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Novell Files Objection to SCO's Proposed Sale of Assets to UnXis. Duh. - Updated 3 Xs: text and HP reserves rights |
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Monday, February 07 2011 @ 04:12 PM EST
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Novell has, as expected, filed an objection to SCO's proposed sale of
assets to UnXis. It's terse in mood, but unless the judge is asleep, it should do the job. The first basis for the objection is that SCO doesn't have the "necessary consents" from Novell "for the assumption and assignment of agreements with Novell". As Novell tells the court, "Original APA Section 9.5(c) expressly
prohibits its assignment by SCO without Novell’s consent." And Novell won't consent this time either, just like last time. Next, even if SCO could force it past the judge without Novell's consent, Novell says there's another problem: SCO would have to make a cure payment that it can't afford. The purchase price from UnXis is insufficient for that, even added to what SCO has in hand. And finally, there's inadequate "assurance of future performance by unXis as the proposed assignee," Novell delicately mentions. Like they have no record of doing this kind of business or any other kind of business?
Details on the money situation:
10. Novell has also obtained an award in the District Court Action against SCO of
$3,506,526 (including pre- and post-judgment interest) for the Debtors’ breaches of the Original AP A, plus costs of $187,817.95 and accruing interest. Of that sum, $625,486.90 plus accrued interest thereon was paid last Spring as funds held in trust for Novell (see Agreed Order Approving Stipulation [etc.] (Dkt. No. 1126), but the balance of about over $3 million (plus accruing interest and perhaps additional costs due to the Debtors’ further appeal) remains unpaid....
In addition to getting Novell’s consent, to assume and assign the Original APA itself the Trustee will have to pay a cure amount of over $3 million pursuant to Novell’s judgment and awarded costs pursuant to Code section 365(b)(1).6 It does not appear that the estates have that much unencumbered cash in them, or that much cash of any kind for that matter, even with the
addition of the purchase price of $600,000.7 This is another reason why Novell contends that the Court must disapprove the unXis APA. And even if there were enough cash to pay this cure amount, it is questionable whether paying $3 million to get $600,000 (plus some speculative warrants) is an acceptable exercise of the Trustee’s business judgment.
_____
6 Novell believes these costs are also expenses of administration under Code section 503. See, e.g., Irmas Family Trust v. Madden (In re Madden), 185 B.R. 815 (BAP 9th Cir. 1995).
7 The Balance Sheet in the October 2011 Monthly Operating Report (“MOR”) of SCOO (the main vessel of assets for the Debtors) shows $707,489 in unrestricted cash, $186,987 in restricted cash and $679,145 in net receivables. It also shows a owners’ equity of a negative $7.875 million, a figure that would be even worse were about $1.2 million in receivables from insolvent SCO and an inexplicable $2 million in goodwill subtracted from the asset side. (Dkt. No. 1214.)
So SCO would seem to be trying to avoid its financial obligations. You think?
Further, Novell argues, with cases, SCO can't just pick what parts of a contract it wishes to sell and which it wants to keep:
11. Novell’s objections to the unXis APA also require a brief summary of applicable principles of law regarding the assumption and assignment of executory agreements. The Trustee must take each contract as he finds it, with all of its burdens along with its benefits. He thus may only assume a contract in whole; he cannot pick and choose which provisions or benefits or burdens he wishes to assume and assign and which he wishes to shed. In re Fleming Cos., 499 F.3d 300, 308 (3d Cir. 2007); Cinicola v. Scharffenberger, 248 F.3d 110, 11-20 (3rd Cir. 2001). The assumption and assignment of a contract is “‘intended to change only who performs and obligation, not the obligation to be performed itself.’” Id. (citation omitted) (emphasis added).
12. By the same token, the Trustee must assume or assign all of a series of integrated and related contracts even if they appear in separate documents.
Here's the docket entry:
1225 -
Filed & Entered: 02/07/2011
Objection
Docket Text: Objection of Novell, Inc. to Sale (related document(s)[1212]) Filed by Novell, Inc. (Attachments: # (1) Exhibit # (2) Exhibit # (3) Exhibit # (4) Exhibit) (Greecher, Sean)
The first exhibit is Hon. Ted Stewart's Findings of Fact and Conclusions of Law after the second trial in Utah.
The next is Stewart's Order denying SCO's Renewed Motion for Judgment as a Matter of Law or, in the Alternative, for a New Trial.
The third is the Final Judgment.
And the last is the Taxation of Costs.
Here's the text of the objection's introductory summary:
Novell, Inc. (“Novell”), objects to the proposed sale by chapter 11 trustee
Edward M. Cahn (the “Trustee”) of certain of the assets of debtors The SCO
Group, Inc. (“SCO”) and SCO Operations, Inc. (“SCOO” and, together with SCO, the
“Debtors”) pursuant to the Asset Purchase Agreement (dated January 19, 2011)
(the “unXis APA”) between the Debtors and unXis, Inc. (“unXis”).1
The unXis APA is yet the latest installment in a series of attempts by the
Debtors to sell assets without necessary consents from Novell for the assumption
and assignment of agreements with Novell. As before, Novell will not consent.
Moreover, even if they could sell the assets
without Novell’s consent, the Debtors will have to make a cure payment that is
beyond their means, even with the addition of the purchase price of $600,000.
