SCO Grp v. Novell Inc

Filing 867

NOTICE OF FILING OF OFFICIAL TRANSCRIPT for dates of March 24, 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. 867 Att. 2

1 2 3 4

THE COURT: MR. JACOBS: THE COURT:

Are we ready? We are, Your Honor. Okay. Ms. Malley.

We went a little bit longer because the jury

5 did not receive its allotment of rations until later on. 6 MR. JACOBS: I'll go along with Mr. Brennan. A

7 hungry jury is not a happy jury. 8 9 10 11 12 13 14 15 Braham. 16 17 forward. 18 TOR BRAHAM, THE COURT: Mr. Braham, if you will please come THE COURT: That's a good point.

Is Mr. Braham in the courtroom? MR. JACOBS: THE COURT: Yes. Okay.

(Jury brought into the courtroom.) Mr. Jacobs. MR. JACOBS: Your Honor, Novell calls Mr. Tor

19 the witness hereinbefore named, being first duly 20 cautioned and sworn or affirmed to tell the truth, the 21 whole truth, and nothing but the truth, was examined and 22 testified as follows: 23 THE CLERK: Please be seated. And if you would

24 please state and spell your name for the Court. 25 A. Tor Braham. T-o-r. B-r-a-h-a-m. 2324

Dockets.Justia.com

1 2 BY MR. JACOBS: 3 4 5 Q. A. Q.

DIRECT EXAMINATION

Good afternoon Mr. Braham. Good afternoon. What was your role in the 1995 Asset Purchase

6 Agreement between Novell and Santa Cruz? 7 A. I was one of the lead negotiators and the head

8 of the outside legal group that managed the transaction 9 on behalf of Novell as a partner at Wilson, Sonsini, 10 Goodrich and Rosati. 11 Q. How did you happen to become a partner at What was -- where did you start in

12 Wilson, Sonsini? 13 terms of school? 14 A.

I went to college at Colombia University in New

15 York and then went to law school at New York University 16 in New York. I came out to California, really, to work I started at a law firm in

17 with technology companies.

18 Southern California called Manaf, Phelps, Rothenberg & 19 Tunis. 20 And, after about a year and a half -THE COURT: Mr. Braham, may I remind you that

21 the Court reporter has got to get everything you say, and 22 when you start using terms such as the names of law firms 23 and so on, slow down a little bit so everything can be 24 heard? 25 THE WITNESS: Okay. Sure.

2325

1 2 A.

THE COURT:

Thank you.

I joined Wilson, Sonsini Goodrich & Rosati in,

3 I think, 1984 as an associate and worked there, until I 4 left the firm in 1997, doing exclusively mergers and 5 acquisitions, initial public offerings, and intellectual 6 property work and related corporate work for technology 7 companies located in Silicon Valley and around the United 8 States. 9 Q. So give the jury a sense of your practice as of What kind of transactions were you doing,

10 the mid-'90's.

11 and what was your role? 12 A. So, by the mid-'90's, I had transitioned into

13 being primarily a lawyer working and advising on mergers 14 and acquisitions. I still did some work on initial

15 public offerings or registration statements with the SEC 16 for companies when they do financing, but I also 17 continued to do a fair amount of intellectual property 18 licensing for my clients. 19 So, I would have a range of clients, and I

20 would generally -- all corporations that were technology 21 companies, and I would represent them in everything, sort 22 of soup to nuts, but, by the mid-'90's, I had 23 transitioned into a particular focus on mergers and 24 acquisitions for the tech companies. 25 Q. And describe your relationship with Novell as

2326

1 of 1995. 2 A. So, Novell was one of my biggest clients, and

3 the firm's biggest clients, and particularly around 4 mergers and acquisitions or M&A. We had done work from And my mentor

5 them, worked with them for a long time.

6 and the top partner at Wilson, Sonsini is a guy named 7 Larry Sonsini. And he was on the board of Novell and was

8 one of the lead directors there who created, in addition 9 to my work with the company, a close relationship. 10 And so I knew the company well, and I had, by

11 the mid-'90's, worked on eight or nine different 12 acquisition transactions representing them, and they were 13 one of my biggest clients and one that I was -- you know, 14 a substantial portion of my time was working with them, 15 as they did all kinds of deals and built the company. 16 Q. So, again, just to give the jury a sense of

17 this, as an outside counsel, what kind of understanding 18 do you gain of a company like Novell's business in the 19 course of representing them? 20 A. Well, you get to know, you know, all the

21 different moving parts, and you get to know all the 22 people as well. You -- frequently, when you work with

23 them on an acquisition, you get to know the business, 24 intimately, of what was acquired, and then sometimes, 25 when those businesses are separated or you do a different

2327

1 transaction, then you kind of bring your institutional 2 history to bear on remembering what you learned when you 3 worked on a different deal. 4 You also -- one of the reasons why corporate

5 law firm relationships are long-term relationships is 6 that you learn how decisions are made within a company 7 and how to interact with the company to help them come to 8 decisions and come to terms on a transaction, and which 9 is frequently difficult to do when it's a new client, but 10 when you have a long history, you get a familiarity with 11 all the people and what their strategies are and 12 objectives are for the company, as well as how to -- how 13 to navigate through all the different voices that compose 14 a corporation. 15 Q. So, as of 1995, your relationship with Novell, Who were you taking

16 who were you interacting with? 17 direction from? 18 A.

At that time, David Bradford was my primary He was the general counsel of Novell. But,

19 interaction.

20 more importantly, he was, for me, the lead voice on -21 about what kinds of business decisions Novell was making, 22 and he would give me direction on how to represent Novell 23 in various different transactions, but also Jim Tolonen, 24 who was the CFO. 25 Coast. Jim actually resided out in the West

Novell was headquartered in Provo, Utah, but it

2328

1 had a very significant business fingerprint in Silicon 2 Valley, and Jim Tolonen, the CFO, lived out on the West 3 Coast, and that had me meeting him a little bit more than 4 the Utah -- all of the other Utah Novell people. 5 Mary Burnside, who was the chief operating

6 officer, who was -- kind of ran the nuts and bolts, 7 day-to-day of the company, less involved in deals, but I 8 would interact with her. 9 Q. So, as of 1995, to sum up, you have done, You've worked with David

10 eight, nine transactions.

11 Bradford on those transactions? 12 A. I worked extensively with David Bradford, but I

13 also worked with my partner Larry Sonsini, who would give 14 me direction from time to time, and I probably worked on 15 another, I mean, maybe that many transactions that didn't 16 happen, and I also worked on deals that were contemplated 17 or ideas that never crystalized into actual 18 transactions. 19 Q. And, in all those transactions, how would you

20 describe your role -- the role of David Bradford in 21 giving you direction, in a nutshell? 22 A. He would be the person I would get the most

23 ultimate instruction from as to how to -- how to advance 24 Novell's interest and where the various different 25 tradeoffs that occur in a deal should be balanced. And

2329

1 we had done enough deals together where we kind of had a 2 very efficient methodology of -- with him as sort of the 3 business negotiator and guider of me, and me being the 4 implementer along with him. 5 well. 6 Q. Mr. Braham, I'd like to show you a document, And we understood each other

7 Exhibit H-2, and ask if you can identify that for us, 8 please. 9 A. This is the agreement and plan of merger or

10 acquisition agreement under which Novell acquired the 11 UNIX business from AT&T, through acquisition of the UNIX 12 System Laboratories, Inc. company, which was a 13 corporation owned by AT&T -- owned primarily by AT&T. 14 actually had some small minority investors as well. 15 16 17 18 evidence. 19 20 21 22 Q. MR. SINGER: THE COURT: No objection. It will be admitted. Q. A. Did you represent Novell in that transaction? I did. MR. JACOBS: Your Honor, we would move H-2 into It

(Novell Exhibit H-2 received in evidence.) BY MR. JACOBS: To step back a little bit in

23 time Mr. Braham, did you become familiar with the UNIX 24 Operating System in the course of your work with Wilson, 25 Sonsini?

