Question
From: (redacted)
Sent: Friday, July 13, 2007 3:26 PM
To: Verne,B. Michael
Subject: Followingup on and confirming our telephone conversation of earlier this week
B. Michael Verne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, N.W., Room 303
Washington, DC 20580
Dear Mr. Verne,
I write tofollow-up on and confirm our telephone conversation of July 10 concerning thefollowing hypothetical.
1. Foreign Corporation
Foreign Corporationwhich will be making an acquisition has three shareholders, as follows
No.
Shareholders
Percentage/Number of shares
1.
Foreign Government Agency
49%
2.
Foreign Cooperative
51%
3.
Ministry of Foreign Government
1 special share
The backgrounds ofthe shareholders are:
(a)ForeignGovernment Agency is not a corporation (it is a statutory body created under anAct of Parliament.)
(b)ForeignCooperative is an investment cooperative which was created as an investmentvehicle for all savings collected from its members.
(c)Aministry of Foreign Government has a special share and Foreign Corporation isobliged to abide by the decision of this ministry irrespective of the othershareholders' views.
2. Relationship between Foreign Corporation andForeign Cooperative
Traditionally,Foreign Corporation's management requested its shareholders, including ForeignCooperative, to propose names for Foreign Corporation's Board of Directors anddirectors for the Boards of Foreign Corporation's Group of Companies(subsidiaries). Foreign Corporation's management will then prepare a list ofnames to submit to Foreign Corporation's Nominating Committee. (Two of ForeignCooperative's nominees are on the board of Foreign Corporation now; theyaccount for substantially less than half of the board seats.)
Importantly,Foreign Cooperative has no right to have its nominees on the Board of ForeignCorporation or on the boards of any of the Group of Companies, or to makenominations to the Boards of Foreign Corporation or of any of the Group ofCompanies. Similarly, Foreign Corporation's management is not required to askForeign Cooperative for nominees for the Board of Foreign Corporation or theGroup of Companies.
3. The appointment process of ForeignCorporation's directors
No
Process
1.
Foreign Corporation's management will write to its shareholders, requesting for names as nominee directors
2.
Shareholders will propose nominee directors to serve as directors of Foreign Corporation and its Group of Companies (subsidiaries).
3.
Foreign Corporation's management will assess whether these proposed names are suitable.
4.
These names will be placed before the Nominating Committee. The Nominating Committee evaluates these proposals.
5.
Upon approval by the Nominating Committee, the approved list of names for the Foreign Corporation's Board of Directors will be sent to the Deputy Prime Minister for endorsement
6.
The approved list will be placed before the Board of Directors of Foreign Corporation for adoption.
4. Foreign Corporation's customary practice inselecting its directors
(i)Compositionof Foreign Corporation's Nominating Committee
ForeignCorporation has a three-person Nominating Committee, consisting of ForeignCorporation's Chairman (who is also the Chairman of Foreign Government Agency),Foreign Government Agency's Director General, and a representative from ForeignGovernment's Ministry of Finance.
(ii)Selectionprocess of Foreign Corporation's Nominating Committee
TheNominating Committee has typically reviewed the list of nominees prepared bythe management of Foreign Corporation, and can make changes to the list in itsdiscretion. The Nominating Committee is not required to seek recommendationsfrom Foreign Cooperative for the Board of Foreign Corporation or any of theGroup of Companies. Nor is the Nominating Committee required to nominate anyonefrom Foreign Cooperative or any person Foreign Cooperative suggests to theNominating Committee's list of proposed directors for Foreign Corporation orfor any of the Group of Companies.
5. Relationshipbetween the Deputy Prime Minister and Nominating Committee of Foreign Corporation
TheNominating Committee's list of directors for Foreign Corporation is reviewed bythe Deputy Prime Minister of Foreign Government. The Deputy Prime Minister mayin his or her discretion add persons to or subtract persons from the list ofnominees for Foreign Corporation's Board. The Deputy Prime Minister has noobligation to appoint to the board anyone from Foreign Cooperative or anyperson Foreign Cooperative may suggest.
(TheDeputy Prime Minister does not review the Nominating Committee's list ofdirectors for the Group of Companies; that list goes to Foreign Corporation'sBoard of Directors which makes a record of those nominations.)
Inour conversation, you had asked whether, after the Deputy Prime Minister hasnamed the directors, those names are then submitted to the shareholders,including the Cooperative, for approval. The Deputy Prime Minister's list does not go to the shareholders forapproval. It is presented at Foreign Corporation's Board of Directors meetingfor ratification of the appointments.
6. Conclusion
Basedon our conversation, I understood that you would concur, on the facts describedabove, that Foreign Cooperative would not be deemed to be holding "votingsecurities" of Foreign Corporation under the HSR Act and Rules. I wouldappreciate your confirmation that my understanding is correct for the purposeof proceeding further.
Thank you for your attention to this matter.