SCO Grp v. Novell Inc

Filing 866

NOTICE OF FILING OF OFFICIAL TRANSCRIPT for dates of March 23, 2010-Jury Trial before Judge Ted Stewart, re 567 Notice of Appeal,. Court Reporter/Transcriber Patti Walker, CSR, RPR, CP, Telephone number [phone]. NOTICE RE REDACTION OF TRANSCRIPTS: Within 7 business days of this filing, each party shall inform the Court, by filing a Notice of Intent to Redact, of the parties intent to redact personal data identifiers from the electronic transcript of the court proceeding. The policy and forms are located on the court's website at www.utd.uscourts.gov. Please read this policy carefully. If no Notice of Intent to Redact is filed within the allotted time, this transcript will be made electronically available on the date set forth below. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 5/10/2010. Redacted Transcript Deadline set for 5/20/2010. Release of Transcript Restriction set for 7/19/2010. (Attachments: # 1 Part Two, # 2 Part Three)(jmr) Modified by removing restricted text on 7/19/2010 (rks).

SCO Grp v. Novell Inc

Doc. 866

1991

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 vs.

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

THE SCO GROUP, INC., a Delaware corporation, Plaintiff,

) ) ) ) ) ) ) Case No. 2:04-CV-139TS

NOVELL, INC., a Delaware corporation, Defendant.

_________________________________) AND RELATED COUNTERCLAIMS. )

_________________________________)

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

REPORTED BY: Patti Walker, CSR, RPR, CP 350 South Main Street, #146, Salt Lake City, Utah 84101

Dockets.Justia.com

1992

1 2 3 4 5 6 7 8 9 10 11 12 13 For Defendant: 14 15 16 17 18 19 20 21 22 23 24 25 For Plaintiff:

APPEARANCES

Brent Hatch HATCH JAMES & DODGE 10 West Broadway, #400 Salt Lake City, Utah 84010 Stuart Singer BOIES SCHILLER & FLEXNER 401 East Las Olas Blvd., #1200 Fort Lauderdale, Florida 33301 Edward Normand BOIES SCHILLER & FLEXNER 33 Main Street Armonk, New York 10504

Sterling Brennan WORKMAN NYDEGGER 60 East South Temple, #1000 Salt Lake City, Utah 84111 Eric Acker Michael Jacobs MORRISON & FOERSTER 425 Market Street San Francisco, California

94105

1993

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Allison Amadia Witness James Tolonen INDEX Examination By Mr. Brennan Mr. Hatch (Direct) (Cross) PAGE 1999 2038 2090 2100 2103

Mr. Brennan (Redirect) Mr. Hatch Mr. Brennan (Recross) (Direct)

1994

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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

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

1995

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

SALT LAKE CITY, UTAH; TUESDAY, MARCH 23, 2010; 8:30 A.M. PROCEEDINGS THE COURT: Good morning.

Do we have anything before we bring the jury in? MR. JACOBS: A brief report, Your Honor. In the

wake of your ruling on Mr. Keller yesterday, that Mr. Keller would be allowed to testify, we took his deposition yesterday afternoon. Shortly after the deposition, SCO

reported to us that they do not plan to call Mr. Keller in their case in chief. their rebuttal case. MR. SINGER: Mr. Jacobs' report is accurate. With They reserve the right to call him in

respect to all the issues of privilege, we decided we weren't going to call him, at least in our case in chief. We have raised with the other side, Your Honor, now that the end is somewhat in sight, the issues of closing. We wanted to make sure our discussions are

consistent with what the Court's requirements are. First, we indicated that we intended, if it meets with the Court's approval, to split our closings as we did in the opening where Mr. Hatch and I would both address the jury as part of closing. THE COURT: MR. SINGER: for each side. That will be fine. Second, we're talking about the time

I think we -- well, an hour and 15 minutes.

1996

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

They suggested an hour and a half.

Either of those would be

okay with us if it meets with the Court's schedule. THE COURT: An hour and 15 minutes.

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

minutes, that would include your rebuttal time. MR. SINGER: THE COURT: MR. BRENNAN: Yes. Thank you, Your Honor.

Mr. Brennan. Thank you.

Just so we're all clear, it's our anticipation that the last witness and the last presentation of evidence would conclude by 1:30 on Thursday? THE COURT: MR. BRENNAN: Yes. Then the Court's intention would be

to instruct essentially first thing Friday morning, then go to the closings, as you've indicated, and be done by noon for them to take the case? THE COURT: Yes. Is that going to work? I mean,

is that going to be a great disadvantage to cut you to an hour and 15 minutes? MR. BRENNAN: We were hoping for an hour and a We

half, Your Honor, but we're mindful of the schedule.

thought we had worked out a mechanism that would permit an hour and a half. It might be that it would run to 12:30.

1997

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 this case.

THE COURT: MR. BRENNAN: THE COURT: for the Judge.

That is your mechanism? Yes, that's the mechanism. Let's keep our language simple here

Counsel, I am mindful of the complicated nature of I'm also mindful of the fact that the issues for And I, frankly, worry more

the jury are somewhat limited.

than anything about the jury's ability to benefit from too lengthy of closings. If you feel strongly that an hour and

a half is necessary for you, then I will give you both of you an hour and a half. But I will tell you that my

experience is that after a while, there are diminishing returns. But I'll ultimately leave that up to you. If you

think an hour and a half is necessary, I'll give it to you. MR. BRENNAN: I can tell you have listened to me What if we were to

long enough to give that direction.

report to the Court tomorrow whether we felt we needed the extra 15 minutes. THE COURT: if we need to. Really, we can decide Friday morning, Just understand that I

There is no hurry.

really do expect us to finish the testimony Thursday at 1:30 without question. And then the closer we can keep to noon

for the jury, the better off we all are. I might remind you that one of the jurors -- Ms. Malley reminded me of this this morning -- number ten,

1998

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

indicated she had a vacation that begins Saturday.

It was

actually going to begin Friday, but when I asked her if it can be delayed one day, she said yes. on a vacation Saturday and Sunday. She is still planning

She will be back Monday.

If they have to go beyond late Friday night, I'll have to tell her go ahead and take your vacation and the jury can come back next week, which is not a problem. that in mind, if you would please, counsel. MR. BRENNAN: THE COURT: MR. SINGER: MR. BRENNAN: THE COURT: MR. BRENNAN: Tolonen. Honor. THE COURT: All right. Thank you. We will. Thank you, Your Honor. But just keep

Is there anything else? Not from the plaintiffs. No, Your Honor. What will we be doing first thing? Our first witness will be James R.

