A motion introduced in the proceedings asks for an injunction against the customer assurance program (CAP), which has been described as a disproportionate and unreasonable response to the Oracle threat.

They believe the CAP is much more debilitating that a traditional shareholder rights plan, in that it cannot be terminated by the PeopleSoft board, and third party contracts rights have now been created which cannot be rescinded.

PeopleSoft introduced the CAP after Oracle launched its offer, in order, it claims, to provide assurance that their software investments would be protected and supported in the event PeopleSoft was acquired.

The deal offers buyers a rebate of a multiple of their license fee, and has become a standard part of the PeopleSoft license contract. The running total PeopleSoft would owe, if acquired is $800 million.

However, it is claimed recent changes to customer contracts make this look less like an assurance and more like an attempt to obstruct not only Oracle’s bid, but also its plan to put up its own list of directors at PeopleSoft’s next shareholder meeting

New terms in PeopleSoft contracts could preclude an acquirer from reducing the amount of money spent on support, or to slow upgrade and release cycles.

The contracts could also preclude an acquirer from providing reduced interoperability with third-party database software, without triggering the $800 million CAP payout. The lengths of the contractual provisions were also extended.

PeopleSoft believe the CAP is of great benefit to its customers, and consequently to its shareholders.

The CAP contracts now redefine acquisition to include not only the purchase of a majority of shares, but also the takeover of PeopleSoft’s board of directors by individuals not currently on the board, or not approved by those currently on the board.

Oracle is understandably not happy at the development and is believed to be planning to launch a proxy contest at PeopleSoft’s 2004 annual meeting to put its supporters on PeopleSoft’s board.

Oracle claim the modifications reflect PeopleSoft’s blatant disregard for shareholder value and choice, preventing shareholders from exercising their right to determine board membership.

This article was based on material originally published by ComputerWire.