[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; part 5 mp3; part 6 mp3; part 7 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,
nor by any of the registered owners of "SCO" trademarks.
RCS revision info: $Id: SCO-Group-bankruptcy-875-unofficial-transcript.html,v 1.4 2009/08/03 07:27:07 al Exp $]
Motion Hearing, July 27, 2009
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, July 27, 2009
09:30:00 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 July 27, 2009, at
9:30 A.M." (Docket No. 867, filed July 24, 2009), the "Order Re:
Hearing to be Held on July 27, 2009" (Docket No. 856, July
21, 2009), and the "Minute
Entry" (Docket No. 875, 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)
- "Order
Re: Hearing to be Held on July 27, 2009" (Docket No. 856, July 21,
2009), stating that "The Court will not hear testimony or admit into
evidence reports or affidavits/declarations addressing the merits of
Debtors' claims against IBM, Novell, Red Hat and/or AutoZone".
- Pre-hearing status (per agenda):
"This matter will go forward"
Item 5: "Debtors'
Motion for Authority to Sell Property Outside the Ordinary Course of
Business Free and Clear of Interests and for Approval of Assumption
and Assignment of Executory Contracts and Unexpired Leases in
Conjunction with Sale" (Docket No. 815, June 22, 2009), with
Exhibit A, Purchase and Sale Agreement, part 1
(#784-3) and part 2
(#784-4); Exhibit B,
proposed order (#784-5); Exhibit C,
notice of cure amounts (#784-6); and notice
of the motion (#784-2), setting objection deadline of July 20,
2009 and hearing date of July 27, 2009.
- Some
exhibits and schedules to the Purchase and Sale Agreement (Docket
No. 819, June 23, 2009) (unsigned filing, in violation of
F.R.Bankr.P. 9011)
- "Notice
of Cure Amounts in Connection with the Assumption and Assignment of
Unexpired Leases and Executory Contracts" (Docket No. 832, July 8,
2009), with Exhibit A thereto (which is also Exhibit A to the Purchase
and Sale Agreement), part 1
(#832-2)
, part 2
(#832-3), part 3
(#832-4), part 4
(#832-5), part 5
(#832-6), part 6
(#832-7), and part 7
(#832-8)
- Some revised portions and some new portions of the sale
agreement's Exhibit A, part 1 (#833)
, part 2
(#833-2), and part 3
(#833-3) (Docket No. 833, July 10, 2009) (unsigned filing, in
violation of F.R.Bankr.P. 9011)
- Objection of
Oracle USA, Inc. (Docket No. 849, July 20, 2009)
- Objection of
Novell (Docket No. 851, July 20, 2009), with Exhibit A
(#851-2)
- Objection of
IBM (Docket No. 852, July 20, 2009)
- Objection of M/S Sunray Computers PVT. LTD. (not docketed, dated
July 16, 2009)
- "Novell's
Response to the Debtors' Notice of Cure Amounts" (Docket No. 858,
July 22, 2009), with Exhibit A
(#858-2)
- Reply
(Docket No. 860, July 23, 2009)
- A notice of
filing (Docket No. 870, July 26, 2009) with "Agreement
and Amendment to Purchase and Sale Agreement" (#870-2)
- Pre-hearing status (per agenda):
"This matter will go forward"
Misc:
- So-called "objections" to conversion: 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)
- June 15, 2009 hearing transcript (Docket No. 834, filed July 13,
2009) (see also the audio and an unofficial transcript)
recording that the hearing on the conversion motions was continued
until the to-be-determined hearing date for a to-be-filed sale motion.
- June
15, 2009 minutes (Docket No. 813, entered June 19, 2009) recording
that the sale motion hearing date (and, therefore, the continued
conversion motions hearing date) had been set as July 27, 2009
- "Order
Re: Hearing to be Held on July 27, 2009" (Docket No. 856, July 21,
2009) addressing a few discovery and procedural issues, and recording
that a teleconference was set for July 22, 2009.
- "Debtors'
Objection to International Business Machines Corporation's Proffered
Hearing Exhibits and Motion to Exclude Such Exhibits" (Docket
No. 868, July 24, 2009)
Minutes: The "Proceedings" section of the minutes
says: "HEARING HELD. AGENDA ITEMS: #1 - #5 - All matters taken under
advisement."
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,,)
|
| 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://bergersingerman.com/images/image_bio/Arthur_Spector.gif)
|
| 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)
|
| 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://www.cravath.com/biospdfs/RLevinWebBio.pdf)
|
| David
Russell Marriott (New
York Bar #2682565, admitted 1995)
Attorney for Creditor International Business Machines Corp. (no PHV admission on file)
Cravath, Swaine & Moore LLP
825 Eighth Ave, New York NY 10019
(image from http://www.cravath.com/biospdfs/dmarriott.pdf)
|
| Michael
Timothy Reynolds (New
York Bar #2772291, admitted 1996; Delaware
admission pro hac vice (dkt. #848), July 17, 2009)
Attorney for Creditor International Business Machines Corp.
Cravath, Swaine & Moore LLP
825 Eighth Ave, New York NY 10019
(image from http://www.cravath.com/biospdfs/mreynolds.pdf)
|
| 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)
|
| 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)
|
| William
Kevin Harrington (Pennsylvania
Bar #78367, admitted 1996 (inactive); Delaware Bar
#4051)
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?56,39196,0,,)
|
| 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://mofo.com/images/attorney/407.jpg)
|
| Amish
R. Doshi (New
York Bar #2910222, admitted 1998; pending
Delaware pro hac vice application (dkt. #857), filed July 22,
2009)
Attorney for Creditor Oracle USA, Inc. (appearing telephonically)
Day Pitney LLP
7 Times Square, New York NY 10036
(image from http://daypitney.com/_images/professionalphotos/DoshiAmish.jpg)
|
| Ryan
E. Tibbitts (Utah
Bar #4423, admitted 1984)
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)
|
| Michael Allen Jacobs (California
Bar #111664, admitted 1983; Delaware
admission pro hac vice (dkt. #171), October 31, 2007)
Attorney for Creditor Novell, Inc.
Morrison & Foerster LLP
425 Market St, San Francisco CA 94105
(image from http://mofo.com/images/attorney/235.jpg)
|
| Kenneth
Ray Nielsen
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)
|
| 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)
|
| Leslie Allen
Bayles (Illinois Bar,
admitted 2000; Delaware
admission pro hac vice (dkt. #808), June 15, 2009)
Attorney for Unxis, Inc. (but PHV admission was only for
representing Gulf Capital Partners, LLC)
Bryan Cave LLP
161 North Clark St Ste 4300, Chicago IL 60601
(image from http://bryancave.com/files/Professional/86adc483-fd96-4b5a-9126-de8f95c774a7/Presentation/Photo/e15.jpg)
|
| Stephen L. Norris (District of Columbia
Bar, admitted 1977 (inactive))
Witness for Debtors The SCO Group, Inc., et al.
President of Unxis, Inc.
(The only address on file for Unxis is the one for notices in §13.6
of the sale agreement: unXis, Inc., c/o MerchantBridge & Co, Ltd.,
Knowsley House, 173-176 Sloane Street, London SW1X 9QC, United
Kingdom, Attention: Eric le Blan)
(image from http://en.epochtimes.com/news_images/2007-12-20-norris.jpg)
|
| Jeff Fred Hunsaker
Witness for Debtors The SCO Group Inc., et al.
President of SCO Operations, Inc.
355 S 520 W, Lindon UT 84042
(image from http://sco.com/images/execs/sco%20jeff%20hunsaker%20hi-res2.jpg)
|
| Christopher
Royer Donoho III (New
York Bar #2842961, admitted 1997)
Attorney for LNS Acquisition LLC and LNS Inc. (no PHV
admission on file) (appearing telephonically)
Lovells LLP
590 Madison Ave, New York NY 10022
(image from http://www.lovells.com/NR/rdonlyres/8656C241-5402-45CA-BE76-8BC05B389091/0/Donoho_Christopher_07.jpg)
|
| Alan P. Petrofsky
Equity Security Holder, pro se (appearing telephonically)
3618 Alameda Apt 5, Menlo Park CA 94025
(image from http://petrofsky.org/csua-alpetrof-mirror/al-head.gif)
|
Other Appearances (in order listed on sign-in
sheet)
| Mauricio
Alfredo Gonzalez (California
Bar #230614, admitted 2004)
Attorney for Debtors The SCO Group, Inc. et al. (no PHV admission on file)
Boies Schiller & Flexner LLP
333 Main St, Armonk NY 10504
(image from http://www.bsfllp.com/lawyers/data/:v_get/latest/0856/_res/id=sa_Pic1)
|
| Franklin
Hoff Caplan (Massachusetts Bar, admitted 1981 (inactive); Florida Bar
#759333, admitted 1988)
Attorney for Debtors The SCO Group, Inc. et al. (no PHV admission on file)
Berger Singerman, P.A.
200 S Biscayne Blvd Ste 1000, Miami FL 33131
(image from http://bergersingerman.com/images/image_bio/Frank%20Caplan%20NEW.jpg)
|
| Jason Colin
Cyrulnik (New
York Bar #4332284, admitted 2005)
Attorney for Debtors The SCO Group, Inc. et al. (no PHV admission on file)
Boies Schiller & Flexner LLP
333 Main St, Armonk NY 10504
(image from http://www.bsfllp.com/lawyers/data/:v_get/latest/0595/_res/id=sa_Pic1)
|
| Douglas
Alan Bates (Florida Bar
#791431, admitted 2004)
Attorney for Debtors The SCO Group, Inc. et al. (no PHV
admission on file) (appearing telephonically)
Berger Singerman, P.A.
350 E Las Olas Blvd Ste 1000, Fort Lauderdale FL 33301
(image from http://bergersingerman.com/images/image_bio/Douglas%20Bates.jpg)
|
AUDIO AND INCOMPLETE, UNOFFICIAL, UNCERTIFIED TRANSCRIPT
Audio
Index
(09:38:35/1+00:00:00) First Session
(09:41:09/1+00:02:34) (SCO's opening)
(10:00:40/1+00:22:05) (IBM's opening)
(10:05:00/1+00:26:25) (Novell's opening)
(10:18:44/1+00:40:09) (U.S. Trustee's opening)
(10:30:23/1+00:51:48) *** RECESS ***
(11:10:48/2+00:00:00) Second Session
(11:12:20/2+00:01:32) (Direct examination of Ryan E. Tibbitts by Mr. Spector for Debtors)
(11:19:07/2+00:08:19) (Court's examination of Ryan E. Tibbitts)
(11:20:16/2+00:09:28) (Cross-examination of Ryan E. Tibbitts by Mr. Marriott for IBM)
(11:21:31/2+00:10:43) (Cross-examination of Ryan E. Tibbitts by Mr. Jacobs for Novell)
(11:29:15/2+00:18:27) (Re-direct examination of Ryan E. Tibbitts by Mr. Normand for Debtors)
(11:34:12/2+00:23:24) (Direct examination of Kenneth Ray Nielsen by Mr. Spector for Debtors)
(11:47:03/2+00:36:15) (Cross-examination of Kenneth Ray Nielsen by Mr. Reynolds for IBM)
(12:15:57/2+01:05:09) (Cross-examination of Kenneth Ray Nielsen by Mr. Lewis for Novell)
(12:25:12/2+01:14:24) (Cross-examination of Kenneth Ray Nielsen by Mr. Harrington for the U.S. Trustee)
(12:27:08/2+01:16:20) (Re-direct examination of Kenneth Ray Nielsen by Mr. Spector for Debtors)
(12:42:14/2+01:31:26) (Re-cross-examination of Kenneth Ray Nielsen by Mr. Lewis for Novell)
(12:49:10/2+01:38:22) *** RECESS ***
(14:04:09/3+00:00:00) Third Session
(14:06:41/3+00:02:32) (Direct examination of Darl Charles McBride by Mr. Spector for Debtors)
(15:46:53/3+01:42:44) *** RECESS ***
(16:03:28/4+00:00:00) Fourth Session
(16:04:21/4+00:00:53) (Cross-examination of Darl Charles McBride by Mr. Marriott for IBM)
(16:23:44/4+00:20:16) *** RECESS ***
(16:43:48/5+00:00:00) Fifth Session
(16:44:06/5+00:00:18) (Resumed cross-examination of Darl Charles McBride by Mr. Marriott for IBM)
(17:31:38/5+00:47:50) (Cross-examination of Darl Charles McBride by Mr. Lewis for Novell)
(17:58:11/5+01:14:23) (Cross-examination of Darl Charles McBride by Mr. Harrington for the U.S. Trustee)
(18:05:47/5+01:21:59) (Re-direct examination of Darl Charles McBride by Mr. Spector for Debtors)
(18:44:21/5+02:00:33) *** RECESS ***
(18:57:38/6+00:00:00) Sixth Session
(18:59:38/6+00:02:00) (Direct examination of Stephen L. Norris by Mr. Spector for Debtors)
(19:23:11/6+00:25:33) (Cross-examination of Stephen L. Norris by Mr. Reynolds for IBM)
(19:38:20/6+00:40:42) (Re-direct examination of Stephen L. Norris by Mr. Spector for Debtors)
(19:47:07/6+00:49:29) (Direct examination of Jeff Fred Hunsaker by Mr. Spector for Debtors)
(20:20:24/6+01:22:46) *** RECESS ***
(20:28:30/7+00:00:00) Seventh Session
(20:30:24/7+00:01:54) (Oracle's objection resolved)
(20:33:58/7+00:05:28) (IBM's conversion argument)
(20:44:01/7+00:15:31) (Novell's conversion argument)
(20:46:55/7+00:18:25) (U.S. Trustee's conversion argument)
(20:49:59/7+00:21:29) (Debtors' conversion opposition and sale argument)
(21:19:28/7+00:50:58) (IBM's sale opposition and conversion reply)
(21:37:05/7+01:08:35) (Novell's sale opposition and conversion reply)
(21:46:16/7+01:17:46) (U.S. Trustee's sale opposition and conversion reply)
(21:48:42/7+01:20:12) (Debtors' sale reply)
(22:04:02/7+01:35:32) (Court promises ruling "certainly within a week")
(22:04:59/7+01:36:29) *** RECESS ***
(09:38:35/1+00:00:00) CLERK: Please rise.
(09:38:38/1+00:00:03) THE COURT: Good morning, everyone. Thank you, and please be
seated.
(09:38:40/1+00:00:05) VOICES: Good morning, your honor.
(09:38:41/1+00:00:06) THE COURT: Good morning. Well, we are here for the motion to
dismiss and motion to approve a sale, and I am ready, having reviewed
all of the documents, and how shall we proceed? Mr. Spector, good
morning.
(09:38:56/1+00:00:21) MR. SPECTOR: Good morning, your Honor. I suppose
appearances would be helpful.
(09:39:00/1+00:00:25) THE COURT: Yes.
(09:39:01/1+00:00:26) MR. SPECTOR: My name is Arthur Spector. I'm here with my
partner Frank Caplan over there --
(09:39:05/1+00:00:30) THE COURT: All right.
(09:39:06/1+00:00:31) MR. SPECTOR: -- representing SCO Group, Incorporated and SCO
Operations, Incorporated, both of whom are debtors-in-possession in
this case. With me also is our paralegal Carmen Cruz, who's going to
try to keep things in order for us.
(09:39:18/1+00:00:43) THE COURT: Okay, welcome.
(09:39:19/1+00:00:44) MR. SPECTOR: And I'll let the other counsel -- of course,
Mr. Tibbitts, general counsel of the debtors --
(09:39:23/1+00:00:48) THE COURT: Yes
(09:39:24/1+00:00:49) MR. SPECTOR: -- is here as well.
(09:39:25/1+00:00:50) THE COURT: Of course. Good morning, Mr. Tibbitts. Any other
introductions?
(09:39:36/1+00:01:01) Good morning.
(09:39:37/1+00:01:02) MR. GREECHER: Good morning, your Honor. Sean Greecher from
Young, Conaway, on --
(09:39:38/1+00:01:03) THE COURT: Yes, sir.
(09:39:39/1+00:01:04) MR. GREECHER: -- behalf of Novell, here with Adam Lewis, who
you know.
(09:39:42/1+00:01:07) THE COURT: Absolutely. Mr. Lewis.
(09:39:43/1+00:01:08) MR. GREECHER: And I believe you've, uh, I believe you've met
Michael Jacobs (inaudible).
(09:39:45/1+00:01:10) THE COURT: Yes, good to see you.
(09:39:50/1+00:01:15) Ms. Silverstein, good morning.
(09:39:51/1+00:01:16) MS. SILVERSTEIN: Good morning, your Honor. Laurie
Silverstein for IBM, here with Richard Levin --
(09:39:55/1+00:01:20) MR. LEVIN: Good morning, your Honor.
(09:39:55/1+00:01:20) THE COURT: Of course. Mr. Levin, good to see you again.
(09:39:57/1+00:01:22) MS. SILVERSTEIN: Also David Marriott --
(09:39:58/1+00:01:23) MR. MARRIOTT: Good morning, your Honor.
(09:39:58/1+00:01:23) THE COURT: Mr. Marriott, yes, sir.
(09:39:58/1+00:01:23) MS. SILVERSTEIN: -- and Michael Reynolds will be addressing
the Court.
(09:40:01/1+00:01:26) MR. REYNOLDS: Good morning, your Honor.
(09:40:01/1+00:01:26) THE COURT: All right, thank you. Mr. Reynolds, welcome.
(09:40:02/1+00:01:27) MR. O'NEILL: Good morning, your Honor.
(09:40:03/1+00:01:28) THE COURT: Good morning, Mr. O'Neill.
(09:40:04/1+00:01:29) MR. O'NEILL: I just wanted to say good morning. I'm here with
Mr. Spector.
(09:40:05/1+00:01:30) THE COURT: All right.
(09:40:06/1+00:01:31) MR. O'NEILL: -- on behalf of the debtors.
(09:40:07/1+00:01:32) THE COURT: Thank you, thank you. Now I know that I had --
(09:40:10/1+00:01:35) MR. SPECTOR: We have, we have counsel from Boies, Schiller --
(09:40:12/1+00:01:37) MR. NORMAND: -- Good morning, your honor, this is Ted Normand
from Boies, Schiller for the debtors.
(09:40:15/1+00:01:40) THE COURT: Good morning. Anyone else? Well, I know we
talked about two and a half hours a side. That is, you know, a -- I'm
not inflexible on that, of course, depending upon how things are
moving along. I'll just be even handed with the amount of time. And
if it looks like despite your best efforts it's taking a little bit
longer obviously I'm not going to cut people off just because you've
hit the -- the magic amount of time, but, uh, be -- I'll try and, you
know, keep mind of the time, keep track of the time, and see how we
go. Mr. Spector.
(09:40:55/1+00:02:20) MR. SPECTOR: Good morning again, your Honor. Am I on the
clock yet?
(09:41:00/1+00:02:25) THE COURT: Not yet.
(09:41:01/1+00:02:26) MR. SPECTOR: Okay. I'm prepared to --
(09:41:02/1+00:02:27) THE COURT: Because there may be some preliminary matters, is
that --
(09:41:04/1+00:02:29) MR. SPECTOR: Well, I was just going into my opening.
(09:41:06/1+00:02:31) THE COURT: Okay.
(09:41:07/1+00:02:32) MR. SPECTOR: Okay.
(09:41:08/1+00:02:33) THE COURT: All right.
(09:41:09/1+00:02:34) MR. SPECTOR: We're here today on two matters, SCO's motion to
sell substantially all of their assets under section three
sixty-three, and IBM's, Novell's, and the U.S. Trustee's motions to
convert the cases.
(09:41:19/1+00:02:44) Putting aside the U.S. Trustee's motion for the time being,
these motions by IBM and Novell to convert the cases to Chapter Seven,
and even more so their objections to the sale to Unxis are baseless.
Moreover, their reasons for filing the motions have nothing to do with
their interest as alleged creditors hoping to be paid for their
claims.
(09:41:42/1+00:03:07) They're active in these cases for one reason only, and that
is to put SCO out of business in order to kill SCO's lawsuits against
them. These parties, who call themselves creditors are subverting the
purpose of Chapter Eleven, namely to keep a business in business in
order to pay their just debts, preserve jobs, provide a return to
stockholders if we're fortunate enough to have a solvent case.
(09:42:03/1+00:03:28) IBM and Novell want to kill SCO's business, and they care not
a whit that they and the creditors, the legitimate creditors, will
receive little or nothing in the process. Why in heaven's name does
IBM care whether SCO sells its Unix business to Unxis? And that's
(you-nexis) how that name's pronounced, we learned.
(09:42:19/1+00:03:44) THE COURT: Thank you.
(09:42:20/1+00:03:45) MR. SPECTOR: Why did IBM unleash its hordes of high-powered
attorneys coast-to-coast to depose anyone who might dare to testify
for SCO. What possible reason does IBM have to oppose the sale? The
only reason is that by the sale, SCO would survive, and survive with
the potent claims against IBM intact.
(09:42:41/1+00:04:06) IBM and Novell want to crush SCO, and soon, before the Court
of Appeal can vindicate it. They know that once that happens, they
will have to face juries to answer for what they have done to SCO.
