[This is the unofficial transcript posted at scofacts.org of the proceeding
of which a copy of the
official audio recording can be found here: part 1 mp3; part 2 mp3; part 3 mp3; part 4 mp3; Full
FTR CD.
See also the hearing's agenda,
minutes, and sign-in sheet.
See http://scofacts.org/bankruptcy.html
for links to recordings of other hearings in this case.
Scofacts is not endorsed by the "SCO Group" Delaware corporation,
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RCS revision info: $Id: SCO-Group-bankruptcy-813-unofficial-transcript.html,v 1.6 2010/03/29 04:08:58 al Exp $]
Motion Hearing
IN THE UNITED STATES
BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
|
In re:
The SCO GROUP, INC., et al.,
Debtors.
| Chapter 11
Case No. 07-bk-11337-KG
(Jointly Administered)
|
(The debtors' current names, file numbers at the Delaware
Division of Corporations, and Rule 1005 information (IRS employer
identification ("EID") numbers and all names used within the eight
years before the filing of their petitions (September 14, 1999 to
September 14, 2007)) are as follows: (1) The SCO Group, Inc.,
Del. Corp. #3266987, EID 87-0662823, which was named "Caldera
International, Inc." prior to May 16, 2003; and (2) SCO Operations,
Inc., Del. Corp. #3187414, EID 97-0617393, which was named "Caldera
Systems, Inc." prior to September 23, 2002.)
Monday, June 15, 2009
14:07:10 Eastern Daylight Time (-0400)
Before the Honorable Kevin Gross, U.S. Bankruptcy Judge
Courtroom 3, 824 N Market St Fl 6, Wilmington DE 19801
Courtroom clerk: Sherry Scaruzzi
Audio recording operator: Jennifer Pasierb
Agenda and Minutes
(See also the "Amended Notice of
Agenda of Matters Scheduled for Hearing on June 15, 2009, at 2:00
P.M." (Docket No. 806, filed June 15, 2009) and the "Minute Entry" (Docket
No. 813, June 19, 2009)).
Item 1:
"Motion of
the United States Trustee to Convert Cases to Cases Under Chapter
7" (Docket No. 750, May 5, 2009), with proposed
order (#750-3) and notice
(#750-2), setting objection deadline of May 26, 2009 and
hearing date of June 12, 2009.
- Re-notice
(Docket No. 767, May 21, 2009) re-setting objection deadline to June
5, 2009, and hearing date to June 15, 2009.
- Debtors'
response (Docket No. 778, June 5, 2009)
- Pre-hearing status (per agenda):
"This matter will go forward"
Item 2:
"Motion of
International Business Machines Corporation for an Order
Converting the
Debtors' Chapter 11 Bankruptcy Cases to Cases Under Chapter 7 of the
Bankruptcy
Code" (Docket No. 751, May 11, 2009), with proposed
order (#751-3) and notice
(#751-2), setting objection deadline of June 1, 2009 and
hearing date of June 12, 2009.
- Re-notice
(Docket No. 767, May 21, 2009) re-setting objection deadline to June
5, 2009, and hearing date to June 15, 2009.
- Debtors'
response (Docket No. 778, June 5, 2009)
- Reply
(Docket No. 798, June 11, 2009)
- Pre-hearing status (per agenda):
"This matter will go forward"
Item 3: "Novell's
Motion for Conversion" (Docket No. 753, May 11, 2009), including
notice thereof, setting objection deadline of June 5, 2009 and hearing
date of June 12, 2009. (Note: no proposed order was filed (in
violation of Local Rule 9013-1(f)))
- Re-notice
(Docket No. 767, May 21, 2009) re-setting hearing date to June 15,
2009.
- Debtors'
response (Docket No. 778, June 5, 2009)
- Reply
(Docket No. 796, June 10, 2009)
- Pre-hearing status (per agenda):
"This matter will go forward"
Item 4: "Debtors'
Motion to File Under Seal Debtors' Appendix to Their Response to
Motions to Dismiss or Convert" (Docket No. 784, June 8, 2009),
with proposed
order (#784-2)
- Order
shortening notice period (Docket No. 791, June 9, 2009)
- Notice
(Docket No. 792, June 9, 2009), setting objection deadline of June 15,
2009, at 10:00 a.m., and hearing date of June 15, 2009, at 2:00 p.m.
- Objection of
IBM (Docket No. 803, June 15, 2009), with Exhibit A
(#803-2)
- Pre-hearing status (per agenda):
"This matter will go forward"
So-called "Objections": there were three letters to the
Court that the deputy clerks gave docket captions of type "objection",
which the debtors then listed as "objections" in the hearing agenda.
However, none of the letters purported to be formal objections, none
of them were written by counsel, and none of them were from parties
that are natural persons entitled to appear without counsel.
- Letter
to Judge Gross from Herb Jackson, Managing Director, Renaissance
Ventures, LLC (Docket No. 783, June 5, 2009)
- Letter
to Judge Gross from Sharon M. Duker, Managing Director, XAC, LLC
(Docket No. 804, dated June 9, 2009, filed June 12, 2009)
- Letter
to Judge Gross from Jan Loeb, President and Portfolio Manager, Leap
Tide Capital Management, Inc. (Docket No. 805, dated June 5, 2009,
filed June 11, 2009)
Minutes: The "Proceedings" section of the minutes
cryptically says nothing about the disposition of any of the four
agenda items, merely reporting: "HEARING HELD. AGENDA ITEMS: Parties
will discuss when to return to court for Sale hearing - Sale hearing
scheduled 7/27/09". From the recording it is clear that at the
hearing the three conversion motions were continued to an indefinite
future date, with the understanding that a date of either July 16 or
July 27 would be determined in follow-up consultations with chambers,
and that the same date would be used for hearing an anticipated
sale motion. It appears that the July 27 date was then settled on at
some point during the four days between the hearing and the entry of
the minutes.
Participants
See also the "SIGN-IN-SHEET" (#731-2)
Identified Speakers (in order of appearance)
|
Sherry Scaruzzi
Deputy Clerk of Court
824 N Market St Fl 6, Wilmington DE 19801
|
|
Hon. Kevin
J. Gross (Pennsylvania
Bar #27160, admitted 1978 (inactive); Delaware Bar #209)
United States Bankruptcy Judge (appointed 2006)
824 N Market St Fl 6, Wilmington DE 19801
(image from http://ecf.deb.uscourts.gov/cgi-bin/show_case_doc?232,109446,0,,)
|
| James
E. O'Neill III (Pennsylvania
Bar #44247, admitted 1985; Delaware Bar #4042, admitted 2001)
Attorney for Debtors The SCO Group, Inc. et al.
Pachulski Stang Ziehl & Jones LLP
919 N Market St Fl 17, PO Box 8705, Wilmington DE 19899
(image from http://pszjlaw.com/assets/images/1504.jpeg)
|
| Stuart Harold
Singer (Florida Bar
#377325, admitted 1983; Delaware admission pro hac vice by oral order
during hearing, June 15, 2009)
Attorney for Debtors The SCO
Group, Inc. et al.
Boies Schiller & Flexner LLP
401 E Las Olas Blvd Ste 1200,
Fort Lauderdale FL 33301
(image from http://www.bsfllp.com/lawyers/data/:v_get/latest/0019/_res/id=sa_Pic2)
|
| Arthur
Jay Spector (New
York Bar #3748621, admitted 1975; Florida Bar
#620777, admitted 2002; Delaware
admission pro hac vice (dkt. #49), September 18, 2007)
Attorney for Debtors The SCO Group, Inc. et al.
Berger Singerman, P.A.
350 E Las Olas Blvd Ste 1000, Fort Lauderdale FL 33301
(image from http://www.bergersingerman.com/images/image_bio/Arthur_Spector.gif)
|
| Richard
B. Levin (D. Columbia Bar,
admitted 1976; New
York Bar #4412862, admitted 2006; Delaware
admission pro hac vice (dkt. #99), October 4, 2007)
Attorney for Creditor International Business Machines Corp.
Cravath, Swaine & Moore LLP
825 Eighth Ave, New York NY 10019
(image from http://web.archive.org/web/20040806085447/www.skadden.com/bioImages/836.jpg)
|
| Adam Aiken Lewis (California
Bar #88736, admitted 1979; Delaware
admission pro hac vice (dkt. #44), September 18, 2007)
Attorney for Creditor Novell, Inc.
Morrison & Foerster LLP
425 Market St, San Francisco CA 94105
(image from http://www.mofo.com/images/attorney/407.jpg)
|
| Darl Charles McBride
Witness for Debtors The SCO Group Inc., et al.
President of The SCO Group, Inc.
355 S 520 W, Lindon UT 84042
(image from http://sco.com/images/execs/McBride34.jpg)
|
| Franklin
Hoff Caplan (Massachusetts Bar, admitted 1981 (inactive); Florida Bar
#759333, admitted 1988)
Witness for Debtors The SCO Group, Inc. et al.
Berger Singerman, P.A.
200 S Biscayne Blvd Ste 1000, Miami FL 33131
(image from http://www.bergersingerman.com/images/image_bio/Frank%20Caplan%20NEW.jpg)
|
| Joseph
James McMahon, Jr. (Pennsylvania
Bar #77570, admitted 1996; Delaware Bar #4819)
Attorney for Acting United States Trustee Roberta A. DeAngelis
United States Department of Justice
844 King St Rm 2207, Wilmington DE 19801
(image from http://ecf.deb.uscourts.gov/cgi-bin/show_case_doc?193,109446,1,,)
|
Other Attendants (listed on sign-in
sheet or mentioned during proceedings)
| Edward John
"Ted" Normand (New
York Bar #2783447, admitted 1996; Delaware admission pro hac vice
by oral order during hearing, June 15, 2009)
Attorney for Debtors The SCO
Group, Inc. et al.
Boies Schiller & Flexner LLP
333 Main St, Armonk NY 10504
(image from http://www.bsfllp.com/lawyers/data/:v_get/latest/0065/_res/id=sa_Pic3)
|
| Sean
T. Greecher (Delaware Bar #4484, admitted 2004)
Attorney for Creditor Novell, Inc.
Young Conaway Stargatt & Taylor
1000 West St Fl 17, PO Box 391, Wilmington DE 19899
(image from http://www.ycst.com/inc/attimage.php?att=43)
|
| Laurie
Selber Silverstein (Delaware Bar #2396, admitted
1985)
Attorney for Creditor International Business Machines Corp.
Potter Anderson & Corroon LLP
1313 N Market St Fl 6, Wilmington DE 19801
(image from http://www.potteranderson.com/assets/images/72.jpeg)
|
| Alan P. Petrofsky
Equity Security Holder, pro se (appearing telephonically)
3618 Alameda Apt 5, Menlo Park CA 94025
(image from http://scofacts.org/SCO-BK-hearing-pics-Petrofsky-skirt-malfunction.png)
|
| Kenneth
Ray Nielsen
Potential Witness for Debtors The SCO Group Inc., et al.
Chief Financial Officer of The SCO Group, Inc.
355 S 520 W, Lindon UT 84042
(image from http://media.collegepublisher.com/media/paper985/stills/4393afc45b2d4-81-1.jpg)
|
| Alan Stephen
Pearce (New
York Bar #1555408, admitted 1966)
Potential Witness for Debtors The SCO Group Inc., et al.
Bryan Cave, LLP
1290 Avenue of the Americas, New York NY 10104
(image from http://bryancave.com/files/Professional/4261a7a6-94ed-4109-9195-99762a8eaada/Presentation/Photo/ap3.jpg)
|
| Ryan
E. Tibbitts (Utah
Bar #4423, admitted 1984)
Potential Witness for Debtors The SCO Group Inc., et al.
General Counsel of The SCO Group, Inc.
355 S 520 W, Lindon UT 84042
(image from http://www.sco.com/2005forum/breakouts/images/rtibbitts_reg.gif)
|
| William M. Broderick
Potential Witness for Debtors The SCO Group Inc., et al.
Director of Software Licensing of The SCO Group, Inc.
355 S 520 W, Lindon UT 84042
(image from http://ecf.utd.uscourts.gov/cgi-bin/show_case_doc?260,21594,9)
|
AUDIO AND UNOFFICIAL, UNCERTIFIED TRANSCRIPT
Audio
Index
(14:07:10/1+00:00:00) Please rise
(14:07:36/1+00:00:26) Oral pro hac vice motions
(14:08:17/1+00:01:07) Procedural discussion and announcement of a sale agreement that was executed just minutes ago
(14:15:34/1+00:08:24) Recess
(14:54:14/2+00:00:00) Please rise
(14:54:25/2+00:00:11) Initial discussion about whether sale agreement should be considered
(15:12:04/2+00:17:50) Court suggests a separate trial on the evidentiary question
(15:13:14/2+00:19:00) Procedural discussion
(15:20:20/2+00:26:06) Start of trial on the debtors' oral motion for the sale agreement to be allowed as evidence when the conversion motions are tried
(15:24:19/2+00:30:05) Direct examination of Darl Charles McBride by Mr. Spector for SCO
(15:29:29/2+00:35:15) Direct examination of Franklin Caplan by Mr. Spector for SCO
(15:47:20/2+00:53:06) Cross-examination of Franklin Caplan by Mr. Lewis for Novell
(15:52:10/2+00:57:56) Cross-examination of Franklin Caplan by Mr. Levin for IBM
(16:03:31/2+01:09:17) Recess
(16:15:59/3+00:00:00) Please rise
(16:16:18/3+00:00:19) Resumed direct examination of Darl Charles McBride by Mr. Spector for SCO
(16:26:23/3+00:10:24) Cross-examination of Darl Charles McBride by Mr. Lewis for Novell
(16:35:46/3+00:19:47) Cross-examination of Darl Charles McBride by Mr. Levin for IBM
(16:40:55/3+00:24:56) Debtors' argument
(16:45:06/3+00:29:07) Novell's opposition
(16:51:41/3+00:35:42) IBM's opposition
(16:55:23/3+00:39:24) U.S. Trustee's opposition
(16:56:52/3+00:40:53) Debtors' reply
(17:01:34/3+00:45:35) End of trial; Court's ruling
(17:04:41/3+00:48:42) Recess
(17:40:32/4+00:00:00) Please rise
(17:40:40/4+00:00:08) Scheduling discussion, including movants' consent, per 11 U.S.C 1112(b)(3), to: (1) the hearing on the conversion motions being continued to July 16 or 27; and (2) the conversion decision deadline being extended from June 30 to July 20 or 29
(17:52:17/4+00:11:45) Recess
First Session
(audio: 14:07:10 to 14:15:36 (4MB mp3))
(14:07:10/1+00:00:00) CLERK: Please rise.
(14:07:15/1+00:00:05) THE COURT: Good afternoon, everyone. Thank you, and please
be seated. Well --
(14:07:24/1+00:00:14) MR. O'NEILL: Good afternoon, your Honor.
(14:07:24/1+00:00:14) THE COURT: -- Mr. O'Neill, Good afternoon.
(14:07:26/1+00:00:16) MR. O'NEILL: Your honor, James O'Neill, Pachulski, Stang,
Ziehl, and Jones, appearing today on behalf of the Debtors. With me
today, as the court knows, my co-counsel Mr. Arthur Spector,
(14:07:35/1+00:00:25) THE COURT: Yes.
(14:07:36/1+00:00:26) MR. O'NEILL: And also appearing today at counsel table are
special counsel in this case, Stuart Singer and Ted Normand --
(14:07:43/1+00:00:33) THE COURT: Yes.
(14:07:43/1+00:00:33) MR. O'NEILL: -- from the Boies, Schiller firm.
(14:07:44/1+00:00:34) THE COURT: Welcome, gentlemen.
(14:07:45/1+00:00:35) MR. SINGER: Thank you, your Honor.
(14:07:46/1+00:00:36) MR. O'NEILL: Mr. Singer has appeared before your Honor --
(14:07:48/1+00:00:38) THE COURT: He certainly --
(14:07:48/1+00:00:38) MR. O'NEILL: -- before in this case.
(14:07:49/1+00:00:39) THE COURT: Yes.
(14:07:50/1+00:00:40) MR. O'NEILL: Both of these gentlemans are good -- members of
the bar in good standing in the courts where they hail from.
Mr. Normand from New York, Mr. Singer is admitted in the federal
courts in Florida, so we would ask that they be permitted to appear
pro hac vice today, for today's proceedings.
(14:08:07/1+00:00:57) THE COURT: Yes. You certainly are--
(14:08:08/1+00:00:58) MR. O'NEILL: And we'll follow up with motions.
(14:08:08/1+00:00:58) THE COURT: You certainly are admitted for this -- for this
hearing, gentlemen.
(14:08:11/1+00:01:01) MR. SINGER: Thank you
(14:08:12/1+00:01:02) THE COURT: And welcome to you.
(14:08:13/1+00:01:03) MR. O'NEILL: Thank you, your Honor. I'm going to turn the
podium over to Mr. Spector, your Honor.
(14:08:15/1+00:01:05) THE COURT: All right.
(14:08:17/1+00:01:07) MR. SPECTOR: (inaudible)
(14:08:18/1+00:01:08) THE COURT: Actually, I guess it's -- it's not your motion, but
you may as well make the introduction.
(14:08:22/1+00:01:12) MR. SPECTOR: I was going --
(14:08:22/1+00:01:12) THE COURT: I was thinking, if I may just express that I see
that we have a number of witnesses, and certainly I think the briefs
that I've reviewed constitute very ample opening statements if not
more, and I was thinking if it's all right with everyone we would just
proceed right to the testimony.
(14:08:40/1+00:01:30) MR. SPECTOR: Your Honor, of course, this is your courtroom.
I was going to introduce our worthy adversaries --
(14:08:45/1+00:01:35) THE COURT: Of course.
(14:08:45/1+00:01:35) MR. SPECTOR: -- first, because it is their burden. However,
on the point you just raised, there are things that have happened
since the response and the reply.
(14:08:53/1+00:01:43) THE COURT: Okay.
(14:08:54/1+00:01:44) MR. SPECTOR: Things that have happened literally minutes ago.
(14:08:56/1+00:01:46) THE COURT: Okay.
(14:08:56/1+00:01:46) MR. SPECTOR: This is SCO, Judge (laugh).
(14:08:57/1+00:01:47) THE COURT: Absolutely.
(14:08:59/1+00:01:49) MR. SPECTOR: And I think it would be helpful to you to know
what else is out there that you didn't read.
(14:09:04/1+00:01:54) THE COURT: I did not mean to foreclose anything such as
you're suggesting.
(14:09:08/1+00:01:58) MR. SPECTOR: Okay, so, I mean, normally it's a finite --
(14:09:11/1+00:02:01) MR. LEVIN: Your Honor.
(14:09:12/1+00:02:02) THE COURT: Mr. Levin.
(14:09:12/1+00:02:02) MR. LEVIN: Excuse me for interrupting.
(14:09:13/1+00:02:03) THE COURT: Yes.
(14:09:13/1+00:02:03) MR. LEVIN: Richard Levin, Cravath, Swaine, and Moore, for
IBM. Good afternoon, your Honor.
(14:09:16/1+00:02:06) THE COURT: Welcome to you, good afternoon.
(14:09:19/1+00:02:09) MR. LEVIN: You suggest that we dispense
with opening statements. If we are going to do that -- and we haven't
been heard from on that subject yet -- what Mr. Spector was about to
propose was an opening statement --
(14:09:29/1+00:02:19) THE COURT: Yes.
(14:09:29/1+00:02:19) MR. LEVIN: -- on things that were not
previously in the papers. If we are going to dispense with them, and
he has evidence about that, we suggest that he put it on the witness
stand. And perhaps we should -- can have a moment to confer on
whether -- of course, as Mr. Spector said, this is your courtroom and
we will follow your dictates, but if you are asking for our view on
that, I'd like just a moment on that.
(14:09:48/1+00:02:38) THE COURT: Okay.
(14:09:49/1+00:02:39) MR. SPECTOR: Your honor, there was a little debate in house,
whether I just do it in the cross-- in the direct examination of one
of our witnesses and say, I show you exhibit so-and-so, and then just
spring it on everybody as a big surprise, and -- and -- and -- or,
give it in the opening statements so, you know what an opening
statement is, your Honor: you will hear testimony from so-and-so about
so-and-so. And so I'm thinking that it's a good idea in this case
that we do it that way. That's why I say that.