2330

1 2 3

A. Q. A.

Yes. And how did that happen? Well, over the years, even before this

4 transaction, UNIX was a pretty high-profile collection of 5 technologies. I had worked a lot with companies in

6 Silicon Valley who used UNIX or touched UNIX in various 7 different parts of their business. SUN Microsystems, for

8 example, was a client of Wilson, Sonsini, and UNIX was 9 the other operating system or collection of operating 10 systems out there, in contrast to Microsoft and Microsoft 11 Windows, Microsoft Windows NT operating system. 12 lot was covered in the press and certainly in the 13 industry around UNIX and the importance of UNIX as an 14 alternative to Microsoft, particularly as Microsoft 15 became more and more powerful and the perception that 16 Microsoft was becoming a monopoly emerged. 17 So I learned about UNIX through our clients, And a

18 but also through the financial and technology press, but 19 never worked directly with the UNIX technologies until 20 this deal. 21 Q. So, let's describe this -- this transaction It's called an Agreement and Plan of Can you describe for the jury

22 in a nutshell.

23 Reorganization and Merger.

24 in sort of a lay-person's terms, what the form of the 25 Novell/USL/AT&T transaction was?

2331

1

A.

So, I mean, in simplest terms, it was an It's

2 acquisition of the corporation, UNIX Systems Labs.

3 called an agreement and plan of reorganization and merger 4 because it was done as a stock-for-stock transaction. 5 Novell issued stock, which went to AT&T, and acquired 6 this business, and for tax reasons and for historical 7 corporate reasons, these things are done in what's called 8 a reverse triangular merger, which is a little 9 complicated. 10 But, basically, you have the subsidiary of AT&T

11 merge with a newly-formed subsidiary of Novell end up as 12 a subsidiary of Novell. And there's a variety of reasons

13 why it's done that way rather than simply 14 I-buy-your-stock kind of deal, but largely driven by tax 15 and some corporate history. 16 Q. And describe the -- as compared with other

17 kinds of M&A deals, is it simpler or more complicated if 18 you buy an entity like, say, USL, as compared with buying 19 specific assets, for example? 20 A. You know, generally speaking, it's simpler to

21 buy the whole company and just to buy a business because 22 then you're not going to have to go through and parse 23 what assets am I getting? 24 behind? 25 complex. What assets am I leaving

Asset deals are very time intensive and very

2332

1

You know, I think, intuitively, sometimes you

2 think, well, if I don't buy the whole business, maybe it 3 will be simpler. But the reality is, it's simpler to And you

4 say, I'm going to buy the whole corporation.

5 just inherit whatever is there; whereas, when you do an 6 asset deal and buy a business out of another entity but 7 by doing it by assets, you now have to go essentially 8 asset by asset and define what's coming, what's staying 9 behind. 10 And very often there are shared assets or there

11 are assets that bear not only on the business you are 12 acquiring but on the business that's being left behind 13 and so you have to parse out, how do we share? 14 is not just intellectual property. And this

How do we share a

15 building that has employees who might work for both 16 businesses? 17 continuing. 18 And so the process of doing an assset deal How do we share customers who may be

19 is -- you know, you can start with, we are going to buy 20 this business, but then you have to actually go and, in 21 some cases, down to the desk top, what am I transferring 22 and what am I keeping? 23 And it's a lot of work.

So, as a general rule, you know, you kind of

24 want to buy the whole corporation if you can so you don't 25 have to have the arm wrestling asset by asset, just

2333

1 because it's a lot of work.

And it's also possible, you But, you know, people

2 know, to have confusion in that.

3 do asset -- when you have a business within a larger 4 entity, you frequently are stuck with doing an asset 5 deal, and when you have a business where you're 6 continuing relationships on both sides, you frequently do 7 an asset deal. 8 Q. So, this was the simpler kind of acquisition,

9 an acquisition of an entity? 10 A. Yes. It was simpler. It was not simple, but

11 it was simpler. 12 Q. Okay. And this being the USL transaction. Do

13 you recall the value of the stock that Novell issued in 14 exchange for the UNIX Systems Laboratory, Inc., business? 15 16 A. Q. Yes. It was approximately 300 million.

So, this transaction is dated as of February And, about two and a half years later, the

17 12, 1993.

18 Asset Purchase Agreement between Novell and Santa Cruz is 19 going to get negotiated. What's your understanding of What

20 what changed as you were brought into the APA?

21 changed such that Novell was now divesting assets that it 22 had just acquired? 23 A. So, Novell's interest in UNIX was -- it had a

24 variety of different purposes, in acquiring UNIX, in 25 owning it, and in ultimately selling it, selling a piece

2334

1 of the business.

There was the financial side.

This was

2 an important technology that there was royalties that 3 were -- that USL was collecting and Novell was partnered 4 with the company that partly built itself through 5 acquisition, but there was also a strategic side which 6 was that Novell, in the industry, had a very important 7 role in providing software and infrastructure for 8 networking, and it was important for its business that 9 Microsoft not have too much strength and too much power 10 over the entire world of software. 11 Netware, which was its core product, and then

12 ultimately Netware directory services and other related 13 products, would flourish more if Microsoft was not in a 14 position of going to corporations and saying: 15 take my operating system. 16 architecture. 17 it all to you. 18 Netware was a set of infrastructure software You'll

You'll take my networking I'll provide

You'll take my applications.

19 that would work to connect different computers, and 20 particularly disparate kinds of computers, and if 21 Microsoft had too much dominance, the importance of 22 Netware and the value of Netware and the money that could 23 be made by selling Netware would be diminished. 24 So, it was originally acquired, UNIX Systems

25 Labs, partly for financial reasons, but partly for Novell

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1 to become a good shepherd of the UNIX Operating System 2 and collection of operating systems, which is really what 3 it was, so that the other players in the industry, major 4 players in the industry, would have -- could sell 5 computers that ran on operating systems that were not 6 solely Microsoft; so AT&T, SUN, HP, Sequent, Digital 7 Equipment Corporation, on down, would have -- not have to 8 only seem Microsoft software. 9 And there was a feeling, at AT&T, that they AT&T, of course, is a

10 were not in a great position.

11 phone company and the backbone of the internet from a 12 physical standpoint, but that they weren't in the best 13 position to license software around the country, to 14 develop it and to be responsive to all of the 15 corporations who wanted to use UNIX, and there was a 16 feeling that Novell was a good home for it. 17 And Novell felt that way, and AT&T felt that

18 way, and so they bought it. 19 Q. So that explains the 1993 transaction. That

20 explains the inbound transaction, right? 21 22 23 A. Q. A. Yes. Okay. Then what happens?

Once they bought it, they found that they were

24 not in the strongest position to support and proliferate 25 UNIX. They had their own battles to fight around other

2336

1 technologies, Netware, GroupWise, others.