(09:42:52/1+00:04:17) The sale to Unxis is complex technically, but simple in
bankruptcy terms. It's complex because as you will hear and probably
already know, the circumstances of this case make sale of the Unix
business, an extremely difficult proposition. It is nevertheless
quite simple from a bankruptcy perspective.
(09:43:12/1+00:04:37) There's a buyer willing and able, virtually unconditionally,
to pay enough within a matter of days to permit SCO to pay all of
their allowed claims in full. There is no more due diligence. There
is nothing else for the SCO debtors -- or the sellers, to do, other
than -- to satis-- to satisfy the closing -- other than to obtain an
order from this court.
(09:43:34/1+00:04:59) The evidence will demonstrate the nearly nonstop efforts the
debtor has made to market these assets to ensure that the estate
would be getting a fair deal.
(09:43:44/1+00:05:09) The Court already knows, simply by its juxtaposition with these
motions to convert, alleging continuing losses, that there is a good
business reason to sell these assets under section 363 without a plan.
…
(09:44:32/1+00:05:57) But Novell and IBM will try to divert the Court's attention
from the real section 363 issues and try to focus on all sorts of red
herrings. We urge the Court to keep an eye on the ball, here, and
remember that the purpose of court oversight of a sale, in bankruptcy,
is the protection of the estate as a whole.
…
(09:55:03/1+00:16:28) As intimated earlier, a most unusual circumstance is that the
debtors have insurance against any potential loss from now until
August thirty-first, and most certainly through the date of the
anticipated closing of the Unxis sale in a couple of weeks, in the
form of a personal guarantee from the debtors' largest stock holder,
Ralph Yarro.
(09:55:24/1+00:16:49) Mr. Yarro is committed to underwrite up to two hundred
thousand dollars of losses, should they occur, so that the debtors'
cash is not eroded when the Court grants the debtors extended life.
There's no reason, if we're worried about true creditors, not to
extend the life to August thirty-first, when the losses are being
underwritten.
…
(09:59:58/1+00:21:23) THE COURT: Thank you, Mr. Spector. By the way, I failed to
acknowledge Mr. Harrington's appearance for the United States Trustee.
Good morning, Mr. Harrington.
(10:00:09/1+00:21:34) MR. HARRINGTON: Good morning, your Honor.
(10:00:22/1+00:21:47) MR. SPECTOR: Your honor, do you -- do you have a clock
(inaudible)?
(10:00:24/1+00:21:49) THE COURT: I'm keeping track.
(10:00:25/1+00:21:50) MR. SPECTOR: Can you share it?
(10:00:26/1+00:21:51) THE COURT: Oh, that was fifteen minutes.
(10:00:28/1+00:21:53) MR. SPECTOR: Oh. I'm in -- I'm in business.
(10:00:32/1+00:21:57) THE COURT: Mr. Levin, good morning.
(10:00:33/1+00:21:58) MR. LEVIN: Good morning, your Honor. Richard Levin, Cravath,
Swaine, and Moore for International Business Machines Corporation.
(10:00:40/1+00:22:05) Your honor, it was not IBM's original intention to oppose the
sale of the assets proposed. There were just a few things in the sale
agreement that concerned us when we read it.
(10:00:53/1+00:22:18) One was what we call the vanishing -- I'm sorry, the poison
pill. The second was the vanishing Letter of Credit - Sun. We call
that the solar eclipse --
(10:01:05/1+00:22:30) THE COURT: Ha, ha.
(10:01:06/1+00:22:31) MR. LEVIN: -- um, and the third was the need for the debtors
to make a record to support the sale. But what we found out in
discovery surprised us. And you see some of that reflected in our
opposition paper.
(10:01:19/1+00:22:44) THE COURT: Yes, yes.
(10:01:20/1+00:22:45) MR. LEVIN: We found out that there were secret payments from
the debtor and its CEO to Mr. Norris. There was a reduction in the
purchase price for the, um, for an asset that is currently generating
no revenue -- no material revenue. Um, there's the, as I said, the
solar eclipse.
(10:01:44/1+00:23:09) We've learned that there's no committed financing for this
transaction, and that the agreement is largely an option, for which
the debtors have received a payment of two hundred fifty thousand
dollars.
(10:01:55/1+00:23:20) We believe that we needed to call these matters to the
Court's attention, and with them, we found it hard not to oppose the
sale. What we found out we believe also supports the conversion
motion, and we'll get into that in the evidence.
(10:02:12/1+00:23:37) Since then there's been a new development. This case is full
of new developments. Last Thursday, your Honor, we received and, uh,
by copy, of, and -- we saw a copy of an email to the Debtor the debtor
received, a proposal from LNS Acquisition, LLC, which is an affiliate
of DMEP Corporation, doing business as Hale Global, to acquire all of
the assets of the debtor.
(10:02:43/1+00:24:08) We haven't had time since Thursday afternoon when this came
in to evaluate whether it is a higher and better offer or whether it
is not. But what it does tell us is that the idea -- in addition to
all of the other problems that we have with the sale -- it does tell
us that the idea of a private sale is not a good idea in this case.
(10:03:06/1+00:24:31) If you look at the structure of the sale agreement itself,
there's no urgency to closing the sale. There's time to conduct an
auction. We have a competing bidder.
(10:03:17/1+00:24:42) And I also might mention that the principal of LNS
Acquisition is present in court today as is his counsel, who can
represent to the Court that they are willing to participate in an
auction. Obviously they're not ready to bid. It's a little early for
that, but they're reviewed -- they'll represent that they've reviewed
the Unxis agreement, and even in the face of that they're willing to
bid, which suggests they would come up with something higher and
better, otherwise, why bother?
(10:03:48/1+00:25:13) So we believe that there should be an auction, that this
should not go by private sale. And because of the dynamics of this
case, your Honor, and all of the other things that we will show during
this case, we believe that this Court should exercise its discretion
under 1104(a)(3) to order the appointment of a trustee to conduct that
auction, rather than allowing SCO to conduct it itself, since it is so
closely allied with the current bidder, it can't be a neutral party, a
disinterested board of directors, in effect, to conduct an auction
process, unless some independent directors were appointed at this
point.
(10:04:30/1+00:25:55) So we believe that the fastest and easiest way to get there
would be the prompt appointment of a Chapter Eleven trustee to conduct
that auction.
(10:04:37/1+00:26:02) Your Honor, on the other hand, if the Court determines not to
order an auction for this case, then, for the reasons we stated in our
opposition, and as the evidence will show, we believe the sale should
not be approved, and the case should be converted to Chapter Seven.
(10:04:52/1+00:26:17) THE COURT: All right, thank you, Mr. Levin. Mr. Lewis, good
morning.
(10:05:00/1+00:26:25) MR. LEWIS: Good morning, your Honor. I don't have very much
here as an opening. I think I just want to follow on a few points.
(10:05:05/1+00:26:30) THE COURT: Okay.
(10:05:06/1+00:26:31) MR. LEWIS: If you listened, especially to the beginning of
the debtors' opening, what you heard, I think very clearly, was this
case is all about the litigation. That's what this is about.
(10:05:17/1+00:26:42) And so, if that's what this is about, then in a sense part of
what's confronting the Court today is, who should decide what to do
with that litigation? The debtor has said repeatedly that we want to
squash the debtor and crush the litigation. We've not asked for any
such thing. We've asked for conversion to a Chapter Seven, for the
appointment of a neutral to assess that litigation, given management's
obvious commitment to it pretty much come what may.
(10:05:46/1+00:27:11) And I think that's still a really good idea here. So the
sale should be disapproved, among other reasons, because a neutral
needs to evaluate this whole approach to this case. And we have not
had a neutral since the beginning of this case to do that. And you
heard it again this morning. They won't concede that point, but
that's what you heard. And I think it -- you heard it very, very
clearly.
(10:06:10/1+00:27:35) And I want to reiterate again that we have not tried to end
the litigation through this case. We have tried to get the litigation
in the hands of someone who can approach it rationally. Maybe that
someone will decide that the litigations are worth billions of
dollars, and we will not see an end to it.
(10:06:29/1+00:27:54) Maybe that person will decide it's worth a whole lot less,
and there's a lot of risks to the creditors, a lot of uncertainties, a
lot of maybes, and a long way down the road, even if the case gets
reversed in the tenth circuit, and the -- what's in the best interests
of creditors is some other approach to the litigation, perhaps a
settlement.
(10:06:47/1+00:28:12) But that's -- should be in the hands of someone whose
judgment now can be trusted, and I don't think the Court or the
creditors can trust the management of the debtor right now. That's
just the way it is.
…
(10:10:24/1+00:31:49) THE COURT: Thank you, Mr. Lewis. Anyone else wish to be
heard?
(10:10:29/1+00:31:54) MR. DOSHI: Your honor?
(10:10:29/1+00:31:54) THE COURT: Yes.
(10:10:30/1+00:31:55) MR. DOSHI: If I may interrupt on the phone for a second.
(10:10:34/1+00:31:59) THE COURT: Who is this?
(10:10:35/1+00:32:00) MR. DOSHI: This is Amish Doshi with Day Pitney on behalf of
Oracle USA Inc.
(10:10:39/1+00:32:04) THE COURT: Yes, Mr. Doshi.
(10:10:41/1+00:32:06) MR. DOSHI: Good morning, your Honor. I just want to note my
appearance for the record, and also note that we do not take any
position with respect to this motion to convert issue, but at some
appropriate time, when your Honor is ready, with respect to the sale
motion and the assumption and assignment, or attempted assumption and
assignment of any Oracle agreement, at that point I would like to be
heard. We filed a limited objection, and I just wanted to note for
the record that at some appropriate time I want an opportunity to be
heard on that limited issue. Once again, we take absolutely no
position with respect to this motion, and I don't want to interrupt
the proceedings that are going on with respect to that.
(10:11:25/1+00:32:50) THE COURT: Thank you, Mr. Doshi. I certainly will give you
an opportunity to be heard at the, uh, at the right time.
(10:11:28/1+00:32:53) MR. DOSHI: Thank you.
(10:11:29/1+00:32:54) THE COURT: Your honor, Mr. Levin. Uh, we have a procedural
question.
(10:11:32/1+00:32:57) THE COURT: Okay.
…
(10:15:40/1+00:37:05) MR. SPECTOR: The record will be replete with testimony to
show that the estate is getting a fair price, notwithstanding, as red
herrings I told you were going to be coming up, on another deal.
(10:15:52/1+00:37:17) Um, Mr. Hale is not new to this court. Mr. Hale was the lead
of York. Remember York. Because of York, we're in the position we're
in now. Uh, we spent tons of money to try to bring that York deal
home early in the case. Mr. Hale, you'll hear testimony -- I'm not --
I'm doing an opening -- no, don't put that on the clock, I'm
responding to their argument. You're going to hear testimony --
(10:16:15/1+00:37:40) MR. LEVIN: Your Honor, excuse me, I just asked a procedural
question of how we were going to handle --
(10:16:20/1+00:37:45) THE COURT: Yes.
(10:16:20/1+00:37:45) MR. LEVIN: -- the amendment. That's all I asked.
(10:16:22/1+00:37:47) MR. SPECTOR: Well, it -- it invol-- it invoked the idea of an
auction. He says we can't do an auction without looking at it, so
while we're talking about the auction -- um, while we're talking about
the auction, Mr. Hale, through Global -- whatever it is, Hale Global,
came back, and you'll hear Mr. McBride talk about it, he came back in
the last several months before the sale -- he's one of those people
who considered this offer and rejected it.
(10:16:46/1+00:38:11) Um, now, on Thursday of last week, while we're getting --
doing everything, getting documents, we get this email from him,
copied to IBM's lawyer and Novell's lawyer by the way, uh, saying oh
by the way here's what it is. Well, one of our deal partners
disassembled it and said here's what the deal really is. We get to
the merits of the deal -- if we get to the merits of the deal, it
stinks.
…
(10:18:37/1+00:40:02) MR. HARRINGTON: Good morning, your Honor.
(10:18:38/1+00:40:03) THE COURT: Good morning.
(10:18:38/1+00:40:03) MR. HARRINGTON: William Harrington, for the office of the
United States Trustee. I'm pinch-hitting for Joseph McMahon today.
(10:18:44/1+00:40:09) Your honor, I wanted to just get up briefly. There's been a
lot of talk, mainly from the debtors, about what would happen, sort of
post-sale, and some sort of structured dismissal, but that hasn't
really been defined, there's no motion on the table.
(10:18:59/1+00:40:24) I know your Honor has read our motion. Our motion is very
simple.
(10:19:02/1+00:40:27) THE COURT: Yes.
(10:19:03/1+00:40:28) MR. HARRINGTON: And I don't think the debtor really disputes
what's contained in our motion. Although they sort of disputed it
today, I don't think they dispute there's a continuing loss here. The
reasonable likelihood of rehabilitation, I think they were sketchy as
to what's going to happen with that.
(10:19:20/1+00:40:45) And the code talks about a plan, your Honor, and the debtors
being able to propose a plan to prove unusual circumstances in the
best interests of the creditors. That's not being discussed by the
creditor-- by the debtors, and we have serious concerns about some
sort of structured dismissal that doesn't follow the code, your Honor.
(10:19:42/1+00:41:07) There's two ways -- there's, I guess, three ways to get rid
of a case in bankruptcy, and the first is a plan, and that's what is
contemplated under the code and chapter eleven, that you'll get out
through a plan, a reorganization. We're not -- no one's talking about
doing that here.
(10:19:57/1+00:41:22) The second is to convert the case and let a chapter seven go
through the claims and evaluate the claims and make distributions.
And then the third would be a straight dismissal with no sort of
structure to it, in certain circumstances.
(10:20:10/1+00:41:35) So, I did want to get up and rise because there is sort of a
lingering discussion of a structured dismissal here, uh, with no sort
of -- it's sort of an amorphous structured dismissal, it's been
mentioned, but there's no kind of discussion as to what form that
would take.
(10:20:25/1+00:41:50) Um, and, we believe your Honor the two ways out here are
reorganization plan or a chapter seven trustee, and that's why we
moved for conversion. Thank you, your Honor.
(10:20:36/1+00:42:01) THE COURT: Thank you, Mr. Harrington, thank you. All right,
anyone else?
(10:20:42/1+00:42:07) MR. MARRIOTT: Your honor, David Marriott, if I may, for IBM.
(10:20:44/1+00:42:09) THE COURT: Of course.
(10:20:48/1+00:42:13) MR. MARRIOTT: I think it might be to everyone's advantage if
we cleared some -- some procedural underbrush. We have provided the
Court and counsel for the debtors a set of exhibits --
(10:20:59/1+00:42:24) THE COURT: Yes.
(10:21:00/1+00:42:25) MR. MARRIOTT: -- that we propose to move into evidence during
the course of these proceedings, your Honor.
…
(10:29:28/1+00:50:53) (silence)
(10:30:01/1+00:51:26) MR. SPECTOR: Here are the other two.
(10:30:04/1+00:51:29) THE COURT: So we have declarations of Mr. Nielsen,
Mr. Tibbitts, and Mr. Hunsaker, and that's what we'll review, and,
you'll just let me know when you're ready to proceed, is that right,
Mr. Marriott?
(10:30:15/1+00:51:40) MR. MARRIOTT: Yes, your honor. Thank you.
(10:30:17/1+00:51:42) THE COURT: Thank you. All right, we'll stand in recess as
long as necessary.
(10:30:23/1+00:51:48) *** RECESS ***
(11:10:48/2+00:00:00) CLERK: Please rise.
(11:10:52/2+00:00:04) THE COURT: You may be seated. Thank you. Mr. Marriott, did
you want to respond to the declarations? I mean, I know you're going
-- you'll make -- you'll probably want to cross-examine. Not
probably.
(11:11:07/2+00:00:19) MR. MARRIOTT: We will I believe have some objections to the
content of the declarations, --
(11:11:11/2+00:00:23) THE COURT: All right.
(11:11:12/2+00:00:24) MR. MARRIOTT: -- but perhaps what makes sense is to have the
witnesses called, and we can state our objections when they've adopted
their declarations, which is, I assume, the procedure we will be
following.
(11:11:19/2+00:00:31) THE COURT: Exactly.
(11:11:20/2+00:00:32) MR. MARRIOTT: Thank you.
(11:11:21/2+00:00:33) THE COURT: Thank you.
(11:11:24/2+00:00:36) MR. SPECTOR: So, uh. Do you want me to --
(11:11:26/2+00:00:38) THE COURT: Mr. Spector.
(11:11:27/2+00:00:39) MR. SPECTOR: How exactly do you want --
(11:11:28/2+00:00:40) THE COURT: Oh, I guess -- I guess we ought to call
Mr. Tibbitts to the stand.
(11:11:30/2+00:00:42) MR. SPECTOR: All right, do I do that, now?
(11:11:32/2+00:00:44) THE COURT: Why not. I'll do it. Mr. Tibbitts.
(11:11:33/2+00:00:45) (laughter)
(11:11:36/2+00:00:48) You may --
(11:11:36/2+00:00:48) MR. TIBBITTS: Do I need my declaration up there with me, or --
(11:11:39/2+00:00:51) THE COURT: Yes, I think that's a good -- you'll probably need
that, Mr. Tibbitts.
(11:11:42/2+00:00:54) Is that all right, Mr. Marriott? Any objection?
(11:11:43/2+00:00:55) MR. MARRIOTT: That's fine by me, your Honor. I have no
objection.
(11:11:46/2+00:00:58) THE COURT: Okay. And we will have you sworn, Mr. Tibbitts.
(11:11:53/2+00:01:05) CLERK: Please take the stand. Raise your right hand, place
your left hand on the Bible. State your full name and spell your last
name for the record.
(11:12:02/2+00:01:14) MR. TIBBITTS: Ryan E. Tibbitts, T-I-B-B-I-T-T-S.
(11:12:07/2+00:01:19) CLERK: Do you solemnly swear to tell the truth, the whole
truth, and nothing but the truth, so help you God?
(11:12:12/2+00:01:24) MR. TIBBITTS: Yes, I do.
(11:12:13/2+00:01:25) THE COURT: Thank you, Mr. Tibbitts.
(11:12:17/2+00:01:29) When you're -- yes, you may proceed.
(11:12:20/2+00:01:32) Q: Mr. Tibbitts, do you adopt your declaration?
(11:12:23/2+00:01:35) A: Yes, I do.
(11:12:24/2+00:01:36) MR. SPECTOR: That it?
(11:12:25/2+00:01:37) THE COURT: Thank you.
(11:12:25/2+00:01:37) MR. SPECTOR: Okay.
(11:12:26/2+00:01:38) THE COURT: All right, now that's official.
(11:12:27/2+00:01:39) MR. MARRIOTT: Thank you, your Honor.
(11:12:28/2+00:01:40) THE COURT: Thank you. Mr. Marriott.
(11:12:31/2+00:01:43) MR. MARRIOTT: Uh, good morning, Mr. Tibbitts.
(11:12:33/2+00:01:45) MR. TIBBITTS: How are you.
(11:12:33/2+00:01:45) MR. MARRIOTT: Your Honor, if I may, I think, in the interests
of expedition, what I'd like to do is state for the record our objections
to certain paragraphs of Mr. Tibbitts' declaration --
(11:12:43/2+00:01:55) THE COURT: All right.
(11:12:44/2+00:01:56) MR. MARRIOTT: -- and then I have but a few questions for
Mr. Tibbitts on behalf of IBM. Your Honor, we would object to
paragraphs seven, eight, nine, ten, eleven, twelve, sixteen, and
seventeen, on the grounds that they are speculative, not based on
personal knowledge, and based on hearsay, for reasons that I believe
are plain on the face of the document.
(11:13:24/2+00:02:36) I assume your Honor will take those objections under
advisement if and when you consider the merits of the testimony and
you don't wish to have further argument on that.
(11:13:32/2+00:02:44) THE COURT: Well, I suppose to the extent that I sustain your
objections, you wouldn't have to cross-examine on those points.
(11:13:40/2+00:02:52) MR. MARRIOTT: I don't intend, your Honor, to cross-examine
on those points. The speculative nature -- the testimony in those
paragraphs, your Honor, speaks to what would happen in a world in
which the tenth circuit court of appeals were to reverse Judge
Kimball's decision in Novell's favor in the District Court in Utah.
And Mr. Tibbitts' testimony, as your Honor knows, if you've had an
opportunity to review this, --
(11:14:02/2+00:03:14) THE COURT: Yes.
(11:14:02/2+00:03:14) MR. MARRIOTT: -- lays out what his view of several
possibilities in the event that event in the future -- that uncertain
event in the future were to occur. It's our position that's -- that
that is necessarily and inherently speculative. That it isn't and
can't be based on personal knowledge. That it's based in parts on
hearsay, and for those reasons alone your Honor not -- ought not take
that into evidence. I don't believe there's much additional
cross-examination to do about it if I think speaks for itself and on
its face suffers from those problems. I have only, uh, several
additional questions for Mr. --
(11:14:31/2+00:03:43) MR. JACOBS: If I could --
(11:14:32/2+00:03:44) THE COURT: You -- please.
