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If PeopleSoft Inc.’s offer of customer rebates succeeds at staving off a hostile takeover from Oracle Corp., it could give other companies powerful ammunition to stave off an unwanted suitor. That is, if the move succeeds. First, the plan must pass a pair of tough courtroom tests in Delaware, the venue of choice for corporate governance disputes. If it does pass, and PeopleSoft’s rebate plan is found to be a valid business decision that thwarts Oracle’s takeover, the company’s maneuver may open a new line of anti-takeover defenses, said Douglas Cogen, a Fenwick & West partner. “The Delaware courts will have to take something they haven’t had to deal with … before,” said Cogen, who co-chairs Fenwick’s mergers and acquisitions group. “That’s why it’s interesting. [PeopleSoft's strategy] is really a different technique.” Pleasanton, Calif.-based PeopleSoft has been locked in a long-running takeover fight with Redwood City’s Oracle. And it has begun adding a provision into contracts that promises to pay customers rebates if PeopleSoft is taken over and its software is no longer supported. Steven Swasey, a PeopleSoft spokesman, said the company’s plan is not an anti-takeover defense but insurance for customers. But that’s not the way Oracle or a group of PeopleSoft shareholders see it. This week, both filed motions in the Delaware courts to stop the company from handing out such rebates. Now, the courts will decide whether the customer rebates are sound business or a so-called “poison pill” designed to make company less attractive to a buyer. “It’s not a poison pill in the traditional sense,” Cogen said. “This is saying the company will be saddled with a heavy commercial burden.” The PeopleSoft-Oracle fight has been fun theater for corporate lawyers, particularly as their clients consider launching or fear they may need to fend off a hostile bid. David Katz, a partner at New York’s Wachtell, Lipton, Rosen & Katz, said some companies are looking to make a deal before interest rates go up, but targets aren’t necessarily willing to haggle. Thus, hostile bids are born. “I call it the rearview mirror effect,” said Katz. “If they had a high number in the not-so-distant past, it’s hard to accept less.” “I’m always interested to see tactics and the back and forth of different parties and potentially second-guess strategies as an outsider,” Katz said of the PeopleSoft fight. Corporate lawyers haven’t been treated to a good fight involving poison pills since the late 1990s, when the so-called “dead-hand provision” was struck down in Delaware. In a dead-hand provision, newcomers to a board of directors couldn’t kill a company’s anti-takeover defenses without prior approval from the company. Though dead hands expired, the Delaware courts have upheld a number of other takeover measures since a series of suits in the late 1980s. And PeopleSoft is presumably hoping that trend continues. Lawyers at Gibson, Dunn & Crutcher are representing the company, though Swasey, the company spokesman, said PeopleSoft and its attorneys would not comment on legal strategy. Lawyers representing about a dozen individual investors with pending litigation against PeopleSoft sought an injunction against the company using the customer rebate provision, said Bruce Jameson, a Prickett, Jones & Elliott partner in Wilmington, Del. “Our view is the customer assurance program has the same effect as a poison pill,” Jameson said, “and in some ways, it’s actually worse.” Oracle filed a similar motion Monday, asking for an expedited decision. A scheduling conference will be held Friday, Jameson said. In a statement, Oracle — which is being represented by Davis Polk & Wardwell — called the customer rebate plan “management entrenchment at its worse.”

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