(14:10:17/1+00:03:07) THE COURT: Well, I guess I'll ask our friends for IBM and for
Novell and from the United States Trustee's office, do you want it
sprung on you, or would you like a little bit of an opening argument?
(14:10:28/1+00:03:18) MR. LEVIN: Well, uh, interesting, your Honor, if we say we
want it sprung, then you'll say we can't complain that it was sprung
on us.
(14:10:33/1+00:03:23) THE COURT: That's right.
(14:10:35/1+00:03:25) MR. LEVIN: May we have just a moment to confer.
(14:10:36/1+00:03:26) THE COURT: Sure.
(14:10:55/1+00:03:45) MR. LEVIN: Your honor, we think it would be appropriate if
Mr. Spector were going to produce a document for the witness to
authenticate or identify, that we don't need his opening statment, we
need to see the document. And perhaps we can look at that before we
-- before the witnesses are called.
(14:11:17/1+00:04:07) MR. SPECTOR: Not a problem.
(14:11:17/1+00:04:07) THE COURT: All right --
(14:11:17/1+00:04:07) MR. SPECTOR: The document isn't in the courtroom yet, it's
still being photocopied, it's enormous.
(14:11:22/1+00:04:12) THE COURT: Okay.
(14:11:23/1+00:04:13) MR. SPECTOR: And we're making five copies of it, so, we --
here three, and two to your -- so, that's why -- if they looked at it,
they're going to say, you dropped this on us now? Well, the truth of
the matter is it was just signed, as -- two -- you know, ten to two.
(14:11:39/1+00:04:29) THE COURT: Well, let me -- let me make a suggestion, because
we shouldn't proceed, obviously, by -- by confusion. Would you like
five or ten minutes to take a look at what it is, and then when I come
back, I could come back in and you would at least have a better sense
of what position you want to take, Mr. Levin?
(14:11:58/1+00:04:48) MR. LEVIN: Yes, especially since Mr. Spector represents that
it's enormous. I was going to say, your Honor, that -- I appreciate
his comment about this being sprung on us at the last moment and a
surprise and this is so huge and how can you deal with this -- um, the
statute requires the court to decide this matter within fifteen days
after the hearing.
(14:12:21/1+00:05:11) THE COURT: Yes.
(14:12:21/1+00:05:11) MR. LEVIN: We've already given additional time. Only three
days at SCO's request, but some additional time because of the Court's
calendar. If this is going to go into a trial about a new document
that just was created this afternoon, I don't know how we're going to
stay within the fifteen day limit, but we'll take a look and let you
know what we think.
(14:12:38/1+00:05:28) THE COURT: Well, rather than speculate, why don't we -- why
don't you share that document and then I will uh -- I will return in
five or ten minutes, if that's acceptable.
(14:12:46/1+00:05:36) MR. LEVIN: We look forward to the sharing.
(14:12:47/1+00:05:37) MR. SPECTOR: Let me just tell to your Honor so you don't have
to just listen in on us. It's a -- this is a purchase and sale
agreement that was just executed a few minutes ago. It's in the works
forever --
(14:12:57/1+00:05:47) THE COURT: Okay.
(14:12:58/1+00:05:48) MR. SPECTOR: -- but the -- everything is now signed, sealed,
and delivered. All the schedules, all the exhib-- all that's
together. It only just happened as I was walking over to court.
(14:13:06/1+00:05:56) THE COURT: All right.
(14:13:06/1+00:05:56) MR. SPECTOR: And so I will give -- this is the only copy in
the courtroom. One of the counsel in the back handed it up to me,
it's her copy.
(14:13:13/1+00:06:03) THE COURT: Oh, fine.
(14:13:14/1+00:06:04) MR. SPECTOR: The rest of them are still being marked for
exhibits, so I'll give this to Mr. Levin, and the rest of them can
share it, I guess.
(14:13:19/1+00:06:09) THE COURT: Mr. Levin.
(14:13:20/1+00:06:10) MR. LEVIN: Well, okay, then we'll need a little more time,
since there are three parties here and we have only one copy. When
can we expect the other copies to arrive?
(14:13:30/1+00:06:20) MR. SPECTOR: Minutes, I mean --
(14:13:32/1+00:06:22) THE COURT: In minutes, it sounds like.
(14:13:33/1+00:06:23) MR. SPECTOR: It's leg-- logistics. Your honor, I know
there's a fifteen day limit. We can do this. Now, if they say
they're prejudiced by the late delivery, well, so are we. I didn't
know I had it or I didn't have it when I prepared this case for
trial. So I have two different cases to try today, which, right?
(14:13:49/1+00:06:39) THE COURT: Right.
(14:13:50/1+00:06:40) MR. SPECTOR: So, it's tough. This is bankruptcy. Everything
is done in an accelerated basis --
(14:13:55/1+00:06:45) THE COURT: Understood.
(14:13:56/1+00:06:46) MR. SPECTOR: -- and we do the best we can. The suggestion I
have is, they can -- we'll put it into evidence through Mr. McBride's
testimony. They'll have their copies. If they are not prepared to
cross-examine on it, not a problem, we still have fifteen days. We
can come back on another date, your honor's suiting. And they can
then -- do it then. I don't think we should stop the presses for this.
(14:14:20/1+00:07:10) THE COURT: No, I understand, and -- and let me ask, how many
witnesses, on the movants' side, will you be presenting?
(14:14:26/1+00:07:16) MR. LEVIN: We are relying on the record in the Court, your
Honor.
(14:14:29/1+00:07:19) THE COURT: Okay, and Mis-- Yes, the Debtors.
(14:14:31/1+00:07:21) MR. SPECTOR: I'll tell you the names.
(14:14:32/1+00:07:22) MR. LEVIN: Excuse me, except to the extent of any
cross-examination.
(14:14:34/1+00:07:24) THE COURT: I have a list, I think it's eight, it looks like.
Is that roughly right?
(14:14:36/1+00:07:26) MR. SPECTOR: Well you know better than me. I can tell you
the names, but I never did count them.
(14:14:42/1+00:07:32) THE COURT: There are --
(14:14:43/1+00:07:33) MR. SPECTOR: Eight might be right.
(14:14:43/1+00:07:33) THE COURT: Yes, I have a list of eight.
(14:14:44/1+00:07:34) MR. SPECTOR: Okay.
(14:14:45/1+00:07:35) THE COURT: Give me a sense how much time we're talking about,
for your prese-- for the presentations.
(14:14:51/1+00:07:41) MR. SPECTOR: Your honor, I think this can be done today.
(14:14:53/1+00:07:43) THE COURT: Okay.
(14:14:54/1+00:07:44) MR. SPECTOR: Your honor, I'm not saying by six o'clock --
(14:14:55/1+00:07:45) THE COURT: Right.
(14:14:57/1+00:07:47) MR. SPECTOR: -- but if you give us some allowances, we might
have it done today. If not, one more day.
(14:15:01/1+00:07:51) THE COURT: All right, and I know that everyone is here and we would like
to finish it today, and I am certainly prepared and willing to, uh --
to exceed our normal time limits, so, let's see how we do, but I just
wanted a general sense. So why don't we give a little bit of time to
the movants to review the document. Hopefully additional copies will
be here soon enough, and you'll have an opportunity at least to -- to
not be surprised.
(15:15:24/1+01:08:14) MR. LEVIN: You mean to be less surprised.
(14:15:26/1+00:08:16) THE COURT: -- to be less surprised. Or at least -- well, I
won't -- I won't comment any further, but at least we'll stand in
recess then for maybe ten or fifteen minutes, hopefully. Thank you.
(14:15:34/1+00:08:24) *** RECESS ***
Second Session
(audio: 14:54:14 to 16:03:33 (33MB mp3))
(14:54:14/2+00:00:00) CLERK: Please rise.
(14:54:19/2+00:00:05) THE COURT: Thank you, please be seated. Mr. Levin.
(14:54:25/2+00:00:11) MR. LEVIN: Your honor, thank you for accommodating us with a
few extra minutes. Now I note, almost two fifty-five, we've had about
forty minutes to look at the document.
(14:54:34/2+00:00:20) THE COURT: Yes.
(14:54:35/2+00:00:21) MR. LEVIN: And it confirmed what we suspected before we took
the recess, which is, this is too complicated to understand in forty
minutes, or even an hour and forty minutes. We understand how
bankruptcy works, but we also understand how courts work and judicial
procedures work.
(14:54:53/2+00:00:39) I think I speak on behalf of Novell and the U.S. Trustee as
well when I say that our proposal your Honor is that we proceed with
the motion as it existed when this hearing started, not as it changed
after the -- after the hearing started. If the debtors wish to bring
a motion to approve a bidding procedures and a sale, they are
certainly able to do that.
(14:55:16/2+00:01:02) But for us to try to get into -- to -- to take a motion on a
conversion and convert it into the question of the approval of the
sale itself, on the theory -- and I -- the reason I say that is
because, if -- if no, uh -- SCO proceeds now and says this shouldn't
be converted because we have this sale, we've in effect validated the
sale or the sale process in the face of a motion to convert.
(14:55:45/2+00:01:31) We think that's a bit improper way to bring a sale before
this court, and we would be entitled to notice, in the absence of an
extreme emergency, to have a bid procedures motion or a sale hearing
on before this court. This is not the way to do it.
(14:56:06/2+00:01:52) We propose that the Court proceed with the motion to dismiss
on the record as it existed. We will object to witnesses addressing
the sale and the apparent agreement that we have in front of us, as
irrelevant to that motion and procedurally improper. And we would ask
Mr. Spector, before we start this hearing, in light of that, to
describe the topic of each of the eight witnesses -- the topic that
each of the eight witnesses will speak on -- not to describe their
testimony, that's an opening statement, and we've already concluded to
dispense with opening statements, but we simply don't know who the
witnesses are or what the topic is that they'll be talking about.
That's how we would propose to proceed, your Honor.
(14:56:51/2+00:02:37) THE COURT: Thank you, Mr. Levin. Anyone else?
(14:56:56/2+00:02:42) MR. LEVIN: Thank you, your Honor.
(14:56:57/2+00:02:43) THE COURT: Yes, Mr. Spector.
(14:56:58/2+00:02:44) MR. SPECTOR: Your honor.
(14:56:59/2+00:02:45) THE COURT: Mr. Spector.
(14:57:00/2+00:02:46) MR. SPECTOR: Let me tell you what we're not asking for.
We're not asking for approval of the sale today.
(14:57:04/2+00:02:50) THE COURT: Right.
(14:57:05/2+00:02:51) MR. SPECTOR: We have to file a motion for that. Before you
file a motion, I think the Court encourages us to actually have the
sale. I think we've gone down the route before. So we have the
documents that we can really now file a motion for sale. We don't
intend to ask for bid procedures. We intend to do a sale to this
party, without any further ado, and when the sale closes, get out of
bankruptcy, pay the creditors in full -- it's part of my opening
statement, okay, I'm going to be doing that, if you -- it's like w--
talking about talking about -- I'd like to actually say it and not
just pretend to say it.
(14:57:39/2+00:03:25) We have a -- we have -- the purpose of this, judge, is to
show one of the many unusual circumstances. Many cases -- and now I
am going into an opening -- many cases address if there's a legitimate
proposal to pay the creditors in full, that's an unusual circumstance
that, that even if there were cause, would, would, uh, would counsel
the Court to deny the motion.
(14:58:04/2+00:03:50) We have a sale that can close in thirty days. If your Honor grants
a motion for 363 sale on June thirtieth, fifteen days from now, we
have a proposal to close it before July fifteenth. We will, we will
have testimony to show that we won't be losing money in those next
thirty days, and why. We have backup ideas. There are other sug-- we
have lots of other causes.
(14:58:29/2+00:04:15) For example, and I'm doing this without the preparation that
I ought to be doing, we have a stockholder standing up ready to
underwrite any losses in the next thirty days. We have money, real
money, in case there are losses, in case the deal goes sideways again,
which has been ha-- happened before. But we now -- we have the whole
document -- the whole deal, done, finally. So, we have a case to
make, Judge. They may not, but we do, and I object to having somebody
asking the Court to say no, you can't present it this way, you have to
present it that way.
(14:59:00/2+00:04:46) This is a terminal event in the life of these -- uh, cases --
the life of this -- these companies, and the ramifications your Honor
knows about, or at least has some idea about from our response. This
is not something we think we should be circumscribed about.
(14:59:15/2+00:05:01) We have an opening statement. We didn't agree -- your Honor
says we don't do it, we don't do it, but we would-- we think, because
as you just heard -- I've already told you two things you didn't know.
Uh, that's part of our opening statement, and in the opening statement
I will highlight what it is the witnesses will testify about.
(14:59:32/2+00:05:18) One of the things Mr. McBride will testify about -- he's one
of our witnesses -- of course is the sale. He'll tell your Honor and
the parties in interest, the highlights, the purpose, the deal -- of
the deal. Mr. McBride's also going to testify about the backstop.
Mr. McBride will help the Court understand Mr. Nielsen's testimony,
which will precede it, about the financial situation of SCO, up to now
and for the foreseeable next thirty days. And he'll -- the two of
them will present that case to show why, even if there were losses
before, your Honor can take the risk with us that the creditors will
be protected in the next several days -- several days.
(15:00:14/2+00:06:00) And of course, we're going to ask Mr. Singer in our opening
statement to -- to -- we're going to ask your Honor if we can have
Mr. Singer reserve his opening statement to the beginning of our
defense proofs, because we think that makes the most sense. It will
be more understandable that way than bifurcating it in the middle of
the opening statement that I make. I would like to handle all of the
matters that don't involve the litigation. We have someone who
knows it a lot better than I ever could.
(15:00:40/2+00:06:26) So, we have a game plan for the presentation of our proofs.
You've heard the movants say that they don't have any witnesses.
Well, we'd like to get on and give you our witnesses. Not all of them
will take that long. Mr. McBride may take some time, of course. And
if we don't have enough time today, all to the better for them. They
can dissect the agreement --
(15:01:02/2+00:06:48) We're not talking about putting this off to January. We're
talking about, within the fifteen days that your Honor has, if -- and
I wasn't -- I was prepared -- I was hoping we would have this signed a
couple days ago so we wouldn't have to go through the dramatics that
we're going through today. I knew this was going to happen, and I
would have liked to have been able to say they've seen it, we're ready
to go -- uh, hard deadlines make deals close. Nothing else but.
(15:01:26/2+00:07:12) THE COURT: This is about as close to a Perry Mason situation
as a Bankruptcy Judge gets.
(15:01:31/2+00:07:17) MR. SPECTOR: Judge, you should only know what it's like to be
in my shoes.
(15:01:34/2+00:07:20) THE COURT: I can imagine.
(15:01:36/2+00:07:22) MR. SPECTOR: Okay, so, so the -- the point I'm trying to make
is, we don't have to have hysterics. We know they're prejudiced by
the late delivery of this, and we're not going to take advantage of
that. If they decide that they need more time, they probably do. And
by the way, those schedules are still being copied. This -- one of --
one exhibit alone, I've found out, is five hundred pages. That has to
be delivered too, as part of the contract.
(15:01:57/2+00:07:43) So, we'd like to begin, make our opening statement, call our
witnesses, do as much as we can today, and, in as much as it's likely
that they'll want to have a chance to review the most important piece
of evidence, we come back when your Honor says we can, within the
fifteen days. We're not looking for any extraordinary relief.
(15:02:15/2+00:08:01) THE COURT: Understood.
(15:02:16/2+00:08:02) MR. SPECTOR: Thank you.
(15:02:18/2+00:08:04) THE COURT: Mr. Lewis.
(15:02:19/2+00:08:05) MR. LEWIS: Thank you, your Honor.
(15:02:20/2+00:08:06) THE COURT: Good afternoon, sir. Welcome back.
(15:02:21/2+00:08:07) MR. LEWIS: Thank you, your Honor, it's always a pleasure to
be here.
(15:02:22/2+00:08:08) THE COURT: It's always a pleasure to have you here.
(15:02:24/2+00:08:10) MR. LEWIS: Thank you. Your honor, I want to start with the
comment that somehow this being a terminal event is the signal fact.
It being a terminal event, if it is, and I don't think that it is,
we're just talking about conversion to chapter seven. It's the debtor
that wanted to have the case dismissed rather than having it converted
to a seven. We're just talking about putting this whole process into
someone else's hands for a while.
(15:02:50/2+00:08:36) Um, but -- but more importantly than that, your Honor, the
fact that it's allegedly a terminal event doesn't change the rules of
procedure and the notions of due process and fairness, and this is not
the first time in this case -- this is not the only time that we've
been faced with some last minute thing to beat a deadline, that came
in after the -- after the door had closed and we were trying to deal
with it. And I -- the Court may remember another time that happened
and we heard from -- from the debtor that oh, yeah, I guess we're
kinda not quite ready yet, and we'll-- let's continue this, we'll come
back, and of course then they withdrew it.
(15:03:30/2+00:09:16) Now, we have this long agreement here, and yes, I suppose we
could come back and cross-examine the witness about it. But your
Honor, it's much more effective to be able to cross-examine a witness
when he's there, right after he's given his testimony, rather than
waiting until a week or two or three weeks later. Uh, but we can't
possibly cross-examine, for example, a witness on the so-called
agreement, because we can't possibly understand it in the time we have
available today.
(15:04:02/2+00:09:48) THE COURT: I appreciate that.
(15:04:03/2+00:09:49) MR. LEWIS: Um, and, and it's just -- for the debtor to say
they're not trying to prejudice us, and all that -- it's just -- it is
prejudicial. And furthermore, in terms of scheduling, your Honor,
this was originally set for the twelfth, and the debtor asks to have
it continued because someone wasn't available that day, and I advised
the debtor in response that I had a very bad schedule the rest of the
month, but I could do it today, and so we schedule it for today.
(15:04:39/2+00:10:25) Your honor, I have, uh, I'm going back tomorrow on this
matter one way or another, not today. I'm in Minneapolis / St. Paul
the rest of the week starting Wednesday. I'm in the central valley of
California, as they knew, most of the following week. I'm in Honolulu
for depositions the beginning of the following week, so it's like
July. And what this all amounts to, your Honor, is the debtor buying
time, which is in its interest, because it wants to get to the end of
the appeal, because it thinks that that's the end-all and be-all of
this case, and, uh, and -- and this just works in its favor.
(15:05:21/2+00:11:07) It's already had some extra time on this proceeding, and
there's no reason why we shouldn't go ahead today on the record that
was available by the deadlines.
(15:05:30/2+00:11:16) I think the debtor's going to advise the Court that it's
withdrawing its motion to, uh, to file certain IBM documents under
seal. I would not have objected on the grounds that IBM was going to
object, because I'm not a party to that confidentiality agreement. I
was going to object on the grounds that it's too late.
(15:05:48/2+00:11:34) We can't keep doing this at the last moment. And I
understand bankruptcy. I've been doing it thirty years. And I
understand there are some -- you have to be flexible and somewhat
nimble, but this is really taking it to an extreme, and it's not the
first time in this -- the debtor has already had accommodations, again
and again from this court, and from the parties, and I just think
today we should go ahead on the record which we have, and which was
prepared, and the parties responded to and came prepared for.
(15:06:19/2+00:12:05) We shouldn't be going ahead on a record that no one's
prepared for, except the debtor, who's been apparently working on this
-- maybe we'll find out someday it's been working on this a long some
time and could have done this sooner. No way to test that today.
(15:06:33/2+00:12:19) So, I ask the court to proceed with the hearing as originally
scheduled on the original record to which parties referred in their
papers, and if -- as, uh -- as counsel for IBM suggested, if they want
to do something else in terms of a motion to sell, they're free to do
that. Although --
(15:06:53/2+00:12:39) THE COURT: But I would have to take that into account. Let's
assume that today we closed this record, and tomorrow they came in and
said your Honor, we have a totally new development in this case, uh,
we have a sale. Wouldn't the Court have to take that into
consideration? --
(15:07:10/2+00:12:56) MR. LEWIS: Your honor --
(15:07:11/2+00:12:57) THE COURT: -- Reopen this record? So, how is that different?
