PeopleSoft, Inc., Form 10-Q, 6/30/2003

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Stu5cSJ3MUyZEwYNgSsNoi6GAa0ucOlR+JticHHcgrbWIQSFstel/0XlXu2sLz/P oUl+9JFeMDogLZSNr1p+Qg== 0000891618-03-004435.txt : 20030814 0000891618-03-004435.hdr.sgml : 20030814 20030814161417 ACCESSION NUMBER: 0000891618-03-004435 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEOPLESOFT INC CENTRAL INDEX KEY: 0000875570 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 680137069 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20710 FILM NUMBER: 03847921 BUSINESS ADDRESS: STREET 1: 4460 HACIENDA DRIVE CITY: PLEASANTON STATE: CA ZIP: 94588-8618 BUSINESS PHONE: 925-225-3000 MAIL ADDRESS: STREET 1: 4460 HACIENDA DRIVE CITY: PLEASANTON STATE: CA ZIP: 94588-8618 10-Q 1 f92386e10vq.htm FORM 10-Q PeopleSoft, Inc., Form 10-Q, 6/30/2003

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2003


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From ________ To ________

Commission File Number: 0-20710

PeopleSoft, Inc.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		68-0137069 (I.R.S. Employer Identification No.)

4460 Hacienda Drive, Pleasanton, California 94588-8618
(Address of principal executive offices, Zip Code)

(925) 225-3000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

On August 8, 2003, the Registrant had 364,055,320 shares of common stock outstanding.

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002	2
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2003 and June 30, 2002	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and June 30, 2002	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	27
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 2.	Changes in Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Submission of Matters to a Vote of Security Holders	40
Item 5.	Other Information	41
Item 6.	Exhibits and Reports on Form 8-K	41
SIGNATURES		43

PART I – FINANCIAL INFORMATION
ITEM 1 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PEOPLESOFT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)
(Unaudited)


					June 30, 2003			December 31, 2002

				ASSETS
Current assets:
	Cash and cash equivalents				$	272,860		$	319,344
	Short-term investments					1,666,693			1,588,172
	Accounts receivable, net					312,291			357,353
	Deferred tax assets					38,700			40,559
	Prepaid expenses and other current assets					54,568			45,448

		Total current assets				2,345,112			2,350,876
Property and equipment, net						389,974			222,800
Investments						37,764			21,946
Deferred tax assets						140,839			149,187
Capitalized software, net						35,679			44,101
Goodwill						54,657			54,294
Other assets						6,217			5,359

		Total assets			$	3,010,242		$	2,848,563

			LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable				$	35,429		$	23,356
	Accrued liabilities					102,933			109,331
	Accrued compensation and related expenses					148,878			172,566
	Income taxes payable					23,471			48,095
	Short-term deferred revenues					468,501			422,657

		Total current liabilities				779,212			776,005
Long-term deferred revenues						90,319			95,460
Other liabilities						29,617			21,486

		Total liabilities				899,148			892,951
Commitments and contingencies (see accompanying notes)
Stockholders’ equity:
	Common stock					3,191			3,150
	Additional paid-in capital					1,439,759			1,382,442
	Retained earnings					674,816			599,803
	Treasury stock					(36,429	)		(35,563	)
	Accumulated other comprehensive income					29,757			5,780

		Total stockholders’ equity				2,111,094			1,955,612

		Total liabilities and stockholders’ equity			$	3,010,242		$	2,848,563

See accompanying notes to unaudited condensed consolidated financial statements.

PEOPLESOFT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)
(Unaudited)


			Three Months Ended				Six Months Ended
			June 30,				June 30,
			2003		2002		2003		2002

Revenues:
	License fees		$	111,726	$	131,929	$	192,567	$	265,219

	Maintenance revenue			205,563		171,327		405,484		335,900
	Professional services revenue			180,153		178,956		359,647		356,830

		Service revenue		385,716		350,283		765,131		692,730
	Development and other service revenue			—		—		—		7,530

		Total revenues		497,442		482,212		957,698		965,479
Costs and expenses:
	Cost of license fees			9,563		10,182		18,289		21,619
	Cost of services			166,698		171,159		330,167		335,689
	Cost of development and other services			—		—		—		6,755
	Sales and marketing expense			131,492		126,162		251,050		250,732
	Product development expense			84,646		87,547		168,351		169,880
	General and administrative expense			41,024		27,396		74,039		57,642
	Restructuring, acquisition and other charges			13,799		8,679		13,799		11,479

		Total costs and expenses		447,222		431,125		855,695		853,796

Operating income				50,220		51,087		102,003		111,683
Other income, net				4,712		8,478		11,678		15,717

Income before provision for income taxes				54,932		59,565		113,681		127,400
Provision for income taxes				18,398		23,545		38,668		46,836

Net income			$	36,534	$	36,020	$	75,013	$	80,564

Basic income per share			$	0.12	$	0.12	$	0.24	$	0.26
Shares used in basic income per share computation				315,707		310,617		315,302		309,276
Diluted income per share			$	0.11	$	0.11	$	0.23	$	0.25
Shares used in diluted income per share computation				318,630		318,535		319,299		322,590

See accompanying notes to unaudited condensed consolidated financial statements.

PEOPLESOFT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)


				Six Months Ended June 30,
				2003			2002

Operating activities:
Net income				$	75,013		$	80,564
Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			56,710			46,335
		Provision for doubtful accounts			5,544			6,140
		Tax benefits from employee stock transactions			3,585			22,496
		Provision (benefit) for deferred income taxes			7,739			(4,268	)
		Gain on sales of investments and disposition of property and equipment, net			(1,289	)		(2,881	)
		Non-cash stock compensation			4,628			3,752
		Restructuring, acquisition and other charges			1,722			11,479
		Changes in operating assets and liabilities:
			Accounts receivable		45,350			54,293
			Accounts payable and accrued liabilities		10,735			(10,963	)
			Accrued compensation and related expenses		(26,157	)		(22,323	)
			Income taxes, net		(23,529	)		11,176
			Deferred revenues		26,439			12,755
			Other		6,769			5,832

		Net cash provided by operating activities			193,259			214,387
Investing activities:
Purchase of investments					(6,822,384	)		(4,733,065	)
Proceeds from sales and maturities of investments					6,732,056			4,581,692
Purchase of property and equipment					(213,801	)		(50,859	)
Acquisitions, net of cash acquired					—			(117,758	)

		Net cash used in investing activities			(304,129	)		(319,990	)
Financing activities:
Proceeds from employee stock transactions					49,145			78,113

		Net cash provided by financing activities			49,145			78,113
Effect of foreign exchange rate changes on cash and cash equivalents					15,241			12,066

Net decrease in cash and cash equivalents					(46,484	)		(15,424	)
Cash and cash equivalents at beginning of period					319,344			433,700

Cash and cash equivalents at end of period				$	272,860		$	418,276

Supplemental disclosures:
	Cash paid for interest			$	74		$	2,149
	Cash paid for income taxes			$	50,330		$	16,548

See accompanying notes to unaudited condensed consolidated financial statements.

PEOPLESOFT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation

The accompanying financial statements for the three and six months ended June 30, 2003 and 2002 have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. These financial statements are unaudited and in the opinion of management, include all necessary adjustments for the fair presentation of the Company’s financial position, results of operations and changes in cash flows. The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that may affect the amounts reported in the accompanying financial statements. Despite the Company’s best effort to make these good faith estimates and assumptions, actual results may differ. Certain prior period amounts have been reclassified to conform to the current period presentation.

These interim financial statements are prepared in accordance with Securities and Exchange Commission rules and regulations, which allow certain information and footnote disclosures, normally included in annual financial statements, to be condensed or omitted. As a result, these interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

2. Income Per Share

Basic income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted income per share is computed by dividing net income by the sum of weighted average number of common shares outstanding and the number of potential dilutive common shares outstanding during the period. Potential dilutive common shares consist of shares issuable upon the exercise of stock options, shares issuable resulting from withholdings associated with the Company’s employee stock purchase plan and restricted stock not yet vested, using the treasury stock method, and the conversion of convertible subordinated notes, using the if-converted method.

The following table sets forth the computation of basic and diluted income per share (in thousands, except per share amounts):


			Three Months Ended				Six Months Ended
			June 30,				June 30,
			2003		2002		2003		2002

Numerator:
	Net income		$	36,534	$	36,020	$	75,013	$	80,564
Denominator:
	Denominator for basic income per share -
		Weighted average shares outstanding		315,707		310,617		315,302		309,276
		Employee stock options and other		2,923		7,918		3,997		13,314

	Denominator for diluted income per share -
		Weighted average shares outstanding, assuming exercise of potential common shares		318,630		318,535		319,299		322,590

Basic income per share			$	0.12	$	0.12	$	0.24	$	0.26
Diluted income per share			$	0.11	$	0.11	$	0.23	$	0.25

The following table sets forth the common shares that were excluded from the diluted income per share computations because the exercise or conversion prices were greater than the average market price of the common shares during the period or were otherwise not dilutive (in millions):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2003		2002		2003		2002

Employee stock options		51.9		41.2		45.3		20.7
Unvested restricted stock		0.7		0.8		0.7		—
Shares issuable from convertible debt		—		1.1		—		1.1

Total shares excluded		52.6		43.1		46.0		21.8

The weighted average exercise prices of the employee stock options with exercise prices exceeding the average fair value of the Company’s common stock for the three months ended June 30, 2003 and 2002 were $25.78 and $28.19 per share, respectively, and for the six months ended June 30, 2003 and 2002 were $27.72 and $42.06 per share, respectively.

3. Stock-Based Compensation

The Company accounts for employee stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB Opinion No. 25). The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (SFAS 123), to stock-based employee compensation for the three and six months ended June 30, 2003 and 2002 (in thousands, except per share amounts).


		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2003			2002			2003			2002

Net income, as reported		$	36,534		$	36,020		$	75,013		$	80,564
	Add: Stock-based employee compensation expense included in reported net income, net of tax		2,045			1,916			4,065			3,325
	Deduct: Stock-based employee compensation expense determined under the fair value method, net of tax		(33,984	)		(49,144	)		(74,886	)		(87,008	)

	Pro forma net income (loss)		4,595			(11,208	)		4,192			(3,119	)
Basic income (loss) per share
	As reported	$	0.12		$	0.12		$	0.24		$	0.26
	Pro forma	$	0.01		$	(0.04	)	$	0.01		$	(0.01	)
Diluted income (loss) per share
	As reported	$	0.11		$	0.11		$	0.23		$	0.25
	Pro forma	$	0.01		$	(0.04	)	$	0.01		$	(0.01	)

4. Comprehensive Income

Comprehensive income primarily includes unrealized gains or losses on investments, mark-to-market adjustments on interest rate swap transactions, and foreign currency translation adjustments, which are reflected as a component of stockholders’ equity. The components of comprehensive income, net of tax, were as follows (in thousands):


			Three Months Ended					Six Months Ended
			June 30,					June 30,
			2003		2002				2003			2002

Net income			$	36,534	$	36,020			$	75,013		$	80,564
Other comprehensive income:
	Net unrealized gain (loss) investments			1,896		63				1,317			(302	)
	Foreign currency translation adjustments			13,933		16,745				19,731			14,964
	Interest rate swap transactions:
		Net unrealized loss on cash flow hedges		—		(983	)			(58	)		(855	)
		Reclassification adjustment for earnings recognized during the period		871		818				2,106			2,090
		Reclassification adjustment for realized loss on the termination of interest rate swap agreements		881		—				881			—

Comprehensive income			$	54,115	$	52,663			$	98,990		$	96,461

5. Derivative Financial Instruments

Derivative financial instruments are only utilized by the Company to reduce foreign currency exchange and interest rate risks. The Company does not hold any derivative financial instruments for trading or speculative purposes.

Forward Foreign Exchange Contracts

The Company has a foreign exchange hedging program principally designed to mitigate the potential impact due to changes in foreign currency exchange rates. Forward exchange contracts are primarily used to hedge foreign currency exposures and generally have terms of two months or less. The derivatives used in the foreign exchange hedging program are not designated as cash flow or fair value hedges under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133), as amended. These contracts are recorded on the balance sheet at fair value in “Accrued liabilities.” Changes in fair value of the contracts and the amounts being hedged are included in “Other income, net.”.

During the three months ended June 30, 2003 and 2002, the Company recorded net foreign currency losses of $1.0 million and net foreign currency gains of $3.0 million, respectively. During the six months ended June 30, 2003 and 2002, the Company recorded net foreign currency losses of $1.2 million and net foreign currency gains of $2.5 million, respectively. At June 30, 2003, each of the foreign exchange contracts matured within 60 days and had a book value that approximated fair value. Neither the cost nor the fair value of these forward foreign exchange contracts was material at June 30, 2003.

At June 30, 2003, the Company had the following outstanding forward foreign exchange contracts to exchange foreign currency for U.S. dollars:


	Notional
Foreign Currency	Amount

Singapore dollars	$	8.8 million
Canadian dollars		8.5 million
New Zealand dollars		1.0 million
Japanese yen		1.0 million
Swiss francs		0.9 million
Swedish krona		0.8 million
Euros		0.7 million
Taiwanese dollars		0.4 million

	$	22.1 million

At June 30, 2003, the Company had the following outstanding forward foreign exchange contracts to exchange U.S. dollars for foreign currency:


	Notional
Foreign Currency	Amount

Hong Kong dollars	$	0.9 million
South African rand		0.6 million

	$	1.5 million

At June 30, 2002, the Company had the following outstanding forward foreign exchange contracts to exchange foreign currency for U.S. dollars:


	Notional
Foreign Currency	Amount

Hong Kong dollars	$	8.7 million
Singapore dollars		5.7 million

	$	14.4 million

At June 30, 2002, the Company had the following outstanding forward foreign exchange contracts to exchange U.S. dollars for foreign currency:


	Notional
Foreign Currency	Amount

Euros	$	3.7 million
South African rand		2.9 million
British pounds		1.1 million
Swiss francs		0.9 million
Japanese yen		0.8 million
Canadian dollars		0.6 million
Swedish krona		0.4 million
New Zealand dollars		0.3 million

	$	10.7 million

Interest Rate Swap Transactions

The Company used interest rate swap transactions to manage its exposure to interest rate changes on its synthetic lease obligations. The swaps had an aggregate notional principal amount of $175.0 million and matured at various dates in 2003, consistent with the expiration of the synthetic leases. Under the swap agreements, the Company received a variable interest rate based on the three month LIBOR rate and paid a weighted average fixed interest rate of 6.8%. The swaps were designated under SFAS 133 as hedges against changes in the amount of future cash flows. In February 2003, the Company exercised its option under a synthetic lease agreement to purchase certain of its headquarters facilities located in Pleasanton, California for $70.0 million, and concurrently, swaps with an aggregate notional principal amount of $70.0 million matured. On June 30, 2003, the Company exercised its option under a synthetic lease agreement to purchase certain of its headquarters facilities located in Pleasanton, California for $105.0 million. As a result of this transaction, the Company terminated its remaining interest rate swap agreements with an aggregate notional principal amount of $105.0 million resulting in a pretax charge of $1.4 million to “Other income, net.” Included in “Accumulated other comprehensive income” at March 31, 2003 was a $1.8 million unrealized loss (after-tax) related to these interest rate swaps. In the second quarter of 2003, $0.9 million (after-tax) was reclassified from other comprehensive income into earnings by making scheduled swap payments and $0.9 million (after-tax) was recognized as a realized loss that was reclassified from other comprehensive income into earnings upon the termination of the remaining interest rate swap agreements.

Concentrations of Credit Risk

The Company does not have a significant concentration of credit or operating risk in any one investment, industry or geographic region within or outside of the United States.

6. Restructuring Reserves

During the second quarter of 2003, the Company recorded pretax restructuring charges of $13.8 million. The $13.8 million of restructuring charges are included in “Restructuring, acquisition and other charges” and consisted of $4.6 million for employee severance, $7.5 million for the fair value of lease obligations associated with the closure of an office facility and $1.7 million for the impairment of related leasehold improvements.

Approximately $12.1 million of the restructuring charge is a cash charge, which is expected to be funded through operating cash flow.

The following table sets forth the activity in the Company’s restructuring reserves for the quarter ended June 30, 2003, which is included in “Accrued liabilities” (in thousands).


		Employee			Asset				Leases
		Costs			Impairment				Obligations			Total

Balance March 31, 2003		$	—			$	—		$	1,115		$	1,115
	Restructuring charges		4,544				1,722			7,533			13,799
	Cash payments		(1,559	)			—			(465	)		(2,024	)
	Non-cash items		—				(1,722	)		28			(1,694	)

Balance June 30, 2003		$	2,985			$	—		$	8,211		$	11,196

Future cash payments related to the restructuring reserves, which consist of future severance payments and office lease payments, are expected to be made through October 2005.

7. Products and Service Warranty Reserve

The Company provides for the estimated cost of product and service warranties based on specific warranty claims, provided that it is both probable that a potential liability exists and that the amount can be reasonably estimated. Additional information may become available in the future which may result in changes to the originally estimated liability. In addition, if estimated claims are settled for amounts differing from the Company’s estimates, or if the estimated value of warranty claims were to increase or decrease, revisions to the estimated warranty liability may be required and warranty expense may change from current levels.

The following table sets forth the activity in the Company’s product and service warranty reserve, which is included in “Accrued liabilities,” for the three months ended June 30, 2003 (in thousands):


		Total

Balance at March 31, 2003		$	12,289
	Expense related to new claims		2,397
	Reduction in expense related to changes in estimates		(1,530	)
	Settlement of claims		(3,621	)

Balance June 30, 2003		$	9,535

8. Business Combinations

On June 1, 2003, the Company, Jersey Acquisition Corporation, a wholly owned subsidiary of the Company (“Jersey”), and J.D. Edwards and Company (“J.D. Edwards”) entered into an Agreement and Plan of Merger which provided for an offer to purchase all the outstanding shares of common stock of J.D. Edwards (the “exchange offer”). On June 16, 2003, the Company entered into an Amended and Restated Agreement and Plan of Merger and Reorganization with J.D. Edwards and Jersey. The value of the consideration to be given for approximately 122 million shares of the outstanding J.D. Edwards common stock was approximately $1.8 billion.

