Ocean Park Advisors, UnXis has accessed information in the data room from the transaction, participated in telephone calls with Ocean Park Advisors and the trustee's counsel and others at SCO in order to gather more information about the company's operations prior to submitting its bid. Neither Mr. Bolandz, or to the best of his knowledge, any member of the UnXis team has any relationships with Ocean Park Advisors or the trustee.

Upon closing on the acquisition of the SCO software business assets, they expect to generate sufficient cash flow from operations to pay the company's current liabilities, as they become due. Also, UnXis is in the process of raising additional capital to fund any shortfalls in operations, to engage in a restructuring, corporate development, and the development of necessary upgrades in product modernization.

In accordance with the terms of the asset purchase agreement, they intend to close on the transaction no later than March 30th, and if possible, much earlier.

Mr. Bolandz will testify that they believe that if the sale does not close, without a major capital infusion, SCO will be unable to continue to operate, and there will be irreparable harm, not only to SCO but to the enormous number of national and international businesses in over eighty countries which rely on the SCO operating system to conduct their day-to-day business. Failure to continue the SCO business will have a huge economic and financial impact worldwide.

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In addition to this proffer, Mr. Bolandz acknowledges filing the declaration that Your Honor has before you, and the information set forth therein is true and correct. And the resumes and biographies attached thereto remain the same parties that they intend to be putting on the board and hiring.

THE COURT: All right.

MS. FATELL: And that would complete the proffer, Your Honor.

THE COURT: Thank you. Thank you, Ms. Fatell.

Mr. Lewis, would you like to cross-examine?

MR. LEWIS: I would like to examine Mr. Bolandz, please.

THE COURT: You certainly may. Mr. Bolandz. If you'll just remain standing in the witness stand, we'll have you sworn and testify in a moment. Thank you.

THE CLERK: Raise your right hand and state your full name for the Court, spelling your last name.

MR. BOLANDZ: Richard Alexander Bolandz, B-O-L-A-N-D-Z.

(Witness sworn)

THE CLERK: You may be seated.

CROSS-EXAMINATION

BY MR. LEWIS:

Q. Good afternoon, Mr. Bolandz.

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A. Good afternoon.

Q. I'm Adam Lewis. I'm counsel for Novell.

MR. LEWIS: Your Honor, I'd like to follow the same process here by handing the witness a copy of his declaration, if that's okay?

THE COURT: Of course. And I have it right in front of me. Thank you, Mr. Lewis.

Q. Mr. Bolandz, I'd like to ask you, to begin with, if you would just look at that declaration and tell me if it looks like the one that you filed and signed?

A. Yes.

Q. Thank you. Mr. Bolandz, the license -- the sublicense that this agreement applies for is a nonexclusive license; is that right?

A. I'm not aware of the terms of the sublicense.

Q. Have you ever read the sublicense?

A. Term license is a term of art.

THE COURT REPORTER: Excuse me, Your Honor?

THE COURT: Yes.

THE COURT REPORTER: Could you have speak --

THE COURT: I'm sorry, yes. Mr. Bolandz, if you'll -- that's great. Move that forward so you're speaking into it and we'll pick up your testimony better.

A. -- is a term of art. My understanding is it is the rights

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to continue doing business that SCO had and Caldera before it, and the three or four iterations going back to the original UNIX at AT&T.

Q. And is it your understanding that -- let me get this -- I've heard so many different pronunciations of your company's name. Can I get the official pronunciation from you?

A. [unc-sis].

Q. UnXis. Thank you. Is it your understanding that UnXis will have the exclusive right to do that kind of licensing and business? Or is it your understanding that SCO will continue to have that right, as well.

A. Well, SCO will cease to exist as an entity.

Q. So your answer is?

A. The answer is SCO would not have that right as well.

Q. Okay. Who are the officers and directors of UnXis now?

A. Eric LeBlan and Steven Norris and myself.

Q. And what other positions?

A. Steven Norris is the chairman, vice chairman, Eric LeBlan, and CEO would be me.

Q. Is there a president?

A. No.

Q. Secretary? So three directors -- two directors --

A. At this point, three.

Q. Three. Now, in your proffer and in your declaration as well, you talk about how UnXis plans to fund operations out of

Page 47

cash flow. Do you recall that?

A. Short-term operations out of cash flow. But the company has been --

Q. Let me --

A. -- disinvested.

Q. Let me try to take this step by step. And just try to answer my questions. And if I've left something out, I'm sure your counsel can bring it out. But I prefer if you just answer what I ask you, if that's okay. So you say short-term. What is short-term? How many months?

A. I would think at least six months to be able to get the company restructuring plan in place and organize financing.

Q. Okay, and you've created projections for doing that?

A. Yes.

Q. Written projections, done an analysis, you've got a business plan?

A. The business plan is underway.

Q. Underway as in preparation of it?

A. As in -- as in a competitive strategy has been developed.

Q. Um-hum.

A. A business plan, you're talking about three-dimensional financial modeling. We're not down to four decimal places.

Q. Are you down to any decimal places?

A. Yes.

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Q. And what money does UnXis have committed to it right now, legally, as you understand it? Binding commitments.

A. 600,000 dollars.

Q. No other money?

A. UnXis was a special purpose entity formed strictly for acquiring this asset.

Q. And UnXis, as I understand it, is going to run the business, is that right?

A. That's right.

Q. Okay, so my question is, does UnXis have any other committed financial resources at the moment, other than whatever it may generate from operations?

A. We have letters of intent, which basically require that the asset is owned by UnXis.

Q. And once the asset is owned by UnXis, are those authors of those letters of intent committed to providing further financing, legally, as you understand it?

A. Legally, as I understand it? I can't answer that question legally. I'd have to defer to my attorneys.

Q. Not of concern to you whether or not it's legally binding once the assets are acquired?

A. Well, letters of intent are just that: intent.

Q. So your understanding is that it's not legally binding. They could walk from them if they wanted to, even after acquisition?

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A. Yes.

Q. Okay, that's what I'm trying to get at. Thank you. So in fact, other than the 600,000 dollars that UnXis has deposited for the purchase price, it has no other financial resources at the moment?

A. That's correct.

Q. And no other binding legal commitments for financial resources.

A. Back to the legal thing again. Letters of intent.

Q. Which people can walk from if they choose to?

A. That's correct.

Q. Okay. Now, in talking about the shares in your declaration, you talk about that it's your understanding that there are so many shares authorized.

A. Um-hum.

Q. Why do you use the phrase, "it's your understanding"? Do you not know?

A. That is my understanding.

Q. Do you not know whether there are so many shares?

A. Well, understand is to know.

Q. Okay. Now, at the end of your declaration, in paragraph 9 -- you might want to take a look at this -- you make some statement about how you don't understand why Novell is objecting and you'd really like to work with Novell, and so on. Do you see that?

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A. Yes.

Q. Okay. Have you or anyone on behalf of UnXis, to your knowledge, reached out to Novell or anyone on behalf of Novell to talk about getting along?

A. No. I have not.

Q. To your knowledge, has anyone done that on behalf of UnXis?

A. I have no way of knowing.

Q. So you'd like to do this and you can't understand why Novell is objecting, not working with you, but you haven't asked Novell why that is?

A. Well, we don't own the assets. We're not really in a position to be making any deals with Novell about anything. The -- my view is that Novell is in a complementary, not competitive business, not being in the operating system space. And it does provide a suite of software tools which support our direct competitors, Microsoft and Analytics (ph.). So other than for not wanting sheer anticompetitive behavior, Novell would have access to 1.5 server instillations that we have if we work together.

MR. LEWIS: No further questions, Your Honor. Thank you.

THE COURT: All right, Mr. Lewis. Thank you.

Ms. Fatell.

REDIRECT EXAMINATION

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BY MS. FATELL:

Q. Good afternoon, Mr. Bolandz.

A. Good afternoon.

Q. Bonnie Fatell, for the record. I want to focus primarily on the financing for this acquisition. You stated that 600,000 dollars is firm; you have letters of intent. Can you -- let me back up for a minute. Can you give us a little bit of -- some insight into your background in the area of acquisitions?

A. My work has been involved in advising private equity groups, valuating the companies, the technologies, developing their competitive strategies, and transition management through restructurings and building companies from a patent.

Q. And has that involved either yourself going out and raising funds or working with some of the investors to pull the funds together?

A. My role in the fundraising process is generally to be there to discuss the technical issues involved in whatever the product or service might be, interfacing with the technical advisors on the side of the capital partners.

Q. Okay, and in your declaration, you indicated, I believe, that MerchantBridge and, I believe -- I don't have it in front of me -- is it GulfCap Partners --

A. Yes.

Q. -- are right now, I guess, supporting this company in some regard, is that accurate?

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A. Well, MerchantBridge and Steven Norris Capital Partners, now have been involved in this process for years and invested, you know, a significant amount of, you know, time and expense in evaluating, pursuing, conducting due diligence, et cetera. I entered this process in just, I don't know, a year ago.

Q. And have you done business with either of those entities before?

A. I had done business with Steven Norris Capital Partners and prior to Steven Norris Capital Partners, Mr. Norris was with Washington Capital Advisors, and both of those people, I've done business with -- both of those entities.

Q. Do you have any reason to believe that UnXis will not be able to raise the funds necessary to go forward in operating and developing and building this company?

A. I do not. The only reason that it wouldn't go through is if we don't control the asset. Investors are not interested in putting up money if there's no asset to put it up for.

Q. And when you say you have no reason not to think it won't go through, what do you base that on?

A. Well, if the sale -- if this sale is not approved?

Q. No, if the sale is approved, you have reason to believe that your financing will come through.

A. Yes, absolutely.

Q. What do you base that on?

A. Absolutely. Based on the relationships of Mr. Norris and

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Mr. LeBlan with the investors. These are long, decades-long relationships with the same investors over series of successful ventures. It's not -- these are not unknown entities.