And that will be followed by Allison Amadia, Your

Ms. Malley, if you would, please. Counsel, Ms. Malley just informed me that apparently there was an accident on the freeway south, and a juror may be on the other side. So that you don't have to

sit here and be nervous, I will excuse myself and come back as soon as we have all the jurors. (Recess) THE COURT: Ms. Malley, if would you please bring

1999

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

the jury in. (Jury present) THE COURT: Mr. Brennan. MR. BRENNAN: Thank you. Good morning, ladies and gentlemen.

Your Honor, Novell wishes to call as its next witness Mr. James Tolonen. JAMES TOLONEN, Having been duly sworn, was examined and testified as follows: THE CLERK: If you would please state and spell

your name for the Court. THE WITNESS: T-o-l-o-n-e-n. DIRECT EXAMINATION BY MR. BRENNAN: Q A Q A Q A Q Good morning, Mr. Tolonen. Good morning. Have you ever worked for Novell? Yes, I have. When was it that you worked for Novell? I worked for Novell from 1989 to 1998. During that time period, what position or positions did Sure. My name is Jim Tolonen.

you hold at Novell? A Throughout that entire period as the chief financial

2000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

officer.

I was also, for part of that, senior vice

president and executive vice president, and then a member of the office of the president, which was a three-member strategy council. Q As a member of the office of the president, what

essentially did you do? A It was really the highest group of all the executives.

We probably had maybe 6,000 employees world around and a dozen or more executives. This was a small group that met

regularly just to discuss strategy with Ray Noorda. Q Please tell the jury a little bit about your

educational background, if you might. A That's going way back, but I have a master's -- let's

go back, an engineering degree from the University of Michigan. accounting. I later also received an MBA in finance and I later also have achieved a certified public

accountant, a CPA, as well. Q You mentioned that you began formally working for If you could summarize for us your work

Novell in 1989.

experience from the time that you obtained your MBA from Michigan to the time that you started with Novell in 1989. A After college I worked as a certified public accountant That's part of the training required

for about five years.

to achieve the CPA certificate is direct public accounting experience. I then worked in several small technology

2001

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

start-ups, generally in the California Bay area, Silicon Valley area. One of those was a company called Bosher where He was brought in as a CEO there while I That company later got

I met Ray Noorda.

was vice president of finance. acquired and he left.

Several years later I left and went

to a technology start-up in networking in the Bay Area called Excelan. We took that company public and in 1987 ran

it as a successful public company for several years, and then Novell acquired it in 1989. Q Thank you. You mentioned an individual by the name of Ray Noorda. Can you tell us who Ray Noorda is? A Certainly. Ray Noorda was the chief executive officer

of Novell.

He was brought in at the founding of Novell long

before -- I mean, somewhere between my earlier work experience with him and later, and continued as the CEO of Novell through 1994 or so. Q A What was your personal relationship with Mr. Noorda? I directly reported to him the entire time at Novell, He was someone I

and also I guess at some level a mentor. looked up to and learned a lot from. Q I'm going to have jump forward a bit.

You've described

for us your work experience prior to joining Novell in 1989. You've told us that you worked there until 1998. If you

could summarize your work and professional experience from

2002

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

1998 to the present, please. A Sure. After leaving Novell, I was at that time an

existing board member of a small public company that asked me to step in as president and chief financial officer of that company to help it out for about a year, and I did that. I took a little time off with my family, and then I

moved back after that, that one-year experience. I then went to -- became an investor, then a board member, and then chief operating officer and chief financial officer and took another company public in the early 2000s. I then joined a third -- next company after that, which is Business Objects, maybe a half billion dollar corporation when I joined it, large multinational, traded both in Europe and in the United States on both exchanges, dual listed, dual traded, very complex structure. And I was the chief And then

financial officer there for about seven years.

just retired about a year ago when that company was sold to SAP. Q A At present, do you have any board positions or other -I do. I stay active. I'm a board member of a public

company called Glu-Coat systems, a technology company in the Bay Area. Also a board member of a philanthropic

organization doing green work as El Coral, interacting with Coral Reef Alliance, trying to help out indigenous people in the coral areas around the world.

2003

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

If I keep going -- I find it hard to retire, so I'm also doing advisory services on several small start-up companies in the Bay Area. Q You mentioned various positions that you've held either I would

as a senior executive officer or as a board member.

like to have you focus for a moment on the experience you have had as a senior executive officer of publicly traded companies. And, in short, can you explain to the jury what,

in your view, the duties and responsibilities are of a senior executive officer of a publicly traded company? A Most of my experience has been as a chief financial Although I think that term is often not well People think about it as the guy with the green

officer.

understood.

armband that is doing the books, which is a very important part of the role. For virtually all of the companies I was chief financial officer or president, or chief operating officer, I had that role, which includes the treasury function, the investments, the cash, the credit functions of screening for new customers, the paying the bills functions of accounts payable, all of worldwide payroll responsibilities, information services and technology, all the computing systems of the company worldwide, investor relations. As a public company, you are always communicating with shareholders, analysts and investor relations. Often

2004

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

facilities comes with that, the real estate aspects of expansion and contraction and dealing with landlords and construction and operation and occupancy of buildings. Because of my background being fairly broad in not just the finance but the engineering background, I often got involved in sales presentations, customer briefings and presentations, a very broad role. Q Let me have you now focus on the experience you've had

as a member of boards of directors of publicly traded companies. What, in general, have you viewed your

responsibilities to be as a member of the board of directors of these various companies? A It's really a strategic adviser and a shareholder It's a fiduciary role. It's representing

representative.

sort of the inside in. successful.

Its helping the company be

One of my good friends who's a senior, he was a publisher in the internal auditing field, says the perfect board member keeps his nose into everything but his fingers out of everything. You observe, you're a fiduciary, you're You

an oversight, but you don't actually do the work. encourage and help and inspect management. Q A

What was it that brought you to Novell in 1989? As I mentioned, a company that I was the chief

financial officer of, a public company called Excelan, was

2005

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

acquired by Novell. Q You've described for us your general duties and

responsibilities of a senior officer, particularly a chief financial officer. Would you describe for us, particularly

focused on the time that you were the CFO of Novell, what your job duties were at Novell as chief financial officer? A In fact, they were the same. Let me cover those, but I talked about

also try and be more a little more specific. the financial aspects. systems of the company.

