Amdur v. Meyer, 28 Misc. 2d 855

Amdur v. Meyer

28 Misc. 2d 855 | N.Y. Sup. Ct. | 1961

Thomas A. Aurelio, J.

Defendant Hettinger moves for summary judgment dismissing the amended complaint.

Involved in this derivative stockholders’ suit is the validity of the actions taken by the corporation in pursuance of a stock option plan. The employments and the plan were initiated in 1956. Thereafter, the corporation declared two stock dividends. By reason of such stock dividends, the corporation has increased the number of shares optioned to the employees under the employment agreements and stock option plan, and has also reduced the price per share, purportedly to equalize the position of the optionees by virtue of the claimed dilution of value resulting from the stock dividends.

The stock option agreement provides, in pertinent part, as follows:

“ (7) In the event of any change in the common stock capitalization of bestwall through recapitalization resulting in stock split-ups, the option price and the number of shares subject to this option as specified in paragraph (1) above shall be adjusted accordingly.

6£ (8) In the event that bestwall shall merge or consolidate with any other company or corporation or shall adopt any plan of stock capitalization affecting the number of shares of common stock outstanding, other than as provided for in paragraph (7) hereof, then in any such event the option price and the number of shares subject to the option as specified in paragraph (1) above shall be adjusted with the same effect as if such shares had been previously issued to ”.

Following the second stock dividend, the corporation, through action of its board, resolved that the stock option plan was to be construed as though it had expressly provided for adjustment in the event the corporation declared any stock dividend.

Both parties refer to page 513 of Ballantine, Corporations: “ There is danger that the shares subject to an option may be altered or changed in value, and elaborate provisions are usually made for the protection of the conversion privilege to prevent dilution by amendments reducing par value or by stock split-ups or the issue of additional shares as stock dividends.” Protec*857tion of a conversion privilege to prevent dilution by reason of declaration of stock dividends was not provided in the stock option plan under review, and its provisions above quoted may not be presumed, as a matter of law, to encompass a stock dividend. Nor is the fact that surplus is capitalized on the declaration of a stock dividend to be equated with 61 any change in the common stock capitalization ”. The motion is denied.