0004009 Informal Interpretation

From: [redacted]

To: "mverne@ftc.gov" <mverne@ftc.gov>

Subject: 801.12

Mike - I have another question for you on applying the fun formula in 801.12. I have a situation where X's articles state that the holders of Series A shares voting as a class elect 2 of 5 directors. The holders of Common voting as a class elect 2 of 5 directors, and the fifth director is elected upon the approval of (i) the holders of the majority of the A shares and (ii) the holders of Common Stock voting as a class. If Y just holds A shares, would I calculate Y's percentage as follows?

[(The A shares held by Y divided by all A shares outstanding) times (2 divided by 6)] plus [(the A shares held by Y divided by all A and Common shares outstanding) times (1 divided by 6)]?

I am concerned that application of the formula may not work in a case where the last director must be approved by the majority of the A voting as a class and the majority of the Common voting as a class. Strict application of the formula overstates Y's holdings in X because even if Y holds a majority of the A shares, Y cannot unilaterally elect the fifth director because a majority of the Common could veto his choice.

What do you think?

Thanks

[redacted]