So there is running the accounting There is the external reporting.

As a public company, you have all the Securities and Exchange Commission reports that are required to be filed periodically, the public company documents. There is all the internal reporting, budgeting, forecasting, comparison of actual versus those plans, management operational accounting, the treasury investment, the global tax strategy, certainly mergers and acquisitions. Particularly at Novell, I think while I was there we did -I guess 15 or more acquired acquisitions of smaller companies. And often with those there is also divestitures. Often the

All that is complicated accounting transactions.

CFO, in my case, I was involved with virtually all of those. Q Are you familiar with what is known as the UNIX

operating system? A I am familiar with it. I have never actually

2006

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

programmed in it, but I'm quite familiar with it. Q Explain to us what your understand is of the UNIX

operating system. A I'll give some context for that. The computers -- or

the hardware aspects require two kinds of software, operating systems software, which is really the things that translate the machine language into instructions, then there is what most of us deal with, which is the applications, what you actually see on the screen. So UNIX was a very

broad, stable operating system that was developed by an organization called the UNIX Systems Laboratories. its early life was owned by AT&T. called Bell Laboratories. sometimes. Most of

There was even a company

People heard of Bell Lab

That's where UNIX was invented as a software

operating system. It was originally designed for high power computers and mini computers before the existence of PCs. It later

revolved to be, because of that, a very broad and often called ruggedized because it had the trial by fire of lots of large system transactions using it. So it was very --

considered a stable industrial strength company operating system. Q You mentioned UNIX System Laboratories. Is it true

that Novell acquired UNIX System Laboratories? A Yes, it did.

2007

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Q A Q

Do you recall when about that acquisition took place? '92 or three probably. Let me have you focus, if you would, on UNIX System

Laboratories and the UNIX system before Novell acquired it. Did Novell have any relationship relative to the UNIX operating system or UNIX System Laboratories before it acquired UNIX System Laboratories? A Not so much directly with the Bell Laboratory and UNIX

operating system as with the dozens to hundreds of licensees of that operating system. What Novell's early claim to fame

was was that it could connect dissimilar computers so they could share information. That's called networking.

And because UNIX had proliferated across anything from HP, UX, UNIX, Sun UNIX, IBM UNIX, and people licensed some of that technology that were deploying it in their unique computer systems, Cray, Andel, it was widely used. If those

computers could talk to one another, we were helping connect those computers as a network operating system so they could talk to one another. Q What was the Novell product or system that would allow

that -A Q A Q It was called NetWare. Are you familiar with a product known as UnixWare? I am. Could you describe your understanding of UnixWare?

2008

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

A

As UNIX -- as the personal computer started coming on

to the corporate world, there was a question of what was the right operating system for the personal computer. Microsoft, of course, had a DOS version. There were other

DOS versions, ER DOS that Novell owned for a period of time. But those systems were not considered at that time strong, ruggedized and powerful enough for corporate usage. were still evolving, very young in their infancy and testing. So there was a question could UNIX fulfill that. They

A version of UNIX for the PC or Intel processor was called UnixWare. Q A Q A Q Who developed UnixWare? We did that. Novell? Novell. Were you involved in Novell's acquisition of UNIX

System Laboratories? A Q I was. Would you describe what your role was in that

acquisition? A I was one of the three or four key executives assigned If you think about corporate

to doing that transaction.

acquisitions as three or four phases, life cycles just like people or plants or animals, one is the discovery or finding a company or fit and having some level of social

2009

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

interaction.

Often there is an illusion between mergers and There is a dating phase. That's the That tends to be Then

acquisitions and marriages.

there is actually the event, the marriage. transaction itself. The documents are on.

much more legal and finance driven. THE COURT: Mr. Tolonen, could you slow down a

little bit so the court reporter can get down what you are saying. THE WITNESS: I would be happy to. I get excited.

So the marriage phase, the transaction phase which tends to be more ceremonial. At some level it's very There are

complicated because there are a lot of issues.

people issues, technology issues, ownership rights issues, there's negotiations of cost and price, and everything is a tradeoff. Then there is an integration and an operating phase and that's where, like a marriage, it's the reality of living together. So different people get involved in

different phases of that. BY MR. BRENNAN: Q Can you tell us why it was Novell decided to acquire

UNIX System Laboratories? A It was part of a large strategy for the Novell entity. It was a time of great change in Microsoft was coming in the stage

We were rapidly growing. the computer industry.

2010

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

of -- again, thinking about the size and the time, personal computers were just coming out networking. The Internet, as It was in a It was

we know it, wasn't described in a public way. technology way. People knew it could be done.

evolving from a very early military system which was connecting military computers and getting into the public domain to what we now call the Internet. In that kind of system we believed there needed to be a lot of applications that were network aware. to be a networking operating system. very powerful operating system. There needed

There needed to be a

So we were expanding in

each of those areas, acquisition of application software and then also operating systems software. Q And UNIX essentially filled the role of the operating

system? A It did. It served a significant role in terms of a

computer operating system that would scale and grow and be very powerful. Q Now when Novell acquired UNIX System Laboratories, did

it acquire all of the company's assets or only a subset? A Q It acquired the entire business. How much did Novell pay to acquire all of the UNIX

System Laboratories business? A Q I believe it was something in excess of $300 million. To your understanding, did that include the acquisition

2011

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

of any copyrights that pertained to the UNIX software? A Absolutely, everything. It was the entire business,

all of its assets, all of its liabilities, all of its property. Q Just jump forward for a minute. Were you also involved

in the sale of certain assets by Novell to a company called Santa Cruz Operation? A Q Yes, I was. Just so we can understand perhaps the distinction

between the acquisition by Novell of all of the UNIX System Laboratories business and the sale of some of the assets by Novell to Santa Cruz Operation, was there a difference between those two transactions? A Q A Yes, there was. Could you describe what the basic difference was? In the case of an acquisition of a company, the

acquirer, the buyer acquires everything about the company, all of its assets, all of its liabilities and risks associated with ownership. You know, the people involved,

generally the entire operation think of it as an all kind of a purchase. In a different kind of a purchase, it's called a purchase of specific assets, there is a -- rather than just saying you get everything, you say, here's the list of things you get, here's the list of things you don't get. So

2012

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

there's a much more of a carve out, a specific target of a particular asset being acquired. We were, in the case of The Santa Cruz Operation, selling only a specific part of the business. In fact, we

kept some other parts and we had licensed other parts to other businesses. Q Now focusing on the transaction between Novell and