Q. Okay.

MS. FATELL: I have no further questions, Your Honor.

THE COURT: All right, thank you, Ms. Fatell. Mr. Lewis?

MR. LEWIS: Nothing, Your Honor.

THE COURT: All right. You may step down, Mr. Bolandz. Thank you, sir. Thank you.

THE WITNESS: Thank you.

MS. FATELL: Your Honor, we'd like to call William Broderick to the stand, please.

THE COURT: All right. Mr. Broderick. Good afternoon, Mr. Broderick. If you'll --

MR. BRODERICK: Good afternoon, Your Honor.

THE COURT: -- do as your predecessors and remain while you're sworn.

THE CLERK: State your full name for the Court, spelling your last name, please.

MR. BRODERICK: William Michael Broderick, B-R-O-D-E-R-I-C-K.

(Witness sworn) THE CLERK: You may be seated.

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THE COURT: Thank you, Mr. Broderick.

DIRECT EXAMINATION

BY MS. FATELL:

Q. Good afternoon, Mr. Broderick.

A. Good afternoon.

Q. I'd like to start first with your personal background. If you could give the Court some insight into your professional experience in the past?

A. Okay. I went -- my -- in 1966, I went to my freshman year in college out in Missouri. When I completed my freshman year, I returned to New Jersey and enlisted in the Army. I spent two years and seven months in the Army, the last year and a half with the 101st Airborne Division in Vietnam. The first half of that time in Vietnam was with an infantry company; the second half was with a recon unit. When I returned to the States, I was discharged from the Army and re-enrolled in college. In 1973, I received a B.A. in business from William Patterson University and I went out to California. In 1975, I received an MBA from University of Santa Clara and came -- went back to New Jersey and started my career.

Q. And who did you start working for?

A. My first employer was Trans World Airlines. I worked with them in New York, London, and Paris. I spent five years with the airline. Returned to the States and got a job with -- at the time, they were called Perkin-Elmer. It was their data

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systems. They were a computer manufacturer. They subsequently changed their name to Concurrent Computer Corporation. I spent ten years with Perkin-Elmer/Concurrent, and then I took a job with AT&T's UNIX System Laboratories in December of 1991.

Q. Okay, and after that, you foll -- basically, can you describe for us, you followed the UNIX system as it progressed through its various acquisitions?

A. Yes, I did. When I was at -- when I first was at UNIX System Laboratories, I was manager of sales operations reporting to the vice president of sales. I was responsible for planning for the sales organization, running interference between the salespeople and financing contracts people, and you know, pretty much what the vice president didn't want to do.

Novell purchased us in '92, '93, and shortly after that -- I went to Novell, and shortly after that, I became a contract manager and I was sent out to Greensboro, North Carolina, where -- it was AT&T's location where their contracts managers were. I went through training down in Greensboro and training back up in New Jersey with our -- our lawyers who handled the contracts. And I worked as a contracts manager for Novell. In '96, the asset purchase agreement closed with Santa Cruz Operation, and I moved over with all the other people to Santa Cruz Operations as a contracts manager, a licensee of the UNIX software, dealing with the same customers, working with the same internal people. We just all picked up -- we didn't pick

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up; we didn't even move offices. We just kept on doing, we just got new business cards. And then in 2003, Santa Cruz -- 2001, Santa Cruz sold the business to Caldera, and I moved over to Caldera with the people that were in the UNIX group, and we continued to license UNIX. Again, it was same office, same people, just new business card, doing business exactly the same way we were doing it before.

And then in two -- early -- late 2002, early 2003, I left the employ of Caldera and was put on -- and worked with them on a contract basis, a consulting basis, and then -- for about a six month period, and then was rehired -- by then, it was the SCO Group -- working as a -- my title was director of software licensing. And I was licensing the software as I had done at Novell, Santa Cruz, and Caldera.

Q. Are you presently employed by SCO?

A. I am not an official employee. I'm on contract again, and my contract is up at the end of this month.

Q. For those of us who are not as computer savvy as some, can you describe for us what it is that SCO does?

A. They develop and market the UNIX operating system. And an operating system is, you have a computer and you have the applications, which is really what you want the computer to do. It could be running dental office records, it could be doing financial transactions. The operating system sits on the

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computer between the computer and the application, and the operating system tells the computer how to handle the application. So you've got the three parts, and they work together. The application is trying to get the work done, and the operating system tells the computer how to do it.

Q. Can you describe the type of customers that SCO has, people who use its operating -- we call the operating system the UNIX system? Is that what it is?

A. UNIX operating system.

Q. Okay, and can you describe the types of customers, location, size, et cetera, just generally?

A. Oh, sure. UNIX has been a popular and well thought of operating system for the past thirty years. It's used worldwide by individuals, universities -- just about every university in the world has a UNIX license. We have small companies, large companies, mid-size companies use UNIX to run their operations. Governments worldwide, United States government, just about all the departments of the government from Commerce Department, Department of the Defense, Army, Navy, Air Force, National Security Agency, they all have UNIX licenses and they use UNIX. In Israel and Germany and United Kingdom, the governments are using UNIX operating system.

Q. And examples of retailers?

A. We've got McDonald's, we've got the pharmacies, CVS.

Q. Financial institutions, I assume?

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A. Financial institutions.

Q. Okay.

A. Wall Street firms.

Q. How do customers get the UNIX system?

A. There's two ways. We -- the way it originally started out was AT&T licensed the source code. And the source code is human-readable code. It's not the code that sits on the computer that actually runs the application. It's kind of like just getting a huge textbook of the code that you put on the computer and you can manipulate it, work it, add things to it, take things away. Basically, what a licensee would do is take the source code and modify it so it would work on the specific computer they wanted it to work on and possibly modify it so it could work with the application they would want it to work on. And when they first started up, it was companies like Hewlett- Packard, Compaq Computer, IBM, Dell, all the computer manufacturers had UNIX licenses. They would -- they'd get the source code, they'd modify the code so it would work on their computers, and then when they shipped a computer, they sold a computer, it would go with what they call the binary form of the operating system, and that's where they compiled code, and the binary is what sits on the computer and runs it. So every computer that was shipped, every UNIX computer that was shipped out by these computer manufacturers is how the market got the product.

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Q. And when you talk about a binary system, as I understand it, that would be going into a computer store and taking off of the shelf Quicken or Microsoft Word or something like that, that's --

A. Sure, if you go into a store and you buy Microsoft Windows, you're buying a binary.

Q. Okay.

A. You can only use the code.

Q. Okay, now you described the sale -- you mentioned the sale of the software business from Novell to Santa Cruz. Did the way UNIX was operated change at all when that sale occurred?

A. You mean the way we licensed UNIX?

Q. Yes.

A. No, not at all.

Q. And how about when Santa Cruz then sold to Caldera. Was there any change there?

A. There was no change at all. In fact, we continued to use the same software agreements. All the agreements that we used that were originated with AT&T that went to UNIX System Laboratories, and then through Novell to Santa Cruz Operation, and then to Caldera, those agreements were used virtually intact except the name was changed. In fact, when we changed from Novell to Santa Cruz Operation, in the transition period, it was Novell's instructions to us, use these agreements; just change the name from Novell to Santa Cruz.

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Q. And these agreements that you're referring to, they are the licenses of the source code?

A. Yes.

Q. Okay, your declaration was filed --

MS. FATELL: If I may have a moment, Your Honor?

THE COURT: Of course.

MS. FATELL: May I approach the witness, Your Honor?

THE COURT: Yes. Yes, Ms. Fatell.

Q. If I can direct you to paragraphs 13 and 14 in your declaration, you're describing some various parties in 13 in which there were third-party source code license agreements between SCO and also between its predecessors and these various entities. Can you gives us an idea what kinds of license agreements those are?

A. Sure. In paragraph 13, these are what we refer to as the technology source code licenses. This is where somebody licenses the source code; they've got the full source code product, and they could modify the product and add things to it, take things away, do whatever they wanted to to get it to work on their computer and do what they wanted. Then they could -- would be able to prepare a binary. And in order to ship a binary, they had to execute an additional sublicensing agreement that covered terms and conditions for issuing the bi -- for distributing the binary. But paragraph 13 has to do with the overall software agreement for licensing the full

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source code product.

Q. And describe those sublicenses for a minute, if you will.

A. Well, the sublicense agreement, what people did was, they executed the software agreement which was the terms and conditions -- the overall terms and conditions that a licensee had to agree to in order to use the source code product. The sublicensing agreement, if we have a licensee that wants to in turn develop a derivative work and ship it on their computer, then they would have to take a sublicensing agreement. That was the terms and conditions for the distribution of a product.

Q. Okay, and in paragraph 14, are those different types of agreements?

A. Paragraph 14 is different. I included these because I wanted to show that all of the agreements went from AT&T to UNIX Systems Laboratories to Novell to Santa Cruz with really just a name change.

Now, in 14, there are called reference agreements. And the reason we have the reference agreements, it's to license the full source code product, you're going to pay 2 -- 300,000 dollars for that source code product. Some -- there are some companies that are writing applications, developing applications, independent software vendors. They want to be able to see UNIX in order to make their product work with UNIX. They don't want to lay out 300,000 dollars. A lot of these guys start out working in their garage. So what we did was we

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came up -- well, AT&T came up -- UNIX Labs came up with a reference source agreement. It's a 15,000 dollar annual fee, and they get to look at the code. They can't modify the code; they can't create binaries. It's a read-only. It's like getting the -- it's getting the code almost in a textbook. But they'll pay 15,000, and they can look at the code and do what they need to their product.