Finally, the Debtors have failed to provide adequate assurance of future
performance by unXis as the proposed assignee.
Though the current transaction differs slightly from those in the past, Novell’s fundamental objections are the same as before, as elucidated by Novell in, e.g., its Objection of Novell, Inc., to Assumption and Assignment and Cure Amounts (Dkt. no. 1141) (the “Recent Objection”) and Novell’s Response to Debtors’ Notice of Cure Amounts (Dkt. no. 858) (the “Earlier Objection”). The unXis APA suffers from the very same infirmities as those earlier transactions. Moreover, the economics of each deal the Debtors have put before this Court in the three-plus years since they filed these cases have grown inexorably worse, as have their finances, which are now beyond desperate.
As Novell will demonstrate, this deal makes no economic sense given its minimal proceeds, as contrasted with the Debtors’ cost to cure defaults under the Novell agreements it must assume and assign if it is to close the unXis AP A.
It should be clear by now, therefore, that the estates cannot engage in any material transaction without Novell’s consent, and they should not spend any more time or money on pursuing transactions without getting that consent.
Update 2: HP has now filed a reservation of rights:
02/07/2011 - 1226 - Reservation of Rights Filed by HEWLETT-PACKARD COMPANY. (Attachments: # 1 Exhibits A & B # 2 Certificate of Service) (Songonuga, Natasha) (Entered: 02/07/2011)
There's a stipulation attached, basically saying HP and SCO can't find all the old contracts, but HP wants to help SCO sell, so it agrees to the contracts they can find being assumed and tranferred, but no matter what SCO does or does not do or who ends up owning the contracts, neither SCO nor any new owner can sue HP for IP infringement or block them from using UNIX as per the prior contracts. Any owner has to acknowledge the stipulation HP and SCO entered in 2003, the terms of which they say will remain confidential.
Update 3: HP has now filed a corrected version, correcting the date on page 1 that references its earlier Reservation of Rights, from November 23, 2011 to November 23, 2010:
02/08/2011 - 1227 - Reservation of Rights (Corrected) of Hewlett-Packard Company Regarding Debtors' Notice of Cure Amounts in Connection with the Assumption and Assingment of Executory Contracts and Unexpired Leases Filed by HEWLETT-PACKARD COMPANY. (Attachments: # 1 Exhibits A & B) (Songonuga, Natasha) (Entered: 02/08/2011)
They also corrected 'there assignment' to 'their assignment'
on page 2. But HP still called the Ch. 11 Trustee 'the Edward N. Cahn'. Indeed, he is sui generis to me, too.
Update: Here's the complete Novell Objection, as text:
*******************
UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re:
The SCO Group, Inc., et al.,
Debtors.
_________________
Chapter 11
Case No. 07-11337 (KG)
(Jointly Administered)
Objection Deadline: February 7, 2011 at 4:00 p.m. (prevailing Eastern time)
Hearing: February 16, 2011 at 4:00 p.m. (prevailing Eastern time)
OBJECTION OF NOVELL, INC. TO SALE
Novell, Inc. ("Novell"), objects to the proposed sale by chapter 11 trustee Edward M.
Cahn (the "Trustee") of certain of the assets of debtors The SCO Group, Inc. ("SCO") and SCO
Operations, Inc. ("SCOO" and, together with SCO, the "Debtors") pursuant to the Asset
Purchase Agreement (dated January 19, 2011) (the "unXis APA") between the Debtors and
unXis, Inc. ("unXis").1
The unXis APA is yet the latest installment in a series of attempts by the Debtors to sell
assets without necessary consents from Novell for the assumption and assignment of agreements
with Novell. As before, Novell will not consent. Moreover, even if they could sell the assets
without Novell's consent, the Debtors will have to make a cure payment that is beyond their
means, even with the addition of the purchase price of $600,000. Finally, the Debtors have
failed to provide adequate assurance of future performance by unXis as the proposed assignee.
Though the current transaction differs slightly from those in the past, Novell's
fundamental objections are the same as before, as elucidated by Novell in, e.g., its Objection of
Novell, Inc., to Assumption and Assignment and Cure Amounts (Dkt. no. 1141) (the "Recent
Objection") and Novell's Response to Debtors' Notice of Cure Amounts (Dkt. no. 858) (the
"Earlier Objection"). The unXis APA suffers from the very same infirmities as those earlier
transactions. Moreover, the economics of each deal the Debtors have put before this Court in the
three-plus years since they filed these cases have grown inexorably worse, as have their finances,
which are now beyond desperate. As Novell will demonstrate, this deal makes no economic
sense given its minimal proceeds, as contrasted with the Debtors' cost to cure defaults under the
Novell agreements it must assume and assign if it is to close the unXis APA.
It should be clear by now, therefore, that the estates cannot engage in any material
transaction without Novell's consent, and they should not spend any more time or money on
pursuing transactions without getting that consent.
I. BACKGROUND
1. The Court has been feted with the background of this situation numerous times. Still,
it will be useful for Novell to reiterate certain information essential to this objection.
