P sought an order that would direct the Board of Katy Industries, Inc. to grant an affiliate of Pensler Capital, an option to purchase 20% of Katy's outstanding common stock at $27.80 per share. The granting of such an option was a condition of an offer for a $27.80 per share cash merger extended by Pensler to Katy. The board rejected the transaction because of the objection of the Carroll family as this would deprive them of their legitimate and dominant voice in corporate affairs and would constitute a breach of fiduciary duty. Ps contend that when an earlier offer of a $25.75 cash-out merger was proposed by the Carroll Family; the company was put up for sale. Thus, the only duty of the board was to maximize value to the stockholders. Ps contend that rejection of the Pensler deal was not consistent with that goal. Exercise of the option would dilute the Carroll family voting block to 40% from 50.6% and thus make the sale to Pensler feasible. The option was rejected by the board. On March 8, 1994, the Special Committee recommended that the board approve a special cash dividend of $14.00 per share of Katy common stock.

This section contains the nature of the case and procedural background.

The legal issues presented in this case will be displayed here.

The court's holding and decision will be displayed here.

Legal analysis from Dean's Law Dictionary will be displayed here.