Kpn-ibasis Hearing Transcript

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE iBASIS, Inc.,

: : Plaintiff, : : vs. : : KONINKLIJKE KPN N.V., KPN : B.V., CELTIC ICS INC., EELCO : BLOK, JOOST FARWERCK, AD : SCHEEPBOUWER, STAN MILLER, : BAPTIEST COOPMANS, A.H.J. : RISSEEUW, M. BISCHOFF, C.M. : COLIJN-HOOIJMANS, D.I. JAGER, : M.E. VAN LIER LELS, J.B.M. : STREPPEL, R.J. ROUTS, D.J. : HAANK, W.T.J. HAGEMAN, M.E. : HOEKSTRA, AND M.N.A.J. VOGT, : : Defendants. : : KPN B.V. and KONINKLIJKE KPN : N.V., : : Counterclaim-Plaintiffs,: : vs. : : iBASIS, INC., ROBERT H. : BRUMLEY, CHARLES N. CORFIELD, : OFER GNEEZY, W. FRANK KING, and : GORDON J. VANDERBRUG, : : Counterclaim-Defendants : - - -

Civil Action No. 4774-VCS

-----------------------------------------------------CHANCERY COURT REPORTERS 500 North King Street - Suite 11400 Wilmington, Delaware 19801-3759 (302) 255-0525

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Chancery Court Chambers New Castle County Courthouse Wilmington, Delaware Friday, August 14, 2009 2:30 p.m.

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BEFORE:

HON. LEO E. STRINE, JR., Vice Chancellor.

APPEARANCES:

SCHEDULING CONFERENCE

RAYMOND J. DiCAMILLO, ESQ. Richards, Layton & Finger, P.A. -andADAM H. OFFENHARTZ, ESQ. JENNIFER H. REARDEN, ESQ. Of the New York Bar Gibson, Dunn & Crutcher LLP For Plaintiff and Counterclaim Defendants DAVID J. TEKLITS, ESQ. Morris, Nichols, Arsht & Tunnell LLP -andDARIN P. McATEE, ESQ. JULIE A. NORTH, ESQ. MISTY L. ARCHAMBAULT, ESQ. of the New York Bar Cravath, Swaine & Moore LLP For Defendants and Counterclaim-Plaintiffs Koninklijke KPN N.V. and KPN B.V. and Defendants Celtic ICS Inc., Eelco Blok, Joost Farwerck, Ad Scheepbouwer, Stan Miller, Baptiest Coopmans, A.H.J. Risseeuw, M. Bischoff, C.M. Colijn-Hooijmans, D.I. Jager, M.E. Van Lier Lels, J.B.M. Streppel, R.J. Routs, D.J. Haank, W.T.J. Hageman, M.E. Hoekstra and M.N.A.J. Vogt - - -

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THE COURT:

Thanks for coming in.

Everybody wants to expedite, but nobody agrees on how.

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Here's how we're going to do it.

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not going to just expedite one side or the other.

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the other hand, I do want this to be efficiently

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litigated.

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I'm On

I'd have to say, on behalf of iBASIS is the plaintiff here; right?

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MR. OFFENHARTZ:

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THE COURT:

Yes, Your Honor.

And then our friends from

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the Netherlands are on the other side of it.

The

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bankers are so creative; right?

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going to make your clients popular in Massachusetts to

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name the target, or the way you're going to swallow it

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up is name it Celtics.

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way.

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is like the target and the shark or something.

Do you think it's

I'm not sure you view it that

Bankers need to -- I thought bleeding bait fish

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Why don't you name it, like the

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acquirer could be like paddywagon and the target could

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be Irishman.

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and cod, too.

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A great thing for the home of the bean That would be beautiful. Anyway, here's what I think one of the

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things -- I'll pick on iBASIS a little bit.

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number of your defendants probably have no business CHANCERY COURT REPORTERS

A large

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being in this case.

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probably of getting personal jurisdiction over them.

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You're trying to get them because they're a European

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supervisory board.

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You've got no possible way

There's a reason why we have entities

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in Delaware and entities in the United States and

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there is a limited liability and you're pleading in

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civil conspiracy and everything.

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corporation.

That's the whole idea.

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stockholder.

That's the doctrine you extend beyond

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the board to a controller who is supposedly exercising

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control over an entity akin to that of a fiduciary on

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the board.

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company, not -- because I read things, you know,

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not -- was it 18? MR. McATEE:

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THE COURT:

Eight or nine guys. None of whom are directors

of the Delaware entity; right.