And they began

2 to feel that they couldn't invest all the resources that 3 would be desirable to make it as successful as possible, 4 and they were developing a set of technologies, a 5 particular flavor or brand of UNIX called UnixWare, and 6 they had worked on that, and there was a feeling that 7 they were not in the best position to continue to develop 8 it and to market that particular flavor to exploit. 9 Now, UnixWare was addressed to the Intel -- the

10 Intel microprocessor hardware, and there was a feeling 11 that -- which is where Microsoft had the greatest 12 dominance. And there was a feeling at Novell that

13 emerged that we want this to be successful, but we can't 14 put all the wood behind this arrow ourselves, and, if we 15 can find another home for UnixWare, that would be 16 desirable if it could be somebody who would really go 17 after that business more agressively and with more focus 18 than we can. 19 Q. So you gained this understanding as you were

20 brought in to represent Novell in the Asset Purchase 21 Agreement; is that correct? 22 A. Yes. I may have got some of that understanding

23 simply working with Novell over the two years in the 24 interim, but got more of it as we got into discussion of 25 the potential sale to SCO.

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1

Q.

In a general case, leaving aside the specifics

2 of the Asset Purchase Agreement for a minute, at what 3 point does an outside counsel like yourself get involved 4 in an M&A transaction like this? 5 A. Well, you're talking about any outside counsel?

6 I mean, it might be any point -7 Q. Well, let's take your experience with Novell.

8 Typically how would you get get involved, and at what 9 point would you be brought in? 10 A. In the case of Novell, I would probably get

11 involved maybe a month, six weeks before a transaction, 12 when people were still crystallizing ideas about the 13 deal. In other situations, outside counsel isn't brought And, in fact, in many companies -- not

14 in until the end.

15 Novell -- companies might do transactions by themselves 16 without outside counsel at all. 17 internally. 18 But, with Novell, I would hear about them They might do them all

19 relatively early, either through David Bradford or Jim 20 Tolonen or others at Novell or through my partner Larry 21 Sonsini who, of course, sat on the board, and I would 22 hear about things in the germination stage more often. 23 Q. Now, at some point, you get involved in the

24 Asset Purchase Agreement? 25 A. Yes.

2338

1

Q.

What is your recollection when your period of

2 intense involvement actually got underway? 3 A. The most intense involvement I remember over

4 the last week or so before the announcement of the 5 transaction. And it's hard for me to remember exactly. But I remember what people

6 It was 15 years ago.

7 sometimes refer to as a forced march, where people show 8 up at a law firm, day after day after day, negotiating 9 drafts and turning a deal. 10 of both sides there. And you have representatives

And I remember that forced march

11 very clearly at the offices of Brobeck, Phleger, 12 primarily in -- I don't remember exactly the time 13 frame. 14 Q. It sounds like you have a picture in your mind

15 of this place? 16 A. I have a picture in my mind of the place and

17 the conference room and where I was sitting and where 18 other people from the law firm on the other side, Brobeck 19 Phleger, as well as some SCO people were in the room. 20 And I have a picture in my mind of an exhausting series 21 of days, including one weekend, all weekend long. 22 Placing that in an exact time frame is just very hard 23 after 15 years. 24 Q. Now, Mr. Braham, who was on the Wilson, Sonsini

25 team representing Novell in that forced march to

2339

1 concluding the agreement? 2 A. So, primarily it was myself, and then a younger

3 lawyer named Allen -- Aaron Alter, who is a partner there 4 now. I'm not sure whether he was a partner or a senior At the time, I think he was a young partner.

5 associate.

6 And then a very smart associate named Shannon Whisenant, 7 who worked at Wilson -- actually she's from this area -8 but she was a younger associate. 9 And then, behind that, there was a tax lawyer He didn't appear at the negotiations, And

10 named Don Bradley.

11 but he was -- gave me counsel behind the scenes.

12 then Larry Sonsini, although he wasn't day-to-day on the 13 transaction, was back in his office and a resource for me 14 to consult with. 15 Q. And who were your counterparts representing

16 Santa Cruz in the negotiations? 17 A. So, there was -- the most senior person who did

18 appear at the negotiations was a partner there named Ed 19 Leonard, who was one of the top business lawyers at 20 Brobeck, Phleger. There was a younger partner named

21 Scott Lester and, then, most immediately, day-to-day, was 22 a smart associate there named Jeff Higgins. 23 Q. Now, in an M&A deal, as opposed to maybe some

24 other kinds of transactions, talk about the differing 25 roles and agendas that people in a transaction like that

2340

1 might have and what the role of outside counsel is in 2 putting all that together? 3 4 A. Q. So, the different agendas among -Among the company representatives, the people

5 who might be funneling to you or funneling through the 6 general counsel. 7 8 9 A. Q. A. On the Novell side? Yes. So, there's David Bradford, who was the primary

10 communicator to me and the lead negotiator as to what 11 positions to take and what was most important, both 12 objectives and weighing of tradeoffs that occur in the 13 negotiation, and he would be right up there. And he had

14 been involved in all of the transactions for Novell, and 15 you know, I viewed as a very credible, authorized and 16 dispassionate voice as to how to think about Novell's 17 interests. 18 Then there were a whole range of people who

19 were involved in the USL UNIX business within Novell, and 20 some of those people -- in fact, most of them had come 21 over from USL when we acquired USL. 22 USL from AT&T. When Novell acquired

And those people were good people and

23 were very important to the UNIX business, but they -24 they were more interested in that business and, as I 25 remember, I knew many of them, and I don't know if it's

2341

1 even clear which we were going to move over and be part 2 of the acquired business. 3 One of the things that happens in a

4 disposition, when a company is being -- selling off a 5 business, is you have people who still are technically or 6 still working for the seller but who are going to be 7 moving over and working for and going to be compensated 8 and fed by and looking for protection from the buyer. 9 And this results in an inherent conflict of interest. 10 It's nothing that's wrong about it. 11 It's just that you have people whose roles are

12 moving, and their interests frequently are different than 13 the interests of the seller. And, frankly, they are also

14 different, sometimes, from the interests of the buyer. 15 They have interests that coincide with each side and some 16 that are different from each side. So there was that

17 universe of people, and I think, you know, they were -18 they have to be involved because they are the most 19 knowledgeable about the business, but you also have to be 20 sensitive to -- that not everything that they want is 21 what's necessarily in the best interests of your client, 22 the seller. 23 Q. Okay. And when you are referring, now, to your

24 client, who, ultimately, are you accountable to? 25 A. So, it would be the -- David Bradford is the

2342

1 spokesman for the client, and he was accountable to the 2 board of directors of the company and to -- and with 3 direction from the CEO, but not exclusively the CEO of 4 the company. 5 Q. Specifically, with respect to the Asset

6 Purchase Agreement, then, what was your day-to-day 7 responsibility in that intense period of negotiation? 8 A. To represent Novell, to determine what Novell

9 wanted to accomplish with the transaction at a strategic 10 level as well as an execution level, to be their primary 11 mouthpiece in the negotiations, funneling through all the 12 different inputs that I would get from Novell, to 13 negotiate for them the best I could, to protect their 14 interests, to draft the contract along those lines, to 15 supervise people who worked for me to draft other pieces 16 of the contract along those lines, to report back to 17 David Bradford and others at Novell faithfully what the 18 art of the possible is in the negotiation and to 19 implement the best deal I could get Novell consistent 20 with the direction I had been given as to how to protect 21 them. 22 Q. As you got into the period of intensity for

23 your involvement, what did you understand some of the 24 specific issues to be on account of the fact that Santa 25 Cruz was the acquiror here?

2343

1

A.

