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ORACLE V. PEOPLESOFT: A CASE STUDY, 12 Harv. Negot. L. Rev. 1
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12 Harv. Negot. L. Rev. 1
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Harvard Negotiation Law Review
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2007
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Oracle v. PeopleSoft
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ORACLE V. PEOPLESOFT: A CASE STUDY
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David Millstone

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Guhan Subramanian
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Copyright (c) 2007 Harvard Negotiation Law Review; David Millstone; Guhan Subram
anian
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\u8220\'3fThere is no possibility of any condition, at any price that PeopleSoft
will be sold to anyone. No possibility.\u8221\'3f
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-- Craig Conway, CEO and Director, PeopleSoft

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\u8220\'3fWe\rquote ve got this war game in a box. This has all been pre-scripte
d. If they launched on J.D. Edwards, we were going to launch on them.\u8221\'3f
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-- Larry Ellison, CEO and Director, Oracle
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It was 7:30 in the morning, Pacific Standard Time, on Monday, June 2, 2003. Orac
le Co-President Safra Catz was on her home exercise bike when the news came acro
ss CNBC: two of her major competitors, PeopleSoft and J.D. Edwards (JDEC), had a
greed to merge. Catz stared at the screen for just a moment, then leapt off her
bike and headed upstairs to her computer. It was true; a deal had been signed ov
er the weekend. Catz\rquote s inbox began to fill with a flurry of reaction. A B
lackBerried message from Joe Reece, Oracle\rquote s banker at Credit Suisse Firs
t Boston (CSFB), suggested they discuss \u8220\'3fwhether it makes sense to stir
the pot on this.\u8221\'3f
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A junior banker weighed in with a more lengthy analysis. Summaries, statistics,
trading multiples, market color. The financial surgeons of Wall Street\rquote s
most powerful shops were dissecting the deal, probing it for weaknesses, and
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laying its pathology out for their eminent client. But Catz was cautious. There
was one person she needed to talk to before she let slip the dogs of war.
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Unsure whether Larry was up yet, she emailed.
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Subject: PeopleSoft/J.D. Edwards.
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Body: Now would be the time to launch on PeopleSoft.
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Thirteen minutes later, at 7:47 am, came Larry\rquote s reply:
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Subject: RE: PeopleSoft/J.D. Edwards.
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Body: Just what I was thinking. Where are you?

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It was going to be a long week.
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Background
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EGDAE_1}{\*\bkmkend co_g_ID0EGDAE_1}
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Oracle and PeopleSoft competed in the enterprise application software business:
it accounted for approximately 20% of Oracle\rquote s revenues (the remainder wa
s database) and 100% of PeopleSoft\rquote s. Enterprise application software aut
omates business processes, such as purchasing and selling, accounting, and payro
ll. The software is a big-ticket item for most companies, with purchase prices o
ften in six or even seven figures. And after paying the large price tag, a compa
ny will spend as much as ten times the purchase price to install and integrate t
he software into its operations: hiring consultants to tailor and install the so
ftware; training employees in its use; and even changing the way the company doe
s business in order to make the most of the software\rquote s capabilities. Unsu
ccessful installations have brought havoc to companies, ruined quarters, and end
ed careers of IT heads. As a result the decision to buy is not taken lightly, an
d once bought the commitment on both sides is long term.
\par
}
}
}
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
In addition to paying the purchase price and related installation costs, compani
es that buy enterprise application software pay two ongoing maintenance fees to
the vendor. The first fee gives a buyer access to personalized support: the righ
t to call and ask questions, submit problem reports, etc. The second and larger
fee is for software update rights. This second fee gives a buyer access to the l
atest versions of the software, including bug fixes, product enhancements, and u
pdates.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj

{\*\bkmkstart co_g_ID0EWEAE_1}{\*\bkmkend co_g_ID0EWEAE_1}


{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
A company\rquote s software can quickly become obsolete if not assiduously updat
ed. Consider, for example, a company that uses software to manage its payroll.
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
If withholding tax laws change and the software is not updated to incorporate t
he change, the software becomes useless, and the company has no way to pay its e
mployees. For
}
{\i1 \fs20 \cf22 \f2 \b1
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*3
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
this reason virtually all enterprise application customers pay the update fee.
Enterprise software vendors are not contractually obligated to provide updates o
r even bug fixes to customers who sign up for update rights. Instead, the market
runs on trust and reputation. Customers depend vitally on an \u8220\'3fimplicit
contract\u8221\'3f with their software vendor to support their mission-critical
purchase.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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The Predator: Oracle Corp.
\par
}
}
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Oracle was founded in 1976 by Larry Ellison, the brilliant and fiercely competit
ive college dropout who still ran the company in 2003. Most of Ellison\rquote s
$15 billion net worth was tied up in his 26% ownership interest in Oracle. Ellis
on flew fighter aircraft, raced sailboats, and collected Japanese art. He was kn
own to be a ruthless competitor and once famously paraphrased the Mongol warlord
Genghis Khan in a New York Times article: \u8220\'3fIt is not sufficient that I
succeed; all others must fail.\u8221\'3f
}
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4
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
In 2003 he was featured in a 60 Minutes II episode entitled \u8220\'3fThe Most
Competitive Man In the World.\u8221\'3f Fueled by Ellison\rquote s unique combin
ation of success and showmanship, many books had been written about him over the

years, with titles such as Everyone Else Must Fail: The Unvarnished Truth About
Oracle and Larry Ellison; The Oracle of Oracle: The Story of Volatile CEO Larry
Ellison and the Strategies Behind His Company\rquote s Phenomenal Success; and
The Difference Between God and Larry Ellison: God Doesn\rquote t Think He\rquote
s Larry Ellison.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ESHAE_1}{\*\bkmkend co_g_ID0ESHAE_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
More generously, Ellison had also built a company worth more than $60 billion th
at provided the technology to manage much of the world\rquote s information. By
2003, Oracle had over 41,000 employees and sold products in over 120 countries.
It was the largest employer in the world of CalTech and MIT engineers as well as
the world\rquote s largest employer of Harvard mathematicians. Oracle also had
a highly regarded sales culture that produced, among others, Tom Siebel, the fou
nder and CEO of Siebel Systems, and Craig Conway, the CEO of PeopleSoft. The com
pany\rquote s competitiveness and success in gaining market share earned it a re
putation as a bruising competitor.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Historically, Oracle did not grow through acquisition. The company\rquote s bigg
est deal before PeopleSoft was only $150 million. Most others were barely materi
al. Over its first two decades the company had so much organic growth - doubling
in size in some years - that
}
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*4
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
acquisitions were at best an afterthought. Within Oracle the conventional wisdo
m was that integrations required too much management attention when so much grow
th could be achieved just by executing well.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
All that changed in 2002. Ellison confounded the tech community when he announce
d that the heady days of 100% growth were over. The bubble had burst. The window
of opportunity that had made Ellison and his contemporaries the richest men in
the world was closing. Ellison offered the ultimate Silicon Valley heresy: the i
nformation technology industry was now mature.
\par
}

}
}
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To Ellison, growth and competitiveness would have to come from consolidation, an
d Ellison wanted to be the consolidator, not the consolidated. That task fell to
Ellison\rquote s right-hand woman, Oracle\rquote s Co-President Safra Catz. Cat
z graduated from the Wharton School and then began law school at the University
of Pennsylvania. She moved to Harvard Law School where she was recruited by the
investment banking firm of Donaldson Lufkin & Jenrette (DLJ).
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
After working for 12 years as a banker at DLJ, where she rose quickly to the le
vel of managing director, she was recruited by Oracle, her client, in April 1999
. By 2004, Catz shared overall operating responsibility for the company with Ell
ison; she also managed its M&A strategy. She was named by the Wall Street Journa
l as one of \u8220\'3f50 Women to Watch\u8221\'3f in American business. She was
also widely rumored to be Ellison\rquote s likely successor, though she publicly
disclaimed any interest in the top job at Oracle.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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The Prey: PeopleSoft
\par
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EKLAE_1}{\*\bkmkend co_g_ID0EKLAE_1}
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PeopleSoft was founded in 1987 by David Duffield, a billionaire in his own right
, who still owned 8% of the company when Oracle launched its bid. Duffield was t
he anti-Ellison: a warm, grandfatherly character who kept three dogs and four bi
rds at home and had donated a substantial amount of his fortune to animal rights
organizations. Often appearing in his trademark Hawaiian shirts, Duffield was f
amous for encouraging a supportive, familial culture among \u8220\'3fPeople peop
le,\u8221\'3f the 8,300 employees at his firm where he was known to sign emails
with his initials \u8220\'3fD.A.D.\u8221\'3f PeopleSoft\rquote s first product w
as a human resources offering, and by 2004 it continued to enjoy widespread cust
omer acceptance for its HR products. In addition, PeopleSoft sold financial mana
gement systems, customer relations management software, supply chain management
products, and related consulting services.
\par
}
}
}
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}
{\i1 \fs20 \cf22 \f2 \b1

{\*\bkmkstart co_pp_sp_111958_5_1}{\*\bkmkend co_pp_sp_111958_5_1}


{\i1 \fs20 \sa0 \ul0 \cf22 \strike0 \f2 \b1 \sb0
*5
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
In 1999, at the age of 59, Duffield retired as CEO (retaining the Chairman titl
e) and brought in Craig Conway as his successor. Conway had been Vice President
of Sales & Marketing at Oracle from 1985 to 1992. Ellison claimed that Conway wa
s fired by his direct boss at Oracle, Ray Lane, because Conway was a \u8220\'3fb
ad apple and had to go.\u8221\'3f
}
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Conway had a more benign interpretation of events: \u8220\'3fRay and I looked a
t each other and concluded that one of us was probably redundant to the cause.\u
8221\'3f
}
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6
}}}
\par
}
}
}
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Conway bounced back to become the \u8220\'3fClint Eastwood of software,\u8221\'3
f leading turnaround efforts at TGV and OneTouch before accepting the top job at
PeopleSoft. PeopleSoft\rquote s dramatic growth over its first ten years had sl
owed, and Conway was viewed by many as the person capable of taking the company
to the next level. One year after Conway joined the company, PeopleSoft unveiled
the newest version of its signature software, PeopleSoft 8, to strong reviews f
rom customers and analysts.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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Contact
\par
}
}

{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj


{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EKOAE_1}{\*\bkmkend co_g_ID0EKOAE_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
In June 2002, one year before the takeover contest unfolded, Conway was thinking
about how to build critical mass in application software. With his board\rquote
s approval, Conway approached Ellison, whom he had not spoken to since he left
Oracle in 1992. Conway proposed a merger between PeopleSoft and Oracle\rquote s
enterprise software business. Oracle would be the new company\rquote s majority
shareholder and Conway would be its CEO. Ellison was enthusiastic about the comb
ination:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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Increasing the size of the business gives us tremendous economies of scale and e
fficiencies, and makes us more profitable and more competitive. We can put more
engineers on product development because we have more customers. That makes the
products better, which in turns gets us additional customers. We amortize our en
gineering costs over a larger customer base. That makes us more profitable.
}
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7
}}}
\par
}
}
}
}
}
}
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Ellison instructed Catz to put a team together. Within days, senior managers fro
m each company converged at the Lafayette Park Hotel on the East Bay in San Fran
cisco to sift through the particulars
}
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}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
of Conway\rquote s proposal. The mood was optimistic at the meeting, which last
ed most of the day.
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
While there were some technical complications, both sides thought that the deal
made sense overall. They agreed to meet again with larger teams. It was the las

t thing that the two companies would ever agree on.


\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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The second meeting never happened. Two stories later emerged as to why. Accordin
g to Catz:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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It was really, really simple. And it\rquote s interesting because Craig Conway a
lso testified under oath and came up with something different, which was really
magical. But the reality is that Craig and Larry got back on the phone [after th
e Lafayette Park Hotel meeting] and they both indicated that their teams wanted
to go forward. Larry says \u8220\'3fWe\rquote re interested in acquiring PeopleS
oft.\u8221\'3f And Craig says, \u8220\'3fWell, I want to merge the two applicati
ons businesses, but I want to run it. Oracle can be our largest shareholder, but
I need to be in charge.\u8221\'3f And Larry didn\rquote t go along with that co
ncept. He thought that we could run it better as part of Oracle and run it bette
r, period, than Craig could. And since Craig was very interested in his own job,
he just said, \u8220\'3fThat\rquote s not going to work,\u8221\'3f and got off
the phone.
\par
}
}
}
}
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PeopleSoft thought the holdup was Oracle\rquote s insistence on using its own pr
oduct going forward. Unlike Oracle\rquote s enterprise application product, whic
h could run only on Oracle\rquote s database, PeopleSoft\rquote s software worke
d across platforms. George \u8220\'3fSkip\u8221\'3f Battle, a PeopleSoft directo
r, explained:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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What we wanted was a company that was separate from the database business. So th
e only way we were interested in doing it is if it were a standalone company. We
wouldn\rquote t be interested in having our applications software straitjackete
d into any single database manufacturer. And I think Oracle really was looking a
t the apps business as a way of enhancing their position on the database side.
\par
}
}
}

}
}
}
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
In any case, there was no meeting of the minds and no more meetings between Orac
le and PeopleSoft. By September 2002, Conway, speaking about Ellison, stated, \u
8220\'3fWhen you alienate everybody, you become someone no one wants to play wit
h.\u8221\'3f
}
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8
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}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
It was clear that after a decade-long d\u233\'3ftente, the bad blood between El
lison and Conway had resurfaced.
\par
}
}
}
}
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}
{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200
The Initial Attack
\par
}
}
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On June 6, 2003, D-Day, Oracle launched its \u8220\'3fwar game in a box.\u8221\'
3f
}
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9
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}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0

Oracle\rquote s attack was surprising, but unlike its storied predecessor, it w


as not overwhelming.
\par
}
}
}
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Oracle\rquote s announced tender for PeopleSoft at $16 per share offered almost
no premium to the market price at the time. In fact, the offer price was 3.6% be
low the 30-day average trading price and 12.1% below the 180-day average trading
price prior to the offer. Exhibit 1A provides information on PeopleSoft\rquote
s share price during the ten years before the bid, relative to the Dow Jones Com
puter Software Index. Exhibit 1B provides information on PeopleSoft\rquote s sha
re price from January 2002 through October 2004.
\par
}
}
}
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Although CSFB, Oracle\rquote s bankers on the deal, had opined that $16 was too
low and would be a tactical mistake,
}
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}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Catz explained the decision to go with the $16 offer:
\par
}
}
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
When, all of a sudden PeopleSoft moved to buy JDEC, it was absolutely obvious th
at they had come to a conclusion that they couldn\rquote t possibly stay indepen
dent. Their shareholders were now presented with the question: what do we do? So
this was the perfect time to give those shareholders another option. And we tho
ught, \u8220\'3fGee, maybe we can get it at this price because to anybody but Or
acle, and maybe SAP, this company was not worth a cent over $16.\u8221\'3f
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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The offer was not well-received. Investors considered it suspicious and almost c

omically below market.