Santa Cruz Operation, was there a point -- perhaps using your dating and marriage metaphor, was there a point in this dating, marriage stage where there was contemplation given to selling all of the business to Santa Cruz rather than just part of it? A I'll say yes to that, meaning that we were in the At the

process of diversifying UNIX into the marketplace.

time Novell was competing very heavily with Microsoft. Microsoft had DOS and then came out with Windows and was -if you remember the terminology of the days, Windows 97 was kind of the first stable version of Windows that seemed to work. That was coming and wasn't even out yet. They were

talking about an NT, or a new technology that would be more powerful. We wanted to proliferate UNIX in as many strong

company hands as possible to make it a viable competitor in the marketplace. Q Ultimately did Novell sell all of the assets relative

to UNIX that it had acquired from UNIX System Laboratories

2013

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

to Santa Cruz or only a smaller subset of those assets? A Q Smaller subset. Could you explain to the jury why it was that Novell

did not sell all of its related assets to Santa Cruz? A Probably two or three reasons. We had talked to other

companies as well.

Santa Cruz Operation had been a licensee They had a product in

of the UNIX technology from Novell.

the marketplace on the Intel platform that was using UNIX, and they had a product in that space. They were therefore a

good candidate to help us take this product into the PC space. We had many other customers who were also licensees and much, much larger customers. Packard was a licensee. licensee. IBM was a licensee. Hewlett

And Sun Computer Systems was a

In fact, Novell itself had incorporated much of

the UNIX technology we had purchased from UNIX System Laboratories into other areas of our business. An example would be the Tuxedo product, which, that's again, assuming acronyms, t-u-x-e-d-o, transactions for UNIX extended to distributing operations. So it was a networking We wanted to

aspect of UNIX to connect to similar UNIXs. keep that.

We had other parts of UNIX that were potentially in our code because we merged engineering organizations. to keep that. We needed

We were really selling the rights to continue

2014

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

the UNIX operation to SCO but only for the Intel chips, that business, and not in competition or not to take away our own ownership rights, our own other products, or our own relationship with our other licensees. Q What was Novell hoping the Santa Cruz Operation would

do with the assets relative to UNIX if Novell did sell? A Proliferate it into the PC marketplace through a

product called UnixWare. Q How did Novell expect that to be beneficial to get that

into Novell? A It would give another strong competing operating system It would give

in the marketplace to the Microsoft version.

a company that wanted to continue to develop and operate and extend that operating system in the PC space. And if they

were very successful, we could have also reaped some further benefits. There was a royalty structure such that below a

certain level Santa Cruz Operation would not owe any additional money to Novell, and in the middle range they would cross a hurdle, and then there was a cap of how much royalties they would pay, assuming they were successful at that. Q What was your role in the transaction whereby Novell

sold certain specified assets to Santa Cruz Operation? A I was one of the key three or four executives assigned It was myself, the

to the project to sell those assets.

2015

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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

Novell at the time have a member of its board of directors by the name of Larry Sonsini? A Q Yes, it did. What was the relationship between Larry Sonsini and the

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

Wilson Sonsini. Q To your observation, what was the relationship between

Larry Sonsini, one of the founding members of the firm, and then this Tor Braham who you indicated was with Wilson Sonsini? A Tor was one of the Wilson attorneys. I worked with him

on many transactions and accounts. representative of Wilson for Novell.

He was a prime His specialty was in A

technologies, mergers, acquisitions, software licensing. very bright guy. And at some level was sort of an up and

comer that was assigned to our company because Larry wanted sort of an oversight, and wasn't doing work as a board member, he wanted to make sure his firm was representing us

2016

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

well. Q Now you've mentioned that during your tenure at Novell Had

you worked on a number of merger and acquisition deals. you worked with the Wilson Sonsini firm prior to the transaction involving Santa Cruz Operation? A Q Yes, I had. What was the Wilson Sonsini's firm relationship to

Novell? A They were our primary outside counsel on corporate

matters, on SEC matters, and then contract, merger, acquisition matters. Q Had you worked with Tor Braham before the Santa Cruz

Operation transaction? A Q A Q Yes, I had. What were your impressions of Mr. Braham? I liked him a lot. He was a very smart attorney.

I would like to have you focus on the specifics of the Did you ever see any drafts of

asset purchase agreement.

the asset purchase agreement before it ultimately was signed by the parties? A Q Yes, I did. What, to your understanding, was the purpose of

reviewing drafts going back and forth? A It really was a business review. And the chief

financial officer, as I mentioned, has certain fiduciary

2017

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

responsibilities to the business in its reporting.

And

transactions, acquisitions and divestitures have complex accounting issues, so I was a business executive reviewer of the transaction and probably virtually every draft. Q In terms of the asset purchase agreement itself, what

was your relationship with Novell's general counsel, David Bradford, in connection with this transaction? A He was probably the lead in the transaction -- in

creating the document with Tor Braham and senior executives both assigned to this project. Q Was it your understanding that under the asset purchase

agreement Novell would be selling certain specified assets to Santa Cruz? A Q Yes. To your understanding, what did Novell get in return

for the assets that it did transfer or sell to Santa Cruz? A Essentially stock in the company. The company was

relatively small. business.

It didn't have a lot of cash to buy the

We eventually came to an agreement that they

would issue new shares to Novell to become a partial owner, smaller owner, I think it was 17 percent of the company ultimately, in exchange for the assets that they wanted to acquire. Q And did you ever attempt to place some sort of

valuation on the stock shares in Santa Cruz that Novell

2018

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

obtained from Santa Cruz as part of this transaction? A Absolutely. We had to do that both in terms of

negotiating, understanding the value, but also in terms of external reporting, what do we get. books and records. Q What was the valuation that Novell arrived at in terms So that's part of our

of the Santa Cruz stock it obtained? A It was -- I would say around $50 million. Six million

shares, and we determined a price of -- it was about $8.50 or 70 cents. arrived at. Q Perhaps you might. My suspicion is it's a fairly If you like, I can tell you how that gets

detailed accounting mechanism, but if you could summarize for us how that value was arrived at. A I can. Maybe specifically for the jury, how does one

come up with these things, how does one determine the value of something. company. Santa Cruz Operation was a publicly traded

So there was a value that could be determined

every day by looking in the paper and saying what is Santa Cruz Operation's stock worth. a share. Well, it's $10 and something

But a company's value in its stock -- the price

per share is impacted by how many shares there are. Sometimes I talk about this as a pizza or a piece of pie to people when I'm explaining it to them saying if the price of a pizza is $10 for a large pizza, there are ten

2019

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

slices, you could say it's a dollar a slice. those is a share.