A. The Essence of the Original APA and the unXis APA
2. In 1995, Novell sold certain assets to the Debtors' predecessor, Santa Cruz, pursuant
to an Asset Purchase Agreement (the "Original APA"). Recital A of the Original APA states
that:
Seller is engaged in the business of developing a line of software
products currently known as Unix and UnixWare, the sale of
primary binary and source code licenses to various versions of
Unix and UnixWare, the support of such products and the sale of
other products which are directly related to Unix and UnixWare
(collectively, the "Business").
(Findings of Fact and Conclusions of Law (Case No. 2:04-CV-139 TS (the "District Court
Action"), United States District Court, District of Utah (the "District Court") (the "F&C")
6 ¶ 14.)2
3. In 2004, litigation broke out between Novell and the Debtors, which had since bought
the Novell assets from Santa Cruz (from now on, Novell will refer only to the Debtors in
2
connection with the Original APA as though they were the original counterparty). Among the
central issues was whether Novell transferred its underlying UNIX software copyrights in the
Original APA. The Debtors claimed that it had, and Novell asserted that it had not, but that it
had instead merely licensed the copyrights to the Debtors in order to permit them to develop,
modify, and distribute UnixWare. (See F&C 1-2.) One of the arguments the Debtors made in
support of their position was that they had to own the copyrights to conduct their business. (See,
e.g., F&C 16 ¶ 36, 27 ¶¶ 62-63.)-Ultimately, both the jury and the District Court in the ligation
sided with Novell, rejecting the contention that the Debtors had acquired the Unix copyrights.
(F&C 32-33 ¶¶79-80.; Memorandum Decision [etc.] (District Court Action Dkt. No. 877 (the
"Memorandum") 6-7.)3 Instead, the license to the copyrights that Novell granted in the Original
APA was held to be sufficient.
4. The Debtors now seek to convey virtually all of the Original APA assets to unXis.
As the unXis APA's recitals announce:
A. Seller provides UNIX® system software products and related
services (together with the business and operations of Seller
relating thereto and the goodwill appurtenant to such business and
assets, and the furnishing of services in connection therewith, the
"Business").
B. Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, substantially all of the Acquired Assets (defined
below) of Seller related to the Business, and Buyer desires to
assume certain Obligations (defined below) of Seller related to the
Business, all on the terms and subject to the conditions set forth in
this Agreement.
(unXis APA 1.) It follows by the Debtors' own admission that to operate the Business as defined
the unXis APA, unXis (or any other buyer) needs access to the copyrighted material that the
Debtors licensed from Novell. In other words, any buyer of the Business must have the Debtors
assume and assign their Novell copyright licenses.
3
5. As Novell explains below, what these facts mean is that the Debtors cannot close the
unXis APA unless it assumes and assigns the Original APA and related agreements. But they
cannot do that without Novell's consent, which Novell does not give, without curing at least $3
million in defaulted debt to Novell, and without providing adequate assurance of future
performance by unXis, which the Trustee has not done.
B. The Structure and Essential Terms of the Original APA
6. In the Original APA, Novell reserved certain important rights to itself. For example,
as noted above, it retained all copyrights. There are other provisions imposing continuing
obligations of the parties to each other that arise in or from the Original APA. As noted above,
Novell licensed the copyrights to the Debtors. Other examples include the provisions of Original
APA Section 4.18 (obligation of SCO to develop the "Business" Novell sold to it). Under
Amendment 2 to the Original APA, as confirmed by the Tenth Circuit's decision in the appeal of
the District Court Action, SCO also has ongoing obligations to Novell relating to its dealings
with SVRX Licenses. (See generally The SCO Group, Inc. v. Novell, Inc., 578 F.3d 1201, 1208,
1227 (10th Cir. 2010); F&C.)
7. In addition, the Original APA provided for and gave rise to certain other agreements
between Novell and SCO (together with the Original APA, the "Original APA Agreements").
Pursuant to Original APA Section 1.6, there is a Technology License Agreement (the "TLA")
between the parties in which the Debtors licensed certain rights to Novell. (See, e.g., F&C 13-14 ¶ 29.)
8. In addition, although the transferred assets included legal title to (but not Novell's
equitable interest in) SVRX software licenses (the "SVRX Licenses"), which generated a royalty
stream for Novell (the "SVRX Royalties"), Novell similarly reserved and augmented important
rights for itself regarding the SVRX Licenses and SVRX Royalties. Specifically, for purposes of
this proceeding:
- SCO has only "legal title and not an equitable interest in
the SVRX Licenses [R]oyalties within the meaning of
4
Section 541(d) of the Bankruptcy Code." (Original
APA § 1.2(b).)
- "All right, title and interest to the SVRx [sic] Royalties,
less . . .[a] 5% fee for administering the collection thereof
pursuant to Section 4.16 hereof" are excluded from the
transfer. (Original APA, Schedule 1.1(b)(VIII).)
- "Within 45 days of the end of each fiscal quarter of [SCO],
[SCO] shall deliver to [Novell] or [Novell's] assignee
100% of any SVRX Royalties collected in the immediately preceding quarter.” (Original APA § 4.16(a).)
- SCO is required “to [re]assign [to Novell at Novell’ s sole pleasure] any rights to . . . any SVRX License to the extent so directed in any manner or respect by” Novell. (Original APA § 4.16(b).)
-
SCO cannot “amend, modify or waive any right under or assign any SVRX License without the prior written consent of [Novell].” (Original APA § 4.16(b).)