}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
\u8220\'3fIt was not credible,\u8221\'3f recalled a large PeopleSoft investor.
\u8220\'3fI was on the conference call when they announced it. Oracle did nothin
g on the call to foster credibility. They sounded as if they had some Machiavell
ian strategy to destroy a competitor. Pretty heavyweight investment bankers opin
ed privately that Oracle had made a terrible mistake.\u8221\'3f
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
While the Street was skeptical, Conway was incensed. The PeopleSoft CEO heard ab
out the offer in Amsterdam, on his way to visit with customers. Without consulti
ng his board, he called the bid
}
{\i1 \fs20 \cf22 \f2 \b1
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}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
\u8220\'3fatrociously bad behavior from an atrociously bad company.\u8221\'3f
}
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11
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
He likened the offer to a wedding with Oracle\rquote s CEO, Larry Ellison, \u82
20\'3fshowing up with a shotgun trying to get someone to marry him.\u8221\'3f
}
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}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
And he sent out a company-wide voicemail telling employees that \u8220\'3fit sh
ould go without saying that there is no possibility that PeopleSoft would consid
er selling the company to Oracle.\u8221\'3f
}
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13

}}}
\par
}
}
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
The PeopleSoft board convened to assess the offer on Sunday, June 8, with Conway
, still in Amsterdam, participating via speakerphone. Exhibit 2 provides a list
of the eight PeopleSoft board members (including Michael Maples, who joined the
board from J.D. Edwards just after the bid was launched) along with brief biogra
phies of each. Other than Duffield (who owned 7.6% of PeopleSoft) and Conway (wh
o owned 1.4%), the remaining six directors collectively owned 1.5% of the stock
- typical for a company of PeopleSoft\rquote s size.
\par
}
}
}
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Conway quickly turned the meeting over to Andrew Bogen of Gibson Dunn & Crutcher
, PeopleSoft\rquote s outside legal counsel. Bogen, a highly experienced M&A law
yer, briefed the board on its responsibilities under Delaware law in the face of
a hostile offer. Delaware law requires board members, as fiduciaries of the com
pany, to dispassionately and carefully evaluate any bona fide offer. According t
o Bogen, Conway\rquote s immediate dismissal of the offer, and his stated unwill
ingness to consider any offer, could be construed as violations of the board\rqu
ote s fiduciary duties. In order to distance the company from those comments, Bo
gen recommended that the board establish a \u8220\'3fTransaction Committee,\u822
1\'3f comprised solely of independent directors, to evaluate and respond to Orac
le\rquote s offer.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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The majority view was that Conway\rquote s rhetoric was troubling and needed to
be toned down. The board adopted Bogen\rquote s recommendation to form a Transac
tion Committee, with Skip Battle as the chair. Battle was an independent directo
r at PeopleSoft who had considerable experience in difficult business situations
: when the dot-com start-up venture AskJeeves nearly went bust in 2000, Battle,
an early-stage investor, stepped in and engineered a turn-around that eventually
led to the sale of AskJeeves to Barry Diller\rquote s IAC in 2005. The other me
mbers of the Transaction Committee were the other independent directors: Frank F
anzilli, Steven Goldby, Cyril Yansouni,
}
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}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200

and (shortly thereafter) Michael Maples. According to PeopleSoft\rquote s SEC f


ilings:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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The Transaction Committee is responsible for evaluating the Oracle tender offer,
including any amendments thereto, and any related activities of Oracle in conne
ction with its announced intent to acquire PeopleSoft. The Transaction Committee
is also responsible for advising the Board on making recommendations to stockho
lders and any other actions the Board make [sic] take in response to Oracle\rquo
te s offer.
}
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14
}}}
\par
}
}
}
}
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}
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The Transaction Committee was the easy call. More difficult was deciding how to
deal with Oracle. The problem the board faced was that, as they saw it, Oracle\r
quote s actions made no sense.
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
If Oracle was interested in a transaction, why didn\rquote t it first approach
the board privately? And if it actually wanted to buy PeopleSoft, why did it off
er such a pathetic premium? As Battle explained:
\par
}
}
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{\i0 \fs20 \sa50 \ul0 \cf1 \strike0 \f2 \b0 \sb50
I thought that this was a tremendously disruptive thing to do that was clearly a
n advantage to Oracle in the competitive environment. I didn\rquote t know if th
ey wanted to buy or not. What they say about hostiles is that you come in hard,
you come in high, and you come in once. They were low, they were lame, and they
looked like they were trying to screw up the asset.
\par
}
}
}

}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Hostile bids are always disruptive, but for industry-specific reasons that both
PeopleSoft and Oracle understood, Oracle\rquote s bid was a particularly serious
threat to PeopleSoft. PeopleSoft\rquote s customers, like Oracle\rquote s, do n
ot simply purchase software the way one might purchase a word processor or a vid
eo game. They are purchasing a relationship with the vendor. Anything that is pe
rceived to threaten that relationship in the long term will impair business in t
he short term. This feature of the enterprise application software business deri
ves from the longevity of the software (typically five years or more) and the en
ormous costs of adopting and implementing the software. If PeopleSoft\rquote s c
ustomers believed a victorious Oracle would discontinue support for the products
at some point in the future, they would stop purchasing products right now. Bat
tle described the dilemma that would consume the PeopleSoft board for the next 1
8 months:
\par
}
}
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When people buy these large-ticket enterprise software licenses, they buy it on
the basis of features, they buy it on the basis of support, and they buy it on t
he basis of company viability. By the time we had gotten together on Sunday, Ora
cle had already made some statements that said \u8220\'3fWe\rquote re not going
to actively
}
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
market PeopleSoft software.\u8221\'3f And the analysts,
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15
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Gartner and others, had come out with some statements that said, \u8220\'3fDon\
rquote t buy until you see where this is going to go.\u8221\'3f So anything that
we do to get in the way of license sales is going to hurt shareholder value. Th
at drove us for 18 months. The Delaware courts hate comments like the one that C
onway made about \u8220\'3fWe\rquote ll never sell to those guys.\u8221\'3f But
our customers and prospects don\rquote t hate it. We had something like twenty-t
hree or twenty-four days to the end of the quarter. Seventy percent of license d
eals come in the last three days. So the first thing we\rquote re saying is: \u8
220\'3fHow are we going to keep this company together?\u8221\'3f The headline is
\u8220\'3fOracle Launches Hostile Takeover.\u8221\'3f If the headline on the 2n

d of July is \u8220\'3fPeopleSoft Announces a Serious Miss in Software Licenses,


\u8221\'3f our shareholder value is toast.
\par
}
}
}
}
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
As a source close to the situation remarked, Oracle\rquote s initial strategy wa
s \u8220\'3feither incredibly evil or incredibly stupid.\u8221\'3f The evil inte
rpretation - held by many at PeopleSoft and on the Street - was that Oracle\rquo
te s bid was not serious and was calculated to wound PeopleSoft. The pending bid
would create a cloud of \u8220\'3ffear, uncertainty, and doubt\u8221\'3f over P
eopleSoft, impairing its ability to sell software to new customers who would be
relying on PeopleSoft to be there for updates and support. Thus a low-ball bid c
ould be a self-fulfilling prophecy, reducing value until $16 was actually a good
price. Alternatively, the bid could deliver a blow sufficient to cripple People
Soft as a competitor. The Darwinian realities of the market would do the rest.
\par
}
}
}
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Oracle was looking to acquire PeopleSoft \u8220\'3ffor the sole purpose of killi
ng it,\u8221\'3f
}
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16
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}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Conway insisted. PeopleSoft formalized this accusation in a suit filed against
Oracle on June 13, 2003, just one week after Oracle\rquote s announcement. The c
omplaint alleged deceptive business practices, tortious interference, and a lita
ny of other misdeeds. The suit was filed in Alameda County, California, PeopleSo
ft\rquote s hometown. Specifically, PeopleSoft alleged:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
A concerted scheme by Oracle and its agents to: (i) interfere with PeopleSoft\rq
uote s plan to merge with J.D. Edwards & Co. (\u8220\'3fJ.D. Edwards\u8221\'3f);
(ii) undermine PeopleSoft\rquote s viability by creating uncertainty and doubt
in the minds of PeopleSoft\rquote s customers and prospective customers; and (ii
i) undercut PeopleSoft\rquote s business operations by disparaging PeopleSoft\rq
uote s products, services and

}
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future prospects, all under the guise of a disingenuous tender offer.
}
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17
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\par
}
}
}
}
}
}
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PeopleSoft\rquote s story gained traction from outside commentators on the deal.
A Barron\rquote s article dated June 9 stated that analysts and investment bank
ers \u8220\'3fseem to agree that Ellison is not terribly serious about buying Pe
opleSoft,\u8221\'3f but \u8220\'3fby making a run at the company through an offe
r that was market value in cash, Ellison at the very least can create confusion,
uncertainty and chaos among the customers and employees of both PeopleSoft and
J.D. Edwards.\u8221\'3f
}
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18
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
A hedge fund partner was quoted as saying: \u8220\'3fThis isn\rquote t a takeov
er; it\rquote s a hostage-taking.\u8221\'3f
}
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19
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\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj

{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj


{\*\bkmkstart co_g_ID0EPIAG_1}{\*\bkmkend co_g_ID0EPIAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
The sinister interpretation also found support in some internal Oracle documents
. An email from CSFB\rquote s Joe Reece entitled \u8220\'3ftwist in the wind\u82
21\'3f advised Catz to keep the bid low \u8220\'3fto create doubts in the minds
of the market\u8221\'3f and thereby produce \u8220\'3fa decline in the price [of
PeopleSoft].\u8221\'3f
}
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20
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}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Although this email became \u8220\'3fExhibit A\u8221\'3f in PeopleSoft\rquote s
case, it was technically from CSFB, not Oracle. Careful analysis of Oracle\rquo
te s statements in the first few weeks demonstrates that Ellison and his team he
wed closely to their talking points. Oracle would support PeopleSoft\rquote s pr
oducts but not produce a new version.
}
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21
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Oracle would offer customers trouble-free migration onto Oracle\rquote s platfo
rm. Otherwise, customers would be supported with what they had. The deal only ma
de sense, Catz and Ellison insisted, if Oracle could cultivate PeopleSoft\rquote
s customer base.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EHKAG_1}{\*\bkmkend co_g_ID0EHKAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Even PeopleSoft noticed Oracle\rquote s message discipline. An internal report t
o Conway from a team sent to comb through the public record for Ellison\rquote s
misstatements concluded:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
[We] have gone through the scripts and found nothing condemning. Ever since his
initial interview June 6, [Ellison] has managed to stay on point. The interviewe
rs try to pin him on his intention not to enhance/support our products/customers
, but he continually sticks to the \u8220\'3fwe will support but not actively ma
rket\u8221\'3f story line. This is the same issue we had this summer in trying t
o find quotes and couldn\rquote t. I think everyone (from us to

}
{\i1 \fs20 \cf22 \f2 \b1
{\*\bkmkstart co_pp_sp_111958_12_1}{\*\bkmkend co_pp_sp_111958_12_1}
{\i1 \fs20 \sa0 \ul0 \cf22 \strike0 \f2 \b1 \sb0
*12
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
the press) picked up on Larry/Oracle\rquote s initial misstep and took full adv
antage to the point where it was widely believed Larry said more than he actuall
y did.
}
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22
}}}
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EBMAG_1}{\*\bkmkend co_g_ID0EBMAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Oracle may have been pledging support, but no one heard them in the din of accus
ations. Catz noted:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa50 \ul0 \cf1 \strike0 \f2 \b0 \sb250
We\rquote re saying \u8220\'3fthe sky is blue\u8221\'3f and they are claiming th
at we said the sky is black. And I have it written in transcripts - in transcrip
ts - that we said that the sky was blue. And we could not get the message out. W
e were extremely frustrated because we could not get the truth out. And it was j
ust the most frustrating experience when you\rquote re telling the truth and the
truth does not come out.
\par
}
}
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ELNAG_1}{\*\bkmkend co_g_ID0ELNAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
\u8220\'3fThis is the most heavily PR\rquote ed case that I have ever been invol
ved in,\u8221\'3f
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
said one experienced dealmaker close to Oracle. He added, \u8220\'3fIf you look

at Oracle\rquote s results through all of this, I think the PR people were a di


saster.\u8221\'3f As one person close to Oracle admitted, \u8220\'3fConway very
artfully depicted PeopleSoft as the little guy getting picked on.\u8221\'3f
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EWOAG_1}{\*\bkmkend co_g_ID0EWOAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Upbraided by the financial community and losing ground in the press, Oracle quic
kly changed course. On June 18, just seven trading days after its initial $16 of
fer, Oracle raised its bid 20% to $19.50, for a total offer value of $6.3 billio
n. Catz explained the reasoning:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
As [Oracle CFO and later Chairman] Jeff Henley and [Oracle Co-President] Charles
Phillips talked to the owners of the stock, they were told that $16 was not eno
ugh. It made us look like we weren\rquote t serious and that we were just trying
to muck up their deal with JDEC. Now of course, if you\rquote re a seller you\r
quote re going to say whatever you can to get the buyer to raise the price. But
we decided that at $19.50 the deal still worked for us--and only us--and we coul
d afford it. We spoke to the holders of a majority of the shares and $19.50 was
above where every one of them indicated they would sell their shares to us. In f
act many were saying, \u8220\'3fGive us $18 and it\rquote s over.\u8221\'3f At $
19.50 we were comfortably above the clearing price.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ESQAG_1}{\*\bkmkend co_g_ID0ESQAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
But it was too late. PeopleSoft\rquote s board took only a day to reject this of
fer, saying it undervalued the company and citing additional risks to the deal s
uch as regulatory review.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \qc \b1
{\*\bkmkstart co_g_ID0EBRAG_1}{\*\bkmkend co_g_ID0EBRAG_1}
{\i0 \fs20 \ul0 \cf1 \strike0 \f2 \b1
}
{\i1 \fs20 \cf22 \f2 \b1
{\*\bkmkstart co_pp_sp_111958_13_1}{\*\bkmkend co_pp_sp_111958_13_1}
{\i1 \fs20 \sa0 \ul0 \cf22 \strike0 \f2 \b1 \sb0
*13
}
}
{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200

