Question
From:
(redacted)
Sent:
Monday, June 30, 20084:59 PM
To:
Verne, B. Michael
Cc:
(redacted)
Subject: Dutch NV
Mike,
Thanks for speakingwith us earlier today about our transaction involving a Dutch NV("DutchCo") that has two boards-a Supervisory Board and a ManagementBoard. You indicated that the PNO has generally taken the position that theSupervisory Board of a Dutch NV with this type of two-tier board structure,rather than the NV's Management Board, is the board that is more akin to theboard of directors of a U.S. corporation and is therefore the pertinent entityto consider for purposes of the control test under section 801.1(b)(2). Webelieve this is the correct approach in DutchCo's case but wish to confirm thisand accordingly have outlined below per your request additional factsconcerning the responsibilities and composition of DutchCo's Supervisory andManagement Boards.
The general duty ofDutchCo's Supervisory Board is to supervise the Management Board and thegeneral course of affairs of DutchCo. There currently are no DutchCo executivesamong the ten members of the Supervisory Board. The Management Board isrequired to report to the Supervisory Board regarding the strategic policy,general and financial risks, and management and control systems of DutchCo. TheSupervisory Board approves DutchCo's operating budget, capital budget, andbusiness plan. The approval of the Supervisory Board is also required for(among other things): expenditures that exceed the budget by more than 5%;salaries, bonuses, and other compensation of the officers of DutchCo; proposalsfor the appointment or removal of DutchCo's auditor; commencing any litigationor arbitration proceeding or settling any such proceeding; proposals forstatutory mergers or demergers; and exercising the voting rights on shares heldby DutchCo in other companies. The Management Board, which is composed of fourDutchCo executives, is entitled to make decisions that are not reserved for theSupervisory Board and that do not otherwise require shareholder approval.
Given the broadrights exercised by the Supervisory Board, in particular the right to approvebusiness plans and budgets of DutchCo, we believe the Supervisory Board is moreakin to a U.S. board of directors and is therefore the appropriate board tolook to in order to determine control of DutchCo for HSR purposes. Please letus know whether you concur with this analysis. If you need any additional details,we would be happy to provide them.