How is this different?
(15:07:16/2+00:13:02) MR. LEWIS: First of all, your Honor, there are deadlines the
Court has to use in order to -- to render a decision on this ma--
(15:07:23/2+00:13:09) THE COURT: Understood.
(15:07:24/2+00:13:10) MR. LEWIS: -- on this matter.
(15:07:25/2+00:13:11) THE COURT: Understood.
(15:07:26/2+00:13:12) MR. LEWIS: And, um, if we're going to have something on a
so-called sale, we should at least have it on some organized basis,
not this basis.
(15:07:35/2+00:13:21) THE COURT: Oh, no, no. I agree with that.
(15:07:37/2+00:13:23) MR. LEWIS: And the problem there, your honor, is my schedule,
as the debtor has known since asking me to reset this thing, for the
rest of the month is pretty well tied up. And so we are now in effect
giving the debtor an extension, because of this last minute
development. And there has to be at some point which fairness to the
other parties is also important.
(15:07:59/2+00:13:45) There's just way too much to go into with respect to this
so-called sale to make it even rational to try to put on evidence and
ask questions about it today. Debtor will get up, we're told, and
testify what's in the agreement. That may be the debtor's
interpretation of what's in the agreement. There may be other things
in the agreement that are equally important to creditors, to my cr--
to my client.
(15:08:25/2+00:14:11) How am I going to cross-examine on that, and why should we
separate cross-examination from direct testimony, where you have a
witness who's still up there and doesn't have a whole lot of time, as
a consequence, to prepare his testimony -- to fit his testimony when
he's finally cross-examined. That's the whole point of live trial and
live cross-examination.
(15:08:46/2+00:14:32) THE COURT: Well, it isn't easy for the Court in this
situation, but I certainly cannot close my eyes to what is potentially
-- none of us know really for certain at this moment, I haven't even
seen the agreement that you've looked at -- what is potentially a
very, very significant development in this case.
(15:09:05/2+00:14:51) MR. LEWIS: Your honor, I don't disagree it might be a
significant development.
(15:09:09/2+00:14:55) THE COURT: And not only a significant development -- would
have substantial bearing upon a motion to convert, if they have a very
solid, um, agreement of sale that is in the best interest of these
debtors' estates.
(15:09:20/2+00:15:06) MR. LEWIS: I guess the problem your Honor is how to fit that
opportunity into what's available now, and unfortunately the way
things have panned out, as the debtor knows, trying to fit that in on
the current schedule is going to be very, very difficult --
(15:09:34/2+00:15:20) THE COURT: I understand.
(15:09:35/2+00:15:21) MR. LEWIS: -- for me, and I've been involved in this case
from the beginning, for my client. I can't just send --
(15:09:38/2+00:15:24) THE COURT: No, no.
(15:09:39/2+00:15:25) MR. LEWIS: -- someone else to do this, --
(15:09:40/2+00:15:26) THE COURT: I understand.
(15:09:41/2+00:15:27) MR. LEWIS: -- um, but uh, you know, to meet the fifteen day
requirement for the Court to rule on this matter. I'm not sure what
the answer is, except I'm sure that the answer is not to turn this
into a mini-hearing on this sale motion, when nobody could possibly
address it in any rational fashion today. I mean, they've just
finished it.
(15:10:03/2+00:15:49) Now there may be other testimony that we can dispense with
today, and we'll see about that, but, I guess that's my concern, is --
it's just really unfair -- and, and, and this thing may turn out to be
a complete nothing of a sale. It may or may not be. I don't know. I
can't say that it is, I haven't really had a chance to study it in any
useful fashion.
(15:10:25/2+00:16:11) THE COURT: Okay. Mr. Levin.
(15:10:30/2+00:16:16) MR. LEVIN: Just to amplify on Mr. Lewis's points, your Honor.
Two things. Number one, we haven't learned much about this agreement
in the hour that we've had it, or the forty minutes we had to look at
it, but the one thing we have learned is that it's signed by Stephen
Norris, of Stephen Norris Capital Partners. That deal has been before
this court for fifteen or sixteen months. This is not something that
just arose last week and all of a sudden, it came up, it's a last
minute development.
(15:11:04/2+00:16:50) Those negotiations had been going on or off -- I don't know,
we have no idea -- for at least sixteen months. This court has
deadlines. The local rules have deadlines. Had the debtor decided,
well, we're not going to file our opposition by the, uh, you know,
June fifth, which was the deadline, we're going to wait until June,
uh, twelfth to file our opposition, just because, well, we couldn't
quite get it ready, we've been working on it and working on it but we
couldn't quite get it ready. At some point this Court says, there's a
deadline, and you must meet the deadlines.
(15:11:39/2+00:17:25) I understand the inclination of a bankruptcy court to take
any last-minute information into account. This is a dynamic process.
As Mr. Lewis said, I've been doing this for a long time, and I
understand it's a dynamic process and things change. But at some
point, especially with somebody who's been at the table for sixteen
months, this court can, and should, enforce deadlines. And this is
past the deadline. We think it should proceed as -- as the record was
set.
(15:12:04/2+00:17:50) THE COURT: Well, let me make a suggestion, because what I've
got before me right now is, in effect, a motion -- an evidentiary
motion. And what I would like to do is to hear evidence concerning
the concerns that Mr. Levin has raised. Why it is now come to -- why
we have an agreement as of today.
(15:12:33/2+00:18:19) MR. SPECTOR: That's fine. That's part -- that's part of the
presentation I will make, your Honor.
(15:12:36/2+00:18:22) THE COURT: Without the substance, but I think as a
preliminary matter, I would like to know what the negotiations have
been, why we are here today instead of six months ago, you know,
evidence to that effect. And then, on that record, subject to
cross-examination, uh, not on the merits, not on the substance,
because I appreciate that the movants have difficulty cross-examining
on the merits of this agreement, but I would just like to know whether
or not I should in fact adjourn this hearing to take into
consideration the agreement of sale.
(15:13:14/2+00:19:00) MR. SPECTOR: Your honor, we do not request an adjournment to
the hearing. We are prepared --
(15:13:16/2+00:19:02) THE COURT: I understand.
(15:13:17/2+00:19:03) MR. SPECTOR: Right, and I am sorry about the situation we've
put Mr. Lewis in. This is not the way I wanted to do it either, but I
-- and this is -- you know, I knew Mr. Lewis had a problem this week.
I didn't realize he was tied up for the whole month, and maybe if he
told me that it didn't register. And I wasn't planning on having to say they'll
need more time. I was planning to have this to them a few days ago.
(15:13:44/2+00:19:30) But we have no problem making the record your Honor asked
for. It is part of our presentation of Mr. McBride's testimony. We
also have the lawyers who negotiated this -- hundreds of thousands of
dollars of legal fees just in the last month, probably, --
(15:13:59/2+00:19:45) THE COURT: Okay.
(15:14:00/2+00:19:46) MR. LEWIS: -- to get the very difficult issues resolved.
Your honor has an appreciation of how difficult some of these legal
issues are when we still don't have the clarity of the tenth circuit
ruling.
(15:14:09/2+00:19:55) THE COURT: Understood.
(15:14:10/2+00:19:56) MR. SPECTOR: We've -- we, okay, so yes, we can make that
record, but in the interest of everybody's time, I would suggest that
your Honor take the record in the ordinary manner.
(15:14:20/2+00:20:06) THE COURT: With the -- with the --
(15:14:21/2+00:20:07) MR. SPECTOR: And, and, and, take it under, you know, under
advisement, that you could -- if, if your Honor thinks that there's
some reason why it shouldn't come in -- this is a trial to a court --
you can take that into account when you make your ruling at the end.
But think it's going to be very awkward to say okay, we're going to
have a record -- we didn't prepare a record for the lawyers to come
and testify. I was out of the picture, I can't even make a proffer of
what all went on. My head was on doing this.
(15:14:47/2+00:20:33) So, uh, I -- I think the easiest way to do that is to let
Mr. McBride tell you the highlights -- I can in an opening tell you
the highlights, you'll know what they know -- it's just surface level,
of course. Uh, but Mr. McBride is prepared to testify, and when
asked, I can say, well, isn't this the same Mr. Norris? Well, yeah,
it is, but it isn't really the Mr. Norris who we were negotiating with
at the end, it was a different cast of characters, and things that --
(15:15:14/2+00:21:00) These questions are valid questions, but there are answers,
and I shouldn't be getting up here trying to tell you -- tell you
about them. I wasn't personally involved with those. So, again, I
suggest, let's get to it. Let's, like Nike says, just do it. Let's
call our witnesses, let them make their case.
(15:15:32/2+00:21:18) I appreciate the difficulty of Mr. -- Mr. Lewis. Uh, I don't
know -- I don't have a solution for that. All I can suggest is --
and we are not looking to extend the time. We can produ-- if we
started on time, if we had this two days ago, we could have possibly
gotten this whole case in tonight. Not now. Doesn't look like we'll
have enough time now.
(15:15:52/2+00:21:38) But, but it is in their hands, if they want to accommodate
Mr. Lewis, and I'm not asking for this. I have a vacation planned
also after that, but I-- you know, I'll make accommodations. Oh, I
take that back, my -- my vacation's in August.
(15:16:06/2+00:21:52) THE COURT: Okay.
(15:16:07/2+00:21:53) MR. SPECTOR: July is open. So --
(15:16:08/2+00:21:54) THE COURT: Okay.
(15:16:09/2+00:21:55) MR. SPECTOR: -- so if, if they can't -- if we can't get that
fifteen days in because of Mr. Lewis's difficult schedule, it's in
their hands. I don't have a problem going to July first, July second,
July seventh, July -- whenever it is that suits the Court's calendar.
(15:16:21/2+00:22:07) But, your Honor is exactly right when you say this is
crucial. This is th-- this is how we satisfy the Court that it should
not convert the case. That, and a couple of other bells and whistles
of importance, but by no means are anything nearly as important as the
fact that we're going to get -- and this is in manner of opening
statement -- two point four million dollars. The claims, you will
hear, are a million dollars or less.
(15:16:48/2+00:22:34) What we plan to do, with your Honor's blessing: close the
sale, dismiss the case, pay the creditors in full, get no discharge of
any Novell claim. We'll have -- we have a bond set aside to fully pay
Novell. I'm wondering if they -- they may have missed that, they
should be in favor of that. Uh, we have a bond set aside as part of
this deal, to pay Novell in full. IBM, we'll meet them in court. No
discharge, get out of bankruptcy with a dismissal, pay the creditors
upon exit, and go upon our merry way.
(15:17:20/2+00:23:06) That is an elegant end to this case. All of that depends
upon doing what we propose. So, again in the nature of opening,
that's what our proposal would be.
(15:17:34/2+00:23:20) THE COURT: All right.
(15:17:37/2+00:23:23) MR. LEVIN: Your honor, I'm not going to argue the substance
as my learned colleague did. I want to just try to put a procedural
framework about what the Court suggested, and that is, as I hear the
Court, you're saying we should treat this as the Debtors' motion for
leave to file a late opposition.
(15:17:54/2+00:23:40) THE COURT: Or, or newly discovered evidence, or however we
want to frame it. Yes, that's really what I think -- that's where I
think we are. Now, it may make the order a little more unusual, less
workable, but I think --
(15:18:14/2+00:24:00) MR. LEVIN: Your honor --
(15:18:14/2+00:24:00) THE COURT: -- I think that's -- that is how I would like to
proceed. I'd like to know why I should consider this agreement of
sale.
(15:18:22/2+00:24:08) MR. LEVIN: And your Honor, as I understand -- let me go back
to what I suggested a moment ago and then -- of what you're going to
consider. What I suggested I think fits with what the Court has
proposed, and that is that the new evidence might be a grounds for
allowing them to file a late opposition, and that's what they're going
to show, but, what I think I hear the Court saying is the evidence in
support of that motion to file a late opposition is not going to go to
the substance of why it's good evidence, why it's a good deal, or why
it should be pursued, but rather, why it took them so long.
(15:19:03/2+00:24:49) THE COURT: That's correct, but the la-- the pra-- I, I want
you all to know that the practical result of my finding that they
should have leave to file this and for the Court to consider this
would be either we proceed today on the merits --
(15:19:18/2+00:25:04) MR. LEVIN: Yes.
(15:19:19/2+00:25:05) THE COURT: Or, we adjourn.
(15:19:21/2+00:25:07) MR. LEVIN: We understand that, your Honor, but we're first
going to take whether they should be allowed to file this late
document.
(15:19:27/2+00:25:13) THE COURT: Yes.
(15:19:27/2+00:25:13) MR. LEVIN: Thank you, your Honor.
(15:19:29/2+00:25:15) THE COURT: I think that's the way we have to proceed under
these circumstances, and I do understand, again, I'm very sensitive,
not only to a debtor being able to maintain its case, but as well to
what's in the best interest of the creditors of these estates, of this
estate, and that may very well mean this sale. So -- but in the first
instance I need to know why I should be considering the evidence.
(15:19:57/2+00:25:43) MR. SPECTOR: So, your Honor, you're asking me to make a
separate record, or to --
(15:19:59/2+00:25:45) THE COURT: Yes.
(15:19:20/2+00:25:06) MR. SPECTOR: -- begin with an opening and call my first
witness, and I'll --
(15:20:02/2+00:25:48) THE COURT: I think to make a separate record here on the, um,
permissibility of my considering your evidence.
(15:20:09/2+00:25:55) MR. SPECTOR: Well, in that case, I will make my off-the-cuff
perfunctory opening on that --
(15:20:14/2+00:26:00) THE COURT: Okay.
(15:20:14/2+00:26:00) MR. SPECTOR: -- point and then call a witness.
(15:20:15/2+00:26:01) THE COURT: All right.
(15:20:20/2+00:26:06) MR. SPECTOR: The evidence will
show, for Mr. McBride and perhaps others, that after the debtor filed
its plan in January 2009 that provided for a 363 sale of parts of the
business, and as a second alternative a stand-alone plan, if the price
was not sufficient to cover what we needed to cover, that Mr. McBride
received phone calls from a number of different sources saying don't
do that, fall in with us, we'd like to be your sponsor, we'd like to
buy the property itself. One of those calls was from the aforesaid
Mr. Norris, and, frankly, we had other calls. I think York also
called again, and others. And so, talks started again, and rather
than proceed with a 363 sale, they warmed up those ashes and -- and
saw wh-- see what -- to see what they could do.
(15:21:26/2+00:27:12) Skipping ahead to the current. In the meantime, other
parties in interest contacted the debtor for various and sundry deals.
As of the day I wrote this response, your Honor, we had four deals on
the table, that I didn't know which one to address in my response.
All of-- it was literally a horse race, and we jokingly considered
who's out -- nose and -- who's in front, who's catching up and so
forth. We had our deal team at Berger Singerman working on four deals
at one time.
(15:22:06/2+00:27:52) And Mr. McBride, who I didn't -- was not intending to ask
about this, but given the new subject matter I will have to go into
this. We devoted a large part of our time to other suitors that were,
until very recently, out in front. And we only -- and until we signed
this deal, I had no expectation for sure that we were going to get a
GCP deal.
(15:22:37/2+00:28:23) Mr. McBride will testify similarly, they were going back and
forth while I was working on my opening statement today. Mr. Caplan
was in Pachulski's office sending drafts back and forth to the Bryan
Cave folks for CG -- GCP, Gulf Capital Partners, which is the
investment banker for the deal, for the buyers. And, I got to say I
was almost shocked when I got the phone call walking over here, that
the deal was actually signed.
(15:23:10/2+00:28:56) MR. SPECTOR: So, that's the very high viewpoint. If you're
going to want more details on that, I'm going to put Mr. McBride on
the stand.
(15:23:18/2+00:29:04) THE COURT: Yes.
(15:23:19/2+00:29:05) MR. SPECTOR: May have to put Mr. Caplan, our deal, uh,
partner, on the stand.
(15:23:24/2+00:29:10) THE COURT: Okay.
(15:23:24/2+00:29:10) MR. SPECTOR: May even wind up calling Bryan Cave's counsel,
who are here, because that's just that deal. Mr. Caplan can tell you
about all the other deals he was working on. He and Dan Lampert of
our office were working on.
(15:23:35/2+00:29:21) And so, it was unbelievably stressful and hectic, and we didn't
know what deal we were going to bring to this court, or -- if any.
But, that's my proffer of my opening statement, and with that I'll
call Mr. McBride as my first witness.
(15:23:49/2+00:29:35) THE COURT: Very well. Thank you Mr. Spector. Mr. McBride,
good afternoon. If you'll remain standing while you're sworn, sir.
(15:24:00/2+00:29:46) CLERK: Please raise your right hand and place your left hand
on the Bible. State your full name and spell your last name for the
record.
(15:24:06/2+00:29:52) MR. MCBRIDE: Darl Charles McBride. Last name is M-C capital
B-R-I-D-E.
(15:24:11/2+00:29:57) CLERK: Do you solemnly swear to tell the truth, the whole
truth, and nothing but the truth, so help you God?
(15:24:15/2+00:30:01) MR. MCBRIDE: Yes, I do.
(15:24:16/2+00:30:02) CLERK: Thank you.
(15:24:17/2+00:30:03) THE COURT: You may proceed whenever you're ready.
(15:24:19/2+00:30:05) Q: Your name, please, for the record.
(15:24:21/2+00:30:07) A: Darl Charles McBride.
(15:24:24/2+00:30:10) Q: Thank you -- forgot she already got to that.
(15:24:27/2+00:30:13) MR. SPECTOR: May I dispense with the pedigree, for this court --
(15:24:28/2+00:30:14) THE COURT: Yes
(15:24:29/2+00:30:15) MR. SPECTOR: -- part of it?
(15:24:29/2+00:30:15) THE COURT: Yes.
(15:24:30/2+00:30:16) MR. SPECTOR: Thank you.
(15:24:30/2+00:30:16) THE COURT: We have that on the record, I think, previously.
(15:24:32/2+00:30:18) MR. SPECTOR: All right, then. I was going to do it in my
regular op-- but I'll pass on that.
(15:24:36/2+00:30:22) THE COURT: All right.
(15:24:37/2+00:30:23) Q: Mr. McBride, you've been in court, you've heard what the
subject matter of this part of the trial is about?
(15:24:43/2+00:30:29) A: Yes.
(15:24:44/2+00:30:30) Q: Okay. Basically, why is it that we showed up literally at
the last second with a contract of this sort. Right, that was --
that's the issue?
(15:24:54/2+00:30:40) A: Right.
(15:24:55/2+00:30:41) Q: Okay, please explain to the Court, uh, when -- oh, all
right, all right, we'll do it the easy way, can you tell the Court why
it took this long to get this deal here now?
(15:25:11/2+00:30:57) A: Well, there's a lot of circumstances. If you want to talk
to the very beginning of the -- when the case was filed, or talking --
(15:25:17/2+00:31:03) Q: Answer it any way you choose.
(15:25:18/2+00:31:04) A: -- recently, okay.
(15:25:19/2+00:31:05) MR. LEVIN: Objection, your Honor. That -- that last comment
from Mr. Spector confirmed what we feared over here. This calls for a
very long narrative. Counsel should ask questions.
(15:25:29/2+00:31:15) THE COURT: All right --
(15:25:29/2+00:31:15) MR. SPECTOR: I'll go back --
(15:25:30/2+00:31:16) THE COURT: -- Yes, I sustain that.
(15:25:32/2+00:31:18) Q: When did you -- when did you first meet Mr. Norris?
(15:25:36/2+00:31:22) A: I first met Mr. Norris about a year and a half ago.
(15:25:41/2+00:31:27) Q: And what was the subject matter of that meeting?
(15:25:44/2+00:31:30) A: The subject matter was discussion about investing in our
company, S-C-O.
(15:25:50/2+00:31:36) Q: Okay, and tell us what those negotiations were about at
the first stage.
(15:25:55/2+00:31:41) A: The first stage, Mr. Norris represented that he had a
group of investors from the Middle East that were prepared to come in
and invest in our company.