PeopleSoft Raises the Drawbridge


\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EPRAG_1}{\*\bkmkend co_g_ID0EPRAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Before 1983, a target board\rquote s determination of inadequacy would not have
prevented a hostile takeover bid if a majority of the shareholders wanted to acc
ept the offer. But the world changed in 1983 with the invention of the \u8220\'3
fshareholder rights plan,\u8221\'3f better known as a \u8220\'3fpoison pill.\u82
21\'3f The pill that PeopleSoft had in place was typical: if any individual or e
ntity acquired more than 20% of PeopleSoft\rquote s shares without the approval
of PeopleSoft\rquote s board, all other shareholders would have the right to buy
shares at 50% of the prevailing market price. The exercise of these deep-in-the
-money options would severely dilute the hostile bidder from 20% to 1.4%. In our
two decades of experience, no hostile bidder has ever \u8220\'3fbroken through\
u8221\'3f (triggered) a poison pill. As a result most practitioners and academic
commentators today consider the pill to be a \u8220\'3fshow stopper\u8221\'3f a
gainst a hostile bidder. The consequence is that a target board can unilaterally
veto a hostile takeover bid through the use of a pill.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ENSAG_1}{\*\bkmkend co_g_ID0ENSAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
The Delaware Supreme Court upheld the validity of the poison pill in its seminal
1985 decision Moran v. Household International,
}
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23
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
and further solidified the pill in its 1989 decision Paramount Communications v
. Time.
}
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24
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
In Time, the Court held that \u8220\'3f[d]irectors are not obligated to abandon
a deliberately conceived plan for a short-term shareholder profit unless there
is clearly no basis to sustain the corporate strategy.\u8221\'3f
}
{\i0 \fs16 \cf1 \f2 \b0
{\*\bkmkstart co_footnoteReference_F25331276586_ID0EGT}{\*\bkmkend co_footnoteRe

ference_F25331276586_ID0EGT}
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25
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Notwithstanding the sweeping language in Time, the Delaware courts have repeate
dly noted that the ability to maintain a pill is not unlimited; rather, courts w
ill scrutinize the decision to keep a pill under the \u8220\'3fintermediate\u822
1\'3f standard of review set out in Unocal v. Mesa Petroleum.
}
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26
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
The Unocal test has two parts: first, the target board must demonstrate that th
e hostile bid presents a \u8220\'3fthreat\u8221\'3f to the corporation; and seco
nd, the target board must demonstrate that its defensive response was \u8220\'3f
reasonable in relation to the threat posed.\u8221\'3f
}
{\i0 \fs16 \cf1 \f2 \b0
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27
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Although the Unocal test has been characterized as \u8220\'3fenhanced\u8221\'3f
judicial scrutiny (in contrast to the extremely deferential \u8220\'3fbusiness
judgment review\u8221\'3f), no Delaware court since Time has required a target b
oard to eliminate (\u8220\'3fredeem\u8221\'3f) its poison pill under Unocal\rquo
te s two-part test.
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ECUAG_1}{\*\bkmkend co_g_ID0ECUAG_1}
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}
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{\*\bkmkstart co_pp_sp_111958_14_1}{\*\bkmkend co_pp_sp_111958_14_1}
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*14
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
In addition to its poison pill, which was already in place when Oracle launched
its bid, PeopleSoft rapidly erected four other defenses over the next two month
s:
\par

}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \ql \fs20 \cf1 \f2 \li0 \b1
{\*\bkmkstart co_g_ID0ESUAG_1}{\*\bkmkend co_g_ID0ESUAG_1}
{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200
Bulking Up: The JDEC Deal Re-Cut and Re-Spun
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0E3UAG_1}{\*\bkmkend co_g_ID0E3UAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
The Oracle offer had immediate consequences for PeopleSoft\rquote s pending acqu
isition of J.D. Edwards. Because PeopleSoft would be required to issue a signifi
cant number of new shares to acquire JDEC, a shareholder vote was required by st
ock exchange listing rules. Oracle wanted PeopleSoft shareholders to vote no in
order to signal that they preferred the $16 cash offer. For PeopleSoft, closing
the JDEC deal would increase the size of the prospective deal for Oracle by almo
st 30%, and would force Oracle to acquire an additional company it might not be
interested in (at least at the price it was prepared to pay for PeopleSoft).
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ERVAG_1}{\*\bkmkend co_g_ID0ERVAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
On June 16, PeopleSoft amended the terms of its merger agreement to include sign
ificant cash consideration, thereby avoiding the shareholder vote. Although it t
hwarted shareholders who might have opposed the deal, this move was part of the
standard defense playbook and legally unremarkable. What raised eyebrows was Peo
pleSoft\rquote s second announcement that day: expected synergies from the deal
had been revised upward, from $85 million on May 31st, to $167 million just two
weeks later (and one week after the Oracle bid), on June 11th. According to a ba
nker present at the June 11th meeting, no board member questioned the revisions.
PeopleSoft directors later testified that management had always expected $150-$
200 million in synergies, but a lower number had been used initially in order to
be conservative.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \ql \fs20 \cf1 \f2 \li0 \b1
{\*\bkmkstart co_g_ID0EJWAG_1}{\*\bkmkend co_g_ID0EJWAG_1}
{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200
Golden and Tin Parachutes
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ETWAG_1}{\*\bkmkend co_g_ID0ETWAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0

In August 2003, two months after the initial offer, PeopleSoft\rquote s board ap
proved amendments to its severance policies to provide large cash payments to se
nior executives (so called \u8220\'3fgolden parachutes\u8221\'3f) in the event o
f a change of control. Consistent with PeopleSoft\rquote s egalitarian spirit, t
he program was expanded to cover all employees (the somewhat sarcastically named
\u8220\'3ftin parachutes\u8221\'3f). In view of Oracle\rquote s announced expec
tations regarding staff reductions, the cost of the new severance packages was e
stimated at $200 million.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \ql \fs20 \cf1 \f2 \li0 \b1
{\*\bkmkstart co_g_ID0EFXAG_1}{\*\bkmkend co_g_ID0EFXAG_1}
{\i0 \fs20 \ul0 \cf1 \strike0 \f2 \b1
}
{\i1 \fs20 \cf22 \f2 \b1
{\*\bkmkstart co_pp_sp_111958_15_1}{\*\bkmkend co_pp_sp_111958_15_1}
{\i1 \fs20 \sa0 \ul0 \cf22 \strike0 \f2 \b1 \sb0
*15
}
}
{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200
Antitrust
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ETXAG_1}{\*\bkmkend co_g_ID0ETXAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
In any proposed merger or acquisition larger than $50 million, the Department of
Justice (DOJ) (or in some cases the Federal Trade Commission) must determine wh
ether the deal is anticompetitive. Under the Hart-Scott-Rodino Antitrust Improve
ments Act of 1976, the first review is perfunctory, while the \u8220\'3fsecond r
equest,\u8221\'3f if it is demanded, is long, data-intensive, and thorough.
}
{\i0 \fs16 \cf1 \f2 \b0
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28
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
If the DOJ concludes that the deal is anticompetitive, it can sue to block the
transaction or negotiate with the parties to obtain divestment of certain assets
after the consummation of the deal.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EHYAG_1}{\*\bkmkend co_g_ID0EHYAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
During the review process, private parties can lobby the DOJ to try to influence

its decision. In the days immediately following the Oracle bid, PeopleSoft laun
ched a massive campaign to encourage the DOJ to block. According to Skip Battle,
pushing for antitrust review was \u8220\'3fthe biggest decision we made in the
whole process.\u8221\'3f The difficulty stemmed from the one-way nature of the d
ecision: once PeopleSoft claimed that the deal was anticompetitive, it lost any
ability to reverse itself and later support the deal. In contrast, the poison pi
ll, though potent, could always be revoked by a target board.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EIZAG_1}{\*\bkmkend co_g_ID0EIZAG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Antitrust dominated PeopleSoft\rquote s second board meeting after the Oracle bi
d, on Tuesday, June 10th. Gibson Dunn cautioned against too public an antitrust
campaign, arguing that it could backfire and give Oracle an argument in the Dela
ware courts that PeopleSoft was not open to a deal.
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Conway saw antitrust as a silver bullet. At one point he told the board: \u8220
\'3fWe will keep or lose the company immediately following the Justice Departmen
t decision . . . the rest is completely and only a matter of money, which we do
not control.\u8221\'3f
}
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29
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Battle felt it was a close call, but ultimately came to support an antitrust ca
mpaign:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa50 \ul0 \cf1 \strike0 \f2 \b0 \sb50
We believed that there was no way this thing would be approved without a second
request. You go from three to two [competitors in the enterprise applications ma
rket], it seems pretty obvious. And so we knew that this deal was going to be hu
ng up in multiple levels of antitrust review. Our lawyers were completely convin
ced that this would require a second request, and they believed that there was a
substantial likelihood that the government would move to block.
\par
}
}
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj

{\*\bkmkstart co_g_ID0ED2AG_1}{\*\bkmkend co_g_ID0ED2AG_1}


{\i0 \fs20 \ul0 \cf1 \strike0 \f2 \b0
}
{\i1 \fs20 \cf22 \f2 \b1
{\*\bkmkstart co_pp_sp_111958_16_1}{\*\bkmkend co_pp_sp_111958_16_1}
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*16
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
So our decision was, do we throw ourselves on the side of the government in tha
t assessment or not? And we decided to put ourselves on the side of that governm
ent assessment, because it would be a tonic to our customers and our prospects,
and would likely maximize license sales. So if we were wrong, we\rquote d have a
better share price to negotiate from.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EZ2AG_1}{\*\bkmkend co_g_ID0EZ2AG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Without consulting Gibson Dunn, PeopleSoft hired Gary Reback as its lead antitru
st counsel. Reback, best known for his crusade against Microsoft on behalf of Ne
tscape, was described by the American Lawyer as \u8220\'3fbrilliant and exceptio
nally intense\u8221\'3f
}
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30
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
and by Wired magazine as \u8220\'3fthe only man Bill Gates fears.\u8221\'3f
}
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31
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Reback and Conway set off on an antitrust roadshow, which had immediate payoffs
: in the first week after Oracle\rquote s bid, Richard Blumenthal, State Attorne
y General for Connecticut (one of PeopleSoft\rquote s biggest customers), sued t
o block the merger. And shortly thereafter, just as Battle had predicted, the De
partment of Justice issued a second request.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \ql \fs20 \cf1 \f2 \li0 \b1

{\*\bkmkstart co_g_ID0E33AG_1}{\*\bkmkend co_g_ID0E33AG_1}


{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200
The Customer Assurance Program (CAP)
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EG4AG_1}{\*\bkmkend co_g_ID0EG4AG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
On June 9, 2003, three days after Oracle announced its bid, Kyle Bowker, a senio
r sales executive at PeopleSoft, sent an email to his staff announcing a new pro
gram. PeopleSoft would offer customers rebates of two times their money in the e
vent an acquirer discontinued new sales of the PeopleSoft product line or \u8220
\'3fmaterially reduce[d] support services\u8221\'3f for PeopleSoft products with
in two years from the customer contract date. The program was initiated without
formal board approval and without public disclosure, though it was later ratifie
d by the board and disclosed in general terms in SEC filings.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EY4AG_1}{\*\bkmkend co_g_ID0EY4AG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Although the CAP received attention in the press as \u8220\'3fa new kind of pois
on pill,\u8221\'3f Oracle initially did not worry about the CAP. Catz explained:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
The moment we saw the CAP, my initial reaction was, \u8220\'3fNo problem.\u8221\
'3f We\rquote re going to support the products. Why would we not support the pro
ducts? I was not concerned about it. And Larry wasn\rquote t concerned about it,
because it would only be triggered in the event that we did something against o
ur own interest. So
}
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{\*\bkmkstart co_pp_sp_111958_17_1}{\*\bkmkend co_pp_sp_111958_17_1}
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*17
}
}
{\i0 \fs20 \sa50 \ul0 \cf1 \strike0 \f2 \b0 \sb250
why would we do that? So I was not worried about the first version.
\par
}
}
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EW6AG_1}{\*\bkmkend co_g_ID0EW6AG_1}

{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200


Over the next 18 months, the program evolved through five different versions, mo
st notably increasing the payment multiples to a sliding scale between two and f
ive times the purchase price (with the multiple increasing as the size of the co
ntract increased), and doubling the length of the protection period to four year
s. Exhibit 3 provides the details on these refinements. By November 2004, the CA
P mandated $2.0 billion in payments to PeopleSoft customers if Oracle acquired P
eopleSoft and then reduced support for its products.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EIABG_1}{\*\bkmkend co_g_ID0EIABG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
As the CAP liability continued to accrue at a ferocious pace, Ellison and Catz b
ecame worried about the sheer magnitude of the potential liability (amounting to
more than one-third of PeopleSoft\rquote s pre-bid market capitalization) and t
he vagueness of the support trigger. As Ellison described in October 2004:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
The biggest concern I have right now is something I learned very recently, which
is the ambiguity in some of the [CAP] contracts. The trouble is we live in a li
tigious world. And some customers might decide to take advantage of the insuranc
e, just see what happens in court - or, at the very least, use that as a negotia
ting technique against us. . . . Someone will say, \u8220\'3fAll right, I have t
his offer of five times my money back, but why don\rquote t you just cut my main
tenance fees in half instead and forget the whole thing.\u8221\'3f And we end up
having to do that with hundreds and hundreds of customers, which will be very e
xpensive.
}
{\i0 \fs16 \cf1 \f2 \b0
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32
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Two features of the CAP were particularly noteworthy. First, like PeopleSoft\rq
uote s antitrust defense (and unlike the poison pill), the CAP could not be pull
ed back by PeopleSoft because it was a contractual term embedded in customer con
tracts. Therefore, the CAP could not be used as a bargaining chip against Oracle
, to be eliminated in exchange for a higher price. Second, the magnitude of the
CAP payments was not the product of arms-length bargaining: customers clearly li
ked higher CAP payments, and PeopleSoft liked higher CAP payments too because la
rger contingent payments would yield a larger deterrent effect, and only Oracle
- not PeopleSoft - would suffer the negative consequences of the accrued liabili
ty. PeopleSoft recognized this benefit in its SEC filings: \u8220\'3fThe terms o
f the customer
}
{\i1 \fs20 \cf22 \f2 \b1
{\*\bkmkstart co_pp_sp_111958_18_1}{\*\bkmkend co_pp_sp_111958_18_1}
{\i1 \fs20 \sa0 \ul0 \cf22 \strike0 \f2 \b1 \sb0

*18
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
assurance program require an acquisition by an entity other than PeopleSoft; th
erefore no action taken unilaterally by PeopleSoft would, by itself, result in t
he recognition of a contingent liability.\u8221\'3f
}
{\i0 \fs16 \cf1 \f2 \b0
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{\field {\*\fldinst HYPERLINK "#co_footnote_F33331276586_1" }{\fldrslt
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33
}}}
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EZCBG_1}{\*\bkmkend co_g_ID0EZCBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
In short, the CAP was the perfect defense, a win-win for both PeopleSoft and its
customers. At a conference held at Tulane Law School while the CAP was being li
tigated, Steven Koch, head of global M&A at CSFB, told Vice Chancellor Leo Strin
e who would eventually hear the case: \u8220\'3fIf this [the CAP] is legitimate,
I\rquote m going to start running around pitching these contracts to all my cli
ents.\u8221\'3f
}
{\i0 \fs16 \cf1 \f2 \b0
{\*\bkmkstart co_footnoteReference_F34331276586_ID0EMD}{\*\bkmkend co_footnoteRe
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34
}}}
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \qc \b1
{\*\bkmkstart co_g_ID0ETDBG_1}{\*\bkmkend co_g_ID0ETDBG_1}
{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200
Oracle Turns to Shareholders
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0E4DBG_1}{\*\bkmkend co_g_ID0E4DBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
All of these defenses were arrayed against Oracle by the end of the summer 2003.
Oracle could not buy the company directly through a tender offer. And, as Catz
recalls, PeopleSoft was steadfast in its unwillingness to negotiate:
\par
}

