IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

iBASIS, Inc., :
:
Plaintiff, :
:
vs. : Civil Action
: No. 4774-VCS
KONINKLIJKE KPN N.V., KPN :
B.V., CELTIC ICS INC., EELCO :
BLOK, JOOST FARWERCK, AD :
SCHEEPBOUWER, STAN MILLER, :
BAPTIEST COOPMANS, A.H.J. :
RISSEEUW, M. BISCHOFF, C.M. :
COLIJN-HOOIJMANS, D.I. JAGER, :
M.E. VAN LIER LELS, J.B.M. :
STREPPEL, R.J. ROUTS, D.J. :
HAANK, W.T.J. HAGEMAN, M.E. :
HOEKSTRA, AND M.N.A.J. VOGT, :
:
Defendants. :
:
KPN B.V. and KONINKLIJKE KPN :
N.V., :
:
Counterclaim-Plaintiffs,:
:
vs. :
:
iBASIS, INC., ROBERT H. :
BRUMLEY, CHARLES N. CORFIELD, :
OFER GNEEZY, W. FRANK KING, and :
GORDON J. VANDERBRUG, :
:
Counterclaim-Defendants :
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CHANCERY COURT REPORTERS

500 North King Street - Suite 11400
Wilmington, Delaware 19801-3759
(302) 255-0525
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1 Chancery Court Chambers

New Castle County Courthouse
2 Wilmington, Delaware
Friday, August 14, 2009
3 2:30 p.m.

4
BEFORE: HON. LEO E. STRINE, JR., Vice Chancellor.
5
SCHEDULING CONFERENCE
6 APPEARANCES:

7 RAYMOND J. DiCAMILLO, ESQ.

Richards, Layton & Finger, P.A.
8 -and-
ADAM H. OFFENHARTZ, ESQ.
9 JENNIFER H. REARDEN, ESQ.
Of the New York Bar
10 Gibson, Dunn & Crutcher LLP
For Plaintiff and Counterclaim Defendants
11
DAVID J. TEKLITS, ESQ.
12 Morris, Nichols, Arsht & Tunnell LLP
-and-
13 DARIN P. McATEE, ESQ.
JULIE A. NORTH, ESQ.
14 MISTY L. ARCHAMBAULT, ESQ.
of the New York Bar
15 Cravath, Swaine & Moore LLP
For Defendants and Counterclaim-Plaintiffs
16 Koninklijke KPN N.V. and KPN B.V. and
Defendants Celtic ICS Inc., Eelco Blok,
17 Joost Farwerck, Ad Scheepbouwer, Stan
Miller, Baptiest Coopmans, A.H.J.
18 Risseeuw, M. Bischoff, C.M.
Colijn-Hooijmans, D.I. Jager, M.E. Van
19 Lier Lels, J.B.M. Streppel, R.J. Routs,
D.J. Haank, W.T.J. Hageman, M.E. Hoekstra
20 and M.N.A.J. Vogt

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1 THE COURT: Thanks for coming in.

2 Everybody wants to expedite, but nobody agrees on how.

3 Here's how we're going to do it. I'm

4 not going to just expedite one side or the other. On

5 the other hand, I do want this to be efficiently

6 litigated.

7 I'd have to say, on behalf of iBASIS

8 is the plaintiff here; right?

9 MR. OFFENHARTZ: Yes, Your Honor.

10 THE COURT: And then our friends from

11 the Netherlands are on the other side of it. The

12 bankers are so creative; right? Do you think it's

13 going to make your clients popular in Massachusetts to

14 name the target, or the way you're going to swallow it

15 up is name it Celtics. I'm not sure you view it that

16 way. Bankers need to -- I thought bleeding bait fish

17 is like the target and the shark or something.

18 Why don't you name it, like the

19 acquirer could be like paddywagon and the target could

20 be Irishman. A great thing for the home of the bean

21 and cod, too. That would be beautiful.

22 Anyway, here's what I think one of the

23 things -- I'll pick on iBASIS a little bit. A large

24 number of your defendants probably have no business

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1 being in this case. You've got no possible way

2 probably of getting personal jurisdiction over them.

3 You're trying to get them because they're a European

4 supervisory board.

5 There's a reason why we have entities

6 in Delaware and entities in the United States and

7 there is a limited liability and you're pleading in

8 civil conspiracy and everything. You get the parent

9 corporation. That's the whole idea. The controlling

10 stockholder. That's the doctrine you extend beyond

11 the board to a controller who is supposedly exercising

12 control over an entity akin to that of a fiduciary on

13 the board. That would suffice to get the Dutch parent

14 company, not -- because I read things, you know,

15 not -- was it 18?