(15:26:08/2+00:31:54) Q: And did that -- how long did those talks last before we
finally put something before the Court, if you can recall?
(15:26:16/2+00:32:02) A: Um, we were talking for, I would say, several weeks,
before we filed something with this court.
(15:26:24/2+00:32:10) MR. SPECTOR: Um, you Honor, I don't know if you want me to go
into what that deal was. It's all on the record.
(15:26:28/2+00:32:14) THE COURT: It's a -- th-- I've --
(15:26:29/2+00:32:15) MR. SPECTOR: Okay.
(15:26:30/2+00:32:16) THE COURT: It's not necessary.
(15:26:31/2+00:32:17) MR. SPECTOR: Okay.
(15:26:32/2+00:32:18) Q: Um, eventually, what happened with that proposal?
(15:26:35/2+00:32:21) A: Eventually, the legal team from the Middle East investment
group that was doing due diligence had problems with the sale, or I'm
sorry, the ruling that had come out of the Utah courtroom, which had
been the reason that the York deal previous to the Norris deal had not
gone through, and they --
(15:26:56/2+00:32:42) Q: Is that the ruling of 2007 you're speaking of?
(15:26:59/2+00:32:45) A: Correct, August of 2007.
(15:27:03/2+00:32:49) Q: And they were unable to get their arms around this deal,
was that a problem?
(15:27:07/2+00:32:53) A: It was, it was like how you buy a house when you can't
figure out if you have the title to it here.
(15:27:14/2+00:33:00) Q: All right, then -- skipping forward then to the, uh, end
of December of '08, January, beginning of January of '09, do you
remember authorizing me to file a plan on behalf of the companies?
(15:27:25/2+00:33:11) A: Yes
(15:27:26/2+00:33:12) Q: All right, can you describe that plan for the -- for the
Court?
(15:27:29/2+00:33:15) A: Yes.
(15:27:30/2+00:33:16) Q: Just, just summary.
(15:27:31/2+00:33:17) A: The summary of that plan was that we would have a 363
asset sale of our products businesses, and we would either come back
to the court with a conclusion to that sale, or, in the alternative,
we would come back and say we are going to revamp the company down
into a smaller non-product development kind of company that would be
profitable.
(15:27:59/2+00:33:45) MR. SPECTOR: Your Honor, it's just occurred to me --
(15:28:01/2+00:33:47) THE COURT: Yes.
(15:28:01/2+00:33:47) MR. SPECTOR: -- talking about people's schedules. I haven't
spoken to Mr. Caplan about this eventuality, but I may want to ask
Mr. McBride to step down and get Mr. Caplan. He has to -- he has an
uncle who died in Philadelphia and he's got to go to a shiva, he's got
to leave at four thirty. So, if I'm going to ask him any questions,
it just occurs to me, it's almost three thirty now. I'd like to put
him on so he can be gone before.
(15:28:25/2+00:34:11) THE COURT: All right.
(15:28:26/2+00:34:12) MR. SPECTOR: Is that, is that a problem for anyone?
(15:28:30/2+00:34:16) MR. LEVIN: Excuse me, your Honor, what is the topic of his testimony?
(15:28:33/2+00:34:19) THE COURT: He will -- go on, I'm sorry.
(15:28:34/2+00:34:20) MR. SPECTOR: The topic of the testimony is why it took so
long, what the issues were that took us to this very minute to get the
deal done.
(15:28:41/2+00:34:27) THE COURT: Yes. All right, that's certainly --
(15:28:43/2+00:34:29) MR. LEVIN: No objection, your Honor.
(15:28:44/2+00:34:30) THE COURT: -- I certainly understand, and I -- that's fine.
(15:28:46/2+00:34:32) MR. SPECTOR: Step down, please.
(15:28:48/2+00:34:34) I call Franklin Caplan to the stand.
(15:28:58/2+00:34:44) THE COURT: Mr. Caplan, if you will just step in the -- in the
box. May we waive the swearing of an attorney? Or do you -- would
you like him sworn?
(15:29:08/2+00:34:54) MR. LEVIN: He's an attorney, your Honor?
(15:29:09/2+00:34:55) THE COURT: Yes.
(15:29:10/2+00:34:56) MR. LEVIN: I think that's appropriate.
(15:29:11/2+00:34:57) MR. SPECTOR: Thank you, your honor.
(15:29:12/2+00:34:58) THE COURT: To waive -- to waive? Okay, you may just be
seated. Thank you. Mr. Caplan, I lost an uncle myself and I rushed
down to a funeral today and rushed back, so I certainly sympathize
with you.
(15:29:23/2+00:35:09) MR. CAPLAN: I wonder if we're related, your Honor.
(15:29:25/2+00:35:11) THE COURT: I don't know. Vineland, New Jersey, of all
places.
(15:29:28/2+00:35:14) MR. CAPLAN: Eh, different uncle.
(15:29:29/2+00:35:15) Q: Frank, Frank would you please state your name and
occupation for the record.
(15:29:32/2+00:35:18) A: Franklin Caplan. I'm an attorney.
(15:29:34/2+00:35:20) Q: And you were present during the colloquy with the Court
and counsel regarding the purpose of this testimony?
(15:29:39/2+00:35:25) A: Yes.
(15:29:40/2+00:35:26) Q: Okay, can you explain, when did you first come into the
picture, with respect to dealing with Mr. Norris or his various
interests relative to SCO?
(15:29:52/2+00:35:38) A: On one prior occassion, prior to this transaction, roughly
the beginning, I believe, of 2009, I'm not certain -- 2008, I'm not
certain about the date, it was quite a while ago, and it pertained to
a deal that didn't occur.
(15:30:11/2+00:35:57) Q: Did you, uh, partake in the negotiations and drafting of
the deal that's before the Court now?
(15:30:16/2+00:36:02) A: Yes.
(15:30:17/2+00:36:03) Q: Tell the Court what difficulties you encountered in
getting this deal done.
(15:30:22/2+00:36:08) A: I became involved in this episode approximately between
three and four weeks ago. At that time, I came in to assist another
colleague of mine who was projecting to go on a holiday. The timing
within we were thinking that this deal had a chance to be reduced to a
contract overlapped with his vacation plan. So, I became involved and
jumped into a deal that had moved to a fairly evolved state, but which
was substantially affected by, I wouldn't say so much disagreement
about, but the need to explain precisely what it was that was being
sold, what it was that was not being sold, and how, within the realm
of assets not being sold, intellectual property that supported the
litigation that's been I'm sure discussed in these proceedings from
the beginning, could proceed such that SCO in prosecuting those cases
wouldn't be compromised in its standing and would have the full array
of rights that it intended to argue about in that proceeding.
(15:31:48/2+00:37:34) Q: And, so, that issue about how SCO can sell intellectual
property, yet retain sufficient rights in that property to maintain
lawsuits against IBM, Novell, and perhaps others, was the sticking
point?
(15:32:05/2+00:37:51) A: That was the major sticking point. On top of that, the
predictable array of buttoning-up points to make a document internally
consistent took some time, but that was the sticking point.
(15:32:22/2+00:38:08) Q: Well, did the bucket of assets change at any time during
your negotiation and drafting of this deal?
(15:32:29/2+00:38:15) A: The bucket of assets changed materially and frequently
during our drafting of this deal. In one respect, pertaining to
certain products that might or might not be included in the sale, but
more importantly, and more difficult to manage from the draftsman's
perspective, what exactly SCO needed to retain so as to be able to
maintain standing and prosecute the litigation.
(15:32:58/2+00:38:44) Q: Are there any other issues of difficulty that you had to
get around?
(15:33:04/2+00:38:50) A: There were conforming representations and warranties, uh,
I view that and suggest that one should view that in the context of
just making a document work. But it, but it, I think it's fair to
say, and it would be accurate, that all of those, I'll call them
housekeeping issues pertaining to this purchase and sale agreement,
revolved mostly and materially around the issue of the retained
litigation rights.
(15:33:30/2+00:39:16) Q: Other than the commonality of Mr. Norris and SCO, were
these the same cast of characters that were purchasing, that you were
dealing with the year before?
(15:33:38/2+00:39:24) A: No. Uh, the principal businessman, whom I've spoken to on
the telephone once I believe, but only met by email otherwise, is not
someone that I'd met previously.
(15:33:54/2+00:39:40) Q: And are you familiar with, uh, -- strike that. Where is
this person that you are referring to located?
(15:34:04/2+00:39:50) A: London.
(15:34:05/2+00:39:51) Q: So you -- the principal of the buying group then is in
London?
(15:34:08/2+00:39:54) A: Yes.
(15:34:09/2+00:39:55) Q: And Mr. Norris is not part of that buying group, he's part
of the -- well, let me strike that. What is Mr. Norris's role, then?
(15:34:17/2+00:40:03) A: I'm not certain. Mr. Norris signed the document today. I
met Mr. Norris for the first time this afternoon. I've not been aware
of Mr. Norris weighing in on any of the negotiations although I
believe he was copied on emails.
(15:34:34/2+00:40:20) Q: When did you first actually have a law firm to deal with,
on the other side of the deal?
(15:34:40/2+00:40:26) A: I believe I met, uh, Mr. Pearce, who's in the courtroom
from Bryan Cave, probably -- well again between three and half weeks
ago or a month ago.
(15:34:55/2+00:40:41) Q: And before that there were no lawyers for the buyers, is
that right?
(15:34:58/2+00:40:44) A: That's correct.
(15:34:59/2+00:40:45) Q: Okay.
(15:35:00/2+00:40:46) A: At least to my knowledge.
(15:35:02/2+00:40:48) Q: So this, did this new group of individuals behind the
buying, behind the purchaser I should say, did they engage in new due
diligence or were th-- use the old due diligence, or was it a
combination?
(15:35:15/2+00:41:01) A: I believe it was a combination, although I wasn't
primarily involved with the due diligence. There were a great many
very elaborate disclosure schedules that had been developed from the
York deal, that were delivered to Bryan Cave's team and were updated
and swapped out as information changed.
(15:35:42/2+00:41:28) Q: What about schedules for this deal, how difficult was it
to put together schedules for this deal?
(15:35:49/2+00:41:35) A: I perceived the scheduling was extremely difficult,
although I wasn't working on it directly.
(15:35:54/2+00:41:40) Q: You had help on that?
(15:35:55/2+00:41:41) A: Yes. We had -- we had a team at our law firm, Bryan Cave
had an extensive team of people, and SCO Group had an entire team
dedicated only to responding to scheduling questions and missing
information and the like.
(15:36:15/2+00:42:01) Q: What were you doing, uh, about Noon today?
(15:36:21/2+00:42:07) A: I was in the Pachulski conference room in Wilmington -- I
drove here this morning from Philadelphia -- to hope, uh hopefully
close, or sign, rather, finalize and sign, on this purchase agreement.
At around noon today, I was engaged in electronic communication with
Bryan Cave, a team of lawyers, exchanging comments principally on the
subject of what we called the retained litigation rights.
(15:36:55/2+00:42:41) While that was occurring, there was shifting of disclosure
information from one schedule to another, to describe assets that were
to be sold, as opposed to assets that were to be retained.
(15:37:10/2+00:42:56) A: And what were you doing at one o'clock this afternoon?
(15:37:15/2+00:43:01) A: At one o'clock this afternoon I was taking an Advil. I
was emailing, with, I think, increasing interest, Bryan Cave, as to
whether we were actually going to see a contract. We were aware of
the court start time at two o'clock today. We were aware of the need
to read it, once it was delivered. And, at about one o'clock today it
hadn't yet come, so we were anxious about that.
(15:37:47/2+00:43:33) Q: When did you finally see the contract?
(15:37:49/2+00:43:35) A: I think the contract hit at about one fifteen. It might
have been one ten or approximately. We received a blackline. We --
it was not blacklined against a draft that we had circulated as a
suggestion draft last evening. So it took a few minutes to create
that opportunity to read what Bryan Cave was coming back to by way of
final proposals, against that which we had suggested last evening.
(15:38:18/2+00:44:04) At about one thirty we had finished that review, and about
quarter to two we decided we were ready to sign.
(15:38:26/2+00:44:12) Q: And where did you do the signing?
(15:38:28/2+00:44:14) A: The signing took place in the lobby at the Hotel du Pont.
(15:38:32/2+00:44:18) Q: At about quarter to two, or ten to two, or so?
(15:38:35/2+00:44:21) A: It finished at about two o'clock.
(15:38:37/2+00:44:23) Q: Two o'clock.
(15:38:38/2+00:44:24) A: I went back to Pachulski to create duplicate sets of the
original document. I didn't pause to make photocopies because I
believed the court hearing was going to commence at two o'clock.
(15:38:56/2+00:44:42) Q: Now let's, let's go back now. And, and, uh, three and a
half weeks ago when you came in to help out, I think the partner's
name you helped was Dan Lampert, right?
(15:39:06/2+00:44:52) A: That's correct.
(15:39:07/2+00:44:53) VOICE: Excuse me, could you --
(15:39:08/2+00:44:54) Q: Were there any --
(15:39:09/2+00:44:55) VOICE: Dan --
(15:39:09/2+00:44:55) MR. SPECTOR: Dan Lampert.
(15:39:10/2+00:44:56) VOICE: He's been here before, I think you know him.
(15:39:13/2+00:44:59) Q: Um, were there any other deals that you were working on
while you were working on this Gulf Coast Partners deal?
(15:39:22/2+00:45:08) A: Um, yes.
(15:39:25/2+00:45:11) Q: Tell the Court about those deals.
(15:39:29/2+00:45:15) A: There were three other deals. One deal involved a plan
sponsor, whose name was LSC Holdings, I believe. That deal was
proceeding -- it accelerated shortly after this deal, the deal that's
presented today, became rather fast and furious. As it accelerated it
became apparent that what it was looking like was a plan and a DIP
loan.
(15:40:10/2+00:45:56) Uh, I believe it was -- the negotiations were between five
and six and a half million dollars of, uh, DIP loan and a plan that
would result in the acquisition of a range of equity in SCO, um,
post-confirmation. Post-bankruptcy, I guess.
(15:40:33/2+00:46:19) Q: Was there a time that it was the belief of the Berger
Singerman and SCO team that that was the leading horse in the race for
the deal?
(15:40:44/2+00:46:30) A: Yeah, there wa-- there was approx-- there was about a week
-- there was about a week's time -- five-day maybe -- maybe into
Saturday of the week before last, that that deal received the bulk of
our attention.
(15:40:55/2+00:46:41) Q: Tell -- tell the Court about the other deals that we were
working on.
(15:41:01/2+00:46:47) A: At the same time, there was a third deal that was proposed
by a gentleman named Hank Bysteen (phonetic). This deal involved a
subscription for warrants in SCO and a funding into SCO of
approximately -- to be determined, but the range was I think between
two and a half million dollars and up. And the consideration for
that, in addition to warrants, would be a share of litigation proceeds
if there are any.
(15:41:45/2+00:47:31) Q: Uh, by the way, who was your counterpart on the DIP loan
plan sponsor deal. Who were the attorneys on the other side of that?
(15:41:52/2+00:47:38) A: The attorneys were Proskauer Rose. Uh, the lead lawyer in
the deal was Peter, and I'm afraid I can't pronounce --
(15:41:59/2+00:47:45) Q: Was it Antoszyk?
(15:42:01/2+00:47:47) A: Yes, that's the name.
(15:42:02/2+00:47:48) Q: A-N-T-O-S-Z-Y-K?
(15:42:04/2+00:47:50) A: That's right. We, um, spent -- the same time we were
working on this deal with the Bryan Cave attorneys we were working --
at various times more, probably never less, simultaneously with this
Pro-- with the Proskauer lawyers.
(15:42:28/2+00:48:14) Q: Did the Hank deal have any face-to-face meetings between
the parties, to your knowledge?
(15:42:38/2+00:48:24) A: I believe the parti-- I believe the principals met on at
least three occasions that I'm aware of.
(15:42:44/2+00:48:30) Q: Weren't they in New York over this past weekend, meeting?
(15:42:48/2+00:48:34) A: I don't know that. I, I was on the telephone myself with
Mr. Bysteen this weekend.
(15:42:55/2+00:48:41) Q: So as of this weekend that deal was still very much alive?
(15:42:59/2+00:48:45) A: This -- my Saturday morning was spent on that deal.
(15:43:01/2+00:48:47) Q: Saturday morning was -- on the Hank deal?
(15:43:03/2+00:48:49) A: Yes.
(15:43:05/2+00:48:51) Q: Tell the -- tell the judge about the fourth deal.
(15:43:08/2+00:48:54) A: The fourth deal was a bit of a hybrid. It involved the
investment on the part of one of the directors of SCO of new moneys.
It asked for a simultaneous commitment on the part of other directors,
shareholders, or others who might be interested in making a commitment
to invest, a sum of money the sum of which was, minimum, a million
dollars.
(15:43:44/2+00:49:30) The consideration for that investment or those investments
would be the issuance of warrants, um, with -- again with conversion
rights similar to the Hank deal that would depend on various factors,
and also a share of the litigation proceeds if there were any.
(15:44:02/2+00:49:48) Q: With whom did you work on the other side trying to
document that deal?
(15:44:10/2+00:49:56) A: I confess a lack of memory. I -- it was happening
simultaneously.
(15:44:15/2+00:50:01) Q: Well, let me ask you if this -- if I've got the right
person. Was it David Marks?
(15:44:20/2+00:50:06) A: David Marks was assisting -- my view of David Marks was
that he was assisting me in identifying corporate formality needs that
SCO would need to accomplish to put SCO in a position to do the deal.
David Marks is a lawyer at Dorsey.
(15:44:38/2+00:50:24) Q: When were you last in conversation with him on the fourth
deal?
(15:44:44/2+00:50:30) A: Uh, Saturday.
(15:44:47/2+00:50:33) Q: So all of these deals were alive, as of this weekend?
(15:44:50/2+00:50:36) A: As of this weekend, my personal psychology was that it was
more likely that we were going to perform either the Hank deal or the
so-called Ralph deal, the fourth deal, or a combination of the two of
them.
(15:45:04/2+00:50:50) It was yesterday around eleven o'clock in the morning when I
realized that we were going to be working on this deal.
(15:45:15/2+00:51:01) Q: Was my analogy in my opening statement, about the horse
race, is that something that was actually used, or?
(15:45:22/2+00:51:08) A: Well, yes, but it came about on Belmont Saturday, so I
wouldn't take too much credit for it.
(15:45:29/2+00:51:15) Q: All right, so, this Saturday was June thirteenth. Our
response deadline was, I'll submit to the Court, was June fifth. So,
would it have been possible -- this is a rhetorical question -- for us
to have highlighted in our response that we had a deal with Gulf
Capital Partners on June fifth?
(15:45:47/2+00:51:33) A: Not in my opinion.
(15:45:49/2+00:51:35) MR. SPECTOR: Okay, um, that's all I have for the witness.
(15:45:58/2+00:51:44) THE COURT: All right, thank you, sir.
(15:45:59/2+00:51:45) MR. SPECTOR: By the way, w-- one more -- like Colombo, one more question.
(15:46:03/2+00:51:49) Q: When was the last time you were in a courtroom?
(15:46:05/2+00:51:51) A: I guess, this morning in speaking to some of the Bryan
Cave attorneys, that it was 1987.
(15:46:11/2+00:51:57) MR. SPECTOR: Okay, thank you.
(15:46:13/2+00:51:59) THE COURT: Thank you, Mr. Spector. Mr. Levin?
(15:46:15/2+00:52:01) MR. LEVIN: Your Honor, since this is unplanned testimony, and
unplanned cross-examination --
(15:46:21/2+00:52:07) THE COURT: Yes.
(15:46:22/2+00:52:08) MR. LEVIN: It would be helpful to know from Mr. Spector,
which other witnesses he will have on this narrow issue. Other than
Mr. McBride, of course, we know that.
(15:46:32/2+00:52:18) MR. SPECTOR: Depending on how it goes, I may be calling
someone from Bryan Cave. I don't even know the names of the people.
They're in the courtroom, and I may want to call them to get the other
side of the deal. But I'm reserving that. I'm just giving the best I
can tell you right now.
