underline;">: Overview. Public company spin-off butterfly by DC of Spinco including splitting of stock options..
Option exchange
DC had an option plan under which it had granted stock options some of which included "tandem share appreciation rights" (which permitted the option holder to surrender a vested stock option in exchange for a cash payment equal to the "in the money value" of the option thereby extinguishing the holder's option). Under the butterfly reorganization those options were exchanged for options to acquire shares of Spinco and new options to acquire shares of reorganized DC (a.k.a., New DC), corresponding to the division of assets between the two corporations. In the case of Spinco, its option plan enabled it to issue stock options with "attached tandem share appreciation rights". In the case of New DC, the ruling does not expressly refer to tandem share appreciation rights but the replacement options are issued under DC's existing plan, which includes such rights.
Ruling
The exchange of the existing options for new options of Spinco and New DC would be governed by s. 7(1.4). The ruling was conditioned on the new options of Spinco and New DC being the sole consideration for the disposition of the old options and the old options being cancelled. Although the tandem share appreciation rights are not expressly addressed, the ruling in effect treats the tandem share appreciation right as part of the option itself.