16 MR. McATEE: Eight or nine guys.

17 THE COURT: None of whom are directors

18 of the Delaware entity; right.

19 MR. McATEE: Correct.

20 MR. DiCAMILLO: There are two

21 defendants.

22 THE COURT: There are two. I don't

23 read your friends as saying that those folks are in

24 the fiduciary breach. I know European -- about

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1 European board structures and stuff. It's like a

2 hobby of mine. Safer than other hobbies. Not as

3 interesting.

4 But my point is, I don't think that we

5 have a statute for, you know, if you serve on the

6 supervisory board of an entity that's a controlling

7 stockholder of a Delaware corporation we can serve

8 you. Part of why I'm getting into this now is people

9 want expedition. You have to focus. And, you know,

10 requests for admission to 18 different people, the

11 tradition around here is, when you expedite, you

12 obviously have to choose your targets for discovery.

13 Firms of the quality of the four firms involved have

14 typically been able to sit down rationally and agree

15 on these things.

16 What I'm saying to iBASIS is -- you

17 know, I'm not -- you're not going to get this like a

18 plenary entire fairness proceeding trial. One tactic

19 you can do is let it close and then press whether it's

20 entire fairness or not. But, you know, there's enough

21 here around these projections and others things and

22 there's a utility to deciding that upfront that I'm

23 going to expedite. But I want it to be focused.

24 With respect -- you can bring your

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1 legal arguments. If you want to waive discovery,

2 waive discovery. And I have no problem with you

3 bringing -- as part of what you wish for relief if you

4 want to combine it with the briefing and just go on

5 the law, that's fine. But you are seeking something

6 in the nature of final relief. And actually

7 traditionally, if you read Intercompany, I know that

8 there's a footnote in Time Warner that suggests

9 Intercompany's, you know, not good law. But the

10 spirit of what they say would suggest that this part

11 of Intercompany says, when you're going to redeem a

12 rights plan, it's final relief. It can't be done on a

13 preliminary injunction basis for an obvious reason.

14 If the Court's wrong, there's no way to undo it.

15 And one of the things Chancellor Allen

16 did in Intercompany was to construct the stylized --

17 that's what the friends in academia would say --

18 stylized facts. You know, he did that in this case

19 and he sort of listed these ten things that he said

20 was undisputed and on that basis pulled the pill. In

21 many situations the facts aren't uncontroverted, which

22 means you all need to think about whether you want a

23 short evidentiary hearing with respect to the pill.

24 With respect to the projections and

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1 other things, I also need to see, you know, whether

2 they're reliable, how they're being prepared. I also

3 will say, having written both Pure Resources and some

4 other stuff, that one of the things that's really

5 never been able to be authoritatively determined by

6 our Supreme Court since Kahn v Lynch is exactly what

7 are the standards which apply in this context.

8 And so I'm not saying that either side

9 is wrong. I'm saying, as a judge, the way that

10 Kahn v Lynch has worked, it's a beautiful thing. I

11 wish I could write something like this, which is write

12 an opinion that is its own defense. It's an opinion

13 that makes it impossible for the doctrine to be

14 reversed because the hydraulic pressures it creates

15 means there's never any chance for appellate review.

16 I'm sure that United States Supreme Court judges on

17 both sides wish they could come up with something as

18 effective as that. So there is some interesting

19 issues.

20 With respect to timing, that's where I

21 need a little bit of people's rational help. I've got

22 to say that the papers I got today aren't that

23 helpful. With respect to the controller, I don't

24 really care whether the controller has to wait a

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1 little bit. I mean, you've controlled this company

2 for a long time. You whip out an offer at the end of

3 July and you have to swallow the minority by X date.

4 I mean, come on. And that's just not that compelling

5 an interest.

6 On the other hand, you know, commerce

7 is commerce and it ought to move on. And I'm hesitant

8 to just sort of embrace a date without you all. I

9 also actually like lawyers. They're interesting,

10 intelligent people. It's the time of year when, you

11 know -- and you work hard enough where you endanger

12 your family life in general, where I don't wish to

13 destroy anyone's family life.

14 MS. NORTH: My family is thankful for

15 that.

16 THE COURT: It's the time of year

17 where oftentimes you have some precious opportunity to

18 spend a little time with your children or, if you're

19 lucky enough and they're gone, spend time with your

20 spouse or maybe somebody you like better than your

21 spouse. And often that happens before Labor Day.

22 What I'm saying is, we ought to do

23 this in a way that doesn't destroy -- the company's

24 not going anywhere. This is not a situation where,

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1 you know, the acquirer is going to lose the target to

2 someone else.