Each one of

But if someone were to cut all of those

pieces in half, now what is a piece worth, what's a share worth. Well, it's half. It's less.

So in the case of a company that had a value, it was the value in the paper every day. share. Let's call it $10 a They were So the

They were going to create new pieces.

going to create six million new slices, new shares. value per share would be less.

So some work was done consistent with other accounting principles at the time to say how much less, and we came up with the $8.70 as being about 15 percent less per share than the current traded value because there is a whole lot more shares showing up. They just issued pieces of paper to us.

So the ownership of the company, now it was worth this much. Now, you know, it hasn't changed in value, but the value of a slice or one share has decreased because now there's more shares. So we came up with the $8.71. And it

was reviewed by our auditors as a reasonable assessment, and the attorneys, and that's the numbers we used for our SEC filings. Q A When you say SEC filings, what do you mean? Securities and Exchange Commission, a public company

periodically reporting. Q Now if I could direct your attention -- this will

2020

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

likely be on the screen for you -- to what has been admitted into evidence as Exhibit 1. It's the asset purchase

agreement by and between The Santa Cruz Operation, Inc. and Novell, Inc. dated September 19th, 1995. In particular, I

would like to direct your attention, Mr. Tolonen, to a provision in the asset purchase agreement, and that would be -- this will show on your screen as well -- section 1.1 under the heading the acquisition. And this, so you know,

Mr. Tolonen, by now is very familiar to the jury, but I would like to have you focus on this. It states under 1.1(a) the following, purchase and sale of assets. On the terms and subject to the conditions set Did

forth in this agreement, seller -- let me pause there.

you understand under this asset purchase agreement that the seller was Novell? A Q That's correct. And it continues, will sell, convey, transfer, assign Did you

and deliver to buyer -- let me pause again.

understand the buyer to be Santa Cruz Operation? A Q I did. And buyer will purchase and acquire from seller on the

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

2021

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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

agreement. get. Q

This is what you get and this is what you don't

Did you also have an understanding that assets that

would be excluded, that is that would not be purchased by Santa Cruz, would be set forth in schedule 1.1(b)? A Q Yes, correct. Now if we might then turn to schedule 1.1(b) of the You will see that on the screen.

asset purchase agreement.

You will see that on page 2 of that schedule under the heading Roman numeral V, intellectual property, it references as excluded assets, quote, all copyrights and trademarks, except for the trademarks UNIX and UnixWare. And then section B -- subsection B is all patents. see that? A Q Yes, I do. Was it your understanding at Novell that Novell Do you

purposefully was excluding from the assets to be transferred

2022

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

under the asset purchase agreement all copyrights and trademarks except for the trademarks UNIX and UnixWare? A Q Yes, absolutely. Did you also understand that Novell was excluding from

the asset purchase agreement all patents? A Q Yes. Why was it that Novell was excluding all copyrights and

trademarks except for the trademarks UNIX and UnixWare? A It was part of our strategy and really necessary under

the nature of the transaction in light of the value in the software is in its ownership, and the ownership is often controlled by the copyrights, just like the ownership of a book would be. Software is a little more complex than that. New chapters keep

It doesn't have an ending necessarily.

getting added and software keeps getting written and modified. one. Two, Santa Cruz Operation was relatively small and couldn't afford the entire value of -- or a greater value than what was the list of assets acquired, so the things that were retained were part of that price negotiation, what do you get for how much can you pay. strategically to Novell. larger customers. And it was important They were So who has rights to what becomes very important,

We had other customers.

They were important industry customers

who were licensing product and technology from us, that we

2023

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

retained the rights to the royalty flows off of those. had to have the ownership to be able to control those relationships. And I think there are probably two other reasons.

We

One

was we had intermingled at some level the operating groups. We knew exactly what we were selling, but we didn't want to have any ownership questions on the code we retained, our NetWare operating system, who owns that. So we wanted to be

clear we still owned the copyrights and the UNIX code from Bell Labs. And we had some concerns over the long-term viability of Santa Cruz Operation. There's lots of mergers and

acquisitions in software, what if they were going to be acquired by another company, one that would be a competitor to Novell, so we didn't want to have any rights brought into question or any of our own ownership rights of the software brought into question in such a situation. critical part of the agreement. Q Were you aware that all copyrights and trademarks, So it was a

except for the trademarks UNIX and UnixWare, and all patents were going to be excluded from the transaction before the asset purchase agreement was signed? A Does anyone know how an agreement ends until it ends. Were there negotiations Of

It's not done until it's done.

about what goes, what doesn't go, what's on each list?

2024

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

course. Q Were you surprised by the inclusion of this language in

the asset purchase agreement? A No. It was an important element to the strategy from

Novell's point of view. Q Did you consider this to be a lawyer's error or a

scrivener's error or a mistake? A Absolutely not. In fact, it was expressly called out

in the board of directors resolution that that was one of the things we were keeping. Q Did you consider Novell's outside counsel, Tor Braham

at the Wilson Sonsini firm, to be operating out of control or out of his authority in preparing the asset purchase agreement which included the excluded asset schedule that we've been looking at? A Q No. A very smart guy doing a very quality job.

Did you understand Mr. Braham and the other attorneys

at Wilson Sonsini to be acting at the direction of Novell management, including yourself, in the preparation of the asset purchase agreement? A Q Yes. After the asset purchase agreement was signed on

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

2025

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

A

I would say casual involvement.

It's my recollection This one,

that I was assigned to another project.

essentially the asset purchase agreement part, was concluded. There was some tidying up to do in the contract.

There was an amendment that I kept abreast of but was not as actively involved in those, called clean up points. Q Between the time that the initial asset purchase

agreement was signed in September 19th, 1995 and the actual close of the transaction in December 1995, did you ever have occasion to make any presentations to the Novell board of directors regarding what was going on between Santa Cruz and Novell pursuant to the asset purchase agreement? A Q A Yes. Could you generally describe that for the jury? As a chief financial officer, I was not a member of the Generally that is the case. But like

board of directors.

the general counsel, the chief financial officer is often called on to go to board meetings to make presentations, and I was present at many of those board meetings. I made

several presentations to the board about the status of the contract and about the ongoing business relationship. As I

said, the contract itself was part of it, but then there's also the integrations and how is it going, and what are the accounting aspects of the transaction and how it gets reported.