So, fairly along the way, we discovered that

2 Santa Cruz, as we spent more time with it, really did not 3 have the financial resources to buy all of the UNIX 4 business that was owned by Novell, and it was a small 5 company. It was struggling. It was a publicly-held

6 corporation, but it had struggled for a number of years. 7 Its stock price had come under pressure. I think there

8 was a perception that its business, which was developing 9 and licensing a flavor of the UNIX business for the Intel 10 386 microprocessors, that that business was under 11 pressure and potentially not viable at all, long-term. 12 So its stock priced suffered, and they didn't

13 have sufficient -- they didn't have significant cash. 14 They didn't have any excess cash. What cash they had,

15 they needed for their operations, and they had a limited 16 market cap or a limited market value of their company and 17 thus were limited in their ability to pay for a 18 collection of technologies that Novell had purchased for 19 300 million and were worth a tremendous amount of money. 20 Q. So, how was the deal structured in order to

21 address that concern? 22 A. So, a number of -- a number of moving parts to

23 go in to get into a collection of economics that could 24 make the deal work with Novell. So, first of all, they

25 got what turned out to be a little over 16 percent of

2344

1 Santa Cruz Operation's stock. 2 3 Q. A. Meaning Novell, here? Novell did. And that particular piece was

4 constrained by a NASDAQ, which is a Federal Rule that 5 says that a public company can't issue more than that 6 amount of its shares in an acquisition without getting 7 stockholder approval of its own shareholders. 8 So if you were going to issue, for example, 50

9 percent of your company to somebody to acquire a 10 business, you need stockholder approval. To get -- you To do

11 need to go to your own stockholders for approval. 12 that, you need to file a proxy statement with the 13 Securities and Exchange Commission, and that proxy 14 statement needs to include a tremendous amount of

15 information, including audited financial statements of 16 the business that you're acquiring. 17 In this case, there weren't separate audited

18 financial statements for the UNIX business or the 19 UnixWare business or any piece of it at Novell. And so

20 financial statements couldn't be obtained that would have 21 enabled SCO to go to its shareholders, and it would have 22 taken a year. 23 times. I have been through this a number of

It could have taken at least a year for them to

24 be in a position to make that filing. 25 So nobody wanted to wait a year, so that was a

2345

1 constraint.

We had to keep the number of shares below

2 that threshold so that we wouldn't have to go through 3 that process. Time was passing, and it's not desirable So we're limited in

4 for either side to go through that.

5 terms of the value of stock, and that was about 50 6 million. 7 So, beyond that, there was a royalty

8 arrangement that said that, if SCO developed -- was 9 required to actually develop and complete a new version 10 of UnixWare called the merged product and go out and 11 license that, and there would be royalties that would 12 come, if they hit their business plan, to Novell, to pay 13 a portion -- to pay additional cash flows to Novell 14 for -- that would come back to Novell. And that was

15 viewed as a potential contingent element of the purchase 16 price. 17 And then, perhaps most importantly, Novell

18 retained all the economics and relationships arising out 19 of the UNIX business. This is not the UnixWare flavor,

20 but the basic UNIX business under which Novell, USL and 21 then Novell, had licensed to IBM and SUN and HP and 22 Sequent and all these other companies, their own version 23 of UNIX. Those -- that business or the economics of that

24 business is retained for Novell, so that we weren't 25 selling all that we bought from AT&T. Novell wasn't

2346

1 selling all that we bought from AT&T. 2 We basically carved down to what SCO could

3 afford to pay for, which was the UnixWare business, or 4 the right to exploit and develop that particular flavor, 5 which was the objective of the deal to begin with. 6 Q. So, let's talk for a bit about the retained

7 portion of the business, the UNIX part of the business 8 that dated back to the AT&T days, as opposed to the 9 UnixWare business. Let me -- as the deal was presented

10 to you for implementation, did you understand that SCO 11 would have some role, vis-a-vis the old UNIX business, or 12 SCO would have some role, vis-a-vis the old UNIX 13 business? 14 15 16 A. Q. A. Yes. And what was that role? They were going to be the agent to manage the

17 collection of monies, of royalties on behalf of Novell, 18 of those older base UNIX businesses, those other 19 relationships. And the reason for that is we were

20 transferring all the physical manifestations of the 21 contracts and the people to SCO, and it made sense for 22 there just to be one administrator, so they acted as an 23 agent. 24 They were intended to act as an agent to manage

25 that business on our behalf, on Novell's behalf, so that

2347

1 you wouldn't have a licensing group at Novell and a 2 licensing group at SCO doing -- you know, tripping over 3 each other. 4 Q. They were basically put in as an agent. Is U-3 a

I'm showing you U-3, Mr. Braham.

5 draft of the Asset Purchase Agreement with your 6 handwriting on it? 7 8 9 Honor. 10 11 12 13 Q. MR. SINGER: THE COURT: No objection. U-3 will be admitted. A. It is. MR. JACOBS: Offer U-3 into evidence, Your

(Novell Exhibit U-3 received in evidence.) BY MR. JACOBS: So, Mr. Braham, this is a draft It has a typed-on-it

14 of the Asset Purchase Agreement.

15 date, in the lower left-hand corner, of September 16, 16 1995. 17 18 A. Q. Do you see that? I do. And it has a lot of your handwriting on it,

19 right? 20 21 A. Q. It does. That's my handwriting.

This is only three days from the closing,

22 right -- not the closing but the execution of the Asset 23 Purchase Agreement? 24 25 A. Q. I believe that's correct, yes. So does this refresh your recollection a little

2348

1 bit about what you were referring to as to the forced 2 march and as to when that was likely taking place? 3 A. Yeah. I believe that the forced march of the

4 day-after-day meetings, that this was in the middle of 5 that. 6 Q. Now, if you turn to, in the draft, page 26,

7 Bates Novell 42712. 8 9 A. Q. Yes. I'm sorry. Twenty-seven Can you see a section

10 there marked 4.16? 11 12 A. Q. Yes. Now, what's going on in this section and what

13 can you tell, from some of the handwriting that you've 14 applied to this draft? 15 MR. SINGER: Excuse me, Mr. Jacobs, the copy of

16 this exhibit you have provided me doesn't have page 27. 17 18 19 it? 20 MR. JACOBS: It's out of order, Your Honor. MR. JACOBS: THE COURT: It's out of order. Nor does mine. Where will I find

21 It's before 26. 22 23 24 25 THE COURT: MR. JACOBS: THE COURT: MR. JACOBS: What's the Bates number? 42711. 427. 11.

2349

1 2

THE COURT: THE WITNESS:

11? So this is -- 4.16 is the key

3 provision that embodied the deal that the UNIX business, 4 as compared to the UnixWare business, that the old UNIX 5 business, the base ownership of UNIX and the relationship 6 of all the other hardware companies, IBM, SUN, HP, 7 Sequent, etc., that those licenses and those 8 relationships would be -- would remain with Novell, but 9 be administered by SCO. 10 And I'm putting in language here -- this is my

11 handwriting -- to make very clear that SCO did not have 12 the right to modify or change or waive those licenses 13 without our written consent and that they were acting -14 they were to act only as our agent, and, if they did not, 15 we could step in and do it ourselves. So this was an

16 enforcement mechanism that established that SCO would act 17 as Novell's agent to exploit these SVRX licenses, which 18 is really -- think of it as the UNIX relationship with 19 the other big companies. 20 And it was important that we establish that

21 this is Novell's business, essentially, and their 22 involvement in it is to be our agent, and if they didn't 23 do what they were supposed to do, we could step in and do 24 it on our own. 25 Q. The concept of an agent, that's something that