- SCO must provide Novell detailed monthly reports and submit to audits. (Original APA §§ 1.2(b).)
- SCO must collect and remit all royalties per Section 4.16. (Original APA § 1.2.)
(Emphasis added.)
9. Finally, and of the utmost importance, Original APA Section 9.5(c) expressly
prohibits its assignment by SCO without Novell’s consent.
10. Novell has also obtained an award in the District Court Action against SCO of
$3,506,526 (including pre- and post-judgment interest) for the Debtors’ breaches of the Original AP A, plus costs of $187,817.95 and accruing interest.
4 Of that sum, $625,486.90 plus accrued interest thereon was paid last Spring as funds held in trust for Novell (see Agreed Order Approving Stipulation [etc.] (Dkt. No. 1126), but the balance of about over $3 million (plus accruing interest and perhaps additional costs due to the Debtors’ further appeal) remains unpaid.
5
II. APPLICABLE LAW GENERALLY
11. Novell's objections to the unXis APA also require a brief summary of applicable
principles of law regarding the assumption and assignment of executory agreements. The
Trustee must take each contract as he finds it, with all of its burdens along with its benefits. He
thus may only assume a contract in whole; he cannot pick and choose which provisions or
benefits or burdens he wishes to assume and assign and which he wishes to shed. In re Fleming
Cos., 499 F.3d 300, 308 (3d Cir. 2007); Cinicola v. Scharffenberger, 248 F.3d 110, 11-20 (3rd
Cir. 2001). The assumption and assignment of a contract is "'intended to change only who
performs and obligation, not the obligation to be performed itself.'" Id. (citation omitted)
(emphasis added).
12. By the same token, the Trustee must assume or assign all of a series of integrated and
related contracts even if they appear in separate documents. In re Exide Techs., 340 B.R. 222,
229 (Bankr. D. Del. 2006), affirmed 607 F.3d 957 (3d Cir. 2010). In Exide Techs., the Court
found that the following agreements were part of an integrated transaction and that the debtor
had to assume or reject them as a batch rather than individually:
In 1991, [debtor] Exide entered into a series of agreements
with EnerSys for the sale of substantially all of Exide's industrial
battery division. The parties executed over twenty-three
agreements as part of the transaction. The following four
agreements are at the heart of this dispute: (1) the Trademark and
Trade Name License Agreement, dated June 10, 1991 ("Trademark
License"), (2) the Asset Purchase Agreement, dated June 10, 1991,
(3) the Administrative Services Agreement, dated June 10, 1991,
and (4) a letter agreement, dated December 27, 1994 (collectively,
all four are referred to herein as the "Agreement") . . . .
As part of the transaction, EnerSys paid in excess of $ 135
million at closing. In exchange for such payment, EnerSys
received various assets, including manufacturing plants, equipment
and certain intellectual property rights. Certain Exide employees in
the industrial battery division became EnerSys employees.
Ibid, 340 B.R. at 227-28.
6
13. In addition, the right to assume or reject an executory contract is subject to certain
limitations. One, found in section 365(c) of the Code, sets forth exceptions to the general right to
assume executory contracts in the first instance. It provides, in relevant part:
The trustee may not assume or assign any executory contract or unexpired lease
of the debtor whether or not such contract or lease prohibits or restricts
assignment of rights or delegation of duties, if --
(1)(A) applicable law excuses a party, other than the debtor, to such contract or
lease from accepting performance from or rendering performance to an entity
other than the debtor or the debtor in possession, whether or not such contract or
lease prohibits or restricts assignment of rights or delegation of duties; and
(B) such party does not consent to such assumption or assignment;
11 U.S.C. § 365(c).
14. Accordingly, under section 365(c) of the Code, the Trustee may not assume or assign
an executory contract without consent if "applicable law" provides that the non-debtor does not
consent. In the Third Circuit, based on the so-called "hypothetical" test governing the interplay
between Code sections 365(c) and 365(f), see Cinicola, 248 F.3d at 126 n.19; In re West Elecs.,
Inc., 852 F.3d 79, 83 (3d Cir. 1988), the Trustee may not assume, let alone assign, licenses of
copyrights from the copyright holder without the former's consent. Cinicola, 248 F.3d at 121;
RCI Tech. Corp. v. Sunterra Corp. (In re Sunterra Corp.), 361 F.3d 257, 265-70 (4th Cir. 2004).
III. THE DEBTORS MUST ASSUME AND ASSIGN ALL THE ORIGINAL
APA AGREEMENTS
15. As explained above, unXis will need the copyright licenses to be able to operate the
Business that it is buying. But the Debtors will have to assume and assign to unXis more than
just the licenses.5 Based upon Exide Technologies, it is clear that the copyright licenses are part
of an integrated transaction that includes all of the Original APA Agreements. Consequently, the
Trustee must assume all of the Original APA Agreements (not just the licenses or even just the
Original APA) or can assume and assign none of them. Exide Technologies.; Fleming Cos.
7
Here the Trustee does not appear to be trying to assume all of the Original APA Agreements,
starting, but not ending, with the Original APA itself. For that reason alone, Trustee cannot
convey the Business-critical copyright licenses to unXis. Moreover, as Novell will explain
below, there are additional reasons why the Trustee cannot assume any of the Original APA
Agreements (as he must do if he is to assume any).