}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa50 \ul0 \cf1 \strike0 \f2 \b0 \sb250
There was just absolutely no interest [in negotiating]. There was no one on thei
r side to talk to. We were always open to talking. We had an offer on the table.
And they just absolutely wouldn\rquote t talk to us about anything. And they we
ren\rquote t interested in any information from us. Literally, there was no one
to talk to on their side. . . . They were absolutely resolute it would happen ov
er their dead bodies.
\par
}
}
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EQFBG_1}{\*\bkmkend co_g_ID0EQFBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
PeopleSoft\rquote s directors felt they had reasons for not coming to the table.
They were unconvinced that Oracle actually wanted a deal. If this were a scheme
to damage their business, then negotiating would play right into Oracle\rquote
s hand: PeopleSoft and Oracle would have a duty to amend their Schedules TO and
14D-9 indicating that negotiations were underway, but Oracle could then take an
unreasonable position in the negotiations. Or PeopleSoft might make progress wit
h Oracle, then be blocked by the Department of Justice.
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
PeopleSoft\rquote s customers would fear for the company\rquote s long-term via
bility and abandon purchases. There were just too many scenarios in which People
Soft got jilted at the altar.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ELGBG_1}{\*\bkmkend co_g_ID0ELGBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Also diminishing the chances of a negotiated solution was the growing level of d
istrust and animosity. PeopleSoft was convinced that it was fighting for its lif
e. For its employees, the prospect of mass layoffs loomed large. If PeopleSoft f
altered in one quarter, there might not be another to make it up. PeopleSoft and
Oracle
}
{\i1 \fs20 \cf22 \f2 \b1
{\*\bkmkstart co_pp_sp_111958_19_1}{\*\bkmkend co_pp_sp_111958_19_1}
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*19
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
salespeople sparred every day over prospective accounts. Battle remembers it as
a streetfight: \u8220\'3fOracle salespeople were saying in pitches that you can
\rquote t buy PeopleSoft software; \u8216\'3fThey\rquote re going to be dead. Th
ey\rquote re gone. They\rquote re history. You shouldn\rquote t be buying it. Do

n\rquote t be a chump. You\rquote ll get fired.\u8217\'3f That sort of stuff.\u8


221\'3f
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EOIBG_1}{\*\bkmkend co_g_ID0EOIBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Oracle, for its part, was infuriated at what it felt was the incredible disinfor
mation emanating from PeopleSoft. It was as if the tender offer had given People
Soft license to say whatever it wanted, no matter how strained or factually inac
curate.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0E4IBG_1}{\*\bkmkend co_g_ID0E4IBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
In one famous exchange that reflected the tenor of the time, Conway, pressed by
a reporter on why he would not consider an offer at any price, declared, \u8220\
'3fIt\rquote s like me asking if I could buy your dog so I can go out back and s
hoot it.\u8221\'3f
}
{\i0 \fs16 \cf1 \f2 \b0
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{\field {\*\fldinst HYPERLINK "#co_footnote_F35331276586_1" }{\fldrslt
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35
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
At an Oracle analyst conference Ellison responded, \u8220\'3fI think at one poi
nt Craigy thought I was going to shoot his dog. If Craigy and his dog were stand
ing next to each other, trust me, if I had one bullet, it wouldn\rquote t be for
the dog.\u8221\'3f
}
{\i0 \fs16 \cf1 \f2 \b0
{\*\bkmkstart co_footnoteReference_F36331276586_ID0E6J}{\*\bkmkend co_footnoteRe
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36
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Conway and his dog both showed up to PeopleSoft\rquote s next analyst conferenc
e clad in bullet proof vests.
}
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37
}}}

\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EKKBG_1}{\*\bkmkend co_g_ID0EKKBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Having no one at PeopleSoft to negotiate with, Oracle turned to shareholders. In
November 2003, Oracle nominated five candidates to stand for election to the Pe
opleSoft board of directors, and proposed a bylaw change that would expand the b
oard by one seat from eight to nine. Because shareholders could effectively pass
the bylaw amendment and fill the seat in one meeting, the contest offered Oracl
e the opportunity to take control of PeopleSoft by electing a majority of its di
rectors at its annual meeting on March 25, 2004.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0E3KBG_1}{\*\bkmkend co_g_ID0E3KBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
To rally support for its nominees, Oracle raised its offer to $26.00 per share i
n cash on February 4, a 63% increase over the initial bid and $9.4 billion in to
tal value. Oracle declared in its press release, \u8220\'3fThis is our final pri
ce. We urge PeopleSoft\rquote s directors to seriously consider our offer and pu
t the interests of their stockholders first.\u8221\'3f
}
{\i0 \fs16 \cf1 \f2 \b0
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38
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
But Oracle did not yet have a clean shot. The Department of Justice would short
ly announce whether it intended to block the transaction on antitrust grounds. C
atz explained:
\par
}
}
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{\i0 \fs20 \ul0 \cf1 \strike0 \f2 \b0
}
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{\*\bkmkstart co_pp_sp_111958_20_1}{\*\bkmkend co_pp_sp_111958_20_1}
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*20
}
}
{\i0 \fs20 \sa50 \ul0 \cf1 \strike0 \f2 \b0 \sb250
We had thought that at the antitrust division . . . cooler heads would prevail,
and that [PeopleSoft] itself would be impacted by an extremely generous offer f
or their shares, and this showed our seriousness about it. We just did not think

the Department of Justice was going to block us. Because I knew the market very
, very well, and I knew it was painfully competitive. And the concept that Peopl
eSoft was actually a price leader, meaning the lowest price, was just absurd.
\par
}
}
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0E5MBG_1}{\*\bkmkend co_g_ID0E5MBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
So we didn\rquote t think [the DOJ] would block. We thought maybe the higher pri
ce would energize the \u8220\'3flet\rquote s get this deal done\u8221\'3f group
[at PeopleSoft]. And that was really a mistake because what we didn\rquote t kno
w was that PeopleSoft had basically put in their own unstoppable poison pill, wh
ich is to get the Justice Department involved. . . . The fact that they did that
and that it was really out of their hands - and then they hid behind the Justic
e Department when they rejected $26 ultimately.
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
They hid behind what they had set in motion.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ETNBG_1}{\*\bkmkend co_g_ID0ETNBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
PeopleSoft cited regulatory concerns in dismissing Oracle\rquote s revised bid,
but its recommendation to shareholders focused on the inadequacy of the $26.00 p
er share offer. The first bullet read:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa50 \ul0 \cf1 \strike0 \f2 \b0 \sb250
The revised offer price is inadequate and does not reflect PeopleSoft\rquote s r
eal value.
}
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39
}}}
\par
}
}
}
}
}
}

{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj


{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ETOBG_1}{\*\bkmkend co_g_ID0ETOBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
In case the point was missed, Conway added, \u8220\'3fOracle\rquote s offer does
not begin to reflect the company\rquote s real value.\u8221\'3f
}
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40
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
These statements raised obvious questions about what PeopleSoft believed the co
mpany\rquote s real value to be. Lee Geishecker of the Gartner Group commented t
hat Oracle\rquote s offer was considered so generous in some circles that invest
ors must be wondering whose interests the PeopleSoft board is looking after.
}
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41
}}}
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ESPBG_1}{\*\bkmkend co_g_ID0ESPBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
But these questions were quickly overshadowed. On February 10, 2004, PeopleSoft
got word that the DOJ intended to sue. An ecstatic Duffield emailed Conway sayin
g, \u8220\'3fObviously this is huge. You and your team have performed heroically
throughout this ordeal. Let\rquote s just hope the formal announcement by the J
ustice Department is zealous and unwavering.\u8221\'3f
}
{\i0 \fs16 \cf1 \f2 \b0
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42
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
It was. On February 26, 2004, the Department of Justice, joined by seven states
, filed suit to block the
}
{\i1 \fs20 \cf22 \f2 \b1
{\*\bkmkstart co_pp_sp_111958_21_1}{\*\bkmkend co_pp_sp_111958_21_1}
{\i1 \fs20 \sa0 \ul0 \cf22 \strike0 \f2 \b1 \sb0
*21
}
}

{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200


transaction on antitrust grounds. Knowing that it could not win shareholder sup
port in the face of this litigation, Oracle withdrew its nominees and dropped it
s proxy contest the same day.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EDRBG_1}{\*\bkmkend co_g_ID0EDRBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Duffield took a victory lap in an email to Battle. \u8220\'3fHopefully no one el
se reads your email,\u8221\'3f he began. \u8220\'3fI\rquote d personally like to
do something special for the independent directors. . . . It could be lavish li
ke a really good watch (better than Rolex) or a trip to a resort, or maybe even
a few more hours with our attorneys.\u8221\'3f
}
{\i0 \fs16 \cf1 \f2 \b0
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43
}}}
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \qc \b1
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{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200
A Long, Hard Slog
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ETSBG_1}{\*\bkmkend co_g_ID0ETSBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Following the decision to abandon its proxy contest, Oracle retrenched. Catz set
about the grueling task of finding a path through PeopleSoft\rquote s defenses.
The first goal was to take away Conway\rquote s silver bullet - antitrust. Prep
aring for the summer\rquote s trial against the government consumed a significan
t amount of Catz\rquote s time. To those who had initially doubted Oracle\rquote
s sincerity, the company\rquote s willingness to go toe-to-toe with the Departm
ent of Justice was surprising. In most takeover contests, the government\rquote
s decision to block a bid causes the bidder to withdraw. But for Catz, this case
was not just about PeopleSoft; the future of her industry was at stake:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
It\rquote s an extremely tough decision when you are facing the front-page of a
complaint that says \u8220\'3fUnited States of America versus you.\u8221\'3f Mos
t management teams and most boards will not subject their company to that. And t

he fact that we went ahead and decided that not only would we fight it, but we f
elt we had to fight it, was based on two things. First, we felt we would win. Se
cond, we felt we had to win because consolidation was very, very important to us
. Our business has zero marginal costs for a new license. There are very high fi
xed costs, very low marginal costs. As a result, scale matters. In a business wh
ere scale matters, you have to get scale. There are only two ways to do this: yo
u can sell a lot more somehow; or you can acquire something. And so we had to wi
n in order to defend this principle.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Oracle also took advantage of the lull to reevaluate its strategic posture. On M
ay 14, 2003, Oracle lowered its bid to $21.00 per share citing \u8220\'3fchanges
in market conditions and in PeopleSoft\rquote s market valuation.\u8221\'3f
}
{\i0 \fs16 \cf1 \f2 \b0
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44
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
While reducing a bid was a highly unusual step in a takeover contest, PeopleSof
t\rquote s stock had been declining since the DOJ announcement in February.
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
As Catz recalled:
\par
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \ul0 \cf1 \strike0 \f2 \b0
}
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*22
}
}
{\i0 \fs20 \sa50 \ul0 \cf1 \strike0 \f2 \b0 \sb50
By then, the market was really figuring that Oracle was never going to prevail
in their case with the government, so it should value PeopleSoft as a stand-alon
e company. People were starting to catch hold of the fact that two struggling co
mpanies together [PeopleSoft and JDEC] does not make a strong company. And so th
e stock price was starting to reflect the fact that this is really all it\rquote
s worth.
\par
}
}

}
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \qc \b1
{\*\bkmkstart co_g_ID0EAXBG_1}{\*\bkmkend co_g_ID0EAXBG_1}
{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200
Conway Falls
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EKXBG_1}{\*\bkmkend co_g_ID0EKXBG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
On Sept. 9, 2004, one year and three months after Oracle\rquote s initial offer,
Judge Vaughn R. Walker of the United States District Court for the Northern Dis
trict of California handed the Department of Justice an embarrassing defeat. In
a strongly-worded 164-page opinion, Judge Walker held that the DOJ had failed to
prove that a merger between Oracle and PeopleSoft would be likely \u8220\'3fsub
stantially to lessen competition\u8221\'3f in the business applications software
market. Conway announced in an email to employees, \u8220\'3f[A]ntitrust concer
ns were never the centerpiece, only one of many issues.\u8221\'3f The court\rquo
te s ruling does not mean Oracle will acquire PeopleSoft.
}
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45
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
However, PeopleSoft\rquote s situation was growing desperate and Conway\rquote
s even more so.
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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Conway\rquote s take-no-prisoners style had been encouraging to customers, but i
t had also frayed his relationship with his board. Conway often acted without co
nsulting them and sought to control the flow of information. He had also bristle
d under Bogen\rquote s warnings about fiduciary duties, and eventually fired the
experienced Gibson Dunn attorney. He was especially incensed by Bogen\rquote s
decision to take concerns regarding the CAP directly to the board. In notes Conw
ay prepared about the \u8220\'3fsignificant degradation in the relationship\u822
1\'3f with Gibson Dunn, he cited \u8220\'3fNo escalation to CFO or CEO - straigh
t to BOD closed session.\u8221\'3f
}
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46
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
To replace Bogen, the board hired Victor Lewkow of Cleary Gottlieb in New York
City.
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
As Conway grew increasingly \u8220\'3fout of control\u8221\'3f (in the words of
one person close to the deal), PeopleSoft\rquote s board faced a dilemma. Conway
was still the public face of PeopleSoft, its cheerleader and lead salesman. Wha
t kind of message would it send to dismiss him in the middle of a takeover conte
st? For better or worse, Conway and PeopleSoft were married. Every way out was m
essy. Finally, however,
}
{\i1 \fs20 \cf22 \f2 \b1
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*23
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Conway went too far. At an analyst day in September 2003, Conway said:
\par
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa50 \ul0 \cf1 \strike0 \f2 \b0 \sb50
I don\rquote t think the Oracle bid is a current issue. It\rquote s a movie that
\rquote s been playing for a long time. I think people have lost interest in it.
The last remaining customers whose business decisions were being delayed have a
ctually completed their sales and completed their orders. So I don\rquote t see
it as a disruptive factor . . . .
}
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47
}}}
\par
}
}
}
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj

{\*\bkmkstart co_g_ID0ET2BG_1}{\*\bkmkend co_g_ID0ET2BG_1}


{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
The board and PeopleSoft managers knew this was not true, but the company did no
t formally retract the statement. Instead, when PeopleSoft released a transcript
of the event, the last two sentences of the above text were replaced with subst
itute, corrected language: \u8220\'3fOracle\rquote s tactics have created concer
n among many users, and that\rquote s a problem for us. Fortunately, we\rquote v
e been able to overcome much of it and we expect that we will continue to be abl
e to do so. So I don\rquote t see it as a disruptive factor . . . .\u8221\'3f
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Despite the Orwellian effort to correct the record (as described later by Vice C
hancellor Strine), the original statements eventually came back to haunt Conway
and the board. In a deposition Conway was grilled about the incident by David Ba
labanian of Bingham McCutchen and Michael Carroll of Davis Polk & Wardwell, both
senior members of Oracle\rquote s legal team.
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
\u8220\'3fDid you make those statements?\u8221\'3f asked Balabanian.
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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\u8220\'3fYes,\u8221\'3f Conway answered.
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
\u8220\'3fWere they true?\u8221\'3f
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ED5BG_1}{\*\bkmkend co_g_ID0ED5BG_1}
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\u8220\'3fNo, they weren\rquote t true. . . . I was promoting, promoting, promot
ing.\u8221\'3f Conway said.
\par