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MR. McATEE:

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MR. DiCAMILLO:

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The controlling

That would suffice to get the Dutch parent

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You get the parent

Correct. There are two

defendants. THE COURT:

There are two.

I don't

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read your friends as saying that those folks are in

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the fiduciary breach.

I know European -- about

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European board structures and stuff.

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hobby of mine.

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interesting.

It's like a

Safer than other hobbies.

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Not as

But my point is, I don't think that we

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have a statute for, you know, if you serve on the

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supervisory board of an entity that's a controlling

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stockholder of a Delaware corporation we can serve

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you.

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want expedition.

Part of why I'm getting into this now is people You have to focus.

And, you know,

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requests for admission to 18 different people, the

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tradition around here is, when you expedite, you

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obviously have to choose your targets for discovery.

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Firms of the quality of the four firms involved have

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typically been able to sit down rationally and agree

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on these things.

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What I'm saying to iBASIS is -- you

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know, I'm not -- you're not going to get this like a

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plenary entire fairness proceeding trial.

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you can do is let it close and then press whether it's

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entire fairness or not.

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here around these projections and others things and

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there's a utility to deciding that upfront that I'm

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going to expedite.

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One tactic

But, you know, there's enough

But I want it to be focused.

With respect -- you can bring your CHANCERY COURT REPORTERS

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legal arguments.

If you want to waive discovery,

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waive discovery.

And I have no problem with you

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bringing -- as part of what you wish for relief if you

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want to combine it with the briefing and just go on

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the law, that's fine.

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in the nature of final relief.

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traditionally, if you read Intercompany, I know that

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there's a footnote in Time Warner that suggests

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Intercompany's, you know, not good law.

But you are seeking something And actually

But the

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spirit of what they say would suggest that this part

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of Intercompany says, when you're going to redeem a

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rights plan, it's final relief.

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preliminary injunction basis for an obvious reason.

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If the Court's wrong, there's no way to undo it.

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It can't be done on a

And one of the things Chancellor Allen

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did in Intercompany was to construct the stylized --

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that's what the friends in academia would say --

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stylized facts.

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and he sort of listed these ten things that he said

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was undisputed and on that basis pulled the pill.

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many situations the facts aren't uncontroverted, which

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means you all need to think about whether you want a

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short evidentiary hearing with respect to the pill.

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With respect to the projections and

You know, he did that in this case

CHANCERY COURT REPORTERS

In

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other things, I also need to see, you know, whether

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they're reliable, how they're being prepared.

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will say, having written both Pure Resources and some

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other stuff, that one of the things that's really

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never been able to be authoritatively determined by

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our Supreme Court since Kahn v Lynch is exactly what

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are the standards which apply in this context.

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I also

And so I'm not saying that either side is wrong.

I'm saying, as a judge, the way that

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Kahn v Lynch has worked, it's a beautiful thing.

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wish I could write something like this, which is write

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an opinion that is its own defense.

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that makes it impossible for the doctrine to be

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reversed because the hydraulic pressures it creates

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means there's never any chance for appellate review.

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I'm sure that United States Supreme Court judges on

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both sides wish they could come up with something as

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effective as that.

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issues.

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I

It's an opinion

So there is some interesting

With respect to timing, that's where I

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need a little bit of people's rational help.

I've got

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to say that the papers I got today aren't that

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helpful.

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really care whether the controller has to wait a

With respect to the controller, I don't

CHANCERY COURT REPORTERS

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little bit.

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for a long time.

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July and you have to swallow the minority by X date.

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I mean, come on.

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an interest.

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I mean, you've controlled this company You whip out an offer at the end of

And that's just not that compelling

On the other hand, you know, commerce

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is commerce and it ought to move on.

And I'm hesitant

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to just sort of embrace a date without you all.

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also actually like lawyers.

I

They're interesting,

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intelligent people.

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know -- and you work hard enough where you endanger

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your family life in general, where I don't wish to

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destroy anyone's family life.

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It's the time of year when, you

MS. NORTH:

My family is thankful for

THE COURT:

It's the time of year

that.

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where oftentimes you have some precious opportunity to

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spend a little time with your children or, if you're

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lucky enough and they're gone, spend time with your

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spouse or maybe somebody you like better than your

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spouse.

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And often that happens before Labor Day. What I'm saying is, we ought to do

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this in a way that doesn't destroy -- the company's

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not going anywhere.

This is not a situation where,

CHANCERY COURT REPORTERS

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you know, the acquirer is going to lose the target to

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someone else.