3 I don't know how many depositions you

4 are all seeking, if you were to do this in advance of

5 a preliminary injunction?

6 MR. DiCAMILLO: Unclear. We've

7 noticed a bunch of depositions. However, we certainly

8 are cognizant of what Your Honor said, and as we

9 indicate in our paper today --

10 MR. OFFENHARTZ: We will certainly

11 trim it down. When we made those initial discovery

12 requests, we neither had counsel that we could

13 block --

14 THE COURT: You want a couple on the

15 board and a couple in the working group, whoever the

16 person is at Morgan Stanley.

17 MR. DiCAMILLO: Yes. We need a

18 handful of depositions.

19 MR. OFFENHARTZ: A few additional ones

20 dealing with the fraudulent scheme issues. Certainly,

21 Your Honor --

22 THE COURT: Is a fraudulent schemer so

23 extensive that it goes beyond the same people?

24 MR. OFFENHARTZ: Your Honor, I really

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1 am very confident that we can pare down the list of

2 depositions and certainly pare down the discovery

3 requests such that we can make this work.

4 THE COURT: It's got to work for more

5 than you all. It's great. It works for us.

6 MR. OFFENHARTZ: I'm sure I can

7 convince my colleague, Mr. DiCamillo.

8 THE COURT: They have discovery

9 they're going to wish to take as well. They're going

10 to have to deal with the basis for which you have a

11 pill. They obviously have a right to inquire into

12 your basic theory about the business is just, you

13 know, a wonderful -- this is the company, "I call my

14 brother in Sao Paulo every Saturday."

15 MR. McATEE: We're not there.

16 THE COURT: That's one of your

17 competitors.

18 MR. McATEE: Yeah.

19 THE COURT: I watch the Gold Network

20 and I think that's every other ad.

21 MR. DiCAMILLO: It seems to me, Your

22 Honor, if we pick a reasonable date, some time in

23 September or early October, we can work with

24 Mr. Teklits and figure out a sensible discovery

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1 schedule.

2 We understand what Your Honor wants to

3 hear and how you want to do it. I think we can figure

4 it out.

5 THE COURT: The question is, you know,

6 in some ways it's more to you all, which is you're

7 attacking this rights plan.

8 Are you limiting yourself to the idea

9 that they just simply, no matter -- assume there would

10 be clear justification under something like the Unocal

11 standard for the target board to do what it wishes,

12 which is they have no authority to do. Are you

13 limiting yourself to that argument or are you going to

14 say and, in the alternative, there's no justification

15 equitably for them to use a pill even if they have

16 authority?

17 MR. McATEE: We were going to make

18 both arguments, although only the first on our

19 proposed motion. But if we want to do it all at the

20 same time --

21 THE COURT: The reason why I say

22 there's not much room for efficiency, I think -- my

23 sense is, you know, you may say it's okay for you all

24 just the way the disclosures came out about the

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1 projection. It is an interesting colorable claim. If

2 you look at Weinberger and other things, honestly, it

3 might be in your clients' interest to get it resolved

4 in some way. But I'm going to expedite on that.

5 Given that I'm going to expedite on that, it's not

6 really a real efficiency for me or anybody else to

7 jump a motion to judgment on the pleadings. You can

8 certainly make those arguments. What I'm getting at

9 is, what is the shape and nature of the hearing we're

10 going to have? If you want to present some factual

11 arguments about the pill in person, you know, we may

12 be talking about a short trial.

13 We're not talking about a damages

14 stage, so we're not getting to where they have to have

15 valuation experts. I mean, I think the more -- where

16 the valuation or something came up, the special

17 committee is going to make its arguments about value,

18 you guys will in the context of some sort of

19 reasonableness analysis when we get to the pill.

20 I've also seen some of that overlap

21 with why Morgan Stanley told these things, blah, blah,

22 blah.

23 If you assume that the worse you had

24 to take like -- if there were 12 depositions all

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1 around, that's probably a reasonable.

2 MS. NORTH: I think that is

3 reasonable.

4 THE COURT: When could we be looking

5 to have and if you wanted like, say, two days, a day

6 and a half? We allocate two days for an evidentiary

7 hearing.

8 MR. DiCAMILLO: If we can get a couple

9 days early October, that might work.

10 THE COURT: It looks like I can do

11 something the eighth and ninth of October. I

12 understand from an acquirer's standpoint you want to

13 move fast. If you're thinking about when you can

14 actually -- since we're in the middle of August now --

15 MR. McATEE: And August is a very

16 tough month.