2026

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Q

At any time during any of the interim Novell board of

directors meetings from the date that the asset purchase agreement was signed in September until the asset purchase agreement closed in September, were there ever any discussions that you were a party to at the board level or any member of the board or any other invited executive questioned or wondered whether copyrights and trademarks other than the trademarks UNIX and UnixWare were being in fact sold to Santa Cruz? A Q Not that I'm aware of, no. You mentioned there had been an Amendment No. 1. MR. BRENNAN: portion of Exhibit 1. This is actually T-5. is in evidence already. Your Honor, I believe T-5 If we could place on the screen a

Just for Your Honor's benefit, this

also is a replication of part of Exhibit 1 in evidence. BY MR. BRENNAN: Q Mr. Tolonen, if I could direct your attention to Does this appear to be Amendment No. 1 to the

Exhibit T-5.

asset purchase agreement? A Q It does. Appears to be.

To your understanding, did Amendment No. 1 change or

modify the exclusion in the initial asset purchase agreement so that the initial asset purchase agreement was changed and copyrights or trademarks other than UNIX or UnixWare would

2027

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

then be sold or transferred to Santa Cruz Operation? A Q No, I do not believe it made that change. You mentioned earlier that, to your understanding,

there had been a resolution by the Novell board of directors approving the asset purchase agreement; is that correct? A Q That is correct. And did you have an understanding as to whether the

Novell board of directors actually included a resolution that specifically approved of the exclusion of copyrights and trademarks? A Q That's correct as well. To your understanding, was the initial asset purchase

agreement signed by Mr. Robert Frankenberg? A Q A Yes, it was. To your understanding, who was Mr. Frankenberg? He was the chief executive officer, CEO that replaced

Ray Noorda when Ray Noorda retired. Q To your observation, who was more involved from a

senior management level in the asset purchase agreement, yourself or Mr. Frankenberg? A Myself. There was a team of executives on the outside

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

2028

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Q

Now did there come a time while you still were the

Novell chief financial officer that there was Amendment No. 2 to the asset purchase agreement that was discussed? A Q Yes. That was about maybe a year later.

And I would like to have you focus your attention on Did you have any

what became ultimately Amendment No. 2.

role or involvement in what became Amendment No. 2? A Yes. I was the signer of that amendment. MR. BRENNAN: evidence Exhibit N-8. not, I'll move it. evidence. THE COURT: BY MR. BRENNAN: Q Mr. Tolonen, if you will look at what's on the screen. N-8 has not yet been admitted. Your Honor, I believe we have in Maybe we can just confirm that. If

It also is a part of Exhibit 1 in

It's titled Amendment No. 2 to the asset purchase agreement. If we could scroll down, for your benefit, to the second page, I believe you'll see a signature. signature? A Yes, it is. MR. BRENNAN: Your Honor, for ease of reference, I Is that your

do wish to move into evidence Novell Exhibit N-8, Amendment No. 2. THE COURT: MR. HATCH: Any objection? It's already in as Exhibit 1, Your

2029

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Honor. MR. BRENNAN: I do recognize it is part of the

larger Exhibit 1, but just for ease of reference for this examination it would help to have this separately. THE COURT: It will be admitted.

(Defendant's Exhibit N-8 was received into evidence.) MR. BRENNAN: BY MR. BRENNAN: Q Mr. Tolonen, looking at the top of Amendment No. 2, if Thank you, Your Honor.

we could just highlight that first provision, it states, quote -- if I'm reading correctly -- as of the 16th day of October, 1996. A Q Did I read that date correctly?

It looks correct to me, yes. The September 19, 1995 asset purchase agreement, the

agreement, between Novell, Inc. and The Santa Cruz Operation is amended in the following respects. have you focus on paragraph A. And then if I could That

I will highlight that.

continues, quote, with respect to schedule 1.1(b) of the agreement titled Excluded Assets, section V, subsection A shall be revised to read, colon, all copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the agreement required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies. However, in no event shall

2030

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Novell be liable to SCO for any claim brought by any third party pertaining to said copyrights and trademarks. Now with that particular language in mind, my question is did you approve of this Amendment No. 2? A Q I signed it. So I would like to step back in time and talk about First of all, did

with you how Amendment No. 2 came to be.

you work with anyone else at Novell in terms of the legal draftsmanship of Amendment No. 2? A There was a young attorney, Allison, that worked for I think David also

David Bradford that was involved. reviewed it. Q

Do you remember this young attorney, her name would be

Allison Lisbon? A Q Yes, that's correct. Did you have any interaction with Ms. Lisbon regarding

Amendment No. 2? A Q Yes, I did. Now before Amendment No. 2 was approved and entered

into, were you aware that there had been a previous draft that had been proposed by Santa Cruz Operation? A Q T-34. MR. BRENNAN: Your Honor, this is not yet in Yes, I was. If I could direct your attention to Novell Exhibit

2031

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

evidence. BY MR. BRENNAN: Q It will either be on the screen or there is also a

binder in front of if you if you would like a hard copy of this document. Are you able to see it on the screen? A Q Yes, I can see that. For your benefit, if we could display the whole

document, you will see that what is before you doesn't have any signatures on it, correct? A Q Correct. To your understanding is T-34 a draft of Amendment No.

2 that was proposed by Santa Cruz Operation? A I'll take your word that that was the draft. It's a

little hard to read on the screen without the full size here. Q Perhaps what we could do is highlight, so you can see a

little more clearly, paragraph A of the proposed Amendment No. 2. clear? A Yes, that helps. There was some language here that was And looking at that language, does this appear

in an early draft, and I'm presuming it was the one proposed by SCO, that was unacceptable to us and we deleted certain parts of that. MR. BRENNAN: Your Honor, I wish to move into

2032

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

evidence Novell Exhibit T-34. MR. HATCH: Your Honor, I don't think he has

established foundation with this witness. THE COURT: be admitted. (Defendant's Exhibit T-34 was received into evidence.) MR. BRENNAN: Thank you, Your Honor. I'll overrule the objection. It will

Now if we could then have displayed to the jury what is highlighted. BY MR. BRENNAN: Q Let's look at the language that was proposed by Santa The proposed language for Amendment No. 2

Cruz Operation.