2350

1 lawyers become familiar with in law school, correct? 2 3 A. Q. Yes. And what's the basic idea of an agent and what

4 their duties are? 5 A. So, if you are -- if you own an asset or a

6 business or have the economic rights to something, you 7 can appoint somebody to act on your behalf so that you 8 don't need to be there every minute and sign every 9 document or to exploit -- it empowers somebody to work 10 for you and to represent you. 11 And we all have real estate agents when we sell

12 our home, and they might go into negotiations on our 13 behalf when we are selling a home or when we are buying a 14 home. 15 own. Sometimes the agents don't have any power on their Sometimes they are given limited powers, but within

16 the scope of the agency, to act on our behalf. 17 You see it in real state. You see it in all

18 kinds of businesses, where businesses identify somebody 19 who has a limited power to do the work on behalf of 20 somebody else, and they frequently get -- in our real 21 estate deals, we get commissions. 22 a 5 percent share of the royalties. 23 But the idea is, is that it's our money, our In this case, they got

24 business, and you work for me except for your slice of 25 the economics. And that's what we were trying to get at

2351

1 here. 2 Q. And if the person who has retained the agent is

3 dissatisfied with the agent's performance, what can 4 typically happen? 5 A. Well, then you can terminate the agent at-will.

6 Now, there's frequently negotiations over -- in a real 7 estate deal, you can terminate your agent, but if he's 8 brought you a buyer, you can't terminate him and cut him 9 out of that fee. You have what people call a tail that

10 deals with a transitional relationship between 11 termination of an agent and going to maybe -- and 12 starting with a new agent. But the agent works for and

13 at the pleasure of the principal and has frequently 14 fiduciary duties to the principal, meaning very high 15 duties to work for you, not for himself. 16 Q. And what were you trying to configure here,

17 vis-a-vis the agency relationship that you testified 18 to? 19 20 me. A. I was trying to configure here -- or not really

Novell was trying to configure here, with me as its

21 negotiator and implementer, a relationship where SCO 22 would work on Novell's behalf around this set of 23 technologies to maximize and assist Novell in maintaining 24 the viability of this business because this was a 25 critical part of the purchase price that made it possible

2352

1 for them to buy the UnixWare and take over the UnixWare 2 assets that it got. 3 Q. And did Novell, in the drafting that you did of

4 section 4.16, limit its authority to direct SCO as to 5 what it could do vis-a-vie the UNIX licenses? 6 7 8 A. Q. A. It did. Sorry? It did restrict SCO. The language that I

9 recognize here says:

Shall not have the right to enter

10 into future licenses and amendments of the SVRX licenses, 11 it says, except as may be incidental to the UnixWare 12 business that they were acquiring. 13 And it -- they couldn't do SVRX licenses

14 without our consent. 15 Q. And if you go to the bracketed sentence: In

16 addition, at seller's sole discretion and at seller's 17 direction, buyer shall amend, modify or waive. 18 Do you see that? It's highlighted on your

19 screen, Mr. Braham. 20 21 A. Q. Yes. Yes.

Did Novell, seller, limit itself in any way as

22 to the direction it could give to Santa Cruz, the buyer? 23 A. It did not. That sole discretion is put in

24 there to try to make completely clear that Novell is in 25 control here, and Novell has the right to tell SCO what

2353

1 it can do and can't do and to avoid -- people talk about 2 for the avoidance of doubt. 3 about in legal contracts. 4 avoidance of doubt. 5 6 Q. A. The avoidance of doubt of what, sir? As to whether Novell had complete rights to That's something people talk That's in there for the

7 control what happened with the UNIX business, the SVRX 8 historical UNIX assets and technologies. 9 Q. Showing you V-3, is that your handwriting on

10 V-3, sir? 11 12 13 Honor. 14 15 16 17 Q. MR. SINGER: THE COURT: No objection. It will be admitted. A. It is. MR. JACOBS: I move V-3 into evidence, Your

(Novell Exhibit V-3 received in evidence.) BY MR. JACOBS: Now, if you turn -- so V-3 is

18 another draft of the Asset Purchase Agreement with your 19 handwriting on it; is that right, Mr. Braham? 20 21 A. Q. It is. And now if we turn to section 4.16 in this

22 draft, which is at 42765, could you read aloud, 23 Mr. Braham, the handwritten box at the bottom of that 24 page? 25 A. "In the event that buyer shall fail to take any

2354

1 such action concerning the SVRX licenses as required 2 herein, seller shall be and hereby is granted the rights 3 to take any such action on its own behalf." 4 Q. So, the intent of that language, Mr. Braham,

5 was what? 6 A. If SCO didn't do what it was supposed to do as

7 our agent, we could step in, on our own, on our own 8 initiative, at our choice, and do it ourselves. And so

9 it's intending to give us the right to do that, as well 10 as granting us any rights we need in order to be able to 11 have the power to do that. So, it is intended to be a

12 crystal clear communication that Novell can step in and 13 protect itself if SCO goes off the reservation. 14 Q. Now, were there a couple of particular concerns

15 that Novell had about being able to direct Santa Cruz 16 back in September of 1995? Were there some agenda items

17 that related to this provision in the company's agenda? 18 19 that. 20 Q. Were you aware that Novell had entered into A. I'm not sure I understand what you mean by

21 buyouts of SVRX royalties going into these negotiations? 22 A. Yes. They had done -- I believe that they

23 had -- I'm not sure what they had done before, but there 24 was always the possibility of doing complete buyout 25 transactions with the end user -- not really the end

2355

1 user, the OEM customer of UNIX, such as an IBM, Sequent, 2 HP, other big companies that might be running royalties 3 in the UNIX relationships. 4 In other words, those companies pay a per-copy

5 fee or pay for source code access, and they might do a 6 deal with Novell, where we just pay a lump sum, and now 7 we have a royalty-free, unfettered right in the future. 8 And the ability to do those buyouts was something that we 9 were very interested in preserving. 10 Q. And then was there a project related to Hewlett

11 Packard that was on the company's agenda at that time? 12 A. There was. So -- it was believed -- I

13 believed.

People at Novell communicated to me that they

14 believed that the best party to advance UNIX, for the 15 Intel 64 bit architecture. So, at this time, Intel's

16 microprocessors were 32 bit microprocessors. 17 And think have of it as they are like a And so you had

18 6-cylinder car but not a 12-cylinder car.

19 software in UNIX for the 6-cylinder car, but HP was 20 working on its 64 bit architecture, and it was believed 21 that they would be the best party to develop the software 22 for the 64 bit architecture, so the 12-cylinder car. 23 And Novell -- it was very important to Novell

24 to retain the rights to enable HP to develop that flavor 25 of UNIX. And another purpose of the retention in rights

2356

1 is so that Novell had the ability to enable HP to go off 2 and do this. 3 So, the licenses to UNIX with these other big

4 companies, it wasn't as simple as we're granting you 5 technology and you can put it with your computers and 6 ship it. Within each of those relationships, there was

7 source code, which enabled those companies to go off and 8 develop their own flavors of UNIX and to use in their own 9 computer systems. And, in this case, HP, there was one

10 coming up with HP, where they were going to develop a 11 flavor for the 64 bit microprocessor, and we wanted the 12 flexibility -- insisted upon, and I don't even think it 13 was controversial -- the flexibility to grant those 14 rights to HP to allow them to do that for the benefit, 15 ultimately, of UNIX in the marketplace. 16 17 on. 18 room. Q. Now let's create a picture here of what's going You're in this conference

You're drafting away.