(11:14:32/2+00:03:44) MR. JACOBS: If I may, this will be the first and last time
that I disagree with Mr. Marriott today, but I actually think if you
were to rule it would expedite my cross-examination at least, because
if it -- I have to be concerned that it might come in, then I have to
develop further aspects of the proposed testimony, so if --
(11:14:47/2+00:03:59) THE COURT: And forgive me, your name again?
(11:14:48/2+00:04:00) MR. JACOBS: Michael Jacobs, your Honor, I'm sorry.
(11:14:49/2+00:04:01) THE COURT: I'm sorry, Mr. Jacobs.
(11:14:50/2+00:04:02) MR. JACOBS: And I'm sorry for not being at the microphone also.
(11:14:51/2+00:04:03) THE COURT: No, I th-- I think we picked you up right there at
the table.
(11:14:54/2+00:04:06) MR. MARRIOTT: And, to be clear, Mr. Jacobs, I believe, is the
primary questioner of Mr. Tibbitts.
(11:14:58/2+00:04:10) THE COURT: Yeah, okay.
(11:14:59/2+00:04:11) MR. MARRIOTT: I'm principally stating IBM's objections, which
I think your Honor should grant, and because I only have several
questions it doesn't impede my examination in the way it will Mr. --
Mr. Jacobs.
(11:15:08/2+00:04:20) THE COURT: All right. Um, Mr. Spector, any response to the
objection?
(11:15:16/2+00:04:28) MR. SPECTOR: Mr. Normand will handle this witness.
(11:15:18/2+00:04:30) THE COURT: All right Mist-- good -- good morning.
(11:15:19/2+00:04:31) MR. NORMAND: Good morning, your Honor. Ted Normand.
(11:15:20/2+00:04:32) THE COURT: Yes.
(11:15:21/2+00:04:33) MR. NORMAND: This goes to an issue that Mr. Spector addressed
in the argument last week, so I have one broad point and one specific
point.
(11:15:28/2+00:04:40) As a broad matter I'm not sure that the label speculative is
of particular significance here. I mean what your Honor is charged
with doing is, to some extent, making a prediction about how these
claims are going to be resolved.
(11:15:39/2+00:04:51) I don't think there's any question that the pendency of the
litigation is relevant. We're not going to address the merits, we're
not trying to prove up the merits, but th--
(11:15:46/2+00:04:58) THE COURT: Right.
(11:15:46/2+00:04:58) MR. NORMAND: -- I don't think there's a question. IBM and
Novell haven't gone so far as to say the pendency of the litigation is
irrelevant. So, given its relevance, your Honor is charged with
making one prediction or another about what might happen. That's my
general comment.
(11:16:00/2+00:05:12) I would say specifically we have the general counsel of the
company, who's been exposed to the proceedings and who, as a mechanism
for your Honor to gain some knowledge through a witness about the
company's view, trying to make the point that, you know, there's a
reasonable prospect of rehabilitation, the company's view about how
things might play out.
(11:16:18/2+00:05:30) Now, they're entitled to put up -- I think they can argue as
attorneys, they can argue against it. The way we've chosen to do it
is to use the general counsel of the company to argue about how he
thinks, given his many-year exposure, his investment in the issues as
a -- as the general counsel of the company, his non-stop experience
with dealing with them. He's qualified to speak to what he thinks
will happen upon any one of a number of events, in particular
concerning the tenth circuit appeal.
(11:16:47/2+00:05:59) So, for both those reasons I think that Mr. Tibbitts should
be permitted to testify to the substance of those paragraphs.
(11:16:52/2+00:06:04) THE COURT: Thank you, Mr. Normand. Anything further,
Mr. Marriott?
(11:16:57/2+00:06:09) MR. MARRIOTT: Your honor, I would say simply that, without
boring your Honor again with all the detail of our letter brief --
Mr. Levin's letter brief to the Court -- we laid out there why, your
Honor, this testimony is inherently speculative, why it's been
disallowed by courts in other jurisdictions. It is offered here, as I
understand it, for the purpose of showing that this -- the debtors
have some prospect of rehabilitation. And a -- an uncertain potential
recovery, at a date uncertain in the funer-- future, your Honor, is
necessarily and inherently speculative, and for the reasons set out in
those papers and that I've otherwise stated here, it ought not,
we respectfully submit, be allowed.
(11:17:33/2+00:06:45) THE COURT: Yes, Mis-- Mr. Jacobs.
(11:17:34/2+00:06:46) MR. JACOBS: Michael Jacobs, your Honor. For the record,
Novell joins in IBM's objections to this testimony.
(11:17:38/2+00:06:50) THE COURT: All right. Mr. Normand?
(11:17:42/2+00:06:54) MR. NORMAND: One last word, your Honor.
(11:17:43/2+00:06:55) THE COURT: Yes.
(11:17:45/2+00:06:57) MR. NORMAND: It's important to note that part of what
Mr. Tibbitts is testifying to in these paragraphs is -- is based on
his personal experience, and that is, in particular, what he thinks
will happen in the market, for lack of a better term, if there is some
sort of reversal from the tenth circuit.
(11:17:59/2+00:07:11) That's an issue that he has grounds to address based on
first-hand knowledge. And again I think we're -- we shouldn't get
hung up on labels. Is it speculative? It's forward-looking, but
that's the context in which everyone hear finds themselves. Of course
your Honor knows that. And your Honor's task is to predict what's
going to happen in the future, and Mr. Tibbitts has personal
knowledge, based on which he can speak to that issue.
(11:18:23/2+00:07:35) VOICE: May I just --
(11:18:24/2+00:07:36) MR. MARRIOTT: One additional point, your Honor, raised by
Mr. Norris's argument. A further problem with Mr. Tibbitts'
testimony, your Honor, is that it is in effect improper lay opinion
testimony. What Mr. Normand should have said, and what Mr. Tibbitts
says at paragraph ten of his declaration, is that he will speak to the
effect that he personally believes a decision by the tenth circuit
court of appeals would have on the stock price and the market
capitalization of the SCO Group. That is, if anything, your Honor, a
classic question of expert opinion. It is not a question for a lay
witness, independent of the other reasons for objection which we've
laid out. Thank you, Judge.
(11:18:58/2+00:08:10) THE COURT: Thank you. Well, you know, Mis-- Mister -- let
-- let me ask Mr. Tibbitts one question.
(11:19:07/2+00:08:19) Q: Mr. Tibbitts, as general counsel for SCO, is it your -- is
it your responsibility -- there may be others -- but is it one of your
responsibilities to monitor the litigations to which you refer in your
declaration?
(11:19:22/2+00:08:34) A: Yes.
(11:19:23/2+00:08:35) THE COURT: Okay. Well, given the fact that Mr. Tibbitts is a
lawyer, is general counsel, is charged with the responsibility of
monitoring the litigation, I am going to overrule the objection except
as it relates to what impact the litigation would have upon the stock
prices, because I do not believe that Mr. Tibbitts, as a lawyer, has
the expertise to opine on that, or to even speak to it as a fact -- as
a matter of fact.
(11:19:51/2+00:09:03) But other than that, as far as what might happen, I think it
goes to the weight of the evidence, I think we all know that this is
based on surmise to a large extent, but nonetheless, as general
counsel, I do think that Mr. Tibbitts ought to be entitled to testify
-- or his -- his declaration, at least as to those points, should be
admitted.
(11:20:13/2+00:09:25) MR. MARRIOTT: May I inquire, your Honor?
(11:20:14/2+00:09:26) THE COURT: Yes.
(11:20:15/2+00:09:27) MR. MARRIOTT: Thank you.
(11:20:16/2+00:09:28) Q: Mr. Tibbitts, in your declaration, you describe certain of
the claims that the debtors have against Novell and IBM, correct?
(11:20:27/2+00:09:39) A: Yes.
(11:20:28/2+00:09:40) Q: You do not mention, however, in your declaration, any
counterclaims that either Novell or IBM has against the debtors,
correct?
(11:20:35/2+00:09:47) A: That's correct.
(11:20:36/2+00:09:48) Q: And in fact IBM has a number of counterclaims against
debtors, correct?
(11:20:41/2+00:09:53) A: Uh --
(11:20:42/2+00:09:54) Q: Against the SCO Group, Inc.?
(11:20:44/2+00:09:56) A: Well, I know at one point they had a number of
counterclaims and they dropped many of those. Uh, and I don't know if
they have many claims left, or one or two. (noise) Sorry.
(11:20:53/2+00:10:05) Q: But, isn't a fact, Mr. Tibbitts, that IBM asserted more
than ten counterclaims against the SCO Group, Inc., including four
patent counterclaims, which were -- which patent counterclaims were
dropped?
(11:21:07/2+00:10:19) A: Uh, I don't have the numbers in my head, but that sounds about
right.
(11:21:09/2+00:10:21) Q: And IBM has asserted against the SCO Group counterclaims in
addition to patent counterclaims, correct?
(11:21:15/2+00:10:27) A: Yes.
(11:21:16/2+00:10:28) Q: And those cases are pending, correct?
(11:21:17/2+00:10:29) A: Yes.
(11:21:18/2+00:10:30) Q: In fact IBM moved for summary judgment, for a declara-- with
respect --
(11:21:22/2+00:10:34) MR. MARRIOTT: Withdrawn, your Honor. No further questions.
(11:21:24/2+00:10:36) THE COURT: All right, thank you. Mr. Jacobs, when you're
ready, sir.
(11:21:31/2+00:10:43) Q: Mr. Tibbitts, let's talk first about the timing of a
possible tenth circuit ruling. In your declaration you say that you
have been advised -- that SCO has been advised, that Judge McConnell
plans to rule on his cases prior to his departure date, do you recall
that --
(11:21:48/2+00:11:00) A: Correct.
(11:21:48/2+00:11:00) Q: -- testimony in your declaration? What exactly has been
said by whom to whom, sir?
…
(11:28:54/2+00:18:06) MR. JACOBS: Thank you, your Honor, no further questions.
(11:28:55/2+00:18:07) THE COURT: All right. Any re-direct, Mr. Normand?
(11:29:09/2+00:18:21) MR. NORMAND: Uh, just briefly, your Honor. Good morning,
Mr. Tibbitts.
(11:29:12/2+00:18:24) MR. TIBBITTS: How are you.
(11:29:15/2+00:18:27) Q: Mr. Marriott had asked you about counterclaims, do you
recall that?
(11:29:18/2+00:18:30) A: Yes.
…
(11:32:20/2+00:21:32) THE COURT: Mr. Tibbitts, you may step down, sir.
(11:32:21/2+00:21:33) MR. TIBBITTS: Thank you.
(11:32:22/2+00:21:34) THE COURT: Thank you.
(11:32:30/2+00:21:42) MR. SPECTOR: Uh, Mr. Tibbitts is going to go call
Mr. Nielsen, who wou--
(11:32:31/2+00:21:43) THE COURT: Oh fine, good.
(11:32:32/2+00:21:44) MR. SPECTOR: -- who would have been our first, but we did --
now Mr. Tibbitts can stay here with us.
(11:32:37/2+00:21:49) THE COURT: Yes, he -- yes, he's entitled to stay.
(11:32:39/2+00:21:51) (silence)
(11:33:23/2+00:22:35) MR. LEVIN: Your Honor, may I just inquire how much time we've
expended, in the interests of keeping everyone on the same page?
(11:33:28/2+00:22:40) THE COURT: You know, it's -- it's -- it's very difficult,
because some of it -- a lot of it's been argument. I have you at the
moment at fifteen minutes.
(11:33:37/2+00:22:49) MR. LEVIN: Thank you, Judge.
(11:33:38/2+00:22:50) THE COURT: And I have the other side at about twenty-five
minutes.
(11:33:42/2+00:22:54) MR. SPECTOR: Your Honor, uh, I guess we call Ken Nielsen to
the stand.
(11:33:44/2+00:22:56) THE COURT: Mr. Nielsen, thank you. If you'll just remain
standing while you're sworn, Mr. Nielsen.
(11:33:50/2+00:23:02) MR. SPECTOR: So, I think they want you to (inaudible) this
Bible.
(11:33:53/2+00:23:05) MR. NIELSEN: Ah, here it is.
(11:33:55/2+00:23:07) CLERK: If you could raise your right hand, place your left
hand on the Bible. State your full name and spell your last name for
the record.
(11:34:00/2+00:23:12) MR. NIELSEN: Kenneth Ray Nielsen, N-I-E-L-S-E-N.
(11:34:04/2+00:23:16) CLERK: Do you solemnly swear to tell the truth, the whole
truth, and nothing but the truth, so help you God?
(11:34:08/2+00:23:20) MR. NIELSEN: I do.
(11:34:12/2+00:23:24) Q: Do you adopt your declaration, sir?
(11:34:16/2+00:23:28) A: Yes.
(11:34:17/2+00:23:29) Q: You know what that means?
(11:34:18/2+00:23:30) A: No. But I assume it means, do I -- is this my
declaration?
(11:34:21/2+00:23:33) Q: Yes, and -- and you agreeing that that is accurate.
(11:34:24/2+00:23:36) A: Yes.
(11:34:26/2+00:23:38) THE COURT: Thank you.
(11:34:34/2+00:23:46) MR. REYNOLDS: Good morning, your Honor. Good morning,
Mr. Nielsen.
(11:34:36/2+00:23:48) MR. NIELSEN: Good morning.
(11:34:38/2+00:23:50) MR. REYNOLDS: I'm Michael Reynolds from Cravath, Swaine, and
Moore, in New York, on behalf of IBM. As a threshold matter, your
Honor, I'd like to, on behalf of IBM, object to paragraphs
twenty-eight to thirty-six of Mr. Nielsen's declaration, on the
grounds that those -- the subjects described therein are beyond the
scope of the topics that, uh, the debtors indicated Mr. Nielsen would
be here to testify about.
(11:35:01/2+00:24:13) The topics that we were advised he would be testifying about
were, and I quote, financial results and management steps to conserve,
and did not relate to the topics that are addressed in the paragraphs
I just listed.
(11:35:16/2+00:24:28) (silence)
(11:36:00/2+00:25:12) If I could further explain, your Honor.
(11:36:03/2+00:25:15) THE COURT: I was just waiting for a response, but go ahead.
Please go ahead while you're there, Mr. Reynolds.
(11:36:06/2+00:25:18) MR. REYNOLDS: Yes if you had a chance to review those
paragraphs briefly, you'll see they relate to the witness's views on
various intercompany impact of, um, a conversion to chapter seven.
(11:36:18/2+00:25:30) THE COURT: Right.
(11:36:19/2+00:25:31) MR. REYNOLDS: And that's a topic that does not fall within
the two that I mentioned, and in fact, during Mr. Nielsen's deposition
I specifically asked him, just to make sure there was no chance of him
going into this area, whether it was his intent to address this
subject, and he was instructed by counsel not to go into that subject,
even though I thought that was something that we were entitled to do
in these depositions.
…
(11:44:38/2+00:33:50) MR. SPECTOR: Second, your Honor, and I may come back to this
multiple times today, we showed up in court on the assigned date for
trial on June fifteenth with eight live witnesses. Mr. Nielsen was
one of them. They wouldn't have had one whit of discovery on that
day, and we would have proceeded to trial.
(11:44:53/2+00:34:05) I know we brought in some evidence. We could have done that
as the last witness at the trial, if we would -- if we want -- if we
wanted to, we could have put that into evidence with the last of the
eight witnesses and say, and here's the purchase and sale agreement
that was inked three hours ago.
(11:45:08/2+00:34:20) And we would have had the trial, and they wouldn't have had
anything for Mr. Nielsen, or anybody else. We've produced thousands
and thousands of documents. They've had -- they 'posed everybody.
Uh, none of that would have happened if we'd gone to trial on June
fifteenth when we were scheduled to go.
(11:45:24/2+00:34:36) We're not begrudging we got six extra weeks, but it was all
to the advantage of IBM, Novell.
…
(11:46:20/2+00:35:32) THE COURT: Well just look-- I think just for the -- for the
sake of moving things along, I'm going to overrule the objection. I
understand it. Um, but I think that Mr. Spector has made a good
point, and that is, we had -- we had a hearing scheduled previously
that did not proceed, and, uh, I will reluctantly overrule the
objection. And I think a few of the paragraphs don't relate to the --
a few of the objected to paragraphs don't relate to the, uh, the
foreign business.
(11:46:53/2+00:36:05) MR. REYNOLDS: Very well, your Honor. I'll do my best to ask
questions --
(11:46:56/2+00:36:08) THE COURT: Okay.
(11:46:56/2+00:36:08) MR. REYNOLDS: -- on those topics, when we get to them. Uh,
are we still in the morning? Good morning, Mr. Nielsen, again.
(11:47:03/2+00:36:15) Q: I would like to ask you, first, if you, um, have had a
chance to review your declaration since you -- since you signed it.
(11:47:09/2+00:36:21) A: Yes.
(11:47:10/2+00:36:22) Q: Do you believe it to be true and correct in every way?
(11:47:14/2+00:36:26) A: Yes.
…
(12:15:31/2+01:04:43) MR. REYNOLDS: No further questions, your Honor.
(12:15:32/2+01:04:44) THE COURT: All right, Mr. Reynolds, thank you. Mr. Lewis,
whenever you're ready.
(12:15:47/2+01:04:59) MR. LEWIS: Thank you, your Honor. Good afternoon,
Mr. Nielsen.
(12:15:51/2+01:05:03) MR. NIELSEN: Mr. Lewis.
(12:15:52/2+01:05:04) MR. LEWIS: Adam Lewis, I represent Novell in this matter.
(12:15:57/2+01:05:09) Q: Um, to return to your testimony in your declaration and in
response to questions from Mr. Reynolds today, about the incorrect
information in your -- in the submission to the bankruptcy court in
response to the motions to convert, do you recall that testimony,
generally?
(12:16:15/2+01:05:27) A: Yes.
…
(12:18:05/2+01:07:17) Q: When was the last time the debtor filed a monthly
operating report?
(12:18:10/2+01:07:22) A: Um, it would have been, mm, May in -- first week of --
second week of -- some time in June.
…
(12:19:22/2+01:08:34) Q: Did you make any effort to verify whether there was such
an entity as Stephen Norris Capital Partners?
(12:19:28/2+01:08:40) A: Yes.
(12:19:29/2+01:08:41) Q: Okay, what did you do to do that?
(12:19:31/2+01:08:43) A: Um, we had already had some discussion with Mr. Norris
before, and Capital Partners.
(12:19:36/2+01:08:48) Q: Did you verify the existence of this entity, any way?
Check the secretary of state's records anywhere, something like that?
(12:19:44/2+01:08:56) A: No.
(12:19:52/2+01:09:04) Q: And this invoice is numbered ninety-eight eighty-seven, is
that correct?
(12:19:59/2+01:09:11) A: Yes
…
(12:24:58/2+01:14:10) MR. LEWIS: I have no further questions, your Honor.
(12:25:00/2+01:14:12) THE COURT: Thank you, Mr. Lewis. Mr. Harrington.
(12:25:08/2+01:14:20) MR. HARRINGTON: Very briefly, your Honor. For the record,
William Harrington, from the office of the United States Trustee.
(12:25:12/2+01:14:24) Q: Have you ever been a chapter seven trustee?
(12:25:15/2+01:14:27) A: No.
(12:25:18/2+01:14:30) Q: Are you aware that chapter seven trustees can operate a
business?
(12:25:22/2+01:14:34) A: Yes.
(12:25:24/2+01:14:36) Q: Did you take that into account when you did your
declaration?
(12:25:28/2+01:14:40) A: Yes.
(12:25:31/2+01:14:43) Q: So when you say, when the business terminates upon
conversion, is that correct?
(12:25:37/2+01:14:49) A: Correct.
(12:25:39/2+01:14:51) Q: It is correct? or it's not correct?
(12:25:40/2+01:14:52) A: Well, it's not correct, but that's my assessment.
…
(12:27:00/2+01:16:12) THE COURT: Thank you, Mr. Harrington. Mr. Spector.
(12:27:08/2+01:16:20) Q: This is July twenty-seventh, correct?
(12:27:10/2+01:16:22) A: Correct.
…
(12:42:02/2+01:31:14) MR. SPECTOR: That's all I have on re-direct.
(12:42:03/2+01:31:15) THE COURT: All right. Thank you, Mr. Spector. Anything
further? Mr. Lewis.
(12:42:12/2+01:31:24) MR. LEWIS: Your honor, I'm not going to call on this very
long.
(12:42:14/2+01:31:26) Q: Uh, Mr., um, Nielsen, you testified that the six hundred
and twenty-five thousand dollars that's currently being held in a
trust account, on account of a Novell judgment, would be freed up if
the tenth circuit reverses, do you recall that testimony?
(12:42:31/2+01:31:43) A: Yes.
…
(12:49:06/2+01:38:18) THE COURT: All right, counsel. Thank you.
(12:49:10/2+01:38:22) *** RECESS ***
(14:04:09/3+00:00:00) CLERK: Please rise.
(14:04:11/3+00:00:02) THE COURT: Thank you everyone, please be seated. I apologize
that it's a little warm in here, but apparently it's a building
problem, not just this courtroom. Anyone who would like to take off
his jacket is welcome to do so. I would not be at all offended, so,
however you're comfortable.