IV. THE NOVELL AGREEMENTS CANNOT BE ASSUMED AND
ASSIGNED WITHOUT NOVELL'S CONSENT
16. The copyright licenses in (or provided for by) the Original APA are part of the
integrated transaction of which the Original APA is the linchpin. The Original APA itself both
contains copyright licenses and is part of an integrated agreement (comprising the Original APA
Agreements) that encompasses other, albeit separately-documented, copyright licenses. (The
SVRX Licenses are also copyright licenses, although it appears that the Trustee does not intend
to assume and assign them.) Consequently, the Trustee cannot assume any of these copyright
licenses (or copyright license-embedding agreements such as the Original APA) without
Novell's consent. Sunterra Corp. Novell declines to consent.
17. This means that the Trustee cannot assume the Original APA or any copyright license
in it or that is part of the integrated agreement comprising the Original APA Agreements.
Hence, the Trustee also cannot assume any of those agreements since under Exide Technologies
he must assume them all to assume any of them.
V. THE DEBTORS MUST PAY THE FULL AMOUNT OF THE NOVELL
JUDGMENT AND COSTS IN ORDER TO ASSUME THE ORIGINAL
APA
18. In addition to getting Novell's consent, to assume and assign the Original APA itself
the Trustee will have to pay a cure amount of over $3 million pursuant to Novell's judgment and
awarded costs pursuant to Code section 365(b)(1).6 It does not appear that the estates have that
much unencumbered cash in them, or that much cash of any kind for that matter, even with the
8
addition of the purchase price of $600,000.7 This is another reason why Novell contends that the
Court must disapprove the unXis APA. And even if there were enough cash to pay this cure
amount, it is questionable whether paying $3 million to get $600,000 (plus some speculative
warrants) is an acceptable exercise of the Trustee's business judgment.
VI. THE TRUSTEE HAS NOT PROVIDED ADEQUATE ASSURANCE OF
FUTURE PERFORMANCE
19. The Trustee has presented no evidence regarding what unXis is, what its resources
are, or who its personnel are. Hence, he has thus far supplied no evidence of unXis's ability to
provide Novell with the adequate assurance of future performance of the terms and conditions of
the Novell Agreements (and, indeed, of the larger family of Original APA Agreements) to which
Novell is entitled under Code section 365(f)(2)(B). See generally Cinicola, 248 F.3d at 120 n.10
(discussing adequate assurance for both assumption and assignment). The Debtors have the
burden of proof on this issue. Ill Inv. Tr. V. Allied Waste Inds., Inc. (In re Resource Tech.
Corp.), 624 F.3d 376, 384 (7th Cir. 2010); HEA Mgt. Group, Inc. v. Health Enters. Of Michigan,
Inc. (In re Texas Health Enters., Inc.), 246 B.R. 832, 835 (Bankr. N.D. Tex. 2000).
20. Indeed, what evidence there is offers little comfort to Novell. We know that this
Court questioned unXis's good faith in the failed proposed transaction that the Earlier Objection
addressed. (See Memorandum Opinion (Dkt. No. 890) 9 ("Further, the Court is unable to find
based on this record, the Debtors' history of unsuccessful sale efforts and this sale's peculiar and
questionable timing that Unxis has acted in good faith.").) And we also know that an entity
associated with unXis's signatory on the unXis APA., Stephen Norris, was involved in one of the
Debtors' earlier abortive attempts to push through an ill-advised sale. (Ibid 6.) Finally, we know
that Mr. Norris of unXis was party to a somewhat unusual loan transaction involving Darl
McBride while Mr. McBride was still managing the Debtors and Mr. Norris was still in the hunt
9
for a deal with the Debtors. (See Transcript of July 27, 2009 proceedings (Dkt. No. 892) 259:1-23.)
VII. CONCLUSION
The simple fact is that the Debtors, Trustee and unXis require Novell's consent to the
unXis APA. Based on the Earlier Objection and the Recent Objection, this is no surprise.
Rather, this newest foray by the Trustee and Debtors into a sale of the Debtors' assets is nothing
less than a stubborn refusal to face facts that will go on until the estates have completely depleted
the little they have left (and perhaps even after that in the misguided hope of pulling a rabbit out
of the hat).
And as Novell has explained, there are other obstacles to the transaction even were its
consent not needed. For example, as noted above, the cure cost alone to assume the Original
APA outstrips the estate's assets and is, in any case, a bad economic deal in return for $600,000
and warrants of speculative value. Nor will the economics improve. The purchase prices the
Debtors have negotiated have gone down steadily over the years since they filed these cases, and
their assets have declined just as steadily. This will only get worse.
In sum, there is no reason for the Trustee to pursue any further any transaction
necessarily involving the Original APA, as does the unXis APA, without first getting Novell's
consent to it. The parties should not have to come back to Court on yet another contested sale.
10
Dated: February 7, 2011
Wilmington, Delaware
YOUNG CONAWAY STARGATT & TAYLOR, LLP
/s/ Sean T. Greecher
James L. Patton (No. 2202)
Michael R. Nestor (No. 3526)
Sean T. Greecher (No. 4484)
[address, phone]
-- and --
MORRISON & FOERSTER LLP Adam A. Lewis [address, phone]
-- and --
MORRISON & FOERSTER LLP Larren M. Nashelsky [address, phone]
Counsel for Novell, Inc.
