Opinion ID: 718662
Heading Depth: 2
Heading Rank: 2

Heading: Sligo's Attempt to Exercise its Option

Text: Cornell committed suicide on January 31, 1994, and the Trustees succeeded him as successor co-trustees of the Trust. 3 Under the Agreement, his death constituted a transfer which triggered Sligo's option to purchase the shares held in the Trust. On February 18, 1994, Sligo exercised its option and notified the Trustees of its intention to purchase the shares of Sligo stock held in the Trust. In order to determine the purchase price of these shares, Sligo contacted the accounting firm then servicing the Corporation, Deloitte & Touche, and requested that it calculate the book value of Sligo as of the date of Cornell's death, January 31, 1994. That book value was calculated using Sligo's financial statements for 1993 and information obtained from Sligo regarding income for the period January 1-31, 1994. Deloitte & Touche determined the book value of all Sligo shares on January 31, 1994 to be $546,523.00. Cornell's fifty percent interest was $273,261.50, and Sligo tendered one and one-half times this amount, $409,892.25, to the Trustees. 4 Although Deloitte & Touche did not calculate the book value of Sligo shares as of December 31, 1989--the date referred to in Section 5.2(b)of the Agreement--the parties do not dispute that the book value on that date was $879,724.00. The book value of Cornell's fifty-percent interest in Sligo at that time was $439,862.00. (J.A. at 724.) Based on the accountant's calculation of the January 31, 1994 book value, Sligo offered the Trustees $409,892.25 for the Trust's shares of Sligo stock. The Trustees refused the offer, claiming that Sligo had improperly calculated the book value and asserting the following: First, because the shareholders and Sligo never determined Market Value under the procedure established in Section 5.3, the fail safe provision in Section 5.2(b) applies, and the Market Value of the shares was one and one-half times their book value as of December 31, 1989, not January 31, 1994. They accordingly assert that Sligo must pay $659,793.00 for the shares--the agreed upon December 31, 1989 book value of $439,862.00 multiplied by 1.5. Second, and alternatively, if the book value is to be calculated as of the date of Cornell's death, the $1.5 million due to Sligo from Cornell's life insurance policies should have been included in the determination of book value. Third, and also based on the calculation of book value as of the date of Cornell's death, the accountants did not make an independent review of the records of Sligo in order to calculate book value and instead relied on unreviewed information Sligo supplied. (Appellant's Br. at 13.) They accordingly claim the accountants did not determine the book value of the shares as required by Section 5.2(b) of the Agreement.