If you are still having problems viewing this message, please click here for additional help

The recently decided case of Vague v. Bank One Corporation by the Delaware Supreme Court (copy attached) illustrates that care must be taken in communicating with individuals who have received options to purchase stock of a company. In Vague, a CEO was told by the company's general counsel that he had several years to exercise his options upon retiring, and received a written summary showing such. However, the information was incorrect, and subsequent summaries were sent to the CEO indicating a shorter time frame, but the CEO did not read such summaries, and didn't learn of the shorter time frame for exercising the options until it was too late to do so. Suffering a loss of several million dollars, the CEO filed suit against the company. The Court reversed a lower court's grant of summary judgment for the company, finding that the CEO would have a cause of action if he could show that he was provided with false information and that he justifiably and reasonably relied on the false information.

The moral of this story is to be careful when communicating with optionees about their options. The best crafted option documentation in the world can easily be undone by a few incorrect statements followed by reasonable reliance upon such statements.

File Attachments click to download