was, quote, with respect to schedule 1.1(b) of the agreement, titled Excluded Assets, section V, subsection A shall be revised to read: All copyrights and trademarks,

except for the copyrights and trademarks owned by Novell as of the date of this Amendment No. 2, which pertain to the UNIX and UnixWare technologies and which SCO has acquired hereunder. However, in no event shall Novell be liable to

SCO for any claim brought by any third party pertaining to said copyrights and trademarks. Do you see that language? A Q Yes, I do. Was the language that was selected for this subpart A

2033

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

unacceptable to Novell? A Q A Yes, it was. Why was that? Because SCO had not acquired all of the copyrights

under the -- as of the purchase agreement. Q So was your understanding, then, the reason for

rejecting the proposed language that Santa Cruz offered was because it suggested that SCO would have acquired all the copyrights? A Q Yes. I would like to ask you for just a minute about those

who might have or might not have been involved with Amendment No. 2. You are familiar with an individual by the

name of Ed Chatlos? A Q Yes. Was Mr. Chatlos involved in any way in the negotiation

or preparation or approval of Amendment No. 2? A No, not to my knowledge. He was involved with the SCO

Operation and was part of the UNIX system sale, the UNIX and UnixWare sale. Q But no, he was not a negotiator.

And you are familiar with an individual by the name of

Duff Thompson? A Q A Yes. Who was Duff Thompson? He was a Novell employee who came to Novell through

2034

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

another acquisition.

He was an attorney by training and was In fact,

working in the Novell business development group.

was involved in between the two parts of the contract. Where I was involved, I was involved in the main asset purchase agreement and this amendment, and he was involved in helping clean up the contract in Amendment No. 1. Q To your observation, was Mr. Thompson involved at all

in the negotiation, drafting or ultimate approval of Amendment No. 2? A At all is a little -- I don't recall his involvement,

no, in any significant way. Q Are you familiar with an individual by the name of Ty

Mattingly? A Q A Yes. Who do you understand Mr. Mattingly to be? He was an assistant to Ray and a mid level manager who

was also working in the business development group. Q To your observation, was Mr. Mattingly involved in any

way with Amendment No. 2? A Q Probably not directly or specifically, no. If we might, I would like to turn back to Trial Exhibit This is the Amendment No. 2 that was To your understanding,

N-8 in evidence.

signed and approved by both parties.

what was the purpose of Amendment No. 2? MR. BRENNAN: In particular, go back and highlight

2035

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

section A of Amendment No. 2. THE WITNESS: Sure. I would describe Amendment 2

as similar to Amendment 1 in that it was generally a clean up type of amendment, not deemed a material or significant amendment in terms of changing of the asset purchase agreement, but improving clarity. The primary discussion was around how -- it was both in Amendment No. 1 and 2, how do the two companies deal with third parties who are other licensees of UNIX. So how

does SCO and Novell deal with IBM or with Sun or with other companies in developing process and procedures around how would we make that work smoothly and best for all parties concerned. That's what the latter half is. In this particular case, it was proposed by SCO that there should be some changes to make clear that they had rights they would need. Copyright laws -- I'm not a

lawyer, so this may not be perfect, but there is the ownership of the copyright and then use licenses. say there are also lots of nuance of that. You could

There can be a

use license for a territory or a use license for a particular operating system or a computer system. So you

can carve up the licenses in lots of ways, often done by the owner as licensing to multiple different parties for different uses. One might think of that as like in a book or a

2036

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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

the rights to use this in some fashion. There was a concern that was raised that was it clear that SCO had the right use rights they needed with regard to the acquisition of UNIX and UnixWare, and we wanted to be clear that, of course, they should have the right use rights. use question. It's not an ownership question. It's a

This was designed to try and address that. They were

Clearly, they weren't excluded the use part.

allowed the use that they needed for the acquisition of UNIX and UnixWare. BY MR. BRENNAN: Q Now under Amendment No. 2 did Novell intend to transfer

actual ownership of UNIX copyrights to Santa Cruz? A Q No, absolutely not. Did you ever tell anyone that Novell intended to

transfer ownership of the UNIX copyrights to Santa Cruz by or under Amendment No. 2? A No. In fact, that language was taken out of the

earlier draft. Q In any of your dealings with the Novell board of

directors, did you ever suggest to the board or make any reports to the board suggesting that under Amendment No. 2

2037

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Novell was transferring ownership of the UNIX copyrights? A No. That would have been contrary to the resolution

which excluded them. Q Now with what you just said in mind, that is that the

initial resolution relative to the asset purchase agreement was by resolution of the board? A Q Yes. And, in particular, there was a resolution regarding

exclusion of copyrights, correct? A Q That's correct. When you signed Amendment No. 2, did you go back to the

board of directors and get approval to sign Amendment No. 2? A Q A No, I did not. Why is that? It was not any change in the original asset purchase

agreement exclusion, it was a clarification of the terms of that agreement. Q If under Amendment No. 2 there had been an actual

transfer of ownership of the UNIX copyrights to Santa Cruz, do you believe that that would have been a material change that would have required board of director approval by Novell? A Yes. There would have been an easy way to do that, put

it on the schedule of included assets, which we clearly did not do.

2038

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Q

Why is it that you think Amendment No. 2 did not

transfer ownership of the UNIX copyrights to Santa Cruz? A Q It was not its intent. Now we've talked about the schedule 1.1(b) of the asset Under

purchase agreement, which is the excluded assets.

Amendment No. 2, did Amendment No. 2 also change the schedule of included assets? A Q No, it did not. Do you know when Novell closed the deal with Santa Cruz

in December of 1995, whether there was a bill of sale for the assets being transferred? A Q Yes, there was. And in connection with Amendment No. 2, was there a

revision of that bill of sale to include any UNIX related copyrights? A Q No, there was not. Do you have a financial interest in the outcome of this

litigation? A No, I do not. MR. BRENNAN: Mr. Tolonen, thank you. I have no

further questions at this time. THE COURT: Mr. Hatch. CROSS-EXAMINATION BY MR. HATCH: Q Good morning, Mr. Tolonen.

2039

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

A Q

Good morning. Now you indicated I think in your testimony that you

were one of two or three key executives at Novell who were handling the transaction, the APA, correct? A Q Yes, that's correct. Do you know what the name of the -- the code name that

was given internally to Novell for this project? A I don't recall the code name. We had lots of acronyms

and code names. Q You were the key executive and you didn't know what the

actual code name was? A I probably did 20 different code names, mergers and

acquisitions while I was at Novell. Q deal? A No, I do not believe I have. MR. HATCH: BY MR. HATCH: Q A Q A Q A Do you see this document, Mr. Tolonen? Yes, I can see it. Do you know who Ed Chatlos is? I do. Have you ever heard of the term sleigh ride team? That was the business development team's code name for Let me have -- let's go to Exhibit 86. Is it possible that you've overstated your role in this

this project.

