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The takeover battle between business software companies Oracle Corp. and PeopleSoft Inc. began a new chapter Monday morning in Delaware’s Court of Chancery as a PeopleSoft board member conceded that CEO Craig Conway was fired because he had lied to the public about the effects of Oracle’s bid and because he had vowed never to sell the company. Conway was ousted last week in a surprise move by the company’s board. Board members would say at the time only that the unanimous decision was the result of a loss of confidence in Conway. But under examination by Michael Carroll, a partner at Davis Polk & Wardwell in New York who is representing Oracle in the trial, PeopleSoft director Steven Goldby said that the board decided that Conway’s intransigence was “one link in a chain of events” that led to Conway’s ouster. Goldby also said the board decided to fire Conway because of false statements he had made to analysts Sept. 4, 2003. At that time, Conway said the Oracle bid was no longer “a current issue” and that PeopleSoft customers who had considered using competitors’ software instead decided to stay with PeopleSoft. Oracle made a hostile bid for the Pleasanton, Calif., company on June 6, 2003. The current value of the bid is $7.7 billion, or $21 a PeopleSoft share. The trial in the case before Vice Chancellor Leo E. Strine Jr. may not only determine the outcome of Oracle’s takeover attempt but could set important legal precedent regarding the ways in which target companies may or may not seek to fend off hostile bids. Conway admitted in his Aug. 25 deposition in the case that his 2003 statements to analysts were false. “I was doing the same thing policemen do at the scene of a crime — telling people that the show’s over, to move on,” he said of his comments. The assurances that the Oracle bid hadn’t affected PeopleSoft’s business were “absolutely not true. We have never been out of harm’s way by virtue of Oracle’s bid.” Goldby echoed that assessment this morning. “The company was and continues to be in a fight for its life,” he said, as a result of Oracle’s bid, which precipitated an unusually acrimonious and protracted fight that led not only to the case before Strine but to an antitrust suit in which a federal judge rejected the U.S. Department of Justice’s claim that an Oracle acquisition of PeopleSoft would be anticompetitive. In his testimony Monday morning, Goldby said that the PeopleSoft board learned of Conway’s comments the week before it fired him. Oracle had sent a copy of the deposition to PeopleSoft’s lawyers and asked that they show it to the company’s board, Goldby acknowledged Monday. After reviewing the transcript, the board opted to fire Conway last Thursday night and announce the move Friday morning. Goldby testified that Conway had alienated employees as well, some of whom were “terribly, terribly unhappy working for him, and likely to quit.” By the end of last year, he said, “the board realized that a number of very important people were leaving the company.” After examining Goldby on the firing of Conway, Carroll turned to PeopleSoft’s role in allegedly orchestrating antitrust concerns among customers and state governments. During one exchange, Goldby acknowledged that PeopleSoft founder, chairman and CEO David Duffield was “exuberant” when the Department of Justice determined to challenge Oracle’s tender offer. Goldby also expressed discomfort with Conway basing his defense against the Oracle bid on the antitrust case. Copyright �2004 TDD, LLC. All rights reserved.

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