Q. Okay. To your knowledge, has Novell generally been aware of the SCO licenses with third parties?

A. Well, of course. They told us to use their licenses; just change Novell to Santa Cruz.

Q. And to your knowledge, has Novell ever told SCO that it couldn't enter into these license agreements with third parties?

A. Never.

Q. To your knowledge, has Novell ever tried to stop a licensee from using the license source code or the binary code?

A. No.

Q. Did any of these customers or third parties take an assignment of the 1995 APA with Novell when they entered into these license agreements?

A. No, they were simply licensing the source code.

Q. Okay. There's been reference made to the sublicense agreement that's attached as an exhibit to the asset purchase agreement with UnXis. Are you familiar with that document?

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A. Yes, I am.

Q. Did you participate in preparing it?

A. No, I did not.

Q. Have you reviewed it?

A. Yes, I have.

Q. And is it similar to the existing license agreements that SCO has that you've just described with its customers?

A. It's virtually word-for-word. If --

Q. And how do you know that?

A. I went through the sublicense agreement and I laid out the software -- one of the software agreements from, well, it's the same one from Novell or Santa Cruz, the ones I attached here, I laid side-by-side. And I went through provision by provision in the software -- in the sublicensing agreement, and I could find virtually identical words in the software agreement or sublicensing agreement.

Q. Okay. Now, I want to turn to SCO's present relationship with Novell. Do you know whether SCO and Novell currently have a business relationship with one another?

A. No, they do not.

Q. Does SCO purchase any product from Novell?

A. No.

Q. Does Novell purchase any product from SCO?

A. No.

Q. Does Novell make any payments to SCO?

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A. No.

Q. Putting aside the SBRX royalties, does SCO make any payments to Novell?

A. The only possible payment they would make is, in the UNIX where 2.1 operating system, which is an operating system from the mid-1990s, it included Netware, and there was a Netware royalty to Novell. Now, if there's a one-off chance that somebody ships a UNIX for a 2.1 product, we'll -- all third-party -- all third-parties that have products, you know, code in that product, we would owe them a royalty. Novell would be one of those parties. But I don't know if it's happening now. I would doubt it. Were later releases than that.

Q. So when would you say that the Netware product was an active product in SCO's business?

A. Well, we took it out -- I believe we took it out of the UNIX for 7 product, and that was released in the late '90s.

Q. In the late '90s, and this is 2011, so the likelihood that there's any payments being made would be small, great?

A. Very small.

Q. Are you aware of whether Novell provides any reports of any kind to SCO.

MR. LEWIS: Sorry, couldn't hear the question.

MS. FATELL: I'm sorry.

Q. I said, are you aware of whether Novell provides any kind of reports to SCO?

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A. No.

Q. Does SCO provide any reports to Novell? Again, I'm setting SBRX aside.

A. No, they don't.

Q. Would you say that the relationship that you've just described between SCO and Novell has been consistent since the transfer of the assets in 1995?

A. Since the transfer of the assets in 1995, we licensed the source code, we licensed binaries, and there was no contact or interest expressed by Novell on what we were doing.

Q. Okay, if SCO is unable to transfer these assets to UnXis, what impact will there be on its customers?

A. If SCO goes out of business, the impact is going to be pretty disastrous worldwide. This is an operating system that's used worldwide. We're not selling a lot of product right now, but we have a lot of support relationships in place. The people -- the installed base that's using UNIX needs us to support them. The distributors that distribute our product do a lot of the support of their customers, but we have support agreements, we support those distributors. If those distributors can no longer support their customers, then all those people I described before, small, medium, large corporations, retail outlets, government agencies, they're up a creek for support. If something happens to their operating system, they've got nobody to turn to.

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Those distributors that are distributing our product will no longer have our product to distribute, so unless they can flip to something else, they're going to go out of business.

Q. Why can't these thousands of entities that you just described that have the operating system, why can't they just switch to another operating system?

A. For one of the main reasons why UNIX became so popular thirty years ago and has been popular all along just -- by the industry. In order to switch to another operating system, you have to rewrite your application because it has -- you have to tell your application how to work with that operating system.

Q. Okay.

MS. FATELL: I have no further questions.

THE COURT: All right, thank you, Ms. Fatell.

Mr. Lewis?

MR. LEWIS: Thank you, Your Honor.

THE COURT: Yes.

CROSS-EXAMINATION

BY MR. LEWIS:

Q. Mr. Broderick, do you anticipate having a position with UnXis after this transaction closes?

A. I don't know. As far as I know, April 1st, I'm unemployed.

Q. Have you talked to UnXis about a position?

A. No, I have not.

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Q. Have they talked to you about it?

A. No, they have not.

Q. Have you communicated any interest to UnXis through anyone else?

A. I have, in general conversations it would be nice to be employed.

Q. That sounds pretty unremarkable.

A. It's a feeling pretty much a lot have right now.

Q. So let's go back to what the sublicense is a sublicense of. What's it a sublicense of? What license?

A. Which sublicense are you talking about?

Q. The sublicense that is being granted to UnXis under this transaction.

A. Okay, what they're doing is, the sublicense is a sublicense for what's been defined as the licensed properties. The licensed properties are the intellectual property and copyrights that the Court in Utah said didn't get transferred to Santa Cruz, and SCO does not own, but since the asset purchase agreement closed in 1996, Santa Cruz and Caldera and everybody have been using them and licensing them with no objections from Novell, so we've got a right to license those products. Since those products, we don't have the ownership of those, then what we're doing is we're selling what we own and we are licensing what we don't own the same way it's been

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licensed since 1996 by Santa Cruz Operations.

Q. Okay.

A. And before.

Q. Now, during all this licensing that's been going on all these years, has SCO been in default under the asset purchase agreement to Novell?

MS. FATELL: Objection, Your Honor. Calls for a legal conclusion.

THE COURT: Mr. Lewis.

Q. Are you aware --

THE COURT: I'll sustain that because I think it does, and it probably can be re-asked.

MR. LEWIS: I'll see if I can rephrase it a bit.

Q. During all these years of licensing, has Novell claimed that SCO is in default to Novell, as it now does?

A. From the time in 1996 --

Q. Yeah.

A. -- when the asset purchase -- no, never.

Q. In fact, only since this bankruptcy, right? If that?

A. No, actually, it was before the bankruptcy. It was when -- it was shortly -- well, if you want to get the time frame, it was shortly after Novell announced that they were going to use Linux as their platform of choice for their Netware product, and SCO came out and made some claims that Linux included some UNIX, and then Novell started coming out

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with claims that you really didn't buy UNIX.

Q. So when the litigation began, essentially.

A. Yes.

Q. Is that a fair statement?

A. Yes.

Q. Okay. And during all of this time that all this licensing has been going on, has SCO been in bankruptcy? Or Caldera, or Santa Cruz? A. No. Q. But it is now, right?

A. Oh, yeah.

Q. And it's trying to sell these assets in the bankruptcy case according to bankruptcy law?

A. Sure.

Q. Okay. Now, you talk about transactions in the ordinary course in a couple of your paragraphs, that this is just another ordinary course transaction. In how many transactions in the past has SCO effectively conveyed away its business?

A. What are we talking about? The sale agreement --

Q. Yeah.

A. -- to UnXis?

Q. Yeah.

A. Well, Santa Cruz did it to Caldera.

Q. Okay.

A. So there's one.

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Q. Okay. And since then?

A. Now.

Q. Okay.

A. You don't do it every day.

Q. In the bankruptcy? In the bankruptcy case, right?

A. Oh, in the bankruptcy?

Q. Yeah.

A. This is the first time in a bankruptcy that the business is being sold.

Q. Okay. And would you consider a one-time transaction ordinary course?

A. When I refer to ordinary course, I'm talking about licensing of the software.

Q. Okay.

A. And I was talking about we are -- I'm talking about the license properties and the sublicense agreement, that in licensing those -- those properties under the sublicense agreement to -- thought it was going to get me in trouble -- [unc-sis]?

THE COURT: [unc-sis], yes.

Q. We got that officially, today, Mr. Broderick.

A. -- to UnXis, licensing those -- those intellectual property and copyrights to UnXis is in ordinary course of business because they were licensed from 1996 on with no objection from Novell.

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Q. But does the ordinary course of business include a transaction which puts you out of business? Is that ordinary course of business?

A. That's not what I'm saying is ordinary course of business.

Q. I understand that, but isn't that what this transaction does?

A. Are we talking about the sublicense agreement where licensing --

Q. The sub --

A. The sublicense agreement where we are licensing the copyrights that the Court said we don't have is ordinary of business. We license those -- we have been licensing since Santa Cruz closed the asset purchase agreement.

Selling the business, ordinary course of business? Well, the business -- I've been sold three times. So I guess in business, you do sell a business, so it would -- I would consider selling a business an ordinary course of business.

Q. Okay. Now, can you separate the sublicense from the rest of the transaction? Let me put this question differently. Would there be a transaction with UnXis without the rest of the asset purchase agreement, besides the sublicense?

A. I don't know.

Q. You don't know. You have no idea whether UnXis would simply take a license and nothing else?

A. I don't know.

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MS. FATELL: Objection, Your Honor. Calls for speculation.

THE COURT: I'll sustain the objection.

Q. But it would be fair to say, would it not, that SCO has not historically entered into such a sublicense as part of a larger transaction in which it put itself out of business?

A. Are you saying historically, SCO has not licensed just the technology and copyrights that the court --

Q. No, I obviously asked a bad question. Isn't it true that SCO has never before entered into a sublicense like this as part of a larger transaction in which it also, at the same time, put itself out of business?

A. SCO has never -- SCO has not entered into a sublicense like this in the past because Novell never claimed ownership of the copyrights in the past and we didn't have this court order that they do own the pre-APA copyrights. That was never an issue in the past. It was never raised by Novell in the past. Therefore, when we took the software agreements at the time Santa Cruz got the asset purchase agreement, Novell said, use these agreements, change the name from Novell to Santa Cruz, and go do your business. They didn't say you must include something in there that says, you don't own those copyrights.