2040

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Q

And the people on here are people that you understood

were involved in this transaction, correct? A On the business development side, yes. Not so much on

the contract side. Q A it. Q Have you seen this document before? I don't see that I'm on the to list. I don't recall. You understand that this is Mr. Chatlos talking to the I may have seen

entire sleigh ride team, correct? A Q A The business development team, yes. From people from both sides, correct? I see this is a memo from Ed Chatlos, yes. MR. HATCH: into evidence. MR. BRENNAN: Your Honor, I don't think they have Your Honor, I would move Exhibit 86

laid a foundation for this. THE COURT: I would have to agree. He says he's

never seen it, he's never seen it. MR. HATCH: All right. I would agree, too. If

he's not part of the team, he's not here. MR. BRENNAN: move to strike. BY MR. HATCH: Q Well, let me ask you, sir -THE COURT: Just a second. The Court will agree Your Honor, that's just argument. I

2041

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

with Mr. Brennan, that Mr. Hatch's comment was testifying and ask the jury to disregard his comment. BY MR. HATCH: Q who? A Certainly this was a large transaction that probably This memo from Ed Chatlos, you understood him to be

had dozens and dozens and dozens of people involved trying to keep up with its status, which were people had different roles. I was the key executive assigned by the company to It doesn't say there

be the business executive on the APA.

weren't other e-mails going around about trying to keep up. Q A Mr. Duff Thompson is on this document, correct? Yes. MR. HATCH: Your Honor, I would represent that

we've left open Mr. Thompson coming back, if necessary, for things just like this. We'll bring him back if we have to I don't

verify this document, and I would proffer that.

know if that would change the objection of Mr. Brennan or not. MR. BRENNAN: I assume it's up to them as to who We'll have to

they would like to bring back, Your Honor. wait and see if they make that presentation. MR. HATCH: that proffer. THE COURT:

I would like to use the document with

Mr. Brennan, I recall on one occasion

2042

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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

MR. BRENNAN:

every courtesy, Your Honor. THE COURT: MR. BRENNAN: Mr. Hatch -Your Honor, I'm sorry. On that

point, given the representation, we're assuming that Mr. Thompson will, in fact, be brought back. THE COURT: MR. HATCH: That's what I'm going to verify. Your Honor, I'm trying to make sure

that somebody from my team knows whether he's available or not, so let me see. MR. BRENNAN: So, Your Honor, I suppose -- I do

want to extend every courtesy, but I think we need to have a firm commitment. THE COURT: MR. HATCH: BY MR. HATCH: Q A Q A Do you know who Robert Shimp is? I recall the name. Do you know who he is? I don't know him personally. I have met him. He was a I would agree with you, Mr. Brennan. Let me do it this way, Your Honor.

another employee at the time. Q Do you know who Ty Mattingly is?

2043

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

A Q A Q A Q A Q A Q A Q

Yes, absolutely. He's part of the sleigh ride team? Business development team. Do you know who Art Sabsevitz is? I don't recall that name. Do you know who Jim Machi is? I do recall him being involved in the project. From which side? I don't recall. You don't recall? I don't recall. You don't know whether he worked for Santa Cruz or for Who does he work for?

Novell? A Q A Q A Q A Q A Q A Q I believe it was on Novell's side. You are not sure? I believe it was on the Novell side. How about Lisa Ozimek? I don't recall her. Don't know which side? Nope. Do you know who Geoff Seabrook is? Nope. Don't know which side, Novell or Santa Cruz? No. Tor Braham you know?

2044

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

A

Absolutely.

I worked with him on pretty much a daily He was a senior attorney at Wilson, as we

basis on the APA. mentioned. Q A

He didn't tell you about any of these people? There were dozens and dozens of people on the project.

There were key people and less key people in different parts of the project, technology team, business development team, contract team, and senior executives reviewing the work. Q A How about Bill Traber -- excuse me, Biff Traber? Yes. These were also people I knew. This whole list

of people, people on the technology or business development. Q A But do you know who Biff Traber is? I've met him, but I didn't have a lot of dealing or

interaction with him. Q A Q A Q A Q Cruz? A Q A I believe this whole list was Novell. You believe the whole list is Novell? Ted Smith was, Duff Thompson was, Jeff Turner was. Do you know if he worked for Novell or Santa Cruz? I believe this was Novell as well. How about Ron Palmeri? Yes, Novell. Do you know David Black? I don't recall. You don't know whether he worked for Novell or Santa

2045

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Q A Q

Geoff Seabrook wasn't, was he? I don't recall. Ted Smith you know. Burt Levine?

A

I don't recall.

I think he might have been on the UNIX

system lab side. Q A Q A You think Burt Levine was from where? I don't recall. You didn't know that he was the lawyer for Novell? He was a more junior lawyer. I worked with a higher

level, his boss, and our outside counsel. Q Your name doesn't appear on here anywhere, does it? MR. BRENNAN: answered, Your Honor. THE COURT: MR. HATCH: to make sure. BY MR. HATCH: Q There is one other name on here, Gary Daniels. Do you Sustained. Thank you, Your Honor. I just wanted Objection. That's been asked and

know Gary Daniels? A I don't see that name. I don't recall. Q A Q What is the date on this document? September 2nd. 1995? Where's that?

2046

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

A Q

Yes. This deal closed -- I mean this deal was originally

presented to the board on the 18th of September, correct? A Q Correct. The packet was given to the board on the 15th of

September, correct? A Q I believe that's correct, to review. So you are not appearing on a document that's less than

two weeks before the board is being presented with the deal; is that right? A I am not appearing on this document. I was getting

copies of the drafts to review. Q You are not able to identify a significant number of

these people, are you? MR. BRENNAN: Objection, Your Honor. That

mischaracterizes the witness's prior testimony. MR. HATCH: THE COURT: BY MR. HATCH: Q When did the face-to-face negotiating with Santa Cruz I'll move on. All right.

start? A In the spring of '95. We had been talking to them for

quite a while, so it was maybe late spring, late June, July, early summer where the intensity increased. Q Somewhere between spring and late July?

2047

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2