___________________
1
The unXis APA is attached as Exhibit A to the Notice of Filing of (I) Executed Asset Purchase Agreement and (II)
Proposed Sale Order in Connection Therewith (Dkt. No. 1212).
2
A copy of the F&C is attached hereto as Exhibit A.
3
A true and correct copy of the Memorandum is attached hereto as Exhibit B and incorporated herein by reference.
4 See Final Judgment (District Court Action Dkt. No. 878), attached hereto as Exhibit C and incorporated herein by reference; Taxation of Costs (District Court Action Dkt. No. 894), attached hereto as Exhibit D and incorporated herein by reference. See also The SCO Group, Inc. v. Novell, Inc., 578 F.3d at 1227; Proof of Claim No. 146, as amended March 27, 2009.
5 Without those licenses, unXis will be risking an infringement suit by Novell.
6
Novell believes these costs are also expenses of administration under Code section 503. See, e.g., Irmas Family
Trust v. Madden (In re Madden), 185 B.R. 815 (BAP 9th Cir. 1995).
7
The Balance Sheet in the October 2011 Monthly Operating Report ("MOR") of SCOO (the main vessel of assets
for the Debtors) shows $707,489 in unrestricted cash, $186,987 in restricted cash and $679,145 in net receivables.
It also shows a owners' equity of a negative $7.875 million, a figure that would be even worse were about $1.2
million in receivables from insolvent SCO and an inexplicable $2 million in goodwill subtracted from the asset side.
(Dkt. No. 1214.)
11
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Authored by: Erwan on Monday, February 07 2011 @ 04:15 PM EST |
If any...
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Erwan[ Reply to This | # ]
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- Novell Files Objection to SCO's Proposed Sale of Assets to UnXis. Duh. - Authored by: Anonymous on Monday, February 07 2011 @ 04:16 PM EST
- SCO Files Objection to SCO - Authored by: Erwan on Monday, February 07 2011 @ 04:17 PM EST
- COnclusions -> Conclusions - Authored by: DaveJakeman on Monday, February 07 2011 @ 04:59 PM EST
- Footnote 7 - Authored by: Anonymous on Monday, February 07 2011 @ 06:43 PM EST
- Footnote 7 - Authored by: wvhillbilly on Monday, February 07 2011 @ 11:42 PM EST
- any of the Original --> all of the Original - Authored by: Anonymous on Tuesday, February 08 2011 @ 02:15 AM EST
- Further, Novell, argues, -->Further, Novell argues, - Authored by: NigelWhitley on Tuesday, February 08 2011 @ 05:08 AM EST
- HP's PDF says things filed NOV 2011[sic] - Authored by: Ehud on Tuesday, February 08 2011 @ 06:54 AM EST
- HP's PDF says there[sic] last filing - Authored by: Ehud on Tuesday, February 08 2011 @ 06:58 AM EST
- tranferred --> transferred - Authored by: dh2 on Tuesday, February 08 2011 @ 11:34 AM EST
- performs and obligation -> performs an obligation - Authored by: Anonymous on Thursday, February 10 2011 @ 12:47 AM EST
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Authored by: Anonymous on Monday, February 07 2011 @ 04:16 PM EST |
SCO Files Objection to SCO's Proposed Sale of Assets to
UnXis
What? I think you mean Novell files objection.
[ Reply to This | # ]
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Authored by: Anonymous on Monday, February 07 2011 @ 04:18 PM EST |
I suppose that it is NOVELL who files?
JCA[ Reply to This | # ]
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Authored by: Anonymous on Monday, February 07 2011 @ 04:18 PM EST |
While I wouldn't put it beyond SCO to object to their own motion, it's quite
clear that Novell is doing the objecting here...[ Reply to This | # ]
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Authored by: Anonymous on Monday, February 07 2011 @ 04:20 PM EST |
I am surprised there is no objection from the Yarro loan group. This sale is
going to see the departure of the asset collateral for the loan and will leave
them with less than $0.10 on the dollar for their investment.
[ Reply to This | # ]
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Authored by: Erwan on Monday, February 07 2011 @ 04:21 PM EST |
Please quote the articles's title.
---
Erwan[ Reply to This | # ]
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Authored by: Erwan on Monday, February 07 2011 @ 04:23 PM EST |
Thank you for helping to complete the Comes collection.
---
Erwan[ Reply to This | # ]
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Authored by: Erwan on Monday, February 07 2011 @ 04:24 PM EST |
As usual.