Q. Okay, but it's also fair to say, is it not, that SCO has never entered into a transaction before in which it put itself out of business?

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A. SCO has never done -- that's true.

Q. Okay.

A. Otherwise we wouldn't be here because they'd already be out of business.

Q. Excellent. Now, under the asset purchase agreement between SCO and Novell and now SCO and -- well, originally Santa Cruz and Novell and now SCO and Novell, do you recall that there's a provision that requires that SCO develop the business that it's buying?

A. I'm sorry?

Q. Do you recall that in the asset purchase agreement between SCO and Santa Cruz, now SCO and -- I mean, between Novell and Santa Cruz now Novell and SCO there's a provision which requires that the buyer develop the business that it's buying?

MS. FATELL: Objection, Your Honor. I don't think there's been a foundation established that this witness is intimately familiar with the provisions of a 1995 asset purchase agreement to be able to respond to that.

MR. LEWIS: Your Honor, he can tell us if he's not. I think rather presuming one thing or another let's hear what he has to say. I mean, we've quoted it in our brief, so --

THE COURT: All right. I'll overrule the objection. I think it's clear and fair to the witness.

A. There was a -- I don't know the exact wording or how legal

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it was but I know there was an intention. I don't know if it was legally binding but there was an intention in the asset purchase agreement between Novell and Santa Cruz that Novell and Santa Cruz that Novell develop a merged product and Novell would include --

Q. You mean SCO, don't you?

A. SCO.

Q. Would develop a merged product?

A. Yeah. S-C-O.

Q. Yeah.

A. Santa Cruz Operation would continue to develop the units where a product and I believe include Netware in it for that release.

Q. Will it be able to do that after this transaction closes, if it closes?

A. UnXis will.

Q. UnXis will be able to?

A. UnXis will.

Q. Will SCO be able to?

A. No. Because they won't have any people to do it.

Q. Okay. Or any intellectual property?

A. Or any intellectual property.

Q. Okay.

A. Same way Novell could not do it after they sold the business to Santa Cruz.

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MR. LEWIS: I have no further questions, Your Honor. Thank you.

THE COURT: Thank you Mr. Lewis. Ms. Fatell?

REDIRECT EXAMINATION

BY MS. FATELL:

Q. Just briefly, I questions about SCO putting itself out of business. When Novell sold the UNIX business to Santa Cruz, Santa Cruz then continued in that business you said before, correct?

A. I'm sorry?

Q. Santa Cruz then continued with the UNIX business?

A. Absolutely.

Q. And then Santa Cruz sold to Caldera?

A. Yes.

Q. So Santa Cruz was no longer in that business?

A. Absolutely.

Q. Did it have any ability to continue to perform under the APA with Novell once it sold the business to Caldera?

A. Didn't have the people, didn't have the technology.

Q. Did it have the intellectual property?

A. No intellectual property, they sold it.

Q. And when Santa Cruz sold to Caldera was Santa Cruz able to continue the UNIX business?

A. No.

Q. It did it have the employees?

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A. Q. A. Q. talking about SCO. So it wouldn't surprise you that when SCO sold the business to UnXis that SCO wouldn't be able to continue to perform on the UNIX business, correct? would no business longer exist. I'm trying to establish that will continue to exist in UnXis' hands. MR. LEWIS: Your Honor, the implication was longer be able to fulfill its obligation to No. Did it have the IP? No. So Caldera changed its name to SCO so we're still then would no business longer exist. I'm trying to establish that will continue to exist in UnXis' hands.No. Did it have the IP? No. So Caldera changed its name to SCO so we're still then MR. LEWIS: Objection, relevance, Your Honor. What would surprise him or not about the consequences is totally irrelevant to this. They're either going to be able to continue in the business if they want. MS. FATELL: Your Honor, there was a point made that once the business was sold SCO would no longer exist and in essence that business -- the implication was that that business would no longer exist. I'm trying to establish that the business will continue to exist in UnXis' hands.

MR. LEWIS: Your Honor, the implication was longer be able to fulfill its obligation to No. Did it have the IP? No. So Caldera changed its name to SCO so we're still then MR. LEWIS: Objection, relevance, Your Honor. What would surprise him or not about the consequences is totally irrelevant to this. They're either going to be able to continue in the business if they want.

MS. FATELL: Your Honor, there was a point made that once the business was sold SCO would no longer exist and in essence that business -- the implication was that that business would no longer exist. I'm trying to establish that the business will continue to exist in UnXis' hands.

MR LEWIS: Your Honor, the implication was that SCO would no longer be able to fulfill its obligation to develop the business as provided in the APA, that's what the implication was. It has nothing to do with whether the business will exist.

MS. FATELL: I withdraw the question, Your Honor.

THE COURT: Yes. Yes.

MS. FATELL: I have no further questions.

THE COURT: All right. Thank you Ms. Fatell. Mr.

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Lewis?

MR. LEWIS: I can't resist having the last one, Your Honor. I came all the way out here for this I might as get it in, huh?

THE COURT: Take the chance.

MR. LEWIS: Thanks.

RECROSS EXAMINATION:

BY MR. LEWIS:

Q. So Mr. Broderick, when Santa Cruz sold to Caldera did Novell object?

A. No.

Q. Okay. It's objecting now though, right?

A. Excuse me?

Q. It's objecting now though, right? You understand.

A. About pretty much everything.

MR. LEWIS: Okay. Thank you, Your Honor.

THE COURT: Thank you Mr. Lewis. Nothing further? All right. Thank you Mr. Broderick you may step down, sir.

THE WITNESS: Thank you.

MS. FATELL: Your Honor, we're prepared to go to closing. I'd ask if we might just have a brief recess, please.

THE COURT: Think that would be wise. Let's take ten minutes or so. If you need more time you'll let me know but ten minutes and we'll be back.

MS. FATELL: Thank you, Your Honor.

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MR. LEWIS: Thank you, Your Honor.

THE COURT: Thank you. (Recess from 3:44 p.m. until 3:55 p.m.)

THE CLERK: Please rise.

THE COURT: Thank you everyone, please be seated. Thank you. All right. Ms. Fatell, is that the end of the evident?

MS. FATELL: Yes, Your Honor.

THE COURT: Okay. Thank you.

MS. FATELL: Your Honor, I'm reminded that we wanted to move our declarations into evidence if we --

THE COURT: Oh yes. Any objection Mr. Lewis?

MR. LEWIS: No objection, Your Honor.

THE COURT: All right. They are admitted as --

MS. FATELL: Thank you, Your Honor.

THE COURT: -- Debtors' 1, 2 and 3, I guess.

MS. FATELL: Yes.

(The Declarations were hereby received into evidence as Trustee's Exhibit 1, 2 and 3, as of this date.)

THE COURT: Trustee's 1, 2 and 3, excuse me.

MR. LEWIS: Your Honor, maybe it would make sense for me to move into evidence the documents that we attached to our brief which are all court documents.

THE COURT: Any objection there?

MS. FATELL: No, Your Honor. We would move for the

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same with respect to all of our pleadings, actually.

THE COURT: All right. Then both sets of documents are admitted into evidence in support of the motion and/or the objection as the case may be. (The Documents Attached to Novell's Brief were hereby received into evidence as Novell's Exhibits, as of this date) (The Pleadings in Support and/or Objection to the Motion were hereby received into evidence as Trustee's Exhibits, as of this date.)

MS. FATELL: Thank you, Your Honor.

Your Honor, we're here today on behalf of the trustee for SCO to approve the sale of the software business assets. The standard under Section 363 are very well recognized. The burden is on the trustee to show that there's a sound business reason to sell these assets and we believe that the burden is readily met and the testimony supports that. Mr. Comer stated that the company is running out of money, we've heard that the value is declining, that the failure to sell will result in a shutdown, loss of jobs, a complicated and very costly wind down of the foreign subsidiaries.

We heard from Mr. Broderick that there will be a worldwide impact on governments, financial institutions, top Fortune 100 companies as well as small and medium size companies, various government entities all over the country including throughout our federal government and retailers from

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McDonalds to CVS, financial institutions, et cetera. So we think that it is clear, Your Honor, that absent approval of this sale it is not just a question of whether there will be a distribution to creditors. We've acknowledged that this company is administratively insolvent, we recognize that. It's not the first time an administratively insolvent company has been sold but we do think that with respect to the estate as a whole it is in the best interest of this estate as well as all the parties that we mentioned that this sale be approved.

Under 363(f), Your Honor, this sale can be sold -- the assets can be sold free and clear of liens, the liens would attach to the proceeds, the only secured lender we've heard will -- their liens will attach to the proceeds they don't have a lien for the full amount of their debt. They have not objected to this sale.

We've heard testimony that the sale was in good faith, that it was negotiated at arm's length, that there was no collusion. Mr. Comer and others at OPA conducted an extensive and exhaustive sales process over many months. They went for one sale deadline, were not able to get bids by that time, they extended the process and went back to the well and revisited everybody who had had any contact with the company or they had contacted in the past and beat the bushes some more to try and drum up some more interest in these assets.

Finally, there were two final bids submitted and we

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heard that the auction was held. The second bidder who bid eighteen dollars in cash was not willing to increase their bid. They made certain allegations on the record, Your Honor, there was no evidence to support any of their comments about there being any improprieties with respect to the process and I think that from the testimony of Mr. Comer it's clear that this was a very full vetted process. It was done on commercially reasonable terms and it was intended to get the best price that we could for these assets. And with a fully funded cash portion of the bid by UnXis submitted and the assumption of the other liabilities, the continuance of the business, the taking of employees, et cetera and being the only bid we concluded that that was the proper and best interest of the estate to accept that bid. And when I say only bid quite frankly eighteen dollar bid isn't really a bid and they did not bid any further. So we would request, Your Honor, that Court make a good faith finding under Section 363(m) in connection with the sale process.