On June 19, 2003, the Company filed with the Securities and Exchange Commission a Tender Offer Statement on Schedule TO with regard to the exchange offer and a Registration Statement on Form S-4 to register the shares to be issued in the exchange offer. Pursuant to the exchange offer, holders of J.D. Edwards’ common stock were entitled to make an election to tender their shares for cash or shares of PeopleSoft stock and such holders were entitled to receive cash, stock, or a combination of cash and stock, in each case having a value, on a per share basis of $7.05 plus 0.43 of a share of the Company’s common stock, allocated by prorating cash and shares available in the exchange offer among the elections made by the holders. The value of the cash and stock consideration to be paid to tendering J.D. Edwards shareholders was based upon the closing prices of one share of the Company’s

common stock during the five trading days ending before the second trading day prior to the expiration of the exchange offer.

On July 14, 2003, the Company and J.D. Edwards announced that, in connection with the Company’s exchange offer to acquire all of the outstanding shares of J.D. Edwards, the companies received notice of termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

The Company’s offer to acquire all of the outstanding shares of J.D. Edwards expired at midnight, New York City time on Thursday, July 17, 2003. At the expiration of the offer and after delivery of guaranteed shares, 104,754,894 shares of J.D. Edwards common stock had been validly tendered for exchange, all of which were accepted for exchange by PeopleSoft at approximately 1:45 a.m., New York City time, on Friday, July 18, 2003. As a result of such acceptance and exchange, PeopleSoft owns approximately 85% of the J.D. Edwards common stock outstanding as of August 8, 2003 The Company expects to acquire all of the remaining shares of J.D. Edwards by completing a merger of a wholly-owned subsidiary of the Company with J.D. Edwards before the end of August 2003.

9. Oracle’s Unsolicited Tender Offer for PeopleSoft’s Common Stock and Customer Protection Program

Unsolicited Tender Offer for PeopleSoft’s Common Stock

On June 6, 2003, Oracle Corporation (“Oracle”) announced that it intended to commence an unsolicited cash tender offer to purchase all of the outstanding shares of PeopleSoft for $16.00 per share, or approximately $5.1 billion in the aggregate (the “Oracle Offer”). On June 8, 2003, the Company’s board of directors met and discussed Oracle’s unsolicited offer and formed a Transaction Committee of independent directors, comprised of Frank J. Fanzilli, Jr., Steven D. Goldby, A. George Battle and Cyril J. Yansouni. The purpose of the Transaction Committee is to evaluate and assess the terms of the Oracle Offer in consultation with the Company’s board of directors’ financial and legal advisors, and make a recommendation to its board. On June 9, 2003, Oracle and Pepper Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Oracle, filed a Tender Offer Statement on Schedule TO with the SEC in connection with the Oracle Offer. On June 11, 2003, the Company’s board of directors, including all of the members of the Transaction Committee, met with management and the board’s financial and legal advisors to further consider and discuss the Oracle Offer. After careful consideration, including consultation with management and the board’s financial and legal advisors, the Transaction Committee unanimously concluded that the Oracle Offer dramatically undervalued the Company, would face lengthy antitrust scrutiny, with a significant likelihood that the necessary approval would not be granted, the delays and uncertainties created by the Oracle Offer, coupled with Oracle’s stated intent to discontinue the Company’s products, represented a substantial threat to stockholder value, and that the unsolicited and hostile nature of the Oracle Offer, combined with Oracle’s public statements, was designed to disrupt the Company’s momentum at significant cost to the Company and its customers. For these and other reasons (more fully described in the Company’s Solicitation/Recommendation on Schedule 14D-9, as amended, filed with the SEC in response to the Oracle Offer) the Transaction Committee determined that the Oracle Offer was not in the best interests of the stockholders and unanimously recommended to the full board of directors that the full board, in turn, recommend that the Company’s stockholders reject the Oracle Offer and not tender their shares to Oracle for purchase. The full board of directors concurred with the committee and, having determined that the Oracle Offer was not in the best interests of the Company’s stockholders, unanimously recommended that the stockholders reject the Oracle Offer. The Company publicly announced the board’s recommendation on June 12, 2003.

On June 18, 2003, Oracle announced that it had amended its offer to purchase all of the outstanding stock of PeopleSoft by increasing the purchase price from $16.00 to $19.50 per share. After careful consideration, including consultation with management and the board’s financial and legal advisors, the Transaction Committee unanimously concluded that their previously stated reasons for rejecting the Oracle Offer remained unchanged. As more fully described in the Company’s amended Schedule 14D-9, the Transaction Committee determined that the Oracle Offer was not in the best interests of the stockholders and unanimously recommended to the full board that it recommend that the stockholders reject the Oracle Offer and not tender their shares to Oracle for purchase. The full board of directors concurred with the Transaction Committee and, having determined that the revised Oracle Offer was not in the best interests of the Company’s stockholders, unanimously recommended that the stockholders reject the revised Oracle Offer. The Company publicly announced the board’s recommendation on June 20, 2003. On June 30, 2003, the Department of Justice requested additional information from Oracle and the Company regarding antitrust matters relating to Oracle’s proposed acquisition of PeopleSoft, known as a “second request.”

On July 14, 2003, Oracle announced the extension of expiration of the Oracle Offer from July 18 to August 15, 2003. On July 24, 2003, Oracle amended its offer to eliminate the condition requiring Oracle’s consent for any amendment to the merger agreement between PeopleSoft and J.D. Edwards. As a result of the Company’s issuance of additional shares pursuant to the exchange offer and acquisition of J.D. Edwards, Oracle’s cash offer of $19.50 per share was increased to a total of approximately $7.3 billion. On August 8, 2003, Oracle announced the extension of expiration of the Oracle Offer from August 15 to September 19, 2003. See Note 10, “Commitments and Contingencies” for information about litigation instituted by the Company and others related to the Oracle tender offer.

Customer Protection Program

In response to Oracle’s public statement about its intent to discontinue the Company’s products and to minimize a potential loss of business during the Oracle Offer, in June 2003 the Company implemented a customer protection program. This program incorporates a contingent change in control provision to its standard perpetual licensing arrangement which provides customers purchasing application licenses with financial protection in the event that an acquirer discontinues the sale, development or support of PeopleSoft applications within a specified period after an acquisition. That financial protection is in the form of a payment generally equal to two to five times the total arrangement fees. The multiple increases as the arrangement fees increase and generally will be paid provided the following events occur:

• within one year of the contract effective date, the Company is acquired or merged, and the Company is not the acquirer, and

• within two years of the contract effective date, the acquiring company announces a) its intention to discontinue, or discontinues support services before the end of the normal support term as defined by the Company’s standard policies, or b) announces its intention to stop licensing PeopleSoft products to new customers, or c) announces its intention not to provide updates or new releases for supportable products, which would, if the Company were not acquired or merged into the acquired company, have been considered updates or new releases under standard business policies, and

• the customer requests the payment in writing by December 31, 2005, and the customer has timely paid for support services in accordance with the terms of the customer’s agreement with the Company.

Customers retain rights to the licensed products whether or not the customer protection program’s payments are implicated. No customer is entitled to a refund of arrangement fees paid under the customer’s contract with the Company, but the customer would be entitled to a payment under the customer protection program if all of the conditions stated above are met.

The customer protection program has no financial statement impact on PeopleSoft. A contingent liability would only be recognized in the financial statements of the Company or its acquirer upon or after the consummation of a business combination provided all the events listed above occurred. As of June 30, 2003, the maximum potential amount of future payments which may be required to be made under the customer protection program was approximately $391 million.

The Company intends to continue to offer the customer protection program for an indefinite period of time.

10. Commitments and Contingencies

Customer Indemnification

From time to time, the Company agrees to indemnify its customers against liability if the Company’s products infringe a third party’s intellectual property rights. As of June 30, 2003, the Company had no outstanding claims and was not subject to any pending litigation alleging that the Company’s products infringe the intellectual property rights of any third parties.

PeopleSoft Shareholder Actions — Delaware Court of Chancery

announced on June 6, 2003. Plaintiffs in each of the actions seek injunctive relief and an accounting. On June 10, 2003, an action was filed in the Delaware Court of Chancery against these same defendants by Steven Padness (Case No. 20358-NC), making similar allegations and seeking similar relief. On June 12, 2003, an action was filed in the Delaware Court of Chancery against these same defendants by Thomas Nemes (Case No. 20365-NC), making similar allegations and seeking similar relief (the “Nemes Action”). The Nemes Action was amended on June 18, 2003, to include allegations and seeking relief similar to those in the above-referenced actions.

On June 25, 2003, on an application filed in the Nemes Action, the Court consolidated the actions listed above under a single caption and case number: In re PeopleSoft, Inc. Shareholder Litigation, Consol. C.A. No. 20365-NC. Defendants filed their Answer on June 25, 2003.

Document discovery has commenced in these consolidated actions and is coordinated with the discovery in the action filed against the Company by Oracle Corporation, discussed below.

On June 27, 2003, Milton Pfeiffer (Case No. 20390-NC), who purports to be a shareholder of J.D. Edwards, filed a putative class action against J.D. Edwards and several of its officers and directors, alleging that defendants breached their fiduciary duties in connection with the amendment of the merger agreement between J.D. Edwards and the Company. Plaintiff seeks injunctive relief, an accounting and damages. Defendants moved to dismiss or stay the action on the grounds, inter alia, that Pfeiffer is not a proper plaintiff. In response, on July 24, 2003, Pfeiffer amended his complaint, adding as a plaintiff Ward Quarles, who also purports to be a shareholder of J.D. Edwards. The amended complaint also adds the Company as a defendant and alleges that the Company aided and abetted J.D. Edwards and the other defendants in their alleged breaches of fiduciary duty. The amended complaint seeks an accounting and damages.

The Company believes that the claims and allegations asserted in each of the foregoing putative class action suits are without merit, and intends to vigorously defend against these lawsuits.

Oracle v. PeopleSoft — Delaware Court of Chancery

On June 18, 2003, Oracle filed a suit in the Delaware Court of Chancery (Case No. 20377-NC) against the Company, several of the Company’s directors (the “Director Defendants”), and J.D. Edwards, alleging that the Director Defendants breached their fiduciary duties in connection with the Company’s response to Oracle’s tender offer commenced on June 9 and amended June 18, 2003, and that J.D. Edwards aided and abetted such directors’ purported breach of fiduciary duty. Oracle seeks injunctive, declaratory and rescissory relief. On June 25, 2003, defendants filed their Answer. A hearing on a motion for preliminary injunction was scheduled for July 16, 2003, but was postponed upon the request of Oracle. On July 25, 2003, Oracle advised the Court that, in light of the second request for further information it received from the antitrust division of the United States Department of Justice regarding its tender offer, it did not believe it was appropriate to set a hearing date at this time, and requested that the Court allow the parties to report back to it in mid-September of 2003. Document discovery has commenced and is coordinated with that in the consolidated shareholder actions described above.

The Company believes that the claims and allegations asserted in this action are without merit, and intends vigorously to defend against this lawsuit.

PeopleSoft Shareholder Actions — California Superior Court for the County of Alameda

approved by Company shareholders at the 2003 Annual Meeting. Plaintiffs seek injunctive, rescissory and declaratory relief. On June 16, 2003, the Initial Alameda Shareholder Actions were consolidated. On June 11, 2003, two additional actions were filed by Moshe Panzer (Case No. RG03100876) and Arace Brothers (Case No. RG03100830) asserting similar claims. By Order dated July 10, 2003, the Panzer and Arace actions were consolidated with the Initial Alameda Shareholder Actions (collectively “the Alameda Shareholder Actions”).

By Order dated June 18, 2003, the Alameda County Superior Court granted the Company’s Motion to Stay the Initial Alameda Shareholder Actions pending resolution of the claims involving the duties of the defendant directors by the Delaware Court of Chancery. By Order dated July 10, 2003, the Alameda County Superior Court also stayed the Panzer and Arace Brothers cases pursuant to the June 18, 2003 Order in the Initial Alameda Shareholder Actions. Accordingly, all of the Alameda Shareholder Actions are stayed by order of the Court.

The Company believes that the claims and allegations asserted in each of the foregoing putative class action suits are without merit, and intends to vigorously defend against these lawsuits.

Other Matters

The Company is party to various legal disputes and proceedings arising during the ordinary course of business. In the opinion of management, resolution of these matters is not expected to have a material adverse effect on the

financial position, results of the operations and cash flows of the Company. An unfavorable resolution of some or all of these matters could materially affect the Company’s future results of operations or cash flows.

11. Segment Information

The Company’s chief operating decision maker is its President and Chief Executive Officer (CEO). While the CEO is apprised of a variety of financial metrics and information, PeopleSoft is principally managed on a geographic basis in terms of revenue and segment margin performance. The Company’s two geographic business segments are: North America, which includes the United States and Canada, and International, which includes all other geographic regions. Operating expenses are managed functionally on a global basis. Assets are not identified with geographic segments because the CEO does not evaluate that information to make resource allocation decisions.

Revenues are defined as revenues generated from unaffiliated customers. Cost of revenues includes the cost of license, cost of services and the direct selling cost included in sales and marketing expense. “Development and other services” revenue is not considered segment revenue. Correspondingly, “Cost of development and other services” is excluded from the cost of revenues for segment purposes. Operating expenses, which are managed functionally on a global basis, include corporate marketing, product development, general and administrative expenses as well as restructuring, acquisition and other charges.

Accounting policies for each of the reportable segments are the same as those used on a consolidated basis. The following table presents a summary of operating information for the three and six months ended June 30, 2003 and 2002 (in thousands):


	Three Months Ended June 30,

	Operating Segments

2003	North America		International		Other		Total

Revenues	$	367,458	$	129,984	$	—	$	497,442
Cost of revenues		169,230		70,562		—		239,792

Segment margin	$	198,228	$	59,422	$	—	$	257,650

Operating expenses						207,430		207,430

Operating income							$	50,220


	Operating Segments

2002	North America		International		Other		Total

Revenues	$	369,128	$	113,084	$	—	$	482,212
Cost of revenues		173,688		69,088		—		242,776

Segment margin	$	195,440	$	43,996	$	—	$	239,436

Operating expenses						188,349		188,349

Operating income							$	51,087


	Six Months Ended June 30,

	Operating Segments

2003	North America		International		Other		Total

Revenues	$	718,113	$	239,585	$	—	$	957,698
Cost of revenues		328,709		139,098		—		467,807

Segment margin	$	389,404	$	100,487	$	—	$	489,891

Operating expenses						387,888		387,888

Operating income							$	102,003


	Operating Segments

2002	North America		International		Other		Total

Revenues	$	732,190	$	225,759	$	7,530	$	965,479
Cost of revenues		345,060		135,759		6,755		487,574

Segment margin	$	387,130	$	90,000	$	775	$	477,905

Operating expenses						366,222		366,222

Operating income							$	111,683

Revenues from the Europe/Middle-East/Africa region represented 15% and 14% of total revenues, respectively, for the three months ended June 30, 2003 and 2002. Revenues from the Europe/Middle-East/Africa region represented 14% of total revenues for each of the six month periods ended June 30, 2003 and 2002. No other international region had revenues equal to or greater than 10% of total revenues for the three and six months ended June 30, 2003 or 2002. Revenues originating in each individual foreign country were less than 10% of total revenues for each of the three and six months ended June 30, 2003 and 2002.

12. Recently Issued Accounting Standards

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities’’ (FIN 46) that addresses the consolidation of variable interest entities. The interpretation provides guidance for determining when a primary beneficiary should consolidate a variable interest entity, or equivalent structure, that functions to support the activities of the primary beneficiary. The interpretation is effective after January 31, 2003 for newly created variable interest entities. For variable interest entities created before February 1, 2003, the interpretation is effective as of the beginning of the first interim or annual reporting period beginning after June 15, 2003. On June 30, 2003, the Company exercised its option to purchase certain of its headquarters facilities located in Pleasanton, California for $105.0 million, prior to the maturity of the related synthetic lease. Had the Company not terminated this synthetic lease prior to July 1, 2003, it would have been required to consolidate its financial position and results of operations under the provisions of FIN 46. Consequently, given the termination of this synthetic lease, the adoption of FIN 46 will have no effect on the Company’s consolidated financial position, results of operations or cash flows.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (SFAS 150) that establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this statement will have no effect on the Company’s consolidated financial position, results of operations or cash flows.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Discussion and Analysis of Financial Condition and Results of Operations contains “forward-looking statements” concerning non-historical facts or matters that are subject to risks and uncertainties. These forward-looking statements may be preceded by, followed by or include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “projections,” “estimates,” “may,” “will,” “should,” “could” or similar expressions. These forward-looking statements represent our expectations or beliefs concerning future events, many of which are outside of our control. Forward-looking statements contained throughout this Report include, but are not limited to, those identified with a footnote (1) symbol. Many possible events or factors could affect the actual financial results and performance of PeopleSoft and of the combined company after the acquisition of J.D. Edwards. These factors or events could cause those results or performance to differ significantly from those expressed in our forward-looking statements.

We caution that these forward-looking statements are further qualified by important factors, including those set forth below and elsewhere in this Quarterly Report that could cause actual results to differ significantly.

These forward-looking statements and other forward-looking statements made elsewhere in this document are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance. By their nature, they involve risks, uncertainties and assumptions. The future results of PeopleSoft may differ significantly from those expressed in these forward-looking statements. Stockholders are cautioned not to put undue reliance on any forward-looking statement. Any such statement speaks only as of the date of this Quarterly Report. We do not assume any obligation to update or release any revisions to any forward-looking statements, to report any new information, future event or other circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events, except as required by law. For a discussion of factors that could affect future results, see “Factors That May Affect Our Future Results Or The Market Price Of Our Stock.”

RESULTS OF OPERATIONS

The following table shows the percentage of period over period growth and the percentage of total revenues represented by the line items in our condensed consolidated statements of operations:


				Percentage of									Percentage of
				Dollar			Percentage of						Dollar			Percentage of
				Change			Total Revenues						Change			Total Revenues

				Three months ended June 30,									Six months ended June 30,
				2003/2002			2003			2002			2003/2002			2003			2002

Revenues:
	License fees				(15	)%		22	%		27	%		(27	)%		20	%		27	%









	Maintenance revenue				20			42			36			21			42			35
	Professional services revenue				1			36			37			1			38			37

			Service revenue		10			78			73			11			80			72
	Development and other service revenue				N/A			—			—			(100	)		—			1

		Total revenues			3			100			100			(1	)		100			100

Costs and expenses:
	Cost of license fees				(6	)		2			2			(15	)		2			2
	Cost of services				(3	)		34			35			(2	)		34			35
	Cost of development and other services				N/A			—			—			(100	)		—			—
	Sales and marketing expense				4			26			26			—			26			26
	Product development expense				(3	)		17			18			(1	)		18			18
	General and administrative expense				50			8			6			28			8			6
	Restructuring, acquisition and other charges				59			3			2			20			1			1

		Total costs and expenses			4			90			89			—			89			88

Operating income					(2	)		10			11			(9	)		11			12
Other income, net					(44	)		1			1			(26	)		1			1
Provision for income taxes					(22	)		4			5			(17	)		4			5

Net income					1	%		7	%		7	%		(7	)%		8	%		8	%

Diluted income per share					0	%								(8	)%

N/A – Not Applicable

Net income increased $0.5 million or 1% to $36.5 million for the second quarter of 2003 from $36.0 million for the second quarter of 2002. Diluted income per share was $0.11 in the second quarter of 2003, consistent with the first quarter of 2002.