How are the negotiations actually taking place

19 between the Santa Cruz representatives and the Novell 20 representatives over issues like this particular 21 language? 22 A. So, from time to time, Santa Cruz executives

23 might appear for a very short period of time in the 24 negotiating room, but they were not the voice. 25 weren't negotiating anything. They

The negotiations were

2357

1 happening between me and my team and Brobeck and its 2 team. 3 So the way it works, which is very common in

4 the way complex deals are done is, each side funnels in 5 its viewpoints, its hopes and aspirations and fears into 6 their negotiating people, and then that -- those 7 negotiating people articulate a position to the other 8 side, which then is communicated to the lawyers on the 9 other side, and then the lawyers funnel that back to 10 their people. And so you kind of a funnel of all these

11 different inputs which then get put out to the lead 12 negotiator. 13 And it's helpful, to avoid chaos in deals, that

14 that there actually be a single voice representing an 15 entire constituency on each side. It isn't always the

16 case that it works that way, but in this situation it 17 did. They had Brobeck, Phleger as their voice. We were

18 live, in person; me in the conference room, in their 19 offices, as well as Aaron Alter with me most of the time, 20 and the lawyers on their side. And so that was -- that

21 was the war room, where the deal was negotiated. 22 Q. And would the people on your team, acting at

23 your direction, would they exchange drafts with the 24 Brobeck representatives? 25 A. We would. There was -- we would send over, by

2358

1 e-mail or fax, drafts.

This was a time where e-mail was

2 happening, but we all forget that there was a time before 3 e-mail, but we would have e-mail at this point as well as 4 faxes. 5 6 7 Q. A. Q. The good old days? Yeah. Let me show you D-4, please. What is D-4,

8 Mr. Braham? 9 A. I'm trying to look at this and see whether -I'm not sure whether this was

10 it looks like it's a fax. 11 a fax or an e-mail.

But it's an enclosure, sending some

12 language to Jeff Higgins, who was the associate on the 13 deal for Brobeck, from Aaron Alter. 14 Q. And Aaron Alter was your subordinate on the

15 team, correct? 16 A. Yes. So this is a fax, so we're still in the

17 time of the faxing. 18 At this point, people, when they had

19 handwritten stuff on documents, they would fax rather 20 than e-mail because -- right now you can e-mail, and you 21 can put it in a PDF and then you can e-mail it. Back

22 then, PDF's were not -- it may have been possible, but 23 when people had a mark up of something, they would fax 24 those pages rather than e-mail. 25 THE COURT: Mr. Braham, I've got to ask you.

2359

1 You've got a lot of information, but only some of it is 2 relevant to the case, and I want you to please answer the 3 questions posed to you by Mr. Jacobs as directly as you 4 can, please. 5 6 7 Honor. 8 9 10 11 12 Q. THE COURT: MR. SINGER: THE COURT: Any objection. No objection. D-4 will be admitted. THE WITNESS: MR. JACOBS: Okay. I offer D-4 into evidence, Your

(Novell Exhibit D-4 received in evidence.) BY MR. JACOBS: So, as you said, Mr. Braham,

13 this is a fax cover sheet from Aaron Alter to Jeff 14 Higgins, you see it's on Wilson, Sonsini letterhead, and 15 it's going over to Brobeck, and it's dated September 18, 16 1995. 17 18 A. Q. Do you see that? Yes. And if you look on the third page, you'll see

19 some of what's called a rider, with some language in it 20 about -- about bankruptcy in the middle. 21 that? 22 23 A. Q. Yes. What was the concern that drove the proposed Do you see

24 inclusion of that language? 25 A. So, there was a question on the Novell team as

2360

1 to whether SCO was -- potentially at risk for going 2 under, going bankrupt or becoming insolvent. And there

3 is concern, in intellectual property situations, that, in 4 bankruptcy, contracts can be modified or you really don't 5 know how they are going to be handled in bankruptcy. 6 And so, we were concerned that we wanted to

7 make sure that Novell had the equitable interest in the 8 SVRX agreements and royalties because under -- my 9 understanding is that under the Bankruptcy Code, that 10 would enable us not to be -- enable Novell not to be 11 adversely affected if SCO did go into bankruptcy and so 12 that we wouldn't have the unpredictability that can occur 13 as intellectual property or contracts or agreements find 14 their way into a company that's in bankruptcy. 15 Q. So, September 18, 1995. The Asset Purchase

16 Agreement will be executed on September 19, 1995? 17 18 A. Q. Yes. And the language is going back and forth

19 between the negotiating teams? 20 21 A. Q. Yes. Y-3. If you look at especially the third page

22 in on Y-3, Mr. Braham, can you identify what we've got 23 here? 24 25 A. Q. Do you see Shannon Whisenant's name there, on 407? Yes. And you see that she's faxing to Jeff Higgins?

2361

1 2

A. Q.

Yes. And Shannon was on your team and working at

3 your direction, correct? 4 5 6 7 8 9 Q. A. Yes. MR. JACOBS: MR. SINGER: THE COURT: Offer Y-3 into evidence. No objection. It will be admitted.

(Novell Exhibit Y-3 received in evidence.) So, actually, let's start on the front page.

10 And this is a fax from Shannon Whisenant to Burt Levine. 11 Do you see that? 12 13 14 A. Q. A. Yes. Did you know who Burt Levine was? I believe he was a lawyer who worked in the

15 UNIX business at Novell at this point. 16 Q. And if you see the city, state, it says Floren

17 Park, New Jersey? 18 19 A. Q. Yes. Is that consistent with your recollection that

20 he worked in the UNIX business unit? 21 A. Yes. That's where the UNIX business was and

22 remained at Novell. 23 Q. And then the cover sheet that I was showing you

24 at 40407, that's from Shannon Whisenant -- I'm not saying 25 her name right, am I?

2362

1 2

A. Q.

Whisenant. Whisenant at Wilson, Sonsini, again, to Jeff Do you see that?

3 Higgins at Brobeck. 4 5 A. Q. Yes.

And then, if you look at the schedules, you'll

6 see there is a draft dated 9/18/95 of Schedule 1.1(a) and 7 Schedule 1.1(b). 8 9 A. Q. Yes. Do you see that? And if you look at schedule

10 1.1(a), and you look at the intellectual property 11 section, you see intellectual property listed on 1.1(a). 12 Do you see that? 13 schedule? 14 15 A. Q. Yes. And then if you turn the page over to 1.1(b) That's 1.1(a) is the included asset

16 and look at Roman V, you'll see that in intellectual 17 property, all copyrights are excluded. 18 19 A. Q. Yes, I do. How did it come to be that copyrights were Do you see that?