With respect to assumption and assignment of executory contracts --

THE COURT: Yes.

MS. FATELL: -- identified as the assigned contracts there were limited objections, they've been resolve or at least one has been deferred except for the objection of Novell and I'm going to put that objection to the side for one moment,

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Your Honor. With respect to the other contracts that are being assumed and assigned Mr. Bolandz declaration and his testimony satisfies the requirements of providing adequate assurance of further performance. They've identified UnXis, they've identified the financial backers, the board of directors, the CEO, the CFO, the COO. We've heard testimony about the financial parties that are looking to raise money and their experience in that industry. Mr. Bolandz's experience in this industry and his expectation that once the sale order is approved he does not have any expectation that funds will not be raised to go forward. Nevertheless, Your Honor, there are funds already in the trustee's account to close this sale.

There was also testimony that the buyer will fund up to 50,000 dollars of the costs and the estate will fund the balance. There's a total of approximately 100,000 dollars so we believe that we've satisfied the requirement that there'll be sufficient monies to pay the cure amounts.

Notice was extensive; probably over 20,000 people received notice. Fortunately my phone number was not on the notice --

THE COURT: Yes.

MS. FATELL: -- so I didn't receive any of those calls. And so we would ask the Court to find that the assumption and assignment of the executory contracts is

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appropriate and that anybody who failed to object is deemed to have consented to the assumption and assignment. Now, turning to Novell. First of all, Your Honor, I acknowledge that there has been a great legal battle going on between Novell and SCO. SCO lost at the jury trial and that is up on appeal. And the argument has been heard by the Appellate Court and we are awaiting a result so anything that I say, Your Honor, is bearing in mind that there is any appeal.

THE COURT: Thank you.

MS. FATELL: Novell has consistently taken the position that the trustee cannot sell these software assets without assuming and assigning the 1995 APA which requires Novell's consent and they refuse to give consent. We believe, Your Honor, as laid out in our papers, both our objection initially with respect to the assumption and assignment issues and then later our reply to the Novell objection, that SCO does not need to have the copyright license, if you will, assigned to the buyer primarily because there is no copyright license. The right to use these copyrights is an intrinsic part of these business assets and they have followed the assets throughout all of the various transfers of these assets from the time Novell had them to Santa Cruz, to Caldera who then became SCO.

The Utah District Court did not find that there was a license agreement. There is no four-cornered document that anyone can point to that says this is the license by which SCO

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uses the copyrighted material. The District Court repeatedly stated in its findings of fact and conclusions of law and I quote, "Copyrights are not required for SCO to exercise its right with respect to the acquisition of UnXis and UnXisWare technologies."

And, Your Honor, I didn't provide cites because I think if you open to almost any page you will find the court having stated that. But let's be clear, the court found that SCO does not own the copyrights but it does have the right to use them. And it has done so for over sixteen years. We heard testimony from Mr. Broderick about the form of the license agreement and it is the same form that has been used consistently. In fact it's the Novell form that Novell gave to Santa Cruz and said just change the name, use this form, this is the license agreement with full knowledge SCO has been licensing those copyrights to third parties.

Novell itself acknowledges in its objection at paragraph 15 that UnXis will need the copyright licenses to be able to operate the business that it is buying. It describes the trustee's need to convey to the buyer that business critical copyright licenses. Novell wants this Court to focus on the APA and we should take a look at that transaction for a minute. First of all it was a sale. Your Honor, if you were to look at the asset purchase agreement from 1995 in the recitals it says, "The seller is

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engaged in the business of developing a line of software products currently known as UNIX and UnixWare. The sale of binary and 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 and that is collectively defined as the business."

[PJ: Here's the APA, and Amendment 2.]
Under Acquisition Article I it further states that, "On the terms and conditions set forth in this asset purchase agreement the seller will convey, sell, transfer, assign and deliver to buyer and buyer will purchase and acquire from seller all of seller's right, title and interest in and to the assets and properties of the seller relating to the business."

It goes on, obviously there are many, many pages to the document and identifies what are excluded assets and what are included assets. But my point, Your Honor, is that it is the business that was sold and all of the right title and interest in and to the assets and properties of seller relating to that business, Your Honor.

The course of conduct since that time as testified by Mr. Broderick is that there have been a continuing conduct of the business as it was done by the same group of employees at Novell, with the same form of license agreements, with the same types of customers. That business was continued when it was sold and all of that business and all of its rights related to that business were transferred to Santa Cruz. And similarly

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when Santa Cruz sold and transferred the business and all of the rights related to that business to Caldera who subsequently became SCO. Novell, again, wants to focus on the APA. It talks about the sale of business and whether they consented or whether they knew it was going to happen or what their rights may have been, Your Honor, I point out that there's actually a right of first refusal in the 1995 APA so clearly Novell anticipated that there would be or might be subsequent sales of that business. And they themselves reserved the right to make an offer on that. Your Honor, it's our position that every time this was transferred the right to use that copyrighted transferred as well. Again, the Court hasn't pointed to any document that sets out the terms and conditions. So, Your Honor, what we have to do is look at the conduct of the parties.

I struggled, Your Honor, to try and find an analogy here of, you know, what else can I think of that this might be like. Well, let's assume for the moment that someone owns a baking business and they have a secret recipe for their brownies. And they sell that business, lock, stock and barrel to a new purchaser. That purchaser develops that business, expands it, it's now nationally acclaimed, internationally acclaimed, there are restaurants throughout the world that

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carry that brownie and make their own flavor of that brownie. They might add peanut butter chips, they might put on coconut, whatever, they change that brownie. Nevertheless, that recipe and that brownie still resides with the person who acquired that business.

Now, what would happen if the original owner of that recipe suddenly said well, I want my recipe back? I never gave you a license to take that recipe and even though you've built your business and you've licensed it or you've transferred the recipe to other people I never gave you a license so I get to pull that back. Your Honor, there's a course of conduct there. Well, that's the same course of conduct here.

Novell has sat by the sideline while this business has transferred at least twice and now it's about to transfer a third time. And there is clearly, because there's no license that anybody can point to and we acknowledge for purposes of this argument that the copyrights the Court found are owned by Novell, so then we must have an implied license, Your Honor. And again, the implied license, what are the terms of that license; we have to look at the course of conduct among the parties.

To say that we should go back sixteen years and somehow find that the license is in this APA, Your Honor, it just doesn't make any sense and quite frankly we think that it's a red herring. In fact Novell even admits in paragraph 16

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of its objection the vagaries of the status of this license when it says the copyright license in "were provided by" the original APA. In paragraph 16 later on they try a different phrase and they refer to it as the copyright license imbedding agreements such as the original APA. Your Honor, even Novell can't point to a license agreement that governs the SCO use of these copyrights.

[PJ: I don't think that's accurate. In Judge Stewart's ruling, he specifically pointed to the APA itself, and especially Amendment 2's affirmation of it, as being the document affirming the right to use, as he explained in footnotes 76 and 79:
76. After review of the APA and discussions with Tor Braham and James Tolonen, Novell, through Ms. Amadia, made the decision not to alter the APA with regard to copyright ownership as requested by Mr. Sabbath. Rather than alter the APA to transfer copyrights, Ms. Amadia modified the amendment proposed by Mr. Sabbath to affirm that SCO had the rights to use the technology. Ms. Amadia testified that Amendment No. 2 was meant to affirm that SCO had the right to use, manufacture, and make modifications to the UNIX technology....

79. The Court finds that Amendment No. 2 was not intended to confirm that the UNIX and UnixWare copyrights were transferred to SCO under the APA, as argued by SCO. Rather, the Court finds that Novell made a conscious decision to retain the copyrights in the APA and that intent was reflected throughout the negotiating and drafting of Amendment No. 2. The Court finds that Amendment No. 2 was only meant to confirm that SCO had the right to use the UNIX technology. The Court finds the testimony of Novell's witnesses, especially Ms. Amadia and Mr. Tolonen, to be credible. The Court finds SCO's witnesses to be less credible for a number of reasons, including the fact that many were not directly involved in the negotiation and drafting of Amendment No. 2. Additionally, as previously stated, many have a financial interest in this litigation.

So that would be the license right there, not even just implied. Here's her testimony at trial that the judge found credible. In her Declaration, she stated: "I told Mr. Sabbath that while Novell was willing to affirm that Santa Cruz had a license under the Original APA to use Novell's UNIX and UnixWare copyrighted works in its business, Novell was not going to transfer ownership of any copyrights to Santa Cruz through Amendment No. 2." So her testimony was that the APA itself was the license. Ms. Fatell acts like it's incredible to so argue, that it must be an implied license, but the judge who presided over the trial ruled it was a fact and she, in effect, seems to be simply refusing to acknowledge it, and unfortunately, Novell didn't present this material at the hearing.]
So, Your Honor, to argue that it resides, it's embodied, it's somehow in APA we say that's just not true. There is a body of law out there that you can have an implied license, you look to the conduct of the parties and the conduct of the parties here shows that SCO and its predecessors have licensed this product to others, have sublicensed it to others, others have sublicensed it, they've made their own derivatives, their own flavors of UNIX and therefore we have this implied license. And when you look to, well, what are the rights of that license, again, look to the conduct of the parties. We never had to go to Novell for consent. Santa Cruz didn't get consent to sell. Santa Cruz didn't get consent to sell to Caldera, Caldera didn't get consent to change its name to SCO and continue to license to all of its customers. This was the conduct of the parties; this was how this business has been operated.

THE COURT: In order to fund an implied license I have to find knowledge on the part of Novell though, is that

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correct?