For the six months ended June 30, 2003, net income decreased $5.6 million or 7% to $75.0 million from $80.6 million for the six months ended June 30, 2002. For the six months ended June 30, 2003, diluted income per share decreased to $0.23 from $0.25 for the six months ended June 30, 2002.

Net income for the quarter and six months ended June 30, 2003 included restructuring charges totaling $8.5 million (after-tax) resulting from headcount reductions within various worldwide administrative and support functions and the closure of an underutilized office facility. Refer to “Restructuring, Acquisition and Other Charges” below.

Net income for the six months ended June 30, 2002 includes a first quarter charge of $1.7 million (after-tax) for in-process research and development related to the Annuncio Software, Inc. (Annuncio) business combination and a second quarter in-process research and development charge of $8.7 million (no tax impact) related to the acquisition of Momentum Business Applications, Inc. (Momentum).

Revenues

Our software products are generally licensed to end-user customers under non-exclusive, perpetual license agreements. Revenue from license fees decreased by 15% to $111.7 million in the second quarter of 2003 from $131.9 million in the second quarter of 2002. Revenue from license fees decreased by 27% to $192.6 million during the six months ended June 30, 2003 from $265.2 million during the six months ended June 30, 2002. The decrease in license revenue, which was distributed across most geographies, reflects the continued slowdown in capital spending resulting from the ongoing global economic downturn.

Our services revenue consists of software maintenance revenue and professional services revenue (consulting fees, customer training fees and miscellaneous fees). Maintenance revenue was $205.6 million during the second quarter of 2003 compared to $171.3 million during the second quarter of 2002. The $34.2 million increase in maintenance revenue is primarily a result of the continuing addition of new customers to our installed base combined with a high renewal rate by existing customers. Professional services revenue was $180.2 million during the second quarter of 2003 compared to $179.0 million during the second quarter of 2002. The $1.2 million increase in professional services revenue reflects continued demand for consulting and training services associated with license activity from recent quarters. For the six months ended June 30, 2003, maintenance revenue increased by 21% to $405.5 million from $335.9 million for the six months ended June 30, 2002. The increase in maintenance revenue is primarily a result of the continuing addition of new customers to our installed base combined with a high renewal rate by existing customers. For the six months ended June 30, 2003, professional services revenue increased by 1% to $359.6 million from $356.8 million for the six months ended June 30, 2002. The increase in professional services revenue reflects continued demand for consulting and training services associated with license activity from recent quarters.

Development and other services revenue recognized in 2002 consisted of revenue generated pursuant to a development agreement with Momentum. On April 9, 2002, we completed a transaction to purchase Momentum. Subsequent to this acquisition, no development and other services revenue was recognized. Revenue from development and other services was zero for the six months ended June 30, 2003 as compared to $7.5 million for the same period in 2002. Cost of development and other services was zero for the six months ended June 30, 2003 from $6.8 million during the six months ended June 30, 2002. Refer to “Business Combinations” in our Annual Report on Form 10-K for the year ended December 31, 2002 for further discussion about Momentum and the acquisition of Momentum. We do not expect to have any further “Development and other services” revenue or related costs.(1)

Costs and Expenses

Our software products are based on a combination of internally developed and acquired technology, as well as bundled third party technology and products. Cost of license fees consists principally of royalties, license fees for certain third party software products, amortization of capitalized software costs and product warranty costs. Cost of license fees decreased to $9.6 million in the second quarter of 2003 from $10.2 million in the second quarter of 2002 representing 9% and 8% of license revenue in each of those quarters. The decrease in the cost of license fees for the

⁽¹⁾ Forward-Looking Statement

three months ended June 30, 2003 is primarily a result of a decrease in license revenue combined with a change in the associated product mix. During the six months ended June 30, 2003 and 2002, cost of license fees decreased to $18.3 million from $21.6 million, representing 9% and 8% of license revenue in each of those six month periods. The decrease in the cost of license fees for the six months ended June 30, 2003 is primarily a result of a decrease in license revenue combined with a change in the associated product mix. Cost of license fees as a percentage of license revenue may increase as a result of the acquisition of J.D. Edwards and Company (“J.D. Edwards”).⁽¹⁾

Cost of services consists primarily of employee costs and the related infrastructure costs incurred in providing consulting services, post-installation support and training. Cost of services decreased to $166.7 million in the second quarter of 2003 from $171.2 million in the second quarter of 2002, representing 43% and 49% of services revenues in each of those quarters. The decrease in cost of services for the second quarter of 2003 is primarily due to a $3.2 million decrease in travel related expenses, a $2.3 million decrease in meeting expenses, a $1.2 million decrease in employee related costs, and a $2.8 million decrease in fixed fee contract expense due to the timing of projects, partially offset by an increase of $6.0 million for outside consulting expense and a redeployment of consulting personnel working on internal projects. For the six months ended June 30, 2003 cost of services decreased to $330.2 million from $335.7 million during the six months ended June 30, 2002, representing 43% and 48% of service revenues in each of those six month periods. The decrease in cost of services for the six months ended June 30, 2003 is primarily due to a $3.8 million decrease in services warranty expense, a $3.6 million decrease in fixed fee contract expense due to project timing, a $2.8 million decrease in meetings expenses, a $2.1 million decrease in leased computers due to buy-out of computer leases in the first quarter 2003, and a $1.8 million decrease in travel related expenses due to company cost control partially offset by a $5.3 million increase in expenses relating the redeployment of consulting personnel working on internal projects and a $2.7 million increase in employee related expenses. If the demand for services from new and existing customers for installation, consulting, maintenance and training services increases over the next several quarters, our cost of services may increase.⁽¹⁾

Sales and marketing expenses increased to $131.5 million in the second quarter of 2003 from $126.2 million in the second quarter of 2002, representing 26% of total revenues in each of those quarters. The increase in sales and marketing expenses is primarily due to a $4.3 million increase in marketing expenses including, $2.3 million in marketing expenses arising from our response to the Oracle Offer, and a $4.0 million increase in sales commissions, partially offset by a $2.2 million decrease in external consulting expense and a $1.6 million decrease in salaries expense. Sales and marketing expenses increased to $251.1 million for the six months ended June 30, 2003 from $250.7 million for the six months ended June 30, 2002, representing 26% of total revenues in each of the six month periods. The increase in sales and marketing expenses is primarily due to a $5.4 million increase in marketing expense, of which $2.3 million relates to expenses incurred in the second quarter in response to the Oracle Offer, partially offset by a $2.5 million decrease in sales commissions and a $2.2 million decrease in external consulting expense. Sales and marketing expenses may increase in future periods as we increase our sales force and marketing and advertising expenses to improve our competitive positioning in the marketplace and to promote brand awareness and global recognition of our products.⁽¹⁾ Sales and marketing expenses in the third quarter will include marketing expenses incurred in response to the Oracle Offer.⁽¹⁾

Product development expenses consist of costs primarily related to our software developers and the associated infrastructure costs required to fund product development initiatives. Product development expenses decreased to $84.6 million in the second quarter of 2003 from $87.5 million in the second quarter of 2002, representing 17% and 18% of total revenues in each of those quarters. The decrease in product development expenses is primarily attributable to a $4.6 million decrease in employee incentive compensation due to a decline in license revenues, partially offset by a $2.0 million increase in salaries due to increased headcount in 2003. Product development expenses decreased to $168.4 million during the six months ended June 30, 2003 from $169.9 million for the six months ended June 30, 2002, representing 18% of total revenues in each of the six month periods. The decrease in product development expenses is primarily attributable to a $9.6 million decrease in employee incentive compensation due to a decline in license revenues, partially offset by a $5.9 million increase in development activities as developers were redeployed from working on Momentum projects in the prior year and a $4.0 million increase in salaries due to increased headcount in 2003. Our focus is to continue to extend our software offerings by delivering enhanced functionality and to

⁽¹⁾ Forward-Looking Statement

further develop new applications in our integrated application suites: Human Capital Management, Financial Management Solutions, Customer Relationship Management and Supply Chain Management.⁽¹⁾

General and administrative expenses increased to $41.0 million during the second quarter of 2003 from $27.4 million during the second quarter of 2002, representing 8% and 6% of total revenues in each of those quarters. The increase is primarily attributable to investment banking, legal and other expenses of $11.5 million incurred in the second quarter of 2003 related to our response to the Oracle Offer. General and administrative expenses increased to $74.0 million from $57.6 million for the six months ended June 30, 2003, representing 8% and 6% of total revenues in each of those periods. The increase for the six month period is primarily attributable to expenses of $11.5 million incurred in the second quarter of 2003 related to our response to the Oracle Offer, an increase in directors and officers insurance premiums of $1.5 million and increases in employee expenses relating to the redeployment of internal personnel and other costs of $2.3 million. General and administrative expenses in the third quarter will include expenses incurred in response to the Oracle Offer.⁽¹⁾

Restructuring, Acquisition and Other Charges

During the second quarter of 2003, we recorded pretax restructuring charges of $13.8 million. The $13.8 million of restructuring charges are included in “Restructuring, acquisition and other charges” and consisted of $4.6 million for employee severance, $7.5 million for the fair value of lease obligations associated with the closure of an office facility and $1.7 million for the impairment of related leasehold improvements. Approximately $12.1 million of the restructuring charge is a cash charge, which is expected to be funded through operating cash flow. We expect to be able to recover the $13.8 million severance and facility-related restructuring charges through cost savings over the next 8 months. During the six months ended June 30, 2002, we incurred a first quarter charge of $2.8 million related to the write-off of in-process research and development costs associated with our acquisition of Annuncio and a second quarter charge of $8.7 million related to the write-off of in-process research and development costs related to the acquisition of Momentum. In the future, if we complete business combinations and technology purchases, including the completion of our acquisition of J.D. Edwards, we may incur additional in-process research and development charges which may impact our results of operations.⁽¹⁾

Other Income, Net

Other income, net, which primarily includes interest income, decreased to $4.7 million in the second quarter of 2003 from $8.5 million in the second quarter of 2002, and decreased to $11.7 million in the six months ended June 30, 2003 from $15.7 million during the six months ended June 30, 2002. The decrease is primarily a result of a decrease in net foreign currency transaction gains of $4.0 million and 3.0 million for the three and six month periods ended June 30, 2003, a $1.4 million realized loss on the buyout of our remaining interest rate swaps incurred in the second quarter of 2003 and a decrease in interest income in both periods due to lower interest rates.

Provision for Income Taxes

Our income tax provision decreased to $18.4 million in the second quarter of 2003 from $23.5 million in the second quarter of 2002 and decreased to $38.7 million in the six months ended June 30, 2003 from $46.8 million for the same period in 2002. Our effective tax rate was 34.0% and 36.8% for the six months ended June 30, 2003 and 2002, respectively. Exclusive of restructuring charges in the second quarter of 2003 and in-process research and development charges in the first and second quarters of 2002, the effective tax rate for the six months ended June 30, 2003 and 2002 was 34.5%. The net deferred tax assets at June 30, 2003 were $179.5 million. In accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (SFAS 109), the valuation of these net deferred tax assets is based upon an estimate of both the timing and amount of future taxable income. Future taxable income may be derived from future operations, subsequent reversals of deferred tax liabilities and other sources.⁽¹⁾

⁽¹⁾ Forward-Looking Statement

Business Combinations

On June 1, 2003, PeopleSoft, Jersey Acquisition Corporation, a wholly owned subsidiary of the Company (“Jersey”), and J.D. Edwards entered into an Agreement and Plan of Merger, which provided for an offer to purchase all the outstanding shares of common stock of J.D. Edwards (the “exchange offer”). On June 16, 2003, we entered into an Amended and Restated Agreement and Plan of Merger and Reorganization with J.D. Edwards and Jersey. The value of the consideration to be given for approximately 122 million shares of the outstanding J.D. Edwards common stock was approximately $1.8 billion.

On June 19, 2003, we filed with the Securities and Exchange Commission a Tender Offer Statement on Schedule TO with regard to the exchange offer and a Registration Statement on Form S-4 to register the shares to be issued in connection with the exchange offer. Pursuant to the exchange offer, holders of J.D. Edwards’ common stock were entitled to make an election to tender their shares for cash or shares of PeopleSoft stock and such holders were entitled to receive cash, stock, or a combination of cash and stock, in each case having a value, on a per share basis of $7.05 plus 0.43 of a share of PeopleSoft common stock, allocated by prorating cash and shares available in the tender offer among the elections made by the holders. The value of the cash and stock consideration to be paid to tendering J.D. Edwards shareholders was based upon the closing prices of one share of PeopleSoft’s common stock during the five trading days ending before the second trading day prior to the expiration of the exchange offer. The exchange offer expired on July 17, 2003.

On July 14, 2003, PeopleSoft and J.D. Edwards announced that, in connection with our exchange offer to acquire all of the outstanding shares of J.D. Edwards, the companies received notice of termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

Our offer to acquire all of the outstanding shares of J.D. Edwards expired at midnight, New York City time on Thursday, July 17, 2003. At the expiration of the offer and after delivery of guaranteed shares, 104,754,894 shares of J.D. Edwards common stock had been validly tendered for exchange, all of which were accepted for exchange by PeopleSoft at approximately 1:45 a.m., New York City time, on Friday, July 18, 2003. As a result of such acceptance and exchange, PeopleSoft owns approximately 85% of the J.D. Edwards common stock outstanding as of August 8, 2003. We expect to acquire all of the remaining shares of J.D. Edwards by completing a merger of a wholly-owned subsidiary of PeopleSoft with J.D. Edwards before the end of August 2003.

Oracle’s Unsolicited Tender Offer for PeopleSoft’s Common Stock

On June 6, 2003, Oracle Corporation announced that it intended to commence an unsolicited cash tender offer to purchase all of the outstanding shares of PeopleSoft for $16.00 per share, or approximately $5.1 billion in the aggregate (the “Oracle Offer”). On June 8, 2003, the Company’s board of directors met and discussed Oracle’s unsolicited offer and formed a Transaction Committee of independent directors, comprised of Frank J. Fanzilli, Jr., Steven D. Goldby, A. George Battle and Cyril J. Yansouni. The purpose of the Transaction Committee is to evaluate and assess the terms of the Oracle Offer, once announced, in consultation with the Company’s board of directors’ financial and legal advisors, and make a recommendation to its board. On June 9, 2003, Oracle and Pepper Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Oracle, filed a Tender Offer Statement on Schedule TO with the SEC in connection with the Oracle Offer. On June 11, 2003, the Company’s board of directors, including all of the members of the Transaction Committee, met with management and the board’s financial and legal advisors to further consider and discuss the Oracle Offer. After careful consideration, including consultation with management and the board’s financial and legal advisors, the Transaction Committee unanimously concluded that the Oracle Offer dramatically undervalued the Company, would face lengthy antitrust scrutiny, with a significant likelihood that the necessary approval would not be granted, the delays and uncertainties created by the Oracle Offer, coupled with Oracle’s stated intent to discontinue the Company’s market-leading products, represented a substantial threat to stockholder value, and that the unsolicited and hostile nature of the Oracle Offer, combined with Oracle’s public statements, was designed to disrupt the Company’s momentum at significant cost to the Company and its customers. For these and other reasons (more fully described in the Company’s Solicitation/Recommendation on Schedule 14D-9, as amended, filed with the SEC in response to the Oracle Offer, referred to as the Schedule 14D-9), the Transaction Committee determined that the Oracle Offer was not in the best interests of the stockholders and unanimously recommended to the full board of directors that the full board, in turn, recommend that the Company’s stockholders reject the Oracle Offer and not tender their shares to Oracle for purchase. The full board of directors concurred with the committee and, having determined that the Oracle Offer was not in the best interests of the Company’s stockholders, unanimously

recommended that the stockholders reject the Oracle Offer. The Company publicly announced the board’s recommendation on June 12, 2003.

On July 14, 2003, Oracle announced the extension of expiration of the Oracle Offer from July 18 to August 15, 2003. On July 24, 2003, Oracle amended its offer to eliminate the condition requiring Oracle’s consent for any amendment to the merger agreement between PeopleSoft and J.D. Edwards. As a result of PeopleSoft’s issuance of additional shares pursuant to the exchange offer and acquisition of J.D. Edwards, Oracle’s cash offer of $19.50 per share was increased to a total of approximately $7.3 billion. On August 8, 2003, Oracle announced the extension of expiration of the Oracle Offer from August 15 to September 19, 2003. See Item 1. “Legal Proceedings” under “Part II - Other Information” for information about litigation instituted by the Company and others related to the Oracle Offer.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires us to utilize accounting policies and make estimates and assumptions that affect our reported results. We believe our accounting policies and estimates related to revenue recognition, capitalized software, allowance for doubtful accounts, product and service warranty reserve and deferred tax asset valuation allowances represent our critical accounting policies and estimates. Despite the Company’s best effort to make good faith estimates and assumptions, actual results may differ.

Revenue Recognition

We recognize revenue in accordance with the Securities and Exchange Commissions Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” the American Institute of Certified Public Accountants Statement of Position (SOP) 97-2, “Software Revenue Recognition,” as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain Transactions,” and other authoritative accounting literature. We derive revenues from the following sources: license fee revenue, maintenance revenue and professional services revenue.

