Stock Options; Rights; Warrants

Summary

Covers corporate law issues affecting stock options, rights and warrants

Delaware GCL § 157
Rights and options respecting stock

Lillis v AT&T and AT&T Wireless (Del Ch 2005)

Former holders of out-of-the-money options brought suit
Options were cancelled when AT&T Wireless merged with Cingular

Aspen Advisors v United Artists Theatre (Del 2004)

Former creditors of insolvent company received warrants on 7% of the company in settlement
Controlling shareholder later consolidated his theater company holdings in two steps

A short-form merger
Followed by a share exchange with another company

Warrant holders had no cause of action for breach of the implied covenant of good faith and fair dealing
Warrant contract gave them no right to participate in the exchange
Benefit of "anti-destruction" provision in warrant didn't extend to the exchange

Court distinguished Continental Airlines

Warrant holders couldn't seek appraisal
Affirms Chancery Court decision (Del Ch 1.16.04)

Vague v Bank One (Del 2004)

Reverses Chancery Court
CEO's reliance on company's representations about the exercise date of his stock options presented a material issue of fact
Chancery erred in granting company summary judgment

Continental Airlines v American General (Del Ch 1974)

Warrants had an "anti-destruction" provision which provided that in the event of a reorganization, warrant holders were to receive the same property to which they would have been entitled had they exercised the warrants immediately beforehand
Merger agreement provided employee shareholders with the right to buy shares in the merged company at a discount
Warrant holders sued to gain the same benefit offered to employees
Court emphasized that its holding in favor of
warrant holders was based solely on their contractual rights and not on any notions of fiduciary duty
575 A.2d 1160, 1168 (Del 1990)
Cert dismissed, 498 U.S. 953 (1990)

Glinert v Wickes Companies (Del 1993)

Delaware Supreme Court implied that no fiduciary duty is owned to warrant holders even if the warrants would convert to stock of the company automatically

Frankel v Donovan (Del Ch 1956)

Kaufman v Shoenberg (Del Ch 1952)

Gottlieb v Hayden Chemical (Del 1952)

Adhered to 92 A 2d 594 (Del 1952)

Keene v Hoofe (Del Ch 1972)

Aff'd 276 A 2d 269 (Del 1971)

Continental Airlines v American General (Del 1990)

Beard v Elster (Del 1960)

Remand 167 A 2d 231 (Del Ch 1961)

Keene v Hoofe (Del Ch 1970)

Aff'd 276 A 2d 269 (Del 1971)

Pogostin v Rice (Del 1984)

Olson Brothers v Englehart (Del 1984)

Aff'd 245 A 2d 166 (Del 1968)

Dann v Chrysler (Del Ch 1964)

Aff'd sub nom Hoffman v Dann (Del 1964)

Stemerman v Ackerman (Del Ch 1962)

Lieberman v Koppers (Del Ch 1959)

Frankel v Donovan (Del Ch 1956)

Kaufman v Shoenberg (Del Ch 1952)

Sandler v Schenley Industries (Del Ch 1951)

Michelson v Duncan (Del 1979)

Hoffman v Dann (Del 1964)

Elster v American Airlines (Del Ch 1957)

Kerbs v California Eastern Airways (Del 1952)

Ash v Brunswick (D Del 1975)

Olson Brothers v Englehart (Del 1968)

Haft v Dart Group (D Del 1993)

Michelson v Duncan (Del 1979)

Lewis v Vogelstein (Del Ch 1997)

Bennett v Breuil Petroleum (Del Ch 1953)

Wyles v Campbell (D Del 1948)

Forman v Chesler (Del 1961)

Halpern v Armstrong (SD NY 1980)

Maldonado v Flynn (2^nd Circuit 1979)

Ackerman v Stemerman (Del 1964)

Nadler v Bethlehem Steel (Del Ch 1959)

Berkwitz v Humphrey (ND OH 1958)

In Bergstein v Texas International (Del Ch 1982)

Moran v Household International (Del 1985)

Revlon v MacAndrews & Forbes Holdings (Del 1986)

Broad v Rockwell International (5^th Circuit 1981)

Wood v Coastal States Gas (Del 1979)

BSF v Philadelphia National Bank (Del 1979)

Anadarko Petroleum v Panhandle Eastern (Del Ch 1957) 545 A 2d 1171 (Del 1988)

Katz v Oak Industries (Del Ch 1986)

Harff v Kerkorian aff'd in part rev'd in part 347 A 2d 133
(Del 1975)

Simons v Cogan (Del Ch 1987)

Aff'd 549 A 2d 300 (Del 1988)

Weiss v Leewards Creative Crafts (Del 1993)

Gamble v Penn Valley Crude Oil (Del Ch 1954)

Related Topics

Delaware General Corporation Law

Clear Gif