QUESTION
Does a company have the right to refuse to honor a stock option agreement if the agreement was misrepresented to the current owner?
Asked on Feb 09th, 2014 on Corporate Law - Texas
More details to this question:
Several of us had stock options with our company that we helped found in 1997. Those options were to pay the lesser of $25,000 each or 1% of the company's value upon certain events. The options are all vested and the events have occurred. The new owners, however, were not told of this agreement when they bought in. As a result, they refuse to honor it. Seems to me that if I marry a woman without telling her I'm already married, the first marriage doesn't automatically become nullified. But that is essentially what the new owners are claiming. Are we just screwed, or should the company have to pay our options (all total, about $100,000) and work out their beef with the previous owner/seller who failed to mention the agreement when they bought the company?
1 ANSWER
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Did the new company (B) buy the old company (A) and dissolve the old company? Or did the new company (B) simply replace the management of A?
This is an important distinction. If the company that issued your stock options still exists, you have a right to sue them to enforce your options under the agreement. If the new company completely replaced the old company and the old company dissolved, you may be out of luck. An attorney would need to review your agreement and investigate the terms of the merger or corporate takeover that took palce in your case.
Answered on Feb 10th, 2014 at 12:48 PM