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Oracle Corp. and PeopleSoft Inc. return to Delaware Court of Chancery today in a hearing that could hasten the end game in the software companies’ 17-month buyout battle. But while Oracle has asked Vice Chancellor Leo Strine Jr. to void PeopleSoft’s anti-takeover defenses, or “poison pill,” sources said he is not expected to rule on the matter this week. Still, Strine could say whether he is inclined to eliminate the pill or if he prefers the companies to negotiate a solution. “My guess is he’ll refuse to do anything on Wednesday, but at least implicitly threaten to do something in the not-too-distant future,” said David Skeel, a visiting professor at law at the Georgetown University Law Center in Washington. Sources said Strine is unlikely to decide on PeopleSoft’s pill this week, expecting him instead to set a schedule for closing arguments in the trial, which took place in October. In that case Oracle asked the court to rescind PeopleSoft’s pill, which makes acquisitions prohibitively expensive by diluting a company’s shares. But proceedings focused on the target’s so-called customer assurance program, which would add cost to the $8.8 billion deal by promising rebates to customers if Oracle fails to support its rival’s products. Indeed, Strine heard little testimony about PeopleSoft’s pill; he also did not rule on the CAP, although he did strongly imply that the program is legal. Sources expect him to request further legal discovery and testimony, reflecting new developments in the dispute. Since the trial ended Oct. 15 Oracle has raised its bid to $24 per share, spurring roughly 61 percent of PeopleSoft holders to tender shares in favor of the offer. “What the court may do is order the board to bring in an expert to evaluate the offer, and if the offer met certain criteria, perhaps they would have to rescind the pill,” said Nell Minow, Web editor for The Corporate Library, an independent research firm specializing in corporate governance. PeopleSoft’s board of directors on Nov. 20 unanimously rejected Oracle’s takeover offer, saying it undervalues the company. In a letter to PeopleSoft directors on Monday, Oracle said the two are at an “impasse” and questioned PeopleSoft’s rationale for rejecting its $24 per share offer. Oracle also questioned the accuracy of PeopleSoft’s fiscal 2005 guidance, which some financial analysts have said is too optimistic. “There is no good reason to shift the burden of resolution form the board to the Chancery Court in Delaware,” Oracle chairman Jeff Henley wrote. “Likewise, there is no reason to shift the burden of resolution from the board to your shareholders through a protracted proxy battle next spring. These tactics are transparent to all involved.” Most experts said Strine is unlikely to rescind PeopleSoft’s pill. Such a move has little legal precedent, with courts requiring it only if a company’s board has breached its fiduciary duties by not seriously considering an offer or if a single person improperly controlled the panel. Larry Hamermesh, a professor of law at Widener University in Delaware, also said Strine is unlikely to administer a legal remedy while Oracle can pursue its bid through a proxy vote at PeopleSoft’s annual shareholder meeting nearly next year. “The fact that there’s going to be an annual election of directors in the not-too-distant future may dilute the judge’s enthusiasm for doing anything more aggressive here,” he said. “It’s much easier to go to the stockholders with an election and a new slate of directors who will get rid of the pill than it is to get a court to do it.” But Strine could break with precedent and throw out the takeover defense if PeopleSoft fails to adequately explain why it has continually rebuffed Oracle’s offers, which topped out at $26 per share. “PeopleSoft was unable to convince their own shareholders that this wasn’t a good offer,” said Paul Lapides, director of the corporate governance center at Kennesaw State University in Kennesaw, Ga. “Strine has definitely moved the line of what’s required of directors in the past, and it would be more likely than not that he would rescind the poison pill.” Copyright �2004 TDD, LLC. All rights reserved.

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