(14:04:31/3+00:00:22) MR. SPECTOR: Good afternoon, your Honor.
(14:04:32/3+00:00:23) THE COURT: Good afternoon.
(14:04:33/3+00:00:24) MR. SPECTOR: May we proceed?
(14:04:33/3+00:00:24) THE COURT: Yes.
(14:04:34/3+00:00:25) MR. SPECTOR: SCO calls Dur-- uh, Darl McBride to the stand.
(14:04:37/3+00:00:28) THE COURT: All right. Mr. McBride, hello.
(14:04:40/3+00:00:31) MR. MCBRIDE: How you doing.
(14:04:42/3+00:00:33) THE COURT: If you'll just remain standing while you're sworn.
(14:04:45/3+00:00:36) CLERK: If you could 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.
(14:04:51/3+00:00:42) MR. MCBRIDE: Darl Charles McBride. M-C-B-R-I-D-E.
(14:04:51/3+00:00:42) CLERK: Do you solemnly swear to tell the truth, the whole
truth, and nothing but the truth, so help you God?
(14:04:59/3+00:00:50) MR. MCBRIDE: Yes, I do.
(14:05:00/3+00:00:51) CLERK: Please be seated.
(14:05:03/3+00:00:54) THE COURT: Whenever you're ready.
(14:05:04/3+00:00:55) MR. SPECTOR: Your honor, we discussed the last time we were
here about the fact that this court has heard certain witnesses
testify in the past at other hearings, and --
(14:05:12/3+00:01:03) THE COURT: Yes
(14:05:13/3+00:01:04) MR. SPECTOR: -- we could spend some time going through
Mr. McBride's pedigree again, but I would ask your Honor to allow for
the use of that testimony in prior hearings, rather than going through
that again, if there's no objection.
(14:05:27/3+00:01:18) THE COURT: Any objection?
(14:05:29/3+00:01:20) MR. MARRIOTT: As to the pedigree, your Honor?
(14:05:30/3+00:01:21) THE COURT: Yes.
(14:05:30/3+00:01:21) MR. MARRIOTT: If by that we mean background as to where he
went to school --
(14:05:31/3+00:01:22) THE COURT: Yes, education and so on.
(14:05:32/3+00:01:23) MR. MARRIOTT: No objection.
(14:05:33/3+00:01:24) THE COURT: All right. Thank you.
(14:05:34/3+00:01:25) MR. LEWIS: None here, your Honor.
(14:05:35/3+00:01:26) THE COURT: All right, Mr. Lewis, thank you, sir.
(14:05:37/3+00:01:28) MR. SPECTOR: You also, uh, stated that we would get the
testimony from the last June fifteenth hearing would be, uh, brought
into this record as well. I believe that was stated the last time.
(14:05:47/3+00:01:38) MR. LEWIS: Your honor, the June fifteenth testimony was on a
specific narrow issue that this court set up to determine whether to
even consider the purchase and sale agreement --
(14:05:59/3+00:01:50) THE COURT: Yes.
(14:06:00/3+00:01:51) MR. SPECTOR: -- and it was not for the general purposes, that
I recall.
(14:06:03/3+00:01:54) THE COURT: I don't recall that either, so --
(14:06:04/3+00:01:55) MR. SPECTOR: I do recall that, --
(14:06:05/3+00:01:56) THE COURT: All right.
(14:06:05/3+00:01:56) MR. SPECTOR: -- your Honor. At the end of the hearing, you said we could
take everything that was brought up at that hearing and use it here so
we don't have to do it again.
(14:06:12/3+00:02:03) There was a lot of testimony regarding other deals and the
like, and so I could abbreviate the testimony today by saying, you've
testified about experiences and other deals -- not just Mr. McBride,
but I think Mr. Caplan testified about it as well.
(14:06:30/3+00:02:21) THE COURT: Do you have a preference?
(14:06:32/3+00:02:23) MR. MARRIOTT: Your Honor, we don't have an objection to the
incorporation of that testimony into this hearing.
(14:06:36/3+00:02:27) MR. SPECTOR: Thank you.
(14:06:37/3+00:02:28) THE COURT: Mr. Lewis, is that acceptable?
(14:06:38/3+00:02:29) MR. LEWIS: That's all right, your Honor.
(14:06:39/3+00:02:30) THE COURT: All right, then we will do that.
(14:06:40/3+00:02:31) MR. SPECTOR: Thank you.
(14:06:41/3+00:02:32) Q: Uh, Mr. McBride, describe the -- excuse me, please
describe the original business of SCO Unix and Unixware.
(14:06:52/3+00:02:43) A: The original business really had two parts to it. One was
a source licensing business, the other one was a products business.
So, Unix is one of the major operating system platforms around the
world, arguably the most powerful platform from a business standpoint.
And large companies like IBM, Sun Microsystems, a number of companies
from Japan, Hewlett-Packard, Dell, Oracle, and the like, uh lic-- took
down licenses to that Unix operating system.
(14:07:27/3+00:03:18) Q: Stop for a second, you're using lingo. Took down, what
does that mean?
…
(14:29:43/3+00:25:34) Q: How do you perceive the market reaction if SCO were to
receive vindication from the tenth circuit?
(14:29:48/3+00:25:39) MR. LEWIS: Your honor, I have to object here, I'm -- I'm
going to be doing Mr. McBride too, and this and the series of previous
questions about how they would react if the revers-- I mean, that's a
thoroughly and complete hypothetical. There are all kinds of -- as
Mr. Jacobs said -- all kinds of possible forms of reversal,
instructions, remand, and so on and so forth.
(14:30:10/3+00:26:01) I think what we're hearing here and assuming is that it's a
virtual outright victory on various grounds for the debtor, but it's
certainly an incomplete hypothetical, and I don't think these are
proper questions, and I think the witness should not be allowed to
answer them or offer opinion testimony on them.
(14:30:27/3+00:26:18) We don't even have yet any kind of groundwork for his
competency to offer an opinion on the effect of a legal decision --
uh, which is probably in a pretty unpre-- I mean, it's one thing to
talk about gee, I've been selling these things for years, and this is
our track record, and I've been doing this marketing and that
marketing study, and so on and so forth, and -- that's one thing.
(14:30:52/3+00:26:43) This is unprecedented. It's not like he -- the witness has
prior experience, or we certainly haven't heard it, prior experience
with this kind of situation and what the effect would be on marketing.
(14:31:04/3+00:26:55) You know, and so I think the testimony is incompetent, and I
think the questions are incomplete hypotheticals, and I think the
entire line should be shut down, and the prior answers should be
stricken as a consequence. Thank you, your Honor.
(14:31:15/3+00:27:06) THE COURT: Mr. Marriott.
(14:31:16/3+00:27:07) MR. MARRIOTT: Simply joining that, your Honor.
(14:31:18/3+00:27:09) THE COURT: I have to agree with them.
(14:31:20/3+00:27:11) MR. SPECTOR: I can ask it better.
(14:31:20/3+00:27:11) THE COURT: I just think that it's -- it's too far-reaching
and too uncertain and I will sustain the objection.
(14:31:25/3+00:27:16) MR. SPECTOR: It was too wide -- it was too wide of a
question, too. He was right about that, because it didn't identify
what part of it. I was supposing all of it, but -- and I wasn't clear
about that. Let's take it piecemeal.
(14:31:37/3+00:27:28) Q: If the judgment, the money judgment suffered by SCO in
favor of Novell were overturned, would there be any immediate benefit
to SCO?
(14:31:48/3+00:27:39) A: Yes.
(14:31:49/3+00:27:40) Q: What would that be?
(14:31:50/3+00:27:41) A: Immediately, we would have six hundred and twenty-five
thousand dollars released from an escrow account that has -- that has
been reserved, and if that money part of the tenth circuit ju-- ruling
was overturned, that would go out of escrow, and back into our bank
account.
(14:32:09/3+00:28:00) Q: Would it do anything to your bal--
(14:32:10/3+00:28:01) MR. LEWIS: (inaudible)
(14:32:11/3+00:28:02) THE COURT: Mr. Lewis.
(14:32:11/3+00:28:02) MR. LEWIS: I have the same objection, your Honor.
…
(14:32:39/3+00:28:30) THE COURT: Well, but here's what's disturbing me a little
bit. You know, with this line of questioning, it's as if you're
getting the benefit of having established that you're going to win on
the merits, when my ruling was that we weren't going to get into the
merits of the litigation. So here, um, it's as if you had established
your point on the merits, when you haven't even proven those issues --
based upon my ruling, I understand. I just think it's all so
speculative.
(14:33:15/3+00:29:06) MR. SPECTOR: Well, your Honor, um --
(14:33:16/3+00:29:07) THE COURT: Because, for example, the judge, it -- it could be
re-- it could be reversed, but an appeal could be taken, and then the
six hundred twenty five thousand dollars might not be released
immediately, and -- and, you know, there are just so many
possibilities.
(14:33:32/3+00:29:23) MR. SPECTOR: All of that is quite true, and never is it the
fact that a witness when it testifies has absolute certainty of the
assumption that's going to be there. And all of that goes to the
weight.
…
(14:38:45/3+00:34:36) THE COURT: Well I have enough trouble deciding my own cases,
let alone somebody else's cases, and that's really the problem. I, I
certainly am prepared to take notice of the fact that you have -- that
the debtors have very serious litigation that's pending, and that if
they prevail on that litigation, it is going to, uh, help their
rehabilitation. I don't have a problem with that. But I do have a
problem with the speculation about what it's going to do for employees
and customers and that sort of thing. Um, I think as a general
proposition, fine -- it's fine, but as a specific proposition it's
problematic.
(14:39:23/3+00:35:14) MR. NORMAND: Your honor, uh, Mr. Normand, could I make, uh,
two quick points?
…
(14:42:33/3+00:38:24) THE COURT: See, that's the problem I have, Mr. Normand, is,
tech-- As I'm listening to the questions, each question that
Mr. Spector is asking should begin "hypothetically, if", and we don't
do hypotheticals with fact witnesses. We do hypotheticals with expert
witnesses, and I don't think there's an expert witness who could
possibly testify on the outcome of this -- of the pending litigation
and appeal.
…
(14:45:42/3+00:41:33) THE COURT: Here's the practical problem. Mr. McBride can now
testify as to all of the good things that will happen if there is
victory on the appeal. Subsequently, I'll have cross-examination on
what happens if they lo-- if you don't win on appeal. And it will
counterbalance every thing that we've heard for the -- for however
long it takes.
(14:46:03/3+00:41:54) So it is valueless to my decision what will happen if
wonderful things happen.
(14:46:09/3+00:42:00) MR. SPECTOR: We understand the Court's ruling. We'll move on.
(14:46:11/3+00:42:02) THE COURT: And that -- and I'll sustain that -- the
objection, and --
(14:46:13/3+00:42:04) MR. SPECTOR: We will move on.
(14:46:13/3+00:42:04) MR. LEWIS: Thank you, your Honor.
(14:46:14/3+00:42:05) THE COURT: -- we'll strike -- and we'll strike the, uh, the
previous answers relating to the merits, or I should say the possible
outcome.
(14:46:23/3+00:42:14) MR. LEWIS: Thank you, your Honor.
(14:46:24/3+00:42:15) MR. LEVIN: Excuse me one minute.
(14:46:32/3+00:42:23) THE COURT: Okay.
(14:46:33/3+00:42:24) VOICES: Thank you, your Honor.
(14:46:33/3+00:42:24) THE COURT: Yes.
(14:46:34/3+00:42:25) Q: When the cases commenced, did the debtors have some idea
of an exit plan from chapter eleven?
(14:46:41/3+00:42:32) A: Yes.
…
(15:39:05/3+01:34:56) Q: So it's not your contract to assume or reject with Novell?
(15:39:08/3+01:34:59) A: That's my --
(15:39:08/3+01:34:59) Q: That would --
(15:39:09/3+01:35:00) A: That's my understanding.
(15:39:10/3+01:35:01) MR. JACOBS: Your -- your Honor, this is really way beyond
the scope now and --
(15:39:14/3+01:35:05) THE COURT: It certainly is.
(15:39:15/3+01:35:06) MR. JACOBS: -- and go -- there's a lot of litigation
history that goes to whether this -- this company, the SCO Group, is
bound by the Asset Purchase Agreement. We object.
(15:39:23/3+01:35:14) THE COURT: I'll sustain the objection. I, I think that is
beyond this witness's ability, um, to -- to testify.
(15:39:31/3+01:35:22) MR. SPECTOR: The, uh --
(15:39:32/3+01:35:23) THE COURT: Let me just point out, too, your two and a half
hours has roughly been used up.
(15:39:38/3+01:35:29) MR. SPECTOR: Not mine, your Honor, not by my watch.
(15:39:39/3+01:35:30) THE COURT: You've been going for an hour --
(15:39:41/3+01:35:32) MR. SPECTOR: Two-oh-eight.
(15:39:42/3+01:35:33) THE COURT: -- an hour and a half, roughly.
(15:39:43/3+01:35:34) MR. SPECTOR: Right, and I had about --
(15:39:45/3+01:35:36) THE COURT: And you had about an --
(15:39:45/3+01:35:36) MR. SPECTOR: -- ten minutes.
(15:39:46/3+01:35:37) THE COURT: And you had about an hour --
(15:39:49/3+01:35:40) MR. SPECTOR: No, not, I didn't, your Honor.
(15:39:50/3+01:35:41) THE COURT: -- of use.
(15:39:51/3+01:35:42) MR. LEVIN(?): Yes, your Honor --
(15:39:52/3+01:35:43) MR. SPECTOR: No.
(15:39:52/3+01:35:43) MR. LEVIN: -- that is consistent with our timing.
(15:39:53/3+01:35:44) THE COURT: Yeah.
(15:39:53/3+01:35:44) MR. SPECTOR: I -- I didn't. I didn't. I wish we had a
running clock because I was --
(15:39:58/3+01:35:49) VOICE: We do.
(15:39:58/3+01:35:49) MR. SPECTOR: -- careful --
(15:39:59/3+01:35:50) MORE VOICES: We do, your Honor.
(15:40:59/3+01:36:50) THE COURT: Well I've been tryi-- I've been keeping track,
and I'm just saying. I'm not cutting you off, but --
(15:40:05/3+01:35:56) MR. SPECTOR: Well I've only got, maybe four or five more
questions, maybe six more questions.
(15:40:08/3+01:35:59) THE COURT: All right. I'm -- I'm not cutting you off. I'd
like to get all the evidence in.
(15:40:11/3+01:36:02) MR. SPECTOR: Are you, wait a minute, are you counting -- are
you counting the colloquy? I thought you said the colloquy --
(15:40:15/3+01:36:06) THE COURT: No.
(15:40:16/3+01:36:07) MR. SPECTOR: -- wasn't going to count.
(15:40:18/3+01:36:09) THE COURT: No, I'm not.
(15:40:19/3+01:36:10) MR. SPECTOR: I wish I could get a running -- Someone let me
know.
(15:40:20/3+01:36:11) THE COURT: But I don't have a stopwatch. Each time there's an
objection, I don't stop it, you know, the, uh, the time.
…
(15:46:17/3+01:42:08) Q: Do you have any doubts about the, uh, the ability and
desire of Unxis to close this deal promptly?
(15:46:22/3+01:42:13) A: No.
(15:46:23/3+01:42:14) MR. SPECTOR: All right. I have no further questions.
…
(15:46:47/3+01:42:38) THE COURT: And then we'll come back and then there'll be a
brief interruption at that time. Thank you, counsel.
(15:46:53/3+01:42:44) *** RECESS ***
(16:03:28/4+00:00:00) CLERK: Please rise.
(16:03:30/4+00:00:02) THE COURT: Thank you, everyone. Please be seated. All
right. Are you leading off, Mr. Marriott?
(16:03:37/4+00:00:09) MR. MARRIOTT: I am, your Honor, if the Court -- with the
Court's permission.
(16:03:38/4+00:00:10) THE COURT: You may.
(16:03:40/4+00:00:12) MR. MARRIOTT: Thank you, Judge. Good afternoon, Mr. McBride.
(16:03:44/4+00:00:16) MR. MCBRIDE: Morning, Mr. Marriott.
(16:03:45/4+00:00:17) MR. MARRIOTT: Uh, fine, thank you, sir. I just, to, uh,
expedite the examination, I have placed, in addition to the binders
that are behind you, some ex-- some documents from those binders,
including from defendants. They're to your far right, Mr. McBride.
It may be most convenient if you just grab those. Those are in the
binders. I think it will make it easier for you -- for you to follow
along.
(16:04:06/4+00:00:38) MR. MCBRIDE: Right here?
(16:04:07/4+00:00:39) MR. MARRIOTT: May I approach, your Honor?
(16:04:08/4+00:00:40) THE COURT: Yeah, you may, Mr. Marriott, of course.
(16:04:09/4+00:00:41) MR. MCBRIDE: The other far right?
(16:04:11/4+00:00:43) Yeah, those are the ones I (inaudible)
(16:04:13/4+00:00:45) MR. SPECTOR: Just, just so it's clear, we're the debtors.
(16:04:15/4+00:00:47) MR. MARRIOTT: What did I say?
(16:04:17/4+00:00:49) MR. SPECTOR: Defendants.
(16:04:18/4+00:00:50) MR. MARRIOTT: Well I apologize. The Debtors.
(16:04:21/4+00:00:53) Q: Mr. McBride, you understand that IBM and Novell and the
United States Trustee have made an application to have this case
converted to Chapter Seven, right?
(16:04:31/4+00:01:03) A: Yes.
(16:04:32/4+00:01:04) Q: And SCO, the debtors, have opposed that application,
correct?
(16:04:36/4+00:01:08) A: Yes.
…
(16:20:39/4+00:17:11) Q: Who was involved on behalf of debtors in negotiating the
terms of the P.S.A. which is offered to this court for approval? Who
were the individuals?
(16:20:50/4+00:17:22) A: Uh, the primary one would have been Jeff -- Jeff Hunsaker.
(16:20:58/4+00:17:30) Q: Okay, and who besides Jeff Hunsaker negotiated this
proposed -- this deal, which is proposed for approval, with Unxis and
its principals?
(16:21:07/4+00:17:39) A: Well, let's see, as far as negotiating, I think Jeff would
have been the key guy. He would have ran it by me, would have ran it
by our counsel, Ryan Tibbitts, our CFO Ken Nielsen.
(16:21:23/4+00:17:55) Q: Was anyone else involved in dealing with Mr. Hunsaker and
with the proposed buyers?
(16:21:29/4+00:18:01) A: Well, there were a lot of people involved.
(16:21:32/4+00:18:04) Q: Who were they, Mr. McBride?
(16:21:33/4+00:18:05) A: Um, Andy Nagle was involved, he's director of engineering,
Alan Raymond is our vice-president of North America sales, Hans Bayer
is vice-president of international sales, um, --
(16:21:49/4+00:18:21) Q: Tell me about --
(16:21:50/4+00:18:22) A: -- there's probably others.
(16:21:50/4+00:18:22) Q: -- Hans Bayer, Mr. McBride, is he a capable
man?
(16:21:53/4+00:18:25) A: Yes.
(16:21:54/4+00:18:26) Q: Is he honest?
(16:21:55/4+00:18:27) A: I believe so.
(16:21:56/4+00:18:28) Q: Is he trustworthy?
(16:21:58/4+00:18:30) A: I hope so.
(16:21:59/4+00:18:31) Q: Does he -- does he understand SCO's business?
(16:22:04/4+00:18:36) A: I -- I believe he understands it best when it's -- has to
do with the Unix business.
(16:22:09/4+00:18:41) Q: Does he understand SCO's mobility business?
(16:22:12/4+00:18:44) A: I don't think he understands the mobile business that
well.
(16:22:15/4+00:18:47) Q: Isn't it a fact, sir, that Mr. Bayer is the Vice-President
of Worldwide Sales, with responsibility for overseeing, quote, all
aspects of direct and channel sales of the company's Unix and Mobile
products?
(16:22:28/4+00:19:00) A: He's vice-president over international sales.
(16:32:32/4+00:29:04) Q: Mr. McBride, is it not a fact that Mr. Bayer has
responsibility for overseeing all aspects of direct and channel sales
of the company's Unix and Mobile products?
(16:22:42/4+00:19:14) A: That's not my understanding.
(16:22:44/4+00:19:16) Q: So it's your testimony that Mr. Bayer has no
responsibility with respect to SCO's mobile products?
(16:22:50/4+00:19:22) A: I don't believe I said that.
(16:22:51/4+00:19:23) Q: I'm asking you that. Is it your testimony that Mr. Bayer
has no responsibility with respect to SCO's mobile products?
(16:22:57/4+00:19:29) A: He has responsibility for the mobile products as it
relates to his area of the world.
(16:23:05/4+00:19:37) Q: So he has responsibility for SCO's mobile products, at
some level?
(16:23:04/4+00:19:36) A: For -- for selling in the areas that he's in. But we
don't really market the mobile products that much outside of the
U.S. right now, so that's why he's very limited with respect to his
understanding of the mobile products.
