Corporate clients typically are advised to keep their minutes up to date for the purpose of memorializing important corporate actions. Frequently, boards of directors ignore the importance of clearly drafting, executing, and retaining corporate minutes to avoid later disputes. Consider the following resolution from corporate minutes purportedly drafted after a special meeting of the board of directors of Valve and Primer Corporation (“VPC”) in 1987. VPC’s former employee, officer and director, Ralph DiLorenzo, claims the board granted him an option to purchase the corporation’s stock at $250 per share:
That in order to retain and reward such dedication. . . Ralph DiLorenzo be given an option to purchase additional shares not to exceed 300. Said option to be exercised within 10 years from below date at the price of $250 per share. Each share was to be restricted wherein the share must first be offered to Valve and Primer Corporation to be paid by Valve and Primer Corporation and held as Treasury Stock. Valve and Primer Corporation would be given 45 days to consummate the purchase. In the event that Valve and Primer Corporation did not choose to purchase, said stock would be offered to the existing shareholders on a pro rata basis also to be purchased within 45 days. And in the event the shareholders did not purchase said shares, the shares could be sold to any interested person or persons. Purchase price of shares would be based upon the book value pursuant to a certified audit of the worth of the Corporation at the time of sale.
After 40 years of employment by VPC, DiLorenzo was terminated. He then attempted to exercise the stock option, and asserted the value was $4,000 per share. He claimed the minutes show the corporation was obligated to purchase shares he owned and that the option was granted to him in consideration of his continued employment following the 1987 special meeting of the Board. VPC denied any stock purchase agreement was ever reached pursuant to the minutes, that the option to purchase was a bonus, and maintained that the minutes DiLorenzo relied upon were phony because they were inconsistent in subject matter and format from other corporate minutes. The trial court agreed with VPC and DiLorenzo appealed.
The Illinois Appellate Court held that the trial court should not have decided the case in the corporation’s favor without a trial. While the trial court was obligated to assume the minutes were valid in analyzing the case, the validity of the minutes were in doubt. DiLorenzo should have the opportunity to authenticate the minutes and then prove that the bonus referenced in the resolution was an enforceable stock option agreement.
In order for a contract to be enforceable it must be sufficiently definite and certain. A contract is sufficiently definite and certain if the court is able to determine from its terms and provisions what the parties intended. Consequently, although the VPC resolution is poorly worded and its authenticity is in doubt, the Appellate Court held it could at trial be found to be sufficiently definite and certain to ripen into a contract.
Had the corporation’s minutes been carefully drafted, signed, and retained to avoid any doubt about the parties’ intentions, the parties could have avoided a costly and risky trial. We can assist you in properly preparing and maintaining your minutes.