}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0E15BG_1}{\*\bkmkend co_g_ID0E15BG_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
\u8220\'3fThe statements were not true?\u8221\'3f
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
\u8220\'3fThe statements were promotional. I was selling.\u8221\'3f Conway said.
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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\u8220\'3fTrue? False?\u8221\'3f
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ENAAI_1}{\*\bkmkend co_g_ID0ENAAI_1}
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\u8220\'3fAbsolutely not true.\u8221\'3f
}
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48
}}}
\par
}
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}
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
While Max Gitter from Cleary Gottlieb represented PeopleSoft at the deposition,
Carroll intervened at this point to ask Conway whether he was represented indivi
dually as well. Conway said that he was not. Carroll then asked whether Conway h
ad thought about consulting with lawyers about the significance of a CEO making
false statements to the public markets. Conway said that he had not.
}
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49
}}}
\par
}
}
}
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{\*\bkmkstart co_g_ID0ESBAI_1}{\*\bkmkend co_g_ID0ESBAI_1}
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A transcript of the deposition gradually made its way to the PeopleSoft board. F
our weeks after the deposition, on September 30,
}
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*24
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
the other board members voted unanimously to remove Conway as CEO. Conway agree
d to resign from the board and received a $13.7 million severance package becaus
e he was fired without cause.
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Battle ran the conference call the next day announcing Conway\rquote s dismissal
, doing his best to mitigate the obvious damage. \u8220\'3fThere\rquote s no smo
king gun, there are no accounting irregularities,\u8221\'3f Battle assured inves
tors. \u8220\'3f[I]t\rquote s a matter of the board losing confidence in Craig.\
u8221\'3f
}
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50
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
David Duffield would reassume his duties as CEO. Later that day, the Department
of Justice, chastened or perhaps just afraid of creating any more precedent, el
ected not to appeal the antitrust verdict. Sixteen months after announcing its b
id, Oracle had finally regained the initiative.
\par
}
}
}
}
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{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200


Delaware: \u8220\'3fWill Leo Roar?\u8221\'3f
\par
}
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With the antitrust case now resolved, and Oracle gaining momentum, all eyes turn
ed to Delaware. Oracle had brought suit in the Delaware Court of Chancery seekin
g the removal of PeopleSoft\rquote s poison pill and an injunction to stop the C
AP program. Hearing the case would be Vice Chancellor Leo Strine, one of the fiv
e judges on the court. Strine was the \u8220\'3fwunderkind of U.S. corporate law
,\u8221\'3f
}
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51
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}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
recognized among academics, practitioners, and other judges to be the intellect
ual leader of the court. Strine spoke frequently at practitioner and academic co
nferences and taught courses at Harvard, the University of Pennsylvania, and Van
derbilt law schools. He had also written provocative articles in academic journa
ls suggesting his receptivity to arguments that target boards of directors shoul
d not have unfettered discretion to maintain takeover defenses. The Economist sp
eculated that the Vice Chancellor might want to use the case to do something tha
t no Delaware judge had done in 15 years: \u8220\'3fMr. Strine may yearn to scra
p PeopleSoft\rquote s poison pill and send a clear message that American boards
cannot just say no.\u8221\'3f
}
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52
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
If correct, the Vice Chancellor would finally give Oracle a clean shot at attra
cting a majority of PeopleSoft\rquote s shares. As the Economist put it, the 16month controversy had come down to a single question: \u8220\'3fWill Leo roar?\u
8221\'3f
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EUFAI_1}{\*\bkmkend co_g_ID0EUFAI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Strine would evaluate PeopleSoft\rquote s use of the poison pill under the two-p
art Unocal test. Most public commentary focused on the second prong - the \u8220
\'3freasonableness\u8221\'3f requirement - and predicted

}
{\i1 \fs20 \cf22 \f2 \b1
{\*\bkmkstart co_pp_sp_111958_25_1}{\*\bkmkend co_pp_sp_111958_25_1}
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*25
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
that Strine would be unlikely to invalidate the pill in view of the long line o
f Delaware cases finding pills to be \u8220\'3freasonable.\u8221\'3f But some fo
cused on Unocal\rquote s first prong - the \u8220\'3fthreat\u8221\'3f requiremen
t - and argued that the usual threats that the Delaware courts had endorsed, suc
h as \u8220\'3fstructural coercion\u8221\'3f of shareholders (through two-tier,
junk-bond-financed offers) or \u8220\'3fsubstantive coercion\u8221\'3f
}
{\i0 \fs16 \cf1 \f2 \b0
{\*\bkmkstart co_footnoteReference_F53331276586_ID0EFG}{\*\bkmkend co_footnoteRe
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53
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
(that shareholders would tender out of ignorance), did not apply here: Oracle h
ad made a fully financed, all-cash offer for 100% of the shares to sophisticated
shareholders who had had 16 months to consider the offer. One legal advisor to
a major PeopleSoft shareholder estimated a 70% chance that Strine would force Pe
opleSoft to redeem its pill.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ERGAI_1}{\*\bkmkend co_g_ID0ERGAI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
PeopleSoft\rquote s CAP presented even more interesting and novel questions of c
orporate law. The first question was whether the CAP represented a takeover defe
nse at all: Oracle argued that the CAP was intended to operate just like a poiso
n pill (and therefore was subject to Unocal analysis), while PeopleSoft argued t
hat the CAP was intended solely to assure customers and protect the business (an
d therefore was subject only to business judgment review). If the CAP was in fac
t a takeover defense, no one had previously used a threat to customers to satisf
y Unocal\rquote s first prong, though the language of Unocal indicated that such
a threat would be permissible. If the CAP survived the first prong of Unocal an
alysis, was a $2.0 billion potential liability \u8220\'3freasonable in relation
to the threat posed\u8221\'3f ? No one could predict with confidence how Strine
would answer these questions.
}
{\i0 \fs16 \cf1 \f2 \b0
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54
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Indeed, Strine himself did not seem to know: in a conference

}
{\i1 \fs20 \cf22 \f2 \b1
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*26
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
with Allen Terrell of Richards, Layton & Finger and Don Wolfe of Potter, Anders
on & Corroon, lead Delaware counsel for Oracle and PeopleSoft respectively, Stri
ne admitted, \u8220\'3fThis is not an easy case.\u8221\'3f
}
{\i0 \fs16 \cf1 \f2 \b0
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55
}}}
\par
}
}
}
}
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California Looms
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ERIAI_1}{\*\bkmkend co_g_ID0ERIAI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
While the combatants faced off in Vice Chancellor Strine\rquote s courtroom in D
elaware, a parallel skirmish was gaining steam on the west coast. PeopleSoft\rqu
ote s California lawsuit, which had originally been dismissed by Oracle as a nui
sance at best, was slowly becoming a genuine threat. When it started in June 200
3, Oracle was sending two lawyers to court. By October 2004, Oracle was fielding
twelve. PeopleSoft was asking for compensatory damages of $1 billion and puniti
ve damages beyond that. Battle thought it was their best weapon:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
It was very critical that this lawsuit was in Oakland, California. The Delaware
courts say \u8220\'3fWe don\rquote t care about 3,000 layoffs or 6,000 layoffs.
We\rquote re tired of this management entrenchment. You\rquote ve got to be deal
ing with the shareholders, and there\rquote s very little wiggle room you have i
n your loyalty to shareholder value.\u8221\'3f So what\rquote s going to happen
now is instead of a Delaware court with Judge Strine, Larry Ellison\rquote s goi
ng to be sitting in front of a jury in Oakland. And you know people who get on t
wo or three months of jury trial tend to be folks of very modest incomes. They a
re scared to death about 6,000 job losses in this area. And the fact that Larry
Ellison is one of the richest men in the world and acts flamboyantly puts him ri
ght in the crosshairs of why a lot of people think the capitalist system is bad.

\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EZKAI_1}{\*\bkmkend co_g_ID0EZKAI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
So Ellison\rquote s not going to have Strine watching out for him. He\rquote s g
oing to have a bunch of people that think he\rquote s pond scum. And there\rquot
e s a possibility for a pretty big judgment. And everything is going our way.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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The Delaware Trial
\par
}
}
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The Delaware trial began on October 4, 2004 in downtown Wilmington, Delaware. St
rine\rquote s courtroom overflowed with reporters, arbitrageurs, and lawyers. Th
e proceedings were simulcast into adjoining rooms so arbs could use their cell p
hones without disrupting the proceedings. When Ellison declared on the stand tha
t \u8220\'3fthere are
}
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*27
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
more discussions about lowering the [offer] price than raising the price,\u8221
\'3f
}
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56
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
and Catz similarly announced that Oracle might reduce its bid
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
\u8220\'3fsomewhere between a third and a quarter,\u8221\'3f
}
{\i0 \fs16 \cf1 \f2 \b0

{\*\bkmkstart co_footnoteReference_F57331276586_ID0EBN}{\*\bkmkend co_footnoteRe


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57
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
arbs scrambled to sell shares. Anyone getting service on a PDA could watch the
stock prices jump in response to every turn in the testimony. The trial was a st
udy in market efficiency.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EQNAI_1}{\*\bkmkend co_g_ID0EQNAI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Oracle\rquote s alleged efforts to \u8220\'3ftalk down\u8221\'3f the PeopleSoft
stock infuriated PeopleSoft\rquote s board and bolstered the conclusion that Ora
cle was not serious. Oracle would move close enough to sow \u8220\'3ffear, uncer
tainty and doubt,\u8221\'3f then pull back, leaving PeopleSoft \u8220\'3ftwistin
g in the wind.\u8221\'3f For a company that wanted a transaction, PeopleSoft rea
soned, Oracle was surprisingly good at never being ready to transact.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ECOAI_1}{\*\bkmkend co_g_ID0ECOAI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Whatever problems Oracle faced, PeopleSoft\rquote s were worse. Oracle\rquote s
lawyers hounded PeopleSoft\rquote s directors and officers to explain the tensio
ns in their positions: support for Conway for a year, but abrupt and unceremonio
us dismissal; willingness to do a deal, but an unprecedented array of defenses;
careful oversight of management, but approval of substantially revised projectio
ns; belated approval of the CAP, but little understanding of the details.
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
At the end of the two-week trial, Vice Chancellor Strine requested two more days
of testimony on specific aspects of the CAP and PeopleSoft\rquote s use of the
poison pill. But before the court would reconvene, Strine told Oracle, he needed
to have a final, unconditional offer on the table.
\par
}
}
}
}
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Bump and Rush


\par
}
}
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Catz decided to give Strine more than that. On November 1, 2004, Oracle launched
Operation \u8220\'3fBump and Rush.\u8221\'3f Oracle increased its cash offer fr
om $21.00 to $24.00 per share and declared that $24.00 was its \u8220\'3fbest an
d final offer.\u8221\'3f However, Oracle added a condition: \u8220\'3fWe will wi
thdraw our offer unless a majority of PeopleSoft shares are tendered into our of
fer by Nov. 19, 2004.\u8221\'3f
}
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58
}}}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Catz explained:
\par
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
We bumped the stock and then we told stockholders they had until the 19th to get
in the box or we were leaving. So we didn\rquote t give them, \u8220\'3foh, you
\rquote ve got four weeks, you\rquote ve got a month.\u8221\'3f It
}
{\i1 \fs20 \cf22 \f2 \b1
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*28
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
was a bump. We\rquote re giving you the price right now and you better get in h
ere or we\rquote re leaving.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Catz was tired of holding up PeopleSoft\rquote s stock price with her bid and th
en being told that her bid was insufficient because of where the stock price was
. She had put her best and final offer on the table. It was finally time for eve
ryone to choose sides:
\par
}
}

{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj


{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa50 \ul0 \cf1 \strike0 \f2 \b0 \sb250
It was like chasing your tail: every time you raise your offer, the stock price
moves up. I knew that shareholders were interested in our offer, but there was n
o reason for them to indicate their interest in the offer because there was a po
ison pill that prevented them from accepting it. There was no point in being in
the box. So I had to create a situation where there was a point in being in the
box. And the only way was to make sure they understood that we were done. We wer
e leaving and we weren\rquote t kidding.
\par
}
}
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
PeopleSoft declared the $24.00 offer to be inadequate and recommended that share
holders not tender. Teams from both companies set off around the country to lobb
y major shareholders. Battle and Duffield, along with PeopleSoft Vice Chairman a
nd director Aneel Bhusri, conducted marathon meetings with shareholders. To thos
e who met with them, it was clear that Battle and Duffield were not on the same
page.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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Duffield did not want to sell, focusing on the human costs of a takeover. Any tr
ansaction would be followed by a bloodletting at PeopleSoft and, to some extent,
at Oracle. Employees would be fired en masse. The businesses in PeopleSoft\rquo
te s hometown that depend on its continued viability would be ruined.
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Duffield felt he owed a duty to his \u8220\'3fPeople people,\u8221\'3f the empl
oyees who had made him a billionaire and had built his company into a formidable
competitor. \u8220\'3fThink how many divorces are going to happen because of th
is,\u8221\'3f mused one person involved in the deal.
\par
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
The human costs tore at Battle too, but he was more attuned to the ways of Wall
Street. Battle felt that this was not the context in which to open a debate abou
t the free market system. He had assumed a duty to look out for shareholders, an
d he intended to do just that.
\par

}
}
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The meetings were punishing. Battle remembers an especially bad day:
\par
}
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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We met with three groups of arbs one morning, eight at a shot for an hour from 7
:00 to 8:00 to 9:00. That\rquote s like being raw meat in a lion\rquote s den. T
hose guys are intemperate and pretty obnoxious. And then at the end of the hour,
they\rquote d say, \u8220\'3fWell, thank
}
{\i1 \fs20 \cf22 \f2 \b1
{\*\bkmkstart co_pp_sp_111958_29_1}{\*\bkmkend co_pp_sp_111958_29_1}
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*29
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
you very much, we appreciate everything you\rquote re trying to do for sharehol
der value,\u8221\'3f and walk out like we just had a nice cup of coffee together
.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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Instead of providing a straightforward endorsement of the offer as Catz demanded
, the arbs were playing a more nuanced game in the days leading up to November 1
9. Federal securities rules prevented the PeopleSoft shareholders from talking d
irectly to each other, but investors coordinated their actions through back chan
nels such as PeopleSoft\rquote s proxy solicitors. Battle recalled:
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa50 \ul0 \cf1 \strike0 \f2 \b0 \sb250
One large investor pulled his shares back because we said we know this is going
to go above 50%. If it goes to 65%, 68%, 70%, Oracle has no motivation to raise
the price. It\rquote ll look completely dispositive. If it comes in at 55%, 58%,
60%, then Oracle can\rquote t walk away, because they\rquote ve said they\rquot
e d stay in the deal. There were two or three shareholders that actually voted s
ome yes and some no to get to a middle-ground result.
\par
}
}