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I don't know how many depositions you

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are all seeking, if you were to do this in advance of

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a preliminary injunction?

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MR. DiCAMILLO:

Unclear.

We've

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noticed a bunch of depositions.

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are cognizant of what Your Honor said, and as we

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indicate in our paper today --

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MR. OFFENHARTZ:

However, we certainly

We will certainly

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trim it down.

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requests, we neither had counsel that we could

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block --

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When we made those initial discovery

THE COURT:

You want a couple on the

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board and a couple in the working group, whoever the

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person is at Morgan Stanley.

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MR. DiCAMILLO:

Yes.

We need a

handful of depositions.

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MR. OFFENHARTZ:

A few additional ones

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dealing with the fraudulent scheme issues.

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Your Honor --

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THE COURT:

Certainly,

Is a fraudulent schemer so

extensive that it goes beyond the same people? MR. OFFENHARTZ:

Your Honor, I really

CHANCERY COURT REPORTERS

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am very confident that we can pare down the list of

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depositions and certainly pare down the discovery

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requests such that we can make this work.

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THE COURT: than you all.

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It works for us.

MR. OFFENHARTZ:

I'm sure I can

convince my colleague, Mr. DiCamillo.

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It's great.

It's got to work for more

THE COURT:

They have discovery

they're going to wish to take as well.

They're going

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to have to deal with the basis for which you have a

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pill.

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your basic theory about the business is just, you

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know, a wonderful -- this is the company, "I call my

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brother in Sao Paulo every Saturday."

They obviously have a right to inquire into

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MR. McATEE:

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THE COURT:

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MR. McATEE:

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THE COURT:

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That's one of your

competitors.

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We're not there.

Yeah. I watch the Gold Network

and I think that's every other ad. MR. DiCAMILLO:

It seems to me, Your

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Honor, if we pick a reasonable date, some time in

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September or early October, we can work with

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Mr. Teklits and figure out a sensible discovery CHANCERY COURT REPORTERS

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schedule.

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We understand what Your Honor wants to

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hear and how you want to do it.

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it out.

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THE COURT:

I think we can figure

The question is, you know,

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in some ways it's more to you all, which is you're

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attacking this rights plan.

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Are you limiting yourself to the idea

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that they just simply, no matter -- assume there would

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be clear justification under something like the Unocal

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standard for the target board to do what it wishes,

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which is they have no authority to do.

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limiting yourself to that argument or are you going to

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say and, in the alternative, there's no justification

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equitably for them to use a pill even if they have

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authority?

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MR. McATEE:

Are you

We were going to make

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both arguments, although only the first on our

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proposed motion.

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same time --

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But if we want to do it all at the

THE COURT:

The reason why I say

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there's not much room for efficiency, I think -- my

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sense is, you know, you may say it's okay for you all

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just the way the disclosures came out about the CHANCERY COURT REPORTERS

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projection.

It is an interesting colorable claim.

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you look at Weinberger and other things, honestly, it

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might be in your clients' interest to get it resolved

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in some way.

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Given that I'm going to expedite on that, it's not

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really a real efficiency for me or anybody else to

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jump a motion to judgment on the pleadings.

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certainly make those arguments.

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is, what is the shape and nature of the hearing we're

But I'm going to expedite on that.

You can

What I'm getting at

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going to have?

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arguments about the pill in person, you know, we may

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be talking about a short trial.

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If

If you want to present some factual

We're not talking about a damages

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stage, so we're not getting to where they have to have

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valuation experts.

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the valuation or something came up, the special

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committee is going to make its arguments about value,

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you guys will in the context of some sort of

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reasonableness analysis when we get to the pill.

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I mean, I think the more -- where

I've also seen some of that overlap

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with why Morgan Stanley told these things, blah, blah,

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blah.

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If you assume that the worse you had to take like -- if there were 12 depositions all CHANCERY COURT REPORTERS

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around, that's probably a reasonable.

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MS. NORTH:

I think that is

THE COURT:

When could we be looking

reasonable.

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to have and if you wanted like, say, two days, a day

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and a half?

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hearing.

We allocate two days for an evidentiary

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MR. DiCAMILLO:

If we can get a couple

days early October, that might work.

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THE COURT:

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something the eighth and ninth of October.

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understand from an acquirer's standpoint you want to

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move fast.

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actually -- since we're in the middle of August now --

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If you're thinking about when you can

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It looks like I can do

MR. McATEE:

And August is a very

tough month.

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THE COURT:

Right.

Because the Dutch

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are pretty sensible about this.