(16:23:17/4+00:19:49) MR. MARRIOTT: Thank you, Mr. McBride. Your honor, I move to
strike the latter part of the answer, but mostly I want to be
sensitive to the Court's time. It's almost four-thirty.
(16:23:22/4+00:19:54) THE COURT: Thank you, I appreciate that, and, um, I also am
sensitive to your, you know, questioning, um, but I've got to take the
call.
(16:23:32/4+00:20:04) MR. MARRIOTT: I will survive, Judge.
(16:23:32/4+00:20:04) THE COURT: Would five minutes make sense, or is this a good
time to break for you?
(16:23:34/4+00:20:06) MR. MARRIOTT: This is a fine time to break.
(16:23:35/4+00:20:07) THE COURT: All right, then let's take -- I don't know how
long it will last, maybe fifteen minutes, and we'll take about a
fifteen minute recess. Thank you, everyone.
(16:23:44/4+00:20:16) *** RECESS ***
(16:43:48/5+00:00:00) CLERK: Please rise.
(16:43:51/5+00:00:03) THE COURT: Thank you, everyone, please be seated. All right.
A successful call. Thank you. I thank everyone. And you may --
(16:44:01/5+00:00:13) MR. MARRIOTT: May I inquire, Judge?
(16:44:01/5+00:00:13) THE COURT: You may.
(16:44:02/5+00:00:14) MR. MARRIOTT: Thank you, your Honor.
(16:44:06/5+00:00:18) Q: Mr. McBride, after considering a purchase of the entire
mobility business, Unxis discussed with SCO leaving behind the
mobility business, correct?
(16:44:20/5+00:00:32) A: That's correct.
…
(16:48:05/5+00:04:17) MR. SPECTOR: Your Honor, I rise to object to the questions
and the answers that read the exhibit, because the exhibit is what we
objected to as hearsay. So, by reading it out loud, of course it
comes into evidence, so, uh, I object to that line of questioning, and
if we want to take on the, uh the objection, hearsay, we can do that
now. This was something that they wanted to do at beginning, you
said you wanted to hear it in context
(16:48:30/5+00:04:42) MR. MARRIOTT: Your Honor, I'm happy to have the argument now.
I hope it won't count against my time.
(16:48:33/5+00:04:45) THE COURT: No.
(16:48:34/5+00:04:46) MR. MARRIOTT: What -- what I would say is that I think it
might be useful to the Court to understand in full the context of the
document, what it says and was it -- what it doesn't say, in ruling on
the objections.
(16:48:44/5+00:04:56) There are three documents in dispute. The objections that
have been made are one, hearsay and two, relevance. And I would
submit your Honor that at least with respect to relevance, your
Honor's going to need to appreciate in full what's in the document in
order to make the ruling.
(16:48:56/5+00:05:08) My suggestion would be that we proceed with my being allowed
to question in full the witness about the exhibit. Your honor can
then at an appropriate time with the witness off the stand, hear
whatever argument counsel wants to make on the subject. If you find
that the document is inadmissable, the document can be stricken.
Otherwise we're going to get, I'm afraid, bogged down in this without
the Court having the benefit of the fullness of the document. May we
proceed in --
(16:49:17/5+00:05:29) THE COURT: I, uh, yes, I will accept --
(16:49:18/5+00:05:30) MR. MARRIOTT: -- in that way, Judge?
(16:49:19/5+00:05:31) THE COURT: I will accept your -- your suggestion.
(16:49:20/5+00:05:32) MR. MARRIOTT: Thank you.
…
(16:55:03/5+00:11:15) Q: Take a look, if you would Mr. McBride, at exhibit MX-40.
Take a look on the second page, this -- this is an email from Hans
Bayer to Eric Le Blan and Stephen Norris dated June five, 2009, do you
see that, sir?
(16:55:20/5+00:11:32) A: Yes.
(16:55:21/5+00:11:33) Q: That's just before the last hearing before the Court.
(16:55:23/5+00:11:35) MR. SPECTOR: Which exhibit number was that?
(16:55:24/5+00:11:36) MR. MARRIOTT: Forty.
(16:55:26/5+00:11:38) Your Honor, I want to make sure the Court has a-- has an
opportunity to get there. Do you have this, Judge, before I--
(16:55:29/5+00:11:41) THE COURT: I have it, yes. I'm reading it now.
(16:55:30/5+00:11:42) Q: Okay. All right, take a look, if you would Mr. McBride,
on the second page of the document. The third paragraph down begins,
point five. Do you see that?
(16:55:39/5+00:11:51) A: Yes.
(16:55:41/5+00:11:53) Q: Um, and my question to you, sir, was, the portion of the
mobility business retained by SCO actually has no value for new SCO,
right?
(16:55:49/5+00:12:01) A: The question was what?
(16:55:51/5+00:12:03) Q: The portion of the mobility business retained by SCO
actually has no value for new SCO.
(16:55:58/5+00:12:10) A: And you're saying that's?
(16:56:00/5+00:12:12) Q: I'm asking you if that's right.
(16:56:02/5+00:12:14) A: I -- Well I don't -- I don't believe that's totally correct.
(16:56:06/5+00:12:18) Q: Well, that's what Mr. Bayer told Mr. Norris, isn't it?
Take a look at pa-- at poi-- for poi-- point five, where Mr. Bayer,
vice-president of SCO says, quote, this proposal to leave Mobile
behind with old SCO reflects my explanation of Darl's personal
situation, and honestly speaking there could not be a better way of
getting rid of something that actually has no value for new SCO.
You see that?
(16:56:28/5+00:12:40) A: Yes.
(16:56:29/5+00:12:41) Q: And that's what Mr. Bayer said to Mr. Norris, the
principal here of Unxis, right?
(16:56:33/5+00:12:45) A: Yes.
(16:56:35/5+00:12:47) Q: The concept, Mr. McBride, of Mobile, is a dream of yours,
is it not?
(16:56:41/5+00:12:53) A: I don't know that it -- I came up with that in a dream.
(16:56:45/5+00:12:57) Q: Well --
(16:56:46/5+00:12:58) (laughter)
(16:56:50/5+00:13:02) MR. MARRIOTT: Thank you for that moment of levity.
(16:56:52/5+00:13:04) Q: It is, whether or not you came up with it in a dream, it
is a weird dream of yours, is it not?
(16:56:58/5+00:13:10) A: It is a -- is a product that -- the concept of Mobile is a
product that I was the -- the principal driver of, and the Mobile
product line includes the Mobile server and the -- the Mobile
applications.
(16:57:15/5+00:13:27) Q: My question was, is it or isn't it a weird dream of yours?
(16:57:19/5+00:13:31) A: Like I said it wasn't -- didn't come to me in a dream, and
it -- if it did, --
(16:57:22/5+00:13:34) Q: Well that's what Mist--
(16:57:23/5+00:13:35) A: -- it wasn't a weird one.
(16:57:24/5+00:13:36) Q: That's what Mr. Bayer told Mr. Norris, isn't it? Take a
look at --
(16:57:26/5+00:13:38) A: Yes, and so the question is do you want me to interpret
what Hans Bayer thinks is in my head, or do you want me to tell you
what is in my head. I'm trying to understand what--
(16:57:32/5+00:13:44) Q: I want to know what's in your head, Mr. McBride.
(16:57:34/5+00:13:46) A: Yeah, so I -- I wouldn't represent Mobile as a weird dream
of mine.
(16:57:37/5+00:13:49) Q: That, however, is what Mr. Bayer said to Mr. Norris,
right? He said, quote, the whole concept of Mobile is another one of
Darl's weird dreams, where he thought he had found the next big thing,
but reality shows we have spent millions of dollars into developing
something which nobody needs or wants. We have no customers and no
revenue stream for our mobile products, and again he is chasing
something which isn't for real.
(16:58:01/5+00:14:13) That's what he told Mr. Norris, right?
(16:58:02/5+00:14:14) A: Yes.
(16:58:03/5+00:14:15) Q: Now, is it fair to say that the Franklin Covey products
are your beloved toy, Mr. McBride?
(16:58:11/5+00:14:23) A: No -- no, I wouldn't call them that.
(16:58:13/5+00:14:25) Q: That's what Mr. Brayer -- Mr. Bayer told Mr. Norris, isn't
it?
(16:58:18/5+00:14:30) A: That -- that's what it, uh, says somewhere in here, yeah.
(16:58:21/5+00:14:33) Q: Take a look at the first page, second to last paragraph
from the bottom. Quote, Darl is starting to realize now that he won't
have any purpose in life any longer once the company was sold, and
this seems to give him big headaches, as he'd have to find a new
occupation where he most likely won't be in the center of gravity any
longer, and won't have his beloved, quote, toy, close quote, Franklin
Covey, any longer to play with. You see that?
(16:58:47/5+00:14:59) A: Yes.
(16:58:48/5+00:15:00) Q: And that's what Mr. Bayer told, uh, the proposed buyers
here, correct?
(16:58:52/5+00:15:04) A: Yes.
(16:58:53/5+00:15:05) Q: Now, SCO, um, SCO kept a portion of its -- of its mobility
business, you've testified, as part of this proposed transaction,
right?
(16:59:02/5+00:15:14) A: Yes.
(16:59:03/5+00:15:15) Q: And, and you did that because you believed it could help
you win big in the courtroom, and you were reluctant to give up your
dream of having your day in court, right?
(16:59:11/5+00:15:23) A: That's not correct.
(16:59:12/5+00:15:24) Q: Okay. That's, however, what Mr. Bayer told Mr. Norris,
right?
(16:59:16/5+00:15:28) A: That's what's in this email.
(16:59:21/5+00:15:33) Q: The only thing that is real for SCO, Mr. McBride, is its
Unix business, right?
(16:59:27/5+00:15:39) A: That's not right.
(16:59:28/5+00:15:40) Q: Again that, however, is what Mr. Bayer told Mr. Norris,
right?
(16:59:32/5+00:15:44) A: That's what it says here.
(16:59:33/5+00:15:45) Q: Take a look at page two, see the paragraph that says the
only thing? Quote the only thing about SCO which is real for the Unix
business, with its customers and partners and it -- and the employees
generating cash -- I apologize, I ba-- read that badly. Let me try
that again.
(16:59:49/5+00:16:01) The only thing about SCO which is for real is the Unix
business with its customers and partners and the employees generating
cash. Legal and Mobile are just Darl's hopes and dreams to win the
jackpot in the lottery drawing. You see that?
(17:00:03/5+00:16:15) A: Yes.
(17:00:04/5+00:16:16) Q: There is in fact no money available, according to
Mr. Bayer, for the new company, correct?
(17:00:12/5+00:16:24) A: When you say there's no money available,
(17:00:14/5+00:16:26) Q: Well, take a look at the top of page two, where Mr. Bayer
says to Mr. Norris, quote, Jeff -- referring to Mr. Hunsaker -- thinks
that only a direct conversation between either one of the two of you
with Darl could resolve the standstill, as he tells me that Darl won't
speak to him any longer, even if he mentions the deal to him, as Darl
and the BOD -- referring I assume to board of directors -- and the BK
-- referring I assume to bankruptcy lawyers -- simply thinks there is
no money available to fund the new company. You see that?
(17:00:46/5+00:16:58) A: Yes.
(17:00:47/5+00:16:59) Q: And that's what Mr. Bayer told Mr. Norris, right?
(17:00:50/5+00:17:02) A: That's what's in here.
…
(17:17:53/5+00:34:05) Q: Mr. McBride, is it your testimony that you made, uh, this
payment, from your own personal funds, to Mr. Norris, without any
expectation of reimbursement by SCO?
(17:18:04/5+00:34:16) A: Yes.
(17:18:05/5+00:34:17) Q: Are you a wealthy man, Mr. McBride?
(17:18:06/5+00:34:18) A: Not as wealthy as you are.
(17:18:08/5+00:34:20) (laughter)
(17:18:09/5+00:34:21) MR. MARRIOTT: I'd move to strike that, your Honor.
(17:18:10/5+00:34:22) MR. MCBRIDE: Sorry.
(17:18:11/5+00:34:23) THE COURT: I think we'd better.
(17:18:14/5+00:34:26) Q: You also made payments of approximately two hundred
thousand dollars to Mr. Robbins, from your own personal funds, right?
(17:18:20/5+00:34:32) A: Yes.
(17:18:21/5+00:34:33) Q: And he's not a relative of yours, right?
(17:18:23/5+00:34:35) A: Nope.
(17:18:24/5+00:34:36) Q: Not a close friend?
(17:18:25/5+00:34:37) A: Used to be.
(17:18:26/5+00:34:38) Q: Not a friend presently, right?
(17:18:27/5+00:34:39) A: No.
(17:18:28/5+00:34:40) Q: Um, he didn't pay it back, you said. Right?
(17:18:30/5+00:34:42) A: Correct.
(17:18:31/5+00:34:43) Q: And you didn't take any action to get those moneys back,
right?
(17:18:34/5+00:34:46) A: That's wrong.
(17:18:35/5+00:34:47) Q: What action did you take, Mr. McBride?
(17:18:37/5+00:34:49) A: I filed a lawsuit.
(17:18:38/5+00:34:50) Q: What's the -- what's the outcome of that lawsuit?
(17:18:41/5+00:34:53) A: I received a -- a judgment against, actually his wife --
his wife wrote out one of the checks, so --
(17:18:46/5+00:34:58) Q: In -- in what amount, sir?
(17:18:47/5+00:34:59) A: A hundred and nine thousand dollars.
(17:18:49/5+00:35:01) Q: And what about the other ninety-one thousand dollars?
(17:18:52/5+00:35:04) A: We're still working on that.
(17:18:55/5+00:35:07) Q: Mr. McBride's filed -- followed -- Mister, uh, Robbins has
filed a lawsuit against you, hasn't he sir?
(17:18:59/5+00:35:11) A: I've heard so.
(17:19:01/5+00:35:13) Q: Well, you've seen so, have you not?
(17:19:02/5+00:35:14) A: No I haven't.
(17:19:03/5+00:35:15) Q: You understand however, that he has filed a complaint
against you for fraud and deceit, right?
(17:19:08/5+00:35:20) A: Um, I -- I -- I don't know, I haven't seen -- I've -- I've
heard that he's filed something, I don't think that, uh, part of it
was against me.
(17:19:15/5+00:35:27) MR. SPECTOR: Objection, your Honor. Um, he has testified to
that. I have seen it, and he misrepresents what it is as against
Mr. McBride.
(17:19:23/5+00:35:35) MR. MARRIOTT: Your honor.
(17:19:24/5+00:35:36) MR. SPECTOR: I know it says those words in it, but there's
other defendants.
(17:19:28/5+00:35:40) MR. MARRIOTT: One can only deal with the words one has. May
I approach, Judge?
(17:19:30/5+00:35:42) THE COURT: You may, you may.
(17:19:34/5+00:35:46) MR. MARRIOTT: Would you like to join me?
(17:19:36/5+00:35:48) MR. SPECTOR: Oh, I thought you were going up to the bench.
(17:19:38/5+00:35:50) MR. MARRIOTT: No, no, the witness.
(17:19:39/5+00:35:51) VOICE: (inaudible)
(17:19:40/5+00:35:52) Q: Mr. McBride, I show you, uh, what -- what, a -- a -- a
pleading entitled Pelican Equity LLC against Robert, and I'm sure I
will slaughter the pronunciation so I hope they'll forgive me, but
Robert Brazell, Stephen Norris, Talos Partners, Rama --
(17:19:56/5+00:36:08) A: Ramachandran.
(17:19:57/5+00:36:09) Q: Thank you. Darl McBride and Bryan Cave. You see that?
(17:20:00/5+00:36:12) A: Yes I do.
(17:20:01/5+00:36:13) Q: This is the lawsuit that -- to which you testified having
some understanding, right?
(17:20:05/5+00:36:17) A: Yes.
(17:20:05/5+00:36:17) Q: And this lawsuit asserts a number of causes of action
against you, does it not?
(17:20:10/5+00:36:22) A: Again, I haven't read it, but my understanding is the
causes of action wents -- against the people that were tied to the
organization, which I am not.
(17:20:20/5+00:36:32) Q: Take a look if you would at page eighteen, Mr. McBride.
You see where it says first cau-- first claim for relief?
(17:20:25/5+00:36:37) A: Yes.
(17:20:26/5+00:36:38) Q: See where it says violation of the computer fraud and
abuse act?
(17:20:29/5+00:36:41) A: Yes.
(17:20:30/5+00:36:42) Q: See under that where it says against the individual
defendants? See that?
(17:20:39/5+00:36:51) A: Let me see. Yes, I do.
(17:20:53/5+00:37:05) Q: You see page nineteen, where it says second claim for
relief, misappropriation of trade secrets, against the individual
defendants, you see that?
(17:21:00/5+00:37:12) A: Yes.
(17:21:02/5+00:37:14) Q: Page thirty -- twenty-three. Unfair competition against
all defendants. You see that?
(17:21:06/5+00:37:18) A: Yes.
(17:21:07/5+00:37:19) Q: Page twenty-five, tortious interference, against all
defendants, you see that?
(17:21:11/5+00:37:23) A: Yes.
(17:21:16/5+00:37:28) Q: Page thirty-three, fraud and deceit, against all
defendants, do you see that?
(17:21:20/5+00:37:32) A: Yes.
…
(17:24:49/5+00:41:01) Q: Is it fair to say, Mr. McBride, that some of SCO's
employees are fed up with your attempt to protect the litigations
about which you testified?
(17:24:59/5+00:41:11) A: I can't speak for SCO employees.
(17:25:06/5+00:41:18) Q: Well, that's what Mr. Bayer told Mr. Norris, isn't it,
Mr. McBride?
(17:25:11/5+00:41:23) A: You want to point me to something?
(17:25:13/5+00:41:25) Q: Do you know whether that's what Mr. Bayer told Mr. Norris?
(17:25:16/5+00:41:28) A: I -- I'm not sure what he told him.
(17:25:20/5+00:41:32) Q: Take a look at MX-39, if you would, please.
(17:25:23/5+00:41:35) MR. SPECTOR: Your Honor, this is the kind of hearsay
objections I've had all along, and I -- and I'm not saying it every
time because I know the Court's going to let me ask you to strike all
of this if it turns out that I'm right.
(17:25:34/5+00:41:46) THE COURT: That's correct.
(17:25:37/5+00:41:49) Q: You see MX-39, Mr. McBride? This is an email from -- uh,
the bottom of MX-39, from Mr. Bayer to Eric Le Blan, copying Stephen
Norris, Jim Kelly --
(17:25:54/5+00:42:06) A: Yes.
(17:25:55/5+00:42:07) Q: You see that?
(17:25:56/5+00:42:08) A: Yes.
(17:25:56/5+00:42:08) Q: Take a look on the second page in what looks like the
third full paragraph, the -- down there. See where it says, quote, I
can only tell you that this motion has upset all employees I've spoken
to today. They all want the MB backslash GCP deal that happened and
are massively fed up with Darl's attempt to protect the litigation.
You see that?
(17:26:18/5+00:42:30) A: Let's see, that's the bottom of --
(17:26:20/5+00:42:32) Q: Yeah, sorry, it's the -- it's page two --
(17:26:22/5+00:42:34) A: Yeah.
(17:26:23/5+00:42:35) Q: And it's the -- the thir-- the -- the, uh, beginning of
the first full third paragraph.
(17:26:29/5+00:42:41) A: Oh, okay, I see it now.
(17:26:30/5+00:42:42) Q: You see that, right?
(17:26:31/5+00:42:43) A: Yes.
(17:26:32/5+00:42:44) Q: Uh, and in fact some of SCO's -- some of the members of
SCO's own management team believe that these litigations are out of
touch with reality, right, Mr. McBride?
(17:26:40/5+00:42:52) A: I can't speak for them.
(17:26:42/5+00:42:54) Q: Well take a look at the first sentence, if you would, of
the first full paragraph. You see where it says, quote, I still hope
that Darl comes to grips with reality over the next few days, i.e.,
that he finally sees and admits the ancient battle over Linux is long
over. See that?
(17:26:55/5+00:43:07) A: Yes.
(17:26:59/5+00:43:11) Q: You can put that aside, if you would please, Mr. McBride.
Now you've received, have you not sir, a competing bid here from an
organization with which Mr. Charlie Hale is affiliated?
(17:27:11/5+00:43:23) A: Yes.
(17:27:12/5+00:43:24) Q: And you received that on July twenty-three, right?
(17:27:16/5+00:43:28) A: Yes, that's right.
(17:27:18/5+00:43:30) Q: And the email indicated that an entity called LNS
Acquisition was making an offer to compete with the Unxis offer,
right?
(17:27:24/5+00:43:36) A: Yes.
…
(17:30:48/5+00:47:00) MR. MARRIOTT: I have no further questions, your Honor.
(17:30:50/5+00:47:02) THE COURT: Thank you. Mr. Lewis.
(17:30:53/5+00:47:05) MR. LEWIS: Thank you, your Honor. Co-counsel tells me I have
two hours left.
(17:31:18/5+00:47:30) THE COURT: All right.
(17:31:23/5+00:47:35) MR. LEWIS: I'm going to kind of dart around here and there.