License Fee Revenue. For software license agreements that do not require significant modifications or customization of the software, we recognize software license revenue when persuasive evidence of an agreement exists, delivery of the product has occurred, the license fee is fixed or determinable and collection is probable. Our software license agreements generally include multiple products and services, or “elements.” Consulting services, if included as an element of software license agreements, generally do not involve significant modification or customization of the licensed software. We use the residual method to recognize revenue when a license agreement includes one or more elements to be delivered at a future date and vendor specific evidence of the fair value of all undelivered elements exists. The fair value of the undelivered elements is determined based on the historical evidence of stand-alone sales of these elements to third parties. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. If evidence of the fair value of one or more undelivered elements does not exist, the revenue is deferred and recognized when delivery of those elements occurs or when fair value can be established. If the license fee due from the customer is not fixed or determinable, revenue is recognized as payment becomes due, assuming all other revenue recognition criteria have been met. We consider arrangements with extended payment terms not to be fixed or determinable. Revenue associated with reseller arrangements is recognized when we receive persuasive evidence that the reseller has sold the products to an end user customer. Acceptance provisions included in a software license agreement generally grant customers a right of refund or replacement only if the licensed software does not perform

in accordance with its published specifications. Based on our history, the likelihood of non-acceptance in these situations is remote, and we recognize revenue when all other criteria of revenue recognition are met. If the likelihood of non-acceptance is determined to be other than remote, revenue is recognized upon the earlier of receipt of written acceptance or when the acceptance period has lapsed.

In response to Oracle’s public statement about its intent to discontinue the Company’s products and to minimize a potential loss of business during the Oracle Offer, in June 2003 PeopleSoft implemented a program. This program incorporates a contingent change in control provision to our standard perpetual licensing arrangement which provides customers purchasing application licenses with financial protection in the event that an acquirer discontinues the sale, development or support of PeopleSoft applications within a specified period after an acquisition. That financial protection is in the form of a payment generally equal to two to five times the total arrangement fees. The multiple increases as the arrangement fees increase and generally will be paid provided the following events occur:

• within one year of the contract effective date, PeopleSoft is acquired or merged, and PeopleSoft is not the acquirer; and

• within two years of the contract effective date, the acquiring company: (i) announces its intention to discontinue, or discontinues, support services before the end of the normal support term as defined by PeopleSoft standard policies, or (ii) announces its intention to stop licensing PeopleSoft products to new customers, or (iii) announces its intention not to provide updates or new releases for supportable products, which would, if PeopleSoft were not acquired or merged with the acquired company, have been considered updates or new releases under PeopleSoft standard business policies; and

• the customer requests the payment in writing by December 31, 2005 and has timely paid for support services in accordance with the terms of the customer’s agreement with PeopleSoft.

Customers retain rights to the licensed products whether or not the customer protection program payments are implicated. No customer is entitled to a refund of arrangement fees paid under the customer’s contract with PeopleSoft, but the customer would be entitled to a payment under the customer protection program if all of the conditions stated above are met.

The customer protection program was designed to protect a customer’s total investment in PeopleSoft products. We believe that the customer protection provision has encouraged customers to go forward with business arrangements despite uncertainty about the future of PeopleSoft applications in the marketplace that the Oracle Offer and Oracle’s public statements have created. ⁽¹⁾ These assurances provided to customers facilitated completing sales transactions, which preserves the value of PeopleSoft’s business for our stockholders.

The customer protection program has no financial statement impact on PeopleSoft. A contingent liability would only be recognized in the financial statements of PeopleSoft or its acquirer upon or after the consummation of the business combination provided all the events listed above occurred. As of June 30, 2003, the maximum potential amount of future payments which may be required to be made under the program is approximately $391 million.

Maintenance Revenue. Maintenance revenue is recognized ratably over the term of the maintenance agreement, typically one year.

Professional Services Revenue. Professional services revenue primarily consists of consulting and customer training revenues, which are usually charged on a time and materials basis and are recognized as the services are performed. Revenue from certain fixed price contracts is recognized on a percentage of completion basis, which involves the use of estimates. If we do not have a sufficient basis to measure the progress towards completion, revenue is recognized when the project is completed or when we receive final acceptance from the customer.

Capitalized Software

We account for the development cost of software intended for sale in accordance with Statement of Financial Accounting Standards No. 86, “Accounting for Costs of Computer Software to be Sold, Leased, or Otherwise Marketed” (SFAS 86). SFAS 86 requires product development costs to be charged to expense as incurred until

⁽¹⁾ Forward-Looking Statement

technological feasibility is attained. Technological feasibility is attained when our software has completed internal testing and has been determined viable for its intended use. The time between the attainment of technological feasibility and completion of software development has been short with immaterial amounts of development costs incurred during this period. Accordingly, we did not capitalize any development costs in the six month periods ended June 30, 2003 and 2002. We capitalize software acquired through technology purchases and business combinations if the related software under development has reached technological feasibility or if there are alternative future uses for the software. We evaluate the recoverability of capitalized software based on estimated future gross revenues reduced by the estimated cost of completing the products and of performing maintenance and customer support. If our gross revenues were to be significantly less than our estimates, the net realizable value of our capitalized software intended for sale would be impaired.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts at an amount we estimate to be sufficient to provide adequate protection against losses resulting from collecting less than full payment on our receivables. We record an allowance for receivables based on a percentage of revenues. Individual overdue accounts are reviewed, and an additional allowance is recorded when determined necessary to state receivables at realizable value. In judging the adequacy of the allowance for doubtful accounts, we consider multiple factors including historical bad debt experience, the general economic environment, and the aging of our receivables. A considerable amount of judgment is required when we assess the realization of receivables, including assessing the probability of collection and the current creditworthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, an additional provision for doubtful accounts may be required.

Product and Service Warranty Reserve

We provide for the estimated cost of product and service warranties based on specific warranty claims, provided that it is probable that a liability exists, and provided the amount can be reasonably estimated. Warranty expense is equal to the costs to repair or otherwise satisfy the claim. As settlement negotiations proceed, additional information becomes available which may result in changes in the estimated liability. If claims are settled for amounts differing from our estimates, or if the estimated value of warranty claims were to increase or decrease, revisions to the estimated warranty liability may be required and the warranty expense may change from current levels.

Deferred Tax Asset Valuation Allowance

We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”. We assess the likelihood that our net deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we establish a valuation allowance against those deferred tax assets. We consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance. However, adjustments could be required in the future if we determine that the amount to be realized is greater or less than the amount we have recorded. We have established valuation allowances for net operating losses incurred in foreign jurisdictions and other foreign tax benefits as well as on operating loss carryforwards in state jurisdictions of acquired companies.

Liquidity and Capital Resources

At June 30, 2003, we had $272.9 million in cash and cash equivalents and $1.7 billion in short-term investments, consisting principally of investments in interest-bearing demand deposit accounts with various financial institutions, tax-advantaged money market funds and highly liquid debt securities of corporations and municipalities. At June 30, 2003, working capital was $1.6 billion. We believe that the combination of cash and cash equivalents, short-term investment balances and potential cash flow from operations will be sufficient, at least through the next twelve months, to satisfy our cash requirements, including payments of approximately $873 million related to the cash portion of the total consideration to be distributed to J.D. Edwards’ shareholders upon the merger of PeopleSoft and J.D. Edwards, of which approximately $739 million was paid upon completion of the exchange offer in July 2003, and the remainder is expected to be paid upon completion of the merger with J.D. Edwards during the third quarter.⁽¹⁾

Cash provided by operating activities decreased $21.1 million to $193.3 million during the six months ended June 30, 2003 from $214.4 million during the same period in 2002. The decrease was primarily due to a decrease

⁽¹⁾ Forward-Looking Statement

associated with fluctuations in the income tax and accounts receivable balances, a decrease in tax benefits from employee stock transactions, and lower net income in the six months ended June 30, 2003 compared to the same period in 2002.

Cash used in investing activities decreased $15.9 million to $304.1 million during the six months ended June 30, 2003 from $320.0 million during the same period in 2002. The $15.9 million decrease was primarily attributable to $61.0 million lower net purchases of investments and $117.8 million was related to 2002 business combinations, partially offset by $162.9 million in greater purchases of property and equipment, of which $175.0 million relates to exercising options under synthetic lease agreements in 2003 to purchase certain of our headquarter facilities in Pleasanton, California.

Cash provided by financing activities decreased $29.0 million to $49.1 million during the six months ended June 30, 2003 from $78.1 million during the six months ended June 30, 2002. The decrease in was primarily due to $28.0 million less in proceeds received from the exercise of common stock options by employees.

As part of our business strategy, we consider acquiring companies or products from time to time to enhance our product and service lines. These acquisitions may be paid for with available cash, equity, debt or a combination of these sources.⁽¹⁾

Commercial Commitments

On February 27, 2003, we exercised our option under a synthetic lease agreement to purchase certain of our headquarter facilities located in Pleasanton, California for $70.0 million and on June 30, 2003, we exercised our option under a synthetic lease agreement to purchase certain of our headquarter facilities located in Pleasanton, California for $105.0 million, prior to the agreement’s maturity date in September 2003. We have no remaining synthetic leases.

⁽¹⁾ Forward-Looking Statement

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Exchange Risk

Our international business is subject to risks, including, but not limited to, unique economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. Accordingly, our future results could be materially adversely impacted by changes in these or other factors.

International sales are made mostly from our foreign subsidiaries in their respective countries and are typically denominated in the local currency of each country. Our foreign subsidiaries incur most of their expenses in local currency as well.

Our exposure to foreign exchange rate fluctuations primarily arises from intercompany transactions in which certain costs incurred in the United States are charged to our foreign subsidiaries. Intercompany transactions are typically denominated in the functional currency of the foreign subsidiaries in order to centralize foreign exchange risk in the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of our foreign subsidiaries are translated into U.S. dollars during consolidation. As exchange rates vary, these results, when translated, may vary from expectations and may adversely impact overall expected profitability.

We have a foreign exchange hedging program principally designed to mitigate the future potential impact due to changes in foreign currency exchange rates. Forward exchange contracts are primarily used to hedge foreign currency exposures of the parent company as well as the U.S. dollar denominated exposures of our foreign subsidiaries. We operate in certain countries in Latin America and Asia Pacific where there are limited forward currency exchange markets, and thus we also have unhedged exposures in these countries. In general, our forward foreign exchange contracts have terms of two months or less, which approximate the expected settlement date of the underlying exposure. Gains and losses on the settled contracts are included in “Other income, net” and are recognized in the current period, consistent with the period in which the gain or loss of the underlying transaction is recognized.

At June 30, 2003, we had the following outstanding forward foreign exchange contracts to exchange foreign currency for U.S. dollars:


			Notional Weighted
			Average Exchange
Foreign Currency	Notional Amount		Rate per US $

Singapore dollars	$	8.8 million		1.75670
Canadian dollars		8.5 million		1.35510
New Zealand dollars		1.0 million		1.72000
Japanese yen		1.0 million		119.530
Swiss francs		0.9 million		1.34860
Swedish krona		0.8 million		8.03500
Euros		0.7 million		0.87040
Taiwanese dollars		0.4 million		34.5620

	$	22.1 million

At June 30, 2003, we had the following outstanding forward foreign exchange contracts to exchange U.S. dollars for foreign currency:


			Notional Weighted
			Average Exchange
Foreign Currency	Notional Amount		Rate per US $

Hong Kong dollars	$	0.9 million		7.79800
South African rand		0.6 million		7.60000

	$	1.5 million

At June 30, 2003, each of these contracts matured within 60 days and had a book value that approximated fair value. Neither the cost nor the fair value of these forward foreign exchange contracts was material at June 30, 2003. During the six months ended June 30, 2003, we recorded net foreign currency losses of $1.2 million.

Interest Rate Risk

Investments In Debt Securities

We invest in a variety of securities, consisting principally of investments in interest-bearing demand deposit accounts with financial institutions, tax-exempt money market funds and highly liquid debt securities of corporations and municipalities. Cash balances in foreign currencies overseas represent operating balances that are typically invested in short term time deposits in local operating banks.

We classify debt securities based on maturity dates on the date of purchase and reevaluate the classification as of each balance sheet date. As of June 30, 2003 and December 31, 2002, all our investments were classified as available-for-sale, which are carried at fair value. Fair value is determined based on quoted market prices, with net unrealized gains and losses included in “Accumulated other comprehensive income” net of tax, in the accompanying condensed consolidated balance sheets.

Investments in both fixed rate and floating rate interest earning securities carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities, which typically have a shorter duration, may produce less income than expected if interest rates fall. Due in part to these factors, our investment income may decrease in the future due to changes in interest rates.

At June 30, 2003, the average maturity of our investment securities was less than three months and all investment securities had maturities of less than eighteen months. At June 30, 2003, we invested heavily in tax-exempt investments, which reduced our weighted average interest rate.

Below is a schedule that shows the maturity profile of our investment securities held at June 30, 2003 and the related weighted average interest rates. The weighted average rates include both taxable and tax-exempt investments (in millions, except weighted average interest rates):


	Expected Maturity

							Total
	1 Year or			More than 1			Principal		Total
	less			year			Amount		Fair Value

Available-for-sale investments	$	1,664.1		$	37.7		$	1,701.8	$	1,704.5
Weighted average interest rate		1.20	%		1.19	%

Interest Rate Swap Transactions

The Company used interest rate swap transactions to manage its exposure to interest rate changes on its synthetic lease obligations. The swaps had an aggregate notional principal amount of $175.0 million and matured at various dates in 2003, consistent with the expiration of the synthetic leases. Under the swap agreements, the Company received a variable interest rate based on the three month LIBOR rate and paid a weighted average fixed interest rate of 6.8%. The swaps were designated under SFAS 133 as hedges against changes in the amount of future cash flows. In February 2003, the Company exercised its option under a synthetic lease agreement to purchase certain of its headquarters facilities located in Pleasanton, California for $70.0 million, and concurrently swaps with an aggregate notional principal amount of $70.0 million matured. On June 30, 2003 the Company exercised its option under a synthetic lease agreement to purchase certain of its headquarters facilities located in Pleasanton, California for $105.0 million. As a result of this transaction, the Company terminated its remaining interest rate swap agreements with an aggregate notional principal amount of $105.0 million resulting in a pretax charge of $1.4 million to “Other income, net.” Included in “Accumulated other comprehensive income” at March 31, 2003 was a $1.8 million unrealized loss (after-tax) related to these interest rate swaps. In the second quarter of 2003, $0.9 million (after-tax) was reclassified into earnings by making scheduled swap payments and $0.9 million (after-tax) was recognized as a realized loss that was reclassified into earnings upon the termination of the remaining interest rate swap agreements.

ITEM 4 – CONTROLS AND PROCEDURES

As of the end of the second quarter ended June 30, 2003, the Company carried out an evaluation, under the supervision and with the participation of members of our management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934. Based upon that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective in alerting them in a timely manner to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

During the most recent fiscal quarter, there has not occurred any change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

FACTORS THAT MAY AFFECT OUR FUTURE RESULTS OR THE MARKET PRICE
OF OUR STOCK

We operate in a dynamic and rapidly changing environment that involves numerous risks and uncertainties. The following section describes some, but not all, of these risks and uncertainties that may adversely affect our business, financial condition or results of operations. This section should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and the accompanying Notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Quarterly Report on Form 10-Q and the audited Consolidated Financial Statements and Notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2002 Annual Report on Form 10-K.

Oracle Corporation’s tender offer to purchase all of our outstanding common stock is disruptive to our business and threatens to adversely affect the Company’s operations and results.

Oracle Corporation has commenced a cash tender offer, referred to as the Oracle Offer, to purchase all of our outstanding common stock. The Oracle Offer involves certain conditions and is accompanied by actions that may delay or prevent the completion of our merger. Furthermore, we believe that the Oracle Offer raises significant antitrust concerns that could result in a lengthy regulatory review process and protracted litigation. On June 30, 2003, the Department of Justice requested additional information regarding antitrust matters relating to Oracle’s proposed acquisition of PeopleSoft, known as a “second request.” The delay and uncertainty associated with the second request could have a material adverse effect on PeopleSoft’s and J.D. Edwards’ financial condition and operating results.

Oracle’s initially stated intentions that were interpreted to reflect the intent to discontinue the development, sale and support of PeopleSoft products if the Oracle Offer is successful have adversely impacted and may continue to adversely impact both our and J.D. Edwards’ ability to attract new customers and have caused and could continue to cause potential or current customers to defer purchases or to cancel existing orders. Oracle’s recent statements that it would continue to sell and support PeopleSoft products for some time has resulted in additional confusion for our customers. Moreover, as a result of the Oracle Offer, certain of our and J.D. Edwards’ suppliers, distributors, and other business partners may seek to change or terminate their relationships with either company. These actions may adversely affect PeopleSoft’s and J.D. Edwards’ respective financial conditions and results of operations.

Additionally, as a consequence of the uncertainty surrounding their roles and the companies’ futures, our key employees and those of J.D. Edwards may seek other employment opportunities. Moreover, the companies’ ability to attract and retain new key management, sales, marketing and technical personnel could be harmed. If key employees leave as a result of the Oracle Offer, or the companies are unable to attract or retain qualified personnel, there could be a material adverse effect on the business and the results of operations for PeopleSoft and J.D. Edwards.

Responding to the Oracle Offer and Oracle’s other efforts to stop the completion of the acquisition of J.D. Edwards has been and may continue to be a major distraction for management of both PeopleSoft and J.D. Edwards and require both companies to incur significant costs. Management distraction created by the Oracle Offer may also adversely impact our ability to successfully plan the integration of the combined company. This distraction could adversely affect our and J.D. Edwards’ business and results of operations and could negatively affect the results of the combined company.

We may not successfully integrate our and J.D. Edwards’ business operations. In addition, we may not achieve the anticipated benefits of the merger, which could adversely affect the price of our common stock.

We entered into the merger agreement with J.D. Edwards with the expectation that the acquisition would result in benefits to the combined company. However, these expected benefits may not be fully realized. The integration of PeopleSoft’s and J.D. Edwards’ operations may be difficult, time consuming and costly, particularly in light of the technical and complex nature of each company’s products. The combined company must successfully integrate, among other things, certain product and service offerings, product development, sales and marketing, administrative and customer service functions, and management information systems. In addition, we must retain the management, key employees, customers, distributors, vendors and other business partners of both companies. It is possible that these integration efforts will not be completed as efficiently as planned or will distract management from the operations of the combined company’s business.

The challenges involved in this integration include the following:

• managing software development activities to define a combined product roadmap, ensure timely release of innovative products to market, coordinating software development operations in an efficient manner to ensure timely development of product roadmaps, and release of future products to market;

• demonstrating to our existing and potential customers that the business combination will not result in adverse changes in customer service standards or business focus;

• retaining key alliances on attractive terms with partners and suppliers;

• coordinating and integrating sales and marketing efforts to effectively communicate the capabilities of the combined company, cross selling related products to each other’s customers, and managing the combined sales forces;

• assimilating key employees and managing an increased number of employees over large geographic distances;

• creating and effectively implementing uniform standards, controls, procedures, policies and information systems; and

• retaining or recruiting key personnel.