}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\*\bkmkstart co_g_ID0ELYAI_1}{\*\bkmkend co_g_ID0ELYAI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
It\rquote s the only time I\rquote ve ever seen anybody trust in this process. S
ome guys trusted our proxy solicitor Alan Miller, that the count was high enough
so that they could pull some shares off the table to not make this look like su
ch a mandate. Without that trust there would have been no way of negotiating abo
ve $24.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
While the vote got as high as 70% in the days leading up to November 19, the fin
al count was 61% of PeopleSoft\rquote s shares tendered after certain arbs pulle
d back shares at the last minute. Oracle achieved the majority that it had deman
ded in order to stay in the game.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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The Deal
\par
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EWZAI_1}{\*\bkmkend co_g_ID0EWZAI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
During the Delaware trial, a large PeopleSoft shareholder had approached Skip Ba
ttle with the strong sense that Oracle would be willing to offer $26.50 in cash,
or $27.00 with $24 in cash and $3 in Oracle stock. Battle was cautiously intrig
ued: \u8220\'3fWe were getting a lot of pressure from Judge Strine to do somethi
ng, but there was a lot of fear and suspicion, because if we got to the table an
d then it blew up, our salespeople said it was going to be really tough to make
the fourth quarter.\u8221\'3f Battle sent his shareholder back to Oracle to make
sure the deal was available. On November 29, the shareholder came back with his
report: no deal. As Battle described, \u8220\'3fApparently the [Oracle] executi
ves said, \u8216\'3fAre you kidding me? We just won the tender offer. No way.\u8
221\'3f\u8217\'3f
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EO2AI_1}{\*\bkmkend co_g_ID0EO2AI_1}

{\i0 \fs20 \ul0 \cf1 \strike0 \f2 \b0


}
{\i1 \fs20 \cf22 \f2 \b1
{\*\bkmkstart co_pp_sp_111958_30_1}{\*\bkmkend co_pp_sp_111958_30_1}
{\i1 \fs20 \sa0 \ul0 \cf22 \strike0 \f2 \b1 \sb0
*30
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
A few days later, Battle was deposed by Oracle\rquote s lawyers. Under oath he
described his backdoor foray to Oracle and expressed his willingness to take a $
26.50 offer back to the PeopleSoft board if it, in fact, was available. It was t
he first counteroffer, albeit oblique, from PeopleSoft during the 17-month conte
st. But there was a problem: the deposition had been designated attorneys-eyes-o
nly, and therefore not available to the Oracle board and management.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EH3AI_1}{\*\bkmkend co_g_ID0EH3AI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
In order to preserve the confidentiality of Battle\rquote s deposition during th
e resumed Delaware trial, PeopleSoft\rquote s lead Delaware counsel Don Wolfe of
Potter, Anderson & Corroon requested that the courtroom be \u8220\'3fsealed\u82
21\'3f from the public. Oracle\rquote s lead Delaware counsel Allen Terrell of R
ichards, Layton & Finger conversely requested that the \u8220\'3fattorneys-eyesonly\u8221\'3f designation be lifted so that the $26.50 counteroffer could be di
sclosed to the Oracle board. On Thursday, December 9, four days before the trial
would begin, Vice Chancellor Strine held a telephone meeting with Wolfe and Ter
rell. Exhibit 4 provides excerpts from the call. In the call Vice Chancellor Str
ine removed the attorneys-eyes-only designation so that Battle\rquote s depositi
on transcript could be delivered to Joe Grundfest, head of Oracle\rquote s trans
action committee and a law professor at Stanford Law School.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0E63AI_1}{\*\bkmkend co_g_ID0E63AI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
The move had its intended effect. Over the weekend of December 11 and 12, the Pe
opleSoft board authorized their lead transactional lawyers - Doug Smith of Gibso
n, Dunn & Crutcher and Victor Lewkow of Cleary Gottlieb - to call their counterp
art Bill Kelly at Davis Polk, to indicate their willingness to accept $26.50 per
share in cash, or $10.3 billion in total consideration. This time, Oracle agree
d. On Sunday, December 12, one day before the Delaware trial was scheduled to re
sume, the PeopleSoft board formally voted to accept the offer, with Duffield and
former executive Aneel Bhusri abstaining. The merger was completed on January 7
, 2005.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \ul0 \cf1 \strike0 \f2 \b1


}
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*31
}
}
{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200
Exhibit 1A PeopleSoft Share Price Relative to Dow Jones Computer Software Index
, 1994 to 2003 (August 1994 = 100)
\par
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
\par
}
}
}
}
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{\ri0 \i0 \fs20 \cf1 \f2 \li0 \qc \b1
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{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200
Exhibit 1B PeopleSoft Share Price, Jan. 2002 to Oct. 2004
\par
}
}
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TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
\par
}
}
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}
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}
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*32
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{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200
Exhibit 2 PeopleSoft Board of Directors
\par
}
}
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A. George \u8220\'3fSkip\u8221\'3f Battle became a director of PeopleSoft in Dec


ember 1995. Mr. Battle has served on the Board of Directors of Ask Jeeves, Inc.,
a publicly-traded internet search engine company, since December 2000, currentl
y serving as Executive Chairman. He served as its Chief Executive Officer from D
ecember 2000 through December 2003. He was a Senior Fellow at the Aspen Institut
e, an international research firm. From 1968 until his retirement in June 1995,
Mr. Battle served in various roles of increasing responsibility with Andersen Co
nsulting. At the time of his retirement, Mr. Battle was Managing Partner of Mark
et Development and was serving as a member of Andersen Consulting\rquote s Execu
tive Committee, Global Management Council and Partner Income Committee. Mr. Batt
le holds a B.A. degree in economics with highest distinction from Dartmouth Coll
ege and an M.B.A. degree from the Stanford Business School where he held McCarth
y and University Fellowships. Mr. Battle was also the Chairman of the Board of D
irectors of Fair Isaac Corporation, a director of Barra, Inc., and a director of
the following mutual funds: Masters\rquote Select Equity, Masters\rquote Sele
ct Value, Masters\rquote Select Smaller Companies and Masters\rquote Select In
ternational.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\*\bkmkstart co_g_ID0EEABI_1}{\*\bkmkend co_g_ID0EEABI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Aneel Bhusri, a director of PeopleSoft since March 1999, was a General Partner w
ith Greylock Management Corporation, an early stage venture capital firm with of
fices in San Mateo, California and Waltham, Massachusetts. He was associated wit
h PeopleSoft from 1993 through December 2002, serving in a variety of management
positions, including as Senior Vice President, Product Strategy, Marketing and
Business Development from June 1998 to January 1999.
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Prior to joining PeopleSoft, Mr. Bhusri served as an associate at Norwest Ventu
re Partners and spent several years in Morgan Stanley\rquote s corporate finance
organization working with the firm\rquote s high-tech clients. He holds a B.S.
degree in electrical engineering and economics from Brown University and an M.B.
A. degree from Stanford University. Mr. Bhusri was also a director of Marimba, I
nc. and Corio, Inc..
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Craig A. Conway joined PeopleSoft in May 1999 as President, Chief Operating Offi
cer and Director, and was promoted to Chief Executive Officer in September 1999.
From 1996 to 1999, Mr. Conway was President and Chief Executive Officer of OneT
ouch Systems, a leader in the field of interactive broadcast networks. From 1993
to 1996, Mr. Conway served as President and Chief Executive Officer for TGV
}
{\i1 \fs20 \cf22 \f2 \b1
{\*\bkmkstart co_pp_sp_111958_33_1}{\*\bkmkend co_pp_sp_111958_33_1}
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*33
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200

Software, Inc., an early developer of IP network protocols and applications for


corporate intranets and the Internet. Prior to that time, Mr. Conway spent eigh
t years at Oracle Corporation in a variety of senior management roles, last serv
ing as an Executive Vice President. Mr. Conway graduated from State University o
f New York at Brockport with a B.S. degree in computer science and mathematics.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EZBBI_1}{\*\bkmkend co_g_ID0EZBBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
David A. Duffield was a founder of PeopleSoft and has served as Chairman of the
Board since PeopleSoft\rquote s incorporation in 1987. He also served as Chief E
xecutive Officer from August 1987 through September 1999 and President from Augu
st 1987 through May 1999. Prior to founding PeopleSoft, he was a founder and Cha
irman of the Board of Integral, a vendor of human resource and financial applica
tions software, from 1972 through 1987. During a portion of that time, Mr. Duffi
eld also served as Integral\rquote s Chief Executive Officer. Mr. Duffield was t
he co-founder of Information Associates (now a subsidiary of Systems and Compute
r Technology), where he was employed between 1968 and 1972. Prior to that Mr. Du
ffield worked at International Business Machines Corporation (\u8220\'3fIBM\u822
1\'3f), a computer systems manufacturer, as a marketing representative and syste
ms engineer. He holds a B.S. degree in electrical engineering and an M.B.A. degr
ee from Cornell University.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EXCBI_1}{\*\bkmkend co_g_ID0EXCBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Frank J. Fanzilli, Jr., became a director of PeopleSoft in May 2001. Mr. Fanzill
i was Managing Director and the Chief Information Officer of Credit Suisse First
Boston until his retirement in April of 2002. Mr. Fanzilli joined the First Bos
ton Corporation in 1985 as an Analyst in the Information Services Department and
held a variety of positions within Information Technology, including Head of Eu
ropean Information Services and Head of Global Application Development. Prior to
joining Credit Suisse First Boston, Mr. Fanzilli spent seven years at IBM where
he managed systems engineering and software development for Fortune 50 accounts
. Mr. Fanzilli received a B.S. degree in management, cum laude, from Fairfield U
niversity and an M.B.A. degree in finance, with distinction, from New York Unive
rsity, where he was the Marcos Nadler Scholar. Mr. Fanzilli was also a director
of Interwoven, Inc..
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ESDBI_1}{\*\bkmkend co_g_ID0ESDBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Steven D. Goldby, a director of PeopleSoft since February 2000, has served as Ch
airman and Chief Executive Officer of Symyx Technologies, Inc., a leading compan
y applying combinatorial methods to materials science, since July 1998. Prior to
joining Symyx, he served for more than ten years as Chairman of the Board and C
hief Executive Officer of MDL Information Systems, Inc., a biotechnology
}

{\i1 \fs20 \cf22 \f2 \b1


{\*\bkmkstart co_pp_sp_111958_34_1}{\*\bkmkend co_pp_sp_111958_34_1}
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*34
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
software company. Before joining MDL, Mr. Goldby held various management positi
ons, including Senior Vice President, at ALZA Corporation, from 1968 to 1973, an
d was President of Dynapol, a specialty chemical company, from 1973 to 1981.
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Mr. Goldby holds a B.S. degree in chemistry from the University of North Caroli
na and a J.D. degree from Georgetown University Law Center.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EMEBI_1}{\*\bkmkend co_g_ID0EMEBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Michael J. Maples, a director of PeopleSoft since July 2003, served from January
1997 to July 2003, as a director of J.D. Edwards & Company, the successor of wh
ich became a wholly-owned subsidiary of PeopleSoft. Mr. Maples retired in July 1
995 and operated a ranch. From April 1988 to July 1995, Mr. Maples held various
management positions at Microsoft Corporation, last serving as Executive Vice Pr
esident of the Worldwide Products Group. Prior to that, he served as a Director
of Software Strategy for IBM. Mr. Maples holds a B.S. in electrical engineering
from Oklahoma University and an M.B.A. from Oklahoma City University. Mr. Maples
was also a director of Lexmark International, Inc. and NetIQ Corporation.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EHFBI_1}{\*\bkmkend co_g_ID0EHFBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
Cyril J. Yansouni has been a director of PeopleSoft since 1992. From June 2000 t
o June 2003, Mr. Yansouni was the Chairman of the Board of Directors of Read-Rit
e Corporation, a supplier of magnetic recording heads for data storage drives, w
hich sought protection under Chapter 7 of the U.S. Bankruptcy Code in June 2003.
From March 1991 to June 2000, Mr. Yansouni also served as the Chief Executive O
fficer of Read-Rite Corporation. From 1988 to 1991, Mr. Yansouni was with Unisys
Corporation, a manufacturer of computer systems, where he served in various sen
ior management capacities, last serving as an Executive Vice President. From 198
6 to 1988, Mr. Yansouni was President of Convergent Technologies, a manufacturer
of computer systems that was acquired by Unisys Corporation in December 1988. F
rom 1967 to 1986, Mr. Yansouni was employed by Hewlett-Packard Company, where he
served in a variety of technical and management positions, last serving as Vice
President and General Manager of the Personal Computer Group. Mr. Yansouni rece
ived his B.S. degree in electrical and mechanical engineering from the Universit
y of Louvain, Belgium and his M.S. degree in electrical engineering from Stanfor
d University. Mr. Yansouni was also a director of Tektronix, Inc. and Solectron
Corporation.
\par
}
}
}

}
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*35
}
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{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200
Exhibit 3 Accrued Liabilities Under PeopleSoft\rquote s Customer Assurance Prog
ram (as of Nov. 2004)
\par
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{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
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June - September 2003
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Reduction in support within two years of customer contract date
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$310
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2
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
September 2003
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Election of a majority of new directors not approved by incumbent board or acqui
sition within two years of customer contract date
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Reduction in support within four years of customer contract date
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Between two and five times purchase price, with the multiple increasing as the s
ize of the contract increased
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
$170
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \ro
w }
{\trowd \itap0 \trleft0
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \clbrdrl \trql \clvertalt \cellx1240
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \trql \clvertalt \cellx3000
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \trql \clvertalt \cellx4760
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \trql \clvertalt \cellx6520
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \trql \clvertalt \cellx8280
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \clbrdrr \trql \clvertalt \cellx10040
\intbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
3
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
September - November 2003
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Election of a majority of new directors not approved by incumbent board and acqu
isition within two years of customer contract date

}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Same as above
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Same as above
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
$40
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \ro
w }
{\trowd \itap0 \trleft0
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \clbrdrl \trql \clvertalt \cellx1240
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \trql \clvertalt \cellx3000
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \trql \clvertalt \cellx4760
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \trql \clvertalt \cellx6520
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \trql \clvertalt \cellx8280
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \clbrdrr \trql \clvertalt \cellx10040
\intbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
4
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
November 2003- June 2004
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Acquisition within two years of customer contract date
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Same as above
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Same as above
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0

