For adviser use only – not approved for use with clients
Sample single option agreement
Single option agreement for shareholders or partners
This agreement is madethe ______day of ______(month) ______(year)
Between ______
of______
and______of______
and______of______
and______
of______
(hereinafter referred to together as ‘the parties’ and individually as ‘the party’)
Page 1 of 4
Definitions
In this agreement the following terms shall have the following meanings:
‘Business’ means______, (name of firm or company)which is either the firm in which the parties are partners or the company in which the parties are shareholders orany successor of such firm, limited liability partnership or company carrying on the entire operation of the Business.
‘Critical Illness’means any illness or disability suffered by a party giving rise to a payment of a lump sum benefit under the Policy.
‘Market Value’means the value of a deceased party’s interest in the Business as determined by an independent chartered accountant appointed jointly by the parties to this agreement. If an independent chartered accountant cannot be agreed upon, market value will be determined by the President for the time being of the Institute of Chartered Accountants in England and Wales where the Business is domiciled in England or Wales, the President of the Institute of Chartered Accountants in Scotland where the Business is domiciled in Scotland or the President of the Institute of Chartered Accountants in Ireland where the Business is domiciled inNorthern Ireland.
‘Policy’ means any one or more contracts effected by a party with Scottish Equitable plc providing lump sum benefits on the onset of Critical Illness.
‘Share’means a party’s interest in the Business.
‘Specified Date’ means the date when payment is made under the Policy.
Whereas
The parties wish to enter into an arrangement so that on one party suffering a Critical Illness he/she will have the option to sell his/her Share to the other parties.
Now it is hereby agreed as follows:
1.Each of the parties:
(a)hereby grants an option to the other parties to sell his/her Share in the event of his/her Critical Illness;
(b)agrees to effect a Policy to provide sufficient funds for the purchase of the Share, and
(c)agrees to settle the Policy on trust for the primary benefit of the other parties in such manner as shall be agreed between the parties and maintain such Policy in force in consideration of the other party or parties agreeing to do the same.
2.In the event of a party sustaining a Critical Illness that party may exercise the option in Clause 1(a) within one year of the Specified Date and on exercise of the option the other party or parties shall purchase the Share from the party exercising the option.
Page 2 of 4
3. (a) On exercise of the option the price to be paid for the Share shall be the Market Value.
(b) On the exercise of the option by a party (‘the selling party’), the other party shall purchase the selling party’s Share and if there is more than one purchaser:
(i)if the Business is a limited company, in proportion to their respective shareholdings in the company, ignoring the shareholding of the selling party and any other person not party to this agreement, or
(ii) if the Business is a partnership, then in proportion to their respective capital accounts in the business ignoring the capital account of the selling party and the capital account of any partner not a party to this agreement.
4.(a) Each party shall not later than 21 days after entering into this agreement effect a Policy, and each Policy shall be written subject to a trust under which the beneficiaries are the parties to this agreement.
(b)Each party shall promptly pay (or arrange for the payment of) all premiums due under his/her Policy.
5. This agreement will cease to bind any party on the earlier of:
(a) his/her ceasing to be a shareholder or partner in the Business, or
(b) the Business being wound up or a resolution being passed that it shall be liquidated.
6.Nothing in the agreement shall in any way whatsoever prevent or hinder any party from disposing of, charging, encumbering or otherwise dealing in any way with his/her Share.
IN WITNESS WHEREOF the parties hereto have executed this deed as follows:
SIGNED AND DELIVERED AS A DEED
by ______
Signature
at ______on ______in the presence of
Place Date
______Witness
______Full name
______Address
______
______Occupation
Page 3 of 4
SIGNED AND DELIVERED AS A DEED
by ______
Signature
at ______on ______in the presence of
Place Date
______Witness
______Full name
______Address
______
______Occupation
SIGNED AND DELIVERED AS A DEED
by ______
Signature
at ______on ______in the presence of
Place Date
______Witness
______Full name
______Address
______
______Occupation
SIGNED AND DELIVERED AS A DEED
by ______
Signature
at ______on ______in the presence of
Place Date
______Witness
______Full name
______Address
______
______Occupation
IP/00271698/12/17