Delaware Business Litigation Report

Supreme Court Affirms Chancery’s Interpretation of Word “And” in Option Agreements

Weinberg v. Waystar, Inc., No. 274, 2022 (Del. March 16, 2023)
The appellant was a former chief marketing officer of the appellee, a Delaware corporation. Soon after her termination, the appellant timely exercised her equity options and converted them to partnership units. The appellee thereafter exercised its call rights to repurchase the units. The appellant filed suit, arguing that the use of the word "and” in the options agreements meant that both of two conditions (termination of employment and breach of a restrictive covenant) had to be satisfied before the appellee could exercise its call rights. The Court of Chancery ruled in favor of the appellee, finding that "and” meant either of the two conditions would trigger the appellee's call rights.

The Supreme Court affirmed the Court of Chancery’s judgment. The Supreme Court found it dispositive that the Court of Chancery’s interpretation was the only one that gave effect to all provisions of the options agreements. The appellant's reading that both conditions had to be met would render as surplusage two provisions: temporal language relating to the date of termination and a repurchase framework that explicitly did not apply to a restrictive covenant breach. Further, her reading would produce an illogical result: a company would be unable to repurchase equity from an employee who has been terminated for-cause, even if in the context of egregious behavior, and notwithstanding the importance of a call right for effectuating the typical and logical purpose of an equity incentive plan to align current employees' incentives with those of the company.

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