(15:46:45/2+00:52:31) THE COURT: All right.
(15:46:57/2+00:52:43) MR. SPECTOR: Mr. Tibbitts reminds me that there were people
in our shop doing massive due diligence all this time. We may be
calling Bill Broderick to testify about that, and we'll see. I hadn't
considered it because I hadn't considered this whole thing yet.
(15:47:17/2+00:53:03) MR. LEWIS: Good afternoon.
(15:47:19/2+00:53:05) MR. CAPLAN: Good afternoon, sir.
(15:47:20/2+00:53:06) Q: How are you?
(15:47:20/2+00:53:06) A: Fine, thank you.
(15:47:21/2+00:53:07) Q: Good. I'm Adam Lewis. I represent Novell in this matter.
I just have a very few questions for you. You gave some testimony
about how you were dealing with someone in London. Do you recall that
testimony?
(15:47:33/2+00:53:19) A: Yes, sir.
(15:47:34/2+00:53:20) Q: Do you know who's affiliated with that person in London?
(15:47:37/2+00:53:23) A: Who is -- ?
(15:47:38/2+00:53:24) Q: Who is affiliated with that person in London?
(15:47:40/2+00:53:26) A: You know, I -- I'd be -- I don't. I know his name is Eric
le Blan. I don't know anything about him, really.
(15:47:47/2+00:53:33) Q: And so you don't know whether -- whom else might have been
behind whatever group he might be representing, or anything like that?
(15:47:55/2+00:53:41) A: I've assumed that Mr. Norris was.
(15:48:00/2+00:53:46) Q: But you don't know.
(15:48:02/2+00:53:48) A: I don't know how they're related, in business or
otherwise. Um, it -- it never really came up.
(15:48:08/2+00:53:54) Q: Okay. Now, the bucket of assets and transfer of the
litigation issue, that you testified to as being really the key issue
I think you said, in terms of the negotiations -- is that a fair
statement?
(15:48:29/2+00:54:15) A: Yes.
(15:48:30/2+00:54:16) Q: Had that issue ever come up before for, uh, SCO -- the
entire contemplated transactions?
(15:48:39/2+00:54:25) A: Insofar as I've been involved -- my major involvement was
in the York, uh, attempted York deal from I think it was Christmas '07
approximately, and I don't -- the litigation was important, but the
parsing of holding back intellectual property, insofar as I can
remember, was much less important than was -- there was a certain
class of mobility products that was not to be sold, and trying to
describe that so it was clear what was and what wasn't being conveyed
was more at issue in York.
(15:49:19/2+00:55:05) Q: But it was an issue with York as well, whether larger or
smaller?
(15:49:24/2+00:55:10) A: It was, it was -- relevant. I don't actually recall, I
don't recall that anything like the type of negotiation that we went
throught with respect to this deal, was pertinent in that York
transaction.
(15:49:39/2+00:55:25) Q: And in the prior SNCP deal, the Stephen Norris, the plan
that was filed I think in the Spring of last year, do you recall
whether that issue came up in that?
(15:49:49/2+00:55:35) A: I had very little involvement with that --
(15:49:51/2+00:55:37) Q: Okay.
(15:49:52/2+00:55:38) A: I read a term sheet, and I didn't participate further.
(15:50:05/2+00:55:51) Q: When you decided to sign the agreement today, were you
satisfied that the agreement was in final form?
(15:50:15/2+00:56:01) A: Yes.
(15:50:16/2+00:56:02) Q: Okay, you don't anticipate any amendments, changes,
cleanups, fixes, issues that might have been overlooked?
(15:50:26/2+00:56:12) Q: It's conceivable that a type of product that is intended
not to be sold -- this is not pertinent to the litigation issues --
but a type of product that is not to be sold was accurately reflected
as excluded in one place but not another place. Um, my -- my clients
were aware of that. I believe the Bryan Cave team is aware of that,
the decision was, there was no time to fix it, but there was an
understanding that this Me, Inc. class of assets is not to be sold.
(15:51:04/2+00:56:50) Q: Do you believe that there may be other issues that will
need some cleanup later on because of the rushed nature of the
negotiations?
(15:51:12/2+00:56:58) A: I'm not aware of any.
(15:51:13/2+00:56:59) Q: Okay, do you think there might be, given your experience
in trying to document deals?
(15:51:30/2+00:57:16) A: It -- I mean, just in general, this type of work, this was
an extraordinarily fast process and a complicated document. At the
same time, um, we collaborated very well, over the -- especially
yesterday and this morning. Um, it's possible. It wouldn't shock
anybody who's ever been around a transaction. But, as I sit here, I
think we did a pretty good job, in getting this right.
(15:51:49/2+00:57:35) MR. LEWIS: I have no further questions. Thank you, sir.
(15:51:53/2+00:57:39) THE COURT: Thank you, Mr. Lewis. Anyone else? Mr. Levin.
(15:52:00/2+00:57:46) MR. LEVIN: Thank you, your Honor. Good afternoon,
Mr. Caplan, my name is Richard Levin, I represent IBM.
(15:52:04/2+00:57:50) MR. CAPLAN: Good afternoon.
(15:52:05/2+00:57:51) MR. LEVIN: First, condolences on your loss. I'm sorry you
have to be here under these circumstances.
(15:52:09/2+00:57:55) MR. CAPLAN: Thank you.
(15:52:10/2+00:57:56) Q: I apologize if I didn't hear earlier, but what law firm
are you with?
(15:52:14/2+00:58:00) A: Berger Singerman.
(15:52:16/2+00:58:02) Q: Oh, you are with Berger.
(15:52:26/2+00:58:12) You said that, uh, Mr. Lambert -- Lampert was handling the
deal before you got involved?
(15:52:31/2+00:58:17) A: Yes.
(15:52:32/2+00:58:18) Q: Do you know how long he had been working at it?
(15:52:35/2+00:58:21) A: Not, not specifically. I believe that Dan is generally
the principal lawyer on our transactional team that's involved with
SCO, so, I'm surmising that whenever this latest round of transactions
occurred, he would have been involved at the ti-- at the beginning.
(15:52:53/2+00:58:39) Q: But you don't know when that was.
(15:52:55/2+00:58:41) A: I don't.
(15:53:00/2+00:58:46) Q: What is your, uh, what is your specialty?
(15:53:04/2+00:58:50) A: Business transactions, real estate transactions.
(15:53:06/2+00:58:52) Q: Real estate primarily?
(15:53:08/2+00:58:54) A: Fifty-fifty.
(15:53:09/2+00:58:55) A: What is the other fifty
(15:53:11/2+00:58:57) A: Corporate and business transactions.
(15:53:13/2+00:58:59) Q: No particular focus on IP?
(15:53:15/2+00:59:01) A: No.
(15:53:16/2+00:59:02) Q: Does Mr. Lampert focus on IP?
(15:53:17/2+00:59:03) A: No. Both of us have probably similar level of experience
with IP in the sense of deal lawyers who get involved in deals that
involve IP but -- he's -- he -- he and I, I think have both been
practicing around the same time, which is about twenty-three years,
and in that time, uh, we confront copyrights and trademarks
occasionally.
(15:53:48/2+00:59:34) I've never been around a patent and wouldn't know what it
looked like, but, uh, I have, I think, a working knowledge of
copyrights and tradmarks and intellectual property issues.
(15:54:02/2+00:59:48) Q: Uh, you testified earlier that there was extensive
discussion on the -- on getting the assets in form, um, if I can say
this right -- what SCO needed to maintain its ability to prosecute the
litigation -- approximately your words. How did that, how did that
issue come up, rather than just we're transferring all the rights to
you?
(15:54:27/2+01:00:13) A: The deal structure, if I could put it in that term, was
to, sell the business, quote-unquote, possibly with some holdbacks of
certain types of products. The one that I mentioned earlier, Me,
Inc., is an example of that carve-out.
(15:54:49/2+01:00:35) But, in any event, whatever the carve-out, to really carve
out the litigation and whatever proceeds would derive from being
successful with the litigation. And, that involved considerations of
standing and considerations of what happens if they're successful in
prosecuting claims that derive from that success, and trying to
describe all that was what I was trying to allude to was that -- uh,
most difficult issue in terms of documentation and structure.
(15:55:27/2+01:01:13) Q: Uh, and of course Mr. Lamburg had been in-- Lampert had --
apologize for mispronouncing his name continually, let me try that
again. Mr. Lampert had been involved in that very issue before you
got involved, right?
(15:55:40/2+01:01:26) A: I don't know for sure. Uh, let me -- someone will correct
me if I'm wrong on this point -- I believe the first draft of the
asset purchase agreement the, evolution of which is presented today,
didn't have this issue articulated in any -- in any w-- in any way.
(15:56:07/2+01:01:53) I think this came about in discussing, you know, how this
deal was actually going to work, and taking what struck me as not a
generic asset purchase agreement, certainly SCO-tailored, but one that
didn't really drill down in any kind of precise way this distinction
between selling what I called the business a moment ago, and retaining
the litigation.
(15:56:33/2+01:02:19) I think that altogether arose and happened on my watch. Now
when I say my watch, my colleague Dan and others were involved in this
negotiation and the documentation as well.
(15:56:48/2+01:02:34) Q: You said you took it over from him about four weeks ago
when he was going on vacation. Has he come back from vacation yet?
(15:56:53/2+01:02:39) A: He's back from vacation.
(15:56:54/2+01:02:40) Q: How long was his vacation?
(15:56:56/2+01:02:42) A: Six days, I believe. Six bloody days. The -- we worked
together during, uh, I think two weeks before he left. This was more
about ramping up and being fluent on what was supposed to be
happening. He was around for -- if I was in-- if I was involved in a
month I would say he was around for all this -- all but six days.
(15:57:19/2+01:03:05) Q: And, and did the Berger Singerman legal team believe that
this issue about what you characterized as standing was critically
important to be able to maintain the litigation pending in Utah?
(15:57:33/2+01:03:19) A: I used the word standing. I'm not sure that SCO and the
litigation team put it in quite precisely the same way. It was a
convenient way for me to describe what I was trying to preserve.
Personally I think that probably standing in the precise technical
sense of what that means is affected by this, but I use that more as a
convenient expression than as a litigation necessity or strategy.
(15:58:09/2+01:03:55) Q: Well then let me phrase this in a more general term, did
you -- did the Berger Singerman legal team believe that this issue of
the ability of SCO to continue to prosecute the litigation, and the --
describing it in the particular way that you did in the asset purchase
agreement, was critical to SCO's ability to continue to process -- uh,
prosecute the litigation?
(15:58:37/2+01:04:23) MR. SPECTOR: Uh, I'm going to object. He's asking about the
Berger Singerman team. Uh, I think he's qualified to answer what he
believed, but not as a team, there are multiple people on that team.
I'll object to the question.
(15:58:50/2+01:04:36) MR. LEVIN: Then I'll ask --
(15:58:52/2+01:04:38) THE COURT: Yes.
(15:58:53/2+01:04:39) Q: -- the same question with what you -- with respect to what
you believed, Mr. Caplan.
(15:58:56/2+01:04:42) A: Yeah, I believed, and believe, that it was important, to
be able to maintain the litigation and to be successful at it, that we
describe, this thing that I'm trying to articulate, correctly.
(15:59:15/2+01:05:01) Q: You mentioned, um, the initial draft of the purchase
agreement. When was that initial draft?
(15:59:24/2+01:05:10) A: Uh, it preceded -- there was a draft that I inherited on a
particular Sunday, whenever it was, I'll say a month ago roughly, and
I believe that it came out of our office. And when I received it it
was accompanied by a revision draft that was prepared by Bryan Cave.
So my first review was to compare what Bryan Cave had done to our
starting document.
(16:00:04/2+01:05:50) Q: You described three other deals. Do you know when those
deals, when discussions over those deals began?
(16:00:15/2+01:06:01) A: With respect to what I call the Ralph deal, deal number
four, roughly two and a half weeks ago. With respect to what I call
the Hank deal, deal number three, roughly the same time. And with
respect to the Proskauer deal, LSC, uh, a little bit prior to the time
of the other two. Possibly the prior week.
(16:00:58/2+01:06:44) I think it's likely that I became aware of those deals
approximately when they first arose, because we were so active during
that time in trying to figure out what we were going to be doing.
(16:01:28/2+01:07:14) Q: And, you also testified that you got a revised document at
one fifteen this afternoon?
(16:01:35/2+01:07:21) A: One ten, one fifteen.
(16:01:37/2+01:07:23) Q: And that you were able to review all those revisions and
come to a decision within fifteen or twenty minutes? You and the
client?
(16:01:44/2+01:07:30) A: I think we came to a decision at the hotel, so I'm
thinking that it was probably close to two o'clock. I, uh, I came to
the hotel last, because I stayed to print the document out, and I
think that others were reading it while I was reading it too, and I
had a conversation with our clients at the hotel, and that was the
point in time that we decided to go with it.
(16:02:15/2+01:08:01) Q: So it's fair to say you accepted all of the revisions that
Bryan Cave proposed at that point?
(16:02:20/2+01:08:06) A: We talked about one possible alternative wording on a
point, and decided not to press the issue, and that was it.
(16:02:36/2+01:08:22) MR. LEVIN: Thank you, Mr. Caplan. I have no further
questions, your Honor.
(16:02:39/2+01:08:25) THE COURT: Thank you, Mr. Levin. Excuse me. Mr. McMahon?
(16:02:42/2+01:08:28) MR. MCMAHON: No (inaudible).
(16:02:43/2+01:08:29) THE COURT: No questions. All right, sir. Anything further?
(16:02:48/2+01:08:34) MR. SPECTOR: Thank you very much, Frank.
(16:02:49/2+01:08:35) MR. CAPLAN: Thank you. Thank you, your Honor.
(16:02:50/2+01:08:36) THE COURT: Thank you, Mr. Caplan, you may step down and you
are excused, uh, when ready.
(16:02:55/2+01:08:41) MR. CAPLAN: Thank you, sir.
(16:02:59/2+01:08:45) THE COURT: Back to Mr. McBride?
(16:03:00/2+01:08:46) MR. SPECTOR: If I might have a minute to find out who here is
from Bryan Cave and whether they might have anything to add.
(16:03:07/2+01:08:53) THE COURT: Absolutely.
(16:03:21/2+01:09:07) VOICE: Your honor, while that's going on, may we take a
very short recess?
(16:03:24/2+01:09:10) THE COURT: Of course we may, at anyone's request.
(16:03:25/2+01:09:11) VOICE: Thank you.
(16:03:27/2+01:09:13) THE COURT: Five to ten minutes, certainly.
(16:03:28/2+01:09:14) VOICE: Thank you, your Honor.
(16:03:29/2+01:09:15) THE COURT: We stand in recess.
(16:03:31/2+01:09:17) *** RECESS ***
Third Session
(audio: 16:15:59 to 17:04:41 (23MB mp3))
(16:15:59/3+00:00:00) CLERK: Please rise.
(16:16:03/3+00:00:04) THE COURT: Thank you, everyone, please be seated.
(16:16:05/3+00:00:06) MR. SPECTOR: Your Honor, we'll recall Mr. McBride for the
rest of his testimony.
(16:16:08/3+00:00:09) THE COURT: Thank you. Mr. McBride, you've already been
sworn, you may just proceed.
(16:16:18/3+00:00:19) Q: Mr. McBride, was there any significant change in the
landscape between when the York deal was being negotiated and the
first SNCP deal was negotiating on the one -- being negotiated on the
one hand, versus when you were dealing with Gulf Capital Partners now,
any significant change in the lan-- legal landscape?
(16:16:41/3+00:00:42) A: Yes, there was a significant change.
(16:16:42/3+00:00:43) Q: What was that?
(16:16:44/3+00:00:45) A: In the Summer of 2008, we had a bench trial in the Utah
case regarding the forty million dollar judgment that we had hanging
over our heads when we first showed up in this courtroom. And during
that bench trial that amount was reduced from nearly forty million
down to two and a half million dollars plus interest.
(16:17:05/3+00:01:06) Q: Besides the judgment amount, were there any intellectual
property issues that made things easier or harder in your negotiations
the second time around?
(16:17:12/3+00:01:13) A: Yes, there were a couple of things that helped in that
regard.
(16:17:16/3+00:01:17) First of all, Judge Kimball recognized the sale of the UNIX
business, that it was proper for us to be selling the UNIX products.
Secondly, he recognized that post-1996 development work that had gone
on, those copyrights did belong to S-C-O. And the general validation
-- then there was a recognition that we were able to do our SCOsource
licensing, which was an important piece for our litigation recovery.
(16:17:51/3+00:01:52) And then finally he gave a general blessing of the fact that
we did have the rights to run the UNIX business. Maybe that's back to
point one.
(16:18:02/3+00:02:03) Q: Uh, so did that make it any different when you went to
negotiate the deal the second time around with Mr. Norris and his
different cast of characters?
(16:18:10/3+00:02:11) A: Yes, as we went in to -- and I wouldn't call them cast of
characters, because, uh, they're actually pretty solid investment
firm, but -- the group that we're working with going back to Steve and
his group on the second round, were -- let's say that it opened the
door that had previously been shut by the other ruling.
(16:18:32/3+00:02:33) Q: Now, we were, when we stopped, we were asking what
happened after you put up for public notice the sale of the assets
through the 363 process, and the potential stand-alone plan, in the
beginning of 2009. And you said you started getting -- maybe I
didn't, maybe you didn't get this testimony -- did you say whether you
got interest from people to not do a 363 sale and do a stand-- do a
separate deal with these people?
(16:18:59/3+00:03:00) A: We did receive interest. When we published in early
January that we were going to go out and do a sale, we did get
approached by various parties to try and consummate, uh, some kind of
a plan (inaudible) a deal.
(16:19:11/3+00:03:12) Q: Now I recognize that we weren't prepared for this, and you
may -- your memory may not be a hundred percent, but can you tell the
Court, in addition to Mr. Norris, who we know about, who else
contacted you to do a deal?
(16:19:22/3+00:03:23) A: Yes, there was a group out of Los Angeles. Platinum
Equity, buys a lot of software companies, they were a contender. We
received a call from Charlie Hale, from the York deal -- who was the
principal involved in the early York deal, and we spent sixty days
negotiating with him. Uh --
(16:19:50/3+00:03:51) Q: And what time frame was this?
(16:19:53/3+00:03:54) A: This is in the February through April time frame. Now,
we, we -- during this period of time, the -- importantly, uh, Steve
Norris and his partners had come forward with a new investment group
that was London-based.
(16:20:08/3+00:04:09) Eric le Blan, who works with Basil Al-Rahim out of London,
and runs an investment group called Merchant Bridge International,
came forward, and this was the second investment group we worked with
Steve. And from the period of early 2009 up until current day, they
have put a substantial amount of energy into due diligence, into going
through and drafting documents, getting attorneys involved, and get us
to the point where we are right now.
(16:20:47/3+00:04:48) Q: Talking about getting attorneys involved, was that an easy
thing to do?
(16:20:52/3+00:04:53) A: No. Actually, it was a process just to get attorneys
involved. One of the -- the problems we have in our cases, and we
haven't -- we've seen it not just in this case, but in various ones --
is other law firms typically get conflicted out because our archenemy,
as it were, IBM, seems to have a lot of relationships with attorneys.
(16:21:13/3+00:05:14) And, uh, and so I -- we went through a series of attorneys
where they would get engaged, I think the first one was Latham and
Watkins, and they were ready to go, and then they got conflicted out.
Um, and, and there were -- I think there was another group along the
way there. Um, but eventually we did get an attorney group here. So
that -- that also caused some of the delay, from the Norris team's
standpoint.
(16:21:35/3+00:05:36) Q: Was there any purpose, on SCO's part, to delay getting
this deal done?
(16:21:41/3+00:05:42) A: Our goal, from the beginning, has never been to delay.
It's been to try and get things accelerated, to get things finished
and completed.
(16:21:49/3+00:05:50) Q: How hard has the-- SCO been working to put a deal together
finally?
(16:21:53/3+00:05:54) A: Well, I've, I've done, uh, thirty-five, uh, deals, let's
say, in my career, and this has by far been the hardest one. It's
been the smallest one, and it's been the hardest one, which is a
little bit weird.