MS. FATELL: Your Honor --

THE COURT: Knowledge of the transfers.

MS. FATELL: You're right, Your Honor. And there has been -- certainly there's been knowledge. I mean, we've heard testimony that Novell has never interfered with that. They proposed their own form of license agreement to be used to continue to license the product. They've acquiesced in all of the transactions that have taken place.

THE COURT: Okay.

MS. FATELL: Your Honor, Novell tries to argue that the APA, where they allege this license is embedded, is an executory contract and it must be assumed and assigned and the Court has no choice but to deny this sale because they don't consent to the assumption and assignment.

Novell quotes the bankruptcy court decision Exide in support of its decision that the APA and all of the related documents are one integrated transaction and they all must be assumed and assigned. But, Your Honor, Novell incorrectly cites that the Third Circuit decision affirmed the bankruptcy court and in fact it reversed it. And the bankruptcy court -- sorry, I wanted to get that opinion for a moment, excuse me.

If I may, Your Honor, not dissimilar to this situation the court noted that Exide granted EnerSys, which was the other party, a perpetual exclusive royalty free license to use the

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Exide trademark in its business.

[PJ: Exide was about trademarks only, not copyrights, according the the analysis by Skadden Arps at that link, not other forms of intellectual property, as the lawyers call it. It's not usual for folks even in bankruptcy to toss overboard copyright obligations. Yet Ms. Fatell extrapolates the case to SCO, which is about copyrights, not trademarks.]
And the division worked for almost ten years, each party appeared satisfied with the results of the transaction. The court relied, Third Circuit recognized, that the Vern Countryman definition of executory contract is the definition that the courts in this jurisdiction follow. And it's a contract under which the obligation of both the bankrupt and the other party to the contract are so far underperformed that the failure of either to complete performance would constitute a material breach excusing the performance of the other.

The court found in this instance that EnerSys had substantially performed by paying the purchase price and operating the business for over ten years using the assets that were transferred under the agreement and continuing to use the trademark. The court noted that its inquiry was whether the agreement contained at least one obligation for both parties that would constitute a material breach if not performed.

And the court concluded that it was not an executory contract because it did not contain at least one ongoing material obligation for each side. And, Your Honor, we submit that that's exactly the situation here and based on the Third Circuit's ruling in Exide there's no basis for the Court to find that there is an executory contract.

This APA was entered into in 1995 since that time -- that's sixteen years ago, Your Honor. This company has been

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transferred, it's operated, there have been no interactions between the parties with respect to providing reports, any payments back and forth, again, putting aside the Sfax royalties -- and Your Honor, why do I put those aside? We're not transferring the assert purchase agreement, we're not transferred the obligation to collect those royalties. That remains a part of the contract that is not being transferred. We have no obligation to transfer a contract that we think would be burdensome to the purchaser or for any reason. If the purchaser doesn't want it, we have no obligation to transfer that contract. And because it's not executory we have no obligation to even consider whether we need to assume and assign it or whether we need consent from Novell.

Your Honor, we also heard Mr. Broderick respond when asked if when they entered into license agreements did any of the parties also take an assignment of the 1995 asset purchase agreement with Novell. Obviously the answer to that is no.

Your Honor, it's our view that we have to take a pragmatic look at this. We don't know why Novell is objecting to this sale. We can only speculate, is it objecting because it wants to put a competing product out of business, because it wants to try and compete in that market and it now will be the exclusive holder of those copyrights and the right to use that copyrighted material, we can only speculate. But, Your Honor, it just doesn't make sense that a company whose business has

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been transferred twice already cannot transfer its business again.

It's a well accepted principle, I believe, of common law that courts look favorably on anti-alienation provisions. They're construed narrowly so that they don't interfere improperly with commerce or free enterprise. Parties should be able to transfer their assets. We understand that in the IP world there are restrictions but we don't have a license here, Your Honor, we have a course of conduct. We have an implied right to use. And so, Your Honor, we can only look to what those rights should be and it only makes sense and it would only be consistent with that common law theory that an entity that has been using this business and all of the bundle of assets that go with it including the right to license this to third parties should be permitted to go forward. law that license.

So, Your Honor, we think that really as a matter of SCO can sell these assets. Novell does not have a license. At best there's an implied license.

MS. FATELL: There's nothing in that implied license the course of conduct of the parties that this Court that would result in this Court finding that consent based on would -- is required. We think that the trustee has complied with all of the requirements to satisfy 363 and 365 in transferring these assets and assuming assigning those contracts that are executory, and it intends to assume and assign. And therefore,

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Your Honor, we think that the objection should be overruled and we ask that the sale be approved.

THE COURT: all right. Thank you Ms. Fatell. Mr. Lewis?

MR. LEWIS: Thank you, your Honor.

THE COURT: You bet.

MR. LEWIS: First, let's be real clear on what's teed up today. What's teed up is a 363/365 sale. And our objection goes to the applicability of 365 and what its implications are for this transaction. So whatever may or may not be the standards for approval of a sale under 363, we know what they are under 365. And we know that one of them is not the public good. If it's really true, and I suspect that it's not, that all of commerce is going to come to a halt if SCO can't continue to operate its business, or can't find some other way to help people transition, which I suspect they can, and I would bet you a lot of them are already doing that, because they've known for three years that SCO is in trouble. And if they haven't been preparing for a transition, they've not been paying any attention at all.

But even if that were not true, the fact is, that's not a relevant consideration here. So all the testimony about McDonald's and CVS and financial institutions --

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THE COURT: My computer -- and my computer.

MR. LEWIS: -- and your computer, Your Honor -- I suspect will continue to operate notwithstanding that SCO may not stay in business very much longer, one way or the other.

What is relevant here is how Section 365 works, particularly in the context of licenses of intellectual property, such as we are talking about here.

THE COURT: Yes.

MR. LEWIS: And let's start kind of at the back end and work our way up the chain.

The debtor accuses us of pussyfooting with our language about licenses. But it's the debtor that's pussyfooting, because the debtors own agreement talks about a sublicense. Well, a sublicense has to be a sublicense of a license. Not of some kind of inchoate -- whatever it is, floating around just below the surface of the agreement. And indeed, as counsel was arguing, she couldn't help but use the word license. It kept leaping into her vocabulary. And Mr. Broderick, when I asked him "what is this a sublicense of?" He says licenses of copyrights that they got from Novell. And Mr. Comer said the same thing, from a less expert point of view I suppose, but that was his understanding too, and he was in on those conversations.

So that's what we have here. And whether they're implied licenses or expressed licenses isn't the point.

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Because the backdrop to intellectual property law in this field is that if you don't have an express consent provision, you have to get consent. And we have no evidence that there's an express consent provision. We do have an argument that that somehow -- we all knew that was there in the implied license, because that was the course of conduct of the parties. But I bring you back to why we're talking about 365 in the first place.

When Santa Cruz sold to Caldera there was no dispute between the parties. There was no litigation between the parties. And least of all was there a bankruptcy. So the fact that Novell went along with a prior transfer of the whole business doesn't mean that that was the course of dealing between the parties. Or indeed, when it went from Santa Cruz to Caldera SCO. Completely different situation. Hardly makes for a course of dealing.

Now, dance as he might around the issue, Mr. Broderick himself, I think, all but confirmed -- and I think common sense tells you this, that you can't separate out this little sublicense as an ordinary course license, just like all the other licenses that they've done over the years, and there are two reasons for that. Once again, we're in bankruptcy again. Different rules apply. And secondly, in that instance, you can't really separate that sublicense from the sale to UnXis. Do you think UnXis would be buying this without the whole

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transaction? Without the intellectual property? This is a transfer of the business. And one ongoing executory obligation of the APA is that SCO is required to develop "the business."

It isn't going to be doing that anymore, as we heard this morning. And as we thought was pretty obvious before we heard it. Right? That's an important obligation. That's really at the heart of the APA. And that isn't going to be happening anymore. There are others that we've cited to that are ongoing executory obligations. So while this one may be a long-term relationship, nothing in the cases says that long- term relationships mean ipso facto, presto change-o, we have no more -- an executory agreement. We do. And we've never insisted that the APA be transferred. We were content in those prior transactions to let the transactions go through. The circumstances were different than they are today. Today we have SCO, which purporting to transfer this business in a way that puts itself out of business, in a dispute with Novell, where we think it owes us at least three million dollars, where it's appeal means, basically, that it's continuing to disparage our ownership rights. That's another default. And, of course, it's in bankruptcy. So it's not the same circumstance. It's not ordinary course, and it's not the course of conduct of the parties. This is a very different circumstance.

The -- at the other end, we have UnXis, where what we know for sure about UnXis is, we know who it's people are, one

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of whom the Court had some questions about last time around. We know it came up with the munificent sum of 600,000 dollars plus 50 to close this transaction. But we don't know a darn thing about its finances, other than that Mr. Bolandz is confident they'll be able to raise the money.

What does that mean? What that means -- and he has some kind of business plan, but not out to the fourth decibel. What that means is, to me -- and he admits, there are no binding commitments for financing this company once it acquires the assets. Not a single one. As he testified, his white knight could walk, even after the acquisition. And we hear that it's probably six months before we're really talking about new funding -- while they figure out, as he put it, how to run the business. And you know what, if they don't like how the business runs, and they don't like how it operates, and they don't like what its prospects are, maybe that financing won't show up.

So where's the adequate assurance of future performance, Your Honor? There isn't any. There's a lot of speculations and soothing noises and maybes, but nothing that provides us with real adequate assurance of future performance. There's no assurance of performance at all. There's not a penny in the bank, other than the money to close. And not a penny legally committed, once the transaction closes to fund this company going down the road, and probably not much of a

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business plan at that. So what we're buying is a transferee of these assets who may turn out to be worse than SCO, and certainly worse than SCO looked when we originally sought to them, or to Santa Cruz and then to SCO. And that's not adequate assurance of future performance either.

