Duties of Directors of an Acquiring Company

1. Duties of Directors of an Acquiring Company • There are relatively few Delaware cases that specifically address the fiduciary duties that are applicable to directors of an acquiring company. Business Judgment Rule • Delaware courts have generally applied the traditional business judgment rule to actions taken by directors of an acquiring company. SeeAsh v. McCall 2000 Del. Ch. LEXIS 144 (Sept. 15, 2000). • Under Delaware law, a decision made in good faith by informed and disinterested directors will usually be protected by the business judgment rule, which is, in effect, a rebuttable presumption that, in making a business decision, the directors of the company acted on an informed basis, in good faithand in the honest belief that the action that was taken was in the best interests of the company. • See also In re Dow Chemical Company Derivative Litigation C.A. No. 4349-CC, 2010 WL 66769 (Del. Ch. Jan. 11, 2010 where the Delaware Chancery Court reaffirmed the broad applicability of the business judgment rule to such situations. • The Chancery Court reiterated that directors are entitled to rely on the business judgment rule unless the directors are shown by a preponderance of the evidence to have failed to satisfy one of their duties.

2. Duties of Directors of an Acquiring Company • Delaware courts will not second-guess the decisions of disinterested directors acting in good faith and on a fully-informed basis. Acting on an Informed Basis • Directors must take reasonable steps to become informed, prior to making a decision, of all information reasonably available to them. SeeSmith v. Van Gorkom, 488 A.2d 858 (Del. 1985). • Delaware courts have repeatedly emphasized the importance of the decision-making process in determining whether the business judgment rule applies. • Directors need to be actively involved and remain fully informed throughout the process. • Courts will consider whether appropriate steps were taken by the directors to inform themselves of all relevant facts. • Board minutes should record the decision-making process and the actions taken as part of that process.

3. Duties of Directors of an Acquiring Company Reliance on Advisors • Delaware law permits directors to rely in good faith on information prepared and advice provided by officers, employees and outside professionals who are reasonably believed to be knowledgeable in the relevant matter. See DGCL §141(e). • Advisors and experts must be selected with reasonable care, and the directors must actively and directly oversee advisors and experts in order to rely on them. SeeMills Acquisitions Co. v Macmillan, Inc., 559 A.2d 1261, 1281 (Del. 1989). • See also In re Del Monte Foods Company Shareholders Litigation, 25 A.ed 813 (Del. Ch. 2011) – In finding that the Del Monte board failed to act upon its financial advisor’s clear conflicts, the Delaware Chancery Court held that “[t]he record does not reflect meaningful board consideration or informed decision making.” • See also In re El Paso Corp. Shareholder Litigation 41 A.3d 432 (Del. Ch. 2012).