{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0


$1,342
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \ro
w }
{\trowd \itap0 \trleft0
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \clbrdrl \trql \clvertalt \cellx1240
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \trql \clvertalt \cellx3000
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \trql \clvertalt \cellx4760
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \trql \clvertalt \cellx6520
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \trql \clvertalt \cellx8280
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \clbrdrr \trql \clvertalt \cellx10040
\intbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
5
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
June - November 2004
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Acquisition by Oracle or its affiliates within two years of customer contract da
te
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Same as above
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Same as above
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \in
tbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
$156
}
}\i0 \ri50 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \sb0 \intbl \cell \ro
w }
{\trowd \itap0 \trleft0
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \clbrdrb \clbrdrl \trql \clvertalt \cell
x1240
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \clbrdrb \trql \clvertalt \cellx3000
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \clbrdrb \trql \clvertalt \cellx4760
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \clbrdrb \trql \clvertalt \cellx6520
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \clbrdrb \trql \clvertalt \cellx8280
\clpadt20 \clpadft3 \clpadr20 \clpadfr3 \clbrdrb \clbrdrr \trql \clvertalt \cell
x10040
\intbl

{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0


{\field {\*\fldinst HYPERLINK "#co_g_ID0EWOAG_1" }{\fldrslt
{\i0 \fs20 \sa0 \ul0 \cf5 \strike0 \f2 \b0 \sb0
TOTAL
}\i0 \fs20 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}
}\i0 \ri50 \fs20 \cf1 \f2 \li50 \qc \b0 \intbl \cell \intbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \ul0 \cf1 \strike0 \f2 \b0
}
}\i0 \ri50 \fs20 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \intbl \cell \intbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \ul0 \cf1 \strike0 \f2 \b0
}
}\i0 \ri50 \fs20 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \intbl \cell \intbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \ul0 \cf1 \strike0 \f2 \b0
}
}\i0 \ri50 \fs20 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \intbl \cell \intbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\i0 \fs20 \ul0 \cf1 \strike0 \f2 \b0
}
}\i0 \ri50 \fs20 \ul0 \cf1 \strike0 \f2 \li50 \qc \b0 \intbl \cell \intbl
{\ri50 \i0 \fs20 \cf1 \f2 \li50 \qc \b0
{\field {\*\fldinst HYPERLINK "#co_g_ID0EWOAG_1" }{\fldrslt
{\i0 \fs20 \sa0 \ul0 \cf5 \strike0 \f2 \b0 \sb0
$2,018
}\i0 \fs20 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}
}\i0 \ri50 \fs20 \cf1 \f2 \li50 \qc \b0 \intbl \cell \row }}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ENOBI_1}{\*\bkmkend co_g_ID0ENOBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Note: The italicized text in each row indicates the differences from the previou
s row.
\par
}
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \qc \b1
{\*\bkmkstart co_g_ID0EZOBI_1}{\*\bkmkend co_g_ID0EZOBI_1}
{\i0 \fs20 \ul0 \cf1 \strike0 \f2 \b1
}
{\i1 \fs20 \cf22 \f2 \b1
{\*\bkmkstart co_pp_sp_111958_36_1}{\*\bkmkend co_pp_sp_111958_36_1}
{\i1 \fs20 \sa0 \ul0 \cf22 \strike0 \f2 \b1 \sb0
*36
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b1 \sb0
Exhibit 4 Excerpts From Telephone Meeting With the Delaware Chancery Court on D
ecember 9, 2004. Telephone Conference, Oracle Corp. v. PeopleSoft Inc., No. 2037
7 (Del. Ch. Dec. 9, 2004)
}
{\i0 \fs20 \sa200 \ul0 \cf1 \strike0 \f2 \b1 \sb200
.
\par
}

}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ENPBI_1}{\*\bkmkend co_g_ID0ENPBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
THE COURT: I want to put this under seal, too, from the get-go. Do I just have M
r. Wolfe and Mr. Terrell?
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0E3PBI_1}{\*\bkmkend co_g_ID0E3PBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
MR. TERRELL: Yes, Your Honor.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EIQBI_1}{\*\bkmkend co_g_ID0EIQBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
MR. WOLFE: Yes, Your Honor.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EUQBI_1}{\*\bkmkend co_g_ID0EUQBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
THE COURT: . . . I\rquote m going to cut to the chase. I read Mr. Battle to be t
estifying under oath that if Oracle put on the table $26.50, he would recommend
that to the transaction committee and to his board.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EDRBI_1}{\*\bkmkend co_g_ID0EDRBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
MR. WOLFE: I believe he said that quite explicitly.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EPRBI_1}{\*\bkmkend co_g_ID0EPRBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
THE COURT: But he never said it to Joe Grundfest.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj

{\*\bkmkstart co_g_ID0E2RBI_1}{\*\bkmkend co_g_ID0E2RBI_1}


{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
MR. WOLFE: No.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EHSBI_1}{\*\bkmkend co_g_ID0EHSBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
THE COURT: He said it in a deposition, and he said it to some guy who wouldn\rqu
ote t tell him who he was dealing with at Oracle. . . . Now we have an attorneys
\rquote -eyes-only definition, where the people on the other side can get to say
, \u8220\'3fI never got told that. Mr. Blank never came back to me with that.\u8
221\'3f I don\rquote t know how to deal with that. But I\rquote m also saying I
don\rquote t get the maturity level of what is going on here. I really don\rquot
e t.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EITBI_1}{\*\bkmkend co_g_ID0EITBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
MR. WOLFE: Well, Your Honor, I don\rquote t want to leave the impression that th
is is some sort of fabricated, manufactured effort to show we have good faith wh
en in fact we are just inclined to stiff-arm the other side.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EUTBI_1}{\*\bkmkend co_g_ID0EUTBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
THE COURT: I\rquote m not saying that it is. What I\rquote m saying, Mr. Wolfe,
is that these people on both sides are fiduciaries. . . . I hear from Oracle, \u
8220\'3fWe want to negotiate.\u8221\'3f I hear from the lead [PeopleSoft] direct
or that he has a price that he would be willing to recommend, but it hasn\rquote
t been communicated. You know, how am I supposed to write the opinion? I\rquote
m going to write an opinion that says the lead dog has a price, and he is a sma
rt and able man. But I can\rquote t tell whether it was ever communicated, becau
se he wouldn\rquote t actually communicate it to them.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EPUBI_1}{\*\bkmkend co_g_ID0EPUBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
MR. WOLFE: Well, what I understood is that he told the stockholder, in response
to what we understood to be a feeling from Oracle at this level, was if this wer
e real, we would be willing to sit down and undertake negotiations. You may rega
rd this as immature. I
}
{\i1 \fs20 \cf22 \f2 \b1
{\*\bkmkstart co_pp_sp_111958_37_1}{\*\bkmkend co_pp_sp_111958_37_1}

{\i1 \fs20 \sa0 \ul0 \cf22 \strike0 \f2 \b1 \sb0


*37
}
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
think that\rquote s the Court\rquote s prerogative. But I think what Mr. Battle
is concerned about is that he would be dragged into a meeting; he would put a p
rice on the company\rquote s head; and that would get out. I don\rquote t think
he told the stockholder that he would take $26.50. I don\rquote t think that is
quite accurate. What he said was, \u8220\'3fIf that\rquote s what they are talki
ng about, we will have a meeting, and we will . . . .\u8221\'3f
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0E1VBI_1}{\*\bkmkend co_g_ID0E1VBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
THE COURT: What he testified to was that he would recommend it, that it be accep
ted, I believe.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EGWBI_1}{\*\bkmkend co_g_ID0EGWBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
MR. WOLFE: He did. I don\rquote t know that he testified that he told Larry Elli
son that.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EVWBI_1}{\*\bkmkend co_g_ID0EVWBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
THE COURT: . . . Isn\rquote t Mr. Grundfest the head of the transaction committe
e at Oracle?
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EBXBI_1}{\*\bkmkend co_g_ID0EBXBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
MR. TERRELL: Yes, Your Honor.
\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0ENXBI_1}{\*\bkmkend co_g_ID0ENXBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
THE COURT: And Mr. Battle is the head of the transaction committee at PeopleSoft
?

\par
}
}
}
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\ri0 \i0 \fs20 \cf1 \f2 \li0 \b0 \qj
{\*\bkmkstart co_g_ID0EZXBI_1}{\*\bkmkend co_g_ID0EZXBI_1}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
MR. WOLFE: Yes, Your Honor.
\par
}
}
}
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THE COURT: Might I suggest that you guys figure out how you get them together wh
ile you are here?
\par
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MR. WOLFE: Yes.
\par
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THE COURT: And I\rquote m saying this in good faith to both parties. There is a
real value to Oracle of deal certainty at this point. And there is a real value
to PeopleSoft of deal certainty, too. And so, you know, I don\rquote t know what
to make of it. And I don\rquote t know exactly whether to seal or not seal, bec
ause you are going to have to figure out a way for Oracle to be able to respond
to this testimony.
\par
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MR. WOLFE: Certainly. We are not sealing it from Oracle\rquote s lawyers, certai
nly.
\par
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THE COURT: No. I know. Factual assertion, remember: there is some unidentified p
erson at Oracle who supposedly turned down the opportunity to seize upon this ba
ck channel. Right?
\par
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MR. WOLFE: How can they find that person?
\par
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THE COURT: Right.
\par
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MR. WOLFE: Well, we are not trying to prove that Oracle would pay through this p
articular line of evidence. We are not trying to prove that Oracle would pay mor
e than $24 despite the testimony we got the other day from their CFO that they w
ill not negotiate. What we\rquote re trying to prove is that Mr. Battle is not i
ntransient and entrenched.
\par
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*38
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THE COURT: Right. But my initial reaction is that is not a mature way to procee
d. Think of it as a preview of question that you will get at oral argument from
a judge: Isn\rquote t this precisely why we have independent directors like Mr.
Battle and Mr. Grundfest, because of the kind of jejune, playground, adolescent,
macho - it\rquote s not just macho nonsense in this case, because there are wom
en involved in it, too - that goes between managers of companies, and their kind
of little feisty stuff? That is why we have independent directors, actually. Th
e way I can find out whether they are serious is to go to my fellow mature indep
endent director who is not involved in this and say, \u8220\'3fThis is what I ha
ve heard through this third party. Is there plausibility to this? Because, if yo

u are really in good faith willing to sit down and talk to us about our real val
ue, above your current offer, you know, then I want to explore that.\u8221\'3f T
hat is why we have independent directors.
\par
}
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MR. WOLFE: I understand Your Honor\rquote s point. Oracle, or someone presumably
at Oracle, suggesting a higher price is available. We have someone at PeopleSof
t saying, \u8220\'3fGee, if that\rquote s the case, maybe we would be interested
in resolving this thing in a mature way.\u8221\'3f I don\rquote t want to leave
the record in a state where it suggests that Mr. Battle is acting like a teenag
er at the junior prom waiting to get asked to dance.
\par
}
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THE COURT: What I mean is I\rquote m not going to give credence to something, Mr
. Wolfe, that I can\rquote t have tested adversarially.
\par
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MR. TERRELL: Your Honor, you have put your finger on our real concern with Don\r
quote s letter and the request to seal the Court. The real concern is that to da
te we have been unable to tell our client about that testimony, so we feel restr
icted in our ability to deal with it at trial. That\rquote s a greater concern t
o us than, frankly, the sealing or not, though there are complications that go,
as Your Honor is more aware than I, with sealing the court in a public trial, an
d what implications might be drawn, etc. And what I propose to do, and I explain
ed to my client, is we do want the attorney-eyes-only lifted, so that we can dis
cuss his testimony with our client, and then productively be able to deal with i
t, and hopefully productively be able to deal with it on a deal concept. In othe
r words, hopefully, it might lead to some resolution.
\par
}
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THE COURT: I think that is a good idea. I think the attorneys-eyes-only justific
ation for it is not founded. . . . If you get this transcript, you know, Battle
and Grundfest can read it, and they can hear our discussion, and maybe it will j
ust occur to somebody that they ought
}
{\i1 \fs20 \cf22 \f2 \b1

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to - you know, sneak Eggs Benedict together at the hotel. . . . I mean, I\rquot
e m not going to do anything to screw up the end of the year for PeopleSoft; I m
ean, not consciously, anyway. But I\rquote m also not going to have some secret
star chamber thing, where I get told by PeopleSoft in private that they are just
ducky doing a deal, it\rquote s just a question of price, and then not have tha
t fairly tested.
\par
}
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MR. WOLFE: No. I do understand that, Your Honor. I would think that lifting the
attorneys-eyes-only designation would speak to that problem.
}
{\i0 \fs20 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb200
But I also want to say, because you have alluded to it, this board is not simpl
y being difficult for the sake of being difficult. It\rquote s not simply price,
I suppose, but - ultimately it is, but it\rquote s also timing. And you know, O
racle has said that it\rquote s not going to move its $24 offer. It said that pu
blicly. They are in a position where they need an excuse to move, I presume, unl
ess they are going to eat their words in a very sort of public way.
\par
}
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THE COURT: I think there has been machismo posturing on both sides. Your client\
rquote s former CEO said the thing would never, ever be sold. Right? I mean, peo
ple say things. . . . I\rquote m here as part of a reason. I sit here in every c
ase as a part of a reason for settlement, right? It\rquote s not because of my u
nique characteristics of male pattern baldness, but because I\rquote m a judge.
And now you have got not only me, but you have Judge Sabraw [in California]. Rig
ht? And you have got the notion that Strine could pull the pill. Strine could no
t pull the pill. Strine could not pull the pill but enjoin the CAP and declare i
t invalid. Strine could uphold the CAP in its entirety, suggest that the multipl
ier be increased by three, and order that the annual meeting of PeopleSoft be mo
ved to December of 2005. And Judge Sabraw could decide that the damages are zero
, that PeopleSoft has to pay Oracle its attorneys\rquote fees plus $5 billion i
n punitive damages for frivolous litigation, or he could decide that Oracle has
to pay $10 billion to PeopleSoft. All that, Mr. Wolfe, I think is a long-winded
way of saying I think talented, savvy people can probably figure out a way to ju
stify their position, if you are talking about a responsible move and position b
y both sides, that delivers real value for the PeopleSoft stockholders and deal
certainty for Oracle. Right?
\par
}
}
}