20 listed as an excluded asset in the drafts of schedules to 21 the Asset Purchase Agreement? 22 A. We proposed it, negotiated for it. It was

23 agreed upon, and that's how the agreement was executed. 24 Q. And at whose direction did you implement the

25 exclusion, on the excluded assets schedule of all

2363

1 copyrights? 2 3 A. Q. At Novell's, but through David Bradford. And what was the rationale that you understood

4 for excluding the copyrights? 5 A. We were protecting Novell's interests. We were

6 concerned about the copyrights moving over from a 7 bankruptcy standpoint. We were concerned about the

8 copyrights moving over because we had a very important 9 interest in retaining the UNIX business, which is part of 10 the core economics of the deal. 11 negotiated for. 12 It's not -- when you go through an asset deal, And this was the deal we

13 you negotiate asset-by-asset, and we were unwilling to 14 transfer the copyrights, and they were willing to acquire 15 the business without them. 16 Q. Do you recall any push back from Santa Cruz

17 during negotiations on this question? 18 A. I recall some discussion, but I don't -- I

19 don't actually recall strong push back. 20 Q. And did you have an understanding of how the

21 structure of the Asset Purchase Agreement would work if 22 copyrights were excluded, ownership of copyrights were 23 excluded as an asset being transferred to Santa Cruz? 24 How would the deal work? How would -- for example, how

25 did you understand Santa Cruz would go forth and prosper

2364

1 in the UnixWare business without copyrights? 2 A. It had access -- it had physical ownership, in

3 terms of the actual physical embodiment, of the disketts, 4 the manuals, the people who understood it, the computers 5 that had the UnixWare business, the software on it. And,

6 essentially, it had a license to use that to then build a 7 new version of UnixWare, and it would own the copyrights 8 in what it built on top of the base UNIX and UnixWare 9 software that it had a copy of. 10 And it would go forth and license that to third And because its embodiment, its

11 parties, sell it.

12 improvements on that were its copyrights, they had 13 complete ability to exploit the business. 14 Q. And how did that compare with your

15 understanding of the basic structure of the relationship 16 with other vendors of UNIX flavors? 17 A. Well, those other vendors had licenses to UNIX

18 from -- to their version of UNIX and would build their 19 own improvements on their versions of UNIX to which they 20 also had their own copyrights and ownership. Everybody

21 is -- everybody starts out with a foundation and then 22 they build their own house on top of it, and they have 23 the ability, then, to sell that house or exploit that 24 house as they wish, but -- so, everybody sort of starts 25 with a basis that they get a license to, and then they go

2365

1 off and build what is actually theirs on top of it. 2 Q. I'd like to show you, sir, SCO Exhibit 1. Just to tell

3 Actually, at this time, I think I won't.

4 the jury where we're going on this, you weren't involved 5 in Amendment Number 2, were you, sir? 6 7 A. Q. I was not. So, let's look at A-1, which is the Asset

8 Purchase Agreement as executed on September 19, 1995. 9 Would you please look at Section 1.1(a), Purchase And 10 Sale Of Assets. And do you see there's an explanation

11 there of what is going to go to seller and what is not -12 what is going to go from seller to buyer and what is not? 13 Do you see that? 14 15 A. Q. Yes. I would like to ask you particularly about the

16 phrase "notwithstanding the foregoing." 17 A. So, 1.1(a) lays out a list of assets or

18 actually refers to the attachment as a list of assets 19 that are going to be transferred to SCO. 20 definition of assets that are excluded. 1.1(b) is a Sometimes, in

21 drafting an agreement, you have provisions which can be 22 read as inconsistent, or you can have a schedule that 23 looks like it overlaps with another schedule. 24 And what you do in drafting, hopefully, is to

25 clarify that one trumps the other; that, in the event

2366

1 there is a conflict, one wins, so that people can say, 2 well, I know -- maybe I'm confused as to what's on 3 Schedule A, but Schedule B is very clear, and now I need 4 to know who wins in the event that you have a potential 5 overlap. 6 And, "notwithstanding the foregoing," is magic

7 language, in my view and my understanding, that makes it 8 clear that 1.1(b) wins over 1.1(a). 9 I was focused on this language when we were

10 drafting because I was watching with a keen eye to 11 protect Novell's interests, and it's very difficult, in 12 working on a hundred-page agreement, to be absolutely 13 confident as to how every clause is going to be viewed. 14 So you set up some rules to order them. And that

15 "notwithstanding the foregoing" is actually one of the 16 things that I remember very clearly, 15 years later. 17 Q. If you turn, then, to Schedule 1.1(b) and you

18 look at the reference there to intellectual property and 19 the excluded assets, all copyrights and trademarks, do 20 you see that? 21 may be easier. 22 23 A. Q. Yes. Did the Santa Cruz representatives have an You can follow on the screen. I think it

24 opportunity to review this language before the Asset 25 Purchase Agreement was signed?

2367

1 2

A. Q.

Yes, they did. Was Santa Cruz represented by skilled counsel

3 in the transaction? 4 5 A. Q. They certainly were. Is there any doubt in your mind that the Santa

6 Cruz representatives, in looking at this schedule, were 7 capable of understanding your intent to exclude the UNIX 8 and UnixWare copyrights existing as of the date of the 9 Asset Purchase Agreement? 10 11 12 13 A. No doubt, whatsoever. MR. JACOBS: THE COURT: MR. SINGER: Thank you, Mr. Braham. Mr. Singer. Your Honor, with the Court's

14 permission, I'll look for an appropriate breaking point 15 in about ten minutes or so. 16 17 18 BY MR. SINGER: 19 Q. Good afternoon, Mr. Braham. My name is Stuart THE COURT: Thank you, Mr. Singer. CROSS EXAMINATION

20 Singer. 21 22 23 24 A. Q. A. Q.

I'm one of the attorneys for the SCO Group. Good afternoon. Now, have you heard of Amendment Number 2? I have. You understand that Amendment Number 2 changed

25 the language in the Schedule of Excluded Assets that you

2368

1 were discussing with Mr. Jacobs, right? 2 3 4 scope. THE COURT: MR. JACOBS: One second, please. Your Honor, this is beyond the

I specifically excluded him from any -- he

5 specifically excluded himself from any involvement of 6 Amendment Number 2, and now Mr. Singer is just going to 7 engage in a lawyers' debate about the meaning of 8 Amendment Number 2. 9 THE COURT: Well, you asked him about his

10 involvement with Amendment Number 2, so Mr. Singer must 11 be permitted to ask some questions about it as well. 12 13 fine. MR. JACOBS: If it's about his involvement,

If it's about asking this lawyer to be a legal

14 interpreter, I think we're beyond the scope of the direct 15 and wasting time. 16 THE COURT: Do you intend to ask this lawyer

17 about his lawyerly opinion on Amendment Number 2? 18 MR. SINGER: Well, I don't know where this is

19 going with him, but I intend to elicit the existence of 20 Amendment Number 2, the role Amendment Number 2 has 21 versus the others. 22 THE COURT: Why don't you go ahead, and

23 Mr. Jacobs can object to specific questions. 24 Mr. Braham, I'm sure you understand that if

25 Mr. Jacobs stands up before you have answered the

2369

1 question, please pause so that I can hear the objection. 2 3 Q. THE WITNESS: BY MR. SINGER: Okay. Mr. Braham, just so we're clear

4 on what we're talking about, let's put Amendment Number 2 5 before you, which is part of SCO Exhibit 1. 6 last part of that exhibit. 7 haven't you? 8 9 A. Q. I have. And you understand that the way an amendment Which is the

You have seen this before,

10 works -- you were talking a few minutes ago about 11 something having priority over something else. An

12 amendment like this has priority over the language which 13 is replaced, correct? 14 A. It should be read together, but I'm not sure I

15 understand priority. 16 Q. Well, let me be more specific. You understand

17 that when it says, as it does here in paragraph A, "With 18 respect to Schedule 1.1(b) of the agreement titled 19 Excluded Assets, Section 5, Subsection A shall be revised 20 to read." 21 When you have a later amendment like that, you

22 understand that the old language that you were testifying 23 to on the Excluded Assets Schedule no longer exists, and 24 this is the new language that that has replaced it, 25 correct?