I want to emphasize, the public interest issue here is not relevant, and it's certainly not a reason to impose on Novell yet another transaction, in case in which Novell and the other creditors, through these endless efforts to sell these assets over SCO's objections, is going to end up holding the bag on a three million dollar claim. The other creditors aren't going to get a penny either. The only beneficiaries of this transaction are going to be the lender and the administrative claimants and the buyer.

That isn't a good reason to ignore the law, Your Honor. No reason is a good reason to ignore the law, but that's an especially bad reason to ignore the law. The trustee chose his course of action here. What he wanted to try to accomplish -- whether he wanted to settle, whether he could settle with Novell at a price people could live with, that was not possible. The parties tried and they didn't get there. But he chose that course of action. Why should the consequences of that be imposed on Novell again, after we suffered through all the missteps of SCO and its

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management for a year and a half, and now we're almost two years into the trustees regime, and we're facing the same kind of problems -- except the price keeps going down, and the insolvency keeps going up.

So what we have is a sublicense of a license -- and it has to be a license. Everybody admits that. They can't get away from saying it, even though they may try. A sublicense of a license from Novell that's part of an integrated transaction that is still executory.

It's as simple as that, Your Honor. And as a consequence they cannot do this without our consent and without sharing the existing default of at least three million dollars. And I might say, Your Honor, to some extent for what it's worth, if we're talking about motive, which I think are also relevant, our position probably hurts us too. Because we believe that 180- some odd thousand dollars of costs in the litigation are going to end up being administrative expenses. We're not going to get -- the money that's coming in isn't going to go towards that, if it doesn't come in at all. So in that sense, we're probably not going to get our share of that, because as you know, that has to be distributed pro rata.

It's not a big amount. I'm sure our share of that wouldn't be a big amount, given all the other unpaid administrative claims, and paid administrative claims that might have to be reallocated if this case is indeed

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administratively insolvent as it seems -- everybody agrees it is.

So as much as it would be nice to kind of have some successful, in some sense, outcome to this case, the law just doesn't permit it here. And no amount of talking around whether these are licenses, and whether the APA's executory, whatever has to be cured and whether our consent is necessary, changes what the facts are. And the facts are, there is a -- there's going to be a sublicense of a license -- that sublicense is not some little ordinary course sublicense floating around there, just like all the others, and it's a sublicense of a license where our consent is needed, and that's a license that's part of an APA where our consent and cure is needed, and those things are not on the table.

And so the Court, in my respectful opinion, cannot approve this transaction, much as it might like to, and much as it might benefit McDonalds. Or a small business. Or your computer, Your Honor.

THE COURT: Or me.

MR. LEWIS: Thank you, Your Honor.

THE COURT: The appeal is already under consideration, isn't that correct?

MR. LEWIS: The appeal has --

THE COURT: It's been argued?

MR. LEWIS: -- been argued, Your Honor.

Page 101

THE COURT: It's been argued.

MR. LEWIS: They're just waiting for a decision --

THE COURT: Okay.

MR. LEWIS: The appeal was argued maybe three, four weeks ago.

THE COURT: Okay.

MR. LEWIS: I don't know whether to expect a decision quickly, as we got last time, or whether the circuit will take longer this time because it doesn't seem as urgent as it might have seemed last time. I just don't know.

THE COURT: I was just trying to think out loud a little bit if perhaps putting a final piece between the parties in place might somehow be worked into a -- you know, I don't know the strength of the appeal, and how much weight --

MR. LEWIS: I'll volunteer my opinion, Your Honor.

THE COURT: I'm sure, Mr. Lewis. But you know, I was just wondering if that was a mechanism to resolve --

MR. LEWIS: I don't know, Your Honor.

THE COURT: -- the parties' dispute.

MR. LEWIS: Obviously, if we win, that changes the calculus some, although not as much as the jury trial changed it from before.

THE COURT: Sure.

MR. LEWIS: And the Courts ruling on a motion to vacate and the motion for injunctive relief.

Page 102

THE COURT: Yes.

MR. LEWIS: But, yeah, I mean, it sort of puts it to bed, unless the trustee's thinking about petitioning for cert, which as well all know, is not a very easy road to follow. It could take a long time.

THE COURT: And if you lose on appeal, where does this whole thing go? Does it go --

MR. LEWIS: Well, it's hard to say, Your Honor, if for no other reason than we don't know what the grounds might be.

THE COURT: Okay.

MR. LEWIS: For -- I mean, basically, and I venture here maybe a little out of school, but basically I think the grounds are that the jury's verdict was against the weight of the evidence, and basically no rational jury could reach that conclusion. And there were some objections and appeals on district court's rulings on what evidence to admit.

THE COURT: Okay. Okay.

MR. LEWIS: I think those are the main points. But nothing as dramatic as last time, I think.

THE COURT: Understood -- yes. Of course.

MR. LEWIS: So, you know, I just don't know what will happen though. I know what we think, but there's no point, I think, in reciting that.

THE COURT: All right. Thank you as always, Mr. Lewis.

Page 103

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

THE COURT: Thank you for an excellent argument as always.

Ms. Fatell? The reply?

MS. FATELL: Yes, Your Honor. Your Honor, I heard a couple of different things. First I heard that 365 is important here, and that's the controlling provision. And then I thought I heard Mr. Lewis say at the end it doesn't really matter if this is an executory contract. It doesn't really matter if cure amount can be paid or not. This is a sublicense of a license and it can't be done without our consent.

So let me go back for a minute. This is not an executory contract. I didn't -- I listened very closely, and I didn't hear counsel describe any material obligation of Novell to SCO. And if you look at the Vern Countryman definition, there have to be material obligations going back and forth between both parties.

THE COURT: Well I think the one that Mr. Lewis mentioned and then cited to his brief as to others, was the requirement to conduct the business.

MS. FATELL: That's the requirement of SCO --

THE COURT: Yes.

MS. FATELL: -- to Novell.

THE COURT: Yes.

Page 104

MS. FATELL: I didn't hear any obligation of Novell to SCO.

THE COURT: Oh, I'm sorry.

MS. FATELL: So, to be executory, you need material performance required on both sides.

THE COURT: Right.

MS. FATELL: I can't, for the life of me, figure out how this is an executory contract. And again, I didn't see anything in their pleadings nor did I hear anything in argument, and we certainly didn't hear any testimony that refuted the testimony of Mr. Broderick that nothing comes back from Novell. There are no ongoing obligations of Novell.

So I think we have to start with that in the first instance, Your Honor. This is not an executory contract. And the burden should be on Novell to prove that it is, since they're arguing that that's what drives this Court's decision as to whether we can sell these assets. And I think they've failed to meet that burden.

They talk about -- bear with me one moment, Your Honor. They talk about this being a sublicense and it has to be a sublicense of a license. We acknowledge there's an implied license, Your Honor. Still, I haven't heard anybody point to the four corners of a document that has a license that says this is the license of the copyrights from Novell to SCO and we can look at it to see whether it requires consent or it

Page 105

doesn't require consent, or what kind of restrictions or no restrictions there are. And so, when you don't have a license, the Court needs to look to what else, but the conduct of the parties, to determine what the terms are of this implied license. And the conduct of the parties here has been consistent over the years, that these rights to use this copyrighted material have been licensed by SCO and by Santa Cruz and by Caldera, for sixteen years, Your Honor. And there's not been any requirement that there be consent. In fact, there's been acquiescence.

And I believe Mr. Lewis said that they were content -- and I think that was the word he used, to permit the transfer and the licensing up until now.

THE COURT: But that there's now been a change of circumstances --

MS. FATELL: I'm not sure they have the ability to, because there's been a change of circumstances and they don't like SCO anymore, that they can suddenly say while we were content, it wasn't really the same as consent. To me, change one letter -- its consent. You know, they've acquiesced, they've allowed to happen, they've even admitted, at least in argument, that they were content to allow it to happen.

We have a course of conduct. We have an implied license. And it is that implied license that we are sublicensing. And we can look to the actions of the parties

Page 106

over many, many, many, many years to determine that conduct.

And I don't hear Novell pointing to anything that says that they're not -- in essence have stopped from changing the terms of that implied license in midstream because they want to. Parties have relied on that, parties have conducted business based on that. There are many parties outside of this courtroom who have relied and who have taken those licenses and assignments of those licenses. So I'm struggling with how, now suddenly, we can say we don't really consent anymore.

So, Your Honor, I go back to where we started, which is, yes, this is a sale under 363. And yes, 365 is implicated with respect to executory contracts. There is not an executory contract with Novell. And I don't think based on the record before this Court that one could conclude otherwise.

And, therefore, all of these arguments that are made about their consent, and whether there's been adequate assurance of future performance, doesn't really require this Court's consideration, in our opinion. Is there adequate assurance of future performance? We believe there is. All the contract parties whose executory contracts are being assumed and assigned have not come in and objected to that. They've accepted what's been represented to this Court.

Your Honor, the testimony was that this company is being supported by people who are intimately familiar with this industry, who have years and years of experience in this

Page 107

industry, who have the know-how, who are bringing in people with the skills and have experience with this business, and they are fully expecting that they will get the financing to go forward with this business. Does that leave Novell feeling a little insecure? It may. But that's not grounds to deny approval. There's nothing in 363 that says that they're entitled to adequate assurance of future performance as a party to a contract that's not being assumed and assigned.

So, I don't believe that that's the issue before this Court, in connection with approving a 363 sale, when you're dealing with a non-executory contract that is not being assumed and assigned.

THE COURT: All right.

MS. FATELL: Thank you, Your Honor.

THE COURT: Thank you, Ms. Fatell.