So, for the most part, except for specific series of questions, don't
get confused by the fact that I'm not talking about the same thing I
was just talking about.
(17:31:36/5+00:47:48) MR. MCBRIDE: Okay, fair enough.
(17:31:38/5+00:47:50) Q: Okay, so let me start first with the press release, do you
recall the press release, the ten thousand unit press release?
(17:31:44/5+00:47:56) A: Yes.
…
(17:57:44/5+01:13:56) THE COURT: Thank you, Mr. Lewis. Mr. Harrington, I think
Mr. McMahon owes you something. I'm not sure what it is.
(17:57:56/5+01:14:08) MR. HARRINGTON: I'll be very brief, your Honor.
(17:57:57/5+01:14:09) THE COURT: Yes, sir.
(17:57:58/5+01:14:10) MR. HARRINGTON: Although I think I have, you know, two hours
and twenty-five minutes left on my time.
(17:58:02/5+01:14:14) THE COURT: Well, actually the -- I only gave your office
thirty minutes, or something like that, but take whatever time you
need.
(17:58:09/5+01:14:21) MR. HARRINGTON: Well, Joe said I would have plenty of time.
(17:58:10/5+01:14:22) THE COURT: Okay.
(17:58:11/5+01:14:23) Q: Um, did you direct your counsel to give notice of this
sale to -- and I'll refer to the entities as numbers one to four that
were referred to on cross, and other than the Norris and Merchant
Bridge entities, the entities referred to from A through G?
…
(18:05:40/5+01:21:52) MR. HARRINGTON: Your honor, I have no further questions.
(18:05:42/5+01:21:54) THE COURT: Thank you, Mr. Harrington. Mr. Spector
(18:05:47/5+01:21:59) Q: How does the article that talked about the ninety-five
percent of the SCO revenue going to Novell, impact on the comments
made in court that you heard Mr. Lewis talk about?
(18:06:00/5+01:22:12) A: Well, Mr. Lewis's comment, as I recall, I'll try to
paraphrase it, said the April second hearing we represented that the
Norris -- the SNCP deal was being restructured, and that's a true
statement, the -- Again, when we started out with SNCP it wasn't a
signed transaction, it was a memorandum of understanding, which is a
long ways away from a signed deal.
(18:06:26/5+01:22:38) So we had a memorandum of understanding which was a
generalized let's go try and do this, and as we got into this
discussion with a group, um, very credible group out of the Middle
East, they wanted to take a different approach towards the
transaction, and that was causing us to restructure the plan to
relative to what the original MOU called for.
…
(18:15:59/5+01:32:11) Q: Is he authorized by SCO to make statements about legal
positions or financial positions?
(18:16:04/5+01:32:16) A: No.
(18:16:07/5+01:32:19) MR. SPECTOR: Your honor, um, I've got case law to support
this, but the general point I want to make is an officer of a
subsidiary company has no authority just because of that office, to
speak on behalf of the parent company. Moreover, uh, the -- to be an
admission again-- this is -- only comes in as admission, because
everything, as your Honor well knows, is all hearsay, and there's
double hearsay in a lot of that --
(18:16:33/5+01:32:45) THE COURT: Yes.
(18:16:34/5+01:32:46) MR. SPECTOR: -- and the only way it can come in is that it's
not hearsay at all because it's an admission. That's obviously what
I'm going to hear. But an admission to come in -- an admission of a
party, it has to be someone authorized to make that statement. And
the authority is -- is delimited by case law to people who are -- are
authorized to speak on that topic for the company.
(18:16:55/5+01:33:07) So a salesman -- I'm not saying that Mr. Bayer was just a salesman,
but if a salesman says something that is very detrimental to his
employer, on an area that's not in his area of expertise or authority,
that is not an admission of the parent -- of the corporation that he works
for. And, we'll -- if any of this is controversial, I do have case law
support.
(18:17:18/5+01:33:30) MR. SPECTOR: So, it's my opinion, your honor, or not
opinion, my opinion doesn't count. It's my --
(18:17:23/5+01:33:35) THE COURT: Your argument.
(18:17:23/5+01:33:35) MR. SPECTOR: -- my view, your Honor, that the testimony that
we've heard at length about Mr. Bayer said this to so-and-so and
somebody told him about something -- all of that is hearsay and all of
that is not an ad-- cannot be considered an adoptive admission or any
other form of admission, uh, by -- by SCO -- SCO Group or SCO
Incorporated, and I ask that the entire line of testimony be stricken,
uh, and, of course if we had a jury this would be a problem having
heard all this, but I trust your Honor knows how to do this.
…
(18:18:54/5+01:35:06) MR. MARRIOTT: With Mr. Jacobs' permission, I hand your Honor
his Blackberry, which calls up SCO's web page.
(18:19:05/5+01:35:17) THE COURT: Yes.
(18:19:05/5+01:35:17) MR. MARRIOTT: And I would like the Court to review what it
says about Mr. Bayer's current title and responsibilities, which is
exactly what the witness agreed the website printout that he was shown
said.
(18:19:21/5+01:35:33) MR. SPECTOR: We're not contesting, we're not saying
Mr. Marriott misread that or misrepresented what it said.
(18:19:25/5+01:35:37) MR. MARRIOTT: The witness said--
(18:19:25/5+01:35:37) MR. SPECTOR: I just asked the wit--
(18:19:27/5+01:35:39) MR. MARRIOTT: I'm sorry, go ahead.
(18:19:28/5+01:35:40) MR. SPECTOR: I just asked the witness whether he agreed with
it said on the website.
(18:19:30/5+01:35:42) MR. MARRIOTT: The witness said he didn't know --
(18:19:31/5+01:35:43) THE COURT: Oh, I'm sorry, we're -- we need that microphone.
(18:19:35/5+01:35:47) MR. MARRIOTT: Your honor, the witness said, or suggested,
perhaps the page was out of date, and I think you can see, or your
Honor can see back in chambers, that it -- that it is currently what
the web site says.
(18:19:48/5+01:36:00) Your Honor, those documents, the three documents which are in
dispute, are plainly, unquestionably relevant. The only seri-- the
only -- the only objection even attempted here, as to those documents,
with any seriousness is hearsay, and it is at the end of the day, your
Honor, not a serious objection. It isn't a serious objection, it
isn't a correct objection, for at least the following reasons.
(18:20:10/5+01:36:22) First of all, your Honor, the documents aren't hearsay if the
statements about which the witness was questioned were admissions.
The statements were plainly admissions. The statements were made on
behalf of a vice-president of SCO. A person who holds himself out as
a vice-president of SCO. A person who by the -- by the very text of
the documents was acting on behalf of SCO in negotiating with the
buyers in this proposed transaction.
(18:20:38/5+01:36:50) You didn't hear any evidence from Mr. McBride, and I'm happy
to inquire as -- as to the -- as to the punishment of Mr. Bayer for
communicating and dealing with the proposed buyers in this way. He
hasn't been disciplined. There's no evidence that he's been
disciplined, your Honor. The evidence is, as those documents make
plain, that he was carrying out his duties, that he was acting on
behalf of the company in helping to bring about that proposed
transaction.
(18:21:02/5+01:37:14) Moreover, one of the documents, your Honor, is not from
Mr. Bayer, it's from Mr. Hunsaker, who is another vice-president of
the company who plainly is affiliated with the SCO Group, the debtor
in this action.
(18:21:17/5+01:37:29) THE COURT: Well, for -- let me -- let me ask this question.
For example in one of the emails, Mr. Bayer says that all of the
employees think such-and-such and so-and-so. The employees. Now,
that's clearly hearsay. How can he speak for the -- what the
employees think. Um, that's one example.
(18:21:35/5+01:37:47) I was troubled by these emails because I don't know, um, -- I
just don't know their -- I don't know their context. I don't know
really their -- their evidentiary value, frankly, because this -- this
was one man's view.
(18:21:54/5+01:38:06) MR. MARRIOTT: Your Honor, this man was -- was --
(18:21:55/5+01:38:07) THE COURT: And he's -- and he's a -- and he is a
vice-president of their European operations. Not an op-- not an
employee in the United States. Not a --
(18:22:05/5+01:38:17) MR. MARRIOTT: Your Honor, he --
(18:22:05/5+01:38:17) THE COURT: Not a -- Yes?
(18:22:06/5+01:38:18) MR. MARRIOTT: -- he -- he holds himself out, and the website
holds him out, as a representative of the company, without
distinction, to the German subsidiary or -- or SCO. He represents
himself to the -- to the world, we would submit, as being an employee
and a representative of SCO.
(18:22:22/5+01:38:34) And in any event, he was representing him-- he was acting as
an agent of the company in connection with the proposed transaction
which is at issue. And in acting as an agent, your Honor, of the
company in that regard, it makes no difference whether he is
technically an employee of the subsidiary or he is technically an
employee of the SCO Group.
(18:22:43/5+01:38:55) With respect to -- at an absolute minimum your Honor, he
was-- there was apparent authority on his part to be having the
conversations he was having, with the buyer, about the state of the
negotiations, about the value that was being placed on the -- on the
products being sold, the products not being sold.
(18:23:00/5+01:39:12) Plainly, your Honor, to the extent he talks about what other
-- other witnesses thought, there may be different weight which your
Honor would wish to accord to those statements, and that is obviously
your Honor's discretion as the finder of fact in -- in this
particular, uh, proceeding.
(18:23:15/5+01:39:27) But we would submit, judge, there's no question that they
were admissions, because he was acting on behalf of the company as its
agent, and in the course of his duties made those representations.
And Mr. Hunsaker, again, in any case, was plainly a representative of
SCO.
(18:23:29/5+01:39:41) Furthermore, your Honor, one of the issues in this case is
the -- is the good faith, or lack of good faith, of the debtors. And
we would submit, your Honor, that those documents plainly go to that
question, and therefore if they aren't in, your Honor, for purposes of
the truth, and we believe they should be, they're in, we would submit,
your honor, as to state of mind.
(18:23:47/5+01:39:59) Furthermore, there is an exception, as your Honor well knows,
to the hearsay rule, that concern-- there's effectively a catch-all,
that says where there are sufficient indicia of rile-- reliability,
even if the statement is hearsay, even if it's not admission, even
if it isn't otherwise permissible in evidence, where there's
a sufficient indicia of the reliability of the statements, whether
they were in fact made, uh, that the -- that the evidence comes in.
(18:24:10/5+01:40:22) And there can't be any question here that Mr. Bayer didn't
make those statements. There's no suggestion by counsel for the
debtors that he didn't actually make the statements. He did, your
Honor.
(18:24:18/5+01:40:30) He is under the control, here, of debtors. He is an employee
of debtor. Whichever entity they want to say is employ-- he is in
their control. They could have without trouble had Mr. Bayer come and
explain those emails in court, and they made the election not to do
that, Judge. And they could have done that. And they didn't do that.
(18:24:36/5+01:40:48) And there's no reason whatever to think that these documents
are ir-- are irrelevant or are unreliable except that they don't like
what the documents have to say. And it will be for your Honor, based
upon what the documents actually say, and the context in which you can
put them as you read them in their full, to decide what weight they
have.
(18:24:52/5+01:41:04) We would submit, your Honor for those reasons the documents
are -- are and ought to be admissible into evidence. Thank you,
Judge.
(18:24:58/5+01:41:10) THE COURT: Yes.
…
(18:26:40/5+01:42:52) MR. SPECTOR: So, uh, um, now, we ask, was he reprimanded.
(18:26:46/5+01:42:58) Q: Was Mr. Bayer reprimanded?
(18:26:47/5+01:42:59) A: Yes.
(18:26:48/5+01:43:00) A: Who reprimanded him?
(18:26:50/5+01:43:02) A: I did.
(18:26:51/5+01:43:03) Q: How severely?
(18:26:52/5+01:43:04) A: Uh, you'll have to ask Hans.
(18:26:54/5+01:43:06) Q: Did Mr. Hunsaker partake in that?
(18:26:57/5+01:43:09) A: No.
(18:26:59/5+01:43:11) Q: That was you then?
(18:27:00/5+01:43:12) A: Yes.
(18:27:01/5+01:43:13) MR. SPECTOR: Okay, your Honor, both of those issues that
counsel raised, you know, holding himself out as -- he held himself as
what he was, EMEA, Gmbh, uh, both of which are designations for a
foreign entity and not the debtors. And he was reprimanded for
stepping out of line for this. So I think we've made the record we
need to make to exclude these exhibits and the line of questioning
that followed.
(18:27:26/5+01:43:38) MR. MARRIOTT: Your Honor, I -- I --
(18:27:27/5+01:43:39) THE COURT: You rest on the arguments.
(18:27:27/5+01:43:39) MR. MARRIOTT: -- I stand on what I've said.
(18:27:29/5+01:43:41) THE COURT: All right, well I, uh, I am going to -- to sustain
the objection and, uh, and strike that testimony. I think that to the
extent these documents were, um, offered, for the tru-- for their
truth, or as an admission, they simply don't meet the test. Um, and I
also think that, uh, they're highly prejudicial, uh, and that their --
the prejudice far outweighs their relevance.
(18:27:58/5+01:44:10) MR. SPECTOR: Thank you, your Honor.
…
(18:32:08/5+01:48:20) Q: What was this testimony about his verbally agreeing to,
I think you used the term backstop, five million dollar DIP loan.
Tell us about that.
(18:32:16/5+01:48:28) A: Well, Mr. Robbins held himself out as somebody who was a
very wealthy indvidual.
…
(18:32:56/5+01:49:08) At the end of the day, that representation was sort of
like the Bernie Madoff, Jr. representations, as it turns out. He
ended up being fraud, uh, fraudulent in a lot of his business
dealings. He's running a Ponzi scheme. And he ultimately took a
fraud judgment, and when he wouldn't report to court, they issued an
arrest warrant for him, and he's been on the run ever since January of
oh-nine, and so it --
(18:33:24/5+01:49:36) Q: Now, di-- di-- I'll -- I'll -- let me stop that. They're --
(18:33:26/5+01:49:38) A: I'm sorry, I get a little bit wound up when --
(18:33:26/5+01:49:38) Q: -- going to eventually say this is a run-on narrative, and
I wouldn't blame them.
(18:33:29/5+01:49:41) A: Okay.
(18:33:30/5+01:49:42) Q: Uh, now --
(18:33:31/5+01:49:43) A: Well, you asked what I thought about him, so I was trying
to give a --
(18:33:32/5+01:49:44) Q: Well, --
(18:33:33/5+01:49:45) A: -- a picture.
(18:33:34/5+01:49:46) Q: Actually, I -- I'm not sure that was my question.
…
(18:36:19/5+01:52:31) Q: This is where Robbins had deals with Norris, and --
(18:36:21/5+01:52:33) A: Yes.
(18:36:21/5+01:52:33) Q: -- Robbins owed money to Norris?
(18:36:22/5+01:52:34) A: Yes.
(18:36:23/5+01:52:35) Q: Okay.
(18:36:23/5+01:52:35) A: And so he had obligations to pay Norris, and he asked me,
um, if I would again just loan him the money for a period a week or
two, because he'd get it right back to me. So I -- I viewed it as a
pretty innocuous thing at the time.
(18:36:38/5+01:52:50) Q: If you realized how big an issue that came to be in this case,
would you have done that?
(18:36:44/5+01:52:56) A: Not in a million years. And -- and it's not -- before we
get to this case, the McBride family home case has been a disaster
since we went through this. And I have to tell you this whole thing
of him representing that he had all this money, it was a short-term
loan, he was going to pay me back -- not just on the hundred, but on
the full three hundred, um, has been a major problem, uh, at home and
at work.
(18:37:08/5+01:53:20) MR. MARRIOTT: Your honor, can I just inquire where we are on
time, since I know we have additional witnesses?
(18:37:12/5+01:53:24) THE COURT: I think we've all run so far over time at this
point.
…
(18:43:08/5+01:59:20) MR. SPECTOR: That's all I have, your Honor.
…
(18:44:16/5+02:00:28) THE COURT: Ten minutes. Thank you.
(18:44:21/5+02:00:33) *** RECESS ***
(18:57:38/6+00:00:00) CLERK: Please rise.
…
(18:58:27/6+00:00:49) MR. SPECTOR: The debtors call Stephen Norris to the stand.
(18:58:29/6+00:00:51) THE COURT: All right. Mr. Norris.
(18:58:37/6+00:00:59) MR. SPECTOR: Um, I don't believe she, uh, Ms. Bayles gave her
appearance, but, uh, Ms. Bayles is here to, to --
(18:58:46/6+00:01:08) MS. BAYLES: Good evening, your Honor --
(18:58:47/6+00:01:09) THE COURT: Good evening, Ms. Bayles.
(18:58:47/6+00:01:09) MS. BAYLES: Leslie Bayles on behalf of Unxis, Inc.
(18:58:49/6+00:01:11) THE COURT: All right.
(18:58:50/6+00:01:12) MS. BAYLES: And Mr. Spector's going to let me sit on this
side of the bar today.
(18:58:53/6+00:01:15) THE COURT: Absolutely. You certainly may. Mr. Norris, if
you'll just remain standing while you're sworn.
(18:58:58/6+00:01:20) CLERK: If you could please raise your right hand and place
your left hand on the Bible.
(18:59:03/6+00:01:25) MR. NORRIS: Where's the bible?
(18:59:06/6+00:01:28) VOICE: It's not the P.S.A.
(18:59:07/6+00:01:29) MR. NORRIS: No, I found the bible.
(18:59:08/6+00:01:30) MR. SPECTOR: It has papers all over the place.
(18:59:09/6+00:01:31) MR. NORRIS: I hope it's not this Cravath book, here.
(18:59:15/6+00:01:37) CLERK: State your full name and spell your last name for the
record.
(18:59:17/6+00:01:39) MR. NORRIS: Stephen L. Norris. N-O-R-R-I-S.
(18:59:22/6+00:01:44) CLERK: Do you solemnly swear to tell the truth, the whole
truth, and nothing but the truth, so help you God?
(18:59:26/6+00:01:48) MR. NORRIS: I do.
(18:59:26/6+00:01:48) CLERK: Please be seated.
(18:59:27/6+00:01:49) MR. NORRIS: Thank you.
(18:59:29/6+00:01:51) THE COURT: You may proceed.
(18:59:30/6+00:01:52) MR. SPECTOR: Good evening, Mr. Norris.
(18:59:31/6+00:01:53) MR. NORRIS: Good evening.
(18:59:32/6+00:01:54) MR. SPECTOR: Uh, I'm going to quickly go through your pedigree,
but you don't have to go quickly when I -- just because I do.
(18:59:38/6+00:02:00) Q: Uh, Where were you educated, sir?
(18:59:40/6+00:02:02) A: I went to three different universities. I went to the
University of Alabama where I got a Bachelor of Science. I also got a
J.D. degree there. I got a L.L.M. from New York University, and I was
a fail-- fellow at Yale Law School.
…
(19:23:11/6+00:25:33) MR. REYNOLDS: Good evening, Mr. Norris.
(19:23:13/6+00:25:35) MR. NORRIS: Good evening.
(19:23:20/6+00:25:42) Q: You mentioned that you recently received a binding
commitment for one million dollars. Is that, uh, from an investor who
has, uh, subscribed -- signed a subscription agreement, for example?
(19:23:31/6+00:25:53) A: It's actually from two investors.
(19:23:32/6+00:25:54) Q: Two investors totalling --
(19:23:33/6+00:25:55) A: One million.
(19:23:33/6+00:25:55) Q: -- one million?
(19:23:34/6+00:25:56) A: Um-hum.
(19:23:35/6+00:25:57) Q: I see. And have they signed documentation with um -- with
um, Unxis?
(19:23:41/6+00:26:03) A: They have.
(19:23:42/6+00:26:04) Q: They have. And how long ago was that?
(19:23:44/6+00:26:06) A: Um, I think that probably took place on Friday of last
week.
(19:23:52/6+00:26:14) Q: Other than those, uh, those two, uh, documents, which we
haven't seen, uh, total a million dollars, are there any other binding
commitments from any other sources that you have at this time?
(19:24:05/6+00:26:27) A: No.
(19:24:10/6+00:26:32) Q: Uh, under the purchase and sale agreement, I believe even
as amended, Unxis is required to provide a two point one five million
dollar letter of credit within five business days of approval of the
sale order by this court, or they could do so at closing. Do you --
do you understand that?
(19:24:27/6+00:26:49) A: I understand that, yes.
(19:24:29/6+00:26:51) Q: And, that could be, if the judge were to approve the sale
order today that could be five business days from today. You
understand that?
(19:24:36/6+00:26:58) A: I -- understand that.
(19:24:38/6+00:27:00) Q: What is the, uh, capitalization of Unxis?
(19:24:42/6+00:27:04) A: Today?
(19:24:43/6+00:27:05) Q: Today.
(19:24:44/6+00:27:06) A: Probably about ten thousand dollars.
(19:24:46/6+00:27:08) Q: And, is Unx--
(19:24:47/6+00:27:09) MR. SPECTOR: I'm sorry. Question assumed -- the one before.
The question before assumed a fact not in evidence, which is not true.
It could not have been five days from today (inaudible) he asked him.
I believe the contract says five days from a final order.
