0004015 Informal Interpretation

Date:
Rule:
801.12
Staff:
Michael Verne
Response/Comments:

Advised to use as the numerator in the ratio for this director, i.e., if you held 100 of the 500 total shares of class A you would calculate as follows: 100 x 2 = 8% 500 5 100 x = 2% 500 500 Total percentage . . . [illegible] in issues . . . N. Ovuka, T. Hancock, and R. Smith concur. B. Michael Verne 4/26/00

Question

From:    [redacted]

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

Date:     Tue, Apr 25, 2000 3:08 PM

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 6 directors, and the fifth director is selected upon the approval of (i) holders of the majority of the A shares and (ii) the holders of Common Stock voting as a class. If X just holds A shares, would I calculate Y's percentage as follows?

The A shares held by Y divided by all A shares outstanding time (2 divided by 5) plus (the A shares held by Y divided by all A and Common shares outstanding) time (1 divided by 5)?

If am concerned that application of the formula may not work in a case where the last director must approved by the majority of the A voting as a class and the majority of the Common voting stock 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]

[redacted]

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