MR. LEWIS: May I, Your Honor, it'll be very short.

THE COURT: Mr. Lewis, of course, particularly on the executory contract issue which I --

MR. LEWIS: Yes.

THE COURT: -- which is clearly critical.

MR. LEWIS: So, that's not an issue that's been raised before today, but now that it's been raised, the question -- it doesn't seem to be any question whether there are material obligations of the debtor to SCO -- what I'm hearing is, what are the material obligations to Novell? What are the material

Page 108

obligations of Novell to SCO?

[PJ: I'm puzzled that he'd say that the issue hadn't been raised until the hearing. In the Chapter 11 Trustee's reply [PDF] to Novell's objections to the sale, it rather clearly telegraphed its intentions:
The Trustee does not seek to assume nor assign the 1995 APA, or any agreements with Novell, and therefore the Novell Objection is non-responsive to the Sale Motion and should be disregarded.
That doesn't use the word executory, but what else could it mean?]
And I'd suggest, Your Honor, that if Novell were to go out into the marketplace today, and say that SCO has no right to sublicense, we'd be hearing some pretty loud complaining that we had reached the APA, because we had undertaking not to interfere with their licensing. That's how licenses work. That's a pretty hefty, important executory obligation, going downstream. That would be enough by itself, because, as everybody agrees, this license is at the heart of the business. So, there's just one that I can think of right off the top of my head.

Now, let's talk a little bit about this course of conduct thing and consent. I would note, first of all, Your Honor, that counsel did use the word "consent" that we did consent. She didn't like the fact that I used the word for content, and she said it was consent. Well, okay, consent. That means it was needed.

Now, I would add that my argument is that the course of conduct is not relevant to interpreting what the terms of the agreement are -- the implied agreement -- to exclude from it the usual intellectual property consent rights that are implicit in federal law, because what was done all of those years that the debtor is using as course of conduct, was not being done in the context that we have today.

So, it not only -- so, first of all, even if we consented all those times, that doesn't mean that we have to

Page 109

consent this time. Furthermore, that we may have consented all those other times, or that we -- as they were doing these things -- doesn't mean that this situation is just like all the others and therefore that consent should be assumed here as well. Just doesn't work that way.

This is a totally different situation. We have a major dispute between the parties. We have the debtor owing us 3.6 -- three million dollars right now. We have the debtor pursuing an appeal in which it challenges our rights, and we have a bankruptcy which has an overlay to it that changes how things work. And we are simply employing that law to vindicate our rights under these circumstances.

So, what happened in the past is totally irrelevant to what's going on today, Your Honor. And as I said, even the debtor admits that we consented in the past. And my point is simply that we consented in the past on totally different circumstances, doesn't mean that consent should be implied here. A very, very different situation; materially different situation. Thank you, Your Honor. I'm done.

THE COURT: Thank you, thank you, Mr. --

MS. FATELL: Your Honor, if I may just have one minute?

THE COURT: Yes.

MS. FATELL: Your Honor, I have to refer the Court to the Exide Technology's Third Circuit opinion.

Page 110

THE COURT: Yes.

MS. FATELL: And the court deals with material versus nonmaterial obligations. And I'm going to just summarize it briefly, but the obligation to observe the use restriction, was not material. The obligation to observe the quality standards provision was not material. The indemnity obligation and the further assurances obligations -- these are defined terms in this agreement -- do not outweigh the factors supporting substantial performance.

Your Honor, there has been substantial performance under this asset purchase agreement, and, of course, there may be a lawsuit in the works, if Novell decided to go out and do something that would harm SCO's ability to operate its business, but that's not a material, ongoing, substantial performance obligation under the APA. Certainly doesn't -- not under the Third Circuit's analysis. Thank you, Your Honor.

THE COURT: Thank you. Yes, Mr. Lewis.

MR. LEWIS: Your Honor, material remaining obligations to be performed --

THE COURT: Yes.

MR. LEWIS: -- don't mean you have to be doing them every day. It just means that you have an obligation that you have to adhere to, whether it's every day, or every week, or just not interfering with someone's rights. That's a material ongoing obligation, even if it's not something you do every

Page 111

day, the first thing you get up in the morning, after you have your coffee. So, I think counsel's analogy is misplaced.

THE COURT: All right. All right. Well, you know, I actually thought I had a better handle on this case before today's testimony and arguments, which were excellent, and both of you have given me some pause and reason to go back and do a little bit more reading and a little bit more thinking. Help me out timing-wise, Ms. Fatell, because sales are always critical, I know from a timing standpoint. Give me --

MS. FATELL: Your Honor, the asset purchase agreement requires that it close by March 30th.

THE COURT: Okay. That's not an issue then.

MS. FATELL: Okay.

THE COURT: I was thinking, you know, in terms of a handful of days, more than anything. And, it sounds like that won't be a problem in either event.

MS. FATELL: Okay. I mean, the company is, as we've heard, struggling financially.

THE COURT: I know.

MS. FATELL: So, everyday that we don't get to a closing is another day that we are in trouble.

THE COURT: Absolutely. I'm very -- yes.

MS. FATELL: Thank you.

THE COURT: I'm very sensitive to that, of course. Mr. Lewis.

Page 112

MR. LEWIS: Two quick points, Your Honor.

THE COURT: Yes.

MR. LEWIS: First of all, if there's anything the parties can do in terms of post-trial briefing to help you on any of these issues, I'm happy to pitch in, and I'm sure Ms. Fatell would be as well, but that's your call.

THE COURT: I think the papers were splendid, really.

MR. LEWIS: Okay.

THE COURT: And helpful.

MR. LEWIS: Okay.

THE COURT: It's just that I heard a slightly different slant to things here that has given me a little bit of pause.

MR. LEWIS: So much for the adversary process, Your Honor.

THE COURT: Well, it's the way it's supposed to work, frankly, you know --

MR. LEWIS: I think that's right, Your Honor.

THE COURT: -- and, yes.

MR. LEWIS: The second thing I was going to say is the proposed order that the debtor has submitted, we don't have any objections to per se. We do, however, object to the provision which would waive the rule against a ten-day stay, because if the Court rules against us, we may want to appeal, and we may seek a stay pending appeal --

Page 113

THE COURT: I --

MR. LEWIS: -- and we'd like the opportunity to that here.

THE COURT: Okay, I'll be sensitive to that.

MR. LEWIS: Okay. And that will just make me move it a little bit quicker.

MR. LEWIS: All right.

THE COURT: And you know, we try not to impose on our friends across the street with having people run across with, you know, emergency motions, so.

MR. LEWIS: Well, I think we would address that motion to this Court in the first instance anyhow, so.

THE COURT: Of course. All right. I appreciate that. Ms. Fatell?

MS. FATELL: Your Honor, we do have an agreed order it appears except for that provision --

THE COURT: Yes.

MS. FATELL: -- which is different than the order that was submitted. Does Your Honor want us to wait until the ruling comes out before we submit that order?

THE COURT: No, I think it would be helpful for you to do that for me.

MS. FATELL: Okay.

THE COURT: To submit it and I can --

Page 114

MS. FATELL: Your Honor --

THE COURT: -- if need be, you know, be in a position to enter an order.

MS. FATELL: Okay. Your Honor, I will hand up the blackline and the clean --

THE COURT: Thank you.

MS. FATELL: -- and we understand that Your Honor will address the issues.

THE COURT: And I will address these core issues that you've raised promptly, particularly the issue of the executory contract, which -- thank you -- which you both argued well, which I just have to, sort of, decide who's right and who's wrong, at least in my -- who's right or wrong in my view on this.

MR. LEWIS: Your Honor, does the Court anticipate issuing a short opinion as well?

THE COURT: Very -- yes.

MR. LEWIS: Okay.

THE COURT: I will do something very short.

MR. LEWIS: Give us some guidance.

THE COURT: But I'm hoping, you know -- and the reason short is I do want to get something out, hopefully, by the end of the week.

MR. LEWIS: Wonderful, thank you very much, Your Honor.

Page 115

THE COURT: That's my goal. That's my goal.

MS. FATELL: Thank you.

MR. LEWIS: Pleasure to be here as always.

THE COURT: Always good to have you, Mr. Lewis. It's a pleasure, Ms. Fatell.

MS. FATELL: Thank you, Your Honor.

THE COURT: Always a pleasure to have all of you here, and I wish you a good evening. And I'm off to try my hand at mediating a little while. So, we'll stand in recess.

MS. FATELL: Well, good luck, Your Honor.

THE COURT: Good night to you. And thank you, and a safe trip home, everyone.

IN UNISON: Thank you, Your Honor.

(Whereupon these proceedings were concluded at 4:49 PM)

Page 116

INDEX WITNESS - EXAMINATION BY - PAGE

Bruce Comer - Mr. Lewis - 27

Bruce Comer - Ms. Fatell - 37

Richard A. Bolandz - Mr. Lewis - 44

Richard A. Bolandz - Ms. Fatell - 51

William Broderick - Ms. Fatell - 54

William Broderick - Mr. Lewis - 66

William Broderick - Ms. Fatell - 75

William Broderick - Mr. Lewis - 77

EXHIBITS

TRUSTEE'S - DESCRIPTION - PAGE

1, 2 and 3 - Declarations - 78

The pleadings in 79
Support and/or
Objection to the
Motion

Page 117

NOVELL'S - DESCRIPTION - PAGE

The Documents 79
Attached
to Novell's Brief
RULINGS - Page - Line

Overruling of Dinkumware's Objection to the
Sale Order - Page 14 Line 19

Page 118

CERTIFICATION

I, Hana Copperman, certify that the foregoing transcript is a true and accurate record of the proceedings.

______________________________________

Hana Copperman AAERT Certified Electronic Transcriber (CET**D-487) Veritext
[address]

Date: March 4, 2011


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