They're on mandated

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leave.

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the government?

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that's for your vacation.

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school, you know what you get in the beginning of the

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year?

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school supplies.

You know what you get in the Netherlands from You get a check that comes to you Just like, if your kid's in

You get a check, I think, that helps with But they're socialists.

CHANCERY COURT REPORTERS

They were.

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It's a cool country.

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Can we work with those dates maybe? Does that work?

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I like it.

MS. NORTH:

Yes.

There's some

holidays to navigate in September.

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MR. OFFENHARTZ:

Your Honor, if it's

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possible to pick two days, perhaps the following week.

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I apologize.

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regarding the various holidays which may come up in

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I don't have my BlackBerry handy

September somewhat more than usual.

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THE COURT:

You got the whole -- my

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MS. NORTH:

Yom Kippur is on the 28th.

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THE COURT:

But that -- how does the

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only --

8th or the 12th?

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MR. OFFENHARTZ:

I wasn't suggesting

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necessarily that the holidays make the eighth or

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ninth undoable.

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matter, given a few things, among them being August,

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the fact that --

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I was suggesting, as a practical

THE COURT:

That's what I mean.

Part

of what I'm saying is -MR. OFFENHARTZ: September, other people are away.

And then moving into A little bit more

CHANCERY COURT REPORTERS

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breathing room might be helpful for all of us.

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impression from our adversaries in terms of timing is

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they have recognized, even under their scenario, that

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they're rolling things out until September 24th, I

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think, under your own proposal.

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So we're not talking about a dramatic

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extension even where they were coming in,

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admittedly --

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THE COURT:

MS. NORTH:

THE COURT:

What difference an

Versus the 12th or the

13th.

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What I'm

additional four days would make.

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I understand.

trying to figure out --

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My

MR. DiCAMILLO:

Is the Court open on

the 12th?

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THE COURT:

The 13th I'll have to

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leave early, unless you want to do it in Cambridge

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near -- I don't know how far the company is from

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Cambridge.

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Why don't we stick to the eighth and

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ninth.

See what you can do with the schedule.

I'm

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not an inflexible person.

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what I'm saying, I'll say to the defendants is be

If you come back to me --

CHANCERY COURT REPORTERS

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flexible.

If it really works the next week or the

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week after better, then let me know and we'll do that.

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My point is, you'll obviously have to work around the

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scheduling of depositions and all.

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in a situation where, you know, what you may need the

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timing is getting your opening -- what you really have

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to juggle, I think, is the Yom Kippur situation and

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the implications for your brief.

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But you should be

On the other hand, ideally I would get

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everything by Friday the second -- ideally -- but the

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world is not ideal.

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getting opening briefs in on the 29th.

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I would have no problem with

Now, obviously you can't work Yom

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Kippur, but that doesn't mean you can't work Saturday

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and Sunday before.

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MR. DiCAMILLO:

Your Honor, what do

you want in terms of brief?

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THE COURT:

It's always simpler to do,

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especially in this situation where you each have

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claims, simultaneous openings and simultaneous answer.

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If you can do the 29th and get the briefs delivered to

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me on the third.

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thing, have that in by Friday or something like

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that -- the pretrial stipulation.

If we're going to have a pretrial

That would work.

CHANCERY COURT REPORTERS

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The sooner you notice up, you figure

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out who your parties are for deposition, I think the

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better.

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And when does the break end in the Netherlands?

Most people are usually back after Labor Day.

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MS. NORTH:

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MR. McATEE:

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THE COURT:

I think school starts back

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MS. NORTH:

Yeah.

Definitely.

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THE COURT:

Okay.

Well, good luck.

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I don't know. Early September.

there, too.

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Wisdom never comes too late if people can reach an

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agreement.

Some interesting issues.

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(Discussion off the record.)

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(Adjourned at 2:50 p.m.)

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CERTIFICATE

2

I, DIANE G. McGRELLIS, Official Court

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Reporter of the Chancery Court, State of Delaware, do

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hereby certify that the foregoing pages numbered 3

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through 17 contain a true and correct transcription of

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the proceedings as stenographically reported by me at

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the hearing in the above cause before the Vice

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Chancellor of the State of Delaware, on the date

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therein indicated.

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IN WITNESS WHEREOF I have hereunto set my hand at Wilmington, this 17th day of August, 2009.

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/s/ Diane G. McGrellis ---------------------------Official Court Reporter of the Chancery Court State of Delaware

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Certification Number: 108-PS Expiration: Permanent

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