Put and Call Option Agreement

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This Put and Call Option Agreement is for the grant of put and call options over shares in a private limited company.

 

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Put and Call Option Agreement: shares

Put and Call option agreement over shares in a private limited company

Background

What is a put option?

A put call option is a right of a seller – the holder of shares has the option to require (if the holder exercises the put option) that a third party purchases those shares. The seller is the optionholder in this case  – the seller can “put” the shares to the buyer.

What is a call option?

A call option is a right of a buyer – the buyer has the option to require (if the buyer exercises the call option) that a holder of shares sells those shares to the buyer. The buyer is the optionholder in this case – the buyer can “call” for the shares to be sold.

Why have a put and call option?

A put and call option in the same agreement provides a degree of certainty and control for each party – as the optionholder of either the put or the call option, each party will (subject to the satisfaction of any conditions to exercise of the option) have the opportunity to exercise the option and cause the sale and purchase of the relevant shares to occur.

The put and call option are often exercisable during different option periods – for example, the put option may be exercisable first and, only if the put option has not been exercised, will the call option become exercisable (or vice versa).

About this Put and Call Option Agreement

This Put and Call Option Agreement is for the grant of put and call options over shares in a private limited company.

What are the main negotiation points for a put and call option agreement?

The principal matters which the parties to a put and call option agreement will need to negotiate include:

  • option shares: the number of option shares
  • exercise conditions: whether the put option exercise, the call option exercise or both of them is subject to satisfaction of any pre-conditions
  • exercise period: the respective exercise periods for both the put option and the call option
  • exercise price: the price payable for the shares

Document features

Features include:

  • 24 clauses over 16 pages
  • put and call option grant, including definitions of option shares, exercise conditions and exercise periods for both the put and call option
  • put option exercise and form of exercise notice
  • call option exercise and form of exercise notice
  • mechanics for sale and purchase of option shares
  • warranties and undertaking from the seller

Explanatory guidance

As with all of our document templates, your purchase will include access to clear explanatory guidance on the document and its use.

Put and Call Option Agreement: shares

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