2370

1 2

A. Q.

Yes. This is now the operative language, from

3 October, 1996, forward, that has been put into the 4 agreement, correct? 5 6 A. Q. Yes. And so, what you were talking about with this

7 asset schedule that was carefully negotiated, that 8 excluded copyrights from the deal; one year later, that 9 exclusion was taken out and replaced with this language? 10 11 A. Q. I don't believe that it had the effect of -I'm not asking you that. I'm asking you: That

12 language was taken out? 13 14 this. A. The language was taken out and replaced by I assumed that it was properly executed. I

15 don't -- I didn't -- wasn't participating in it, so I 16 assume it was properly executed. 17 Q. I assure you, Mr. Braham, if this wasn't

18 carefully and properly executed, we would be hearing all 19 about it from Novell. 20 21 A. Q. Okay. So, assuming that this was properly executed,

22 you understand that the language that you have been 23 testifying about earlier, on copyrights being excluded, 24 was replaced by the language which now appears in 25 Amendment Number 2?

2371

1 2

A. Q.

Yes. Now, you weren't involved in the drafting of

3 Amendment Number 2, correct? 4 5 A. Q. No. And you weren't involved in the negotiation of

6 Amendment Number 2, correct? 7 8 A. Q. Correct. Okay. Now let's turn back to what you were

9 involved in, which were the issues on the Included Asset 10 Schedule. Is copyright, sir, a way of indicating

11 ownership of source code? 12 A. It's a way of -- it is a -- one of the

13 intellectual property interests involved in ownership. 14 It is not the only form of intellectual property interest 15 in ownership of software or in source code, but it is a 16 particular -- it is a particular slice of intellectual 17 property interests that relate to a software or source 18 code. 19 Q. So there may be other forms of ownership, like That's one form of ownership,

20 owning the tangible media. 21 correct? 22 A. Yes.

That's ownership of the tangible media,

23 correct. 24 Q. And another type of ownership is the ownership

25 of the copyright in that source code?

2372

1 2

A. Q.

Correct. Correct? Okay. Now let's look at what was the

3 Included Asset Schedule in the agreement you negotiated, 4 Schedule 1.1(a). And let's take a look at it together.

5 And if Mr. Calvin highlights that first paragraph, I 6 think you will be able to read even more clearly. 7 You understood that, in the agreement you

8 negotiated, these were the assets being sold to Santa 9 Cruz, correct? 10 11 A. Q. Yes. And that says: "All rights in ownership of

12 UNIX and UnixWare, including but not limited to all 13 versions of UNIX and UnixWare." 14 And let's pause there. This included all

15 versions of both UNIX and UnixWare, correct? 16 17 18 A. Q. A. Yes, but the -Well. Yes, but you have to read this in connection

19 with the specific paragraph on intellectual property. 20 So -21 Q. We're going to get to that. You have -- each In other words,

22 of these paragraphs, sir, is cumulative.

23 if you sell Santa Cruz an asset in paragraph 1 of the 24 list of included assets, you don't have to repeat that 25 in, say, paragraph 5, right?

2373

1

A.

Sometimes you have more specific clauses that

2 could be a subset of a more general clause, and the 3 specific clause is what lawyers typically look to, to 4 deal with those specific items so -5 6 Q. A. Well, my question --- you said you don't have to, but it is the

7 practice, in drafting contracts, to sometimes have 8 broader sets and narrower sets, and sometimes they 9 overlap. 10 Q. If something is transferred on a list of assets

11 that I'm buying on one paragraph, and we're still on 12 another paragraph of the list of assets I'm buying, if 13 something isn't listed in that paragraph, are you saying 14 that somehow it means that it wasn't included in the 15 first paragraph? 16 17 A. Q. I'm confused. Okay. That wasn't a very good question. So

18 let's look at what this actually says:

"All rights in

19 ownership of UNIX and UnixWare, including but not limited 20 to all versions of UNIX and UnixWare.". 21 And if you go down -- and I'm going to skip

22 over some of this that the jury has seen before, and it 23 says: 24 25 A. "Including source code." Do you see that? Yes. Correct?

2374

1

Q.

So one of the included assets, when you just

2 look at the schedule of assets being sold, are all rights 3 of UNIX and UnixWare, including, but not limited to, all 4 versions UnixWare, including source code. 5 6 7 A. Q. Do you see that? Yes. And then, Mr. Braham, if we go down to the list

8 of products right before that. 9 Mr. Calvin, if you could blowup the last part

10 of paragraph 1. 11 At the end there it says: "Such assets to

12 include, without limitation." 13 Now, "without limitation" is also a term of art

14 in your field, right? 15 16 17 A. Q. A. Yes. Can you tell the jury what it means? If you are making a list of something under a

18 general statement, then the list doesn't -- if there's 19 something that's not on the list, it doesn't necessarily 20 mean that it's not included. So, it enables you to talk

21 about something and give examples but not necessarily 22 give every single example, so your list is representative 23 but not necessarily complete. 24 may not be. It may be complete. It

But the -- what you're saying is that, by

25 virtue of making the list, you're not necessarily making

2375

1 it complete. 2 Q. Right. It includes the assets, without

3 limitation, meaning at least the following, but there may 4 be more. 5 6 A. Q. Correct? Yes. Now, if we look at what is then following that

7 paragraph, you have a list of UNIX source code products, 8 correct? 9 10 A. Q. Yes. And those are both UnixWare 2.0 and products Do you see

11 listed as prior products on such schedule. 12 that? 13 14 A. Q. Yes.

And you have the UNIX products, which are

15 listed then below that, which are products that are 16 called UNIX System V Release 4, 1/ES, and prior products 17 to that, UNIX SVR 4, 4.0 MP, and prior products to that, 18 correct? 19 20 A. Q. Yes. So all rights total -- so all rights in

21 interest, all rights in ownership, to use your language, 22 of UNIX and UnixWare, in these products, and/or prior 23 products, were being transmitted in the Schedule of 24 Included Assets, right? 25 A. I believe the intellectual property clause has

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1 to be read with this. 2 ownership.

So, you're saying all rights in

Copyrights are part of rights in ownership,

3 but copyrights and IP is dealt with specifically under 4 the IP section. So, in the absence of that section being

5 there, I would agree with you, but, because that section 6 is there, that specifically deals with the issue of 7 intellectual property, I believe this relates to the 8 physical manifestations of the source code. 9 it's not as comprehensive as you say. 10 Q. So you're saying, when you said all rights in It's not --

11 ownership of UNIX and UnixWare, that doesn't include the 12 rights you get by copyright. 13 A. That is what you're saying?

Because of how we drafted the intellectual

14 property section, that's correct. 15 MR. SINGER: I think we'll pick up with this

16 tomorrow if it's all right with the Court, Your Honor. 17 THE COURT: All right. Ladies and gentlemen,

18 we will recess for the afternoon, and we will continue 19 tomorrow at 8:30. 20 21 (Jury leaves the courtroom.) Mr. Braham, do you pronounce your last name

22 Braham or Braham? 23 24 B. 25 THE COURT: All right. Thank you. I think we THE WITNESS: Braham like "graham" only with a

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1 all ought to be somewhat consistent with the names. 2 3 4 5 matter. 6 7 8 out. 9 THE COURT: Mr. Braham, if you would just THE COURT: MR. JACOBS: Go ahead. Maybe we could let Mr. Braham step Is there anything, counsel, before we recess? MR. SINGER: MR. BRENNAN: Not from us, Your Honor. Your Honor, we just have a brief

10 please excuse yourself to the hallway. 11 MR. BRENNAN: Your Honor, this is a matter that The practice and

12 we would solicit your assistance in.

13 understanding, I think express agreement between counsel 14 for the respective parties has been to notify one another 15 the day