17 THE COURT: Right. Because the Dutch

18 are pretty sensible about this. They're on mandated

19 leave. You know what you get in the Netherlands from

20 the government? You get a check that comes to you

21 that's for your vacation. Just like, if your kid's in

22 school, you know what you get in the beginning of the

23 year? You get a check, I think, that helps with

24 school supplies. But they're socialists. They were.

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1 It's a cool country. I like it.

2 Can we work with those dates maybe?

3 Does that work?

4 MS. NORTH: Yes. There's some

5 holidays to navigate in September.

6 MR. OFFENHARTZ: Your Honor, if it's

7 possible to pick two days, perhaps the following week.

8 I apologize. I don't have my BlackBerry handy

9 regarding the various holidays which may come up in

10 September somewhat more than usual.

11 THE COURT: You got the whole -- my

12 only --

13 MS. NORTH: Yom Kippur is on the 28th.

14 THE COURT: But that -- how does the

15 8th or the 12th?

16 MR. OFFENHARTZ: I wasn't suggesting

17 necessarily that the holidays make the eighth or

18 ninth undoable. I was suggesting, as a practical

19 matter, given a few things, among them being August,

20 the fact that --

21 THE COURT: That's what I mean. Part

22 of what I'm saying is --

23 MR. OFFENHARTZ: And then moving into

24 September, other people are away. A little bit more

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1 breathing room might be helpful for all of us. My

2 impression from our adversaries in terms of timing is

3 they have recognized, even under their scenario, that

4 they're rolling things out until September 24th, I

5 think, under your own proposal.

6 So we're not talking about a dramatic

7 extension even where they were coming in,

8 admittedly --

9 THE COURT: I understand. What I'm

10 trying to figure out --

11 MS. NORTH: What difference an

12 additional four days would make.

13 THE COURT: Versus the 12th or the

14 13th.

15 MR. DiCAMILLO: Is the Court open on

16 the 12th?

17 THE COURT: The 13th I'll have to

18 leave early, unless you want to do it in Cambridge

19 near -- I don't know how far the company is from

20 Cambridge.

21 Why don't we stick to the eighth and

22 ninth. See what you can do with the schedule. I'm

23 not an inflexible person. If you come back to me --

24 what I'm saying, I'll say to the defendants is be

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1 flexible. If it really works the next week or the

2 week after better, then let me know and we'll do that.

3 My point is, you'll obviously have to work around the

4 scheduling of depositions and all. But you should be

5 in a situation where, you know, what you may need the

6 timing is getting your opening -- what you really have

7 to juggle, I think, is the Yom Kippur situation and

8 the implications for your brief.

9 On the other hand, ideally I would get

10 everything by Friday the second -- ideally -- but the

11 world is not ideal. I would have no problem with

12 getting opening briefs in on the 29th.

13 Now, obviously you can't work Yom

14 Kippur, but that doesn't mean you can't work Saturday

15 and Sunday before.

16 MR. DiCAMILLO: Your Honor, what do

17 you want in terms of brief?

18 THE COURT: It's always simpler to do,

19 especially in this situation where you each have

20 claims, simultaneous openings and simultaneous answer.

21 If you can do the 29th and get the briefs delivered to

22 me on the third. If we're going to have a pretrial

23 thing, have that in by Friday or something like

24 that -- the pretrial stipulation. That would work.

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1 The sooner you notice up, you figure

2 out who your parties are for deposition, I think the

3 better. Most people are usually back after Labor Day.

4 And when does the break end in the Netherlands?

5 MS. NORTH: I don't know.

6 MR. McATEE: Early September.

7 THE COURT: I think school starts back

8 there, too.

9 MS. NORTH: Yeah. Definitely.

10 THE COURT: Okay. Well, good luck.

11 Wisdom never comes too late if people can reach an

12 agreement. Some interesting issues.

13 (Discussion off the record.)

14 (Adjourned at 2:50 p.m.)

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1 CERTIFICATE

2 I, DIANE G. McGRELLIS, Official Court

3 Reporter of the Chancery Court, State of Delaware, do

4 hereby certify that the foregoing pages numbered 3

5 through 17 contain a true and correct transcription of

6 the proceedings as stenographically reported by me at

7 the hearing in the above cause before the Vice

8 Chancellor of the State of Delaware, on the date

9 therein indicated.

10 IN WITNESS WHEREOF I have hereunto set

11 my hand at Wilmington, this 17th day of August, 2009.

12

13 /s/ Diane G. McGrellis

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14 Official Court Reporter
of the Chancery Court
15 State of Delaware

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17 Certification Number: 108-PS

Expiration: Permanent
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