---
Erwan[ Reply to This | # ]
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- Market summary for NOVL 2-7-2011 - Authored by: Anonymous on Monday, February 07 2011 @ 04:37 PM EST
- Firefox/Roadmap Andriod but no Linux - Authored by: SilverWave on Monday, February 07 2011 @ 07:46 PM EST
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- Another reason I prefer AMD chips - Authored by: MDT on Tuesday, February 08 2011 @ 09:55 AM EST
- Verizon pulls a sneaky with iPhone rollout - Authored by: hardmath on Tuesday, February 08 2011 @ 10:42 AM EST
- ACS:Law/Media CAT judgement - Authored by: Anonymous on Tuesday, February 08 2011 @ 12:02 PM EST
- What is happening to unxis.com? - Authored by: tiger99 on Tuesday, February 08 2011 @ 12:52 PM EST
- Verizon iPhone 4 nixes antennagate, improves GPS - Authored by: tiger99 on Tuesday, February 08 2011 @ 01:07 PM EST
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Authored by: Anonymous on Monday, February 07 2011 @ 04:24 PM EST |
i love that there are three posters in the main thread
correcting the article title, but failing to notice that there
is a corrections thread [first post] and a correction post on
the very topic preceding theirs.
sum.zero[ Reply to This | # ]
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- was me - Authored by: sumzero on Monday, February 07 2011 @ 04:26 PM EST
- oh irony - Authored by: hans on Monday, February 07 2011 @ 04:30 PM EST
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Authored by: Anonymous on Monday, February 07 2011 @ 04:48 PM EST |
And if the judge approves despite Novell's well-founded objection,
and when SCOG fails to pay appropriate cure amounts, what is
Novell going to do? Sue SCOG? Sue the judge? Appeal?
And putting on my evil thinking cap .... why shouldn't the judge
approve. After all, this way Novell at least gets something,
(ha ha ... that'll be the day) but with an immediate conversion
to chap 7, Novell might get much less, if anything at all.
Barring a miracle that SCOG certainly does NOT deserve, there
is probably no way SCOG could do anything that Novell would
not object to, at least in part, if not in whole.
My evil thinking cap would not blink at all if, Judge approves,
Novell gets squat, the lawsuit(s) continue.[ Reply to This | # ]
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Authored by: rsteinmetz70112 on Monday, February 07 2011 @ 04:53 PM EST |
Seems the only option is Chapter 7 and if there is insufficient money to cure,
what happens then?
Do the agreements simply get disolved?
Novell could go back to collecting their own royalties, but who gets the
ownership of Unixware and OpenServer?
Does Novell get them in compensation for their judgment?
What about everyone else?
---
Rsteinmetz - IANAL therefore my opinions are illegal.
"I could be wrong now, but I don't think so."
Randy Newman - The Title Theme from Monk
[ Reply to This | # ]
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Authored by: Anonymous on Monday, February 07 2011 @ 05:05 PM EST |
It seems like somebody in Novell decided to fight like a
Spartan and talk in Laconic phrases.[ Reply to This | # ]
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Authored by: DaveJakeman on Monday, February 07 2011 @ 05:08 PM EST |
It's like shooting fish in a barrel. Fish that are floating belly-up in poison
water.[ Reply to This | # ]
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Authored by: cpeterson on Monday, February 07 2011 @ 05:08 PM EST |
The Court has been feted with the background of this situation
numerous times. Still, it will be useful for Novell to reiterate certain
information essential to this objection.
OK, whoever you are
out there - I fully understand how good it feels to be able to put just
the right word in just the right place. But I want to know - how
difficult was it to write feted in that spot, when I suspect you really,
really wanted to use fetid? [ Reply to This | # ]
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Authored by: tiger99 on Monday, February 07 2011 @ 05:25 PM EST |
Moreover, the economics of each deal the Debtors have put before
this Court in the
three-plus years since they filed these cases have grown
inexorably worse, as have their finances,
which are now beyond
desperate. Should be clear, even to Gross, that the time limit is
long gone, and either he sends them into Chapter 7 or is taken out back
and......[ Reply to This | # ]
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Authored by: Anonymous on Monday, February 07 2011 @ 05:54 PM EST |
I like:
And even if there were enough cash to pay this
cure amount,
it is questionable whether paying $3 million to
get $600,000 plus some
speculative warrants) is an acceptable
exercise of the Trustee’s business
judgment. [ Reply to This | # ]
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- Getting blunter - Authored by: Anonymous on Tuesday, February 08 2011 @ 07:43 AM EST
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Authored by: Anonymous on Monday, February 07 2011 @ 06:42 PM EST |
SCO is going to continue to exist as a Company on PAPER only as their cash
slowly grinds to less than $0.00
It is actually fitting that the company which threatened the world with it's
arrogance will die with a whimper -
And No One Will Notice[ Reply to This | # ]
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Authored by: Anonymous on Monday, February 07 2011 @ 06:58 PM EST |
I mean, SCO owes more than it is worth to Novell based on a judgement.
Why does the bankruptcy court not simply say SCO now belongs to
Novell, lock. stock and barrel? All assets put together still amount to less
than is owed, do they not?
What am I missing?
[ Reply to This | # ]
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Authored by: Anonymous on Monday, February 07 2011 @ 08:31 PM EST |
ROFL [ Reply to This | # ]
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Authored by: kh on Monday, February 07 2011 @ 11:35 PM EST |
Better to scorch Unix to nothing than leave another competitor.
SCO won't get out of this and MS will be able to focus all its attention on
Linux. [ Reply to This | # ]
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Authored by: Anonymous on Tuesday, February 08 2011 @ 01:28 AM EST |
to this very day [ Reply to This | # ]
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Authored by: Ian Al on Tuesday, February 08 2011 @ 05:53 AM EST |
and I still don't get it.