(19:25:01/6+00:27:23) VOICE: Entry of a sale order, yeah.
(19:25:03/6+00:27:25) MR. SPECTOR: A final order is --
(19:25:04/6+00:27:26) THE COURT: In other words, after the ten-day appeal period.
(19:25:06/6+00:27:28) MR. REYNOLDS: That's -- yeah, point well taken, okay, so --
(19:25:08/6+00:27:30) THE COURT: All right.
(19:25:09/6+00:27:31) Q: Five business days from the entry of the order, which may
not be five days -- likely would not be five from today, could be some
period longer, but not -- not too far off, if the Court were to enter
the order shortly. Did you understand that?
(19:25:20/6+00:27:42) A: I do.
(19:25:20/6+00:27:42) Q: And you said the capitalization of Unxis is approximately
ten thousand dollars.
(19:25:24/6+00:27:46) A: That's correct.
(19:25:26/6+00:27:48) Q: And, uh, you -- you understand that Merchant Bridge and
Gulf Capital Partners are not signatories to the purchase and sale
agreement?
(19:25:33/6+00:27:55) A: I understand that.
(19:25:35/6+00:27:57) Q: Do you have any documents in writing that obligate
Merchant Bridge or Gulf Capital Partners to fund this transaction in
any way?
(19:25:44/6+00:28:06) A: Um, I don't -- I don't believe so.
(19:26:01/6+00:28:23) Q: Do you understand that there are certain contracts that
are to be assumed under the purchase and sale agreement, by Unxis?
(19:26:05/6+00:28:27) A: I do.
(19:26:07/6+00:28:29) Q: And have you personally familiarized yourself with the
contents of those contracts?
(19:26:11/6+00:28:33) A: No.
(19:26:18/6+00:28:40) Q: Isn't it true, uh, Mister, uh, Norris, that Unxis itself,
which you said was created only recently for this transaction,
obviously has no business track record of any kind?
(19:26:26/6+00:28:48) A: That's true. It's a new company.
…
(19:37:55/6+00:40:17) THE COURT: Thank you. Thank you, Mr. Reynolds. Any
re-direct?
…
(19:38:20/6+00:40:42) Q: Show you what's been marked as exhibit D-34. Can you
identify that document sir?
(19:38:33/6+00:40:55) A: Yes, this is actually a copy of the document that was
pointed out before, but has the, uh -- uh, I think probably the
correct date in oh-eight.
…
(19:46:21/6+00:48:43) MR. SPECTOR: Debtors call Jeff Hunsaker.
(19:46:31/6+00:48:53) THE COURT: Mr. Hunsaker, if you'll remain standing while we
have you sworn, sir.
(19:46:34/6+00:48:56) CLERK: Please raise your right hand, place your left hand on
the Bible. Then state your full name and spell your last name for the
record.
(19:46:44/6+00:49:06) MR. HUNSAKER: Jeff Fred Hunsaker. H-U-N-S-A-K-E-R.
(19:46:49/6+00:49:11) CLERK: Do you solemnly swear to tell the truth, the whole
truth, and nothing but the truth, so help you God?
(19:46:53/6+00:49:15) MR. HUNSAKER: Yes.
(19:46:54/6+00:49:16) CLERK: Please be seated.
(19:46:57/6+00:49:19) THE COURT: Thank you.
(19:46:58/6+00:49:20) MR. SPECTOR: Good evening, Mr. Hunsaker.
(19:47:01/6+00:49:23) MR. HUNSAKER: Good evening.
(19:47:02/6+00:49:24) MR. SPECTOR: We're reciting a little mantra here, and if you
don't understand, just say so.
(19:47:07/6+00:49:29) Q: Do you adopt your declaration?
(19:47:09/6+00:49:31) A: Yes.
(19:47:11/6+00:49:33) MR. SPECTOR: Okay. I turn the witness to the --
(19:47:13/6+00:49:35) THE COURT: Yes, thank you. Mr. Marriott, when you're ready.
(19:47:17/6+00:49:39) MR. MARRIOTT: Good evening, Mr. Hunsaker.
(19:47:18/6+00:49:40) MR. HUNSAKER: Good evening.
(19:47:19/6+00:49:41) MR. MARRIOTT: Your honor, I have no questions of this
witness, only objections.
…
(20:17:41/6+01:20:03) MR. DONOHO: Good evening, your Honor.
(20:17:42/6+01:20:04) THE COURT: Good evening.
(20:17:42/6+01:20:04) MR. DONOHO: Chistopher Donoho of Lovells LLP on behalf of LNS
Acquisition LLC. Nice to see you again.
(20:17:47/6+01:20:09) THE COURT: Good to see you again.
(20:17:49/6+01:20:11) MR. DONOHO: It's been an interesting day today.
(20:17:51/6+01:20:13) THE COURT: And you've been very patient.
(20:17:53/6+01:20:15) MR. DONOHO: Thank you. Ha ha. And you have as well. Uh,
did want to point out, uh, that, uh, I know it was discussed today,
that my client has made a proposal. It's been received by the
debtors, and it's been viewed by other constituents in this case as
well.
(20:18:07/6+01:20:29) And we stand by that proposal. We'd like to investigate that
opportunity further. We would obviously be very interested in any
kind of, um, further discussions with the debtor. We obviously would
be interested in any kind of competitive bidding process that may be
set up. We think that our bid is an attractive one. I don't think we
would have gone to the trouble of putting the bid together if we
didn't think that it provided a -- a better form of recovery for the
creditors than, uh, than what's currently on the table. And so we
would simply like that opportunity, if the opportunity arises. Thank
you, your Honor.
(20:18:44/6+01:21:06) THE COURT: All right, Mr. Donoho, thank you.
(20:18:51/6+01:21:13) MR. MARRIOTT: Your honor, we -- uh, movants rest.
(20:18:53/6+01:21:15) THE COURT: Thank you.
…
(20:20:19/6+01:22:41) THE COURT: Yes. Thank you.
(20:20:24/6+01:22:46) *** RECESS ***
(20:28:30/7+00:00:00) CLERK: Please rise.
…
(20:29:08/7+00:00:38) MR. LEVIN: We-- your honor, perh-- you just --
(20:29:09/7+00:00:39) THE COURT: Would you have a suggestion?
(20:29:09/7+00:00:39) MR. LEVIN: -- gave me an idea, --
(20:29:10/7+00:00:40) THE COURT: Yes.
(20:29:11/7+00:00:41) MR. LEVIN: -- on what you said. We'll go first on the
conversion motion --
(20:29:12/7+00:00:42) THE COURT: Yes.
(20:29:13/7+00:00:43) MR. LEVIN: He can respond to that and give his views on the
sale motion --
(20:29:16/7+00:00:46) THE COURT: Correct.
(20:29:17/7+00:00:47) MR. LEVIN: We'll then be able to reply to the conversion as
well as respond to the sale motion --
(20:29:21/7+00:00:51) THE COURT: Perfect.
(20:29:22/7+00:00:52) MR. LEVIN: -- and then he can perhaps have the final word,
but just on the sale motion, not on the conversion motion.
(20:29:27/7+00:00:57) THE COURT: Exactly. Makes all the sense.
…
(20:30:18/7+00:01:48) MR. DOSHI: Uh, your honor?
(20:30:20/7+00:01:50) THE COURT: Yes.
(20:30:21/7+00:01:51) MR. DOSHI: This is Amish Doshi on the phone on be--
(20:30:22/7+00:01:52) THE COURT: Mr. Doshi, yes sir.
(20:30:24/7+00:01:54) MR. DOSHI: I just wanted to note, uh, at some point, I would
like to say a couple of words with respect to only the sale motion as
it relates to the assumption and assignment of the Oracle agreement.
…
(20:33:11/7+00:04:41) MR. LEVIN: Your Honor, I wonder if Mr. Petrofsky is still on
the line.
(20:33:15/7+00:04:45) THE COURT: Mr. Petrofsky?
(20:33:18/7+00:04:48) MR. PETROFSKY: Uh, yes? This is Mr. Petrofsky. Hello?
(20:33:21/7+00:04:51) THE COURT: Yes.
(20:33:22/7+00:04:52) MR. LEVIN: And whether he wishes to be heard. I didn't -- I
didn't mean to exclude him from, uh, from this process.
(20:33:28/7+00:04:58) THE COURT: Did you wish to be heard, or were you on just --
just for the sake of --
(20:33:32/7+00:05:02) MR. PETROFSKY: No, I'm fine, I'm just listening. It's okay.
Thank you.
(20:33:35/7+00:05:05) THE COURT: All right. Well, Mr. Levin, are you making the
closing?
(20:33:44/7+00:05:14) MR. LEVIN: Your honor, I am opening the closing.
(20:33:46/7+00:05:16) THE COURT: Opening the closing, yes.
(20:33:48/7+00:05:18) MR. LEVIN: I'll be focusing only on the conversion motion,
your Honor, although they do interrelate.
(20:33:52/7+00:05:22) THE COURT: Yes.
(20:33:53/7+00:05:23) MR. LEVIN: And I'll try -- I'll try to keep this limited to
the conversion motion.
(20:33:58/7+00:05:28) Your Honor, our grounds for conversion, were for cause, which
is broad in general, but -- and then for a specific cause in addition,
and that is 1112(b)(4)(A), continuing loss and, uh -- continuing loss
to and diminution of the estate.
(20:34:20/7+00:05:50) THE COURT: Yes.
(20:34:21/7+00:05:51) MR. LEVIN: And absence of a reasonable likelihood of
rehabilitation. Let me take those separately.
(20:34:27/7+00:05:57) The debtor, in its opposition to the conversion motion,
agreed that they are -- that there are continuing losses. Mr. Nielsen
got on the stand, their CFO and said, well, yeah, they're continuing
losses, but they're much larger than we put in our opposition papers,
um, they're really big. And in fact, in the now -- I would guess, twenty
or twenty-one months -- that we've been here.
(20:34:53/7+00:06:23) THE COURT: Twenty-one.
(20:34:54/7+00:06:24) MR. LEVIN: I'm sorry, the -- the record only cuts off a few
months ago, so for nineteen months, five point three million dollars
of cash lost, to the creditors and shareholders.
…
(20:40:33/7+00:12:03) MR. LEVIN: Your Honor, this case, as has been noted, is about
the excessive pursuit of litigation. And perhaps the excessive
pursuit of the mobility applications, although that's a little less
clear. But we have a chapter eleven debtor, who is supposed to be
fiduciary for the estate and for the creditors. And what do we have?
(20:40:54/7+00:12:24) McBride's testimony in the -- in his deposition, that he will
not consider selling the litigation as part of any sale.
(20:41:02/7+00:12:32) But -- but worse, we have incorrect financial statements,
uh, to this court, which were not corrected, until called to their
attention.
(20:41:11/7+00:12:41) We have incorrect testimony, not only on the board meeting,
uh, which the record will show was incorrect in the June fifteenth
testimony, but also the reasons for the termination of the, um, of the
sale negotiations, both with York, and, with, um, with, uh, SNCP, the
first, uh, iteration of that. Mr. McBride testified very clearly at
the June fifteen hearing that both of those, um, deals fell apart
because of the uncertainty related to the litigation. You heard a
very different story today. I don't know which one to believe, but a
fiduciary shouldn't be telling this court different stories.
(20:41:49/7+00:13:19) Um, we have a CEO of a business that has sixty-two employees,
and he's not sure who his officers are, or what officer positions they
hold.
(20:41:58/7+00:13:28) We have, questionable payments. There was debate about
them. They attempted to justify them. But, at the most -- at the
least, excuse me your Honor, they were questionable.
(20:42:09/7+00:13:39) Um, We have, um, a mischaracterization of board meetings.
(20:42:14/7+00:13:44) We have a publicly reporting company that has a false website
identifying its officers, according to Mr. McBride's testimony.
(20:42:25/7+00:13:55) And we have Mr. McBride's testimony that they reached, uh,
I'm not certain it was Mr. McBride, but we have other testimony that
they reached an agreement to revise the fee agreement with Boies,
Schiller, and Flexner in this case, without this court's approval, and
that is subject to this court's approval under section 327.
(20:42:43/7+00:14:13) Your honor, this does not amount to a chapter eleven debtor
that should remain in possession. These things all speak of breach of
fiduciary duty, failure to follow the orders of this court, failure to
comply with chapter eleven procedures.
(20:42:57/7+00:14:27) Um, we can debate whether that's gross mismanagement.
(20:43:01/7+00:14:31) There's no excuse for the failure to file any operating
report for any period after March 2009.
(20:43:07/7+00:14:37) All of these are grounds for conversion of the case.
(20:43:10/7+00:14:40) Unusual circumstances. How much must this -- the estate
continue to pay, to support McDonald's? McDonald's ought to be able to
support itself, your Honor. And its other customers.
(20:43:25/7+00:14:55) Your Honor, as I mentioned in my opening, I think the Court
might appropriately consider, in light -- if the Court determines to
go the auction route on the sale, which we'll discuss later,
appointing a trustee under 1104(a)(3), which is an alternative to
granting a conversion motion, or let me say it's an alternative remedy
upon granting a conversion motion, um, and I'll address that more in
connection with the sale, your Honor.
(20:43:50/7+00:15:20) THE COURT: Okay, Mr. Levin. Thank you, sir. Mr. Lewis.
(20:44:01/7+00:15:31) MR. LEWIS: Thank you, your Honor. I don't have much to add
here except I'd like to focus on the issue of rehabilitation, --
(20:44:06/7+00:15:36) THE COURT: Okay.
(20:44:07/7+00:15:37) MR. LEWIS: -- which, the Court knows, the standard is not
just whether you can confirm some kind of plan, but whether you can
confirm a rehabilitating plan that puts an operating company, the
debtor, back out on the street.
…
(20:46:49/7+00:18:19) THE COURT: Yes. Thank you, Mr. Lewis. Mr. Harrington.
(20:46:55/7+00:18:25) MR. HARRINGTON: For the record, your Honor, William
Harrington from the office of the United States Trustee.
(20:46:59/7+00:18:29) Your honor, I think this case is interesting because there --
this is a case where the eight-hundred pound gorillas didn't come in
on the first day of the case and demand conversion. We've waited two
years, now, your Honor, and I think, kind of what I'll call the
eight-hundred pound gorillas in this case, have finally come to the
Court and and said, you know, after five million dollars has been
taken away from our recovery, you know, please do something about it.
(20:47:22/7+00:18:52) So this -- this is not the case where you have the
overbearing creditors coming in on the second day of the case
demanding action of the Court, before anyone has a chance to look at
the case, before the debtors have a ca-- a chance to rehabilitate and
catch their breath. They've had two years, your Honor.
(20:47:44/7+00:19:14) Your Honor, I'm not going to go over continuing loss. I
think that was well covered, um, and I think it is essentially
admitted in the debtors' response.
(20:47:52/7+00:19:22) On rehabilitation, I think that also was well covered, your
Honor. I do want to stress the plan aspect of it. As I said in my
opening, the debtors aren't talking about a plan here. The debtors
are talking about some kind of structured dismissal. I don't know
what that means. That's not part of the bankruptcy code, your Honor.
It's not a plan, it's not a chapter seven distribution.
(20:48:18/7+00:19:48) I am concerned, your honor, if -- when we get to that point
where I think we've demonstrated cause, what your Honor then has to do
is look as to --
(20:48:27/7+00:19:57) THE COURT: Unusual circumstances.
(20:48:28/7+00:19:58) MR. HARRINGTON: -- whether or not it's in the best interest
of the creditors. Unusual circumstances, based on the best interest
of the creditors.
(20:48:34/7+00:20:04) THE COURT: Yes.
(20:48:35/7+00:20:05) MR. HARRINGTON: The creditors are here telling you they want
conversion. They want an independent fiduciary. So I think you have
to take that into account, your Honor, when you make your decision.
Um, and I think it's important that you think about that they waited
two years. They've given the debtor a chance, and the debtor hasn't
produced. And so I think, at this stage, your Honor, you do have to
take into consideration what the creditors are asking you to do, and
these are the eight-hundred pound gorillas in the case, your Honor.
(20:49:02/7+00:20:32) THE COURT: Talk to me for one minute if you will,
Mr. Harrington, based on your experience, about an operating chapter
seven.
(20:49:09/7+00:20:39) MR. HARRINGTON: Well, I think there are a number of options
here, your Honor, and I think Mr. Levin mentioned it. Uh, I mean, a
chapter seven trustee can proceed under 721. You can rule, uh, that
he can operate the debtors through a sale. And that's happened in
this district before. I know George Miller has operated companies --
(20:49:25/7+00:20:55) THE COURT: Yes.
(20:49:26/7+00:20:56) MR. HARRINGTON: -- before under 721. But I think there are other
alternatives. If you decide that the cause exists for conversion, you
can under certain circumstances appoint a chapter eleven trustee, if
you think that's appropriate in carrying out a sale process, or, um,
the appointment of an examiner.
(20:49:45/7+00:21:15) THE COURT: Thank you, Mr. Harrington. All right.
Mr. Spector.
(20:49:53/7+00:21:23) MR. SPECTOR: Yes, your Honor, thank you.
(20:49:54/7+00:21:24) THE COURT: Your -- your turn. Thank you very much, it's been
a long day and a long couple of weeks for you, I know.
(20:49:59/7+00:21:29) MR. SPECTOR: Yes, sir. Uh, before I dive into my closing, I'd
like to address some of the things that I've heard from counsel, and
put that aside and then get into the --
(20:50:08/7+00:21:38) THE COURT: Okay.
(20:50:09/7+00:21:39) MR. SPECTOR: -- guts of mine. Mr. Levin said, uh, SCO had
pricing ability. There's no evidence of that.
(20:50:16/7+00:21:46) As your Honor probably knows from testimony in this case, or
just living with this case, that's not how this business works.
There's contracts. He's suggesting that they can go out and tell Microsoft
tomorrow we're raising the prices. Licenses have been bought. Not
like there's new customers walking in the door and they're going to
raise the price on them. There's no evidence that they have pricing
ability.
(20:50:43/7+00:22:13) The debtor, the -- reorganized SCO -- I don't say the reorganized
SCO because it would be the former debtor SCO -- will have new money
to go on in the rehabilitation phase, post-bankruptcy. If the Unxis
sale closes, they'll have a million dollars left over after paying the
claims. That's new capitalization.
(20:51:07/7+00:22:37) Why no skinny-down plan til now? Because you've heard the
efforts to sell the company as a going concern. Who wants the Unix
business if there's no engineers there, or R and D, or, uh, support
and service? That's why there's not a skinny-down plan. The major,
uh, means that this company's been looking to is to try to sell the --
sell the Unix business.
(20:51:30/7+00:23:00) And by the way it's also not true that Mr. McBride testified
that all they wanted to do was keep the, uh, the litigation. They did
have -- some of the A, B, C, D, E, F, G -- which we never linked up
the names, by the way, --
(20:51:41/7+00:23:11) THE COURT: Understood.
(20:51:43/7+00:23:13) MR. SPECTOR: Some of those people were offering deals that
involved taking stakes in the claims, and we heard Mr. McBride testify
about that. So, everything was on the table. In fact, you -- even
the York deal involved that.
(20:52:01/7+00:23:31) All the website said was SCO. It didn't say SCO Group, SCO
Operations. The website says what it says, and all -- all or at least
the, uh, the subsidiary that Mr. Bayer was affiliated was also called
SCO Group. SCO Group Gmbh, which is Germany. It's a marketing
website. Why bother about niceties about, you know, one or the
other. And -- I won't go into the ruling, but -- that deals with that.
(20:52:32/7+00:24:02) By the way, the record should show, and of
course the record speaks louder than the lawyers, that the April and
May MORs were filed, it's not just since March. Maybe counsel
misspoke when he said March and meant to say May.
(20:52:47/7+00:24:17) The BSF deal is contingent. It's not a done deal. It's a --
it's an offer, basically, by Boies, Schiller and Flexner that hasn't
been executed. There's no signed agreements or anything like that.
It's just a statement saying, if we get past this and we go o-- go
forward, they will do -- they'll restructure going forward, uh, their
contingency fee, in return for, uh, giving up their pre-petition
claim, and some other consideration, which --
(20:53:13/7+00:24:43) MR. LEVIN: Your Honor, I apologize for interrupting
Mr. Spector, but I believe he's going far outside the evidence record
that we have, uh, so far, uh --
(20:53:21/7+00:24:51) THE COURT: On the -- on the -- on the Boies, Schiller issue?
(20:53:23/7+00:24:53) MR. LEVIN: Yes.
(20:53:25/7+00:24:55) MR. SPECTOR: I -- I -- I think he said it was contingent. I
think the test-- the testimony from Mr. Tibbitts in his declaration
talked about that.
(20:53:31/7+00:25:01) THE COURT: All right.
(20:53:34/7+00:25:04) MR. SPECTOR: Um, 1104(a)(3). We said in our response that
that -- there's four options on the table. It's not as hard and fast
as some commentators say since BAPCPA came to the fore. This Court
still has options, and that's one of them. Examiner is another one.
Uh, and, and, uh, frankly, uh, well, uh, we'll get to those at, I
suppose, at another stage.