The execution of these post-merger events will involve considerable risks and may not be successful. These risks include:

• the failure to realize the anticipated synergies from our combination with J.D. Edwards;

• the potential disruption of the combined company’s ongoing business and distraction of its management;

• potential delays related to integration of the operations, technology and other components of the two companies;

• the impairment of relationships with suppliers, customers and business partners as a result of any integration of new management personnel;

• the inability to successfully manage the substantially larger and geographically diverse organization;

• greater than anticipated costs and expenses related to restructuring, including employee severance or relocation costs and costs related to vacating leased facilities; and

• potential unknown liabilities associated with J.D. Edwards, the merger and the combined operations of the two companies.

The combined company may not successfully integrate the operations of PeopleSoft and J.D. Edwards in a timely manner, or at all, and the combined company may not realize the anticipated benefits of the merger to the extent, or in the timeframe, anticipated, which could significantly harm our business and have a material adverse effect on the combined company.

Whether or not the merger with J.D. Edwards is completed, the announcement and completion of the business combination may cause disruptions, including potential loss of customers, suppliers and other business partners, in the business of J.D. Edwards or PeopleSoft, which could have material adverse effects on each company’s or the combined company’s business and operations.

Whether or not the merger is completed, PeopleSoft’s and J.D. Edwards’ customers, suppliers, distributors, licensors and other business partners, in response to the announcement of the offer and the merger, may adversely change or terminate their relationships with either company or the combined company, which could have a material adverse effect on the business of the company concerned. Certain of PeopleSoft’s or J.D. Edwards’ current or potential customers may cancel or defer orders for each company’s products. In addition, customers of both companies may expect preferential pricing as a result of the offer and the merger or the announcement of the offer and the merger. The announcement of the offer and the merger may also adversely affect the companies’ ability to attract new customers.

Some of the contracts with suppliers, distributors, system integrators, customers, licensors, facility owners and other business partners require PeopleSoft or J.D. Edwards to obtain consent from these other parties in connection with the offer and the merger. If their consent cannot be obtained on favorable terms, the combined company may incur higher costs related to replacing suppliers, may suffer a loss of potential future revenue and may lose rights to facilities or intellectual property that are material to the business of the combined company.

Our stock price may remain volatile.

The trading price of our common stock has fluctuated significantly in the past. Changes in our business, operations or prospects, market assessments of the benefits of the merger and of the likelihood that the merger will be completed, regulatory considerations, general market and economic conditions, or other factors may affect the price of our common stock. Many of these factors are beyond our control. The future trading price of our common stock is likely to be volatile and could be subject to wide price fluctuations in response to such factors, including:

• the impact of the pending unsolicited Oracle Offer or any other proposed acquisition of us;

• actual or anticipated fluctuations in revenues or operating results, including revenue or results of operations in any quarter failing to meet the expectations, published or otherwise, of the investment community;

• announcements of technological innovations by us or our competitors;

• introduction and success of new products or significant customer wins or losses by us or our competitors;

• developments with respect to our intellectual property rights, including patents, or those of our competitors;

• changes in recommendations or financial estimates by securities analysts;

• fluctuations in demand for and sales of our products, which will depend on, among other things, the uncertainty regarding success of the merger and operations of the combined company, our customer protection program, the acceptance of our products in the marketplace and the general level of spending in the software industry;

• rumors or dissemination of false and/or misleading information, particularly through internet chat rooms, instant messaging and other means;

• changes in management;

• proposed and completed acquisitions or other significant transactions by us or our competitors;

• introduction and success of new products or significant customer wins or losses by us or our competitors;

• the mix of products and services sold by us;

• the timing of significant orders by us;

• conditions and trends in the software industry, or consolidation within the technology industry that may impact our customers, partners, suppliers or competitors;

• adoption of new accounting standards affecting the software industry;

• acts of war or terrorism; and

• general market conditions.

Charges to earnings resulting from the acquisition of J.D. Edwards including the application of the purchase method of accounting, and restructuring and integration costs may materially adversely affect the market value of our common stock.

In accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), the combined company will account for the acquisition using the purchase method of accounting. Accordingly, the combined company will allocate the total estimated purchase price to J.D. Edwards’ net tangible assets, amortizable intangible assets, and in-process research and development based on their fair values as of the date of completion of the merger, and record the excess of the purchase price over those fair values as goodwill. The combined company’s financial results, including earnings per share, could be adversely affected by a number of financial adjustments required by U.S. GAAP including the following:

• The portion of the purchase price allocated to in-process research and development will be expensed by the combined company in the quarter in which the merger is completed.

• The combined company will incur additional amortization expense over the estimated useful lives of certain of the intangible assets acquired in connection with the merger during such estimated useful lives.

• To the extent the value of goodwill becomes impaired, the combined company may be required to incur material charges relating to the impairment of those assets.

• The portion of the existing deferred revenues on J.D. Edwards balance sheet at the closing of the merger which predominately represents maintenance revenue will be adjusted, based on estimated cost to deliver plus an appropriate gross margin and the portion of deferred maintenance revenue will be recorded as goodwill.

We expect to incur costs associated with combining the operations of the two companies, including transaction fees and other costs related to the offer and the merger. These costs may be substantial and may include those related to the severance and stock option acceleration provisions of J.D. Edwards’ management change in control plan, which will result in certain retention payments after the merger and on the first anniversary of the merger and which could be triggered by certain actions taken by us after the merger. We also face potential costs related to employee redeployment or relocation, employee retention which could include salary increases or bonuses, reorganization or closure of facilities, relocation and disposition of excess equipment, termination of contracts with third parties that provide redundant or conflicting services and other integration costs. We expect to account for these costs either as purchase related adjustments or as expenses which will decrease our net income for the periods in which those adjustments are made.

These costs may negatively impact earnings, which could have a material adverse effect on the price of our common stock.

Litigation related to the merger and the Oracle Offer may result in significant monetary damages or may otherwise negatively impact the business and operation of PeopleSoft and J.D. Edwards.

On June 6, 2003, Oracle announced that it intended to commence a cash tender offer to purchase all of the outstanding shares of PeopleSoft. At least fifteen stockholder lawsuits have been filed against PeopleSoft and certain of our directors and officers alleging breaches of fiduciary duties by PeopleSoft and such persons in connection with the Oracle Offer in Delaware and California state courts. The California stockholder lawsuits have been stayed and a motion for preliminary injunction has been filed in one of the Delaware stockholder suits. A purported class action stockholder lawsuit has also been filed against J.D. Edwards’ directors and officers in Delaware state court alleging breaches of fiduciary duty by such persons and seeking, among other remedies, to enjoin the transactions contemplated by the merger. On June 18, 2003, Oracle filed a lawsuit against PeopleSoft, the members of our board and J.D. Edwards in the Delaware Chancery Court. The lawsuit alleges breaches of fiduciary duties against us and our board and sought to enjoin our tender offer and merger and to enjoin us from implementing a recently announced customer protection program. In addition, other potential lawsuits arising out of the Oracle Offer or the merger could seek to enjoin consummation of the merger or, in the alternative, to rescind the merger, as well as monetary damages. Fluctuation in the price of PeopleSoft or J.D. Edwards common stock may also expose each company to the risk of securities class-action lawsuits. Any conclusion of such litigation in a manner adverse to PeopleSoft or J.D. Edwards could have a material adverse effect on each company’s businesses, financial condition and results of operations. In addition, the cost of defending this litigation, even if resolved favorably, will be substantial. Such litigation could also substantially divert the attention of management and resources in general. Furthermore, uncertainties resulting from the initiation and continuation of any litigation could harm the ability of PeopleSoft and J.D. Edwards to compete in the marketplace. For a more detailed description of the litigation related to the merger and the Oracle Offer, see the discussions under Item 1. Note 10 “Commitments and Contingencies” and Part II - Item 1. “Legal Proceedings”.

Continued regional and/or global economic, political and market conditions may cause a decrease in demand for our software and related services which may negatively affect our revenue and operating results.

Our revenue and profitability depend on the overall demand for our software, professional services and maintenance. Regional and global changes in the economy, governmental budget deficits and political instability in geographic areas have resulted in companies, government agencies and educational institutions, reducing their spending for technology projects generally and delaying or reconsidering potential purchases of our products and related services. The uncertainty posed by the long-term effects of the war in the Middle East and other geopolitical issues may impact the purchasing decisions of current or potential customers. Future declines in demand for our products and/or services could adversely affect our revenues and operating results.

Our quarterly revenues can be difficult to predict and may fluctuate substantially, which may adversely affect our net income.

Our revenues and results of operations can be difficult to predict and may fluctuate substantially from quarter to quarter. Our projected operating costs and hiring plans are based on projections of future revenues. If our actual revenues fall below expectations, our net income may be adversely affected. Factors that may affect the predictability of actual revenues include the following:

• the impact of the pending Oracle Offer or any other proposed acquisition of us;

• our sales cycle can vary as a result of the complexity of a customer’s overall business needs and may extend over one or more quarters;

• the complexity and size of license transactions can result in protracted negotiations;

• a significant number of our license agreements are typically completed within the last few weeks of the quarter and purchasing decisions may be delayed to future quarters;

• the effect of economic downturns and unstable political conditions may result in decreased product demand, price erosion, and other factors that may substantially reduce license and services revenue;

• customers may unexpectedly postpone or cancel anticipated system replacement or new system implementation due to changes in strategic priorities, project objectives, budgetary constraints, internal purchasing processes or company management;

• changes in our competitors’ and our own pricing policies and discount plans may affect customer purchasing patterns and decisions;

• the number, timing and significance of our competitors’ and our own software product enhancements and new software product announcements may affect purchasing decisions; and

• changes in customers’ seasonal purchasing patterns may result in imprecise quarterly revenue projections.

Our future revenue is dependent in part upon our installed customer base continuing to license additional products, renew maintenance agreements and purchase additional professional services.

Our installed customer base has traditionally generated additional new license, professional service and maintenance revenues. In future periods, customers may not necessarily license additional products or contract for additional services or maintenance. Maintenance is generally renewable annually at a customer’s option, and there are no mandatory payment obligations or obligations to license additional software. If our customers decide not to renew their maintenance agreements or license additional products or contract for additional services, or if they reduce the scope of the maintenance agreements, our revenues could decrease and our operating results could be adversely affected.

We may be required to defer recognition of license revenue for a significant period of time after entering into an agreement, which could negatively impact our results of operations.

We may have to delay recognizing license related revenue for a significant period of time for a variety of types of transactions, including:

• transactions that include both currently deliverable software products and software products that are under development or contain other currently undeliverable elements;

• transactions where the customer demands services that include significant modifications, customizations or complex interfaces that could delay product delivery or acceptance;

• transactions that involve non-standard acceptance criteria or identified product-related performance issues; and

• transactions that include contingency-based payment terms or fees.

These factors and other specific accounting requirements for software revenue recognition, require that we have very precise terms in our license agreements to allow us to recognize revenue when we initially deliver software or perform services. Although we have a standard form of license agreement that meets the criteria for current revenue recognition on delivered elements, we negotiate and revise these terms and conditions in some transactions. Sometimes we may license our software or provide service with terms and conditions that do not permit revenue recognition at the time of delivery or even as work on the project is completed.

If accounting interpretations relating to revenue recognition change, our reported revenues could decline or we could be forced to make changes in our business practices.

Over the past several years, the American Institute of Certified Public Accountants has issued Statement of Position (SOP) 97-2, “Software Revenue Recognition,’’ and SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions.” In addition, in December 1999, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 101 (SAB 101), “Revenue Recognition in Financial Statements,” which explains how the SEC staff believes existing revenue recognition rules should be applied to or interpreted for transactions not specifically addressed by existing rules. These standards address software revenue recognition matters primarily from a conceptual level and do not include specific implementation guidance. We believe that our revenue has been recognized in compliance with SOP 97-2, SOP 98-9 and SAB 101.

The accounting profession and regulatory agencies continue to discuss various provisions of these pronouncements with the objective of providing additional guidance on their application. These discussions and the issuance of new interpretations, once finalized, could lead to unanticipated reductions in recognized revenue. They could also drive significant adjustments to our business practices which could result in increased administrative costs, lengthened sales cycles and other changes which could adversely affect our reported revenues and results of operations.

Increases in services revenue as a percentage of total revenues may decrease overall margins.

We realize lower margins on services revenue than on license revenues. In addition, we may contract with certain third parties to supplement the services we provide to customers, which generally yields lower gross margins than our service business. As a result, if services revenue increases as a percentage of total revenue or if we increase our use of third parties to provide such services, our gross margins will be lower and our operating results may be impacted.

Future acquisitions may present risks and we may be unable to achieve the product, financial or strategic goals intended at the time of any acquisition.

As a component of our strategy, in addition to our acquisition of J.D. Edwards, we may acquire or invest in companies, products or technologies, and may enter into joint ventures and strategic alliances with other companies. The risks we commonly encounter in such transactions include:

• difficulty assimilating the operations and personnel of the acquired company;

• difficulty effectively integrating the acquired technologies or products with our current products and technologies;

• difficulty in maintaining controls, procedures and policies during the transition and integration;

• ongoing business may be disrupted by transition and integration issues;

• key technical and managerial personnel from the acquired business may not be able to be retained;

• the financial and strategic goals for the acquired and combined businesses may not be achieved;

• relationships with partner companies or third party providers of technology or products could be adversely affected;

• relationships with employees and customers could be impaired;

• due diligence processes may fail to identify significant issues with product quality, product architecture, legal and financial contingencies, and product development, among other things; and

• significant exit charges may be sustained if products acquired in business combinations are unsuccessful.

Our margins may be reduced if we need to lower prices or offer other favorable terms on our products and services to meet competitive pressures in our industry.

We compete with a variety of software vendors in all of our major product lines, including vendors of enterprise application software, manufacturing software applications, CRM applications, human capital management software and financial management solutions software. Some of our competitors may have advantages over us due to their larger worldwide presence, longer operating and product development history, and substantially greater technical and marketing resources, or exclusive intellectual property rights. At least one competitor has a larger installed base than we do.

If competitors offer more favorable pricing, payment or other contractual terms, warranties, or functionality which we do not currently provide, we may need to lower prices or offer other favorable terms in order to successfully compete.

If we fail to introduce new or improved products and service offerings, our results of operations and the financial condition of the business could suffer.

The market for our software products is intensely competitive and is characterized by rapid technological change, evolving industry standards, changes in customer requirements and frequent new product introductions and enhancements. The competitive environment demands that we constantly improve our existing products and create new products. Our future success may depend in part upon our ability to:

• improve our existing products and develop new ones to keep pace with technological developments, including developments related to the internet;

• successfully integrate third party products;

• enter new markets;

• satisfy customer requirements; and

• maintain market acceptance.

If we are unable to meet these challenges, our results of operations and our financial condition may be adversely affected.

Market acceptance of new platforms and operating environments may require us to undergo the expense of developing and maintaining compatible product lines.

Although our software products can be licensed for use with a variety of popular industry standard relational database management system platforms, there may be future or existing platforms that achieve popularity in the marketplace which may not be architecturally compatible with our software product design. Moreover, future or existing user interfaces that achieve popularity within the business application marketplace may or may not be architecturally compatible with our current software product design. Developing and maintaining consistent software product performance characteristics across all of these combinations could place a significant strain on our resources and software product release schedules which could adversely affect revenue and results of operations. To maintain software performance across accepted platforms and operating environments, or to achieve market acceptance of those that we support, or to adapt to popular new ones, our expenses may increase and our sales and revenues may be adversely affected.

As our international business grows, we will become increasingly subject to currency risks and other costs and contingencies that could adversely affect our results.

We continue to invest in the expansion of our international operations. The global reach of our business could cause us to be subject to unexpected, uncontrollable and rapidly changing economic and political conditions that could adversely affect our results of operations. The following factors, among others, present risks that could have an adverse impact on our business:

• conducting business in currencies other than United States dollars subjects us to fluctuations in currency exchange rates and currency controls;

• increased cost and development time required to adapt our products to local markets;

• lack of experience in a particular geographic market;

• legal, regulatory, social, political, labor or economic uncertainties in a specific country or region, including loss or modification of exemptions for taxes and tariffs, increased withholding or other taxes on payments by subsidiaries, import and export license requirements, trade tariffs or restrictions, war, terrorism and civil unrest;

• higher operating costs due to local laws or regulation; and

• inability to hedge the currency risk in some transactions because of uncertainty or the inability to reasonably estimate our foreign exchange exposure.

Our future success depends on our ability to continue to retain and attract qualified employees.

We believe that our future success depends upon our ability to continue to train, retain, effectively manage and attract highly skilled technical, managerial, sales and marketing personnel. If our efforts in these areas are not successful, our costs may increase, development and sales efforts may be hindered and our customer service may be degraded. Although we invest significant resources in recruiting and retaining employees, there is intense competition for personnel in the software industry. From time to time, we experience difficulties in locating enough highly qualified candidates in desired geographic locations, or with required industry-specific expertise.

The loss of key personnel could have an adverse effect on our operations and stock price.

We believe that there are certain key employees within the organization, primarily in the senior management team, who are necessary for us to meet our objectives. Due to the competitive employment nature of the software industry, there is a risk that we will not be able to retain these key employees. The loss of one or more key employees could adversely affect our continued operations. In addition, uncertainty created by turnover of key employees could result in reduced confidence in our financial performance which could cause fluctuations in our stock price and result in further turnover of our employees.

If requirements relating to accounting treatment for employee stock options are changed, we may be forced to change our business practices or our earnings may be affected.

We currently account for the issuance of stock options under APB Opinion No. 25, “Accounting for Stock Issued to Employees.” Certain proposals related to treating the grant of an employee stock option as an expense are currently under consideration by accounting standards organizations and governmental authorities. If such proposals are adopted, the Company’s earnings could be negatively impacted. As a result, we may decide to reduce the number of stock options granted to employees or to grant options to fewer employees. This could affect our ability to retain existing employees and attract qualified candidates, and increase the cash compensation we would have to pay to them.

We may be required to undertake a costly redesign of our products if third party software development tools become an industry standard.

Our software products include a suite of proprietary software development tools, known as PeopleTools®, which are fundamental to their effective use. While no industry standard exists for software development tools, several companies have focused on providing software development tools and each of them is attempting to establish its own as the accepted industry standard. If a software product were to emerge as a clearly established and widely accepted industry standard, we may not be able to adapt PeopleTools appropriately or rapidly enough to satisfy market demand. In addition, we could be forced to abandon or modify PeopleTools or to redesign our software products to accommodate the new industry standard. This would be expensive and time consuming and may adversely affect results of operations and the financial condition of the business. Our failure to drive or adapt to new and changing industry standards or third party interfaces could adversely affect sales of our products and services.