First, PJ is sure that this won't go to
Chapter 7 and that Cahn is winding down what ever is left if and when unXis get
the Unixware and OpenServer stuff.
Second, the Ralphie loan says,
(b) Pursuant to the Order, all Obligations will be secured and the
Collateral shall be encumbered by valid and perfected first-position liens and
security interests, subject only to the Requisite Priority.
It
goes on to say that in the event of any default (including Cahn stubbing his big
toe on the court steps and SCO's default on the interest payments on the loan)
Ralphie gets first dibs on any remaining cash and assets.
Finally,
Novell (I think) have confirmed that they have been paid the converted, traced
money that the court awarded. Novell maintain that the remainder of the award
has to be paid to cure the APA before the APA can be transferred to unXis. I had
assumed that this remainder just became pre-petition debt that would go the same
way as any other pre-petition debt owed to the creditors.
If Novell are
right about the cure amounts, then Unixware and OpenServer cannot be sold to
unXis. Also, there won't be $600k to pay Ralphie's loan interest and,
according to Novell's analysis of SCO's missing MORs, there is not much else
left in available dosh.
So, if this is the case (I believe Novell more
than I believe Cahn or SCO) SCO are either in default or imminently to be
so.
Novell complain that Lien and Priority. The
lender will be granted a super-priority lien in virtually all of SCO's assets.
It will also be granted a super-priority expense of administration claim (giving
it the right to first payment of cash if the lien otherwise proves inadequate
for repayment in full).
If Bonnie Fatal closes down the company,
without curing the Novell APA and without repaying the loan or interest, how
does Ralphie exercise his 'super priority lien' on remaining cash and assets?
Does he get the lot signed over to his loan group before the company that is SCO
gets closed down? I assume he automatically gets the cash (ahead of the lawyers.
Shame!) and the assets in lieu of the loan amount that cannot be
repaid.
Does anyone have experience of how this
works?--- Regards
Ian Al
SCOG: Yes, they hit the ground. The lawyers are now taking them to the centre of
the Earth. The 'centre of the Earth' is irony. [ Reply to This | # ]
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Authored by: soronlin on Tuesday, February 08 2011 @ 06:36 AM EST |
How on Earth do any of the SCO people or the trustee think they will get
anything out of the litigation?
SCO vs Novell already has a bill of $3,000,000 hanging over them. Without the
copyrights and with the waiver upheld there is no chance they will prevail in
SCO vs IBM.
Are they really that deluded that they believe that some appeal court is going
to reverse the whole thing and hand them that $1B in damages from IBM? Or is it
that it is costing them nothing to continue and there is still a 1% chance they
could make money?
These are intelligent businessmen who are astute enough to rise to the top in
their profession. They cannot be so stupid that they are clinging to the remains
of a ship that the rats have already left.
So what are they thinking? Why do they continue and even insist that they keep
control of the litigation above all else, even if it means throwing away any
other chance of turning a profit?[ Reply to This | # ]
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Authored by: rsteinmetz70112 on Tuesday, February 08 2011 @ 10:18 AM EST |
Is this a change in Novells's position? In earlier filings they specifically
mentioned that they didi not give consent to the assumptions of the APA. This
one seems softer. It says in part
It should be clear by now,
therefore, that the estates cannot engage in any material transaction without
Novell’s consent, and they should not spend any more time or money on pursuing
transactions without getting that consent.
That seems to leave
open the possibility that there is some condition under which Novell will give
its consent.
--- Rsteinmetz - IANAL therefore my opinions are
illegal.
"I could be wrong now, but I don't think so."
Randy Newman - The Title Theme from Monk
[ Reply to This | # ]
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Authored by: celtic_hackr on Tuesday, February 08 2011 @ 12:54 PM EST |
I love the conclusion!
Rather, this newest foray by the Trustee
and Debtors into a sale of the Debtors' assets is nothing less than a stubborn
refusal to face facts that will go on until the estates have completely depleted
the little they have left (and perhaps even after that in the misguided hope of
pulling a rabbit out of the hat). [ Reply to This | # ]
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Authored by: AntiFUD on Tuesday, February 08 2011 @ 02:43 PM EST |
PJ - can you check why , when I am duly logged in, I get an "Access
Denied" page with following message:
You do not have access to view this story. This could be because you aren't a
member of Groklaw. Please become a member of Groklaw to receive full membership
access!
I note that there are no comments yet, and that the article was posted at 1:22
PM.
Your assistance would be much appreciated. Ta.
---
IANAL - Free to Fight FUD - "to this very day"
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Authored by: benw on Wednesday, February 09 2011 @ 08:38 PM EST |
How curious. A document entitled "Notice of Settlement and Release
Agreement. Filed by The SCO Group, Inc." just showed up on the bankruptcy
docket. It is under seal, but the first page says it relates to docket items 936
and 979, "Motion to File Under Seal Exhibit A to the Trustees Motion to
Approve Settlement Agreement With AutoZone" and "Order Granting Motion
of
Chapter 11 Trustee to File Under Seal Exhibti A to the Trustees Motion,
Pursuant 11 U.S.C. Section 105(A) and Fed. R. Bankr. P. 9019, for Approval of
a Settlement Agreement with Autozone".
Is this a new development, or a glitch that caused something old to bubble up
to the top?
[ Reply to This | # ]
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