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MR. TERRELL: . . . Don, are you going to be in your offices tomorrow?
\par
}
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MR. WOLFE: Yes. I will be here.
\par
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MR. TERRELL: Let\rquote s share some thoughts then. You will have the chance to
talk with your folks, I with mine, after we get off with His Honor. I would do a
nything to help the process, to get Battle and
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Grundfest together - I do think it sounds like they are the most productive two
who might get together - and anything else that we can work out just for logist
ics, make life easier for ourselves and the Court. Let\rquote s chat tomorrow ab
out it.
\par
}
}
}
}
}{
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Footnotes
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}
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David Millstone, J.D., magna cum laude, Harvard Law School, 2005.
\par
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}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
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Guhan Subramanian, Joseph Flom Professor of Law and Business, Harvard Law School
and H. Douglas Weaver Visiting Professor of Business Law, Harvard Business Scho
ol. Subramanian served as an expert witness for Oracle in the Delaware and Calif
ornia state court litigation. Millstone was associated with an arbitrage fund th
at held a large block of PeopleSoft shares during the contest. All quotes from G
eorge \u8220\'3fSkip\u8221\'3f Battle and Safra Catz come from author interviews
, unless otherwise noted. The Harvard Negotiation Research Project and the Joy C
ovey Research Fund provided funding to support the development of this case. The
authors thank Allen Terrell, Esq. of Richards, Layton & Finger for his assistan
ce in obtaining certain court documents.
\par
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Plaintiffs\rquote Pre-Trial Brief at 11, Oracle Corp. v. PeopleSoft Inc., No. 2
0377 (Del. Ch. Sept. 8, 2004).
\par
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Mylene Mangalindan, Don Clark & Robin Sidel, Software Assault: Oracle\rquote s B
id for PeopleSoft Offers Possible Taste of Future, Wall St. J., June 9, 2003, at
A1.
\par
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Transcript of Testimony of Safra Catz at 1618, Oracle v. PeopleSoft, No. 20377 (
Del. Ch. Oct. 11, 2004).
\par
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4
}\i0 \fs20 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}
}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj
{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj
{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj
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Andrew Pollack, Fast-Growth Oracle Systems Confronts First Downturn, N.Y. Times,
Sept. 10, 1990, at D1.
\par
}
}
}
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3 \clbrdrl \trql \clvertalt \cellx600
\clpadt20 \clpadft3 \clpadb90 \clpadfb3 \clpadl90 \clpadfl3 \clpadr20 \clpadfr3
\clbrdrr \trql \cellx10080
\intbl
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{\*\bkmkstart co_footnote_F5331276586_1}{\*\bkmkend co_footnote_F5331276586_1}
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5
}\i0 \fs20 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}
}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
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Transcript of Testimony of Larry Ellison at 1141, Oracle v. PeopleSoft, No. 2037
7 (Del. Ch. Oct. 8, 2004).
\par
}
}
}
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\clbrdrr \trql \cellx10080
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Computerworld Honors Program International Archives, Transcript of a Video Histo
ry Interview with Craig Conway at 12 (Apr. 16, 2002), http:// www.cwhonors.org/a
rchives/histories/Conway%20final.pdf.
\par
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7

}\i0 \fs20 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}


}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
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Transcript of Testimony of Larry Ellison, supra note 5, at 1144.
\par
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}
}
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\clbrdrr \trql \cellx10080
\intbl
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}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
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Larry Ellison: A Candid Conversation with Software\rquote s Toughest S.O.B. Abou
t the Techno Bubble, the Wisdom of a National Identity Card, and the Truth About
His Archenemy, Bill Gates, Playboy Magazine, Sept. 1, 2002, http:// www.oracle.
com/global/bg/press/ElisonQ&A_Playboy.pdfsearch=%22interview%C20with%C20larry%C2
0ellison%C3A%C20a%C20candid%C20conversation%.\u768\'3f
\par
}
}
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\clpadt20 \clpadft3 \clpadb90 \clpadfb3 \clpadl90 \clpadfl3 \clpadr20 \clpadfr3
\clbrdrr \trql \cellx10080
\intbl
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}\i0 \fs20 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}
}

}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
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Catz took issue with this characterization, suggesting it may have been the prod
uct of some errant language. \u8220\'3fThe concept of going hostile on PeopleSof
t was not part of a \u8216\'3fwar game in a box.\u8217\'3f There was no war game
in a box. There was no box. The Department of Justice subpoenaed \u8216\'3fthe
box\u8217\'3f and subpoenaed the documents, none of which exist. It was just in
our own hypotheticals: \u8216\'3fGee, if this happens, we should do this. If Peo
pleSoft turns this deal, the JDEC deal, into a cash deal, we should bid for JDEC
.\u8217\'3f It was that kind of a discussion.\u8221\'3f
\par
}
}
}
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\clpadt20 \clpadft3 \clpadb90 \clpadfb3 \clpadl90 \clpadfl3 \clpadr20 \clpadfr3
\clbrdrr \trql \cellx10080
\intbl
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As Catz candidly related, \u8220\'3fThe truth is that we\rquote re not very good
advice takers at Oracle.\u8221\'3f
\par
}
}
}
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}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
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Marcelo Prince, PeopleSoft CEO Calls Oracle Bid Atrociously Bad Behavior, Dow Jo
nes News Service, June 6, 2003.
\par
}
}
}
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Id.
\par
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{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj

{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj


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Plaintiffs\rquote Pre-Trial Brief, supra note 1.
\par
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PeopleSoft Inc., Proxy Statement for the 2004 Annual Meeting of Stockholders (Fo
rm PRER14A) 7 (Feb. 23, 2004).
\par
}
}
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Due to the complexity of the software and the importance of the purchasing decis
ions, companies rely heavily on independent analysts such as Gartner for purchas
ing recommendations.

\par
}
}
}
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Plaintiffs\rquote Pre-Trial Brief, supra note 1.
\par
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}
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Complaint at 2, PeopleSoft Inc. v. Oracle Corp., No. RG0310 1434 (Cal. Super. Ct
. June 13, 2003).
\par
}
}
}
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Mark Veverka, Plugged In: Oracle Rattles Industry with Bid for PeopleSoft, Barro
n\rquote s, June 9, 2003, at T3.
\par
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Target: PeopleSoft, Computer Reseller News, June 9, 2003, at 18.
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Transcript of Testimony of Safra Catz, supra note 3, at 1733.
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New versions, denominated with integers - e.g. PeopleSoft 7 or PeopleSoft 8- are
wholesale overhauls of the software. Updates, which are fixes and improvements
to an existing version, were the primary source of contention.
\par
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Plaintiffs\rquote Pre-Trial Brief, supra note 1, at 19.
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500 A.2d 1346 (Del. 1985)
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(emphasis added).
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Id. at 954-56, 958.
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As Battle put it, \u8220\'3fThere\rquote s a first review and a second review, i
f necessary. And I\rquote ve been involved in a second review before. And in ter
ms of time and effort, in a first review, you can probably put the documents in
my station wagon. In a second review, you\rquote re going to be backing up Safew
ay trucks.\u8221\'3f
\par
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Plaintiffs\rquote Pre-Trial Brief, supra note 1, at 1.
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Susan Beck, Extreme Takeover: During the Longest Merger Fight in U.S. History, P
eopleSoft and its Lawyers Fought Each Other About as Much as They Jousted with O
racle, Am. Law., May 1, 2005, at 86, available at http:// www.law.com/jsp/articl
e.jsp?id=1114798473739#.
\par
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James Daly, The Robin Hood of the Rich: Gary Reback May Be the Only Man Bill Gat
es Fears, Wired, Aug. 1997, http:// www.wired.com/wired/archive/5.08/reback.html
.
\par
}
}
}
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{\*\bkmkstart co_footnote_F32331276586_1}{\*\bkmkend co_footnote_F32331276586_1}
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Transcript of Testimony of Larry Ellison, supra note 5, at 1242.
\par
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}
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PeopleSoft, Schedule 14D-9, at 3 (Mar. 4, 2004).
\par
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\clbrdrr \trql \cellx10080
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David Marcus, Joie de Deal in New Orleans, Corp. Control Alert, Apr. 23, 2004, a
t 14.
\par
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}
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\clbrdrr \trql \cellx10080
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35
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}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
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Oracle\rquote s PeopleSoft Bid Pits Fighter Pilot Against Dog Lover, Bloomberg,
June 16, 2003, at 12.
\par
}
}
}
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\clbrdrr \trql \cellx10080
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36

}\i0 \fs20 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}


}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
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Transcript of Testimony of Larry Ellison, supra note 5, at 1230.
\par
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\clbrdrr \trql \cellx10080
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}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj
{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj
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Cross-examined on his comment in the Delaware litigation, Ellison noted tongue-i
n-cheek that the \u8220\'3fdog never said anything about me.\u8221\'3f To which
Vice Chancellor Strine added: \u8220\'3fThat you could understand.\u8221\'3f
\par
}
}
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\clpadt20 \clpadft3 \clpadb90 \clpadfb3 \clpadl90 \clpadfl3 \clpadr20 \clpadfr3
\clbrdrr \trql \cellx10080
\intbl
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{\i0 \fs20 \cf1 \f2 \b0
{\*\bkmkstart co_footnote_F38331276586_1}{\*\bkmkend co_footnote_F38331276586_1}
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38
}\i0 \fs20 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}
}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj

{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj


{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj
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Oracle Ups Bid for PeopleSoft, CRM Today, Feb. 5, 2004, http:// www.crm2day.com/
news/crm/EpZVAyAyVuPiEEFUsP.php.
\par
}
}
}
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\clpadt20 \clpadft3 \clpadb90 \clpadfb3 \clpadl90 \clpadfl3 \clpadr20 \clpadfr3
\clbrdrr \trql \cellx10080
\intbl
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{\i0 \fs20 \cf1 \f2 \b0
{\*\bkmkstart co_footnote_F39331276586_1}{\*\bkmkend co_footnote_F39331276586_1}
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39
}\i0 \fs20 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}
}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
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PeopleSoft, Inc., Amendment No. 19 to Solicitation/Recommendation Statement (Sch
edule 14D-9), at 2 (Feb. 9, 2004).
\par
}
}
}
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\clbrdrr \trql \cellx10080
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40
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Id. at 8.

\par
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}
}
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3 \clbrdrl \trql \clvertalt \cellx600
\clpadt20 \clpadft3 \clpadb90 \clpadfb3 \clpadl90 \clpadfl3 \clpadr20 \clpadfr3
\clbrdrr \trql \cellx10080
\intbl
{\ri120 \i0 \ql \fs20 \cf1 \f2 \li120 \b0
{\i0 \fs20 \cf1 \f2 \b0
{\*\bkmkstart co_footnote_F41331276586_1}{\*\bkmkend co_footnote_F41331276586_1}
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41
}\i0 \fs20 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}
}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj
{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj
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Michael Bazeley, PeopleSoft Board Rejects New Oracle Offer, San Jose Mercury New
s, Feb. 10, 2004, at 1A.
\par
}
}
}
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\clpadt20 \clpadft3 \clpadb90 \clpadfb3 \clpadl90 \clpadfl3 \clpadr20 \clpadfr3
\clbrdrr \trql \cellx10080
\intbl
{\ri120 \i0 \ql \fs20 \cf1 \f2 \li120 \b0
{\i0 \fs20 \cf1 \f2 \b0
{\*\bkmkstart co_footnote_F42331276586_1}{\*\bkmkend co_footnote_F42331276586_1}
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42
}\i0 \fs20 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}
}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj
{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj
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{\i0 \fs18 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
Trial Transcript, Vol. I at 104, Oracle v. PeopleSoft, No. 20377 (Del. Ch. Oct.
4, 2004).
\par
}
}
}

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\clbrdrr \trql \cellx10080
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43
}\i0 \fs20 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}
}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
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Id. at 105-06.
\par
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}
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\clbrdrr \trql \cellx10080
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44
}\i0 \fs20 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}
}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
{\ri20 \i0 \fs18 \cf1 \f2 \li20 \b0 \qj
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Inside Oracle\rquote s Revised PeopleSoft Bid, CRM Buyer, May 17, 2004, http://w
ww.crmbuyer.com/story/33844.html.
\par
}
}
}
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\clbrdrr \trql \cellx10080
\intbl
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45
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}
}\i0 \ri120 \fs20 \ql \cf1 \f2 \li120 \b0 \intbl \cell \intbl
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PeopleSoft CEO: Ruling Doesn\rquote t Mean Oracle Will Acquire Co., Dow Jones Co
rp. Filings Alert, Sept. 10, 2004.
\par
}
}
}
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Plaintiffs\rquote Pre-Trial Brief, supra note 1, at 26.
\par
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Id. at 24.
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Id. at 24-25.
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Beck, supra note 30, at 86.
\par
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Neil Sutton, PeopleSoft Shows its CEO the Door, Computer Dealer News, Oct. 15, 2
004, at 6.
\par
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John Gapper, Capitalist Punishment, Fin. Times, Jan. 29, 2005, at 16.
\par
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Face Value: The Case of the Poison Pill, Economist, Dec. 11, 2004, at 72.
\par
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A term coined by Ronald Gilson and Reinier Kraakman in an influential article pu
blished in 1989. See Ronald Gibson & Reinier Kraakman,
}
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dType=Y&serNum=0102134543&pubNum=1105&originationContext=document&vr=3.0&rs=cblt

1.0&transitionType=DocumentItem&contextData=(sc.Search)" }{\fldrslt
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Delaware\rquote s Intermediate Standard for Defensive Tactics: Is There Substanc
e to Proportionality Review?, 44 Bus. Law. 247 (1989)
}\i0 \fs18 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}
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.
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There was a second line of argument as well. In an affidavit filed in the Delawa
re litigation, one of the authors of this case noted the potential application o
f an evolving doctrine under Section 141(a) of the Delaware corporate code, whic
h mandates that the corporation \u8220\'3fshall be managed by or under the direc
tion of a board of directors.\u8221\'3f In its 1998 decision Quickturn v. Mentor
Graphics, the Delaware Supreme Court interpreted this provision to mean that a
board cannot tie the hands of a future board: \u8220\'3f[T]o the extent that a c
ontract, or a provision thereof, purports to require a board to act or not act i
n such a fashion as to limit the exercise of fiduciary duties, it is invalid and
unenforceable,\u8221\'3f
}
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dType=Y&serNum=1999037322&pubNum=162&originationContext=document&vr=3.0&rs=cblt1
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Quickturn Design Sys. v. Mentor Graphics Corp., 721 A.2d 1281, 1292 (Del. Super.
Ct. 1998)
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{\i0 \fs18 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
(quoting
}
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lt
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Paramount Commc\rquote n v. QVC Network, 637 A.2d 34, 51 (Del. Super. Ct. 1993)
}\i0 \fs18 \sa0 \cf5 \ul0 \f2 \strike0 \b0 \sb0 }}
{\i0 \fs18 \sa0 \ul0 \cf1 \strike0 \f2 \b0 \sb0
). The CAP seemed to do precisely this. In fact, PeopleSoft acknowledged in SEC
filings that because of the CAP \u8220\'3fit is possible that the newly elected
[Oracle] board might refrain from taking certain actions it might otherwise deci
de to take relating to products and services.\u8221\'3f Of course, the Quickturn
language read literally would seem to prohibit any contract that did not involv
e a spot transaction - say, a ten-year lease. One way to narrow the scope of the
language in Quickturn would be to distinguish between contracts that tied the h
ands of both the current board and the future board (such as a ten-year lease) a
nd contracts that only tied the hands of a future board (such as the CAP).
\par
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\clbrdrr \trql \cellx10080
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See Transcript of Telephone Conference at 26, Oracle v. PeopleSoft, No. 20377 (D
el. Ch. Dec. 9, 2004).
\par
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Transcript of Testimony of Larry Ellison, supra note 5, at 1243.
\par
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Transcript of Testimony of Safra Catz, supra note 3, at 1556.
\par
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Press Release, Oracle Corp., Oracle Announces Best and Final PeopleSoft Offer of
$24 per Share (Nov. 1, 2004), available at http:// www.oracle.com/corporate/pre
ss/2004_nov/latest_psft1.html.
\par
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}
}
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