(16:22:06/3+00:06:07) The, the problem point always keeps coming down to this
ruling of what do we own and what do we not own. And it's compounded
in the deal we're talking about with Merchant Bridge International,
and -- and with Gulf Capital Partners, um, because we're talking about
taking what's already a rough foundation of a house, if you will, and
then talking about splitting that up. You know, how do we --
(16:22:33/3+00:06:34) And so the general deal with Gulf Capital Partners is, um,
the UNIX business, that we've been in this courtroom many months now
talking about how critical the customers are, the core operating
systems they run are. How do we take our customers, our partners, our
products, our resellers, that whole ecosystem of UNIX, and hand it off
to somebody that will take that forward.
(16:22:57/3+00:06:58) And an important part of the Gulf Capital Partners deals
isn't just the money that we get in going forward, but they're
committed to fund it going forward, that they will take it and move it
forward.
(16:23:07/3+00:07:08) Now, that's not our concern, from here forward, once the deal
is done.
(16:23:11/3+00:07:12) Q: Who-- Whose benefit would that be?
(16:23:13/3+00:07:14) A: Well, that would be to the benefit of, of our customers
and employees, and partners and resellers, many of whom are in the
room here today. So that was, uh, one of the things that we've tried
to do from the beginning of these cases is to --
(16:23:27/3+00:07:28) 
(a beep) (probably DTMF 8 (852 Hz and 1336 Hz))
(16:23:28/3+00:07:29) -- to -- to not prejudice --
(16:23:29/3+00:07:30) (ring)
(16:23:30/3+00:07:31) -- our key partners. Whether it was, um, --
(16:23:35/3+00:07:36) (ring)
(16:23:37/3+00:07:38) Q: Whose phone is that?
(16:23:38/3+00:07:39) A: I don't know.
(16:23:41/3+00:07:42) VOICE (telephonic): Sorry I'm not available right now --
(16:23:41/3+00:07:42) MR. SPECTOR: Your phone!
(16:23:42/3+00:07:43) MR. MCBRIDE: That was mine, sorry about that. That was
weird, I just leaned up against it --
(16:23:44/3+00:07:45) THE COURT: That happens.
(16:23:45/3+00:07:46) MR. MCBRIDE: -- and I hit a speed dial.
(16:23:46/3+00:07:47) THE COURT: Yes, yes, it's happened to me.
(16:23:47/3+00:07:48) MR. MCBRIDE: Think I'm going to take that out. That's
dangerous. Sorry about that, your Honor.
(16:23:50/3+00:07:51) THE COURT: That's all right.
(16:23:52/3+00:07:53) A: Um, we've been trying to get a deal that takes care --
that doesn't prejudice employees, does not prejudice customers, but at
the same time we respect that we may owe Novell some money.
Originally it was -- we thought we owed them forty million, now it's
down to two and a half, and that may be zero before the summer is
over, but if we owe them money, then we're committed to pay them, and
this deal accounts for that.
(16:24:15/3+00:08:16) Um, we're committed to taking care of employees, taking care
of customers, creditors, and also shareholders are an important piece
of the pie.
(16:24:24/3+00:08:25) Q: And so, I guess your answer to my question, were you
trying to slow things down, your answer to that is?
(16:24:31/3+00:08:32) A: No. We were -- trying to get it done. I guess the whole
point of that diatribe was to let you know that we're dealing with
something that's very complicated, and the whole idea of splitting
this up and taking care of this group of people over here and getting
a contract that works for Merchant Bridge and Gulf Capital Partners
and still works for the estate, has not been a short putt.
(16:24:53/3+00:08:54) Q: When did you get the board's approval to sign a deal with
Gulf Capital Partners?
(16:24:58/3+00:08:59) A: Um, that came about just a couple of days ago.
(16:25:01/3+00:09:02) Q: That was after the response deadline, wasn't it?
(16:25:04/3+00:09:05) A: Yes.
(16:25:05/3+00:09:06) Q: And when I was preparing the response on behalf of your
company, did I know, did you know, what deal, if any, we would have,
to present to the Court today?
(16:25:13/3+00:09:14) A: No, and I know that there was one point in time you
mentioned to me that you're -- you're -- you were dizzy.
(16:25:20/3+00:09:21) Q: I'm still dizzy.
(16:25:21/3+00:09:22) A: -- which I think related to the -- the deals, but I'm not
sure.
(16:25:25/3+00:09:26) MR. SPECTOR: All right. Um. That's all I have for this
witness, your Honor, on this topic.
(16:25:32/3+00:09:33) THE COURT: Thank you, Mr. Spector.
(16:25:34/3+00:09:35) MR. SPECTOR: Um, you -- you don't get to leave.
(16:25:37/3+00:09:38) MR. MCBRIDE: Can I make one more comment?
(16:25:38/3+00:09:39) (Laughter)
(16:25:41/3+00:09:42) MR. MCBRIDE: I guess not.
(16:25:43/3+00:09:44) MR. SPECTOR: No, you don't get to leave right now.
(16:25:44/3+00:09:45) THE COURT: Oh no, no, you're about to be cross-examined,
Mr. McBride, I'm sorry.
(16:25:46/3+00:09:47) MR. MCBRIDE: Okay.
(16:25:47/3+00:09:48) (silence)
(16:26:04/3+00:10:05) MR. LEWIS: Your Honor, Mr. Levin, who tried to recruit me
many years ago as I was coming out of law school --
(16:26:09/3+00:10:10) MR. LEVIN: Darn, missed that one!
(16:26:10/3+00:10:11) THE COURT: Ha, ha.
(16:26:12/3+00:10:13) MR. LEWIS: -- always sends me up first.
(16:26:14/3+00:10:15) THE COURT: I see.
(16:26:23/3+00:10:24) Q: Mr. McBride, do you recall a hearing in this court
sometime a year ago this past Spring, in which SCO wanted to assume
its -- a lease with its landlord, do you recall that hearing?
(16:26:40/3+00:10:41) A: Generally, yes. I don't remember the details, but I know
-- I remember the point in time, yes.
(16:26:43/3+00:10:44) Q: Right, you remember the event.
(16:26:45/3+00:10:46) A: Yes.
(16:26:46/3+00:10:47) Q: And do you recall testifying at that hearing?
(16:26:48/3+00:10:49) A: I, I don't remember. I know I've been up here a time or
two, but I don't remember exactly.
(16:26:52/3+00:10:53) Q: Okay. Do you recall testimony in which you were
explaining that, um, SCO had, uh, left off trying to find a
transaction for a while and had just resumed its efforts, and -- and
that explained why it was -- the case had gotten so far, uh, without
any resolution and that now you were starting to work again with SNCP.
Do you remember that testimony at all, a year ago, last Spring?
(16:27:23/3+00:11:24) A: I, I don't remember as -- what -- what I testified at that
point in time.
(16:27:27/3+00:11:28) Q: Okay. Is it true that at some point in the, perhaps early
Spring of last year, SCO stopped trying to find a deal for a while?
(16:27:45/3+00:11:46) A: I would say that we -- that there was a period of time
where, after the original SNCP deal did not -- so we tried the York
deal, we tried SNCP. I thi-- I -- as I recall at the end of the SNCP
deal, there was, um, a lot of discussion about let's just see what
happens in this trial, because if we owe forty million dollars, that's
one capital need to solve. If it's less than that, then that's a
different one. So there was probably that period of time where we
took a breather.
(16:28:13/3+00:12:14) Q: Isn't it also true that you, uh, resumed your efforts
before the trial results?
(16:28:20/3+00:12:21) A: I know that, uh, I've been, for the last year and a half,
uh, practically non-stop in trying to get a deal in place. I know
that during that period of time, there hasn't been a month go by that
I haven't had some discussion with Steve Norris or other potential
partners.
(16:28:37/3+00:12:38) Q: Now, do you recall a hearing at which the SNCP deal of
last Spring, a year ago last Spring, uh, was, uh, on the calendar.
You recall that hearing? The SNCP plan?
(16:28:57/3+00:12:58) A: Uh.
(16:28:58/3+00:12:59) Q: Again, I'm not asking for -- do you just remember that a
year --
(16:29:00/3+00:13:01) A: I remember that --
(16:29:01/3+00:13:02) Q: -- a year ago last April there was a hearing --
(16:29:02/3+00:13:03) A: Yes
(16:29:03/3+00:13:04) Q: -- on the SNCP plan.
(16:29:04/3+00:13:05) A: Yes, yes.
(16:29:05/3+00:13:06) Q: And do you recall that at that time, the debtor elected to
not go forward with that plan that day? Do you recall that?
(16:29:11/3+00:13:12) A: Yes.
(16:29:12/3+00:13:13) Q: And do you recall that your counsel explained to the Court
that the reason that had happened was that SNCP had wanted to
restructure the deal, do you -- SCO and SNCP had begun to consider a
different way to do the same deal?
(16:29:25/3+00:13:26) A: Yes.
(16:29:26/3+00:13:27) Q: Okay.
(16:29:32/3+00:13:33) Now, has the question of how to handle the existing
litigation in terms of what rights could or could not be transferred
come up before the negotiations in this deal that you signed today?
(16:29:48/3+00:13:49) A: I'm sorry, could you repeat that?
(16:29:50/3+00:13:51) Q: You heard Mr. Caplan's testimony, correct?
(16:29:52/3+00:13:53) A: Yes, uh-huh.
(16:29:53/3+00:13:54) Q: And in his testimony, Mr. Caplan indicated that it was
crucial to be sure that the debtor kept certain assets --
(16:30:01/3+00:14:02) A: Right.
(16:30:03/3+00:14:04) Q: -- because of concerns about being able to prosecute the
litigation. Do you recall that?
(16:30:07/3+00:14:08) A: Yes.
(16:30:08/3+00:14:09) Q: Had that issue come up ever before, in the year and some
odd, almost twenty months, that the -- that SCO's been in bankruptcy?
(16:30:15/3+00:14:16) A: Yes.
(16:30:16/3+00:14:17) Q: When did it first come up?
(16:30:19/3+00:14:20) A: Um, it first came up as an issue in the York deal. I
think Frank was accurate in his assessment, it wasn't as prominent as
it is now, but -- but it was -- I think what happened in the York deal
was when the ruling came from this court that it was hard to move
forward with the current ruling, that -- that made it difficult. And
then, at various steps along the way, there were discussions of that
issue.
(16:30:51/3+00:14:52) Q: And did it come up in the SNCP transaction of a year ago
last April?
(16:30:58/3+00:14:59) A: I don't remember. I don't recall, specifically, on that.
(16:31:01/3+00:15:02) Q: But, what do with those assets -- you were, you were, you
were going to hold on to the litigation in that --
(16:31:05/3+00:15:06) A: Yes.
(16:31:06/3+00:15:07) Q: -- deal, is that right?
(16:31:07/3+00:15:08) A: Yes.
(16:31:11/3+00:15:12) Q: Just as you are -- I think, from what we can see -- in
your current plan?
(16:31:14/3+00:15:15) A: One -- one of the differential -- yes, bu--
(16:31:17/3+00:15:18) Q: Okay. Now --
(16:31:20/3+00:15:21) A: It was with a different group of people that we were talking
then than we are now, though.
(16:31:24/3+00:15:25) Q: I understand. I'm focusing on the issue, not the people.
(16:31:25/3+00:15:26) A: Okay.
(16:31:29/3+00:15:30) Q: Now, in, uh, June of last year, there was a hearing, do
you recall, on the debtors' motion for an extension of exclusivity.
Do you recall that hearing, generally?
(16:31:45/3+00:15:46) A: I don't remember specifics. I've been here a few times.
I don't remember what that -- I remember --
(16:31:49/3+00:15:50) Q: Do you recall, at, uh, in connection with that motion the
debtor -- I think this was the third motion to extend exclusivity -- I
can't remember, I think it was, but it was, I think, in June of last
year, and the debtor was arguing that the trial had just taken place
in the District Court of the balance of the issues, and really the
debtor needs to know what the outcome of the trial was before it could
proceed, do you recall that?
(16:32:17/3+00:16:18) A: Yes, I do remember that now.
(16:32:20/3+00:16:21) Q: And do you recall then in connection with the motion in
September of last year to extend exclusivity yet again, the debtor
argued that it really needed to get the appeal on file before people
would be willing to consider some kind of transaction for the
resolution of this case, do you recall that?
(16:32:43/3+00:16:44) A: I remember the hearing and generally talking. I don't
remember specifically what my testimony was at that point.
(16:32:48/3+00:16:49) Q: Do you recall the argument, though?
(16:32:50/3+00:16:51) A: Yes
(16:32:52/3+00:16:53) Q: And you recall that that was the debtors' position in
part, was that it needed to get -- that it -- that people who might be
interested in the debtor needed to know the appeal was on file before
they would come out of the woodwork, do you recall that?
(16:33:04/3+00:17:05) A: I think that was -- was an issue.
(16:33:06/3+00:17:07) Q: Okay.
(16:33:22/3+00:17:23) You mentioned your board approval as being within the last
couple of days.
(16:33:26/3+00:17:27) A: Yes.
(16:33:27/3+00:17:28) Q: Do you recall when the board was asked to consider the
transaction?
(16:33:35/3+00:17:36) A: Over the last few weeks we've briefed the board
continually on this horse race that we've been in with the various
horses on the track.
(16:33:47/3+00:17:48) Q: Could you have submitted the transaction to the board
before the last couple of days?
(16:33:54/3+00:17:55) A: We, we did submit to them in substance. We've submitted
to them generally what we were talking about. But again they were one
of three other horses that we were evaluating.
(16:34:07/3+00:18:08) Q: So the board chose not to act on that, for a while. Is
that right?
(16:34:12/3+00:18:13) A: We didn't have -- we had a material change in the Gulf
Capital Partners deal that came up just last week, at the end of last
week, which was they posted a deposit of two hundred and fifty
thousand dollars, and so that was a material change that came up just
last week.
(16:34:35/3+00:18:36) Q: But no one knew that was going to come up before it did,
is that right?
(16:34:40/3+00:18:41) A: No, one of the -- the -- no, that's correct.
(16:34:43/3+00:18:44) Q: Okay. So the board might have acted before that happened?
(16:34:50/3+00:18:51) A: Well, they didn't have anything to act on before that. I
mean you can only act on something that -- if the other side's ready
to sign the deal, which we didn't have.
(16:34:58/3+00:18:59) Q: Was the other side ready to sign the deal two days ago?
(16:35:04/3+00:19:05) A: They were ready pending some changes that we wanted to
make. Before, it was changes they wanted to make.
(16:35:12/3+00:19:13) Q: Okay.
(16:35:13/3+00:19:14) (silence)
(16:35:33/3+00:19:34) MR. LEWIS: Okay, I think I have no further questions. Thank
you.
(16:35:35/3+00:19:36) MR. MCBRIDE: Okay.
(16:35:38/3+00:19:39) THE COURT: Mr. Levin.
(16:35:41/3+00:19:42) MR. LEVIN: Thank you, your Honor. Good afternoon,
Mr. McBride
(16:35:44/3+00:19:45) MR. MCBRIDE: Hello, Mr. Levin.
(16:35:46/3+00:19:47) Q: I want to make sure I understood what your testimony was
earlier when you were first on the stand, and now. You said that the
Middle Eastern legal team that Stephen Norris Capital Partners was
representing in early 2008 had problems with the litigation in the
Utah court and that was one of the reasons they withdrew their offer.
(16:36:15/3+00:20:16) A: Correct.
(16:36:17/3+00:20:18) Q: And also that York had withdrawn for the same reason.
(16:36:21/3+00:20:22) A: Correct.
(16:36:26/3+00:20:27) Q: And you said that Mr. Norris came forward with a new
investor group, um, early in 2009, early this year, is that correct?
(16:36:37/3+00:20:38) A: Yes. I actually first met them in the latter part of 2008,
but they became seriously engaged in the early part of this year.
(16:36:47/3+00:20:48) Q: And from then until now they-- they've put a substantial
amount of time into this transaction?
(16:36:51/3+00:20:52) A: Yes.
(16:36:58/3+00:20:59) Q: You also said that the board approval came a few days ago,
is that right?
(16:37:03/3+00:21:04) A: Yes, that's correct.
(16:37:04/3+00:21:05) Q: So the board hasn't approved the final agreement that
Mr. Caplan was describing there were still ongoing negotiations on
even as late as this afternoon, is that right?
(16:37:12/3+00:21:13) A: No, that's not right.
(16:37:14/3+00:21:15) Q: The board approved the agreement this afternoon or a few
days ago?
(16:37:17/3+00:21:18) A: They approved it a few days ago.
(16:37:18/3+00:21:19) Q: So, they didn't approve --
(16:37:19/3+00:21:20) A: They approved us to sign off what was within the realm of
what we signed off on.
(16:37:25/3+00:21:26) Q: So they didn't approve this particular--
(16:37:27/3+00:21:28) A: Yes they did.
(16:37:29/3+00:21:30) Q: I'm not sure I understand --
(16:37:30/3+00:21:31) A: What happens with boards is they give you latitude to sign
within a certain range of things, and --
(16:37:35/3+00:21:36) Q: I didn't ask --
(16:37:35/3+00:21:36) A: -- if you get the deal there, then you sign, and that's
what we got to.
(16:37:39/3+00:21:40) Q: I didn't ask whether this agreement was within the
latitude of what the board gave you. I asked whether the board
approved this particular agreement.
(16:37:46/3+00:21:47) A: Yes they did.
(16:37:47/3+00:21:48) Q: This particular one that didn't exist when they held their
board meeting?
(16:37:50/3+00:21:51) A: They approved this deal.
(16:37:51/3+00:21:52) MR. SPECTOR: Your hon-- objection. I think they're
argumentative. I think the facts are on the record and we can just make
our own conclusions from them. I object.
(16:37:58/3+00:21:59) MR. LEVIN: I'll withdraw the question, your Honor.
(16:37:59/3+00:22:00) THE COURT: All right.
(16:38:03/3+00:22:04) Q: You also testified, I think you said that the ruling from
this court, I guess in-- although you didn't date it, but I recall it
was in November of 2007 -- made it hard to move forward with the York
deal?
(16:38:16/3+00:22:17) A: I don't remember the time frame. It was sometime between,
well it was sometime in that general time range.
(16:38:23/3+00:22:24) Q: But th-- did I get it right that you said that the ruling
from this court made it hard to move forward with the York deal.
(16:38:30/3+00:22:31) MR. SPECTOR: Your honor, I (inaudible)
(16:38:32/3+00:22:33) MR. LEVIN: I'm asking the witness to confor-- to confirm what
I thought I wrote down and heard --
(16:38:38/3+00:22:39) MR. MCBRIDE: I --
(16:38:39/3+00:22:40) MR. LEVIN: -- during the testimony.
(16:38:40/3+00:22:41) THE COURT: I'll overrule the objection.
(16:38:45/3+00:22:46) A: I recall that the York principal, Charlie Hale, came back
to me, and there was a writing that came from this court, I don't
remember exactly when it came from, but I believe your Honor made a
written statement that you weren't -- didn't understand yourself how a
deal could get done when so many issues were at issue in the District
Court out in Utah.
(16:39:10/3+00:23:11) And that's the statement that I was referring to that came up
in the York deal. That was the statement that made it difficult for
them to complete a deal with us.
(16:39:22/3+00:23:23) MR. LEVIN: Thank you, Mr. McBride. Your honor, I have no
further questions.
(16:39:24/3+00:23:25) THE COURT: All right. Anything further?
(16:39:30/3+00:23:31) MR. SPECTOR: I have no redirect, your Honor.
(16:39:33/3+00:23:34) THE COURT: All right. Mr. McBride, you may step down now,
sir.
(16:39:35/3+00:23:36) MR. MCBRIDE: Thanks.
(16:39:50/3+00:23:51) MR. SPECTOR: Your honor, I think, we have other witnesses,
but I don't want to belabor it. We -- I don't -- I don't think we
wish to call any more witnesses on this point.
(16:39:56/3+00:23:57) THE COURT: On this poi-- Okay.