Increased complexity of our software may result in more difficult detection and correction of errors, delays in the introduction of new products and more costly performance and warranty claims.

Our software programs, like all software programs generally, may contain a number of undetected errors despite internal and third party testing. Increased complexity of the software and more sophisticated expectations of customers may result in higher costs to correct such errors and delay the introduction of new products or enhancements in the marketplace.

Product software errors could subject us to litigation and liability based on performance and/or warranty claims. Although our agreements contain provisions designed to limit our exposure to potential liability claims, these provisions could be invalidated by unfavorable judicial decisions or by federal, state, local or foreign laws or regulations. If a claim against us were to be successful, we might be required to incur significant expense and pay substantial damages. Even if we were to prevail, the accompanying publicity could adversely impact the demand for our products.

If we lose access to critical third party software or technology, our costs could increase and the introduction of new products and product enhancements could be delayed.

We license software and technology from third parties, including some competitors, and incorporate it into our own software products, some of which is critical to the operation of our software. If any of the third party software vendors were to change product offerings, increase prices or terminate our licenses, we might need to seek

alternative vendors and incur additional internal or external development costs to ensure continued performance of our products. Such alternatives may not be available on attractive terms, or may not be as widely accepted or as effective as the software provided by our existing vendors. If the cost of licensing or maintaining these third party software products or other technology significantly increases, our gross margin levels could significantly decrease. In addition, interruption in functionality of our products could adversely affect future sales of licenses and services.

Disruption of our relationships with third party systems integrators could adversely affect revenues and results of operations.

We build and maintain strong working relationships with businesses that we believe play an important role in the successful marketing and deployment of our software application products. Our current and potential customers often rely on third party system integrators to develop, deploy and manage applications. We believe that our relationships with these companies enhance our marketing and sales efforts. However, if these system integrators are unable to recruit and adequately train a sufficient number of consulting personnel to support the successful implementation of our software products, we may lose customers. Moreover, our relationships with these companies are not exclusive, and they are free to start, or in some cases increase, the marketing of competitive business application software, or to otherwise discontinue their relationships with us. In addition, integrators who generate consulting fees from customers by providing implementation services may be less likely to recommend our software if our products are more difficult or costly to install than competitors’ similar product offerings. Disruption of our relationships with these companies could adversely affect revenues and results of operations.

Our intellectual property and proprietary rights may offer only limited protection.

We consider certain aspects of our internal operations, and our software and documentation to be proprietary, and we primarily rely on a combination of patent, copyright, trademark and trade secret laws and other measures to protect our proprietary rights. Patent applications or issued patents, as well as trademark, copyright, and trade secret rights, may not provide significant protection or competitive advantage. We also rely on contractual restrictions in our agreements with customers, employees and others to protect our intellectual property rights. There can be no assurance that these agreements will not be breached, that we have adequate remedies for any breach, or that our patents, copyrights, trademarks or trade secrets will not otherwise become known. Moreover, the laws of some countries do not protect proprietary intellectual property rights as effectively as do the laws of the United States. Protecting and defending our intellectual property rights could be costly regardless of venue.

Through an escrow arrangement, we have granted some of our customers a contingent future right to use our source code solely for internal maintenance services. If our source code is accessed through an escrow, the likelihood of misappropriation or other misuse of our intellectual property may increase.

Third parties may claim that our products infringe their intellectual property rights, which could result in material costs.

Third parties may assert infringement claims against us more aggressively in the future, especially in light of recent developments in patent law expanding the scope of patents on software and business methods. These assertions, regardless of their validity, could result in costly and time-consuming litigation, including damage awards, or could require costly redesign of products or present the need to enter into royalty arrangements which would decrease margins and could adversely affect the results of operations. Any such litigation or redesign of products could also negatively impact customer confidence in our products and result in reduced licensing revenue.

We may be unable to achieve the benefits we anticipate from joint software development or marketing arrangements with our business partners.

We enter into various development or joint business arrangements to develop new software products or extensions to our existing software products. We may distribute ourselves or jointly sell with our business partners an integrated software product and pay a royalty to the business partner based on end-user license fees under these joint business arrangements. While we intend to develop business applications that are integrated with our software products, these software products may in fact not be integrated or brought to market, or the market may reject the integrated enterprise solution. As a result, we may not achieve the revenues that we anticipated at the time we entered into the joint business arrangement.

It may become increasingly expensive to obtain and maintain liability insurance at current levels.

We contract for insurance to cover a variety of potential risks and liabilities. In the current market, insurance coverage is becoming more restrictive, and when insurance coverage is offered, the deductible for which we are responsible is larger. In light of these circumstances, it may become more difficult to maintain insurance coverage at historical levels, or if such coverage is available, the cost to obtain or maintain it may increase substantially. This may result in our being forced to bear the burden of an increased portion of risks for which we have traditionally been covered by insurance, which could negatively impact our results of operations.

We have adopted anti-takeover defenses that could make it difficult for another company to acquire control of PeopleSoft or limit the price investors might be willing to pay for our stock.

Certain provisions of our Certificate of Incorporation and Bylaws could delay the removal of incumbent directors and could make a merger, tender offer or proxy contest involving us more difficult, even if such events would be beneficial to the interests of the stockholders. These provisions include adoption of a Preferred Shares Rights Agreement, commonly known as a “poison pill” and giving our board the ability to issue preferred stock and determine the rights and designations of the preferred stock at any time without stockholder approval. The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of our outstanding voting stock. In addition, the staggered terms of our Board of Directors could have the effect of delaying or deferring a change in control. One of the conditions of the Oracle Offer is the removal or amendment of our Rights Agreement and we are currently involved in litigation with Oracle and purported stockholders of the Company in which the plaintiffs seek to redeem the Rights issuable under the Rights Plan or to render the Rights Plan inapplicable to the proposed acquisition of PeopleSoft by Oracle. To date, our board of directors has not agreed to such removal or amendment. In addition, certain provisions of the Delaware General Corporation Law (DGCL), including Section 203 of the DGCL, may have the effect of delaying or preventing changes in the control or management of PeopleSoft. In its current litigation, Oracle also seeks to enjoin our board from taking any action to enforce Section 203 of the DGCL. We can give no assurances as to the ultimate outcome of such litigation.

The above factors may have the effect of deterring hostile takeovers or otherwise delaying or preventing changes in the control or management of PeopleSoft, including transactions in which our stockholders might otherwise receive a premium over the fair market value of PeopleSoft’s common stock.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

PeopleSoft Shareholder Actions — Delaware Court of Chancery

On June 6, 2003, Felix Ezeir (Case No. 20349-NC), Teresita Fay (Case No. 20350-NC), Robert Crescente (Case No. 20351-NC), Robert Corwin (Case No. 20352-NC) and Ernest Hack (Case No. 20353-NC), all of whom purport to be stockholders of the Company, each filed a putative stockholder class action suit in the Delaware Court of Chancery against the Company and several of its officers and directors. The suits allege that defendants breached their fiduciary duties in connection with the Company’s response to the tender offer purportedly announced by Oracle Corporation on June 6, 2003. Plaintiffs in each of the actions seek injunctive relief and an accounting. On June 10, 2003, an action was filed in the Delaware Court of Chancery against these same defendants by Steven Padness (Case No. 20358-NC), making similar allegations and seeking similar relief. On June 12, 2003, an action was filed in the Delaware Court of Chancery against these same defendants by Thomas Nemes (Case No. 20365-NC), making similar allegations and seeking similar relief (the “Nemes Action”). The Nemes Action was amended on June 18, 2003, to include allegations and seeking relief similar to those in the above-referenced actions.

Document discovery has commenced in these consolidated actions and is coordinated with the discovery in the action filed against the Company by Oracle Corporation, discussed below.

On July 2, 2003, Richard Hutchings (Case No. 20403-NC) filed a putative stockholder class action suit in the Delaware Court of Chancery against the Company and several of its officers and directors. The suit alleges that defendants breached their fiduciary duties in connection with the Company’s response to Oracle’s tender offer purportedly announced on June 6, 2003. Plaintiff seeks injunctive relief, an accounting and damages. On July 22, 2003, the Court ordered that this action be consolidated with the other putative shareholder actions listed above. On June 27, 2003, Milton Pfeiffer (Case No. 20390-NC), who purports to be a shareholder of J.D. Edwards, filed a putative class action against J.D. Edwards and several of its officers and directors, alleging that defendants breached their fiduciary duties in connection with the amendment of the merger agreement between J.D. Edwards and the Company. Plaintiff seeks injunctive relief, an accounting and damages. Defendants moved to dismiss or stay the action on the grounds, inter alia, that Pfeiffer is not a proper plaintiff. In response, on July 24, 2003, Pfeiffer amended his complaint, adding as a plaintiff Ward Quarles, who also purports to be a shareholder of J.D. Edwards. The amended complaint also adds the Company as a defendant and alleges that the Company aided and abetted J.D. Edwards and the other defendants in their alleged breaches of fiduciary duty. The amended complaint seeks an accounting and damages.

The Company believes that the claims and allegations asserted in each of the foregoing putative class action suits are without merit, and intends to vigorously defend against these lawsuits.

Oracle v. PeopleSoft — Delaware Court of Chancery

On June 18, 2003, Oracle filed a suit in the Delaware Court of Chancery (Case No. 20377-NC) against the Company, several of the Company’s directors (the “Director Defendants”), and J.D. Edwards, alleging that the Director Defendants breached their fiduciary duties in connection with the Company’s response to Oracle’s tender offer commenced on June 9 and amended June 18, 2003, and that J.D. Edwards aided and abetted such directors’ purported breach of fiduciary duty. Oracle seeks injunctive, declaratory and rescissory relief. On June 25, 2003, defendants filed their Answer. A hearing on a motion for preliminary injunction was scheduled for July 16, 2003, but was postponed upon the request of Oracle. On July 25, 2003, Oracle advised the Court that, in light of the second request for further information it received from the antitrust division of the United States Department of Justice regarding its tender offer, it did not believe it appropriate to set a hearing date at this time, and requested that the Court

allow the parties to report back to it in mid-September of 2003. Document discovery has commenced and is coordinated with that in the consolidated shareholder actions described above.

The Company believes that the claims and allegations asserted in this action are without merit, and intends vigorously to defend against this lawsuit.

PeopleSoft Shareholder Actions — California Superior Court for the County of Alameda

On June 6, 2003, separate actions were filed in the California Superior Court for the County of Alameda by Doris Staehr (Case No. RG03100291), the West Virginia Laborers Pension Trust Fund (Case No. RG03100306), Lorrie McBride (Case No. RG03100300), and Ray Baldi (Case No. RG03100696) (collectively the “Initial Alameda Shareholder Actions”), all of whom purport to be stockholders of the Company, against several of the Company’s executive officers and directors. The suits allege that defendants breached their fiduciary duties in connection with (i) the Company’s response to Oracle’s tender offer announced on June 6, 2003, (ii) the Company’s agreement to acquire J.D. Edwards & Company, and (iii) the implementation of the 2003 Directors Stock Plan, which was approved by Company shareholders at the 2003 Annual Meeting. Plaintiffs seek injunctive, rescissory and declaratory relief. On June 16, 2003, the Initial Alameda Shareholder Actions were consolidated. On June 11, 2003, two additional actions were filed by Moshe Panzer (Case No. RG03100876) and Arace Brothers (Case No. RG03100830) asserting similar claims. By Order dated July 10, 2003, the Panzer and Arace actions were consolidated with the Initial Alameda Shareholder Actions (collectively “the Alameda Shareholder Actions”).

The Company believes that the claims and allegations asserted in each of the foregoing putative class action suits are without merit, and intends to vigorously defend against these lawsuits.

J.D. Edwards v. Oracle — California Superior Court in the County of San Mateo

On June 12, 2003, J.D. Edwards filed a suit in California Superior Court in the County of San Mateo against Oracle Corporation and two of its executives (Case No. CIV 431969) alleging violations of California’s Business and Professions Code Section 17200 et seq., intentional interference with prospective economic advantage and negligent interference with prospective economic advantage. The suit seeks compensatory damages and a preliminary and permanent injunction enjoining defendants from proceeding with Oracle’s proposed tender offer, taking or attempting to take any other steps to acquire control of the Company or J.D. Edwards, and otherwise interfering with the completion of the proposed merger acquisition of J.D. Edwards by the Company. Pursuant to the agreement of the parties and stipulated scheduling orders, discovery is being coordinated with discovery in the Delaware actions described above. On August 12, 2003, PeopleSoft announced that it intended to consolidate the J.D. Edwards’ actions with PeopleSoft’s suit against Oracle filed in Alameda County and that it intended to dismiss Case No. CIV 431969.

J.D. Edwards v. Oracle — Colorado State Court

On June 12, 2003, J.D. Edwards filed a suit in Colorado State Court against Oracle Corporation and its wholly-owned subsidiary, Pepper Acquisition Corp. (Case No. 03CV4270), alleging claims for tortious interference with contract and prospective business relations. The suit seeks, among other things, compensatory damages of $1.8 billion and an unspecified amount of punitive damages. Oracle has moved to dismiss this complaint, and a response from J.D. Edwards is due on August 18, 2003. Pursuant to the agreement of the parties and stipulated scheduling orders, discovery is being coordinated with discovery in the Delaware actions described above. On August 12, 2003, PeopleSoft announced that it intended to consolidate the J.D. Edwards’ actions with PeopleSoft’s suit against Oracle filed in Alameda County and that it intended to dismiss Case No. 03CV4270.

PeopleSoft v. Oracle — California Superior Court for the County of Alameda

On June 13, 2003, the Company filed a suit in the California Superior Court for the County of Alameda against Oracle Corporation and Pepper Acquisition Corp. (Case No. RG03101434). The Company alleges that, in connection with Oracle’s proposed tender offer, the defendants have engaged in: (i) unfair trade practices in violation of California’s Business and Professions Code; (ii) acts of unlawful interference with the Company’s contracts with its customers; (iii) acts of unlawful interference with the Company’s relationships with its prospective customers; and (iv) acts of unlawful disparagement of the Company’s products and services. The Company seeks an injunction precluding defendants’ unfair trade practices and other unlawful actions, and prohibiting the defendants from proceeding further with the tender offer. The Company also requests restitution and damages. On August 12, 2003, the Company filed an amended complaint, portions of which have been filed with the court under seal, alleging extensive new facts about Oracle management’s ongoing acts of unfair trade practices, including its efforts to disrupt PeopleSoft’s customer relationships. The complaint also alleges new information concerning Oracle’s deliberate campaign to mislead PeopleSoft customers about Oracle’s plans to support PeopleSoft products. In addition, the complaint incorporates claims of interference with customers of J.D. Edwards. The Company has announced that it intends to consolidate the two companies’ claims against Oracle and Pepper Acquisition Corp. into a single lawsuit and, therefore, will voluntarily dismiss J.D. Edwards’ previously filed lawsuits in Colorado and San Mateo County, California. The complaint continues to seek injunctive relief, restitution and damages, including damage caused to J.D. Edwards. Under a stipulated court order in the Delaware case, the parties are conducting discovery related to this action in the Delaware case so as to allow for overall coordinated discovery. PeopleSoft has recently served additional discovery related to the claims in this case. PeopleSoft has advised the court in Delaware that if Oracle opposes the scope or timing of the discovery. PeopleSoft will seek to have the court order revised to allow discovery in this case to proceed separately under the supervision of the Alameda County Superior Court.

Other Matters

We are party to various legal disputes and proceedings arising during the ordinary course of business. In the opinion of management, resolution of these matters is not expected to have a material adverse effect on our financial position, results of operations and cash flows. An unfavorable resolution of some or all of these matters could materially affect our future results of operations or cash flows.

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

(a) The Company held its Annual Meeting of Stockholders on May 27, 2003.

(b) David A. Duffield, Aneel Bhusri, and Steven D. Goldby were each elected as Class I directors for a term of two years. A. George “Skip” Battle, Craig A. Conway, Frank J Fanzilli Jr. and Cyril J. Yansouni were each elected at the prior year’s annual meeting for a term of two years and continue to serve as Class II directors.

(c) The Company’s stockholders voted on the following matters:

(i) Election of three directors. All directors nominated by management were elected.


	Number of Votes		Authority
Name of Nominee	For		Withheld

David A. Duffield		274,852,119		4,487,429
Aneel Bhusri		274,717,748		4,621,800
Steven D. Goldby		264,576,667		14,762,881

(ii) Approval of the adoption of the PeopleSoft, Inc. 2003 Directors Stock Plan, an equity incentive plan for non-employee members of the Board of Directors authorizing the issuance of up to 2,000,000 shares of common stock.


Number of Votes	Number of Votes		Authority
For	Against		Withheld

154,678,740		123,005,356		1,655,452

(iii) Ratification of the appointment of KPMG LLP as independent auditors of the Company for the year ending December 31, 2003.


Number of Votes	Number of Votes		Authority
For	Against		Withheld

269,867,144		7,938,730		1,533,674

(iv) Approval of a proposal urging the board of directors to adopt a policy that the cost of employee stock options be recognized in PeopleSoft’s income statement.

Number of Votes

Authority

Non-

For

Against

Withheld

Votes

110,237,740

120,372,483

5,473,968

43,255,357

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8 - K

(a) Exhibits


2.1		Amended and Restated Agreement and Plan of Merger and Reorganization, dated as of June 16, 2003, by and among PeopleSoft, Inc., J.D. Edwards & Company and Jersey Acquisition Corporation (incorporated by reference to Exhibit 2.1 filed with PeopleSoft, Inc.’s Registration Statement on Form S-4 (No. 333-106269) filed with the Securities and Exchange Commission on June 19, 2003).

3.1		Amended and Restated Bylaws of PeopleSoft, Inc. dated July 18, 2003.

10.1		Executive Severance Policy - Executive Vice Presidents effective as of January 1, 2003.

10.2		Executive Severance Policy - Senior Vice Presidents effective as of January 1, 2003.

31.1		Certification by the Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by the Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


32.1		Certification by the Chief Executive Officer and the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K


(i)		The Company filed a current report on Form 8-K on April 4, 2003 and reported that it had issued a press release announcing preliminary first quarter earnings results.

