Davidal, >>> The only downside would be management's loss of income, but they would share in the upside of what I would imagine at least a doubling of the share price, at time of sale. <<<
Therein lies the rub. Varney doesn't want to lose his salary and have to get a new job in the current lousy job market. He does have 588 K newly minted stock options at .20, but a buyout at .40 only gives him $117 K profit on those. True, he'll get his year's severance pay plus another 6 month's bonus pay, but he'll get that whether Cortex gets bought out now or next year.
So from Varney's perspective, the buyout route is still his last option, despite the fact that it is shareholder's best option.
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