(16:39:57/3+00:23:58) MR. SPECTOR: Yeah.
(16:40:04/3+00:24:05) THE COURT: I think they're resting on the issue of the
introduction of the agreement of sale into the record.
(16:40:11/3+00:24:12) MR. LEVIN: Your honor, as you can imagine, we would not have
any witnesses on --
(16:40:14/3+00:24:15) THE COURT: Right.
(16:40:15/3+00:24:16) MR. LEVIN: -- that motion.
(16:40:16/3+00:24:17) THE COURT: Understood.
(16:40:17/3+00:24:18) MR. LEVIN: Um, and since it is their motion to, uh, excuse a
late filing, I believe Mr. Spector would have the honor of arguing the
motion.
(16:40:26/3+00:24:27) THE COURT: All right.
(16:40:28/3+00:24:29) MR. SPECTOR: Not until he tells me he doesn't have any
witnesses. Then I come up to argue.
(16:40:30/3+00:24:31) THE COURT: Of course.
(16:40:32/3+00:24:33) MR. SPECTOR: All right, so now that the record, I guess, is
closed evidentiary.
(16:40:35/3+00:24:36) THE COURT: Yes.
(16:40:36/3+00:24:37) MR. LEVIN: Uh, your -- I, you know, your Honor, there is a
complete record in this court of all the procedings over the last
twenty-one months. We are assuming that that is a part of the record
on what we're proceeding.
(16:40:46/3+00:24:47) THE COURT: Of course.
(16:40:47/3+00:24:48) MR. LEVIN: Thank you.
(16:40:48/3+00:24:49) MR. SPECTOR: And I -- I wouldn't assume otherwise. The Court
can always take notice of what occurred in its own court.
(16:40:54/3+00:24:55) THE COURT: Absolutely.
(16:40:55/3+00:24:56) MR. SPECTOR: But, uh, having said that, you know, when you're
on the bench, things come before you, but they're -- you can
appreciate, you see a slice of a case, you don't see how the sausage
is made. This is the first time, I believe, that I can recall, any
way, that we've actually showed how the sausage was made. And it's
not a pretty sight in any case, and it wasn't pretty in this case.
With all the different chefs and all the different ingredients that
were going in, uh, we had -- well, I'm a -- I don't have to make a --
a dramatic, a poetic explanation about it. Your honor heard the
testimony, I'm not going to reiterate it.
(16:41:37/3+00:25:38) We didn't know -- we didn't know until this court commenced
today, that we had a deal. It's not like we've been sandbagging.
We've been working our rear ends off for a long time. Even if
Mr. Norris was the principal a year and a half ago, things happened in
that time. Different people came to the table, than the original
ones. A court ruled in Utah that the forty million dollars that we
were looking at is now two and a half plus interest. Court ruled that
we owned the business we thought we owned, with, of course, there are
other issues that are still before the tenth circuit, but we dill--
did still have a business to sell.
(16:42:15/3+00:26:16) We had people coming to us as recently as this weekend who
were better situated to take this deal -- or not this deal, a
different deal -- than the folks who came to the table today.
(16:42:25/3+00:26:26) I don't know what else we could have done. We could have --
we could have sprung it in the middle of Mr. McBride's testimony.
That's one way we could have done it, say all right Mr. McBride, you
got anything interesting to say that happened today on the way to
court? Oh yeah, we signed a deal. I didn't think -- the only other
alternative to that is to do what we just did. And I apologize, it's
not the way I want to do it. I don't think anyone wants to do it that
way. But the fact of the matter, the evidence is plain, you heard
Mr. Caplan testify about what was going on.
(16:43:55/3+00:27:56) I-- If you want to call it newly discovered evidence, I'm not
really sure that's the appropriate -- it's really newly discovered
facts, events. They were evolving. And I think your Honor hit the
nail on the head before. If we were half way through a trial, and
something happened that would chang-- was material, that would change
it, you wouldn't say I'm sorry, you didn't tell us about it two weeks
ago. Life doesn't play that way, you have to take what comes, and
this is what came. And it's a material -- material issue for the life
of this case and which way the court will go.
(16:43:30/3+00:27:31) There's no sandbagging, there's no gamesmanship. It's --
it's unfortunate that -- that it came as late as it w-- if I had my
druthers we would have had it in time for me to write about it in the
response. That was one of the deadlines that was called a soft
deadline by everybody. I want to be able to say it in the response,
here's an unusual circumstance, we've got a buyer who's going to pay
two and a half times the amount of debt, uh, and we'll -- and we'll do
it, now, before, uh, you could ever get it done with a Chapter Seven
trustee and a 341, and, uh, due diligence the trustee has to do,
starting all over -- we've got the deal done. If we're worried about
creditors in the case, we've got them covered. Novell is covered.
They've got a judgment. Novell is covered.
(16:44:14/3+00:28:15) I'm sorry if I'm deviating into the, the, the merits of the,
uh, the deal, but I'll -- I'll cut it off pretty soon. The creditors
and Novell are covered. Everybody else, under our scheme, as I
suggested earlier, will be taken care of. That is IBM, Red Hat, we'll
deal with them in court. There'll be no discharge, and we'll be on
our way.
(16:44:35/3+00:28:36) I don't see why that isn't an acceptable deal to everybody in
the courtroom, number one, and number two I don't see why we should be
faulted for bringing this to your Honor when we did. We couldn't have
done it any sooner.
(16:44:49/3+00:28:50) THE COURT: Thank you, Mr. Spector.
(16:44:51/3+00:28:52) THE COURT: Oh, Mr. Lewis, I see you've -- you've drawn the
straw again.
(16:44:54/3+00:28:55) MR. LEVIN: Your honor, Mr. Lewis does such a much better job,
that I wanted him to go first this time.
(16:44:58/3+00:28:59) THE COURT: All right.
(16:44:59/3+00:29:00) MR. LEWIS: Your Honor, you're clearly on Mr. Levin's side.
(16:45:01/3+00:29:02) (Laughter)
(16:45:06/3+00:29:07) MR. LEWIS: Your Honor, um, if you look at the picture here,
not just sort of -- a little bit of testimony you got today, what you
see -- but certainly some of the testimony that you got today is
important. What you see is a debtor that has not been able to produce
anything. Struggles to produce something at the very last moment.
Counsel apologizes that he doesn't like to do things this way, and I'm
sure he doesn't, but you know, your Honor, that's been the rule in
this case, not the exception. That's happened every time.
(16:45:38/3+00:29:39) We saw this with the York deal, it wasn't complete, and
counsel was up here saying, gee your Honor, you know, it's not the way
I would do it, but, you know, it's the best we could do. SNCP plan,
it was the same thing. And now we're hearing it again. And we're not
even able to evaluate it like we did with the SNCP and York deals
because we don't have those papers in front of us in a timely fashion.
And so -- I -- although I recall, it was one of those two, the papers
were being brought as we spoke, as has happened again this morning.
(16:46:12/3+00:30:13) So I think you have to look at this in the big picture, both
in terms of the procedure in this -- that we've -- that we've lived
with in this case, and also you have to look at it in terms of the
debtor's opportunity and what the debtor explains was the problem.
We've heard one reason after the other why the debtor couldn't get
something together. Needed the -- needed the ruling in the district
court. Needed the appeal to be on file, then everybody would come
flooding out of the woodwork. Well that didn't happen. On any
occasion.
(16:46:47/3+00:30:48) And what you see today is, apparently, if you look at the
timing, um, these deals all of a sudden started coming out of the
woodwork about the time the motions to convert got filed, which is
more than a coincidence, I suspect. And what was the debtor doing in
all of this other time that it was telling this court that it was
going to have a deal?
(16:47:12/3+00:31:13) It told this court that in June for the extension asked for
then, it told this court in September for the extension asked for
then, gave the Court reasons why there was just one more little thing
that had to be done, and everything would be on the table.
(16:47:26/3+00:31:27) And now we have a sale agreement, which counsel represents
does this, that, and the other thing. Of course, we're not in a
position to assess that today, because we don't really know what's in
it, we don't know what the terms and conditions are, we don't know
what the outs are. I recall with the SNCP deal -- what we were able
to look at -- the questions were more what doesn't it do, or what's --
what are the -- the King's Exes, than anything else.
(16:47:52/3+00:31:53) Maybe this has it and maybe it doesn't, but once again, we're
in a position where, because of the way this case has proceeded, not
on occasion, but essentially as a matter of course, we in another
position where we are blindsided at the last moment, becuase the
debtor wasn't doing it's job, and only really started pressing, and
other people only really started responding, when the motions to
convert were filed. That's what it looks like to me. If you look
at the timing, it's uncanny.
(16:48:24/3+00:32:25) And so, um, and -- and in terms of the effect of all of this,
uh, an unspoken premise of this whole dispute is, well, if the Court
grants motion to convert today, this all disappears. We don't know
that. Once again I want to emphasize, we didn't ask to have this case
dismissed. We simply ha-- asked to have it transferred to the
judgment of a neutral, who could consider what to do in a more
thoughtful fashion than we think has been the case here, and who could
at least shut down the money-losing operations in the business.
(16:49:06/3+00:33:07) We're told, well Novell's covered because there's something
in this deal. Well, if the deal doesn't happen, and we go on for
another couple of months or weeks, if you -- if you -- one of the
things I did see in this sale agreement is the closing is ninety
days, or longer if they want to extend. And of course we don't know
what the outs are.
(16:49:28/3+00:33:29) So, how are we covered? We're only covered because the
debtor wants you to conclude that what it says about the deal is not
only in the deal, but the deal will close.
(16:49:41/3+00:33:42) Those two things are certainly not obvious today, when this
court has to rule, or in the next fifteen days, when this court has to
rule, on the motions to convert.
(16:49:51/3+00:33:52) And I want to emphasize again: we're not talking about a
dismissal of this case. We're talking about putting a neutral in
charge, who would be able to make some considered judgments that we
think the record in this case -- and I want to go back to the motions
to convert, and the whole record in the case -- uh, we think the
debtor has demonstrated it lacks.
(16:50:14/3+00:34:15) And it has always sort of waited for the perfect opportunity
to come along, and then when somehow the opportunity doesn't come
along, uh, they file something at the last moment and ask the court
for some accommodation.
(16:50:30/3+00:34:31) So I would ask the court to look at the record in this case
-- you look at the facts, not the sort of semi-opinion testimony we
heard here -- you look at the facts, there's no certainty this deal is
really the deal. Mr. Caplan admitted this was rushed, there might be
changes. I'll bet we're going to start hearing about all kinds of
things that -- the sort of whoopses, and gee, we don't like to do it
this way but we were so rushed now we have to change it again. It's
going to be the same story this court has heard again and again and
again, not just intermittently.
(16:51:02/3+00:35:03) Thank you, your Honor.
(16:51:03/3+00:35:04) THE COURT: Thank you, Mr Lewis.
(16:51:11/3+00:35:12) THE COURT: Mr. Levin, I read your articles on the case law
with great interest --
(16:51:16/3+00:35:17) MR. LEVIN: Thank you, your Honor.
(16:51:16/3+00:35:17) THE COURT: -- all the time. And what I -- I've just been
wondering what happens if I -- if I don't decide it in fifteen days,
do they take me out behind the building and shoot me?
(16:51:25/3+00:35:26) (Laughter)
(16:51:26/3+00:35:27) MR. LEVIN: You know, that's a little bit like that forty-five
day automatic dismissal, uh --
(16:51:30/3+00:35:31) THE COURT: Yes.
(16:51:31/3+00:35:32) MR. LEVIN: -- for Chapter Seven. Yes, it's, uh -- Congress
wasn't so good at, uh, the drafting this go-- last go around --
(16:51:38/3+00:35:39) THE COURT: Yes. That's what --
(16:51:39/3+00:35:40) MR. LEVIN: -- as I think we all agree.
(16:51:40/3+00:35:41) THE COURT: Absolutely.
(16:51:41/3+00:35:42) MR. LEVIN: Uh, your Honor, if the Court determines to
consider this asset purchase agreement in connection with the motion
to convert, I have a lot to say about it, in the few minutes I've had
to think about it, and if the hearing gets adjourned or continued,
I'll have perhaps some more thoughtful things to say about it than I
can say on the fly this afternoon.
(16:52:06/3+00:36:07) Um, I want to discuss -- and I think there will be ample
reason, which we will be able to address in that context, of whether
that document should, uh, constitute unusual circumstances for the
motion to dismiss -- convert, excuse me.
(16:52:26/3+00:36:27) I want to talk about wheth-- whether the Court should
consider it --
(16:52:29/3+00:36:30) THE COURT: Yes.
(16:52:30/3+00:36:31) MR. LEVIN: -- and what's the hurry-up -- what's the hurry-up
rush here.
(16:52:38/3+00:36:39) There are local rules that require oppositions to be filed by
a num-- a certain number of days before the hearing. In this case,
there was a stipulation with the other side that they would file their
opposition by June fifth, and that was in exchange for our agreement
to go not only just beyond the thirty days from when the motions were
filed, but then a few days more beyond that.
(16:53:01/3+00:37:02) That was the deadline, and the question is whether this court
is going to enfore its own deadlines. As Mr. Spector said just a
moment ago, and I think this is the key, oh, that was just a soft
deadline, we sure would have liked to have had this agreement in
before the opposition, but we didn't, today was the real deadline.
(16:53:22/3+00:37:23) That's not the agreement that we had with the debtor, and
that's not what these court -- this court's rules say. The testimony
is clear that these negotiations have been going on at least since
December, maybe we can say since January of this year, five to six
months ago. Mr. McBride testified that the Norris-represented group,
Merchant Bridge, has been putting in substantial effort on this, at
least for the last five months.
(16:53:55/3+00:37:56) Yes, it's not always easy to get to an agreement, but if the
parties understood that June fifth was really a deadline and not a
"soft deadline", the parties would have found a way to get to an
agreement, because deadlines do drive agreements, and what Mr. Spector
is telling you is that the debtor does not respect this court's
deadlines, but it sets its own. And it set the deadline at two
o'clock this afternoon, as Mr. Caplan's testimony showed, that the
agreement came in at one ten, they debated whether they should make
any changes, they concluded that they shouldn't, we can only surmise
because it was ten til two and they knew they had to have a signing,
and that was what they considered the real deadline.
(16:54:38/3+00:38:39) Your Honor, we don't believe that the debtor should be
allowed to flout this court's procedural rules in such a way, and have
this considered as part of the motion to convert. It's entirely
appropriate to have it considered on a motion to approve the sale, and
we will take it up as a motion to approve the sale, but it shouldn't
be heard as part of the motion to convert, and that's why we argued
earlier that we were prepared to proceed on the record as it existed
before this hearing started. Thank you, your Honor.
(16:55:08/3+00:39:09) THE COURT: Thank you. Anyone else?
(16:55:10/3+00:39:11) MR. SPECTOR: I think Mr. McMahon has a (inaudible).
(16:55:19/3+00:39:20) THE COURT: Good afternoon, Mr. McMahon.
(16:55:23/3+00:39:24) MR. MCMAHON: Good afternoon, and very briefly I just want to
refer to a point that's made in our papers, your Honor, with respect
to the cause for relief that's been put before the Court.
(16:55:34/3+00:39:35) As your Honor knows, our office's motion specifically
identifies one ground for relief, that's the substantial loss
continuing, uh -- the -- the language is in the motion, and I don't
feel a compelling need to recite the statute for the Court other than
to point out in the text of our papers we do note that the exceptional
-- I'm sorry, the unusual circumstances exception, uh, the way we read
the statute, add to the BAPCPA, is an act that does not apply to that
particular section of the statute.
(16:56:11/3+00:40:12) And clearly whether this entire, I guess, proposal by the
debtors, and the analysis by the Court, should be taken into account
whether or not the motion can proceed on that individual ground alone.
Meaning that, whether or not this is effectively a request by the
debtors to defer a hearing on the motion to convert for unusual
circumstances. And that, you know, that -- that is an issue which I
think that the Court has to consider in ruling on the instant request
by the debtors.
(16:56:49/3+00:40:50) THE COURT: All right, thank you Mr. McMahon.
(16:56:52/3+00:40:53) MR. SPECTOR: Taking the latter one first, your Honor, not
only does "unusual circumstances" cover the -- the grounds that were
alleged, it -- it also -- substantial -- unusual circumstances of
debtor deal with the gross mismanagement, deal with the subsection j
issue, all the other ones. So it would come in for those anyway. We
have other evidence, on the -- we haven't got to the merits of our
case, but we have other evidence on those other issues. It goes to
the reasonable likelihood of rehabilitation for one thing. I mean,
rehabilitation in the pure form of art -- form that is in the case law
that has been cited by both sides -- exists when a company can
continue in business, pay all its creditors, and -- and go a b-- and
that will happen with this sale. It has to be relevant to that
anyway. So, um, the -- the -- uh --
(16:57:48/3+00:41:49) I'd like to get more to the re-- talk about deadlines and
rules. I was told by local counsel, and a review of the local rules
confirms, there was -- there was no formal pretrial in this case. You
would think that congress would have allowed courts to have pretrials
in big matters like this, appointments of trustees and -- so you that
you didn't have, uh, you know, trials on the fly like we're doing.
But that's okay, we have to deal with what we have to deal with.
(16:58:16/3+00:42:17) But, there's no local rule that says what has to be in a
response. So, they file a motion to convert, we say they will not
make the case, they've got the burden, here are unusual circumstances.
Uh, they have -- we may -- we may be able to show unusual
circumstances -- we may not even say in the response -- all the
response has to do is put the -- put it in issue.
(16:58:37/3+00:42:38) There's nothing in the local rules, there's nothing in
practice, there's in the national rules or the Magna Charta that says
we have to say in our response, oh by the way, here's what we're going
to argue when we get there. I would have done it anyway, because I
want to be persuasive, but there isn't any local rule, there isn't any
deadline we violated. We gave a response, we gave it on the day of
the deadline. It was pretty fulsome as it was. Now we have some new
fact, that just happened.
(16:59:05/3+00:43:06) Now, this isn't technically a Rule 60 motion, under rule --
Federal Rule of Civil Procedure 60. It's not technically a 9023
motion, under Federal Rules of Bankruptcy Procedure, but if you use
that by analogy, your Honor asked, we want to know if the debtors
stalled, is this a gamesmanship, an--
(16:59:20/3+00:43:21) THE COURT: Right.
(16:59:22/3+00:43:23) MR. SPECTOR: I think the record's absolutely clear that it
wa-- we didn't stall, it's not gamesmanship. They're not even arguing
that it was, they're just basically saying, there they go again. Uh,
yeah, I know, there we go again. But it isn't gamesmanship, it isn't
stalling, not sandbagging, it's how life exists from time to time in
the messy trenches. And, uh, there -- the, there just doesn't seem to
be any reason why, under the parameters that your Honor set down for
this mini-trial, why the Court should not take this into evidence and
let us make our case to show why this deal is good -- by the way,
there's other deals as well, now --
(17:00:00/3+00:44:01) I -- I'm intruding on our time, you have til six o'clock, and
the reason I'm doing that is if your Honor allows us to bring this
deal before your Honor, for the purpose of proving our case, not to
sell -- not to approve the sale -- to prove that we have a likelihood
of rehabiliation, remember it's got to be a reasonable likelihood of
rehabilitation.
(17:00:21/3+00:44:22) THE COURT: Right.
(17:00:22/3+00:44:23) MR. SPECTOR: We've got that. We've also got an unusual
circumstance, and that's just this, I -- I have other -- I never did
get to my opening -- all the other unusual circumstances that we would
bring to bear, your Honor. But, but, we have a trial to start, and we
haven't started. Now if your Honor allows us to bring the deal before
your Honor as evidence, we are never going to get the trial done
today, anyway.