(ii)		The Company filed a current report on Form 8-K on April 23, 2003 and reported that it had issued a press release announcing its first quarter earnings results.

(iii)		The Company filed a current report on Form 8-K on June 2, 2003 and reported that it had issued a press release announcing that it had entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated as of June 1, 2003, with J.D. Edwards & Company, a Delaware corporation, and Jersey Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of PeopleSoft.

(iv)		The Company filed a current report on Form 8-K on June 12, 2003 and reported that it had issued a press release announcing that it had filed notification with the U.S. Department of Justice and the Federal Trade Commission of its intention to acquire J.D. Edwards & Company (NASDAQ: JDEC), in compliance with the Premerger Notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 13, 2003


		PEOPLESOFT, INC.

		By:		/s/ KEVIN T. PARKER

				Kevin T. Parker Executive Vice President, Finance and Administration, Chief Financial Officer (Principal Financial and Accounting Officer)

INDEX TO EXHIBITS


Exhibit Number		Description

2.1		Amended and Restated Agreement and Plan of Merger and Reorganization, dated as of June 16, 2003, by and among PeopleSoft, Inc., J.D. Edwards & Company and Jersey Acquisition Corporation (incorporated by reference to Exhibit 2.1 filed with PeopleSoft, Inc.’s Registration Statement on Form S-4 (No. 333-106269) filed with the Securities and Exchange Commission on June 19, 2003).

3.1		Amended and Restated Bylaws of PeopleSoft, Inc. dated July 18, 2003.

10.1		Executive Severance Policy - Executive Vice Presidents effective as of January 1, 2003.

10.2		Executive Severance Policy - Senior Vice Presidents effective as of January 1, 2003.

31.1		Certification by the Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by the Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by the Chief Executive Officer and the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

44 EX-3.1 3 f92386exv3w1.txt EXHIBIT 3.1 Exhibit 3.1 BYLAWS ------ OF -- PEOPLESOFT, INC. ---------------- (As Amended and Restated as of July 18, 2003) -i- TABLE OF CONTENTS ARTICLE I............................................................................................................ 1 CORPORATE OFFICES................................................................................................. 1 1.1 REGISTERED OFFICE..................................................................................... 1 1.2 OTHER OFFICES......................................................................................... 1 ARTICLE II........................................................................................................... 1 MEETINGS OF STOCKHOLDERS.......................................................................................... 1 2.1 PLACE OF MEETINGS..................................................................................... 1 2.2 ANNUAL MEETING........................................................................................ 2 2.3 SPECIAL MEETING....................................................................................... 2 2.4 NOTICE OF STOCKHOLDERS' MEETINGS...................................................................... 2 2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.......................................................... 2 2.6 QUORUM................................................................................................ 3 2.7 ADJOURNED MEETING; NOTICE............................................................................. 3 2.8 CONDUCT OF BUSINESS................................................................................... 3 2.9 VOTING................................................................................................ 4 2.10 WAIVER OF NOTICE...................................................................................... 4 2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING............................................... 4 2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS........................................... 5 2.13 PROXIES............................................................................................... 5 2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE................................................................. 6 2.15 ADVANCE NOTICE OF STOCKHOLDER NOMINEES................................................................ 6 2.16 ADVANCE NOTICE OF STOCKHOLDER BUSINESS................................................................ 7 ARTICLE III.......................................................................................................... 8 DIRECTORS......................................................................................................... 8 3.1 POWERS................................................................................................ 8 3.2 NUMBER OF DIRECTORS................................................................................... 8 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS............................................... 8 3.4 RESIGNATION AND VACANCIES............................................................................. 9 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.............................................................. 9 3.6 REGULAR MEETINGS...................................................................................... 10 3.7 SPECIAL MEETINGS; NOTICE.............................................................................. 10 3.8 QUORUM................................................................................................ 10 3.9 WAIVER OF NOTICE...................................................................................... 11 3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING..................................................... 11 3.11 FEES AND COMPENSATION OF DIRECTORS.................................................................... 11 3.12 REMOVAL OF DIRECTORS.................................................................................. 11 ARTICLE IV........................................................................................................... 12 COMMITTEES........................................................................................................ 12 4.1 COMMITTEES OF DIRECTORS............................................................................... 12 4.2 COMMITTEE MINUTES..................................................................................... 13

-ii- 4.3 MEETINGS AND ACTION OF COMMITTEES..................................................................... 13 ARTICLE V............................................................................................................ 13 OFFICERS.......................................................................................................... 13 5.1 OFFICERS.............................................................................................. 13 5.2 APPOINTMENT OF OFFICERS............................................................................... 13 5.3 SUBORDINATE OFFICERS.................................................................................. 14 5.4 REMOVAL AND RESIGNATION OF OFFICERS................................................................... 14 5.5 VACANCIES IN OFFICES.................................................................................. 14 5.6 CHAIRMAN OF THE BOARD................................................................................. 14 5.7 PRESIDENT............................................................................................. 15 5.8 VICE PRESIDENTS....................................................................................... 15 5.9 SECRETARY............................................................................................. 15 5.10 CHIEF FINANCIAL OFFICER............................................................................... 16 5.11 ASSISTANT SECRETARY................................................................................... 16 5.12 ASSISTANT TREASURER................................................................................... 16 5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS........................................................ 17 5.14 AUTHORITY AND DUTIES OF OFFICERS...................................................................... 17 ARTICLE VI........................................................................................................... 17 INDEMNITY......................................................................................................... 17 6.1 THIRD PARTY ACTIONS................................................................................... 17 6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION......................................................... 18 6.3 SUCCESSFUL DEFENSE.................................................................................... 18 6.4 DETERMINATION OF CONDUCT.............................................................................. 18 6.5 PAYMENT OF EXPENSES IN ADVANCE........................................................................ 19 6.6 INDEMNITY NOT EXCLUSIVE............................................................................... 19 6.7 INSURANCE INDEMNIFICATION............................................................................. 19 6.8 THE CORPORATION....................................................................................... 19 6.9 EMPLOYEE BENEFIT PLANS................................................................................ 20 6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES........................................... 20 ARTICLE VII.......................................................................................................... 20 RECORDS AND REPORTS............................................................................................... 20 7.1 MAINTENANCE AND INSPECTION OF RECORDS................................................................. 20 7.2 INSPECTION BY DIRECTORS............................................................................... 21 7.3 ANNUAL STATEMENT TO STOCKHOLDERS...................................................................... 21 ARTICLE VIII......................................................................................................... 22 GENERAL MATTERS................................................................................................... 22 8.1 CHECKS................................................................................................ 22 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS...................................................... 22 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES................................................................ 22 8.4 SPECIAL DESIGNATION ON CERTIFICATES................................................................... 23 8.5 LOST CERTIFICATES..................................................................................... 23

-iii- 8.6 CONSTRUCTION; DEFINITIONS............................................................................. 23 8.7 DIVIDENDS............................................................................................. 24 8.8 FISCAL YEAR........................................................................................... 24 8.9 SEAL.................................................................................................. 24 8.10 TRANSFER OF STOCK..................................................................................... 24 8.11 STOCK TRANSFER AGREEMENTS............................................................................. 24 8.12 REGISTERED STOCKHOLDERS............................................................................... 25 ARTICLE IX........................................................................................................... 25 AMENDMENTS........................................................................................................ 25