(20:53:58/7+00:25:28) (a sneeze)
(20:53:59/7+00:25:29) THE COURT: Bless you.
(20:54:02/7+00:25:32) MR. SPECTOR: The U.S. Trustee and Mr. Lewis talk about what's
the details of this dismissal, uh, structured dismissal. Actually, I
didn't say anything about that. There is no motion before the Court
yet. We have talked about it. It's not unfair for them to raise it,
but there's also no discussion of any structure. Wasn't planned to be
any structure.
(20:54:19/7+00:25:49) Once the sale closes -- this is me talking, there's no
evidence, this is legal argument -- once the sale closes, and, and the
credit-- and the money is in the hands of SCO -- the bank account of
SCO, the idea would just simply be, I suppose -- we haven't gone
through this, haven't talked to client about it -- just, file a motion
to dismiss. We no longer have the Unix business. We no longer are,
uh, um, uh, have the problem of, uh, but, you know, the problem of the
-- of the -- the appeal will have probably gotten to the end of the
appeal by then. Uh, and there probably no reason to stay in
bankruptcy. The purposes of the bankruptcy have been accomplished.
(20:55:05/7+00:26:35) If there's some structure that is requested by the
U.S. Trustee, we'll discuss the structure.
(20:55:09/7+00:26:39) The bulk of the cl-- creditors are not here.
…
(21:11:16/7+00:42:46) MR. SPECTOR: Where do you find a case like that? Just with
that. Forgetting all the other things I've talked about, where do you
find a case with that? These -- this case is loaded with serious
unusual circumstances.
…
(21:13:10/7+00:44:40) MR. SPECTOR: Most likely scenario is that the businesses will
shut down, making a going concern impossible. Now, your Honor asked a
very good question. I always think it's a fair question about an
operating seven. Or, as the trustee said, what about an eleven
trustee.
(21:13:26/7+00:44:56) Well, I can't speak about the eleven trustee. Your honor's
question, though, raised some hackles. Uh, you'll read in
Mr. Hunsaker's declaration about what's likely to happen. People
don't know, especially Europeans, and customers out there, they get
very nervous when a company they do business with files chapter
eleven. Ask what they feel if they're thinking about a chapter seven,
okay. Oh, what's an operating seven? Nobody knows about that.
(21:13:58/7+00:45:28) These engineers have to think about their families. Will
they stick around and run this company? Will management run the
company? Say what you want about management, will Mr. Hunsaker stick
around and do it? Will any of these other people do that with a
trustee in charge? In a seven mode, for crying out loud? I think
that's a big risk.
(21:14:21/7+00:45:51) And what happens to what it -- the product he wants to sell,
the chapter seven trustee -- he or she -- wants to sell, in that
scenario? Mr. Hunsaker testified, and I believe it's common
knowledge, I don't know that it's -- it needs much evidence, that when
this company ceases to operate in the normal course of business like
it's been, you can kiss it good-bye in terms of recovery.
(21:14:45/7+00:46:15) We've got a recovery that's twice what is out there in terms
of debt, and you can bet that's not going to happen in a seven mode,
or probably even an eleven trustee mode.
…
(21:18:55/7+00:50:25) THE COURT: Mr. Spector, you've now gone on for roughly forty
minutes. It's late. I think your time is up.
(21:19:02/7+00:50:32) MR. SPECTOR: It is up. There are deal terms about the LNS
deal that are very, very poor, and they're much worse -- worse
financially -- financially than the Unxis deal.
(21:19:11/7+00:50:41) THE COURT: All right.
(21:19:12/7+00:50:42) MR. SPECTOR: Your honor, for these reasons, we'll ask your
Honor to approve the sale, and deny the motions to convert.
(21:19:17/7+00:50:47) THE COURT: Thank you, Mr. Spector. All right, Mr. Levin.
(21:19:28/7+00:50:58) MR. LEVIN: Turning to the sale motion, your Honor, let me
pick up where I left off this morning, how many hours ago?
(21:19:39/7+00:51:09) I said we had a few problems with the sale motion. One was
the poison pill.
(21:19:47/7+00:51:17) THE COURT: Yes.
(21:19:48/7+00:51:18) MR. LEVIN: Another was the solar eclipse. Another was the
lack of a record. Well, I can say that the debtor has made at least
somewhat of a record, and one of our problems has been solved in part.
Of couse, it would have been a lot easier had that record been made
when the motion was filed, so we didn't have to go through all this
exercise and we could have focused on the remaining open issues. Let
me address the remaining open issues.
(21:19:16/7+00:50:46) To approve a sale, this court has recognized that a debtor
must meet four -- must show four things. First, a sound business
purpose, second, a fair price, third, notice -- we're not disputing
that, although Novell might -- and fourth, good faith. Let's take
those in order.
(21:20:40/7+00:52:10) Sound business purpose. Mr. Spector argues that the sale
will provide the ability to pay all claims in full.
…
(21:28:10/7+00:59:40) Let me
turn to fair price.
…
(21:30:23/7+01:01:53) Um, the
poison -- excuse me, good faith, your Honor. Skipping the notice and going
to good faith.
…
(21:32:41/7+01:04:11) Finally, your Honor, the last point, uh, has to do with the,
uh, private sale.
(21:32:46/7+01:04:16) THE COURT: Yes.
(21:32:48/7+01:04:18) MR. LEVIN: Um, private sale, as you know, your Honor, does
occur in bankruptcy cases, but is very unusual. Uh, Mr. Spector
attempted to point to GM and Chrysler, but in fact, even in those
cases, the Court provided for an auction, in case there was an
overbidder. Of course, there wasn't, and the sales went to the
stalking horse bidder in both of those cases.
(21:33:10/7+01:04:40) Um, here, we have another bidder, who has made known his
willingness to participate in an auction, based on a starting bid of
the Unxis proposal. I think we can infer from that, your Honor, that
the bidder would not be bidding less than the Unxis proposal. So, we
have a live competition, and there is no reason in this case to
approve this now as a private sale.
(21:33:40/7+01:05:10) Uh, now, if this court is going to order an auction, how
should it be done? As we said earlier, we believed, uh, an
appropriate way to do that would be the appointment of a trustee under
1104(a)(3).
(21:33:54/7+01:05:24) Um, unless your Honor feels -- uh, would like to hear
opposing argument to the burden of proof, uh, issue, which I was --
well, let's just say I was surprised by it. Uh, I'll -- I'll leave
that one aside and go straight to the appointment of a trustee.
(21:34:10/7+01:05:40) Why is a trustee impor-- appropriate in this case? We do not
take the position that a shutdown of the business pending an auction
makes sense. And we, IBM, have never argued that if it -- if the case
is converted to Chapter seven, there should be an operating trustee in
Chapter seven. We think the bankruptcy code is structured in a way
that makes it easier to operate in chapter eleven and not in chapter
seven.
(21:34:34/7+01:06:04) If there is a conversion, because this company is losing
money and has no reasonable prospect of rehabilitation, then it should
be converted to chapter seven and money saved. Stop the bleeding. If
there is going to be an auction, we believe it's important to keep the
business operating for that, and we would not seek immediate
conversion but would seek chapter eleven, uh, trustee instead. Why?
(21:35:00/7+01:06:30) Um, the, um, the debtor has made very clear on the witness
stand today, Mr. McBride's testimony, that they do not trust Mr. Hale.
That's despite the fact that they were here on multiple occassions
seeking to pay York Capital a hundred fifty thousand dollar fee. I
don't know when relations turned sour, your Honor, but I tend to doubt
when Mr. McBride said they turned sour the minute negotiations stopped
back in November of oh-seven. Uh, I -- it -- it -- the two things do
not seem consistent.
(21:35:36/7+01:07:06) Uh, but now they say they cannot trust Mr. Hale. Well, if
they cannot trust Mr. Hale, that's exactly why we need an independent
fiduciary to cut-- conduct the auction. We don't want one of the
bidders at the sale to be told, your bid is not welcome here. That is
not how to have a free and fair auction.
(21:35:55/7+01:07:25) We believe a sale process can be conducted quickly. Mr. Hale
is familiar with this business, he's already proposed, uh, a, uh, uh,
asset purchase agreement. We believe it will take some negotiation,
but we think it could be concluded, uh, within about thirty days, give
or take. Uh, we're not looking for an extended auction.
(21:35:14/7+01:06:44) Uh, it may be that once the buyers who were identified on
that secret certificate of service, uh, know that there's really an
auction, they might come back to the table. When they're told there's
a private sale, they probably don't have much incentive to come back.
We don't know.
(21:36:29/7+01:07:59) So, um, your Honor, we believe the sale should not be
approved for all of the reasons. There's no sound business proo--
purpose. The price as set is not fair. Uh, we question the good
faith, especially of the poison pill provision, and if there is a, uh,
sale approved, that should be changed. Certainly, the -- the fair
price issue could be addressed by an auction, and that is where we
stand, your Honor. Thank you.
(21:36:53/7+01:08:23) THE COURT: Thank, thank you very much, Mr. Levin. Mr. Lewis.
(21:37:05/7+01:08:35) MR. LEWIS: Thank you, your honor. (inaudible) and again I
won't be very long on this.
(21:37:11/7+01:08:41) Your Honor, one way to look at the sale price here is to look
at the sale process throughout this case. And while the debtor wants
you to believe that it was diligently pursuing potential sales, you'll
see in Mr. McBride's deposition that, basically, the deal has been the
deal forever. Sell the Un-- the Unix business, five to ten million
dollars, it's been going on and on and on.
…
(21:46:06/7+01:17:36) THE COURT: Thank you, Mr. Lewis. Mr. Harrington.
(21:46:16/7+01:17:46) MR. HARRINGTON: Your Honor, very briefly, because I think a
lot of ground's already been covered.
(21:46:19/7+01:17:49) Uh, I did want to just hit on that last point. Mr. Spector
keeps saying "Pay the Creditors in full, pay the creditors in full",
and I think he thinks if he says it enough, your Honor's going to have
it ingrained in your head that all the creditors are being paid in
full.
(21:46:36/7+01:18:06) Uh, what he never tells you is when and how the creditors are
going to be paid. And so he says we're going to be all paid before we
get out of bankruptcy and so we're just going to dismiss. There's no
way to pay pre-petition creditors in bankruptcy without a plan, or
without chapter seven trustee filing their trustee's distributi-- or
trustee's final report. So, you can't just pay all your creditors,
just because you have some money. That's not possible, your Honor, so
I did want to raise that issue.
(21:47:06/7+01:18:36) Your Honor, I know you don't want to address the clear and
convincing evidence standard. I don't think there's any case law in the
country on it with respect to the 1112 issue. Uh, to pull that in
from the 1104 I don't think is appropriate. Also, there's an argument
that post-BAPCPA, it's not clear and convincing in the 1104 context as
well, so, I don't think I need to address that any further.
(21:47:28/7+01:18:58) Um, there was a lot of commentary on how the debtors'
management distrusts Hale, and I think Mr. Levin handled that very
well.
(21:47:36/7+01:19:06) One other thing I would want to get to was, um, there was
that, sort of, in -- it was implied that that's a problem for going
forward with the customers again if that -- if they were the
successful purchaser here.
(21:47:55/7+01:19:25) Again, it's protection of the customers, as opposed to
protection of the creditors and the equity security holders. And
those -- that's what your Honor has to be looking at here, the
creditors and the equity security holders. In their best interests,
not the best interests of the customers.
(21:48:10/7+01:19:40) And finally, your Honor, there's been a lot of talk about how
if this case -- there was an appointment of a chapter eleven trustee or
chapter seven trustee, that the -- that all the engineers would go running to the
four corners of the Earth. This case has been going on for -- since 2003.
If these people haven't left by now, they're not leaving, your Honor.
So, that's all I'd want to say. Thank you, your Honor.
(21:48:33/7+01:20:03) THE COURT: Thank you, Mr. Harrington.
(21:48:36/7+01:20:06) MR. SPECTOR: Your honor, I -- I'm not going to make this
long, I'm just going to deal with the points that were raised.
(21:48:41/7+01:20:11) THE COURT: All right.
(21:48:42/7+01:20:12) MR. SPECTOR: This demonstrative exhibit. A variety of points
a want to raise. Number one, in the evidence, we have that the
unsecured claims, after scrubbing, a million seventy-four thousand,
not three million five thirty-one. When does anybody pay attention,
in terms of what's really owed, by looking at the schedules?
(21:49:08/7+01:20:38) Uh, if -- if that were -- I mean, this is not --
(21:49:11/7+01:20:41) The fact that schedules exist, and they say things, is of
very, very minimal value.
…
(21:58:20/7+01:29:50) And, and if we wanted to have other people come kick the
tires and try to, you know, spend some time and money on this, we
didn't want to be seen as walking away from those obligations, so we
wanted the world to know we will honor them.
(21:58:32/7+01:30:02) And of course, the Court didn't hear that, (inaudible) I
don't think we ever did prove it, but that's the purpose of that.
Notice to the world. We're not running away from it.
(21:58:42/7+01:30:12) THE COURT: When I -- when I heard that -- reference to that
motion, I was thinking to myself, my God, I hope I didn't grant that
motion.
(21:58:49/7+01:30:19) (laughter)
(21:58:50/7+01:30:20) MR. SPECTOR: No, no, we didn't proceed on that any-- they --
(21:58:51/7+01:30:21) (laughter)
(21:58:52/7+01:30:22) -- they -- actually, they -- they did our work for us, they
objected, we said okay we'll defer that to another time, but the word
was effective, because we did have other people come kick tires and
spend money.
(21:59:05/7+01:30:35) Well let's talk about the poison pill and the solar eclipse.
That's another one I would love to have Mr. Caplan to assess, but I would
-- my -- my knowledge of those APA amendments are shallow.
(21:59:16/7+01:30:46) But I'll tell you what I can tell you about the poison pill,
the so-called poison-pill --
(21:59:20/7+01:30:50) THE COURT: And -- and let's make this your last point, all
right, because it's -- it's ten o'clock.
(21:59:25/7+01:30:55) MR. SPECTOR: Yes sir, but I want to --
(21:59:26/7+01:30:56) THE COURT: We've been -- this will be your last point. These
will be your last points, or -- decide what your last points are.
(21:59:32/7+01:31:02) MR. SPECTOR: The poison pill does not tie the hands of the
Court. It is not a poison pill by any means. If the Court does not
approve the sale, nothing happens with regard to the -- none of the
rights in that agreement ever arise. If the Court approves the sale,
authorizes the debtor to close, it makes no sense -- I, I mean,
couldn't get it through the deal people -- it makes no sense to worry
about your converting the case.
(22:00:02/7+01:31:32) Why would you approve the sale, that would close, and then
appoint a trustee of what's remaining. Why would you be converting
the case at that point. I saw it as a polar situation. The Court's
going to approve the sale and deny the conversion, or -- nothing bad's
going to happen.
(22:00:20/7+01:31:50) If -- and -- and it -- it was a -- it was a point that the
other side wanted to have, because they felt comfort in it. They
didn't want -- they want to have the Unix business without the claims.
You heard Mr. Norris talk about that.
(22:00:33/7+01:32:03) They didn't want these claims to fall into the hands of
whoever the trustee sells them to. They didn't want to be messing
with them. They trusted it in the hands of SCO's management to
continue, they weren't going to be doing crazy things on that, but --
but if the, uh, if the Court were to grant the motion, for a sale,
none of the rest of things are likely to happen, and -- and we would
be moving to dismiss the case anyway.
(22:01:00/7+01:32:30) The, um, the other thing is, the only time the October first
date comes up is if the Court were to grant one of the three things,
conversion, appointment of a Chapter Eleven trustee, or a -- examiner
with unusual powers, extraordinary powers. And, as I said, that's not
going to happen. If the Court were going to do that, you're not
going to approve the sale. These -- these rights --
(22:01:26/7+01:32:56) So, it looks bad, but it really isn't, and the poin-- the
purpose of that wasn't to bind this court's hands in any way, it was
t-- and you'll see there's other things talking about future events,
after the case is done and we're out of bankruptcy, if something
should happen, and SCO should potentially lose the rights to claims
and other things happen, that's really what that's all designed to do.
(22:01:48/7+01:33:18) Um, I -- I would be interested in the Court's following up
with Mr. Harrington's discussion about an Eleven trustee, if we can
work out -- or an auction process, I don't discount that. The PSA
does in fact talk about, if the Court were inclinded to grant an
auction, that they want to be considered -- in the PSA itself, as a
stalking horse, there's even break-up fees and so forth. So it's not
off the table on our end.
(22:02:15/7+01:33:45) THE COURT: All right. Thank you, Mister -- thank you,
Mr. Spector.
(22:02:17/7+01:33:47) MR. LEWIS: Your Honor, might I just have, literally ten
seconds.
(22:02:19/7+01:33:49) THE COURT: Sure.
(22:02:20/7+01:33:50) MR. LEWIS: And the ten seconds are: on the question of what
evidence there is on the APA, there is the APA. It is in evidence.
The document itself speaks for itself. Contract rules of
interpretation, in the first instance they're always you look to the
four corners of the document. It says what it says, it's just like
Exide. Anybody else who testified today about what it means or
doesn't mean, wasn't around when it was negotiated.
(22:02:45/7+01:34:15) And there is the second piece of evidence, which is Schedule
G, which, like so many other things, we now heard was an oversight --
every time something inconvenient comes up, it's an oversight -- but
it was there, and it's been there all along. Thank you, your Honor.
(22:02:59/7+01:34:29) THE COURT: Thank you.
(22:02:59/7+01:34:29) MR. SPECTOR: Aren't these -- are all of the exhibits and
amendments and everything to the APA there, or is it just the first,
original APA, because if we have just the exhibits, then -- I mean, if
we don't have the full thing, then it's not --
(22:03:08/7+01:34:38) MR. LEWIS: I believe it's just the APA
(22:03:10/7+01:34:40) MR. SPECTOR: Ah, then your Honor we would ask to supplement
the record with the rest of the exhibits, because that's not -- an
amendment to the APA changes the APA.
(22:03:19/7+01:34:49) MR. LEVIN: I thought we were done, your Honor. The evidence
is closed, the A-- what's in is in, and I'm just standing to stretch.
(22:03:25/7+01:34:55) MR. SPECTOR: You heard testimony about -- you -- you heard
testimony about that the amendment, your Honor, and if the amendment
is not in, then the doc-- then the exhibit is not complete, and the
amendment affects the (inaudible) -- in that case, you don't have the
ability --
(22:03:39/7+01:35:09) THE COURT: Any problem with submitting --
(22:03:41/7+01:35:11) MR. JACOBS: We have no problem, your Honor --
(22:03:42/7+01:35:12) THE COURT: All right.
(22:03:43/7+01:35:13) MR. JACOBS: -- as the party to the APA. Amendments --
amendment one and amendment two should be in there. You'll look at
them yourself, you'll see they have no impact on our objection to the
transaction here.
(22:03:52/7+01:35:22) THE COURT: Thank you, Mr. Jacobs. All right, you may submit
the -- the amendments.
(22:03:56/7+01:35:26) MR. SPECTOR: Um, we'll do that. We don't have them with us
today.
(22:03:59/7+01:35:29) THE COURT: Understood.
(22:04:00/7+01:35:30) MR. SPECTOR: Okay. Uh, I'm done.
(22:04:00/7+01:35:30) THE COURT: All right.
(22:04:01/7+01:35:31) MR. SPECTOR: I really am.
(22:04:02/7+01:35:32) THE COURT: I'm reserving decision. I will act on this as
promptly as I possibly can. I think -- I know that -- I know that
there's a statutory time limit here, and, uh --
(22:04:12/7+01:35:42) MR. LEVIN: -- which has long since run, your Honor. We
didn't --
(22:04:15/7+01:35:45) THE COURT: I under-- yes.
(22:04:15/7+01:35:45) MR. LEVIN: We will be patient for your Honor's, uh, decision.
(22:04:17/7+01:35:47) THE COURT: But with -- certainly within a week. That I can
tell you for certain.
(22:04:21/7+01:35:51) MR. SPECTOR: Uh, your Honor, if you wish to call us about any
ideas that come to you with regard to the U.S. Trustee's suggestions.
Uh, I -- I welcome -- you -- I -- you can reach me this week any time
you wish, and if you want to have a conference call to discuss the
parameters, we're willing to discuss that at any time as well.
(22:04:38/7+01:36:08) THE COURT: Thank you, Mr. Spector. All right, counsel, thank
you for a long but entertaining presentation.
(22:04:44/7+01:36:14) VOICES: Thank you.
(22:04:45/7+01:36:15) THE COURT: And good evening to you all, and a safe trip ho--
(22:04:46/7+01:36:16) MR. LEWIS: And to your staff, your Honor. We appreciate your
staff sticking around so long.
(22:04:49/7+01:36:19) THE COURT: Of course. Thank you, Jennifer.
(22:04:50/7+01:36:20) MR. LEVIN: And the marshalls.
(22:04:51/7+01:36:21) VOICE (U.S. MARSHALL?): You're allowed to buy them a drink,
if you would.
(22:04:53/7+01:36:23) THE COURT: I know. A safe trip home, everyone. Good night.
(22:04:59/7+01:36:29) *** RECESS ***
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