10 years from the date the option was granted. Plaintiff focuses on language contained in section 9(a) of the Plan, which provides that a deceased, retired or permanently disabled grantee's option is exercisable "during such twelve-month period as provided in Section 10(b and c) . . . and ending (unless the Option shall have been terminated earlier under other provisions of this Plan) on a date . . not more than ten years after the date of grant of the Option . . .." Plaintiff also focuses on the difference between the mandatory language in section 10(b) ("Grantee must exercise his option within twelve months after his retirement or permanent disability) and the permissive language in section 10(c) (option "may be exercised within twelve months from the date of the deceased Grantee's death").
According to plaintiff, this language means that plaintiff did not have to exercise the option within one year from her husband's death (as she was advised by Mr. Boldt), but could have waited until ten years from the date of the grant of the option, which would have given her the benefit of the increased stock value resulting from the merger of Pratt & Lambert with Sherwin-Williams. Plaintiff argues that if defendant wanted to limit a deceased grantee's successor to the same one-year period during which a retiree or permanently disabled employee "must" exercise the option, it could have used the same mandatory language.
In order to accept this interpretation, and accord plaintiff a ten-year period during which to exercise the stock options granted to Mr. Quinn, the court would have to ignore the "incentive" aspect of the Plan provided by the availability of an increased number of shares corresponding to the employee's continued service. This incentive certainly does not apply once the employee ceases to be employed by the company. See Bernard v. IMI Systems, Inc., 131 N.J. 91, 618 A.2d 338, 346-47 (Sup. Ct. N.J. 1993). It follows that the Plan cannot be construed to give the successor in interest of a deceased employee greater exercise rights than a retiree or permanently disabled employee who actually rendered the benefit to the employer. See Broyles v. Synercon, supra, 512 S.W.2d at 291 (incentive stock option plan cannot be interpreted to allow resigning employee greater rights than employees who stay on the job).
In addition, accepting plaintiff's interpretation would render other contractual language meaningless. Section 9(a) provides that a successor to a deceased grantee may exercise the option "during such twelve-month period as provided in Section 10[(c)] . . .." Plaintiff claims that this provision is modified by the immediately following provision that the exercise period ends "not more than ten years after the date of grant . . .." Even if this language could be interpreted within the context and purpose of the Plan to pertain to a successor in interest to a deceased grantee of an incentive stock option, the immediately preceding parenthetical language specifically states that the ten-year period applies "unless the Option shall have been terminated earlier under other provisions of [the] Plan . . .." One such "other provision" is the general condition stated in the Plan that options "became immediately exercisable" by the successor upon the grantee's death, and "remained so for a period of one year" (Item 8, Ex. B, p. 7).
Therefore, when considered in the context of the purpose and language of the entire contract, the provision in section 9(a) of the Plan that the exercise period shall end "not more than ten years after the date of grant" is a limitation rather than an expansion of the one-year period, as provided in both section 10(c) and the general conditions, during which a successor to a deceased grantee could exercise a stock option. In other words, the only reasonable interpretation of this language is that the successor had one year from the employee's death to exercise the stock option, unless the ten-year period during which the employee could have exercised the option (if he or she were still alive) expired sooner.
This result is not changed by the fact that the company used permissive language in describing the period during which a successor to a deceased grantee could exercise the option, in contrast to the mandatory language used in describing the period during which a retired or permanently disabled grantee could exercise the option. As an example, in Broyles v. Synercon, supra, the plaintiff was granted an incentive stock option under a plan that provided for accrual of the option at a rate of 20% per year for a maximum of five years. The plan also provided that "in the event the employment of the holder of on option is terminated, other than by reason of death, the option may be exercised by the holder at any time within three months after such termination but not more than five years after the grant thereof." The plaintiff resigned in his second year after the grant of the option, at a time when only 20% of the option had accrued. He sued for the right to exercise the option in full, relying on the permissive language in the exercise clause. The court found that the language was "general and evidenced no specific intent to give former employees a right to exercise the full option." 512 S.W.2d at 291. Upon examination of the language of the exercise clause in the context of the entire plan, the court held that the plaintiff's interpretation would defeat rather than effectuate the purpose of the plan, which was to encourage continued employment. Id.
Similarly, in this case the language in section 10(c) providing that the option of a deceased grantee "may be exercised within twelve months" by the successor evidences no specific intent to give the successor the same rights as the living grantee. As discussed above with respect to the language in section 9(a), the parenthetical language in section 10(c) providing that the option may be exercised "in no event after the date fixed in the Option Agreement as its expiration date," considered in the context of the "whole instrument" and in light of the underlying purpose of the Plan, Broyles v. Synercon, supra, is a limitation rather than an expansion of the twelve-month period during which a successor may exercise a deceased grantee's stock option. In other words, the only reasonable interpretation of this language is that a successor had one year from the date of the grantee's death to exercise the option, unless the ten-year period expired sooner.
Finally, this interpretation is supported by the absence of any Plan language expressly providing that the successor to a deceased grantee had ten years from the date of the the grant to exercise the option.
Accordingly, I find that under the plain language and stated purpose of the Plan, plaintiff had twelve months from the date her husband died to exercise the stock options granted to him as an incentive for his continued employment and job performance, or lose the opportunity altogether. Plaintiff's interpretation of the Plan language, which would have given her the opportunity to exercise the stock options for a ten-year period from the date the option was granted, is unreasonable as a matter of law.
Defendant is therefore entitled to summary judgment dismissing the complaint.
For the foregoing reasons, defendant's motion for summary judgment ( Item 8) is GRANTED. Plaintiff's motion for summary judgment ( Item 15) is DENIED.
The Clerk of the Court is directed to enter judgment in favor of defendant.
DATED: Buffalo, New York
November 5, 1997
CAROL E. HECKMAN
United States Magistrate Judge