(17:00:48/3+00:44:49) And I'm intruding on my time just to say Mr. Singer has a
suggestion. He's got a witness here who's an expert, she's come from
somewhere else. Perhaps if your Honor then says, okay we'll let it in
but we'll give you time to cross-examine, we'll adjourn this to
another date, and we'll come back, and have Mr. McBride testify about
the contract and you can cross-examine to your heart's content on that
day. Can we use the remaining time -- I know I'm being presumptuous
-- to let's get some witnesses on Mr. Singer's case out of the way, so
that when we come back it will be strictly on the bankruptcy issues
that we haven't really gotten to today? And I'm mix--
(17:01:34/3+00:45:35) THE COURT: Well, we're mixing up issues. Let me take one at
a time on this, because the first one is difficult enough, and, you
know, I think that Mr. Lewis stated it well when he said the Court has
to look at the big picture, and I do, and I look at the record in this
case. The big picture is what is in the debtors' best interest, the
debtors' estates' best interest. That always has to be a bankruptcy
court's concern and that is my concern here, and I don't think that
anyone could take issue with that.
(17:02:12/3+00:46:13) I have not heard evidence which suggests that this deal that
may or -- that --- that may, hopefully -- that will hopefully happen,
was somehow manufactured simply to stall today's hearing. I don't
believe that's the case, and in any event it can't stall it because
we've commenced the hearing today, and it has to be decided within
fifteen days, so, I think that any delay would be obviously of a
minimal extent, and it really will, I think, turn upon counsel's
schedules even more than mine, because I will make myself as available
as I can.
(17:02:58/3+00:46:59) So under these circumstances, I just think that the big
picture requires a bankruptcy judge to take into account all evidence
which may relate in any way and bear upon what is in the bankruptcy
estate's and its creditors' best interests, and that certainly
includes a potential sale of assets, and for that reason, I am going
to allow the evidence to be presented relating to this agreement of
sale. I think it's a critical issue for the Court to consider.
(17:03:44/3+00:47:45) I -- I do, you know -- whether this is somehow contrary to
deadlines or not, or whether it's late or whether it's new, I'm not
really quite sure, but I know that it is evidence which this court
ought to take into account in the big picture. That then brings us to
the issue of whether we proceed now, or if the movants would like to
have some time to investigate, take discovery, whatever, into this
agreement of sale.
(17:04:21/3+00:48:22) MR. LEVIN: Your Honor, may we have a few moments to confer.
(17:04:23/3+00:48:24) THE COURT: You may, certainly. Take --
(17:04:24/3+00:48:25) VOICE: Thank you, your Honor.
(17:04:25/3+00:48:26) THE COURT: Take five or ten minutes. Perhaps even talk a
little bit about scheduling, and talk with, uh, if you will, with
Mr. Spector about his suggestion about testimony from the expert
witness who is in court today.
(17:04:37/3+00:48:38) MR. LEVIN: Thank you, your Honor.
(17:04:38/3+00:48:39) THE COURT: Thank you.
(17:04:41/3+00:48:42) *** RECESS ***
Fourth Session
(audio: 17:40:32 to 17:52:19 (6MB mp3))
(17:40:32/4+00:00:00) CLERK: Please rise.
(17:40:35/4+00:00:03) THE COURT: Thank you, please be seated. Mr. Levin.
(17:40:40/4+00:00:08) MR. LEVIN: Your honor, thank you for accommodating our
procedural interlude.
(17:40:44/4+00:00:12) THE COURT: Yes.
(17:40:35/4+00:00:03) MR. LEVIN: We hope it was productive. Here's what we have to
propose, and I believe the debtors will agree with this.
(17:40:52/4+00:00:20) We believe there is a lot of common issues between the motion
to approve the sale, which has not yet been filed but which will be
filed shortly, and the motion to convert. I'm not saying they're all
common issues but there is some overlap.
(17:41:04/4+00:00:32) THE COURT: Sure.
(17:41:04/4+00:00:32) MR. LEVIN: And in light of the developments today, on our
side we would prefer to put everything off to a date which would be
the date for the hearing on the motion to approve the sale, assuming
it gets filed in the next few days, and we'll talk about that in a
moment. Have everything heard at once, a combined hearing on the sale
motion and the motion to convert, approximately thirty days hence,
depending on the Court's calendar.
(17:41:31/4+00:00:59) We would need to agree on some interim dates as well, for
example a deadline for filing the sale motion, a deadline for any
amendments to the -- to the asset purchase agreement, and we will also
talk about discovery schedules as well. I think those matters we can
take offline with just counsel, and come back to the Court for a
telephonic hearing if we cannot reach agreement on those, --
(17:41:59/4+00:01:27) THE COURT: Yes.
(17:42:00/4+00:01:28) MR. LEVIN: -- once we know what the hearing date will be, and
the hearing date I think we agree, we would like to get a full day.
Either a morning and an afternoon, or an afternoon and the next
morning, either way. So, uh --
(17:42:12/4+00:01:40) THE COURT: So we're talking sometime - sometime roughly
around the middle of July. Is that right?
(17:42:17/4+00:01:45) MR. LEVIN: Yes, your Honor. One -- one other point, if I may
make, uh, Mr. Lewis --
(17:42:20/4+00:01:48) THE COURT: And Mr. Lewis's schedule is of importance to the
Court as well.
(17:42:23/4+00:01:51) MR. LEVIN: Yes. Mr. Lewis's schedule would make it most
convenient if the hearing were on July sixteen.
(17:42:29/4+00:01:57) THE COURT: July sixteen.
(17:42:30/4+00:01:58) MR. LEWIS: I have a hearing the next day in front of Judge
Sontchi. I would be here already, and my schedule is pretty tight
until then. If that works for the Court. If not then we'll pick
another day, because there are other people to consider, as well as
the Court here, but if that works for the Court, that would be far and
away the best for me.
(17:42:50/4+00:02:18) THE COURT: Well here's what I'm going to do. I'm going to
try to -- I do have a number of things scheduled for the sixteenth,
but if you will give me until tomorrow to check with those parties
just to make sure that their matters are not urgent and I can shift
them a day or so, then we --
(17:43:05/4+00:02:33) MR. LEWIS: The Court's very kind, thank you.
(17:43:06/4+00:02:34) THE COURT: -- then we'll do that and we'll try and schedule
it for the sixteenth.
(17:43:09/4+00:02:37) MR. LEVIN: That's very generous, your Honor. Is it, uh,
should we put a backup date on right now, in case that doesn't work?
(17:43:17/4+00:02:45) THE COURT: Yes. I see, from my calendar, I have a lot of
time either the twentieth of July, which is a Monday, or the
twenty-fourth which is a Friday, or the twenty-seventh which is a
Monday, I mean I'm --
(17:43:33/4+00:03:01) VOICES: (inaudible)
(17:43:34/4+00:03:02) THE COURT: Or the thir--
(17:43:35/4+00:03:03) MR. LEWIS: Your Honor, the twenty-forth is -- the twentieth
doesn't work for me because I'll be at the ninth circuit judicial
conference, I'm one --
(17:43:41/4+00:03:09) THE COURT: Okay.
(17:43:41/4+00:03:09) MR. LEWIS: -- of the lawyer reps there. So the twenty-fourth
or the twenty-seventh, either one is okay with me.
(17:43:47/4+00:03:15) THE COURT: Any preferences from other -- from other folks.
(17:43:50/4+00:03:18) VOICE: Your Honor, I have a conflict on the twenty-fourth,
but the twenty-seventh I think would work, if that --
(17:43:56/4+00:03:24) THE COURT: The twenty-seventh would work?
(17:43:57/4+00:03:25) MR. SPECTOR(?): It works for me as well, let's find out
(inaudible) twenty-seventh (inaudible)
(17:44:02/4+00:03:30) MR. LEVIN(?): That's a little longer than I wanted.
(17:44:03/4+00:03:31) MR. LEWIS(?): Yeah.
(17:44:04/4+00:03:32) MR. SPECTOR(?): -- twenty-seventh looks like the --
(17:44:06/4+00:03:34) THE COURT: All right, so --
(17:44:07/4+00:03:35) MR. LEVIN: We'd like that as a backup, your Honor.
(17:44:08/4+00:03:36) THE COURT: You bet.
(17:44:09/4+00:03:37) MR. LEVIN: It's a little longer than we'd like to go. One
other --
(17:44:10/4+00:03:38) THE COURT: I know.
(17:44:10/4+00:03:38) MR. LEVIN: -- procedural point I'd like to make, Mr. Lew-- I
told you he was better, he reminded me -- that that will be deemed to
be the fifteenth day after the start of this hearing today.
(17:44:20/4+00:03:48) THE COURT: Okay.
(17:44:21/4+00:03:49) MR. LEVIN: The date of that hearing will be deemed to be the
fifteenth day.
(17:44:22/4+00:03:50) THE COURT: All right.
(17:44:23/4+00:03:51) MR. SPECTOR: I didn't remember hearing that.
(17:44:25/4+00:03:53) MR. LEVIN: Well, I will let Mr. Spector comment on that. I
mean, I'm -- of course we're willing to make it the twelfth or
thirteenth day if your Honor needs a couple of days to decide, but
we're not willing to let fifteen more days run after that.
(17:44:36/4+00:04:04) THE COURT: I understand.
(17:44:37/4+00:04:05) MR. SPECTOR: Your honor, that wasn't a subject of our
discussion. I told him, I said make your proffer and I'm just going
to nod head yes, but --
(17:44:43/4+00:04:11) THE COURT: Ha-ha-ha-ha-ha.
(17:44:44/4+00:04:12) MR. SPECTOR: -- I take that back now. What I would say is
let us not agree on anything, let your Honor make the decision,
because if you decide you're going to decide it that day, decide it
that day.
(17:44:52/4+00:04:20) THE COURT: Let me give myself at least a day, to decide. And
I -- look, I think the parties are accommodating one another, you're
working hard. I don't want to do anything that, mmm -- you know,
in any way interferes with those efforts. I think a day would be
sufficient for my purposes, frankly.
(17:45:12/4+00:04:40) MR. LEVIN: Your honor, we're more than content for the Court
to take two days or even three days. Part of the point is, we just
want to know it's going to end, and --
(17:45:18/4+00:04:46) THE COURT: I agree.
(17:45:19/4+00:04:47) MR. LEVIN: -- it's going to end quickly.
(17:45:20/4+00:04:48) THE COURT: I agree. I'm just looking at my schedule. All
right, let's do two days.
(17:45:24/4+00:04:52) MR. LEVIN: Okay,
(17:45:25/4+00:04:53) THE COURT: Let's do two days. Just to be --
(17:45:26/4+00:04:54) MR. LEVIN: We certainly want the court to have time to do a
considered --
(17:45:28/4+00:04:56) THE COURT: Yes
(17:45:28/4+00:04:56) MR. LEVIN: -- decision and we don't want to create an
artificial rush on that.
(17:45:33/4+00:05:01) THE COURT: Absolutely.
(17:45:34/4+00:05:02) MR. SPECTOR: I don't understand. We're going to try this for
two days, your Honor, is that what --
(17:45:36/4+00:05:04) THE COURT: No, no, no. We're going to have the one-day
hearing. Then I'll have two days to issue a decision.
(17:45:43/4+00:05:11) MR. LEVIN: Two days will be the fifteenth day.
(17:45:45/4+00:05:13) THE COURT: Because, I have only fifteen days under the r--
you know, under the -- under the code, and, um, I think that will be
sufficient.
(17:45:56/4+00:05:24) MR. SPECTOR: All I'm saying your Honor, suggesting --
(17:45:58/4+00:05:26) THE COURT: Yes.
(17:45:59/4+00:05:27) MR. SPECTOR: I don't know judges who set their own deadlines
for themselves.
(17:46:02/4+00:05:30) THE COURT: Ha. I don't mind do-- in this case, if it -- if
it sort of helps things along I'm pleased to do it, and I think it's
best sometimes to do a -- to get right to something. So that's --
that's how we'll handle that aspect.
(17:46:19/4+00:05:47) MR. LEVIN: Thank you, your Honor, and we will spend a few
minutes after the hearing among ourselves trying to talk about some of
those interim dates.
(17:46:25/4+00:05:53) THE COURT: All right.
(17:46:26/4+00:05:54) MR. LEVIN: And we'll wait to hear from your chambers on the
July sixteenth --.
(17:46:28/4+00:05:56) THE COURT: -- about the sixteenth -- or the -- yes, or the
twenty-seventh.
(17:46:30/4+00:05:58) MR. SPECTOR: You should tell the judge what types of
deadlines we're going to set.
(17:46:34/4+00:06:02) MR. LEVIN: I thought I did.
(17:46:35/4+00:06:03) THE COURT: I think it was the, uh, the sale itself of course,
the asset purchase agreement and any amendments to that, and
discovery.
(17:46:43/4+00:06:11) MR. LEVIN: Sale motion --
(17:46:44/4+00:06:12) THE COURT: And I guess you ought to also talk about, perhaps,
any additional submissions.
(17:46:48/4+00:06:16) MR. LEVIN: Yes. Okay, so let me review the bidding on that.
The deadline for filing the sec-- motion to approve the sale.
(17:46:55/4+00:06:23) THE COURT: Right.
(17:46:57/4+00:06:25) MR. LEVIN: The, um, ---
(17:46:59/4+00:06:27) THE COURT: The, uh, --
(17:47:00/4+00:06:28) MR. LEVIN: -- deadline for any amendments to the -- any
amendments to the asset purchase agreement.
(17:47:05/4+00:06:33) THE COURT: Yes.
(17:47:07/4+00:06:35) MR. LEVIN: Uh, a discovery schedule, and a deadline for
further written submissions to the court.
(17:47:15/4+00:06:43) THE COURT: Right.
(17:47:16/4+00:06:44) MR. LEWIS: Your honor, I was also thinking of, um -- some --
maybe the same deadline -- a deadline for submission of a list of
direct witnesses and the scope of their testimony. Not the detail,
but just --
(17:47:28/4+00:06:56) THE COURT: Right.
(17:47:29/4+00:06:57) MR. LEWIS: -- something which allows parties to prepare so
we're not all coming in here blind trying to figure out what we're
going to be doing.
(17:47:34/4+00:07:02) THE COURT: I think --
(17:47:35/4+00:07:03) MR. LEWIS: -- be a much more efficient hearing for that
reason, too.
(17:47:36/4+00:07:04) THE COURT: I think that would be well.
(17:47:37/4+00:07:05) VOICE: (inaudible)
(17:47:39/4+00:07:07) THE COURT: A list of witnesses and just a -- at least an
outline of what their testimony will -- will entail.
(17:47:45/4+00:07:13) MR. SPECTOR: (inaudible)
(17:47:49/4+00:07:17) MR. LEVIN: Your Honor, Mr. Spector advises me that there may
actually be bidding on this sale -- not sure yet --
(17:47:55/4+00:07:23) MR. SPECTOR: No, no, sorry --
(17:47:56/4+00:07:24) MR. LEVIN: No? I -- I misspoke. Let's -- go ahead.
(17:47:59/4+00:07:27) MR. SPECTOR: Uh, when we were out in the hallway -- again,
sausage -- uh, they proposed certain things to us, and one of them was
bid procedures motions and bidding, that type stuff, and I quickly
said No, that wasn't what our intention was, we're going to go with
this deal, that was it. Uh, but we don't know that parties in
interest might have -- if, if parties in interest took a different
point of view, we're not sure we can foreclose them, and if there is
such a thing as that, that the U.S. Trustee or a party in interest
wants to --
(17:48:28/4+00:07:56) THE COURT: I was thinking that.
(17:48:29/4+00:07:57) MR. SPECTOR: You were?
(17:48:30/4+00:07:58) THE COURT: I was thinking that the United States Trustee
might have an issue with no bidding --
(17:48:36/4+00:08:04) MR. SPECTOR: Right. The --
(17:48:37/4+00:08:05) THE COURT: -- and auction.
(17:48:38/4+00:08:06) MR. SPECTOR: -- the rule, which I have already marked, allows
for this, and I just --
(17:48:41/4+00:08:09) THE COURT: I understand.
(17:48:42/4+00:08:10) MR. SPECTOR: -- read a case recently when the Court went into
that. And then again, we've been doing nothing but testing the market
for two years almost, so. I would be mak--
(17:48:49/4+00:08:17) THE COURT: Right.
(17:48:50/4+00:08:18) MR. SPECTOR: If I were taking that position, I would be
making an argument about that. However, we wanted to leave the --
they wanted to leave the door open for that as a potential deadline
for bid procedures, and I finally acquiesced because I didn't want to
be difficult, and, uh, if Mr. Levin hadn't raised the (inaudible).
(17:49:08/4+00:08:36) THE COURT: Mr. McMahon.
(17:49:10/4+00:08:38) MR. MCMAHON: Your Honor, uh, good evening, Joseph McMahon. I
actually jumped in with respect to the marketing point. I don't think
we need to get into scheduling a two-tiered structure at this point,
bid procedures then a sale hearing. My point in the hallway was
simply that I trust that the debtors will be serving their sale paper
motions back on the parties that were described in the testimony.
(17:49:41/4+00:09:09) THE COURT: Certainly.
(17:49:42/4+00:09:10) MR. MCMAHON: I doubt that they're aware of the terms of the
finalized agreement. Certainly we weren't, walking in the courtroom.
And, um, I think that's where we start on that point. Um, in light of
the, you know, Mister -- uh, I'm sorry, in light of counsel's remarks
regarding the length of these cases, we -- we've known what the state
of SCO is and has been for a while, but I think that there are certain
things that have to be demonstrated in order to show that the
marketing effort was complete.
(17:50:15/4+00:09:43) THE COURT: Yes, and the last thing we need is one of these
parties who was in negotiations with the debtor coming in at the sale
hearing and saying, you know, we were prepared to do better, or we
never were consulted, or whatever.
(17:50:29/4+00:09:57) MR. LEVIN: Well then, if I can phrase the last deadline that
we should discuss, your --
(17:50:33/4+00:10:01) THE COURT: Yes.
(17:50:33/4+00:10:01) MR. LEVIN: -- Honor, as follows. We'll try to set a deadline
for SCO, the debtors, to change any of the process in the sale motion
that they will file in the coming days.
(17:50:46/4+00:10:14) (silence)
(17:50:51/4+00:10:19) THE COURT: That's fine.
(17:50:51/4+00:10:19) MR. LEVIN: In other words, I expect --
(17:50:52/4+00:10:20) THE COURT: Yes. Yes.
(17:50:53/4+00:10:21) MR. LEVIN: Understood?
(17:50:53/4+00:10:21) THE COURT: Understood.
(17:50:54/4+00:10:22) MR. LEVIN: Thank you, your Honor.
(17:50:55/4+00:10:23) THE COURT: Yes, Mr. Levin. That, that, that finally sunk in.
(17:50:59/4+00:10:27) MR. LEVIN: And I didn't mean it that way, I apologize.
(17:51:00/4+00:10:28) THE COURT: No, I understand that. All right.
(17:51:04/4+00:10:32) MR. SPECTOR: Your Honor, um, going back to dates, the
sixteenth, I'm getting whispers that if we're going to have all this
discovery and all this process, it may be necessary to push it back to
the twenty-seventh, and, uh, because if we're really going to do -- if
they don't do discovery, sixteenth is fine, but if we're going to have
a lot of discovery, it may be, uh, --
(17:51:30/4+00:10:58) THE COURT: I'll tell you what, why don't you talk about that,
because you'll know better perhaps what kind of discovery you're
contemplating. I would hate to see anyone here lock in a schedule,
only to regret it later, with vacations and the like. If you want the
sixteenth, if the movants want the sixteenth, that's fine. I will do
everything I can to get the sixteenth. Otherwise, if you prefer the
twenty-seventh I know that that is open.
(17:52:00/4+00:11:28) MR. SPECTOR: We'll talk about it.
(17:52:02/4+00:11:30) THE COURT: All right. All right counsel. Anything further?
(17:52:04/4+00:11:32) MR. LEVIN: No, we'll report back to chambers, your Honor.
(17:52:05/4+00:11:33) MR. SPECTOR: We'll report back.
(17:52:06/4+00:11:34) THE COURT: Well, as usual it was an interesting hearing
(laughter), and I'll look forward to the next one, so we'll stand in
recess, but really, if you need me, get me on the phone tomorrow.
(17:52:15/4+00:11:43) VOICES: Thank you.
(17:52:16/4+00:11:44) THE COURT: Thank you. Good evening, everyone.
(17:52:17/4+00:11:45) *** RECESS ***
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