-iv- BYLAWS OF PEOPLESOFT, INC. (As Amended and Restated as of July 18, 2003) ARTICLE I CORPORATE OFFICES 1.1 REGISTERED OFFICE The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the corporation at such location is The Corporation Trust Company. 1.2 OTHER OFFICES The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business. ARTICLE II MEETINGS OF STOCKHOLDERS 2.1 PLACE OF MEETINGS Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board of directors. In the absence of any such designation, stockholders' meetings shall be held at the registered office of the corporation. The board of directors may, in its sole discretion, determine that any such meeting shall not be held at any place, but may instead be held solely by means of remote communication in accordance with Section 211(a)(2) of the General Corporation Law of Delaware. If authorized by the board of directors in its sole discretion, and subject to such guidelines and procedures as the board of directors may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication (a) participate in a meeting of stockholders, -1- and (b) be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation. 2.2 ANNUAL MEETING The annual meeting of stockholders shall be held each year on a date and at a time designated by the board of directors. At the meeting, directors shall be elected and any other proper business may be transacted. 2.3 SPECIAL MEETING A special meeting of the stockholders may be called at any time by the board of directors, or by the chairman of the board, or by the president. No other person or persons are permitted to call a special meeting. No business may be conducted at a special meeting other than the business brought before the meeting by the board of directors or the chairman of the board or the president. 2.4 NOTICE OF STOCKHOLDERS' MEETINGS All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, the date and hour of the meeting, the means of remote communication, if any, by which the stockholders or proxyholders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's post office or street address as it appears on the records of the corporation, and if transmitted by electronic means, is given when such electronic transmission is transmitted to the stockholder at such stockholder's electronic mail address as it appears on the records of the corporation. An affidavit of the secretary -2- or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. Notice shall be deemed to have been given to all stockholders of record who share a post office or street or electronic mail address if notice is given in accordance with the "householding" rules set forth in Rule 14a-3(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act"). 2.6 QUORUM The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairman of the meeting or (ii) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. 2.7 ADJOURNED MEETING; NOTICE When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting in the manner set forth in Section 2.5. 2.8 CONDUCT OF BUSINESS The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business. The board of directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the board of directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures for the proper conduct of the meeting, including, without limitation: establishing an agenda or order of business for -3- the meeting; rules and procedures for maintaining order at the meeting and the safety of those present; limitations on participation in such meeting to stockholders of record and others as the chairman shall permit; restrictions on entry to the meeting after the time fixed for the commencement thereof; limitations on the time allotted to questions or comments by participants; and regulation of the opening and closing of the polls for balloting and matters which are to be voted on by ballot. Unless and to the extent determined by the board of directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. 2.9 VOTING The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.12 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements). Except as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. 2.10 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws. 2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise provided in the certificate of incorporation, any action required by this chapter to be taken at any annual or special meeting of stockholders of a corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. -4- Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action which is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware. 2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If the board of directors does not so fix a record date: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. 2.13 PROXIES Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by a written proxy, signed by the stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in-fact. The revocability of a proxy that -5- states on its face that it is irrevocable shall be governed by the provisions of Section 212(c) of the General Corporation Law of Delaware. 2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the post office or street address, or electronic mail address if applicable, of each stockholder and the number of shares registered in the name of each stockholder. Nothing contained in this Section shall require the corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, the list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. 2.15 ADVANCE NOTICE OF STOCKHOLDER NOMINEES Nominations of persons for election to the board of directors of the corporation may be made at a meeting of stockholders by or at the discretion of the board of directors or by any stockholder of the corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this Section. Such nominations, other than those made by or at the direction of the board of directors, shall be made pursuant to timely notice in writing to the secretary of the corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less than twenty (20) days nor more than sixty (60) days prior to the meeting; provided, however, that in the event less than thirty (30) days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder, to be timely, must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person, if any, whom the stockholder proposes to nominate for election or re-election as a director: (i) the name, -6- age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the corporation which are beneficially owned by such person, (iv) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, (v) any other information relating to such person that is required by law to be disclosed in solicitations of proxies that is required by law to be disclosed in solicitations of proxies for elections of directors, and (vi) such person's written consent to being named as a nominee and to serving as a director if elected; and (b) as to the stockholder giving the notice: (i) the name and address, as they appear on the corporation's books, of such stockholder, and (ii) the class and number of shares of the corporation which are beneficially owned by such stockholder, and (iii) a description of all arrangements or understandings between such stockholder and each nominee and any other person or persons (naming such person or persons) relating to the nomination. At the request of the board of directors any person nominated by the board for election as a director shall furnish to the secretary of the corporation that information required to be set forth in the stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this Section. The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these bylaws, and if he should so determine, he shall so declare at the meeting and the defective nomination shall be disregarded. 2.16 ADVANCE NOTICE OF STOCKHOLDER BUSINESS At the annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be: (a) as specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (b) otherwise properly brought before the meeting by or at the direction of the board of directors, or (c) otherwise properly brought before the meeting by a stockholder. Business to be brought before the meeting by a stockholder shall not be considered properly brought if the stockholder has not given timely notice thereof in writing to the secretary of the corporation. To be timely, a stockholder's notice must be delivered to the principal executive offices of the corporation not less than forty-five (45) days prior to the date on which the corporation first mailed proxy materials for the prior year's annual meeting; provided, however, that if the corporation's annual meeting of stockholders occurs on a date more than thirty (30) days earlier or later than the corporation's prior year's annual meeting, then the corporation's board of directors shall determine a date a reasonable period prior to the corporation's annual meeting of stockholders by which date the stockholder's notice must be delivered and publicize such date in a filing pursuant to the Securities Exchange Act of 1934, as amended, or via press release. Such publication shall occur at least ten (10) days prior to the date set by the board of directors. A stockholder's notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address of the stockholder proposing such business, (iii) the class and number of shares of the corporation, which -7- are beneficially owned by the stockholder, (iv) any material interest of the stockholder in such business, and (v) any other information that is required by law to be provided by the stockholder in his capacity as proponent of a stockholder proposal. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section. The chairman of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section, and, if he should so determine, he shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted. ARTICLE III DIRECTORS 3.1 POWERS Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. 3.2 NUMBER OF DIRECTORS The Board of Directors shall consist of eight (8) persons until changed by a proper amendment of this Section 3.2. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS Except as provided in Section 3.4 of these bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting unless specified otherwise in the certificate of incorporation. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Elections of directors need not be by written ballot. -8- 3.4 RESIGNATION AND VACANCIES Any director may resign at any time upon notice given in writing or by electronic transmission to the secretary of the corporation. When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies. Unless otherwise provided in the certificate of incorporation or these bylaws: (i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. (ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware. If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten (10) percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable. -9- 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. 3.6 REGULAR MEETINGS Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. 3.7 SPECIAL MEETINGS; NOTICE Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the secretary or any two (2) directors. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, or by electronic transmission, addressed to each director at that director's post office or street address, or electronic mail address if applicable, as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone, by telegram, or by electronic transmission, it shall be delivered personally or by telephone or to the telegraph company or by electronic transmission at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation. 3.8 QUORUM At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. -10- A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting. 3.9 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws. 3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmissions are filed with the minutes of proceedings of the board or committee. Such filing shall be in paper form if the minutes are maintained in paper form or shall be in electronic form if the minutes are maintained in electronic form. 3.11 FEES AND COMPENSATION OF DIRECTORS Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors. 3.12 REMOVAL OF DIRECTORS Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; provided, however, that, so long as stockholders of the corporation are entitled to cumulative voting, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against his or her -11- removal would be sufficient to elect such director if then cumulatively voted at an election of the entire board of directors. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office. ARTICLE IV COMMITTEES 4.1 COMMITTEES OF DIRECTORS The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) amend the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, or (v) amend the bylaws of the corporation; and, unless the board resolution establishing the committee, the bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware. -12- 4.2 COMMITTEE MINUTES Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. 4.3 MEETINGS AND ACTION OF COMMITTEES Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (Place of Meetings; Meetings by Telephone), Section 3.6 (Regular Meetings), Section 3.7 (Special Meetings; Notice), Section 3.8 (Quorum), Section 3.9 (Waiver of Notice), and Section 3.10 (Board Action by Written Consent Without a Meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. ARTICLE V OFFICERS 5.1 OFFICERS The officers of the corporation shall be a president, a secretary and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more vice presidents, one or more assistant vice presidents, one or more assistant secretaries, one or more assistant treasurers and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person. 5.2 APPOINTMENT OF OFFICERS The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall be appointed by the board of directors, subject to the rights, if any, of an officer under any contract of employment. -13- 5.3 SUBORDINATE OFFICERS The board of directors may appoint, or empower the president to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine. 5.4 REMOVAL AND RESIGNATION OF OFFICERS Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors. Any officer may resign at any time by giving written notice or by electronic transmission to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. 5.5 VACANCIES IN OFFICES Any vacancy occurring in any office of the corporation shall be filled by the board of directors. 5.6 CHAIRMAN OF THE BOARD The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these bylaws. If there is no president, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 of these bylaws. -14- 5.7 PRESIDENT Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. The president shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. The president shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws. 5.8 VICE PRESIDENTS In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the president or the chairman of the board. 5.9 SECRETARY The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof. The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their post office or street addresses or electronic addresses, if applicable, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws. The secretary shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws. -15- 5.10 CHIEF FINANCIAL OFFICER The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director. The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the board of directors. The chief financial officer shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all his or her transactions as chief financial officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or these bylaws. The chief financial officer shall be the treasurer of the corporation. 5.11 ASSISTANT SECRETARY The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as may be prescribed by the board of directors or these bylaws. 5.12 ASSISTANT TREASURER The assistant treasurer, or, if there is more than one, the assistant treasurers, in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the chief financial officer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the chief financial officer and shall perform such other duties and have such other powers as may be prescribed by the board of directors or these bylaws. -16- 5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS The chairman of the board, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. 5.14 AUTHORITY AND DUTIES OF OFFICERS In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders. ARTICLE VI INDEMNITY 6.1 THIRD PARTY ACTIONS The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the corporation, which approval shall not be unreasonably withheld) actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. -17- 6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) and amounts paid in settlement (if such settlement is approved in advance by the corporation, which approval shall not be unreasonably withheld) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if the person acted in good faith and in manner the person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Notwithstanding any other provision of this Article VI, no person shall be indemnified hereunder for any expenses or amounts paid in settlement with respect to any action to recover short-swing profits under Section 16(b) of the Exchange Act, as amended. 6.3 SUCCESSFUL DEFENSE To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by the person in connection therewith. 6.4 DETERMINATION OF CONDUCT Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that the indemnification of the director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall be made (1) by the board of directors or the executive committee, if any, by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding or (2) or if such quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. Notwithstanding the foregoing, a director, officer, employee or agent of the corporation shall be entitled to contest any -18- determination that the director, officer, employee or agent has not met the applicable standard of conduct set forth in Sections 6.1 and 6.2 by petitioning a court of competent jurisdiction. 6.5 PAYMENT OF EXPENSES IN ADVANCE Expenses incurred in defending a civil or criminal action, suit or proceeding, by an individual who may be entitled to indemnification pursuant to Section 6.1 or 6.2, shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that the individual is not entitled to be indemnified by the corporation as authorized in this Article VI. 6.6 INDEMNITY NOT EXCLUSIVE The indemnification and advancement of expenses provided by or granted pursuant to the other sections of this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in their official capacity and as to action in another capacity while holding such office. 6.7 INSURANCE INDEMNIFICATION The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against the person and incurred by the person in any such capacity or arising out of the person's status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this Article VI. 6.8 THE CORPORATION For purposes of this Article VI, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under and subject to the provisions of this Article VI (including, without limitation the -19- provisions of Section 6.4) with respect to the resulting or surviving corporation as the person would have with respect to such constituent corporation if its separate existence had continued. 6.9 EMPLOYEE BENEFIT PLANS For purposes of this Article VI, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Article VI. 6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. ARTICLE VII RECORDS AND REPORTS 7.1 MAINTENANCE AND INSPECTION OF RECORDS The corporation shall, either at its principal executive officer or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and post office or street addresses, or electronic mail addresses if applicable, and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business of the corporation to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every -20- instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, showing the post office or street address, or electronic mail address if applicable, of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. 7.2 INSPECTION BY DIRECTORS Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper. 7.3 ANNUAL STATEMENT TO STOCKHOLDERS The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. -21- ARTICLE VIII GENERAL MATTERS 8.1 CHECKS From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments. 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES The shares of the corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the board of directors, or the president or vice-president, and by the chief financial officer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if the person were such officer, transfer agent or registrar at the date of issue. The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock -22- certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. 8.4 SPECIAL DESIGNATION ON CERTIFICATES If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. 8.5 LOST CERTIFICATES Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and canceled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or the owner's legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. 8.6 CONSTRUCTION; DEFINITIONS Unless the context requires otherwise, the general provisions, rules of construction and definitions in the General Corporation Law of Delaware shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person. -23- 8.7 DIVIDENDS The directors of the corporation, subject to any restrictions contained in (i) the General Corporation Law of Delaware or (ii) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property or in shares of the corporation's capital stock. The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies. 8.8 FISCAL YEAR The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors. 8.9 SEAL The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the board of directors, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 8.10 TRANSFER OF STOCK Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books. 8.11 STOCK TRANSFER AGREEMENTS The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware. -24- 8.12 REGISTERED STOCKHOLDERS The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE IX AMENDMENTS The bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws. -25- EX-10.1 4 f92386exv10w1.txt EXHIBIT 10.1 Exhibit 10.1 PEOPLESOFT, INC. EXECUTIVE SEVERANCE POLICY - EXECUTIVE VICE PRESIDENTS Effective January 1, 2003 If an Executive's employment with the Company is involuntarily terminated by the Company other than for Cause, then, subject to the Executive's executing and not revoking a general release of claims in favor of the Company, the Executive will receive the following: - - 12 months' base salary at the rate in effect on the date of termination; - - 12 months of Executive's target bonus pursuant to the Company's Employee Incentive Compensation Plan at the rate in effect on the date of termination, assuming 100% achievement of Executive's and Company's objectives, and excluding any other bonuses, such as the annual bonus subject to the discretion of the Board of Directors; - - Credit for 12 months of employment toward vesting of stock options, stock appreciation rights, restricted stock awards and stock purchase rights ("Options") granted prior to the date Executive's employment is terminated, unless the plan under which the Options were granted prohibits such credit or acceleration or provides for alternative vesting; - - Reimbursement of COBRA premiums, if Executive is eligible for COBRA, for up to 12 months from the date of termination. Any amounts owed hereunder will be reduced by any other salary, severance, bonus or benefits to which Executive is entitled under any applicable laws or regulations, including, but not limited to, WARN. If (i) there is a Change of Control, and (ii) within one (1) year of a Change of Control, an Executive's employment is either involuntarily terminated other than for "Cause" or terminates by the Executive on the basis of Constructive Discharge, and (iii) the Executive executes and does not revoke a general release of claims in favor of the Company or surviving entity, the Executive will receive the items listed above and the following: - - All unvested Options granted to Executive prior to the date Executive's employment is terminated, will vest, unless the plan under which the Options were granted prohibits such vesting or provides for alternative vesting. The foregoing severance terms do not change the at-will nature of any Executive's employment with PeopleSoft. Any disputes, controversies, or claims arising out of or relating to this Policy must be resolved under PeopleSoft's Internal Dispute Solution (IDS) process. DEFINITIONS "Cause" means (i) a material act of dishonesty by Executive in connection with the Executive's employment with the Company; (ii) the Executive's conviction of, or plea of nolo contendere to, a felony; (iii) the Executive's gross misconduct in connection with the performance of his or her duties; (iv) Executive's death or permanent disability preventing him or her from performing the usual and necessary functions of his or her office; (v) the Executive's material breach of his or 1 her obligations as an officer of the Company; or (vi) the Executive's failure to materially comply with the Company's policies. With respect to clauses (iii), (v) and (vi), such actions shall not constitute Cause if they are cured by the Executive within thirty (30) days following delivery to the Executive of a written explanation specifying the basis for the Company's belief that it has Cause, provided that the Company deems such action capable of being cured. "Constructive Discharge" means (i) the occurrence of one or more of the following ("Constructive Discharge Events"): (a) a material reduction in the Executive's Base Salary or target bonus potential under the Employee Incentive Compensation Plan other than for Cause, ; (b) a material reduction in Executive's authority or duties (other than a material reduction in authority or duties occurring solely by virtue of a Change of Control, as for example, when an Executive retains the position in the Company but the Company is a wholly-owned, privately-held subsidiary or division of a larger company, or a reduction other than for Cause); or (c) relocation of Executive's position outside of the metropolitan area where Executive is currently employed, and (ii) a Constructive Discharge Event continues for more than thirty (30) days after delivery of written notice by the Executive to the Company specifying the circumstances of the alleged Constructive Discharge, which notice must be delivered to the Company within five (5) business days of the Constructive Discharge Event, and (iii) Executive resigns from all positions with the Company or its successor within ten (10) days of the expiration of Company's 30 day cure period, where such Constructive Discharge Event is still ongoing. "Change of Control" means: (a) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing forty-five percent (45%) or more of the total voting power represented by the Company's then outstanding voting securities; or (b) A change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for elections, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (c) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty-five percent (55%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or The consummation of the sale or disposition by the Company of all or substantially all of the Company's assets. 2 EX-10.2 5 f92386exv10w2.txt EXHIBIT 10.2 Exhibit 10.2 PEOPLESOFT, INC. EXECUTIVE SEVERANCE POLICY - SENIOR VICE PRESIDENTS Effective January 1, 2003 If an Executive's employment with the Company is involuntarily terminated by the Company other than for Cause, then, subject to the Executive's executing and not revoking a general release of claims in favor of the Company, the Executive will receive the following: - - 6 months' base salary at the rate in effect on the date of termination; - - 6 months of Executive's target bonus pursuant to the Company's Employee Incentive Compensation Plan at the rate in effect on the date of termination, assuming 100% achievement of Executive's and Company's objectives, and excluding any other bonuses, such as the annual bonus subject to the discretion of the Board of Directors; - - Credit for 6 months of employment toward vesting of stock options, stock appreciation rights, restricted stock awards and stock purchase rights ("Options") granted prior to the date Executive's employment is terminated, unless the plan under which the Options were granted prohibits such credit or acceleration or provides for alternative vesting; - - Reimbursement of COBRA premiums, if Executive is eligible for COBRA, for up to 6 months from the date of termination. Any amounts owed hereunder will be reduced by any other salary, severance, bonus or benefits to which Executive is entitled under any applicable laws or regulations, including, but not limited to, WARN. If (i) there is a Change of Control, and (ii) within one (1) year of a Change of Control, an Executive's employment is either involuntarily terminated other than for "Cause" or terminates by the Executive on the basis of Constructive Discharge, and (iii) the Executive executes and does not revoke a general release of claims in favor of the Company or surviving entity, the Executive will receive the items listed above and the following: - - All unvested Options granted to Executive prior to the date Executive's employment is terminated, will vest, unless the plan under which the Options were granted prohibits such vesting or provides for alternative vesting. The foregoing severance terms do not change the at-will nature of any Executive's employment with PeopleSoft. Any disputes, controversies, or claims arising out of or relating to this Policy must be resolved under PeopleSoft's Internal Dispute Solution (IDS) process. DEFINITIONS "Cause" means (i) a material act of dishonesty by Executive in connection with the Executive's employment with the Company; (ii) the Executive's conviction of, or plea of nolo contendere to, a felony; (iii) the Executive's gross misconduct in connection with the performance of his or her duties; (iv) Executive's death or permanent disability preventing him or her from performing the usual and necessary functions of his or her office; (v) the Executive's material breach of his or 1 her obligations as an officer of the Company; or (vi) the Executive's failure to materially comply with the Company's policies. With respect to clauses (iii), (v) and (vi), such actions shall not constitute Cause if they are cured by the Executive within thirty (30) days following delivery to the Executive of a written explanation specifying the basis for the Company's belief that it has Cause, provided that the Company deems such action capable of being cured. "Constructive Discharge" means (i) the occurrence of one or more of the following ("Constructive Discharge Events"): (a) a material reduction in the Executive's Base Salary or target bonus potential under the Employee Incentive Compensation Plan other than for Cause, ; (b) a material reduction in Executive's authority or duties (other than a material reduction in authority or duties occurring solely by virtue of a Change of Control, as for example, when an Executive retains the position in the Company but the Company is a wholly-owned, privately-held subsidiary or division of a larger company, or a reduction other than for Cause); or (c) relocation of Executive's position outside of the metropolitan area where Executive is currently employed, and (ii) a Constructive Discharge Event continues for more than thirty (30) days after delivery of written notice by the Executive to the Company specifying the circumstances of the alleged Constructive Discharge, which notice must be delivered to the Company within five (5) business days of the Constructive Discharge Event, and (iii) Executive resigns from all positions with the Company or its successor within ten (10) days of the expiration of Company's 30 day cure period, where such Constructive Discharge Event is still ongoing. "Change of Control" means: (a) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing forty-five percent (45%) or more of the total voting power represented by the Company's then outstanding voting securities; or (b) A change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for elections, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (c) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty-five percent (55%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or The consummation of the sale or disposition by the Company of all or substantially all of the Company's assets. 2 EX-31.1 6 f92386exv31w1.txt EXHIBIT 31.1 Exhibit 31.1 CERTIFICATION I, Craig A. Conway, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q for PeopleSoft, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 13, 2003 /s/ Craig A. Conway ----------------------------------- Craig A. Conway President and Chief Executive Officer PeopleSoft, Inc. 45 EX-31.2 7 f92386exv31w2.txt EXHIBIT 31.2 Exhibit 31.2 CERTIFICATION I, Kevin T. Parker, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q for PeopleSoft, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 13, 2003 /s/ Kevin T. Parker --------------------------- Kevin T. Parker Executive Vice President, Finance and Administration, Chief Financial Officer PeopleSoft, Inc. 46 EX-32.1 8 f92386exv32w1.txt EXHIBIT 32.1 EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Each of the undersigned hereby certifies, in his capacity as an officer of PeopleSoft, Inc. (the "Company"), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on his knowledge: - the Quarterly Report of the Company on Form 10-Q for the period ended June 30, 2003 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and - the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the Company. Dated: August 13, 2003 /s/ CRAIG A. CONWAY - ----------------------------- Craig A. Conway President and Chief Executive Officer PeopleSoft, Inc. /s/ KEVIN T. PARKER - --------------------------- Kevin T. Parker Executive Vice President, Finance and Administration, Chief Financial Officer PeopleSoft, Inc. 47 -----END PRIVACY-ENHANCED MESSAGE-----


	Indicate by check mark whether Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

	On August 8, 2003, the Registrant had 364,055,320 shares of common stock outstanding.

	•		within one year of the contract effective date, the Company is acquired or merged, and the Company is not the acquirer, and

	•		within two years of the contract effective date, the acquiring company announces a) its intention to discontinue, or discontinues support services before the end of the normal support term as defined by the Company’s standard policies, or b) announces its intention to stop licensing PeopleSoft products to new customers, or c) announces its intention not to provide updates or new releases for supportable products, which would, if the Company were not acquired or merged into the acquired company, have been considered updates or new releases under standard business policies, and

	•		the customer requests the payment in writing by December 31, 2005, and the customer has timely paid for support services in accordance with the terms of the customer’s agreement with the Company.

•		managing software development activities to define a combined product roadmap, ensure timely release of innovative products to market, coordinating software development operations in an efficient manner to ensure timely development of product roadmaps, and release of future products to market;

•		demonstrating to our existing and potential customers that the business combination will not result in adverse changes in customer service standards or business focus;

•		retaining key alliances on attractive terms with partners and suppliers;

•		coordinating and integrating sales and marketing efforts to effectively communicate the capabilities of the combined company, cross selling related products to each other’s customers, and managing the combined sales forces;

•		assimilating key employees and managing an increased number of employees over large geographic distances;

•		creating and effectively implementing uniform standards, controls, procedures, policies and information systems; and

•		retaining or recruiting key personnel.

•		the failure to realize the anticipated synergies from our combination with J.D. Edwards;

•		the potential disruption of the combined company’s ongoing business and distraction of its management;

•		potential delays related to integration of the operations, technology and other components of the two companies;

•		the impairment of relationships with suppliers, customers and business partners as a result of any integration of new management personnel;

•		the inability to successfully manage the substantially larger and geographically diverse organization;

•		greater than anticipated costs and expenses related to restructuring, including employee severance or relocation costs and costs related to vacating leased facilities; and

•		potential unknown liabilities associated with J.D. Edwards, the merger and the combined operations of the two companies.

•		the impact of the pending unsolicited Oracle Offer or any other proposed acquisition of us;

•		actual or anticipated fluctuations in revenues or operating results, including revenue or results of operations in any quarter failing to meet the expectations, published or otherwise, of the investment community;

•		announcements of technological innovations by us or our competitors;

•		introduction and success of new products or significant customer wins or losses by us or our competitors;

•		developments with respect to our intellectual property rights, including patents, or those of our competitors;

•		changes in recommendations or financial estimates by securities analysts;

•		fluctuations in demand for and sales of our products, which will depend on, among other things, the uncertainty regarding success of the merger and operations of the combined company, our customer protection program, the acceptance of our products in the marketplace and the general level of spending in the software industry;

•		rumors or dissemination of false and/or misleading information, particularly through internet chat rooms, instant messaging and other means;

•		changes in management;

•		proposed and completed acquisitions or other significant transactions by us or our competitors;

•		introduction and success of new products or significant customer wins or losses by us or our competitors;

•		the mix of products and services sold by us;

•		the timing of significant orders by us;

•		conditions and trends in the software industry, or consolidation within the technology industry that may impact our customers, partners, suppliers or competitors;

•		adoption of new accounting standards affecting the software industry;

•		acts of war or terrorism; and

•		general market conditions.

•		The combined company will incur additional amortization expense over the estimated useful lives of certain of the intangible assets acquired in connection with the merger during such estimated useful lives.

•		To the extent the value of goodwill becomes impaired, the combined company may be required to incur material charges relating to the impairment of those assets.

•		The portion of the existing deferred revenues on J.D. Edwards balance sheet at the closing of the merger which predominately represents maintenance revenue will be adjusted, based on estimated cost to deliver plus an appropriate gross margin and the portion of deferred maintenance revenue will be recorded as goodwill.

•		the impact of the pending Oracle Offer or any other proposed acquisition of us;

•		our sales cycle can vary as a result of the complexity of a customer’s overall business needs and may extend over one or more quarters;

•		the complexity and size of license transactions can result in protracted negotiations;

•		a significant number of our license agreements are typically completed within the last few weeks of the quarter and purchasing decisions may be delayed to future quarters;

•		the effect of economic downturns and unstable political conditions may result in decreased product demand, price erosion, and other factors that may substantially reduce license and services revenue;

•		customers may unexpectedly postpone or cancel anticipated system replacement or new system implementation due to changes in strategic priorities, project objectives, budgetary constraints, internal purchasing processes or company management;

•		changes in our competitors’ and our own pricing policies and discount plans may affect customer purchasing patterns and decisions;

•		the number, timing and significance of our competitors’ and our own software product enhancements and new software product announcements may affect purchasing decisions; and

•		changes in customers’ seasonal purchasing patterns may result in imprecise quarterly revenue projections.

•		transactions that include both currently deliverable software products and software products that are under development or contain other currently undeliverable elements;

•		transactions where the customer demands services that include significant modifications, customizations or complex interfaces that could delay product delivery or acceptance;

•		transactions that involve non-standard acceptance criteria or identified product-related performance issues; and

•		transactions that include contingency-based payment terms or fees.

•		difficulty assimilating the operations and personnel of the acquired company;

•		difficulty effectively integrating the acquired technologies or products with our current products and technologies;

•		difficulty in maintaining controls, procedures and policies during the transition and integration;

•		ongoing business may be disrupted by transition and integration issues;

•		key technical and managerial personnel from the acquired business may not be able to be retained;

•		the financial and strategic goals for the acquired and combined businesses may not be achieved;

•		relationships with partner companies or third party providers of technology or products could be adversely affected;

•		relationships with employees and customers could be impaired;

•		due diligence processes may fail to identify significant issues with product quality, product architecture, legal and financial contingencies, and product development, among other things; and

•		significant exit charges may be sustained if products acquired in business combinations are unsuccessful.

•		improve our existing products and develop new ones to keep pace with technological developments, including developments related to the internet;

•		successfully integrate third party products;

•		enter new markets;

•		satisfy customer requirements; and

•		maintain market acceptance.

•		conducting business in currencies other than United States dollars subjects us to fluctuations in currency exchange rates and currency controls;

•		increased cost and development time required to adapt our products to local markets;

•		lack of experience in a particular geographic market;

•		legal, regulatory, social, political, labor or economic uncertainties in a specific country or region, including loss or modification of exemptions for taxes and tariffs, increased withholding or other taxes on payments by subsidiaries, import and export license requirements, trade tariffs or restrictions, war, terrorism and civil unrest;

•		higher operating costs due to local laws or regulation; and

•		inability to hedge the currency risk in some transactions because of uncertainty or the inability to reasonably estimate our foreign exchange exposure.

	(a)		The Company held its Annual Meeting of Stockholders on May 27, 2003.

	(b)		David A. Duffield, Aneel Bhusri, and Steven D. Goldby were each elected as Class I directors for a term of two years. A. George “Skip” Battle, Craig A. Conway, Frank J Fanzilli Jr. and Cyril J. Yansouni were each elected at the prior year’s annual meeting for a term of two years and continue to serve as Class II directors.

	(c)		The Company’s stockholders voted on the following matters: